June 3, 2024 What to expect in Washington (June 3) The House and Senate are back from a one-week week break, and both are in session for two weeks before a House recess the week of June 17, a Senate recess the week of June 24, then both are out for the Independence Day week. There are no deadlines facing Congress before the September 30 expiration of government funding and the farm bill but still plenty of discussion about what is at stake in the November elections, including how lawmakers will approach the TCJA expirations at the end of 2025. There could be more activity from recently convened pre-2025 tax teams and working groups established by Republican members of the tax-writing committees. The House is back today (June 3) with votes on several suspension bills before, later in the week, getting started on the annual government funding bills, beginning with consideration of Military Construction, Veterans Affairs, and Related Agencies (H.R. 8580). The Senate is also back today with a vote at 5:30 p.m. on a Nuclear Regulatory Commission nomination and plans to take up reproductive rights legislation. Tax-writing committee hearings this week include:
Previewing the Tax Court nominations hearing, Tax Notes reported May 30, "There are currently 13 judges on the Tax Court, as the number of vacancies grew to six last year. The work typically covered by the judges whose seats are unfilled has been juggled between the 12 senior judges and six special trial judges working for the court and presiding at trials in 74 cities." Six of the 19 seats are open, and the President has announced an additional three nominations beyond the three considered in the hearing. Looking ahead — There continues to be much speculation about tax and other legislation in 2025. If either party sweeps in the elections, they would be expected to use the budget reconciliation process to enact their policy vision on tax and other issues, with a greater emphasis on revenue offsets now than in the past given debt and deficit concerns. In divided government, there is a lot of gray area and no full picture of what combination of TCJA extensions and other policies, plus revenue offsets, could pass with the as-yet-unknown makeup of Congress and control of the White House. House Ways & Means Committee Chairman Jason Smith (R-MO) has said he would aim to act early in the next Congress on expiring tax provisions, and Majority Leader Steve Scalise (R-LA) has said tax could be a first-100 days issue if Republicans were to sweep in the 2024 elections and end up with control of the White House and Congress. A May 29 Semafor report cited Speaker Mike Johnson as having even grander aspirations, preparing Republicans for a far-reaching bill aimed at addressing a wide range of issues at once. "We don't want to make the mistake that we made in the past," Johnson said. "Back in the 2017 timeframe and in previous years, we Republicans kind of took a single-subject approach to reconciliation. We did one round of health care reform, one round of tax reform. But we're looking at for [fiscal year 2025], we want to have a much larger scope, multiple issues to address in addition to the expiration of the Tax Cuts and Jobs Act." Johnson said, "there'll be a lot of development of those policies in the coming weeks." He did not commit to fully repealing the Inflation Reduction Act (IRA), though past Republican bills have sought to roll back energy tax credits, saying "the details are being determined" on their approach. Similarly, a Bloomberg Daily Tax Report (DTR) story this morning said, "GOP leadership thinks the party didn't take full advantage of the reconciliation tool the last time it controlled the White House and both chambers of Congress, and wants to more extensively use the process if former President Donald Trump returns to the Oval Office, said Rep. Kevin Hern (R-Okla.). 'With reconciliation, it is everything that you ever wished to do and every 8 to 10 years you get to do it, when you have the House, the White House and the Senate,' Hern told reporters recently." Meanwhile, former House Ways & Means Committee Chairman Kevin Brady (R-TX), who ushered in the TCJA during his tenure, continued to warn against increasing the corporate tax rate in an op-ed in the May 31 Wall Street Journal: "Corporations operate on behalf of their shareholders by hiring employees to produce and sell goods and services to customers. If Washington passes a corporate-tax hike, the burden doesn't stop at a check to the Treasury. It must be financed by one or more of that trio: shareholders, workers and customers. The reverse — higher dividend payments to retirees, better wages for workers and reduced inflation pressures on customers — couldn't plausibly be considered a giveaway." A column in the May 31 Washington Post suggested that Republicans may be trying to discredit the Congressional Budget Office (CBO) and other official scorekeepers amid ballooning cost projections. "The CBO and JCT have released several estimates for how much red ink would be required to extend the tax breaks. Each time they release a new estimate, the price grows," the column said. "In fact, since the first estimate was released back in 2018, the cost of extension has grown by about 50 percent, as the Committee for a Responsible Federal Budget recently noted. That's the equivalent of an additional $1.2 trillion through 2034, for a total price tag of more than $4 