04 August 2024 This Week in Tax Policy for August 2 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. Tax bill: A Senate vote to begin consideration of the Tax Relief for American Families and Workers Act (H.R. 7024) package addressing the Child Tax Credit, TCJA pre-cliffs (R&D, interest deductibility, and expensing), housing, disaster relief, and Taiwan had been under discussion since the House passed the bill January 31, and prospects had dimmed as the August recess approached. But Senate Majority Leader Chuck Schumer (D-NY) opted to hold the vote, as a boost for Democrats, like Sherrod Brown (D-OH), who are up for re-election this year who have advocated for a CTC expansion, and to respond to Republican vice-presidential candidate Sen. J.D. Vance (R-OH) saying Democratic presidential candidate Vice President Kamala Harris is calling for an end to the CTC. The August 1 vote failed, as expected, as most Republicans opposed the bill after some GOP leaders argued that a better deal could be struck on tax issues in 2025 if the GOP gains greater control in Congress and, perhaps, the presidency. The vote was 48-44 with 60 votes required and only three Republicans voted in favor: Senators Markwayne Mullin (R-OK), Josh Hawley (R-MO), and Rick Scott (R-FL). Punchbowl News reported August 1, "Sen. Todd Young (R-Ind.), who expressed support for the bill before voting against it today, said the scale of the negotiations [next year] could help leave room for necessary 'horse trading.'" Senator Vance was on the campaign trail, at the US border in Arizona, and absent for the vote. Senators Bernie Sanders (I-VT) and Joe Manchin (I-WV), who caucus with Democrats, voted "no." Leader Schumer voted "no" for procedural reasons, allowing him the option to move later this year to try for another vote on the bill. With this vote on August 1, it is unlikely that the Senate will pass the bill, at least before the election, though Leader Schumer has expressed some hope for reconsideration after the August recess. The $78 billion bill would expand the Child Tax Credit and the Low-Income Housing Tax Credit (LIHTC); address the TCJA pre-cliffs on IRC Section 174 five-year R&D amortization, 163(j) interest deductibility, and bonus depreciation; and provide disaster relief and tax treaty benefits with Taiwan. It is nearly fully paid for with Employee Retention Credit (ERC) enforcement provisions. Presidential race: Tax and other economic policy issues are a significant focus of the presidential race with the impending fiscal cliff of TCJA provisions expiring at the end of 2025. In remarks at the Turning Point Believers Summit in West Palm Beach, FL, July 27, former President Donald Trump said, "We will pass massive tax cuts for workers and that includes no tax on tips … No tax on tips. Remember that's a big deal." He also expressed concern about the expansion of the IRS workforce following enactment of the Inflation Reduction Act (IRA). There is expected to be general continuity with Biden administration policy positions now that Vice President Kamala Harris is atop the ticket, but there is also some daylight between Biden and Harris positions on tax and other issues as they presented themselves as candidates for the 2020 election. An opinion column by Aden Barton in the July 28 Washington Post asked "How should Kamala Harris change Biden's policy agenda?" One recommended idea is abandoning the pledge to not raise taxes on those earning less than $400,000 annually, saying "middle-income earners must pay higher tax rates." Other ideas include fighting climate change even beyond what was provided in the IRA and making childcare a signature campaign issue. 2025 tax cliff: In the July 31 New York Times story previewing the "Super Bowl of Tax" when TCJA provisions expire at the end of 2025: "We're studying and preparing," said Senator Michael D. Crapo of Idaho, who as the top Republican on the Senate Finance Committee has been holding meetings and gathering ideas about next year. "It's preseason." Amid expected continuity with Biden but some uncertainty, VP Harris "has pledged to raise taxes on the wealthy and corporations, yet her campaign has not detailed all of her tax-policy views. People who have previously worked for her said she would likely stick to many of the Biden administration's positions." The story noted that Biden has proposed raising the corporate tax rate, raising the highest marginal income rate, and "making ultrawealthy Americans pay taxes on investment gains on assets they have not yet sold." However, "when Democrats last controlled both chambers of Congress, in 2021 and 2022, lawmakers rejected much of Mr. Biden's tax agenda, making it uncertain where