Americas Tax Policy: This Week in Tax Policy for October 13

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October 15, 2023
2023-1704

This week (October 16 - 20)

Congress: The House is scheduled to be in session this week, with no votes expected until approximately 6 p.m. on Monday, October 16. The Ways & Means Committee has scheduled a "Field Hearing on Access to Health Care in America: Challenges in Rural and Underserved Communities" in Greenville, North Carolina for Tuesday, October 17 (at 9 a.m.). On Wednesday, October 18 (at 2:00 p.m.), the Social Security Subcommittee will hold a hearing on improper payments, and the Oversight Subcommittee will hold a hearing on pandemic fraud on Thursday, October 19, 2023 (at 9 a.m.).

The Senate returns to session (following a one-week recess) at 3 p.m. on October 16, with the next vote on a judicial nomination that day at 5:30 p.m. The Foreign Relations Committee is holding a nomination hearing for former Treasury Secretary Jack Lew to be Ambassador to Israel on Wednesday, October 18 (at 10:30 a.m.) and Reuters reported that the full Senate may vote on the nomination as soon as Thursday given the urgency of the matter. The only business currently on the Senate Finance Committee schedule is a hearing , "Medicare Advantage Annual Enrollment: Cracking Down on Deceptive Practices and Improving Senior Experiences," set for Wednesday, October 18 (10 a.m.).

ABA: The American Bar Association Virtual 2023 Fall Tax Meeting, with panels on international tax and energy among other topics, is October 16 — 20.

The EY Webcast, "Tax in a time of transition: Legislative, economic, regulatory and IRS developments," is October 20. Register here.

Last week (October 9 - 13)

The big picture: The House ended another work week without a Speaker. After Majority Leader Steve Scalise (R-LA) was unable to secure the 217 votes that would be necessary to win the Speakership in a vote of the full House and withdrew from the race Thursday night, the focus turned to Judiciary Committee Chairman Jim Jordan (R-OH). Rep. Jordan received 152 votes in an all-Republican vote on Friday, well short of the 217. Republicans hold only 221 seats in the House (there are two vacancies, one from each party) and can lose only four votes in any party-line vote. No votes are expected in the House until approximately 6 p.m. on Monday, October 16, according to leadership guidance released Friday evening. The Wall Street Journal had reported Rep. Byron Donalds (R-FL) as saying he thought the leadership uncertainty could only stretch through the weekend, because "then it gets problematic" once the Senate returns next week. Punchbowl News pondered on October 9, over what happens if there aren't the votes for any one candidate, "Would the House formally approve [Rep. McHenry] as speaker pro [tempore] — the post he only nominally holds now — for 30 or 60 days in order to get moving on critical issues? Would a 'caretaker speaker' be tapped? Do Republicans have to figure out their internal rules fights first?"

Roll Call cited Rep. David Joyce (R-OH) as saying members have discussed granting Rep. McHenry additional powers as acting speaker. "From my understanding, going back and forth and parliamentarian and Rules … the possibility exists to give somebody … full duties … for a limited period of time," he said. The Washington Post said, "such a move is unprecedented and would require changing the House rules — and might need Democratic support to do so. Current rules state that the temporary position exists only to facilitate and oversee the election of a speaker." Rep. Matt Gaetz (R-FL), whose motion to oust Speaker McCarthy put the House in its current situation and left some members still bruised and calling for his reinstatement, derided the expansion of acting speaker's powers as a "terrible idea." Politico reported Friday afternoon that four centrist Democrats are proposing to support Rep. McHenry having "temporary, expanded authorities," in 15-day increments, to allow the House to take up emergency aid for Ukraine or Israel, a short-term bill that extends government funding through Jan. 11, or general consideration of fiscal 2024 spending bills.

