November 3, 2023
What to expect in Washington (November 3)
The Senate Finance Committee November 2 approved the nomination of Marjorie Rollinson to be Chief Counsel for the IRS and an Assistant General Counsel in the Department of the Treasury by a 16-11 vote, paving the way for a full-Senate vote on confirmation. Senators Bill Cassidy (R-LA) and Thom Tillis (R-NC) joined the Committee's 14 Democrats in approving the nomination. The Committee also approved two nominees to the Board of Trustees of the Federal Supplementary Medical Insurance Trust Fund.
Ranking Member Mike Crapo (R-ID) said prior to the vote, "Ms. Rollinson has a strong resume and impressive technical expertise, and I appreciate both her prior service at the IRS and her willingness to serve today. However, the agencies to which she has been nominated continue to be plagued by various issues … [and] given the many existing unresolved issues at the IRS and Treasury, I cannot support Ms. Rollinson's nomination today. That said, I do look forward to working with Ms. Rollinson on addressing the concerns my colleagues and I have raised throughout this process and making progress." He cited as a concern, "Treasury's advancement of the OECD Pillar 2 negotiations without meaningful congressional input, to the likely detriment of domestic businesses and workers."
Disaster tax relief — The House Ways and Means Committee November 2 approved 38-0 the Federal Disaster Tax Relief Act (H.R. 5863). Introduced by Rep. Greg Steube (R-FL), the bill would provide personal casualty loss relief for any disaster area declared since 2020, provide an exclusion from gross income for amounts received as qualified wildfire relief payments, and treat East Palestine train derailment payments as qualified disaster relief payments. The Committee also unanimously approved bills on Customs and Border Protection revenue functions, protecting personally identifiable information in the context of tariffs, extending reemployment services and eligibility assessments to all claimants for unemployment benefits, and allowing members of the clergy to revoke their exemption from Social Security coverage.
In an opening statement, Chairman Jason Smith (R-MO) said, "This package builds on three pieces of bipartisan legislation to help families recover in the aftermath of a disaster. First, it offers important relief to victims of disasters across the country, including Hurricane Ian last year — which was the costliest storm in Florida history, and which claimed countless lives. This bill will help those individuals and families deduct disaster losses against their tax bill. This bill also exempts from taxes the disaster relief payments received by victims of recent wildfires in California and Hawaii, as well as the train derailment in East Palestine, Ohio last February." Ranking Member Richard Neal (D-MA) said, "These bills under consideration will help Americans facing personal and financial loss from wildfires and support our ongoing efforts to bolster enforcement of U.S. trade laws … these bills have an easy glidepath to the floor and to becoming law."
As Politico noted about the disaster bill, "Lawmakers hope to attach the plan to a potential year-end tax bill. Republicans made it harder to claim casualty deductions as part of their 2017 tax cuts, to help defray the cost of that legislation." Changes made in the 2017 TCJA restrict casualty loss deductions to federally declared disasters, whereas, before 2017, casualty losses were generally deductible, the Congressional Research Service said in a report, "Tax Policy and Disaster Recovery."
House — The House November 2 approved by a 226-196 vote (with 12 Democrats in favor and 2 Republicans opposed) the Israel Security Supplemental Appropriations Act (H.R. 6126), which would rescind some of the Inflation Reduction Act's (IRA) increase in Internal Revenue Service (IRS) funding to pay for $14.3 billion in Israel aid. The Congressional Budget Office (CBO) said November 1 that rescinding $14.3 billion in IRS funding would add $12.5 billion to the deficit, meaning the bill in total would add $26.8 billion to the deficit. Senate Majority Leader Chuck Schumer (D-NY) said, "Let me be clear: The Senate will not take up the House GOP's deeply flawed proposal. Instead, we will work on our own bipartisan emergency aid package that includes funding for aid to Israel, Ukraine, humanitarian aid including for Gaza … " Both Schumer and Republican leader Mitch McConnell (R-KY) said this week that they were working on details of a supplemental funding package.
The House November 1 approved 214-197 the Legislative Branch appropriations bill and yesterday conducted amendment votes in relation to the Interior & Environment bill (H.R. 4821), which continue today with a vote on final passage. Bloomberg reported that consideration of the Transportation-HUD appropriations bill has been pushed into next week due to concerns over Amtrak cuts and other issues.
The Ways & Means Committee is holding a hearing on "Ensuring that 'Woke' Doesn't Leave Americans Broke: Protecting Seniors and Savers from ESG Activism," on Tuesday, November 7 at 10 a.m.
Senate - The Senate November 1 approved by an 82-15 vote the three-bill appropriations minibus comprising the Military Construction-VA, Agriculture, and Transportation-HUD bills. The Senate is now out of session until 3 p.m. on Monday, November 6, with a procedural vote related to the nomination of Monica Bertagnolli to be Director of the National Institutes of Health (NIH) at 5:30 p.m.
The Finance Committee and Budget Committee are both holding hearings targeting the taxation of high-income individuals next week:
IRS — The IRS announced November 1 that sellers of EVs can now register using the new IRS Energy Credits Online tool to "allow dealers and sellers of clean vehicles to complete the entire process online and receive advance payments within 72 hours. The tool will generate a Time of Sale report that the taxpayer will use when filing their federal tax return to claim or report the credit."
The dollar limitations for retirement plans and certain other dollar limitations that become effective January 1, 2024, have been released by the IRS in Notice 2023-75. The dollar limitations adjusted by reference to IRC Section 415(d) are modified annually for inflation and, consequently, most of them are changed for 2024. Of note, the 2024 pretax limit that applies to elective deferrals to IRC Section 401(k), 403(b) and 457(b) plans increased from $22,500 to $23,000. The dollar limitation for catch-up contributions for participants aged 50 or over remains at $7,500. An EY Tax Alert has details.
A November 1 Bloomberg Daily Tax Report story on the October 30 Executive Order (EO) on the Safe, Secure, and Trustworthy Development and Use of Artificial Intelligence (AI) cited IRS Commissioner Danny Werfel as saying the agency is "absolutely committed" to the President's push to regulate how the federal government uses AI. "The Treasury Department received a directive from the executive order to put out a public report to assess AI specific cybersecurity risks for financial institutions. It will also work with various agencies on assessing AI risks on other parts of the order, a Treasury spokesperson said." The report cited Commissioner Werfel as saying, "I think the president is indicating in this executive order, 'Explore, be innovative, but do it carefully.'" Further, "It shouldn't all be just about cost savings and process efficiency, it's about that balanced against the other downsides that can manifest with AI," he said.
Social Security — During the November 2 Senate Finance Committee 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, there was significant discussion of the SSI Savings Penalty Elimination Act (S. 2767), a bill by Chairman Ron Wyden (D-OR) and Senators Sherrod Brown (D-OH) and Bill Cassidy (R-LA) to reform the Supplemental Security Income (SSI) program.