September 24, 2023
Americas Tax Policy: This Week in Tax Policy for September 22
This week (September 25-29)
Congress: The House and Senate are both in session, ahead of the September 30 expiration of government funding. The next Senate vote, at 5:30 p.m. on Tuesday, September 26, will be on a procedural motion related to the Securing Growth and Robust Leadership in American Aviation Act (H.R. 3935), the CR legislative vehicle.
The Senate Finance Committee has noticed a hearing for Thursday, September 28 (at 10 a.m.) to consider nominations including Marjorie A. Rollinson to be Chief Counsel for the Internal Revenue Service and an Assistant General Counsel in the Department of the Treasury.
The Senate Budget Committee has scheduled a hearing, "Medicare Forever: Protecting Seniors by Making the Wealthy Pay Their Fair Share," Wednesday, September 27 (at 10 a.m.).
Last week (September 18-22)
Government funding: House Speaker Kevin McCarthy (R-CA) sent members home without voting on a continuing resolution (CR) and with one legislative workweek to go before a government shutdown if both chambers don't pass the same government funding patch CR by September 30. The focus of conservative holdouts has shifted from demands regarding the contents of a CR to opposing that type of short-term patch in favor of moving the remaining (in the House) 11 of 12 appropriations bills through regular order, which leaders in both chambers and the White House have long said couldn't be accomplished by the deadline. Sending members home for the weekend, with the condition that they could be brought back in the event of any breakthrough, came after Republicans were again unable Thursday to attain the requisite votes on the rule for consideration of the Department of Defense (DOD) spending bill. Holdouts were Reps. Andy Biggs (R-AZ), Dan Bishop (R-NC), Matt Rosendale (R-MT), Eli Crane (R-AZ), and Marjorie Taylor Greene (R-GA), with the latter two fresh objectors to the measure. It was the second failed rule vote this week, with previous 'no' votes Reps. Ken Buck (R-CO) and Ralph Norman (R-SC) having come around to support the procedural "rule" step that was once routine but now deployed by conservatives as a form of protest. Speaker McCarthy had earlier tried to move the proposed House CR, to extend government funding through October 31, further to the right in a bid to win the votes of conservative holdouts, proposing to adhere to FY2022 spending of $1.471 trillion and possibly creating a debt commission, in addition to the previous iteration's inclusion of a Republican-authored border security measure. The focus is increasingly on Rep. Matt Gaetz (R-FL), a late holdout on the January Speakership election who repeatedly threatened Speaker McCarthy's ouster last week. Politico Playbook offered very succinct reporting about Gaetz proposing consideration of full-year appropriations bills one by one and his leadership of the 'never-CR' group of members. "The House has really abandoned the McCarthy CR strategy today and has embraced the Matt Gaetz strategy of single subject spending bills," he said. To that end, the House Rules Committee was scheduled to meet regarding the procedural parameters for consideration of the appropriations bills on DOD, State, Agriculture, and Homeland Security. The Wall Street Journal reported Gaetz as saying, "I'd rather work through those contentious items through the appropriations process than just try to figure out what's the next ornament to hang on a continuing resolution." The report cited Rep. Mike Lawler (R-NY), one of the 18 House Republicans in a Biden-won district, as eyeing a backup plan, if a CR vote doesn't happen, to work with Democrats to circumvent McCarthy and put an alternative on the floor if needed to minimize the length of a shutdown. "If there is not going to be a CR coming out of the House Republican caucus then I will move forward with the discharge petition," Lawler said.
Partnering with Democrats has not been a viable option for Speaker McCarthy given conservatives' vow to oust him from the position over such an approach, but bipartisan escape routes from a potential shutdown could be expected to surface ahead of the shutdown deadline. The bipartisan Senate prerogative for a CR is spending at the current FY2023 level, omission of controversial policy provisions, and likely addition of Ukraine and disaster funding. Senate Majority Leader Chuck Schumer (D-NY), who had his own struggles last week in moving a three-bill appropriations package that some conservative members there want considered one by one, took a procedural step on a bill that could be used as a vehicle for a CR. Punchbowl News: "McCarthy will have a choice to make. Will he bring up the Senate-approved CR and pass it with a mix of Democratic and Republican votes? Will he try to amend it and see if the Senate will bite? (They probably won't.) Or will he ignore it and shut the government down?"
