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March 1, 2024

This Week in Tax Policy for March 1

This Week (February 26-March 1)

Tax bill: Congress February 29 passed a deal to avert a partial government shutdown, by extending the first tranche of expiring appropriations through March 8, in recognition that full-year bills on those appropriations categories are within reach. The other half-dozen appropriations bills, which lawmakers are making slower progress on, are extended through March 22. Future appropriations legislation is eyed as a possible legislative vehicle for the Tax Relief for American Families and Workers Act (H.R. 7024), which was released by Senate Finance Committee Chairman Ron Wyden (D-OR) and House Ways & Means Committee Chairman Jason Smith (R-MO) January 16 and passed by the House January 31. Senate Finance Committee Republicans have called for a markup of the bill. It's unclear if the extra time afforded by this week's deal will help or hurt the effort, as Senate Republican demands are growing:

  • Senate Finance Committee Ranking Member Mike Crapo (R-ID), who didn't sign onto the bill when it was unveiled, detailed concerns in a February 28 statement that was prefaced by saying efforts to have Senate Republicans "rubber stamp" the package have been counterproductive. "I remain concerned the CTC provisions undermine the work requirement and represent a significant shift — described by some Democrats as a down payment — to transform the CTC from primarily working family tax relief into a government subsidy," Crapo said. "Allowing individuals to receive a refundable credit when they have zero annual earnings — as the prior year's earnings provision allows — is a departure from longstanding policy tying the CTC to work."
  • In a March 1 Wall Street Journal story, Crapo said, "I'm trying to see how we can get to yes on, frankly, what now is a multiplicity of issues," adding that he could see a possible path to passage. "It's not easy, but that's why I haven't been able to put it together yet."
  • According to the Bloomberg Daily Tax Report (DTR), "Crapo said there are 'dozens' of examples of problems members have with the bill. Some want items like technical corrections to the bipartisan retirement law called the SECURE 2.0 Act and traditional tax extenders added to the bill, he said."
  • Politico reported that Chairman Wyden said it may be too late to entertain the types of changes Senator Crapo is requesting. "This is the first time I've heard about this new set of comments," Wyden said. "We're down to having a few weeks to get this done, and we need policies that add support, not subtract support." Wyden added, "It's not as if there hadn't been considerable discussion on these issues during the seven months of talks."
  • Morning Tax February 27 cited Chairman Wyden as saying, "It's been out there for five weeks, and they haven't even said — these critics — here's what we want, and here's what we'll vote for if we get the following things … If a senator wants to get to yes, they can do it, because this is something that has been vetted."
  • Senate Finance Committee member Thom Tillis (R-NC), who leveled some of the earliest criticism of the bill as using an illegitimate revenue offset in the crackdown on the Employee Retention Credit (ERC), said in an op-ed in the February 29 WSJ, "The bill's authors say these changes will save more than $70 billion. They presumably didn't consider that this money should have been left in the Treasury. The employee retention tax credit was never paid for to begin with, as it was passed as part of emergency pandemic relief under the Cares Act. Its hasty implementation resulted in massive fraud and cost overruns. How can any fiscal conservative defend using phony savings to pay for more spending?" He further said, "The fundamental problem with the bill is that Republicans made a major concession to Democrats — allowing the child tax credit to begin to transition into a de facto welfare program — in return for something Democrats already wanted: research-and-development tax breaks for businesses."

The Senate will need at least nine Republicans to pass a tax bill presuming the support of all 51 Democrats, though Senator Joe Manchin (D-WV) has expressed concerns with the CTC expansion. Press reports have noted favorable comments for the bill from Senator Todd Young (R-IN), and off-Committee members like Senators Roger Marshall (R-KS), Markwayne Mullin (R-OK), Josh Hawley (R-MO), and J.D. Vance (R-OH). However, as the WSJ pointed out, "it is far from clear if enough Republicans would vote for a bill most GOP colleagues oppose."

Punchbowl News said, in a report on Chairman Smith encouraging Senate Republicans to detail what they need from the bill, "Other Ways and Means Republicans waved off some criticism of the bill as resulting from the Senate disliking deals that don't begin there. They're also hyperaware that there are only weeks left to get this done. Senate Republicans are 'gonna have to square with American businesses, the people who create the very jobs that want to stay here in America,' Rep. Kevin Hern (R-Okla.) said."

