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October 29, 2023

Americas Tax Policy: This Week in Tax Policy for October 27

This week (October 30 - November 3)

Congress: The House is out of session until Wednesday, November 1. Under the schedule set by Speaker Johnson to pursue regular-order consideration of spending bills, the week of October 30 is Legislative Branch, Interior & Environment, and Transportation-HUD; the week of November 6, Financial Services & General Government and Commerce, Justice, Science; then, the week of November 13, Labor-HHS and Agriculture. The Ways & Means Committee does not currently have any hearings scheduled.

The Senate will next convene at 3 p.m. on Monday, October 30, with a judicial nomination vote at 5:30 p.m. Majority Leader Chuck Schumer (D-NY) has taken a procedural step (filing cloture) toward a vote on the nomination of former Treasury Secretary Jack Lew to be Ambassador to Israel. Work is also expected to continue on the three-bill appropriations minibus comprising the Military Construction-VA, Agriculture, and Transportation-HUD bills.

On Thursday, November 2, the Senate Finance Committee will hold a hearing on the nomination of former Maryland Governor (and Baltimore Mayor and presidential candidate) Martin O'Malley to be Commissioner of the Social Security Administration.

Last week (October 23 - 27)

Speaker elected: Rep. Mike Johnson (R-LA) was elected Speaker of the House with all 220 Republicans voting (there was one GOP member absent) for him on October 25, the fourth candidate for the position in a three-week process. He has already set an ambitious schedule for regular-order consideration of appropriations bills, said a continuing resolution (CR) after November 17 should end January 15 or April 15 so the Senate can't "jam" the House with a year-end omnibus, and said he would create a bipartisan debt commission. Rep. Johnson was lesser known than other candidates prior to his ascension to the Speaker role, which was widely observed to have been a benefit in a chamber with many relatively new members, some with an aversion to the Washington establishment. The dust is still settling from the three-week process of electing a new Speaker, but the November 17 deadline for government funding could potentially be controversial. Bloomberg reported Rep. Chip Roy (R-TX) as saying a next CR can't be a "punt," but rather needs significant spending reduction like the Republican CR proposal (to adhere to the FY2022 top-line spending level) that was blocked by some members September 29. Some Republicans have said they are opposed to CRs under any circumstances; it's unclear if that opposition softens under a new Speaker and given the turmoil that preceded his election, but it's also clear that Democrats will not support a CR that follows these conservative Republican objectives.

The impetus for Republican calls for spending cuts is concern over the deficit. On the related issue of economic growth, President Biden October 26 trumpeted 3rd quarter GDP growth as an affirmation of his policies. "I always say it is a mistake to bet against the American people, and just today we learned the economy grew 4.9% in the third quarter … " he said. "It is a testament to the resilience of American consumers and American workers, supported by Bidenomics — my plan to grow the economy by growing the middle class … I hope Republicans in Congress will join me in working to build on this progress, rather than putting our economy at risk with reckless threats of a shutdown or proposals to cut taxes for the wealthy and large corporations, while slashing programs that are essential for hard-working families and seniors."

Tax bill prospects: Of course, the selection of a new Speaker and return to legislating raises questions about what will happen with tax and other items that might ride on future government funding bills. Tax Notes was the first to report on these prospects October 26, saying Republicans from New York and other high-tax states were told by Speaker Johnson that a major tax package wouldn't move without an increase in the TCJA $10,000 state and local tax deduction cap. Some prominent members expressed doubt about the potential for such a package this year. House Budget Committee Chairman and Ways & Means member Jodey Arrington (R-TX), who sponsors a bill (H.R. 2406) to extend 100% expensing, "has his sights set on 2025 for action on the TCJA provisions," according to the report. "We'll put it out, we'll get it out," he said of tax legislation. "We just won't get it done. SALT's going to be the big rub." Senators John Cornyn (R-TX) and Chuck Grassley (R-IA) were cited as suggesting the gulf between the two parties on expanding the Child Tax Credit (CTC) could be too wide for a deal before 2025.

The Bloomberg Daily Tax Report (DTR) reported Senator Cornyn, a Finance Committee member, as saying, "It's hard for me to see the House and the Senate coming together on a package of extenders and other provisions that typically get taken up at the end of the year." The report cited other senators as saying tax package discussions are continuing, but that fully formed legislation is still a long way off. "Discussions are continuing to be ongoing between both Senate Finance and Ways and Means leaders and I believe that we all intend to see if a package can be put together," Senate Finance Ranking Member Mike Crapo (R-Idaho) told Bloomberg Tax. "I'm not saying I know where they're going to end up, we aren't at that point yet."

