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This week (August 5-9)

Congress: The House and Senate are out of session until September 9.

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.

This Week in Tax Policy won't be published while Congress is away.

Last week (July 29-August 2)

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).

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

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

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, 2024 — 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

• 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

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