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This week (June 10-14)

Congress: The House and Senate are in session this week before a House recess the week of June 17, and a Senate recess the week of June 24, then both are out for the Independence Day week.

The Senate Budget Committee has scheduled a hearing for Wednesday, June 12 (10 a.m.) on, "Making Wall Street Pay Its Fair Share: Raising Revenue, Strengthening Our Economy." Witnesses include Joseph Stiglitz, a former CEA Chair under President Clinton who supports proposals to tax high incomes, including a wealth tax.

The House Ways & Means Trade Subcommittee has scheduled a hearing on "Looking Beyond 2025 for Trade with Sub-Saharan Africa, Haiti, and Others" for Wednesday, June 12 (1:15 p.m.).

Last week (June 3-7)

2025 tax cliff: There were some developments this week related to the House Ways & Means Committee tax teams announced in April and Senate Finance Committee tax working groups assembled in May, both of which are comprised entirely of Republicans. Ways & Means Republicans launched a comment portal for the tax teams on May 21. Now Rep. Carol Miller (R-WV), Chair of the Supply Chains Tax Team, is separately asking for input on energy credits and incentives, with an expected focus on which credits are being effectively utilized and where reforms are needed.

Full Committee Chairman Jason Smith (R-MO) has said some Republicans are interested in a corporate tax rate increase (though he is not advocating for that). On June 5, the Bloomberg Daily Tax Report (DTR) cited Senate Finance Committee Ranking Member Mike Crapo (R-ID) as saying of 2025, "everything is in play in the sense that we are looking at everything," but "pro-growth tax policy does not need to be offset." His working groups are "operational," while "declining to give specifics on what topics they'll cover," the report said. The Republican Finance Committee working group effort had a less public rollout than Ways & Means but press reports have said the groups will split among individual taxes, business measures, international tax, retirement, community development, and energy.

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, and Speaker Mike Johnson (R-LA) has been reported as having grand aspirations for such a bill, intending to address a wide range of issues. House Republicans may be more open to revenue offsets than their Senate counterparts, and changes to the corporate income tax rate — while not expiring after 2025 — have been cited, including by Ways & Means Chairman Smith, as one potential source backed by at least some Republican members. Asked at the CNBC CEO Council Summit June 4 about the potential desire of some Republicans to "trade an increase in the corporate rate in order to keep the personal rates down" as individual TCJA provisions expire after 2025, Speaker Mike Johnson (R-LA) said, "I don't intend to choose. I think we need to do both. And I think you can do that if, at the same time, you're dialing back the regulatory state and you're doing your best to reduce mandatory and discretionary spending. And there are ideas on how to do that. So, I think you have to spur economic growth. And the best way to do that is to bring the taxes down."

Democrats would be expected to back 2025 TCJA extensions only for household incomes below $400,000 and have a whole host of proposed revenue offsets from President Biden's budget proposals and bills in Congress, including an increase in the corporate tax rate and other tax increases on corporations and high-income individuals. Invoking the 2011 Obama-era Buffett Rule, President Biden tweeted June 5, "No billionaire should be paying a lower federal tax rate than a teacher, a nurse, or a sanitation worker." A June 7 Wall Street Journal story, "At End of Trump Tax Cuts, Progressives See Leverage to Target the Rich," cited some Democrats as saying the massive scale of the expirations, over which some expect "a yearlong fight and Christmas-season negotiations," gives the party leverage. "Tax policy will be front and center on the 2025 agenda because the system will undergo an earthquake even if Congress does nothing," said Sen. Elizabeth Warren (D., Mass.). "We must have our own agenda and we will." The story cited possibilities like "allowing full expiration, creating a tax increase no one actively voted for and then cutting taxes and making other changes from there," or "kicking the can down the road" by extending the expiration date.

2024 tax bill: Regarding the House-passed Tax Relief for American Families and Workers Act (H.R. 7024) that would expand the Child Tax Credit, address the TCJA pre-cliffs on IRC Section 174 5-year R&D amortization, 163(j) interest deductibility, and bonus depreciation, and more, Senate Majority Leader Chuck Schumer (D-NY) was reported by Bloomberg as declining to speculate June 4 on whether he will bring the measure up for a vote given Republican objections to the bill. He said he is hopeful Finance Ranking Member Crapo will be open to negotiation, but the report said Chairman Ron Wyden (D-OR) views Senator Crapo's offer as unrealistic.

