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April 14, 2024

This Week in Tax Policy for April 12

This Week (April 15-19)

Congress: The House and Senate are in session, with a recess the week following. House business may include a vote on a bill to provide Ukraine funding under more stringent terms than the Senate-passed measure. The Senate next reconvenes at 3 p.m. on Monday, April 15, with a vote at 5:30 p.m. in relation to the nomination of Ramona Villagomez Manglona to be Judge for the District Court for the Northern Mariana Islands.

For most taxpayers, the deadline to file their personal federal tax return, pay any tax owed or request an extension to file is Monday, April 15. On Tuesday, April 16 at 10:30 a.m. is the Senate Finance Committee hearing on the President's Fiscal Year 2025 IRS Budget and the IRS 2024 Filing Season with Commissioner Daniel Werfel.

Also on Tuesday, April 16 at 10 a.m. is the Ways & Means hearing on the Biden Administration's 2024 Trade Policy Agenda with United States Trade Representative Katherine Tai. The Senate Finance hearing with Ambassador Tai is Wednesday, April 17 at 10 a.m. Additionally, Punchbowl News reported April 10 that the Ways & Means Committee "is planning to take up a package of trade bills next week, including addressing the Generalized System of Preferences program, which is expired and benefits imports from developing countries."

Last Week (April 8-12)

Tax bill: There wasn't much reportable progress toward Senate consideration of the House-passed Tax Relief for American Families and Workers Act (H.R. 7024) business tax and Child Tax Credit (CTC) bill, either over the two-week recess or the return to session this week. As questions remained over whether Majority Leader Chuck Schumer (D-NY) would bring the bill up for a test vote and challenge Republicans to provide the 9 or 10 votes necessary to advance the bill or to own its demise, Leader Schumer signaled that he is personally supportive of the measure but efforts to secure the requisite votes are ongoing. Asked at the regular Tuesday post-lunch press conference whether he'd bring the House bill to a vote, Leader Schumer said: "I'm all for the package. If there are enough votes to move it forward in the right way, yes, we'll try to get it on the floor. But right now … they're trying to get enough votes. Yes, the sponsors are trying to see if there are enough votes." Tax Notes April 9 reported Finance Committee Chairman Ron Wyden (D-OR), who crafted the bill with House Ways & Means Committee Chairman Jason Smith (R-MO), as saying, "If the Senate Republicans have concerns now, they ought to bring them to me, but let's get on with it." Finance member Michael Bennet (D-CO) said this week that the bill should be brought up in the Senate. "I believe if you put it on the floor here, you get a broad bipartisan vote in the Senate," Bennet said after a rally focused on the CTC expansion. "There's literally no reason not to put it on the floor." Some Republicans echo that sentiment. Punchbowl News reported Senator Markwayne Mullin (R-OK) as saying he expects problems between the House and Senate in tax negotiations next year if the Smith-Wyden effort fails. "You're not going to pass a House bill that passed overwhelmingly with bipartisan support. And you think you're going to pass a Senate bill with bipartisan support and you're going to get the House to go along with you?" he said. "Do you think Chairman Smith — the chairman of Ways and Means, which all tax bills have to go through — is going to support your bill when you didn't support his? Give me a break."

Taiwan: An April 9 Bloomberg Daily Tax Report (DTR) story focused on United States-Taiwan Expedited Double-Tax Relief Act (H.R. 5988) provisions, which are folded into H.R. 7024, languishing with the broader bill. "If the bigger package is declared dead, an attempt to get the popular Taiwan bill provisions through Congress on their own could still face stiff headwinds, raising 'questions about not just the Senate but how it could get through the House on its own,' said Ray Beeman, a former Ways and Means GOP tax counsel who now leads EY's Washington Council practice … Beeman said Taiwan advocates hoping for relief will have to wait and see the endgame on the tax package, but there's always a sliver of hope for the popular provisions."

An article by EY's Arlene Fitzpatrick, "Taiwan-U.S. Double Tax Matters — Finding a Solution," that was published April 8 in Tax Notes International provides context for various proposals to address the Taiwan-U.S. tax relationship and explains the merits of the options available to navigate this landscape.

Ways & Means TCJA hearing: The long runway of debate over how Congress should address tax policies ahead of the 2025 cliff, when Tax Cuts & Jobs Act (TCJA) individual, passthrough, and many business provisions expire and any number of current tax policies could be reconsidered, continues to play out in Congress. During the April 11 House Ways & Means Committee hearing, "Expanding on the Success of the 2017 Tax Relief to Help Hardworking Americans," the years-long relitigating of the TCJA continued: Republicans credited the bill for economic growth and poverty reduction, while Democrats and one witness said it mostly enriched executives and shareholders less likely to spend the tax savings. Rep. Lloyd Doggett (D-TX) observed the hearing illustrated two paths the US could take on tax: continuing tax cuts to increase the debt under GOP leadership or the 'fair share' tax policies promoted by Democrats. "This is the beginning of what we're going to see over the next 20 months with the expiration of $4.3 trillion worth of tax cuts on all Americans. So, we have a lot of work before us," Chairman Smith said to conclude the hearing.

