January 14, 2024
Americas Tax Policy: This Week in Tax Policy for January 12
This week (January 15 - 19)
Congress: The $1.66 trillion FY2024 topline spending agreement announced by Senate Majority Leader Chuck Schumer (D-NY) and House Speaker Mike Johnson (R-LA) on January 7 has caused an uproar from some House conservatives, who effectively shut down any floor business that requires a rule for voting. (Voting down rules was also employed by some members to express dissatisfaction with legislation in the fall of 2023, contravening the historical role of the rule vote as mostly a formality.) Speaker Johnson is vowing to stand behind the agreement. There is increasing talk that an additional short-term continuing resolution (CR) will be necessary to patch funding beyond the January 19 deadline. Second-ranking Senate Republican John Thune (R-SD) said January 9 that a CR until March may be necessary. Anticipating that an additional short-term continuing resolution (CR) will be necessary to patch funding beyond the January 19 deadline, Leader Schumer filed a procedural motion on H.R. 2872, the legislative vehicle for a Continuing Resolution, with a procedural vote next Tuesday. The Senate is in pro forma session only today and will next convene for business on Tuesday, January 16. The House will also reconvene on Tuesday, at noon for morning hour and 2 p.m. for legislative business.
On Wednesday, January 17 at 10 a.m., the Senate Budget Committee will hold a hearing, "The Great Tax Escape: Closing Corporate Loopholes that Reward Offshoring Jobs and Profits." Witnesses:
- Kimberly Clausing, University of California, Los Angeles School of Law
- Roy Houseman, United Steelworkers
- John Arensmeyer, Small Business Majority
- James R. Hines Jr., University of Michigan
- Mindy Herzfeld, University of Florida Levin College of Law
Friday, January 19 (12:00 p.m. ET) is the EY Webcast, "Tax in a time of transition: legislative, economic, regulatory and IRS developments."
Last week (January 8 - 12)
Tax bill prospects: The release of details of a business and family tax package more than a year in the making seemed imminent as congressional tax writers held separate meetings to discuss the proposal January 10, but no formal statement emerged from committee chairmen. House Ways & Means Committee Chairman Jason Smith (R-MO) said January 10 he is "not going to put a timeline on anything" and Senate Finance Committee Chairman Ron Wyden (D-OR) said in Law360, "There is no deal … We've got more work to do." Wyden has said lawmakers are aiming to complete consideration by the start of the tax filing season, which is January 29, focusing on one piece of the package, which would expand refundable child tax credits for the current filing season. There was no exact diagnosis of the holdup, and in what form details would be shared has been unclear, but some members expressed dissatisfaction with the emerging plan; there are ongoing efforts to add items to it; and broader political dynamics in both chambers raise questions about how a tax bill would be received and supported. The discussed package is reported to total roughly $70 billion and is expected to propose restoring IRC Section 174 R&D expensing and prior parameters for IRC Section 163(j) interest deductibility — possibly retroactive to 2022 and extended through 2025 — plus address the expensing phasedown, the Child Tax Credit (CTC), and include other provisions. Politico confirmed speculation in recent days that, on R&D, "The cost of the research and development item will be less than originally predicted because it includes full deductions for domestic R&D only, and not foreign R&D." A crackdown on the Employee Retention Credit has been widely identified as a potential revenue offset.
Support from other Democrats has been mixed. Chairman Wyden said Democrats had prevailed in achieving rough parity in the package on spending on the CTC relative to business tax provisions. Senator Maggie Hassan (D-NH), who has long called for restoring R&D expensing, celebrated the prospect of something finally being done on the issue alongside a "tailored expansion of the child tax credit." And Sherrod Brown (D-OH), a principal advocate for a CTC expansion who is up for re-election this year in a state that voted Republican in the 2020 presidential election and 2022 Senate election, said he was happy with that aspect of the deal, the Wall Street Journal (WSJ) reported. However, other senators and Democratic House members suggested the package falls short. Ways & Means Ranking Member Richard Neal (D-MA) said making the tax credit fully refundable continues to be important to Democrats and some of the proposals in the agreement are "going backward," Bloomberg Government reported. Punchbowl News reported that Democrats pointedly questioned Neal over the issue during a Wednesday meeting. Politico subsequently reported Neal as saying Ways and Means Democrats may be against the bill in its current form, citing the desire for a larger CTC and greater refundability. "We're still trying to build a bigger child tax credit because we think it's a reasonable balance with what we could do on the business side," Neal said in Tax Notes, adding that there's still enough time to make something happen despite the pressing government funding deadlines. Support from both Neal and Senate Finance Committee Ranking Member Mike Crapo (R-ID) had been uncertain in the run-up to the bill. Crapo has acknowledged the political difficulties such a bill faces in both the Senate and House.