Appropriations: The House has gotten started on the dozen annual government funding bills with floor consideration of the Military Construction, Veterans Affairs, and Related Agencies (H.R. 8580) appropriations measure under an open rule that allows for amendments (which is less common in the House than in the Senate); teeing up the Department of Homeland Security and State and Foreign Operations Appropriations bills; and releasing text of the Financial Services and General Government Appropriations (FSGGA) bill. In the State and Foreign Ops bill, House Republicans proposed "terminating more than 18 unnecessary programs, including the Organization for Economic Cooperation and Development (OECD)." Tax Notes reported that "the OECD's budget is split into two parts, one that levies contributions that take into account the size of a member's economy, and the other based on participation in particular programs," and that some may view the proposed termination of US participation as House Republicans expressing their desire to sink the two-pillar global tax agreement that they have long derided, for a variety of stated reasons. The FSGGA bill would reduce IRS funding $2.2 billion below the FY24 enacted level, to $10.119 billion, with most of the reduction in enforcement funding. Policy riders include those to prohibit "government-run tax preparation software that Congress has not authorized," likely referring to the Direct File program that the IRS has announced will be expanded and made permanent; and prohibit FinCEN promulgation of beneficial ownership reporting rules.

The prior-year House GOP appropriations legislation proposed cuts to the OECD and IRS and other funding that weren't in the March government funding bill negotiated with the Democratic-controlled Senate. Similar differences between the House and Senate in their approach to the appropriations process are expected this year. The expiration of current government funding after September 30 is one of only two deadline items that must be addressed by Congress before the November elections, and, if history is any guide, could easily be patched via a continuing resolution (CR) until a post-election lame-duck session that could close out the year.

Tax Court: The Senate Finance Committee held a June 4 hearing on the nominations of James Ives to be Treasury Inspector General, and Rose Jenkins, Adam Landy, and Kashi Way, who is Legislation Counsel at the Joint Committee on Taxation, to be judges on the United States Tax Court. Chairman Ron Wyden (D-OR) said Finance members "are big fans of the Staff at the Joint Committee on Taxation" and "couldn't do our jobs without your professionalism," while noting that their work occurs largely behind the scenes. "You've had a very good base of support from colleagues on both sides of this committee," he told Way.

"On the staff of the Joint Committee on Taxation, we consider a number of different perspectives. We always try to be honest brokers in a nonpartisan way. We work with Republicans and Democrats, and try to give the best tax advice possible," Way said. "And I think, certainly, that experience has influenced me and my perspective. And if I was confirmed as a judge, I would try and bring that experience and that perspective and listen to all sides and try to be as fair as possible and take all different perspectives into consideration."

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 … "

Energy tax: Secretary Yellen took some heat over tax credit implementation from fellow Democrats during a June 4 Senate Appropriations Financial Services and General Government Subcommittee hearing. Senator Chris Coons (D-DE) expressed concern about Treasury's implementation of tax credits and "making sure that they reach upstream players in the semiconductor industry," asking when to expect final rules that would make credits available to manufacturing facilities producing semiconductor component parts. Secretary Yellen said Treasury asked for comment on the depth of the supply chain and "we're trying to get the final rules out as quickly as possible." Senator Coons and Appropriations full Committee Chair Patty Murray (D-WA) also expressed concerns about the IRC Section 45V hydrogen credit rules.

In comments that generated the most press attention, Senator Joe Manchin (I-WV) told the Secretary, "I totally disagree with what you are doing implementing the EV credits," which were written so that we would "bring manufacturing back to America." He suggested Congress wanted the credit to apply solely to manufacturing in America and with Free Trade Agreement countries, rather than allowing other countries "in the market and staying in the market for the entire extent of the IRA."

Treasury and IRS June 7 issued Notice 2024-48 that publishes information taxpayers may use to determine whether they meet certain requirements under the Statistical Area Category or the Coal Closure Category in Notice 2023-29 for purposes of qualifying for the Energy Community Bonus Credit.

On 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.

IRA guidance tracker: This list describes select IRS guidance related to the Inflation Reduction Act (IRA).

CAMT

• April 15, 2024 — Notice 2024-33 waived the penalty for a corporation's failure to pay estimated tax CAMT payments due on or before April 15, 2024, or May 15, 2024
• December 15, 2023 — Notice 2024-10 included rules for determining the adjusted financial statement income (AFSI) of a U.S. Shareholder when a controlled foreign corporation (CFC) pays a dividend to the US shareholder or another CFC
• September 12, 2023 — Notice 2023-64 included rules for consolidated groups and foreign corporations
• June 7, 2023 — Notice 2023-42 granted penalty relief for corporations that do not pay estimated tax in connection with the CAMT
• February 17, 2023 — Notice 2023-20 provided interim CAMT guidance for insurance companies
• December 27, 2022 — Notice 2023-7 addressed issues regarding IRC subchapters C and K, "troubled corporations," groups of corporations that file consolidated returns, depreciation of IRC Section 168 property, and the treatment of federal income tax credits under the CAMT