IRS in shutdown: In the event of a shutdown, the IRS may not stop working, according to a September 18 Bloomberg Daily Tax Report (DTR) story. It said the IRS likely will use funds from the Inflation Reduction Act (IRA), which allocated $80 billion in funding to the agency that was subsequently cut back, to remain fully operational if the government shuts down. It was thought that supplemental funding would keep the agency in business. However, a later Federal News Network report on September 21 cited the National Treasury Employees Union (NTEU) as saying IRS will "partially close" if Congress triggers a lapse in appropriations. An NTEU email warned the IRS is "severely limited" in its use of IRA funding to keep the agency fully open.
2023 tax bill: An eventual long-term spending package that most likely would not come together until later this year, if it does come together, is the likely vehicle for outstanding tax and health items. In a Wednesday Punchbowl News interview, House Ways & Means Committee Chairman Jason Smith (R-MO) laid out his priorities for a tax extenders package before the end of the year, expressed optimism that he can work with Democrats on the Child Tax Credit (CTC), and said he planned to reintroduce his legislation to make permanent the TCJA's doubling of the credit to $2,000. Democrats are seeking a further CTC expansion, closer to what was in effect for 2021, as a condition of supporting business tax items like a return to R&D expensing from the (also TCJA-enacted) 5-year amortization that took hold in 2022. Republicans have noted the disparity in cost of the two items: about $25 billion for an R&D fix through 2025, compared to $100 billion per year for the 2021 CTC regime. No word yet on whether a more generous approach to business tax provisions could help end the impasse.
Budget: House Budget Committee Chairman Jodey Arrington (R-TX) September 19 released an FY2024 "budget resolution [that] balances the federal budget in 10 years and reduces deficits by $16.3 trillion over that same timeframe, resulting in a $130 billion surplus by FY2033 … [and] focuses on restoring America's fiscal health by right sizing the bloated bureaucracy, reversing Biden's spending." A summary said the resolution allows for Ways & Means-authored legislation that "extends pro-growth tax reforms and improves the tax code," and for "legislation related to promoting American medical innovation if such a measure would not increase the deficit for the period of fiscal years 2024 through 2033." Budget resolutions are nonbinding and offer no procedural advantages unless reconciliation instructions are included, which is not applicable in this case. It is possible that releasing a fiscal roadmap at this point may be useful in demonstrating to conservatives the intention to reduce spending. Politico Morning Tax noted that the resolution, which was considered in Committee Wednesday, "is largely silent on other big questions on taxes — like how Republicans might pay for TCJA extensions, or how much they'd want to offset at all."
Global tax: Tax Notes reported, "House Republican taxwriters are hoping other countries will delay implementation of pillar 2 of the OECD global tax deal while they separately encourage leaders to implement versions of the United States' global intangible low-taxed income regime." Weeks after the GOP members' trip to Europe, the report cited Rep. Ron Estes (R-KS) as saying they are also focusing on what work can be done outside the OECD, including encouraging countries to follow the US lead in implementing something similar to GILTI. "There doesn't have to be any additional work on the part of OECD for countries to implement their own version of GILTI, and I would encourage them to do that," Estes said.
FTC regs: After providing relief over the summer from some components of foreign tax credit (FTC regulations) through the end of the year, the IRS is considering extending the period in which taxpayers can rely on old foreign tax credit rules, according to another DTR report. "The IRS also plans to issue guidance by the end of 2023 on how the foreign tax credit will work with the pending 15% global minimum tax, said Anthony Ferrise, an IRS senior international adviser on cross-border activities. He was speaking at an IRS/Tax Executives Institute conference in New York on Wednesday." In July, Treasury/IRS announced that taxpayers could apply the former regulations' more permissive standards for determining whether a tax was a creditable net income tax under IRC Section 901 and the current IRC Section 903 "in lieu of" tax rules without regard to the attribution requirement for tax years ending on or before December 31, 2023. An EY Tax Alert has details.
IRA guidance tracker: This table describes select IRS guidance related to the Inflation Reduction Act.
