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January 28, 2024

This Week in Tax Policy for January 26

This Week (January 29 - February 2)

Congress: The House and Senate are in session. The Senate will reconvene at 3:00 p.m. on Tuesday, January 30. At 5:30 p.m., there will be a vote on confirmation of a judicial nominee. A bipartisan border package that could be appended to a Ukraine-Israel national security supplemental bill could be unveiled and considered.

The Senate Finance Committee has scheduled a January 31 hearing on the nominations of Corey Anne Tellez to be Assistant Secretary of the Treasury for Legislative Affairs and three nominees to be members of the Social Security Advisory Board. Separately, other nominations held over from the last session of Congress, including Marjorie Rollinson to be Chief Counsel for the Internal Revenue Service, had to be renominated at the start of the current session and will require another Finance Committee vote but not another hearing. The Committee is to hold an Open Executive session to vote on the Rollinson nomination at 10 a.m. on January 31, prior to the hearing.

Last Week (January 22 - 26)

Tax bill: The Tax Relief for American Families and Workers Act (H.R. 7024) TCJA pre-cliffs and expanded Child Tax Credit (CTC) bill could get a House floor vote the week of January 29 when members return from recess (only the Senate was in session this week). Guidance on the Weekly Schedule released by the House Majority Leader's office January 26 listed H.R. 7024 under "Legislation that may be considered" for the Week of January 29th. The bill reflects a deal between House Ways & Means Committee Chairman Jason Smith (R-MO), whose panel approved the measure 40-3 January 19, and Senate Finance Committee Chairman Ron Wyden (D-OR), who says support is growing and a strong House vote could compel the Senate to act. House Speaker Mike Johnson (R-LA) hasn't opined publicly on a path forward for the bill in the House and the position of conservative House Republicans has mostly been under the radar. But there has been pressure from some Republicans objecting to the bill's Child Tax Credit (CTC) enhancements and those representing districts President Biden won in 2020 — many of which are in high-tax states — over the bill's omission of relief from the $10,000 SALT deduction cap. There are multiple obstacles to enactment:

  • Calendar. The target for completing the bill by the beginning of the tax filing season, on January 29, is certain to slip and lawmakers are said to view enactment sometime in February as viable in terms of limited disruption to the tax system, but Congress is out of session for part of February and busy with other issues. The Senate, for example, is slated to be in recess February 12-23 for the Presidents' Day State Work Period, while the House is also out for that second week. Government funding deadlines loom March 1 and 8, requiring appropriators to allocate agreed-to topline spending levels to the dozen annual appropriations bills and to draft and process the bills prior to those deadlines.
  • Senate. Finance Committee Republicans have insisted on a markup of the Tax Relief for American Families and Workers Act, which could result in a lengthy consideration of tax issues in general and potentially loading up the bill with priority issues of members. Tax Notes reported Senator Mark Warner (D-VA) as saying "I've got a couple things I'd love to add to this package … But I also get the fact of you want to avoid the Christmas tree analogy — if this is the only tax vehicle moving, and suddenly it gets loaded up with a whole bunch of other items." Leaders would have a more difficult time having the full chamber consider the bill as a standalone measure in the Senate, where significant floor time would need to be devoted to amendments and process, as opposed to attaching it to a large, fast-moving appropriations bill or other measure.
  • Offset. Senate Finance Committee member Thom Tillis (R-NC) has been openly skeptical about the Employee Retention Credit (ERC) crackdown as the revenue offset. Politico cited Senator John Cornyn (R-TX) as saying Republicans discussed the matter over lunch Tuesday, Senator Tillis thinks the ERC item is "a phony" pay-for and, "I think he's got a good point."
  • CTC. A Bloomberg article cited Senate Finance Committee Ranking Member Mike Crapo (R-ID) as saying he's "obviously" concerned about a provision of the CTC that allows some parents without income to claim the break if they earned at least $2,500 the previous year, which some contend may spur workers to quit their jobs in the second year knowing they can still receive the tax credit. Punchbowl News reported January 25, "Senate Minority Whip John Thune, a member of the panel, said he wanted a markup to try to change some of the child tax credit provisions due to concerns about keeping it tied to earnings and work." Finance Committee member Senator Marsha Blackburn (R-TN) said, "allowing taxpayers to use their prior-year earnings to qualify for the Child Tax Credit will disincentivize them from working and harms our workforce and economy. I am hopeful Speaker Johnson or the Senate Finance Committee will address this provision prior to a vote before the Senate." Senator Marco Rubio (R-FL), who is not on Finance but has his own CTC proposal, wrote to the Wall Street Journal January 22, "House Republicans haven't gone far enough, though. Their deal would index the $2,000 credit per child to inflation … , but without a base increase, negotiators have locked in erosion from Mr. Biden's inflation … . Doing nothing isn't an option, because Republicans' pro-family tax cuts from 2017 will expire in 2025. My proposal for the child tax credit would retain the connection to work but allow families to start receiving the credit with their first dollar of earned income, at a rate of 15.3%, to offset combined employee and employer payroll tax liability."
  • SALT. Chairman Smith and Speaker Johnson held a call January 25 with SALT relief-insistent Republicans who, like Democrats from high-tax states, have thus far been unsuccessful in using their leverage to win a change in the deduction cap. The Hill Newspaper reported that tensions were aired on the call, including from Rep. Nick LaLota (R-NY), who has long been vocal on the topic, and that most of the SALT Caucus members on the call were expected to vote against the bill. "There is real anger about the process," one of the lawmakers told the paper, saying they have felt ignored. Significant Democrat support is expected, meaning the SALT-focused members have less leverage.

Under the bill, restoring Section 174 expensing for domestic R&D and the prior Section 163(j) interest deductibility parameters are proposed to be retroactive to 2022 (with elections) and extended through 2025. Also included are an extension of 100% bonus depreciation and an increase in the Section 179 small business expensing amount. The bill is close to paid for with ERC enforcement provisions.

Treasury: Assistant Treasury Secretary for Tax Policy Lily Batchelder is leaving the post at the end of February and will return to New York University, the Bloomberg Daily Tax Report has reported. Politico reported that Aviva Aron-Dine, now a deputy director at the National Economic Council, will replace her. On social media, Batchelder said Aron-Dine "has decades of experience in tax policy, an uncanny ability to think like a lawyer, economist, and implementer simultaneously, and cares passionately about making the tax system fairer." Politico also reported, "Tom West, deputy assistant secretary for tax policy, who also served in the Trump and Obama administrations, is leaving the agency in the coming weeks. Some of his portfolio will be picked up by Shelley Leonard, the deputy tax legislative counsel. Ted Lee, now a senior adviser, is getting a newly created title: deputy assistant secretary for tax policy and delivery. He'll focus on increasing uptake of clean energy breaks, the Child Tax Credit and other provisions." DTR previously reported that Scott Levine is the replacement for Michael Plowgian as the top OECD negotiator at the US Treasury Department. An NYU news item about Batchelder noted, "The position she leaves at Treasury is not the first post Batchelder has held in government. From 2014 to 2015, she was deputy director of the White House National Economic Council and deputy assistant to the president under President Barack Obama. There, she was responsible for tax and budget issues, including tax reform, retirement policy, and low-income benefits. From 2010 to 2014, she served as majority chief tax counsel for the US Senate Committee on Finance."

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, 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 describes how.

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, 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 clean hydrogen

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

1/19/24 — Notice 2024-20, qualified alternative fuel vehicle refueling property credit

guidance on eligible census tracts and to announce the intent to propose regulations for the credit

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