Politico Morning Tax offered a more optimistic assessment: "Now that the House has gotten back on track, at least for the moment, lobbyists have said that talk about a year-end tax bill has picked up — if for no other reason than people need to be ready in case the climate does become favorable near the end of the year. Also keep in mind: Those Republicans from New York and California wouldn't have quite the same amount of leverage — or de facto veto power — over a bipartisan tax bill, nor is this year their last or maybe even best chance to score SALT changes. (The current cap expires at the end of 2025, along with lots of other individual provisions from the Tax Cuts and Jobs Act.)"

R&D: An October 24 Wall Street Journal (WSJ) story on the IRC Section 174 five-year amortization requirement for R&D expenses (15-year for foreign research) rather than expensing that took effect in 2022 described tax liabilities for businesses small and large and resulting layoffs. "At best, it is a cash flow challenge, costing large public companies hundreds of millions or billions of dollars, which finance chiefs have said could dent their R&D spending," the story said of the change. "At worst, business owners wonder if their companies will make it, with some who run small and medium-size firms slowing growth, laying off workers or dipping into personal savings to cover tax bills due this month." The story noted the oft-described bipartisan support for reversing the policy, impeded by differences over whether to pair it with a child tax credit expansion. It also said, "The weekslong effort to name a House Speaker isn't expediting any change." The WSJ previously wrote about the issue in the September 12 print edition, as "Bipartisan Support Isn't Enough to Change Tax Law."

Education tax: At the October 25 House Ways & Means Committee hearing on education tax policy, Chairman Jason Smith (R-MO) discussed expanding 529 accounts. "In 2017, Republicans took the first step and allowed 529 accounts to cover K-12 education tuition up to $10,000. But 529 accounts could also be amended to cover other educational costs like books, tutoring to help kids catch up after multiple years of forced virtual school, educational therapies for students with disabilities, and supplies for the many families now choosing to homeschool," he said. "These 529 accounts could also help address America's skilled labor shortage by expanding to cover skilled trade or licensing programs." In response to a question from Rep. Danny K. Davis (D-IL) about what programs are complementary to vocational training programs, witness Girard Melancon said the Work Opportunity Tax Credit (WOTC) is a viable tool for training workers, especially those that have been left out of the workforce pipeline. The credit Incentivizes employers to invest in their workers, Melancon said.

Global tax: Both Tax Notes and the Bloomberg DTR reported OECD official Juan Carlos Perez Peña as saying the Inclusive Framework on BEPS is considering issuing Pillar 2 guidance on the treatment of deferred tax assets in jurisdictions with federal and subnational taxes. Tax Notes reported that Perez Peña, at an International Fiscal Association event in Cancun, Mexico, said that the GLOBE rules on which Pillar 2 is based create a deferred tax asset in the jurisdiction in which the entity records a loss, instead of using a loss carryforward mechanism. Upon the suggestion that it may be possible to recast the deferred tax asset at 15% accounting for both the federal and subnational level, because GLOBE rules do not distinguish between the two, he said, "We are working on this issue … The result has to be equivalent to a 15 percent [rate]."

DTR reported Perez Peña as saying that, regarding additional guidance on its treatment of deferred losses in countries that have multiple levels of taxation, "This is something we're already working with the Inclusive Framework on." The story explained: "If a company has a 'deferred tax asset' — in this case, a loss that a company can carry forward and use to lower a taxpayer's liability in the future — in a country that imposes a tax rate below 15%, the Pillar Two rules 'recast' the loss at a 15% rate. That means it is treated as a deferred loss under the new minimum rate. However, the Pillar Two rules don't address how a deferred tax asset is recast under the 15% rate when a company is in a jurisdiction that taxes differently at the state and federal levels, such as in the Swiss cantons or the US."

The October 26 OECD technical webinar on the Multilateral Convention to Implement Amount A of Pillar One included a description of limited exclusions, including for regulated financial services, extractives, autonomous domestic business, and supplies with a defense purpose. There was discussion of, under the Tax Certainty Framework on Amount A, strict deadlines for review processes and reaching decisions on a review in the interest of tax certainty, and consequences if deadlines aren't met. Further, there was also discussion of the list of existing measures subject to removal once the MLC enters into force.

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: 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

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 — 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

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

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, Section 45L New Energy Efficient Home Credit

addresses eligibility, applicable amount of the credit, energy saving requirements, certification requirements, substantiation

See EY Tax Alert 2023-1741

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.

See EY Tax Alert 2023-1723


Contact Information
For additional information concerning this Alert, please contact:
   • Jose Murillo (
   • Jeff Van Hove (
   • Ray Beeman (
   • Kurt Ritterpusch (
   • Bob Carroll (
   • James Mackie (