the party could land next year." Further, "House Democrats on the Ways and Means Committee have held a series of dinners to discuss next year's expiration, and they have also met with nonpartisan tax experts from the Joint Committee on Taxation." The Bloomberg Daily Tax Report said July 29, regarding recent activity of Ways & Means Committee Republican tax teams: "The House GOP supply chains panel led by Rep. Carol Miller (R-W.Va.) toured an oil rig and heard from stakeholders in southern Ohio, last week. The group led by Rep. Mike Kelly (R-Pa.) that's taken a special interest in opportunity zones — his Erie, Pennsylvania-centered district has benefited from the program — toured a project in Washington. Rep. David Schweikert (R-Ariz.), whose team is focusing on the new economy, met last week to discuss worker classification issues as the number of US gig workers grows. Rep. Adrian Smith (R-Neb.)'s rural America tax team is slated to hold meetings with stakeholders during travel in Nebraska and Iowa on August 15 … " EVs: During the July 31 Senate Budget Committee hearing, "Charging Ahead: The Future of Electric Vehicles," Chairman Sheldon Whitehouse (D-RI) extolled the virtues of EVs but said they need to be supported by a stronger and more modern electric grid. He also said that lawmakers must "also find a way to reconcile the surging EV market with a Highway Trust Fund that provides 80% of federal highway spending with a majority of its revenue from federal gas taxes." Some witnesses said electrical infrastructure improvements to handle EVs are underway or being planned. Ranking Member Chuck Grassley (R-IA) said "EV technology is impressive and works well for some," mostly those in suburban and urban areas, but he expressed concern that critical minerals for battery production are predominately mined elsewhere. Senator Grassley also said he has "yet to hear a comprehensive plan to make EV owners pay into the Federal Highway Trust Fund," aside from some states charging extra fees. He noted that the trust fund is projected to be exhausted in 2028. Senator Lindsey Graham (R-SC), from an auto industry-heavy state, said there needs to be a way to make up lost HTF revenue (collected from the gas tax) to pay to maintain the roads, and to come up with an answer about how to improve power grid. He said processing facilities to make a battery don't really exist here. Senator John Neely Kennedy (R-LA) asked why, if EVs are such a good idea, they require subsidies. Opportunity Zones: The July 30 Senate Finance Committee hearing on Tax Tools for Local Economic Development focused on Opportunity Zones and the future of development tax credits and bond financing. Chairman Ron Wyden (D-OR) highlighted the New Markets Tax Credit that he said has "helped get thousands of projects off the ground, health care and manufacturing, childcare centers and schools, retail developments and housing, lots of affordable units." The credit expires at the end of 2025 and, "I want to make sure this doesn't get lost, doesn't get lost next year in what is certainly going to be a spirited discussion about the future of the tax code." Wyden also highlighted the tax exemption for municipal bonds and private activity bonds, saying, "The 2017 Trump tax law diminished the value of these tax-exempt bonds, unfortunately, because it made it harder for state and local governments to reduce their debt." Further, he said, "The fact is, with much of the Trump tax law expiring at the end of next year, there are fresh concerns that Republicans are going to try to go after these key financing tools, again, to pay for the multi-trillion-dollar cost of extending the Trump tax cuts to the very wealthy." Ranking Member Mike Crapo (R-ID) noted that Senator Tim Scott (R-SC) has introduced legislation to extend and improve the Opportunity Zones program, including by requiring reports so Congress can monitor how investments are working, and that witness Shay Hawkins was a member of Senator Scott's staff in 2017 and "was instrumental in developing the Opportunity Zones program." Senator Crapo said, "Opportunity Zones, the New Markets Tax Credit, the historic tax credit, the tax-exempt bonds, and the low-income housing tax credit all spur local economic development. And we can see tangible results in communities around the country." Hawkins said he wants to "empower the Treasury Department to compare the performance of Opportunity Zones against areas that could have been designated that weren't, and also against the broader economy as a whole across a number of measures." IRA guidance tracker: This list describes select IRS guidance related to the Inflation Reduction Act (IRA).
Document ID: 2024-1481 | |||
