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:
IRA guidance tracker: This table describes select IRS guidance related to the Inflation Reduction Act.