As for as additions, Finance Committee Democrats are reportedly pushing for housing provisions in any package, and Chairman Wyden laid down a marker for inclusion of that issue in a December 12 floor speech. Ways & Means member Greg Steube (R-FL) expects his disaster relief proposal to be added to the package, which he also said could see a House vote next week, according to Morning Tax. At the 2024 D.C. Bar Tax Conference January 10, a House Democratic aide suggested that the strong bipartisan support for the United States-Taiwan Expedited Double-Tax Relief Act (H.R. 5988) could make it a strong candidate for inclusion in an eventual package.
Looking ahead to 2025: The Law360 article reported, "Wyden said the negotiations are a precursor to next year's tax negotiations as provisions of the 2017 TCJA expire. 'If you improve the child tax credit, you really strengthen your hand for the big tax negotiations that are going to go on [in] 2025 because you'll be starting from a higher' ground, Wyden said."
On a related note, the staff of the Joint Committee on Taxation (JCT) released a list of provisions of the tax code that expire in 2024—2034, available here.
A Congressional Research Service (CRS) reference table describes TCJA provisions and how they are scheduled to change after 2025, available here.
Nominations: The nomination of Marjorie Rollinson to be Chief Counsel for the Internal Revenue Service was resubmitted to the Senate along with many others January 8, consistent with indications that a Finance re-vote is necessary because of the change to the 2nd session of the 118th Congress. "Nominations that have been neither confirmed nor rejected by the Senate at the time the Senate adjourns sine die or for a period of more than 30 days are returned to the President … " the Congressional Research Service explained. "If a nomination is returned to the President, it is no longer eligible for consideration by the Senate. The President may submit a new nomination, either for the previously returned nominee or for a new candidate. This new nomination is referred to its committee of jurisdiction, which must report out or be discharged before the Senate can vote on confirmation … "
Loss deduction bill: Reps. Jamie Raskin (D-MD) and Jim McGovern (D-MA) January 10 introduced a bill (H.R. 6938) to reinstate the pre-Tax Cuts and Jobs Act deduction for personal casualty losses. The TCJA generally eliminated personal casualty and theft losses not associated with a federal disaster area, though the change expires with many other TCJA individual provisions after 2025. The Washington Post said the impetus for the bill is tax bills faced by victims of scams and other thefts and it "would allow people who have suffered losses since the 2017 tax law change to amend their returns and claim the deduction."
Pillar One: Also at the D.C. Bar conference, Christopher Bello, Attorney-Advisor, Office of Tax Policy, U.S. Department of the Treasury mentioned three remaining sticking points that need to be addressed for the US to be comfortable with signing the Pillar One multilateral convention (MLC): treating Puerto Rico as part of the US, other countries accepting withholding provisions and some tax certainty provisions, and a robust Amount B.
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
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, IRC Section 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 (IRC Section 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, IRC 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
11/17/23 — Proposed regulations (REG-132569-17) on the Investment Tax Credit under IRC Section 48
update the types of energy property eligible for the energy credit, provide additional requirements and rules generally applicable to energy property
See EY Tax Alert 2023-1936
12/1/23 — IRC Section 30D foreign entity of concern proposed regulations (REG-118492-23), plus accompanying DOE rules
FEOC-compliance for battery components determined at the time of manufacture or assembly, and FEOC-compliance for critical minerals determined by reviewing all phases of applicable critical mineral extraction, processing, and recycling
12/14/23 — Proposed regulations (REG-107423-23) on IRC Section 45X Advanced Manufacturing Production Credit
clarifying definitions and confirm credit amounts for eligible components, including for solar energy and wind energy, inverters, qualifying battery components, and applicable critical minerals
See EY Tax Alert 2023-2116
12/15/23 — Notice 2024-10, additional interim CAMT guidance
additional rules for determining the adjusted financial statement income (AFSI) of a US shareholder when a CFC pays a dividend to the US shareholder or another CFC
See EY Tax Alert 2023-2105
12/15/23 — Notice 2024-06, Sustainable Aviation Fuel (SAF) credit
additional safe harbors using the Environmental Protection Agency's Renewable Fuel Standard (RFS) program and related guidance
See EY Tax Alert 2024-0107
12/22/23 — Proposed regulations (REG-117631-23) on the IRC Section 45V hydrogen credit
guidance on how taxpayers can determine lifecycle greenhouse gas (GHG) emissions rates resulting from the hydrogen production process, use electricity from certain renewable or zero-emissions sources to produce qualified clean hydrogen, etc.
See EY Tax Alert 2024-0131
12/26/23 — IRS updated EV credit FAQs
vehicles with battery components manufactured or assembled by a foreign entity of concern aren't eligible for any credit amount
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