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February 4, 2024

This Week in Tax Policy for February 2

This Week (February 5-9)

Congress: The House and Senate are in session. The Senate is then scheduled to leave for a two-week recess for President's Day, February 12-23. The House is set to be out for one week, February 19-23.

The SALT Marriage Penalty Elimination Act (H.R. 7160) to provide a $20,000 SALT deduction cap for joint filers for 2023 could come up for a House vote next week.

On Wednesday, February 7 at 9 a.m. is a Ways & Means "Trade Subcommittee Hearing on Advancing America's Interests at the World Trade Organization's 13th Ministerial Meeting."

Last Week (January 29-February 2)

Tax bill: Following the strong 357-70 House vote January 31 on the $78 billion Tax Relief for American Families and Workers Act of 2024 (H.R. 7024), addressing TCJA pre-cliffs and the Child Tax Credit (CTC) plus US-Taiwan double-tax relief and other issues, attention now turns to the Senate. Plans for consideration and moving the bill forward aren't yet clear but bringing it into the Finance Committee for a markup and/or moving it directly to the Senate floor do not seem to be options currently gaining support from Democratic leaders. Given that some Republicans want to amend the bill and others have reservations about it generally, Senate consideration as a standalone bill may be cumbersome. Under the bill, restoring IRC Section 174 expensing for domestic R&D and the prior IRC 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 IRC Section 179 small business expensing amount. Senate Majority Leader Chuck Schumer (D-NY), who expressed support for the bill after it was unveiled January 16 by House Ways & Means Committee Chairman Jason Smith (R-MO) and Senate Finance Committee Chairman Ron Wyden (D-OR), said January 31, "I'm working with Senator Wyden to figure out the best way forward." If the bill is not to be marked up in the Finance Committee or brought straight to the floor, another option may be to eventually incorporate it in appropriations legislation currently being negotiated by the appropriations committees and the leadership. Congress faces two more government funding deadlines, one on March 1 and the other on March 8, and failure to meet those deadlines would trigger a government shutdown. Chairman Wyden said following the House vote, "I'm going to work with Leader Schumer and my colleagues on both sides to get this done as soon as possible." After next week, the Senate is slated to be out for a two-week President's Day recess February 12-23. Senator Wyden also downplayed concerns about enacting the bill after the filing season started (on January 29), saying, "The IRS has confirmed that it will be able to process changes to people's tax refunds quickly, in approximately six weeks. Taxpayers who send their returns to the IRS early in filing season will not need to file amended returns — the IRS will send them their additional refund automatically."

Republicans have expressed concerns with the bill, including Senate Finance Committee members Thom Tillis (R-NC) questioning the Employee Retention Credit (ERC) crackdown revenue offset and Marsha Blackburn (R-TN) arguing that "allowing taxpayers to use their prior-year earnings to qualify for the Child Tax Credit will disincentivize them from working." However, there is beginning to be a more direct argument made against delivering Democrats an election-year win on the child tax credit issue. Former Chairman Chuck Grassley (R-IA) said there are concerns over approving the bill in an election year, especially with additional refunds. "I think passing a tax bill that makes the president look good — mailing out checks before the election — means he could be reelected and then we won't extend the 2017 tax cuts," Grassley said in an NBC News report. "There's disagreement by some people on whether or not the bill upsets strategy for 2025 — extending the 2017 tax bill." Outside pressure to move the bill continues. "Americans for Tax Reform urges all Members of Congress to vote 'YES' on the Tax Relief for American Families and Workers Act (H.R. 7024)," the group said in a statement, making the bill a "key vote."

SALT bill: House Republican members who had been objecting to movement of H.R. 7024 because the bill does not include SALT deduction cap relief were assured that lawmakers would work on the issue in a separate House bill. The House Rules Committee February 1 reported out a rule providing for consideration of a bill (H.R. 7160) to provide a $20,000 SALT deduction cap for joint filers with adjusted gross income of less than $500,000 for 2023. Asked about the SALT cap issue, Senator Schumer said, "I believe that SALT is very important, it's been extremely detrimental to my state and many blue states, and we're going to figure out the best way to undo it."

Chief Counsel nomination: The nomination of Marjorie Rollinson to be Chief Counsel for the IRS was approved for the second time by the Senate Finance Committee January 31. Her nomination expired at the end of the first session of the 118th Congress after the Senate did not act on it. The vote was 16-11, the same tally as the previous vote November 2. Senators Bill Cassidy (R-LA) and Thom Tillis (R-NC) joined the Committee's 14 Democrats in approving the nomination.

Energy guidance outlook: On January 31, Treasury Assistant Secretary for Tax Policy Lily Batchelder said Phase Three of implementation of the Inflation Reduction Act's (IRA) clean energy provisions may include guidance on:

  • credit monetization
  • elective pay
  • transferability
  • EV tax credits
  • 30C Alternative Fuel Refueling Credit
  • Sustainable Aviation Fuel credit
  • next allocations for 48C Advanced Energy Project Credit
  • Clean Electricity Production and Investment Credits

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

US | Interim guidance on stock buyback excise tax offers mixed bag for corporate taxpayers

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

Anticipated Direction of Forthcoming Proposed Guidance on Critical Mineral and Battery

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

IRS and Treasury issue guidance for owners of solar and wind powered energy facilities in low-income communities for increased energy credit under the Inflation Reduction Act

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 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

Treasury Releases Proposed Guidance to Continue U.S. Manufacturing Boom in Batteries and Clean Vehicles, Strengthen Energy Security

12/14/23 — Proposed regulations (REG-107423-23) on 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 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

IRS updates frequently asked questions for the New, Previously-Owned and Qualified Commercial Clean Vehicle Credit

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

Treasury, IRS issue guidance on the Qualified Alternative Fuel Vehicle Refueling Property Credit

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Contact Information

For additional information concerning this Alert, please contact:

Washington Council Ernst & Young