IRS: The Senate February 29 voted 56-41 to confirm Marjorie Rollinson as IRS Chief Counsel. Five Republicans — Senators Cassidy (R-LA), Collins (R-ME), Murkowski (R-AK), Rounds (R-SD), and Tillis (R-NC) — joined Democrats in approving the nomination. Bloomberg: "Rollinson takes over for Acting Chief Counsel William M. Paul, who has led the chief counsel's office since 2021. The chief counsel job has taken on a more important role since passage of the 2022 law known as the Inflation Reduction Act." As Finance Chairman Wyden has said, "Ms. Rollinson has decades of tax and management experience in both the public and private sector, including several years at the Office of the Chief Counsel that she has been nominated to run. If confirmed, Ms. Rollinson would be the first woman to serve as Chief Counsel."

Energy: On the flip side of recent indications by Republicans that they have some Inflation Reduction Act (IRA) energy tax credits in their sights for revenue offsets, and some outside observers saying repeal of the credits could help pay to extend TCJA provisions expiring in 2025, some Democrats are now saying next year's fiscal cliff could be an opportunity to act on even deeper anti-climate change proposals. During a February 27 Brookings Institution event, Senate Budget Committee Chairman Sheldon Whitehouse (D-RI), who also sits on the Finance Committee, suggested it will take a carbon pricing proposal to put the US on a path to adequately confront climate change, and 2025 tax expirations and resulting negotiations could be an opportunity to act. Whitehouse, who sponsors legislation to install a carbon border adjustment environmental trade policy that includes charges on imports from particularly carbon-intensive manufacturers, said the big question is what will be the vehicle for a major anti-climate change proposal: a 2025 tax bill, budget reconciliation, or a bill following a potential future climate-related major emergency involving wildfires or coastal flooding.

Related to Senator Whitehouse's remarks, a story in the Wall Street Journal said, "A U.S. manufacturing and mining boom launched under President Biden is just getting started. Most of it is heading to Republican-leaning communities … More than three-quarters of the factory and mining investments will go to congressional districts held by Republicans, according to data on green-economy announcements. On a statewide basis, $112 billion in investment would go to Republican or Republican-leaning states … Manufacturing for solar components is clustering in Ohio, Texas and Georgia. Battery plants and mining are growing in Nevada."

Former Biden Treasury official Kimberly Clausing, one of the authors of a paper released in conjunction with the Brookings event, suggested 2025 could produce a grand bargain on tax. The paper said, "Because much of U.S. climate policy currently operates through the tax code, 2025 could prove to be a crucial year for U.S. climate policy choices: At the end of 2025, a large number of [TCJA] provisions are scheduled to expire. That creates an opportunity for pragmatic evaluation of the trade-offs that result from — among other factors — lower tax revenues and continued incentives to invest in decarbonization." The paper said the "scheduled expirations of lower tax rates, fiscal pressures, and unmet climate targets suggests that a range of climate policy options could be under consideration as policymakers debate future tax policy," and it considers the energy and economic implications of repealing or expanding IRA incentives, and a carbon fee.

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

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

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

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, 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

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

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

Next Week (March 4-8)

Congress: The House and Senate are in session. The long-term legislation to extend the half-dozen appropriations bills that now expire March 8 is expected to be released over the weekend and presumably considered next week.

P1 hearing: On Thursday, March 7 at 2 p.m., the House Ways & Means Tax Subcommittee will hold a hearing on "OECD Pillar 1: Ensuring the Biden Administration Puts Americans First."

SOTU: Also on Thursday, March 7, is President Biden's State of the Union Address. Bloomberg reported, "President Joe Biden will advocate plans to increase taxes on the wealthy and corporations as well as to lower prescription drug prices in his State of the Union address next week … The White House didn't offer additional details, but on the campaign trail lately, Biden has been advancing the idea of raising the corporate tax rate from 21% to 28% as well as a tax hitting capital gains for billionaires."

Politico reported a White House official as saying issues the President will talk about include "making the wealthy and corporations pay their fair share, putting the middle class first." The report also said progressive groups have encouraged the President to talk about protecting Social Security and connecting the program with taxing billionaires.

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Contact Information

For additional information concerning this Alert, please contact:

Washington Council Ernst & Young