Republican candidate Former President Trump September 12 said at a Tucson, AZ, rally he would eliminate taxes on overtime pay. "We will end all taxes on overtime," Trump said. "The people who work overtime are among the hardest working citizens in our country … " He previously proposed exempting from tax tip income, which Democratic candidate VP Kamala Harris supports some version of, and Social Security benefits. The Wall Street Journal reported, "The Trump campaign didn't immediately provide information on how the tax exemption would work, how large the tax cut would be or whether he's offering any specific spending cuts or tax increases to cover the potential fiscal cost."

EVs - The House September 12 approved by a 217-192 vote H.R. 7980, Rep. Carol Miller's (R-WV) bill addressing involvement by prohibited foreign entities for purposes of the new clean vehicle credit, tightening the Foreign Entity of Concern (FEOC) definition. Seven Democrats voted in favor of the measure (Caraveo, CO; Cuellar, TX; Davis, NC; Golden, ME; V. Gonzalez, TX; Perez, WA; David Scott, GA) and no Republicans voted against. The vote was part of a series of bills this week addressing foreign adversaries.

The White House stopped short of a veto threat but nonetheless issued a litany of criticisms of the bill. "The Administration opposes H.R. 7980, which would raise taxes on American consumers, punish American auto manufacturers, threaten good-paying auto jobs, undermine our Administration's work to protect the American automotive supply chain … and set back efforts to achieve energy security and combat climate change."

Tax markup - The House Ways & Means Committee September 11 approved five bills:

• the Saving Gig Economy Taxpayers Act (H.R. 190), to restore the previous $20,000 de minimis exception for third party settlement organizations Form 1099-K reporting, rather than the $600 limit approved in the American Rescue Plan Act (ARPA) that was postponed twice by the IRS and planned with a $5,000 phase-in for 2024, was approved 22-16
• the USA Workforce Investment Act (H.R. 9461), addressing charitable contributions to a workforce development or apprenticeship training organization was approved 22-15
• the Educational Choice for Children Act (H.R. 9462), addressing charitable contributions to a scholarship granting organization, was approved 23-16 after several Democratic amendments preventing the benefit if schools don't meet conditions regarding disabilities and other issues were defeated, all by 16-23 votes
• H.R. 9495, which extends due dates for certain Federal tax matters for hostages and persons wrongfully detained, was approved 38-0
• H.R. 3269, addressing the taxation of a less-than-lethal projectile device, was approved 21-15

The lengthy debate, especially regarding the education-focused bills, pushed the duration of the hearing past five hours. Republicans generally touted the educational contributions measures as providing freedom for students to pursue diverse opportunities. Democrats argued that there was insufficient protection against fraud and discrimination. Chairman Jason Smith (R-MO) said in an opening statement, "By stopping an intrusive IRS, keeping our communities safe, and providing relief for Americans held hostage and their families, the legislation before us today will help Americans tackle serious challenges."

2025/Tax avoidance hearing — During the September 12 Senate Finance Committee hearing on "The 2025 Tax Policy Debate and Tax Avoidance Strategies," Democrats highlighted the generational tax-avoidance potential of policies like stepped-up basis, while Republicans focused on the risks of allowing the IRC Section 199A pass-through deduction to expire. Chairman Ron Wyden (D-OR) continued to highlight the "Buy Borrow Die" tax avoidance strategy under which, he said, "an ultra-wealthy investor uses his riches to acquire valuable assets … borrows against that value to generate cash," then avoids tax at death due to stepped-up basis. Ranking Member Mike Crapo (R-ID) said taxpayers face uncertainty over taxes amid the question of whether Democrats will let portions of the TCJA expire and tax increases to take hold. Senator Mark Warner (D-VA) said the last true assessment of tax expenditures in Washington was the 2010 Bowles-Simpson commission, when members winced at federal debt of $16 trillion or $17 trillion that is now double that, at $35 trillion. He warned of the impact of interest on the debt, which, he said, "is going to eat us up." A WCEY Alert is available here.