Global tax: The OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting October 11 released a new multilateral convention (MLC) that "updates the international tax framework to co-ordinate a reallocation of taxing rights to market jurisdictions, improve tax certainty, and remove digital service taxes [DSTs]." OECD said the publication of the convention moves the international community closer to finalization of the Two-Pillar Solution to address the tax challenges arising from the digitalization and globalization of the economy. The MLC will be delivered to G20 Finance Ministers and Central Bank Governors in a new OECD Secretary-General Tax Report ahead of their meeting in Morocco, OECD said. The text "reflects the consensus achieved so far among members on the technical architecture of Amount A, with different views on a handful of specific items noted in footnotes by a small number of jurisdictions who are constructively engaging to resolve differences," according to a cover note. The Bloomberg Daily Tax Report (DTR) cited Manal Corwin, director of the OECD's Center for Tax Policy and Administration, as saying the draft multilateral convention is an "intermediate step" in the process to get countries to sign it. Politico reported, "The goal is to have more than 130 countries sign the treaty by year-end as part of a wider bid to reform international corporate taxation to suit a global and digital economy. For the levy to take effect, at least 30 countries that make up 60 percent of targeted global companies need to sign up." A lot of attention is focused on Washington, where failure to ratify the MLC would likely scuttle the effort.

Request for comments: Also on October 11, Treasury requested public input on the current draft text of the Pillar One MLC, the Explanatory Statement to the Pillar One MLC, and the Understanding on the Application of Amount A Certainty (describing certain administration and dispute resolution parameters). "Treasury stands behind the negotiations, which have resulted in many difficult compromises by all sides with respect to both the design of the partial reallocation of taxing rights and the elimination of discriminatory digital services taxes and similar measures," said Assistant Secretary for Tax Policy Lily Batchelder. "However, as the cover note in the documents states, Pillar One represents a uniquely significant reform to the international tax system. Because of the breadth and complexity of the changes proposed, we view public input as critical to our process — to ensure transparency, to facilitate the resolution of several remaining open issues, and to hear whether the proposed framework would be workable for U.S. taxpayers and other stakeholders." Written comments are due by Monday, December 11.

DSTs: Senate Finance Committee Chairman Ron Wyden (D-OR) and Ranking Member Mike Crapo (R-ID) October 10 called on U.S. Trade Representative Katherine Tai to make clear the United States will forcefully defend American employers against the DST proposed by Canada, which is 3% and goes into effect in 2024 but is retroactive to 2022.

EV guidance: A story in the October 11 WSJ addressed the practical effects of the October 6 IRS proposed regulations (REG-113064-23) on the transfer of new (Section 30D) and previously owned (Section 25E) clean vehicle credits from the taxpayer to an eligible entity. "Starting in January, EV buyers get up to $7,500 off the purchase right at the dealership, rather than wait months until filing their tax return to get the credit … " the article said. "Accelerating the benefits will help boost adoption of the new technology, industry advocates say."

Supporting organizations: IRS October 13 published final regulations (TD 9981) on the prohibition on certain gifts or contributions to Type I and Type III supporting organizations from persons who control a supported organization and on certain other requirements for Type III supporting organizations. The regulations reflect changes to the law made by the Pension Protection Act of 2006.

IRA guidance tracker: This table describes select IRS guidance related to the Inflation Reduction Act.

