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February 2, 2024

What to expect in Washington (February 2)

Following the strong 357-70 House vote January 31 to pass the $78 billion Tax Relief for American Families and Workers Act of 2024 (H.R. 7024) — which addresses TCJA pre-cliffs, the Child Tax Credit (CTC), US-Taiwan double-tax relief and other issues — attention now turns to the Senate. Plans for consideration aren't yet clear, but some Republicans want to amend the bill and others have reservations about it generally. 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." It's unclear if the bill will be marked up in the Finance Committee or brought straight to the floor, and whether it could come up as a standalone bill or be attached to appropriations legislation required to meet March 1 and March 8 deadlines.

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 as a 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.

Former Chairman Chuck Grassley (R-IA) said there are concerns over aiding Democrats politically by 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, as reported by NBC. "There's disagreement by some people on whether or not the bill upsets strategy for 2025 — extending the 2017 tax bill."

Members of the New York delegation advocating for SALT deduction cap relief were assured that lawmakers would work on the issue in a separate House bill. To that end, the House Rules Committee February 1 reported out a rule providing for consideration of the SALT Marriage Penalty Elimination Act (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. It could come up for a House vote next week. 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."

Tax — 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) and the 14 Finance Democrats voted yes.

On January 31, Treasury Assistant Secretary for Tax Policy Lily Batchelder said Phase 3 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

A February 1 Wall Street Journal story, "A New Global Tax Is About to Raise Billions. The U.S. Is Missing Out," said the 15% global minimum tax is here and raising corporate tax payments but, because of partisan disagreement in Washington, "the U.S. isn't directly collecting any money from domestic or foreign companies because of the deal."

Congress — Ways & Means member Rep. Brian Higgins (D-NY), who announced his retirement in November to become head of a performing arts center, has resigned from Congress, effective February 2, 2024.

Kashi Way, Legislation Counsel at the Joint Committee on Taxation, was one of three nominees to be a United States Tax Court judge announced by President Biden February 1.

Leader Schumer announced that language of a bipartisan border security proposal would be ready sometime between Friday and Sunday and a procedural vote could occur by next Wednesday, February 7. The effort to craft such a plan, which could be appended to and help propel a Ukraine-Israel national security supplemental bill, has been going on for several weeks and has been threatened by election-year politics. The New York Times: "Senate leaders in both parties have called the emerging border agreement the best chance in decades to address the intractable issue of immigration, and President Biden has endorsed it. But right-wing Republicans, egged on by former President Donald J. Trump, have denounced it as too weak, prompting Speaker Mike Johnson to call it dead on arrival in the House and indicating that it may have no path through Congress. And since negotiators have yet to release the text of their agreement, it is not yet clear whether Senate Republicans will embrace or reject it."

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For additional information concerning this Alert, please contact:

Washington Council Ernst & Young