16 February 2024 This Week in Tax Policy for February 16 Congress: There wasn't much additional news this week on Senate prospects for the Tax Relief for American Families and Workers Act of 2024 (H.R. 7024) TCJA pre-cliffs, the Child Tax Credit (CTC), US-Taiwan double-tax relief, etc. bill. Finance Committee Chairman Ron Wyden (D-OR) urged Senate Majority Leader Chuck Schumer (D-NY) to bring the measure up later this month when the Senate reconvenes the week of February 26. (Congress is out for the President's Day recess next week.) Bloomberg reported Chairman Wyden as saying businesses face consequences for the Senate's inaction on the business and child tax break bill and, "Delays have costs." Senate Finance Committee Republicans have called for a markup of the bill, which could be amended, there or on the floor. Democratic leaders could also append the bill to appropriations legislation required to meet government funding deadlines of March 1 and 8. Punchbowl News February 16 reported House Ways & Means Committee Chairman Jason Smith (R-MO) as saying the latter option may be more likely, with the bill attached as-is to a moving legislative vehicle. Chairman Wyden previously announced the IRS expectation for being able to process changes to people's tax refunds quickly, in approximately six weeks, and said "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." During a February 15 House Ways & Means Committee hearing, IRS Commissioner Daniel Werfel said, regarding how quickly IRS would be able to make the child tax credit adjustments called for under the bill, "Well, we gave you a range of six to twelve weeks required for implementation from the point of enactment. The reason we give a range is because we need to see the final language. But I'm committed to work diligently to make sure we're closer to the six-week end of that range than the twelve-week." Commissioner Werfel also said that, regarding Republican efforts to roll back the IRS funding increase in the Inflation Reduction Act (IRA), "for every $100 million taken from the IRS, the deficit grows by $600 million over 10 years." The House February 14 failed to adopt the rule 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. The vote was 195-225 with 18 Republicans opposed. While some press stories portrayed the development as another unsuccessful rule vote for Speaker Mike Johnson (R-LA), the bill was brought up as a concession to high-tax state Republicans who pushed for SALT cap relief in a broader tax bill, rather than as a leadership priority. The issue is not strictly partisan, but, as press reports noted, Democrats typically don't help Republicans pass a rule. Members of both parties have threatened since the TCJA to withhold support on tax bills unless relief was provided from the $10,000 deduction cap that was included among offsets for tax benefits in the 2017 law, albeit with the knowledge that it would fall disproportionately on Blue States. Even holding the rule vote was probably the greatest measurable progress on the issue yet. Ways & Means member Rep. Nicole Malliotakis (R-NY) was quoted as saying she is confident of winning SALT changes in 2025, when TCJA individual and passthrough provisions expire and other changes promise a major debate on the tax system. The February 15 Wall Street Journal said of districts in New York, New Jersey, and California where residents are particularly impacted by the cap: "The Republicans who represented those districts in 2017 couldn't block the cap, which was designed to raise money from high-income households to pay for across-the-board tax rate cuts. And lawmakers of both parties who have held those swing seats since 2017 haven't been able to get the rest of Congress to repeal or raise the $10,000 limit, which has been hitting harder in recent years because it isn't pegged to inflation … Whoever is sitting in those swing seats in the next Congress will be back again, pushing against the cap." Energy: During the February 14 House Budget Committee Hearing on the Congressional Budget Office's (CBO) Budget and Economic Outlook, CBO Director Phillip Swagel noted the $428 billion increase in estimates for IRA clean energy tax credits included in the February 7 baseline update. Swagel said "the costs of the energy-related tax provisions are much higher than the staff of the Joint Committee on Taxation originally projected. And those costs reflect new emission standards, market developments, and actions taken by the administration to implement the tax provisions." During questioning from Rep. Lloyd Doggett (D-TX), Swagel said, "working with JCT, we project an increase in the cost and, as you say, that's more uptake: there are more credits for electric vehicles, for wind and solar and that will add to the cost … " CBO specifically said $224 billion of the increase is from revised projections of amounts claimed for clean vehicle tax credits attributable to more stringent EPA vehicle emissions standards, Treasury providing greater flexibility than JCT anticipated including for leased vehicles, and transferability. Estimates for other energy-related tax provisions increased $204 billion, due to greater investment in the manufacturing of batteries and in wind and solar power generation than was anticipated in August 2022. Ways & Means: The House party ratio is now 219-213, which gives Republicans only two votes to spare in any party-line bill on the floor, after former Ways & Means member Rep. Tom Suozzi (D-NY) won the February 13 New York special election to replace former Rep. George Santos (R-NY). Global tax: On February 15, Treasury announced a US agreement with Austria, France, Italy, Spain, and the United Kingdom to extend through June 30, 2024, the October 21, 2021, moratorium on unilateral measures, including digital services taxes (DSTs), "in light of the continuing multilateral negotiations at the G20/OECD Inclusive Framework." IRA guidance tracker: This table describes select IRS guidance related to the Inflation Reduction Act.
Congress: The House and Senate are out of session for the President's Day recess, through February 23. The Senate will next convene at 3:00 p.m. on Monday, February 26, with a judiciary nomination vote at 5:30 p.m. The House is not scheduled to be back until February 28. Congress faces government shutdown deadlines on March 1 and March 8. An IRS public hearing on proposed regulations (REG-132569-17) relating to the definition of energy property and rules applicable to the IRC Section 48 investment tax credit has been scheduled for Tuesday, February 20 (at 10 a.m.). IRS released a related correction on February 16. This Week in Tax Policy won't be published while Congress is in recess.
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