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.