President Biden's primetime post-NATO summit news conference last night didn't veer too far into tax policy, but the President, in response to a question about his legacy, did restate one of the tenets of his campaign, which is that "the wealthy [have] got to start paying their taxes." He also highlighted the CHIPS Act, citing "$50 billion in investment in computer chip manufacturing just coming into being" and saying the money is going towards investment in economies in both red states and blue states.

The President also cited falling inflation figures, saying, "Prices are falling for cars, appliances, and airfares. Grocery prices have fallen since the start of the year. We're going to keep working to take down corporate greed to bring those prices down further." As a counterpoint to his competitor in the presidential race, Biden said, "Meanwhile, Trump's calling for a 10% tariff on everything Americans buy, including foods from overseas, vegetables and other necessities. And economists tell us that that would cost the average American working family another $2,500 a year. It's a tax of $2,500 a year."

2025 — Tax and other policy matters are being overshadowed by broader issues in the presidential race, but Republicans and Democrats continue to debate the degree to which 2001/2012/2017 tax cuts contributed to the worsening deficit and debt picture and how TCJA provisions expiring at the end of 2025 should be extended, mainly whether extensions should be paid for and how. Democrats, as President Biden suggested, are focused on tax increases on corporations and wealthy individuals. Republicans have identified some sources of potential revenue, including Senator Chuck Grassley (R-IA) this week calling for reviewing Inflation Reduction Act (IRA) energy tax credits and "ending the law's subsidies for luxury EVs and other regressive giveaways." Press stories are focusing on energy, health, and nonprofit policies as targets.

The energy issue isn't clear cut: odds of full or near-full repeal of IRA energy credits are low, as many projects are in GOP-led districts; Republicans particularly from the Midwest support credits for biodiesel, alternative fuel, and carbon capture and storage; and repealing tax credits for solar and wind projects is opposed by some members.

A story in the July 12 Bloomberg Daily Tax Report (DTR), "Energy Credits a Sticking Point in GOP's Hopes for Tax Package," said the Republican split over whether to roll back energy credits created and expanded by the IRA "could be a potential snag in GOP efforts" to plan for a major tax package in 2025. Credits related to carbon oxide sequestration, biofuel, hydrogen, and nuclear energy have Republican support, and others have generated new energy facilities and jobs in districts represented by Republican lawmakers, the report noted. "I cannot imagine a world, if we have the House, the Senate, and the presidency, where we do not pull up by its roots, many, if not all of the tax subsidies for green energy corporations," Rep. Jodey Arrington (R-TX), Budget Chairman and a member of the House Ways and Means Committee, said in June, according to the report. But "there's also people in the party who want to keep some of them, so it's going to depend on who's in charge and how big the majority is," said Rep. Andrew Garbarino (R-NY) in the story.

Politico this morning reported, "Republicans are eyeing higher taxes on universities, hospitals and other tax-exempt groups to help cover the massive cost of re-upping their expiring tax cuts. Their antipathy toward tax hikes notwithstanding, they have a slew of proposals to increase a special excise tax on university endowment earnings … they're also considering going beyond that, to dun tax-exempt groups that can look a lot like for-profit businesses." The endowment tax has been scrutinized by House Ways & Means Committee members since at least 2015 and was part of one bill approved by the Committee this week addressing campus protests. The Protecting American Students Act (H.R. 8913) intends to incentivize universities to either enroll more American students or spend more of their endowment funds on those students to avoid being subject to the Endowment Tax. In the Politico report, Ways & Means Chairman Jason Smith (R-MO) said, "I am sure that next year, in the Super Bowl of tax, the endowment tax is going to be top and center of who should fit within it and who should not."

The story said more generally, "Aside from nonprofits, Republicans are also considering higher tariffs, raising the corporate tax rate and rescinding Democrats' electric vehicle subsidies to help defray the cost of any plan." Further, "Commercial banks have long complained credit unions don't have to pay income taxes, though they serve a similar purpose, and tax-exempt hospitals sit alongside taxable ones. Lawmakers across the political spectrum … have complained nonprofit hospitals don't provide enough charitable care to justify their tax exemption."

A DTR report from earlier this week, "Obamacare Premium Benefits Targeted as GOP Pushes for Tax Cuts," said: "Conservatives, fighting for tax cuts, are building a case for letting Obamacare's premium tax credits expire next year, potentially leaving nearly 4 million people uninsured. People in low-to-moderate income households can get a refundable tax credit to buy health insurance through Affordable Care Act marketplaces, a provision Democrats expanded in 2021. The following year, Democrats extended the expansion through the end of 2025. President Joe Biden has called for making the expanded tax credit permanent … 'It's going to draw a lot of attention about how we proceed forward,' Rep. Kevin Hern (R-Okla.) said. 'There's a lot of money being spent so we got to figure out every avenue to get after this.'"

Tax Court — As the Senate went out of session for the week on July 10, and for a week-long recess scheduled for the week of July 15, Majority Leader Chuck Schumer (D-NY) took procedural steps toward potential confirmation votes as soon as the week of July 22 on two Tax Court nominees: Kashi Way, who is Legislation Counsel at the Joint Committee on Taxation, and Adam Landy, a Special Trial Judge. The House and Senate are out the week of July 15 for the Republican National Convention in Milwaukee, WI. Upon returning the week of July 22, the House is expected to focus on FY2025 appropriations bills.

The Tax Court nominations were part of a first tranche reported out favorably by the Finance Committee June 13, and the Committee held a hearing July 10 to consider the additional nominations of Jeffrey Samuel Arbeit (currently Legislation Counsel with the staff of the Joint Committee on Taxation), Benjamin A. Guider III, and Cathy Fung to be Tax Court judges. Currently, six of the 19 Tax Court seats are vacant.

As during the prior hearing, Chairman Ron Wyden (D-OR) was complimentary of the often behind-the-scenes work of the Joint Committee on Taxation staff, saying "we appreciate all the work that JCT does for us … we couldn't do our jobs without their professionalism and expertise." Ranking member Mike Crapo (R-ID) said "it is essential to keep the Tax Court staffed with highly qualified judges to ensure that taxpayers receive fair, impartial and efficient hearings." He asked each, in light of the Supreme Court decision overturning the Chevron precedent, "how would you face this challenge of scrutinizing regulatory actions … [and] would you be willing to rule that a treasury regulation is invalid if the guidance does not align with the statutory language and the legislative history?" (The witnesses all answered in the affirmative.)

On a related note, House Majority Leader Steve Scalise (R-LA) July 10 announced Committee activity in wake of the Supreme Court's decision in Loper Bright Enterprises v. Raimondo overturning Chevron deference, saying, "Committees are sending letters to their corresponding federal agencies to demand the review of various overreaching regulations."

Global tax/trade — Ways & Means Chairman Jason Smith and Trade Subcommittee Chairman Adrian Smith (R-NE), in a July 11 letter signed by every Republican on the Committee, called on United States Trade Representative (USTR) Katherine Tai to utilize authorities under Section 301 of the Trade Act to send a strong response to Canada's decision to impose a digital services tax (DST) on US businesses "given the threat the DST poses to American workers and businesses."

Appropriations — The House on July 10 failed to pass the Legislative Branch Appropriations Act (H.R. 8772). The vote was 205-213, with 10 Republicans joining Democrats in opposing the measure. "A longstanding and contentious freeze on a cost-of-living pay raise for members of Congress, in addition to concerns about higher spending, contributed to the GOP dissension," Politico reported. House Republican-authored appropriations bills include spending cuts and policy riders that are opposed to by Democrats and are expected to set up a clash with the Democratic-controlled Senate.

Meanwhile the Senate Appropriations Committee, which has generally taken a more bipartisan approach under Chairman Patty Murray (D-WA) and Ranking Member Susan Collins (R-ME), unanimously approved 27-0 the Legislative Branch, Agriculture-FDA, and Military Construction-VA bills. Not all of their business is bipartisan, however. In a 15-12 vote, the Committee approved 302(b) subcommittee allocations that would set limits of $895.2 billion for defense and $710.7 billion for non-defense discretionary spending, an issue that is complicated by Fiscal Responsibility Act (FRA) agreed-to limits and the traditional partisan tension between defense and non-defense spending. The allocations do not include the $35 billion in additional emergency funding that Chair Murray and Vice Chair Collins have agreed to for fiscal year 2025.

Transportation — During a July 10 Senate Environment and Public Works Committee hearing on "The Response to the Francis Scott Key Bridge Collapse," Senator Ben Cardin (D-MD) said that while "the bridge will be rebuilt and there will be tolls coming from it and that the state benefits from that new facility," the economies locally "benefit from the federal government's resources that are put in." He said that in previous instances of post-disaster rebuilding of the infrastructure and community, "the businesses got back up quicker, sales taxes increased, revenues increased. Local governments did well, states did well. That's what it's all about. It's getting your economy back to scale."

IRS — An EY Alert on June 28 Treasury and IRS final regulations (TD 10002) regarding the reporting and payment of the excise tax on repurchases of corporate stock, "Final regulations on reporting and paying stock repurchase excise tax apply to filings due beginning October 31, 2024," is here.

Health — Today, July 12, the Ways & Means Committee is holding a Field Hearing on Access to Health Care in America: Unleashing Medical Innovation and Economic Prosperity in Salt Lake City, UT.

This Alert won't be published while Congress is away next week.