Stock buyback excise tax

• April 9, 2024 - Proposed regulations (REG-115710-22) that, among other things, would impose the excise tax on many ordinary course intercompany funding transactions, including distributions, between US subsidiaries and a foreign parent unless the taxpayer can assert the transactions did not have a principal purpose of funding a stock buyback by the foreign parent

Domestic Content Bonus

• May 16, 2024 — Notice 2024-41 expands list of Applicable Projects to include hydropower

EVs

• May 3, 2024 — Final rules (TD 9995) on clean vehicle credits under IRC Sections 25E and 30D, transfer of credits, critical minerals and battery components, and foreign entities of concern

Sustainable Aviation Fuel

• April 30, 2024 — Notice 2024-37 provides guidance and safe harbors using the 40BSAF-GREET 2024 model

Transferability

• April 25, 2024 — Final regulations (TD 9993) describing rules and definitions for the transfer of eligible credits in a taxable year, including specific rules for partnerships and S corporations

Direct pay

• March 5, 2024 — Final regulations (TD 9988) include rules for the elective payment of credit amounts, including definitions and special rules applicable to partnerships and S corporations and regarding repayment of excessive payments

Alternative Fuel Vehicle Refueling Property Credit

• January 19, 2024 — Notice 2024-20 provides guidance on eligible census tracts

45V clean hydrogen credit

• December 22, 2023 — Proposed regulations (REG-117631-23) include definitions of key terms in the statute, including lifecycle greenhouse gas emissions, qualified clean hydrogen, and qualified clean hydrogen production facility

45X Advanced Manufacturing Production Credit

• December 14, 2023 — Proposed regulations (REG-107423-23) clarifying definitions and confirm credit amounts for eligible components, including solar and wind energy components, inverters

45Y, 48E clean electricity credits

• May 29, 2024 - Proposed regulations (REG-119283-23) on greenhouse gas emission rates

45Z Clean Fuel Production Credit

• May 31, 2024 — Notice 2024-49 on registration requirements

Low-income Communities Bonus Credit

• August 10, 2023 — Final regulations (TD 9979) and Revenue Procedure 2023-27 provide guidance necessary to implement the Program, including, in relevant part, information an applicant must submit, the application review process, and the manner of obtaining an allocation

Advanced Energy Project Credit

• February 13, 2023 — Notice 2023-18, first allocation round (Round 1), which began on May 31, 2023, $4 billion of qualifying advanced energy project credits
• April 29, 2024 — Notice 2024-36 for owners of clean energy manufacturing and recycling projects, greenhouse gas emission reduction projects and critical material projects, announcing the second round of credit allocations for the program to allocate the remaining $6 billion credits
• May 22 — IR-2024-144 announced that the DOE Qualified Advanced Energy Project Credit Program Applicant Portal (48C Portal) is open for any applicants to register for a new round of allocations

48 ITC

• November 17, 2023 — Proposed regulations (REG-132569-17) update types of energy property eligible for the energy credit, requirements and rules generally applicable to energy property

45L Energy Efficient Home Credit

• September 27, 2023 - Notice 2023-65 addresses: person eligible for the credit, determining the applicable credit amount, energy saving, certification and substantiation requirements

Wage and apprenticeship

• August 29, 2023 — Proposed regulations (REG-100908-23) provide details on satisfying the requirements and how taxpayers can cure their initial failure to comply with the requirements by making correction payments to workers and paying penalties to IRS

Energy Community Bonus Credit

• June 15, 2023 — Notice 2023-45, guidance for purposes of the production tax credit (PTC) under IRC Sections 45 and 45Y and the investment tax credit (ITC) under IRC Sections 48 and 48E for electricity facilities
• June 7, 2024 — Notice 2024-48 publishes lists of information that taxpayers may use to determine whether they meet certain requirements under the Statistical Area Category or the Coal Closure Category as described for purposes of qualifying for energy community bonus credit amounts or rates under IRC Sections 45, 45Y, 48, and 48E

45J Nuclear Credit

• March 9, 2023 — Notice 2023-24 provides guidance for computing credit, amount of unutilized NMCL, apply for and allocating unutilized NMCL, and transfer to "eligible project partner"

CHIPS Act 48D Advanced Manufacturing Investment Credit

• March 21, 2023 — Proposed regulations (REG-120653-22) address the eligibility requirements, including defining what constitutes an eligible taxpayer, qualified property and an advanced manufacturing facility
• March 5, 2024 — Final regulations (TD 9989) on direct pay