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April 17, 2024

What to expect in Washington (April 17)

The role of tax policy in the 2024 elections, with the Tax Cuts & Jobs Act (TCJA) cliff soon to follow in 2025, continues to be a focus in Congress and on the presidential campaign trail. President Biden April 16 traveled to Scranton, Pennsylvania — widely viewed as a crucial battleground state in the presidential election — to deliver a speech focused on tax policy and draw contrasts with Republicans on the issue that echoed points from his March State of the Union address and FY2025 Budget rollout, and the "fair share" argument and "Buffett Rule" that date back to the Obama administration.

"No billionaire should pay a lower tax rate than a teacher," the President said, continuing to advocate his billionaires' tax proposal for a 25% tax on total income, including unrealized capital gains, for taxpayers with wealth exceeding $100 million. "Biden will head to Pittsburgh on Wednesday and Philadelphia on Thursday as part of an effort to draw contrasts with Trump on tax and economic policies," Reuters reported.

Republicans want to extend TCJA provisions expiring in 2025, while President Biden proposes extending them only for those earning less than $400,000. In addition to a billionaires' tax and increasing the Inflation Reduction Act (IRA) corporate alternative minimum tax (CAMT) from 15% to 21%, the President has proposed tax increases on income, capital gains and dividends, and higher payroll taxes on high-income individuals, and international and other tax increases on businesses. On TCJA public opinion, Politico said April 15, "Multiple polls show a majority of Americans don't think they got a tax cut at all — even though independent analyses show they did. And only about a third of the country approves of the legislation itself, the Tax Cuts and Jobs Act, passed by Congress at the end of 2017."

Senate Finance Committee member Elizabeth Warren (D-MA), commenting on the President's remarks, said on MSNBC April 16 that the TCJA is "more than $2 trillion in tax cuts mostly soaked up by millionaires, billionaires and giant corporations." Between President Biden and Republicans, "on taxes, watch the difference. Joe Biden actually got through a 15% minimum corporate tax on billionaire corporations." Compared to Republicans seeking to extend TJCA provisions for wealthy individuals and large corporations, President Biden "says he is going to raise taxes on the billionaires, and he's going to increase the minimum tax on the billionaire corporations, and that he's going to use that money to invest back in America," Senator Warren said. She said decisions on taxes in 2025 are inevitable: "Taxes are going to happen next year. It is going to be a huge — there's going to be a tax bill one way or another."

Meanwhile, add Senator Kyrsten Sinema (I-AZ) to the list of members working to get a vote on the House-passed Tax Relief for American Families and Workers Act (H.R. 7024) business tax and Child Tax Credit (CTC) bill that is stalled in the Senate. Punchbowl News checked in on efforts to move the bill by Republican Senators Josh Hawley (R-MO) and Todd Young (R-IN) and said Sinema is part of the effort. She and Senator Young are strong advocates of the R&D tax credit, and H.R. 7024 would restore R&D expensing instead of the five-year amortization requirement that took hold after 2021. A Wall Street Journal article, "Companies Reconsider Research Spending with Tax Deal Held Up in Senate," said, "The political wrangling comes as large public companies say the law as it stands is costing them hundreds of millions or billions of dollars, while some owners of small and medium-size businesses say they wonder if their firms will survive."

Senate Democratic leaders continue to pledge their commitment to advancing the bill, which passed the House on a bipartisan vote January 31. Finance Committee Chairman Ron Wyden (D-OR), who crafted the bill with House Ways & Means Chair Jason Smith (R-MO), said to close the April 16 hearing on the President's Fiscal Year 2025 IRS Budget and the IRS 2024 Filing Season, "We are going to pull out all the stops to get this tax bill … " Senate Majority Leader Chuck Schumer (D-NY) tweeted April 15: "It's Tax Day — but GOP obstruction on the Tax Bill has meant millions of families and small businesses face higher taxes We'll keep working to expand the Child Tax Credit, enable more construction of affordable homes, deliver relief to disaster-stricken Americans, help innovation."

Additionally, during the Finance IRS hearing with Commissioner Daniel Werfel, Democrats including Senator Bob Casey (D-PA) praised the role of the Inflation Reduction Act (IRA) IRS funding boost in improving the Service's customer service and enforcement activities targeting complex partnerships. Commissioner Werfel said the IRS has a lot of work to do to evaluate the taxes of corporations, complex partnerships, and wealthy individuals. Senator James Lankford (R-OK) stressed the importance of charitable giving, which he said drops when federal incentives are reduced.

On April 15, which was Tax Day, House Budget Committee Chairman Jodey Arrington (R-TX) introduced the Estate Tax Rate Reduction Act (H.R. 7993), to reduce the estate tax rate from 40% to 20%.

Senators Tammy Baldwin (D-WI), Joe Manchin (D-WV), and Sherrod Brown (D-OH) introduced the Carried Interest Fairness Act (S. 4123) to require carried interest income to be taxed at ordinary wage rates.