Date — Guidance
Link for more information
11/29/22 — Notice 2022-61, prevailing wage and apprenticeship requirements; started clock for construction 60 days+ after guidance
applicable to advanced energy projects (IRC Section 48C), alternative fuel vehicle refueling (IRC Section 30C), carbon oxide sequestration (IRC Section 45Q), clean fuel production (IRC Section 45Z), clean hydrogen production (IRC Section 45V), energy efficient commercial buildings deduction (IRC Section 179D), renewable electricity production (IRC Section 45), energy investment (IRC Section 48) credits; wage requirements also apply to new energy efficient home (IRC Section 45l) and zero-emission nuclear (IRC Section 45U) credits
See EY Tax Alert 2022-1832
12/12/22 — Revenue Procedure 2022-42, IRC Section 30D(d)(3)
agreements between qualified vehicle manufacturers and Treasury regarding the production of automobiles eligible for a clean vehicle credit
12/19/22 — Notice 2023-06 provides guidance on the new sustainable aviation fuel (SAF) credits
primarily addresses the SAF credit requirements applicable to a qualified mixture
12/22/22 — Fact Sheet (FS-2022-40) on energy efficient home improvements and residential clean energy property credits
lists improvements eligible for credits, credit amounts, information on labor costs
12/27/22 — Notice 2023-2, corporate stock repurchase excise tax
rules and procedures for the 1% excise tax on the aggregate fair market value of stock repurchased by certain corporations
See EY Tax Alert 2023-0054
12/27/22 — Notice 2023-7, corporate alternative minimum tax (CAMT)
clarifies which corporations the CAMT applies to and how the alternative minimum tax is calculated
See EY Tax Alert 2023-0091
12/29/22 — FAQs on clean vehicle credits (FS-2022-42)
Updated in February (FS-2023-04)
Updated in March (FS-2023-08)
addresses how the credit applies to purchases of clean vehicles that are new, previously owned or commercial, defines qualified manufacturer
newly addresses situations in which vehicle's classification changed
newly addresses whether credit can be split among multiple owners
12/29/22 — Notice 2023-1, definitions for IRC Section 30D credit for vehicles PIS after 12/31/2022
2/3/23 — Notice 2023-16 modifies Notice 2023-01
announcement that Treasury and the IRS intend to propose regulations on the definitions of the relevant terms under IRC Section 30D for new clean vehicles, and the critical mineral and battery component requirements under IRC Section 30D(e)
changing the vehicle classification standard by which vans, sport utility vehicles, pickup trucks and other vehicles are defined
See EY Tax Alert 2023-0076
12/29/22 — White Paper on
critical mineral requirements - % of value of minerals in battery extracted or processed in the US, FTA w/US, recycled in N. Amer.
= or >40% for a vehicle PIS in 2023 after the date of guidance. Increases annually to 50% in 2024, 60 % in 2025, 70% in 2026, and 80% after.
Similar for batteries: 50% in 2023 after the date of guidance, 60% in 2024-5, 70% in 2026, 80% in 2027, 90% in 2028, 100% after 2028
12/31/22 — Notice 2023-9, IRC Section 45W, safe harbor on incremental cost of commercial clean vehicles
for those placed in service in calendar year 2023 for purposes of the new credit for qualified commercial clean vehicles
2/13/23 — Notice 2023-17 Low-Income Communities Bonus Credit
applies to owners of certain solar and wind facilities placed in service in connection with low-income communities that are eligible for the IRC Section 48 energy investment credit
2/13/23 — Notice 2023-18, 48C advanced energy projects
5/31/23 — Notice 2023-44
program under IRC Section 48C(e) to allocate $10 billion in tax credits for qualified investments
information on "energy communities census tracts" and list of eligible census tracts
See EY Tax Alert 2023-1012
2/17/23 — Notice 2023-20, interim guidance for insurance companies and others for the CAMT
guidance for the determination of adjusted financial statement income as it relates to (1) variable contracts and similar contracts, (2) funds withheld reinsurance and modified coinsurance agreements, and (3) the basis of assets held by certain previously tax-exempt entities with a "fresh start" basis adjustment
See EY Tax Alert 2023-0384
3/9/23 — Notice 2023-24, nuclear credit (45J)
