This Week (July 29 - August 2)

Congress: The House is out of session until September 9, having cancelled votes the week of July 29.

The Senate is back at 3 p.m. on Monday, July 29, and expected to continue consideration and move to final passage of an internet safety for children and teens package encompassing the Kids Online Safety Act (KOSA) and the Children's and Teens Online Protection Act (COPPA).

On Tuesday, July 30 (10 a.m.), the Finance Committee is scheduled to hold a hearing on Tax Tools for Local Economic Development, with at least some expected focus on Opportunity Zones.

The staff of the Joint Committee on Taxation published a report in advance of the hearing, "Tax Incentives for Economic Development and Financing."

2024 tax bill: The focus on the online safety bill likely means the Senate won't conduct a vote prior to the August recess on the House-passed Tax Relief for American Families and Workers Act (H.R. 7024) that would expand the Child Tax Credit and the Low-Income Housing Tax Credit (LIHTC); address the TCJA pre-cliffs on IRC Section 174 5-year R&D amortization, 163(j) interest deductibility, and bonus depreciation; and provide disaster relief and tax treaty benefits with Taiwan. The vote would be expected to fail, lacking GOP support to meet the 60-vote filibuster threshold that applies to most legislation, but would put Republicans on record in opposition. Senate Finance Committee Chairman Ron Wyden (D-OR) continues to cite Republican intransigence for preventing a vote.

• "The ball is in their court," Wyden said in the July 24 Bloomberg Daily Tax Report. "It sounds a little bit like, 'Hey, we'll wait until 2025, then we can get that corporate tax breaks for our buddies, and who cares about the family stuff.'"
• Morning Tax reported July 24: "Sen. Roger Marshall (R-Kan.), one of the minority of Senate Republicans who has expressed support for the tax bill, said he now thinks it's dead. 'I think that we've decided that if we wait when we [have] the Senate majority, that we will have a better chance of getting a little bit better bill through the finish line,' Marshall said."
• Wyden in Punchbowl News July 26: "I think Republicans have shown that they have no interest in being bipartisan with respect to taxes, and that's in pretty sharp contrast to what we've been saying, [which] is we've reached out in these negotiations again and again."

Last Week (July 22 - 26)

Presidential race: Tax and other economic policy issues were just one focus of the changing political outlook this week with Vice President Kamala Harris entering the presidential race, but still a significant one with the impending fiscal cliff of TCJA provisions expiring at the end of 2025 playing a big role in the 2024 elections. President Biden's tax positions were well-known through his budget proposals and frequent statements on the topic, and much of it was the "fair share" tax argument for corporations and high-income individuals that Democrats have long espoused. There is expected to be continuity with VP Harris atop the ticket. In Milwaukee, WI, July 23, VP Harris launched her campaign for the presidency and drew contrasts with former President Trump, who she said intends "give tax breaks to billionaires and big corporations and make working families foot the bill." Democrats in Congress have been cited as wanting VP Harris to carry on President Biden's tax playbook, and there have been many press stories forecasting how she will approach tax policy:

• July 25, Punchbowl News: "Democratic lawmakers see the tax policy message Biden and fellow Democrats have been running as a winning hand … And Biden's pledge not to raise taxes on anyone who makes less than $400,000 per year? Democrats on the tax-writing committees told us they want Harris to stick with that promise."
• July 23, Wall Street Journal: "Harris would be unlikely to dramatically alter the policy positions adopted by the Biden-Harris campaign so close to the election, some of her allies say. She has already been traveling the country campaigning on the administration's policies … " The story did mention the fact that, as a candidate for the 2020 nomination, then-Senator Harris called for repeal of the Tax Cuts & Jobs Act (TCJA), which would return the corporate tax rate back up to 35%, while President Biden has called for extending the TCJA for those with incomes under $400,000.
• July 23 Washington Post: "[M]any observers expect Harris's campaign to largely pick up where Biden left off on the economy."
• July 21 New York Times: "Notably, Ms. Harris wanted to raise the corporate tax rate from 21 percent to 35 percent, which is higher than the 28 percent that Mr. Biden had proposed."

As a candidate for the 2020 presidential nomination, then-Senator Harris called for repeal of the TCJA, a $500 monthly tax credit for families earning under $100,000 annually, a financial transactions tax, and taxing "offshore corporate income at the same rate as domestic corporate income."

In a Bloomberg interview published July 16, former President Trump continued to call for a corporate tax rate cut, saying of the TCJA rate of 21%: "I liked 20% better. I like 15% yet better, but I think that would be, you know, that'd be hard … Fifteen would get us down to being about the lowest. Look, when I did those tax cuts, this place started to boom." The Tax Foundation said July 17 that lowering the corporate rate to 15 percent would reduce federal revenue by $673 billion from 2025 to 2034 on a conventional basis.

2025 tax cliff: There have been various reports of members and staff meeting with trade groups, companies, and the Joint Committee on Taxation (JCT) staff as part of the long process of laying the groundwork for the expiration of TCJA provisions at the end of 2025. Even with the House out of session until after Labor Day, Republicans are expected to continue during the August recess laying the groundwork for addressing the TCJA provisions that expire at the end of 2025, with the Ways & Means GOP tax teams active and at least one Committee field hearing expected. Republicans generally are highlighting the success of the TCJA in reinvigorating the economy post-2017 and making the case for extension of the individual and pass-through provisions.

Former VP Mike Pence and former Senator Pat Toomey (R-PA), who both also served in the House, authored a joint op-ed in the July 25 Wall Street Journal, "If Republicans Don't Win, Get Ready for a Tax Hike," that argued that the TCJA "helped produce the Trump boom" of economic growth after the 2008-09 financial crisis and period of "weak growth" from 2009 to 2016. "Many American multinational companies kept foreign subsidiaries' profits overseas to avoid punitive U.S. taxes. Others moved their headquarters abroad to reduce their overall tax burdens. These so-called corporate inversions were economically rational, but they cost the U.S. jobs, investment and tax revenue," the op-ed said. "The TCJA changed this dramatically by reducing the federal corporate rate to 21%, modernizing the taxation of profits earned by foreign subsidiaries of U.S. companies, and broadening the profit base on which lower rates apply."

Similarly, in a Washington Examiner op-ed, Ways and Means Committee Vice Chairman Rep. Vern Buchanan (R-FL), chair of the American Manufacturing Tax Team, and National Association of Manufacturers (NAM) President and CEO Jay Timmons, called for action to prevent "a wave of tax increases set to fall on Americans next year, particularly on the heart of the economy — manufacturers and their workers." The op-ed said: "In 2018, manufacturers added 263,000 new jobs, the best year for job creation in manufacturing in 21 years. That same year, manufacturing wages increased by 3%. They continued growing by 2.8% in 2019 and by 3% in 2020. These were the fastest rates of annual manufacturing wage growth in decades."

Congressional Review Act: A July 9 Congressional Research Service (CRS) report, "The Congressional Review Act: The Lookback Mechanism and Presidential Transitions," provided some insight into the CRA process, which applies to a rule submitted to Congress either less than 60 days of session in the Senate or less than 60 legislative days in the House before Congress adjourns sine die, with a new period for congressional review of that rule becoming available in the next session of Congress. "CRS unofficially estimates that Biden Administration rules submitted to the House or Senate on or after August 1, 2024, until the end of the second session of the 118th Congress are likely to be subject to the CRA lookback provisions and will qualify for additional periods of CRA review in the first few months of the first session of the 119th Congress (2025)," the report said. "These renewed periods of review are likely to permit disapproval resolutions aimed at such rules until late March 2025 and make the CRA 'fast track' procedures available to consider such joint resolutions in the Senate until late May or early June 2025."

Congressional Republicans have shown interest in rolling back regulations addressing Inflation Reduction Act (IRA) energy tax incentives, and the tax credits themselves. A July 26 Politico story, "Biden made history with his climate actions; Here's how Trump could unravel them," said while a Trump-led Treasury Department "couldn't fully repeal the credits without the help of Congress, it could revise the pending rulemakings to limit who could qualify while still working within the confines of the underlying law." The clean hydrogen credit guidance is still in the proposed stage, which "means a Trump administration could scrap the proposal and loosen the interpretation to favor fossil fuel companies instead," the story said.

Tax Court: Two Tax Court judges were approved by the Senate this week: Kashi Way, who has served on the Joint Committee on Taxation (JCT) staff, was approved by a 79-16 vote, and Adam Landy 85-12. During opening statements of a July 25 executive session to consider a second tranche of three Tax Court nominations, Finance Chairman Ron Wyden (D-OR) said he is working to bring Rose Jenkins' nomination to the floor for a final confirmation vote as soon as possible and Senate Majority Leader Chuck Schumer (D-NY) "has assured me it's also a priority for him." Only Wyden and Ranking Member Mike Crapo (R-ID) were present at the session; the votes were subsequently held off the floor; and the Committee approved the nominations of Jeffrey Arbeit (who has also served on the JCT staff) and Benjamin Guider both 27-0, and Cathy Fung 19-8.

Finance Committee: Senator Bob Menendez (D-NJ) is widely reported as planning to leave Congress on August 20, which would create a vacancy on the Finance Committee. Selecting a replacement on the committee is leadership's decision but one name widely floated as a contender is Cory Booker (D-NJ), the other Senator from New Jersey. Senator Raphael Warnock (D-GA) and others have also been discussed in relation to the Finance seat opening. Currently, three more seats are open in the next Congress because of Democrats retiring (Cardin, Carper, Stabenow).

Insurance: A bill introduced July 23 by Senators Thom Tillis (R-NC) and Bob Casey (D-PA), the Secure Family Futures Act (S. 4740), would repeal the current capital tax treatment of debt investments held by insurers, such as bonds, and apply ordinary tax treatment to them.

Global tax: On July 25, Ranking Member Crapo and Finance members Steve Daines (R-MT) and James Lankford (R-OK) sent a letter to Senate appropriators requesting that the FY2025 Appropriations Bill prohibit any Part II funding or voluntary contributions to the OECD, an organization that they said "leads the anti-American global tax negotiations that will hinder American competitiveness, send U.S. taxpayer dollars to European bureaucrats, and cause American job losses, yet the U.S. unfairly pays the largest contributions." (The House State-Foreign Operations bill proposes to strip OECD funding.)

Energy tax: On July 24, IRS issued Notice 2024-60 to provide initial guidance on the credit for the sequestration of carbon oxide. The Notice describes information that must be included in a written report known as the lifecycle analysis (LCA) report and provides the procedures a taxpayer must follow to submit the report along with required supporting information to the IRS and the Department of Energy for review.

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
• June 28, 2024 — Final regulations (TD 10002) regarding the reporting and payment of the excise tax on repurchases of corporate stock

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

IRC Section 45Q carbon sequestration credit

• July 24 — Notice 2024-60 provides initial guidance, describing information that must be included in a written report known as the lifecycle analysis (LCA) report and provides the procedures a taxpayer must follow to submit the report along with required supporting information to the IRS and the Department of Energy for review

IRC Section 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

IRC Section 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

IRC Sections 45Y, 48E clean electricity credits

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

IRC Section 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, 2024 — IR-2024-144 announced that the DOE Qualified Advanced Energy Project Credit Program Applicant Portal (IRC Section 48C Portal) is open for any applicants to register for a new round of allocations

IRC Section 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

IRC Section 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

• June 18, 2024 — Final regulations (TD 9998) providing employers and workers with more clarity on what's required for recordkeeping, and employers to adopt worker-centric practices like project labor agreements

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

IRC Section 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 IRC Section 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