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June 4, 2023

Americas Tax Policy: This Week in Tax Policy for June 2

This week (June 5-9)

Congress: Leader Schumer announced that the next Senate vote will occur on Tuesday, June 6, at 5:30 p.m. Committee business scheduled for next week includes:

  • On Tuesday, June 6, the House Small Business Economic Growth, Tax and Capital Access Subcommittee will hold a hearing on "American Ingenuity: Promoting Innovation Through the Tax Code."
  • On Wednesday, June 7, the Senate Committee on Finance and Committee on Small Business and Entrepreneurship will hold a roundtable, "Tackling Tax Complexity: The Small Business Perspective," though it is not open to the public and will not be broadcast.
  • On Thursday, June 8, the Senate Foreign Relations Committee will hold a business meeting on matters including S. 1457, the Taiwan Tax Agreement Act of 2023.

Last week (May 29-June 2)

Debt limit: The Fiscal Responsibility Act of 2023 that includes a suspension of the debt ceiling through early 2025, curbs on government spending, claw-backs of IRS and COVID-related funding, and many other items, could be signed by President Biden as soon as Saturday, June 3, White House Press Secretary Karine Jean-Pierre said. "We have to let the House and the Senate do what they need to do so it can get to us, so the President can sign it," she said. The bill was approved by the Senate Thursday night on a 63-36 vote, and by the House 314-117 the night before. The basic components of the bill are:

Debt limit

Suspended until January 2025

Spending curbs

  • FY 2024 defense limit of $868.349 billion, nondefense limit of $703.651 billion
  • 1% increase in FY 2025: $895.212 billion defense, $710.688 billion nondefense
  • if all 12 appropriations bills are not enacted by January 1 of following year, discretionary spending will operate at a maximum of 99% of current levels

IRS funding

$1.4 billion rescinded, plus a reported agreement to claw back $20 billion and perhaps use it for other government funding

Administrative PAYGO

require federal agencies taking actions that would increase spending to submit a proposal to the White House Office of Management and Budget (OMB) reducing spending by an equal or greater amount through other actions (would not apply to federal actions that are estimated to cost less than $1 billion over the 10-year budget window, or $100 million in any given year during the 10-year period)

COVID-19 relief funding

rescind about $28 billion in unspent COVID-19 funding allocated to various federal agencies, as well as rescind portions of American Rescue Plan Act funding

Work requirements

extended for Supplemental Nutrition Assistance Program (SNAP) to those ages 50-54 and a program to implement work requirements for Temporary Assistance for Needy Families (TANF) recipients created

Energy permitting

establish timelines for completing reviews and seeks to remove interagency conflicts by giving "lead agencies" certain responsibilities for managing reviews; expedite approval of the Mountain Valley Pipeline

Student loan

ends the suspensions of federal student loan payments

President Biden said June 2: "No one got everything they wanted, but the American people got what they needed. We averted an economic crisis, an economic collapse. We're cutting spending and bringing the deficits down at the same time. We're protecting important priorities, from Social Security, to Medicare, to Medicaid, to veterans, to our transformational investments in infrastructure and clean energy." Regarding IRS funding, the AP reported, "The White House says the debt deal also includes a separate agreement to take $20 billion from the IRS over the next two years and divert those funds to other nondefense programs … Biden administration officials are offering assurances that the spending cuts secured by Republican negotiators will have minimal impact on the agency's operations over the next few years."

IRS Chief Counsel: President Biden June 2 announced his intent to nominate Marjorie Rollinson as Chief Counsel for the Internal Revenue Service. The announcement said in part: "Marjorie Rollinson has had a distinguished career in tax services. She recently retired from the firm Ernst & Young where she served as the Deputy Director of the National Tax Department since the beginning of 2019. She began her career at Ernst & Young in 1987 (known then as Ernst & Whinney), becoming a partner in 1997. In 2003 she became the Director of the International Tax Services National Tax Group where she served clients directly and also led the International Tax Technical Committee. In 2013 she left the firm to join the Office of Chief Counsel as Technical Deputy Associate Chief Counsel in the Office of the Associate Chief Counsel International, and she was named Associate Chief Counsel International in 2016." The Bloomberg Daily Tax Report said: "Rollinson recently retired from Ernst & Young, and has previously worked in the IRS chief counsel's office, according to the White House. If confirmed by the Senate, Rollinson would lead an office that provides legal advice to the IRS. The IRS has been without a Senate-confirmed chief counsel since the start of the Biden administration."

Treaties: The Senate Foreign Relations Committee June 1 voted out the US-Chile tax treaty 20-1, with Senator Rand Paul (R-KY) the lone vote against the treaty. Senator Paul has long expressed concern about tax treaties over privacy concerns, though a US-Spain treaty was ratified in 2019 after then-Majority Leader Mitch McConnell (R-KY) devoted floor time to the matter and Senator Paul was afforded amendment votes, including on information sharing standards. Senate Majority Leader Chuck Schumer (D-NY) said on the Senate floor May 30, "At stake in this treaty is access to critical minerals like lithium that make everything from iPhones to EVs function. The world is racing to source these materials, and this U.S.-Chile treaty would give America an important edge. Thursday's markup represents a crucial step toward ratifying this treaty." The treaty, which was cleared by the Foreign Relations Committee in the last Congress but not the full Senate, may be poised to advance now that Republican concerns about potential double taxation relating to foreign tax credits have been addressed. The Text of Resolution of Advice and Consent to Ratification includes a declaration saying, "In light of substantial changes made to the international provisions of the Internal Revenue Code in 2017, the Senate declares that future tax treaties need to reflect such changes appropriately, including in Article 23. Therefore, based on discussions with the U.S. Department of the Treasury, additional work is required to evaluate the policy of Article 23 in addressing relief of double taxation and to agree on whether further changes to the terms of the Article are necessary for future income tax treaties."

Energy tax: Treasury and the IRS May 31 issued proposed regulations for applicants investing in certain solar and wind powered electricity generation facilities, regarding the Low-Income Communities Bonus Credit Program.

Also on May 31, in Notice 2023-44, Treasury and the IRS provided additional guidance clarifying and modifying Notice 2023-18, which established the IRC Section 48C(e) program to allocate $10b in credits for investments in eligible qualifying advanced energy projects. Global tax: Upon retweeting a Reuters story on Vietnam's tax rules, Senate Finance Committee Ranking Member Mike Crapo (R-ID) said, "The global tax code negotiated at the OECD condemns tax competition but blesses government subsidies. This deal is already sparking a global subsidy free-for-all." The Reuters story said, "companies are pushing Vietnam to introduce a multi-million-dollar reform that would compensate them for higher levies they face from next year under a global overhaul of tax rules."


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