(1) guidance for computing the credit, (2) the amount of unutilized NMCL, (3) the procedures for taxpayers to apply for, and the IRS to allocate, the unutilized NMCL, and (4) transfer of the IRC Section 45J credit to an "eligible project partner"
See EY Tax Alert 2023-0504
3/31/23 — Proposed regulations (REG-120080-22) on domestic sourcing requirements for 30D EV credit
sources of a single applicable critical mineral may have multiple procurement chains if one source of the applicable critical mineral undergoes the same extraction, processing, or recycling process in different locations
See EY Tax Alert 2023-0660
4/4/23 — Notice 2023-29, "energy communities"
6/15/23 — Notice 2023-45 updates Notice 2023-29
6/15/23 — Notice 2023-47, energy community bonus
for purposes of the production tax credit (PTC) under IRC Sections 45 and 45Y and the investment tax credit (ITC) under IRC Sections 48 and 48E for electricity facilities
clarifies that it applies to taxpayers that begin construction on or after Jan. 1, 2023,
clarifies requirements brownfield site definition for the clean energy ITC and PTC:
Updates on eligibility for the bonus based on updated local unemployment rate data
See EY Tax Alert 2023-0675
See EY Tax Alert 2023-1083
5/12/23 — Notice 2023-38, domestic content bonus under IRC Sections 45, 45Y, 48, and 48E
addresses how to categorize common solar, wind and energy storage components for purposes of the manufactured products requirements
See EY Tax Alert 2023-0908
5/31/23 — Proposed regs (REG-110412-23) on Low-Income Communities Bonus Credit
definitions and requirements that would be applicable for the program allocating the calendar year 2023 capacity limitation
See EY Tax Alert 2023-1018
6/7/23 — Notice 2023-42, CAMT
waives addition to tax under IRC Section 6655 for a corporation's failure to make estimated tax payments of its CAMT under IRC Section 55 for a tax year beginning after December 31, 2022, and before January 1, 2024
See EY Tax Alert 2023-1038
6/14/23 — Proposed regulations (REG-101610-23) on tax credit transferability
11 credits eligible: alternative fuel vehicle refueling (IRC Section 30C), renewable electricity production (IRC Section 45), carbon oxide sequestration (IRC Section 45Q), nuclear power production (IRC Section 45U), clean hydrogen production (IRC Section 45V), advanced manufacturing production (IRC Section 45X), clean electricity production (IRC Section 45Y), clean fuel production (IRC Section 45Z), energy (IRC Section 48), advanced energy projects (IRC Section 48C), and clean electricity investment (IRC Section 48E)
See EY Tax Alert 2023-1103
6/14/23 — Proposed regulations (REG-101607-23) on direct pay
allows entities like tax-exempt organizations, state and local governments, and rural electric cooperatives to treat certain credits as a payment against federal income tax liabilities, rather than as a nonrefundable credit. (Payment will first offset tax liability, excess will be refundable.) Applicable credits are the same as for transferability, plus credit for commercial vehicles (IRC Section 45W)
See EY Tax Alert 2023-1102
6/14/23 — Elective Pay and Transferability FAQs
who is eligible, how to make an elective payment election and receive an elective payment
6/15/23 — FAQs on energy communities
detail on how areas may qualify as an energy community, how to determine whether a project is located in an energy community and brownfield sites for purposes of the Energy Community Bonus Credit
6/29/23 — Announcement 2023-18
confirmed that taxpayers are not required to report or pay the IRC Section 4501 excise tax on stock buybacks on any tax return filed before regulations are published
See EY Tax Alert 2023-1166
8/10/23 — Final regulations (TD 9979) and Revenue Procedure 2023-27 on Low-income Communities Bonus Credit
guidance necessary to implement the Program, including information an applicant must submit, the application review process, and the manner of obtaining an allocation
8/29/23 — Proposed regulations (REG-100908-23) on prevailing wage and apprenticeship requirements
details on satisfying the requirements and how taxpayers can cure their initial failure to comply with the requirements by making correction payments to workers and paying penalties to IRS
See EY Tax Alert 2023-1469
9/12/23 — Notice 2023-64, CAMT
describes rules IRS intends to include in proposed regulations on issues like the determination of a taxpayer's applicable financial statement
See EY Tax Alert 2023-9007
For additional information concerning this Alert, please contact: