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This Week (September 23 - 27)

Congress: The House and Senate are in session, facing a September 30 deadline to extend government funding and other programs, for what is scheduled to be the last workweek until after the elections.

A Senate confirmation vote on the nomination of Rose Jenkins to be a Judge of the United States Tax Court is set for 5:30 p.m. on Monday, September 23.

Last Week (September 16 - 20)

Elections & tax cliff: There is a continued focus on what tax proposals the next president and Congress will pursue in 2025, how much they will cost, and if and how they will be paid for, with at least one top Republican Senator reviving talk of a current policy baseline that doesn't count the cost of extending tax cuts that are in current law. Democratic presidential candidate Vice President Kamala Harris didn't propose anything new on tax policy this week. But Republican candidate Former President Trump, whose signature TCJA law capped the state and local tax (SALT) deduction at $10,000 through next year, promised to restore the deduction if re-elected. During a September 18 rally in New York, he promised to "cut taxes for families, small businesses and workers, including restoring the SALT deduction, saving thousands of dollars for residents of New York, Pennsylvania, New Jersey and other high-cost states." A September 19 Wall Street Journal editorial, "Trump Repeals His Own Tax Reform," said, "Without the $1.2 trillion in budget savings from extending the SALT cap, Mr. Trump will have to scrap other parts of his reform. This could include the 37% top marginal rate, 20% small business deduction and higher estate and gift tax exemptions. Extending those three items would cost about $1.2 trillion combined over a decade."

A September 18 Washington Post analysis on the 2025 tax cliff generally said Senate Republican leaders were noncommittal regarding Trump campaign ideas that go beyond TCJA extensions, which, in addition to restoring the SALT deduction, include dropping the corporate tax rate to at least 20%, and exempting tip income, overtime income, and Social Security benefits from tax. "I'm not endorsing or not endorsing any of those ideas," said Senate Finance Committee Ranking Member Mike Crapo (R-ID), referring to Trump's proposals. "I think that we are going to have a very broad, deep discussion." Senator John Thune (R-SD), the current second-ranking Republican and vote-counting Whip, said, "We'll take them very seriously and into consideration as we try and put this thing together."

A September 18 Politico story, "Trump giving away the store on taxes with a big bill already coming due," said: "Trump wants to finance his plans with much higher tariffs and by repealing green energy tax subsidies, but even conservative-leaning budget analysts say the numbers don't come close to adding up, and some Republicans in Congress aren't so sure about higher tariffs or scrapping renewable energy credits either. Harris too has proposed big-ticket items, as Republicans are quick to note, including a $50,000 deduction for small businesses, a $25,000 credit for first-time home buyers and a $6,000 child tax credit for newborns. But she's also offered a more comprehensive slate of ways to cover those costs."

A new EY publication, "Key tax issues business leaders are watching as 2025 nears," explains the candidates' positions on individual, corporate and international tax policies that may shape tax legislation in 2025.

Current policy baseline: Roll Call September 18 reported Ranking Member Crapo as saying the cost of extending TCJA provisions due to expire at the end of next year should not be offset because they would simply continue current policy, and that "pro-growth" tax policies also don't need to be paid for. "If you look at history, extending current tax law has never been offset by Congress," Crapo said in the report, referencing the end-of-2012 extension of the Bush tax cuts. "If it's literally not changing tax policy, I'm just telling you what the precedent that Congress has set is."

So, what is that precedent? The FY2013 Obama administration Budget released in February 2012 used a "realistic and fair" adjusted baseline that assumed permanent continuation of the 2001 and 2003 tax cuts (as modified by subsequent legislation) for all taxpayers, plus estate taxes at 2012 parameters and permanent extension of relief from the AMT. While the American Taxpayer Relief Act (ATRA) was estimated by the Joint Committee on Taxation (JCT) to cost $3.9 trillion, the Obama administration stated that the tax provisions would raise revenues by $618 billion relative to the $4.5 trillion baseline adjustment, by discontinuing some provisions for high-income taxpayers. Subsequent Obama budgets included in a current policy baseline permanency of temporary (through 2017) ATRA provisions on Child Tax Credit (CTC) refundability, the Earned Income Tax Credit (EITC), and the American Opportunity Tax Credit (AOTC) for education expenses.

Democratic hearing: The September 18 Senate Banking Economic Policy Subcommittee hearing on "The Macroeconomic Impacts of Potential Tax Reform in 2025" succinctly summed up Democratic tax positions in this year's elections and heading into next year's tax cliff: that the Child tax Credit (CTC), Earned Income Tax Credit (CTC), childcare assistance and other elements of the care economy should be bolstered, and paid for with higher taxes on corporations and high-income individuals. Rather than the broad range of Democratic tax increase proposals put forward in the 2020 election and by the Biden administration since then, the hearing reflected an apparent focus on an increase in the corporate tax rate — under the argument that the TCJA cut to 21% wasn't successful — and proposals to tax high-income individuals and generational wealth. (Republicans on the subcommittee didn't attend the hearing.) Chair Elizabeth Warren (D-MA), who is a member of the Senate Finance Committee — Banking has no jurisdiction over tax issues — said Republicans led by Former President Trump want $7 trillion in additional tax cuts including reducing the corporate rate, while Democrats have proposals for "higher taxes on the rich." She said wealthy Americans make tax-driven decisions, and taxing the ultra-wealthy is good for the economy, fair, and popular. "We need to be on offense by looking at the whole tax system" and deciding that better decisions can be made with the nation's tax dollars, Senator Warren said. Senator Chris Van Hollen (D-MD) said that, in 2017, the message from Republicans was that big corporate tax cuts result in massive economic growth and pay for themselves. Witnesses said business investment did not skyrocket as a result of the TCJA, and instead there were more than $800 billion in stock buybacks in 2018 instead of companies growing their businesses or increasing wages. Van Hollen said that, following enactment of the TCJA, prices went up, wages didn't, stock buybacks increased, the deficit increased and "these guys want to run that movie again."

House GOP plans: Beyond the elections, House Speaker Mike Johnson (R-LA) September 17 promised a "Day One" focus on corporate tax policy if there is Republican control of the House, Senate, and the White House next year, saying, "The first thing we want to do is promote investment and opportunity. And we do that by extending and building upon the Trump tax cuts." He said Republicans will ensure the US is the "preeminent location for the investment and innovation and technology by restoring immediate expensing for R&D costs, by ensuring a strong FDII incentive to encourage U.S. ownership of intellectual property and restoring the 100% expensing provision." Johnson, who joined Congress in 2017 ahead of the TCJA's enactment, further said, "And we'll keep those cuts in place to support job creation along with the double guaranteed deduction and a strong child tax credit. But unlike the Democrats' proposal, we will ensure that our tax policy respects the dignity of work, and it doesn't pay people for staying out of the workforce." The foreign-derived intangible income (FDII) deduction of 37.5% (for a 13.125% rate) is set to drop to 21.875% (for a 16.40625% rate) after 2025. Expensing for R&D costs ended after 2021, replaced by 5-year amortization, and 100% expensing began being phased down after 2022. Both of those provisions were addressed in the Tax Relief for American Families and Workers Act (H.R. 7024) approved by the House January 31 before being blocked in the Senate August 1. Speaker Johnson, who was being interviewed by former Trump administration NEC Director Larry Kudlow at The America First Policy Institute, suggested regulatory reform was, and continues to be, complementary to the GOP's tax-cutting priority.

A September 16 letter to House Ways & Means Committee leaders from business groups led by the U.S. Chamber of Commerce cited the groups' support for H.R. 8184, the Growing and Preserving Innovation in America Act, to permanently preserve the FDII deduction and prevent its phasedown. "The FDII deduction has proven remarkably effective at furthering its policy aims and should be made a permanent, undiluted feature of the U.S. international tax system," the letter said.

Global tax: In a September 17 letter to the OECD, Speaker Johnson and other members of House leadership plus Ways & Means Chairman Jason Smith (R-MO) and Republican members of the Committee expressed support for a lawsuit filed by the American Free Enterprise Chamber of Commerce in the Belgian Constitutional Court challenging the undertaxed profits rule (UTPR). They said the UTPR "would surrender U.S. tax sovereignty, allowing unelected foreign bureaucrats to dictate tax policy, and help foreign governments arbitrarily extract hundreds of billions of dollars from the U.S. economy." They lauded the global intangible low-taxed income (GILTI) tax as a "strong global minimum tax" and said, "Regrettably, the UTPR and other policies envisioned in the OECD global tax deal fail to adequately respect GILTI as the first and only proven global minimum tax in the world, which allows foreign governments to unfairly target Americans."

IRC Section 30C guidance: On September 18, Treasury and the IRS released proposed regulations (REG-118269-23) on the IRC Section 30C Alternative Fuel Vehicle Refueling Property Credit. The provision provides a tax credit for up to 30% of the cost of installing qualified alternative fuel vehicle refueling property, such as chargers and hydrogen refueling property.

IRA guidance tracker: This list describes select IRS guidance related to the Inflation Reduction Act (IRA).

CAMT

• September 12, 2024 - 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 generally incorporating interim guidance previously issued by Treasury and the IRS in notices over the past two years
• 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

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

IRC Section 30 Alternative Fuel Vehicle Refueling Property Credit

• September 18, 2024 — Proposed regulations (REG-118269-23) on credit up to 30% for installing alternative fuel vehicle refueling property, such as chargers and hydrogen refueling property

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