trillion over a decade. This swelling cost is partly because of higher-than-expected inflation and income growth over the past few years." Some Republicans have already made these concerns known. "I want to make sure that we extend all of the tax reform that we did in 2017 because we know that that gave us the best, basically, economy of my lifetime," said Sen. John Barrasso (R., Wyo.) said in a May 28 Wall Street Journal story. "CBO is regularly wrong and I expect that they are on this as well, because this is going to result in significant growth." The story, "Republicans' $4 Trillion Question: Should They Pay for Extending Trump Tax Cuts?," said of that question, "Republican lawmakers and aides say they have made no decisions, and the ultimate call will depend on whether they have congressional majorities next year — and by how many seats. The internal party discussions are starting now, as senior Republicans plan for the possibility of holding the House and retaking the Senate and White House in November's elections. Doing so would let Republicans control the tax cuts' fate next year." The tax-writing committees' Republican tax teams and working groups cover the following topics:
Of course, there are many ways to frame the extension of TCJA provisions given current economic concerns regarding, debt, deficit and inflation. Politico Morning Tax May 31 said, "Andrew Bates, the senior deputy White House press secretary, circulated a memo on Thursday arguing that a full (and presumably unpaid-for) extension of the expiring individual provisions from the GOP's 2017 tax law would constitute an 'inflation bomb.'" Housing — A story in the June 2 Washington Post, "Skyrocketing rents and home prices may be pivotal in the 2024 election," said, "Housing is largely a local issue, yet it's presenting a challenging and complex problem in Nevada and other battleground states with implications for this year's race between President Biden and former president Donald Trump. Biden has proposed specific policies and tens of billions of dollars to address the supply and costs, while Trump has mainly proposed reducing inflation. As the incumbent, however, Biden could bear the brunt of the blame, as home affordability has grown worse in recent years." The issue of housing came up at the May 21 Senate Finance Committee hearing on child savings accounts. Senator Steve Daines (R-MT) suggested Biden housing incentives as proposed in the FY2025 Budget and State of the Union address, which included a new tax credit for first-time homebuyers and people who sell their starter homes are detrimental rather than beneficial, and one witness highlighted supply issues. Energy tax - May 31, Treasury Department and IRS issued Notice 2024-49 for the IRC Section 45Z Clean Fuel Production Credit. On May 29, Treasury and IRS released proposed regulations (REG-119283-23) related to the IRC Section 45Y clean electricity production credit and IRC Section 48E clean electricity investment credit established by the Inflation Reduction Act. The proposed regulations would provide rules for determining greenhouse gas emission rates, petitioning for provisional emissions rates and determining eligibility for the credits for facilities placed in service after 2024. Among other things, the proposed regulations identify specific qualifying zero greenhouse gas emissions technologies and would require that technologies relying on combustion or gasification to produce electricity undergo a lifecycle greenhouse gas emissions analysis to demonstrate net-zero emissions. Global tax — Treasury Secretary Janet Yellen said May 25 the US government will not sign the Pillar One multilateral convention (MLC) until India and China agree to certain unresolved issues surrounding transfer pricing. Speaking on the sidelines of a 25 May Group of Seven meeting in Italy, the Treasury Secretary was quoted as saying: "India, in particular, has been a holdout and China has not really engaged very much in these negotiations at all." A May 30 Statement by the Co-Chairs of the OECD/G20 Inclusive Framework on BEPS said, "following productive discussions on remaining open issues related to Pillar One of the Two-Pillar Solution to address the tax challenges arising from the digitalisation of the economy, we can report that the Inclusive Framework on BEPS is nearing completion of the negotiations on a final package on Pillar One (which includes a text of the Multilateral Convention (MLC) for Amount A and a framework for Amount B) with the goal of reaching a final agreement in time to open the MLC for signature by the end of June. In this regard, we welcome the expressions of interest by France and Brazil in hosting a signing ceremony as soon as practical after the MLC is opened for signature." A May 31 Tax Notes article said: "Stakeholders can expect the release of two more rounds of OECD administrative guidance for the global anti-base-erosion (GLOBE) rules in 2024, with one containing measures that should benefit American companies, according to a Treasury official. The package, which should be published soon, 'will include certain administrative simplifications and also some key structural rules which should generally be favorable' to U.S. multinational enterprises, Brett Bloom, an attorney-adviser in Treasury's Office of Tax Policy, said May 30 at a Federal Bar Association conference in Washington."
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