Date — Guidance	Description	Link for more information
11/29/22 — Notice 2022-61, prevailing wage and apprenticeship requirements	started clock for construction 60 days after guidance: new requirements apply to facilities that begin construction on or after January 29, 2023	See EY Tax Alert 2022-1832
12/12/22 — Revenue Procedure 2022-42, EVs	agreements between manufacturers and Treasury regarding production of vehicles eligible for credit	See EY Tax Alert 2023-0076
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	See EY Tax Alert 2022-1912
12/22/22 — Fact Sheet (FS-2022-40) on efficient home, residential credits	lists improvements eligible for credits, credit amounts, information on labor costs	See EY Tax Alert 2022-1935
12/27/22 — Notice 2023-2, stock buyback tax	rules and procedures for the 1% excise tax on the aggregate fair market value of stock repurchased by certain corporations	https://www.ey.com/en_gl/tax-alerts/us---interim-guidance-on-stock-buyback-excise-tax-offers-mixed-b
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 — FS-2022-42 on EV credits; Updated FS-2023-04, FS-2023-08	address how the credit applies to, defines qualified manufacturer; situations in which vehicle's classification changed; whether credit can be split among multiple owners	See EY Tax Alert 2023-0660
12/29/22 — Notice 2023-1, EV credits; modified by Notice 2023-16	definitions for new clean vehicles, critical mineral and battery component requirements	See EY Tax Alert 2023-0251
12/29/22 — White Paper on critical mineral requirements	percentage must be extracted or processed in the US or a country with free trade agreement with US	https://home.treasury.gov/system/files/136/30DWhite-Paper.pdf
12/31/22 — Notice 2023-9, IRC Section 45W, EVs	Safe harbor regarding the incremental cost of vehicles	See EY Tax Alert 2023-0076
2/13/23 — Notice 2023-17 Low-Income Communities Bonus Credit	applies to owners of solar and wind facilities in low-income communities that are eligible for the IRC Section 48 energy investment credit	See EY Tax Alert 2023-0333
2/13/23 — Notice 2023-18, 48C advanced energy 5/31/23 — Notice 2023-44	$10 billion in tax credits, information on "energy communities census tracts"	See EY Tax Alert 2023-1012
2/17/23 — Notice 2023-20, interim guidance for insurance companies and others for the CAMT	determination of adjusted financial statement income for variable contracts, reinsurance, "fresh start" basis adjustment	See EY Tax Alert 2023-0384
3/9/23 — Notice 2023-24, nuclear credit (45J)	computing the credit, amount of unutilized NMCL, unutilized NMCL, transfer of credit to an "eligible project partner"	See EY Tax Alert 2023-0504
3/31/23 — Proposed regulations (REG-120080-22), EV credit	domestic sourcing requirements	See EY Tax Alert 2023-0660
4/4/23 — Notice 2023-29, "energy communities" 6/15/23 — Notice 2023-45 6/15/23 — Notice 2023-47, energy community bonus	for purposes of PTC under IRC Sections 45 and 45Y, ITC under IRC Sections 48 and 48E for electricity facilities; Updates eligibility based on updated local unemployment rate data	See EY Tax Alert 2023-1083
5/12/23 — Notice 2023-38, domestic content bonus under IRC Sections 45, 45Y, 48, and 48E	how to categorize 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 for a corporation's failure to make estimated tax payments of its CAMT	See EY Tax Alert 2023-1038
6/14/23 — Proposed regulations (REG-101610-23) on tax credit transferability	allows an eligible taxpayer to transfer all or a portion of an eligible credit to an unrelated transferee taxpayer for cash	See EY Tax Alert 2023-1103
6/14/23 — Proposed regulations (REG-101607-23) on direct pay	allows entities like tax-exempt organizations to treat credits as a payment against tax, rather than as a nonrefundable credit	See EY Tax Alert 2023-1102
6/15/23 — FAQs on energy communities	how areas may qualify as an energy community, whether a project is located in an energy community	See EY Tax Alert 2023-1083
6/29/23 — Announcement 2023-18, stock buybacks	taxpayers not required to report or pay excise tax 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	implements bonus energy investment credit program for solar or wind facilities in low-income communities: information an applicant must submit, application review, obtaining an allocation	https://www.irs.gov/newsroom/irs-and-treasury-issue-guidance-for-owners-of-solar-and-wind-powered-energy-facilities-in-low-income-communities-for-increased-energy-credit-under-the-inflation-reduction-act
8/29/23 — Proposed regulations (REG-100908-23) on prevailing wage and apprenticeship requirements	satisfying requirements, correction payments to workers, penalties to IRS	See EY Tax Alert 2023-1469
9/12/23 — Notice 2023-64, CAMT	describes rules IRS intends on issues like the determination of a taxpayer's applicable financial statement	See EY Tax Alert 2023-1570
9/27/23 — Notice 2023-65, IRC Section 45L New Energy Efficient Home Credit	addresses eligibility, applicable amount of the credit, energy saving requirements, certification requirements, substantiation	https://home.treasury.gov/news/press-releases/jy1768
10/6/23 — Proposed regulations (REG-113064-23) on transfer of EV credits, plus Revenue Procedure 2023-33	clarifies how taxpayers can elect to transfer new and previously owned clean vehicle credits to dealers who are eligible to receive advance payments of either credit. The revenue procedure includes procedures for how a dealer would register with the IRS to be eligible to receive the credit transfers from taxpayers and provides details on the registration process.	https://www.irs.gov/newsroom/irs-issues-guidance-for-the-transfer-of-clean-vehicle-credits-and-updates-frequently-asked-questions

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Contact Information
For additional information concerning this Alert, please contact:

• Jose Murillo (jose.murillo@ey.com)
• Jeff Van Hove (jeffrey.van.hove@ey.com)
• Ray Beeman (ray.beeman@ey.com)
• Kurt Ritterpusch (kurt.ritterpusch@ey.com)
• Bob Carroll (robert.carroll@ey.com)
• James Mackie (james.mackie@ey.com)