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April 21, 2024

This Week in Tax Policy for April 22

This Week (April 22 - 26)

Congress: The House was in session over the weekend for votes on a national security supplemental after Speaker Mike Johnson (R-LA) split off the ingredients of the Senate-passed measure into separate bills on funding for Israel, Ukraine, and Taiwan and other aid.

The House and Senate are scheduled to be in recess this week. The Senate would have to vote on any House-passed package that is different from the national security supplemental they passed in February, and Senators have been put on notice for possible weekend votes. Senator Rand Paul (R-KY) has indicated he could drag out the process.

Last Week (April 15 - 19)

2024 elections, 2025 cliff: The role of tax policy in the 2024 elections, with the Tax Cuts & Jobs Act (TCJA) cliff soon to follow at the end of 2025, is coming more into focus in Congress and on the presidential campaign trail. In an April 16 speech in Scranton, Pennsylvania — widely viewed as a crucial battleground state in the presidential election — President Biden focused on tax policy and drew 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:

  • "A fair tax code is how we invest in the things that make this country strong: healthcare, education, defense, and so much more … When the very wealthy pay less in taxes, then we have to borrow more and invest less in the things that families really need, from schools, to hospitals, healthcare, roads, bridges, and so much more."
  • The TCJA is a "$2 trillion tax cut that overwhelmingly benefited the wealthiest and biggest corporations and exploded the federal debt."
  • "No billionaire should pay a lower tax rate than a teacher, a nurse, a sanitation worker … my plan calls for a minimum federal income tax of 25 % on billionaires."
  • "Under my plan, nobody earning less than $400,000 will pay an additional penny. I hope you're all able to make $400,000."
  • "Thanks to the law that I wrote and signed, big corporations now have to pay a minimum of 15% tax … It's time to raise the corporate minimum tax to at least 21% so every big corporation finally has to pay their fair share."

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 raising the corporate tax rate to 28% and 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 public opinion relating to the TCJA, 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 included "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." Former President Trump is interested in a new middle-class tax cut if re-elected, maybe through a payroll tax cut, increase in the standard deduction, or rate cut, Reuters reported April 17.

IRA: During the second speech of the three-stop swing through Pennsylvania, President Biden in Pittsburgh April 17 said the IRA was "the most significant law taking on climate change ever anywhere in the world," and, passed only with Democratic votes, includes "billions of dollars in investments in industries of the future, including clean American steel." Referring to the IRA, the President said Republicans "want to repeal that law," and "it would cut the jobs, if you repeal the law." Democrats have celebrated the IRA as an accomplishment and are increasingly looking to highlight the law ahead of the elections. Republicans have, and are expected to continue to, propose repeal of some of the credits to pay for other priorities.

Tax bill: While the April 15 tax filing deadline was at times viewed as a symbolic, if not technical, deadline for the Senate to pass the Tax Relief for American Families and Workers Act (H.R. 7024) business tax and CTC bill, there has been no indication of any imminent action. Future action could involve Senate Majority Leader Chuck Schumer (D-NY) holding a test vote to determine whether there are the requisite Republican votes required to meet the 60-vote threshold for most legislation, with the expectation that most or all Democrats would vote in favor. A WSJ story on the bill said, "Senate Finance Committee Chairman Ron Wyden (D., Ore.), the bill's co-author, said he isn't giving up just because April 15 is passing. 'People that I represent say that a bunch of people in politics are putting their timetable and their interest and their agenda ahead of them,' he said. 'Now, if Republicans come back here and say, you know we've been listening to people and we need a little bit more time to get this done, we can work through that.'" Chairman Wyden, 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 … " Leader Schumer said on social media 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."

The WSJ story noted that Finance Committee Ranking Member Mike Crapo (R-ID) has concerns about the lookback provision allowing prior-year earnings to qualify for the CTC and "is seeking a deal that could get a majority of Republicans to support, not just the bare minimum to get to 60 votes." Tax Notes April 18 reported Senator Crapo repeating a point made by Senator Thom Tillis (R-NC) in March: that the proposal to scale back the Employee Retention Credit as a revenue offset may set a precedent for paying for extensions of expiring tax policies at the end of 2025. "I just wanted to make sure that if the bill goes, if we were able to work out our differences and get something done, I'm trying to be sure that it's very clear that this is not a precedent … " Crapo said. "There was concern, and I expressed this, that a precedent would be set that pro-growth, which is my descriptive of it, pro-growth tax policy requires an offset." At least one Democrat dismissed the point. "'It's remarkable that Republicans actually say this,' House Ways and Means Committee ranking member Richard E. Neal, D-Mass., said of the argument that tax cuts pay for themselves, which he called 'so dated.' That position has 'been dismissed by every mainstream economist in America,' he added."

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

CAMT: In Notice 2024-33, the IRS waived the penalty under IRC Section 6655 for a corporation's failure to pay estimated tax payments attributable to a portion of a corporation's alternative minimum tax (CAMT) due on or before April 15, 2024, or May 15, 2024 (for fiscal-year taxpayers whose tax year begins in February 2024).

Global tax: At the April 16 Ways & Means hearing on the Biden Administration's 2024 Trade Policy Agenda with United States Trade Representative Katherine Tai, 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 the OECD effort to counter the proliferation of digital services taxes may have backfired. He said there are broad concerns about DSTs, and that is why he encouraged the previous Administration to engage in the OECD project. However, Estes noted that Canada is seeking to pursue a DST and the 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 (JCT) estimates 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 policy is Treasury's role.

Bill introductions: On April 15 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.

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

On April 17, IRS updated FAQs for the energy efficient home improvement and residential clean energy property credits.

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

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