February 16, 2024
2024-0422 This Week in Tax Policy for February 16 This week (February 12-16) 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. Date — Guidance | Description | 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 | See EY Tax Alert 2023-0054 | 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 | https://home.treasury.gov/system/files/136/30DWhite-Paper.pdf | 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 | https://www.irs.gov/newsroom/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 IRC 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 | https://home.treasury.gov/news/press-releases/jy1939 | 12/14/23 — Proposed regulations (REG-107423-23) on IRC 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 IRC 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 | https://www.irs.gov/newsroom/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 | https://www.irs.gov/newsroom/treasury-irs-issue-guidance-on-the-qualified-alternative-fuel-vehicle-refueling-property-credit |
Next week (February 19-23) 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. | * * * * * * * * * * | | Contact Information | For additional information concerning this Alert, please contact: Washington Council Ernst & Young | |
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