There was similar debate about the Inflation Reduction Act (IRA), the Democrats' signature law that included hundreds of billions of dollars of energy tax credits. Republicans have, and are expected to continue to, propose repeal of some of the credits to pay for other priorities. Chairman Smith said the credits benefit companies with over $1 billion in sales and EV tax credits are claimed predominantly by households earning six figures. Democrats have celebrated the IRA as an accomplishment and are increasingly looking to highlight the law ahead of the elections. Ranking Member Richard Neal (D-MA) juxtaposed the TCJA with the IRA, saying, "Democrats took a different path and now our economy is the strongest in the world … Our investments in America's workers and families have powered this record growth: new jobs in clean energy and manufacturing, lower health care and energy costs, and holding wealthy tax evaders accountable."

Members also raised issues related to the OECD-led global tax agreement, with Rep. Kevin Hern (R-OK) saying the Biden administration committed the US to a global tax agreement that could diminish US competitiveness and that Congress must approve any such tax changes, which is made clear in the Constitution.

Senate Budget avoidance/evasion hearing: Partisan differences on the path forward for international tax were aired at the April 10 Senate Budget Committee hearing, "Sunny Places for Shady People: Offshore Tax Evasion by the Wealthy and Corporations." The hearing didn't break much new ground on the topic of offshore tax evasion and avoidance by corporations and individuals and the effect on the tax gap, which Ranking Member and former Finance Committee Chairman Chuck Grassley (R-IA) noted has been a focus of Congress for over 20 years. The 2010 Foreign Account Tax Compliance Act (FATCA) imposed new accountholder reporting rules and, Grassley said, the TCJA "combined anti-base erosion and profit shifting measures with a cut to the corporate tax rate" to help "intellectual property previously held offshore for tax reasons return to the U.S."

The Tax Foundation's Daniel Bunn said the TCJA sought to close the gap between the US and foreign tax burden through the corporate rate reduction, and GILTI and FDII promote US R&D and keeping IP in the US. Asked about the President's proposed GILTI reforms for Pillar Two compliance plus a 28% corporate tax, Bunn said they would increase the gap between domestic and foreign taxes and push corporations to develop and move IP offshore. "If the U.S. has a much higher tax burden through GILTI or the domestic corporate tax rate, then instead of continuing to bring IP back or keep IP here in the United States, we'll probably see some of those same games to move things offshore or to develop things offshore rather than do them here in the United States," he said.

Some Democrats on the Budget Committee, which has no jurisdiction over tax legislation, feel not enough has been done to address offshore tax evasion and avoidance and criticized Republican efforts to roll back the IRA's IRS funding. Senator Chris Van Hollen (D-MD) discussed his Disclosure of Tax Havens and Offshoring Act (S. 638), to require disclosure of information on the tax jurisdiction, income, and assets of companies' constituent entities on a country-by-country basis.

Stock buyback tax: On April 9, Treasury/IRS issued proposed regulations (REG-115710-22) on the application of the IRA excise tax on repurchases of corporate stock made after December 31, 2022, which applies at a rate of 1% of the fair market value (FMV) of any stock of a covered corporation that is repurchased by the corporation during its taxable year, minus the aggregate FMV of stock issued by the taxpayer during that year. A Treasury release said the regulations largely adopt the framework of Notice 2023-2, published on January 17, 2023. The proposed rules do modify, among other things, the so-called funding rule for foreign-parented groups. A Treasury press release said the proposed regulations provide a targeted anti-abuse rule to ensure foreign-parented multinational corporations pay their fair share of the stock buyback excise tax, without ordinary course intercompany funding transactions among their corporate affiliates being inadvertently captured. However, the actual language of the proposed regulations is less clear on this point relating to ordinary course funding, including distributions from the US entity to its foreign parent. The IRS simultaneously released proposed rules (REG-118499-23) on the procedures for reporting and paying the new excise tax.

Energy tax: On April 10, Treasury and IRS issued guidance, in the form of a supplemental notice of proposed rulemaking to December 26, 2023, rules on the hydrogen credit. The guidance provides information related to the collection of information for taxpayers to request an emissions value from the Department of Energy (DOE) to petition the Treasury Secretary for a determination of a provisional emissions rate (PER), which is important for purposes of determining the value of the credit.

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 — interim-guidance-on-stock-buyback-excise-tax-offers-mixed-b

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, IRC Section 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 (IRC Section 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, 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

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

3/5/24 - Final regulations (TD 9988) on direct pay, to treat the amount of credits as a tax payment rather than as a nonrefundable credit

describe rules for the elective payment of credit amounts, including definitions and special rules applicable to partnerships and S corporations, and rules regarding repayment of excessive payments

3/5/24 — Final regulations (TD 9989) on direct pay for the advanced manufacturing investment credit under the CHIPS Act

special rules for partnerships and S corporations making the election and rules related to the mandatory pre-filing registration requirement

3/22/24 - Notice 2024-30, energy communities and bonus credit program

expands certain rules for determining what an energy community is for the production and investment tax credits

4/9/24 — Proposed regulations (REG-115710-22) on stock buyback tax

largely adopt framework of January 2023 Notice 2023-2 but modify funding rule for foreign-parented groups; targeted anti-abuse rule to ensure foreign-parented multinational corporations pay their fair share of the stock buyback excise tax, without ordinary course intercompany funding transactions among corporate affiliates being inadvertently captured

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Contact Information

For additional information concerning this Alert, please contact:

Washington Council Ernst & Young