199A: Featured prominently at the hearing was an EY macroeconomic analysis, released in conjunction with NFIB, that concluded that making the 20% small business deduction permanent would create 1.2 million new jobs each year for the first ten years and 2.4 million annually every year thereafter. It would also result in a $750 billion GDP increase in the small business sector over the first ten years, and a $150 billion increase annually after that.

Housing — Senator Tim Scott (R-SC), Ranking Member Crapo, and others September 11 introduced the ROAD to Housing Act (S. 5027), with provisions including reforms to housing counseling and financial literacy programs, eliminating the cap on the number of public housing units that may be converted under the Rental Assistance Demonstration (RAD), homelessness reforms, and requiring HUD to prioritize awarding of competitive grants relating to the construction or preservation of housing to recipients located in or that primarily serve communities designated as Opportunity Zones.

Rail bill — Chairman Wyden and Ranking Member Crapo September 11 introduced the Short Line Railroad Tax Credit Modernization Act (S. 5008) to increase the tax credit available for track rehabilitation and maintenance from $3,500 per mile to $6,100 per mile. It would also make more track eligible for the credit. The base credit was made permanent in 2020. A House companion bill (H.R. 9522) is co-sponsored by Reps. Earl Blumenauer (D-OR) and Mike Kelly (R-PA).

Health care - On September 11, the House Education and the Workforce Committee advanced two health care bills and one Congressional Review Act (CRA) resolution to the full House. The bills advanced aim to address anti-competitive contract terms between provider facilities and insurers and to prohibit provider facilities from charging additional facility fees for telehealth visits furnished by a health care provider located at the facility. The committee also advanced a CRA resolution to block a Biden administration final rule that rescinds a Trump-era 2018 rule that would have expanded the types of employers who could create Association Health Plans (AHPs). The 2018 rule was vacated in court and never implemented.

Government funding - Speaker Mike Johnson's (R-LA) continuing resolution (CR) to extend government funding beyond September 30 and through March 28, 2025, which also includes the SAVE Act bill intended to ensure only citizens are registered to vote in federal elections, was pulled from House consideration. The Speaker said he would continue to work to generate sufficient support for the measure. Among other concerns stifling the bill, some Republicans worry the March end date prevents higher defense funding needed before then. The expectation is that a compromise measure will need to be reached with the Democratic-led Senate prior to the September 30 expiration of government funding.

Hearings — The Senate Finance Committee has scheduled a hearing, "Lower Health Care Costs for Americans: Understanding the Benefits of the Inflation Reduction Act," for Tuesday, September 17 (10 a.m.).

The House Ways & Means Health Subcommittee has scheduled a hearing on "Investing in a Healthier America: Chronic Disease Prevention and Treatment," for Wednesday, September 18 (2 p.m.).

The Senate Banking Economic Policy Subcommittee has scheduled a hearing on "The Macroeconomic Impacts of Potential Tax Reform in 2025" for Wednesday, September 18 (2 p.m.).

CAMT — On September 12, the Treasury Department issued over 600 pages of long-awaited proposed regulations (REG-112129-23) on the application of the 15% corporate alternative minimum tax (CAMT) on the adjusted financial statement income (AFSI) of large corporations. The proposed regulations propose comprehensive rules for determining AFSI, whether a corporation is an applicable corporation, including rules for foreign-parented multinational groups, and the CAMT foreign tax credit. They generally incorporate interim guidance previously issued by Treasury and the IRS in notices over the past two years, but also differ from the prior guidance in some notable respects. Treasury also issued penalty relief (Notice 2024-66) for corporations that fail to pay estimated taxes with respect to CAMT liabilities for tax years that begin after December 31, 2023, and before January 1, 2025. An EY Alert is available here.

The WSJ reported: "The proposed rules explain the definitions and calculations for a parallel corporate tax system based on companies' financial reports, one that runs alongside the regular corporate tax system and makes affected companies pay whichever is greater. The rules mark an attempt to determine, in granular and sometimes impenetrable terms, what counts as a tax toward the 15% total and what counts as income."