An EY Tax Alert, "IRS releases proposed regulations with the procedure for reporting and paying stock repurchase excise tax," is available here.

Trade — Today, the Ways & Means Committee is marking up trade bills addressing issues including:

  • the Generalized System of Preferences (GSP) program (H.R. 7967), which provides nonreciprocal, duty-free tariff treatment to products imported to the US from developing countries;
  • treatment of imports from certain nations for purposes of the de minimis rule that keeps imports under $800 duty- and tax-free (H.R. 7979); and
  • involvement by prohibited foreign entities for purposes of the new clean vehicle credit (H.R. 7980).

GSP was paired with a Miscellaneous Tariff Bill (MTB), which authorizes temporary duty suspensions or reductions for US imports to support domestic manufacturers, in 2021 but the bill was not considered. The programs expired at the end of 2020.

At the April 16 Ways & Means hearing on the Biden Administration's 2024 Trade Policy Agenda with United States Trade Representative Katherine Tai, Chairman Smith announced that he was adding labor and environmental provisions to the GSP bill, which was introduced by Rep. Lloyd Smucker (R-PA) on April 11, in response to requests from Democrats. Rep. Drew Ferguson (R-GA) said he is frustrated by inaction on GSP, which he said is an important tool to create different supply chains. Tai said the Administration is supportive of the reauthorization of GSP. Rep. Earl Blumenauer (D-OR) stressed the importance of Trade Adjustment Assistance (TAA), which provides federal assistance to workers who have involuntarily lost their jobs due to foreign competition and is now only in place in a limited fashion after the most recent authorization expired in mid-2021, and Rep. Linda Sanchez (D-CA) called for TAA to be included in the GSP bill.

The Senate Finance hearing with Ambassador Tai is today, April 17 at 10 a.m.

Global tax — Also during the Ways & Means trade hearing, Rep. Ron Estes (R-KS), a frequent critic of the OECD BEPS 2.0 project, said Pillar Two would accelerate the loss of tax revenue as Treasury ceded the primacy of the US international tax system. On Pillar One, Estes said there are broad concerns about the proliferation of digital services taxes (DSTs), that is why he encouraged the previous Administration to engage in the OECD project, and that condemning DSTs is a bipartisan interest. Estes noted that Canada is seeking to pursue a DST and OECD issued a "convoluted 800-page draft deal," which may refer to the Pillar One Multilateral Convention (MLC). "It is my belief the Pillar One deal now represents a foot in the door to more extraterritorial taxes on successful US businesses," he said. He also noted Joint Committee on Taxation estimates (JCT) on the costs of Pillar One.

Estes said Ways & Means should have been involved in OECD conversations early on and that "it's simply unacceptable that Pillar One, as currently negotiated by the Biden administration, risks sending US dollars to foreign treasuries at the expense of American job creators, innovators, and workers." He asked, regarding the Canada DST, about the threshold for a tax to be considered discriminatory towards the US, as a percentage of in-scope businesses. Ambassador Tai, as she has done in the past, demurred, saying she is the Administration's trade officer, and tax is Treasury's role.

Energy tax — On April 16, IRS updated frequently asked questions in Fact Sheet 2024-14 to provide guidance related to the New, Previously Owned and Qualified Commercial Clean Vehicle Credits.

Health — On April 16, the White House launched the U.S. Global Health Security Strategy (GHSS), which "places county-driven action, equity, and inclusion at its core to ensure the world is better prepared to prevent and respond to health emergencies, including pandemics."

Banking — A Bloomberg story reported Senate Banking Committee Chairman Sherrod Brown (D-OH) as saying he's open to advancing a new law for stablecoins, provided his concerns are addressed, "in a package with a bill authorizing banks to do business with marijuana businesses and another measure clawing back compensation for executives at failed lenders." The report said, "The package of bills could hitch a ride on must-pass legislation to reauthorize the Federal Aviation Administration in May."

National security supplemental — House Speaker Mike Johnson (R-LA) responded to increased pressure to deliver aid to Israel given weekend developments by splitting off the ingredients of the national security supplemental in as many as four bills, with separate votes on funding for Israel, Ukraine, Taiwan and other aid, and other issues. This approach responds to opposition from some Republicans to Ukraine funding. The inclusion of border security provisions, which fell off the Senate-passed bill for lack of support, was reportedly still under consideration. Simmering in the background is the possibility that conservatives dissatisfied with Johnson will move to vacate him from the Speaker position. The NYT said the Speaker's multipart plan "aims to bring together a complicated mix of bipartisan coalitions and allow different factions in the House to register their opposition to pieces of the aid package without sinking the entire thing. And it would ultimately mean cobbling together just enough support from Democrats and mainstream Republicans to pass the legislation amid resistance from hard-right Republicans to Ukraine funding and among left-wing Democrats to unfettered aid for Israel."

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