September 29, 2024 This Week in Tax Policy for September 30 This week (September 30-October 4) Congress: The House and Senate are out of session. Both chambers September 25 approved, and President Biden subsequently signed, a continuing resolution (CR) to extend government funding through December 20. Passage of the government funding measure mostly concluded Congress' business until after the elections, the outcome of which will have a major effect on how a longer-term government funding measure and other matters are handled during an expected lame-duck session in November/December and the end of 2025 TCJA tax cliff next year. The Senate is adjourned until Tuesday, November 12, which is also the date the House is slated to return to session. Wednesday, October 2 (1 p.m.) is the EY Webcast, "Corporate alternative minimum tax: what the proposed regulations could mean for companies." Last week (September 23-27) Election: Both Democratic presidential candidate Vice President Kamala Harris and Republican candidate Former President Trump elaborated on their tax plans in dueling economic speeches this week, in Pittsburgh, PA and Savannah, GA respectively. VP Harris September 25 expressed support for the international tax proposals put forward by the Biden administration, in the context of paying for the New Way Forward to Build American Industrial Strength plan, which includes America Forward tax credits for emerging industries. A press release said Investments in American Innovation will cost approximately $100 billion and "will be paid for by a portion of the proceeds of international tax reform, which seeks to prevent a global race to the bottom and to discourage inversions, outsourcing, or international tax strategies designed by corporations to avoid paying their fair share to the United States." More generally, the Harris campaign's 82-page document on economic plans released on September 25, "A New Way Forward for the Middle Class," said the plan to make the tax system fairer and promote fiscal responsibility will "reform the international tax system so that corporations can no longer get big rewards for shifting jobs and profits overseas." VP Harris said in Pittsburgh September 25, "I will recommit the nation to global leadership in the sectors that will define the next century. We will invest in biomanufacturing and aerospace, remain dominant in A.I. and quantum computing, blockchain and other emerging technologies. Expand our lead in clean energy, innovation and manufacturing. So, the next generation of breakthroughs, from advanced batteries to geothermal to advanced nuclear are not just invented but built here in America by American workers." The "America Forward" plan is a continuation of the approach taken in the Bipartisan Infrastructure Law, the CHIPS and Science Act, and the Inflation Reduction Act (IRA), using industrial policy to bolster investments in target areas and linked to the treatment of workers, including union organization, and supporting investments in longstanding manufacturing, energy, and agricultural communities. The release said Harris wants to foster strategic industries essential to economic growth and national security like biotechnology to help "produce critical medicines," AI, expanding clean energy manufacturing and innovation, revitalizing the semiconductor industry, investing in aerospace and automobiles, and industrial tools and machines. It also said she wants to reform tax laws to let workers share in a company's success, including broad-based employee stock ownership and profit-sharing plans. The newly announced approach competes with Republican candidate Former President Donald Trump's tax and tariff proposals that he restated this week. These include a 15% "Made in America" tax rate for companies that make products in America and, for those that make products elsewhere, "a very substantial tariff when you send your product into the United States." Tariffs were previously described to be 10%-20% or 60% for products from foreign adversaries, and Trump said 100% or 200% could apply to foreign automobiles. In his September 24 speech, Former President Trump said he wants companies that have left the US "to be filled with regret and come sprinting back to our shores," and promised manufacturers, "I will give you the lowest taxes, the lowest energy costs, the lowest regulatory burden, and free access to the best and biggest market on the planet, but only if you make your product here in America." He previously announced the preferential corporate tax rate, drawing comparisons to the Section 199 domestic production activities deduction repealed under the TCJA. The Former President was sharply critical of Democratic presidential candidate Vice President Kamala Harris' tax plans, including "how Kamala treats the American manufacturers: They can all leave — whatever is left of them and there's not that much, they've gotten rid of so much — but if instead you ship production overseas, then she will give you a tax break. So, if you build your product, make your product overseas, she's offering a tax break to make it overseas." He promised expanded R&D tax credits and 100% bonus depreciation/expensing. Revenue offsets: A particular focus as the two candidates have rolled out their tax proposals is how much they will cost and if and how they will be paid for. Former President Trump has said economic growth would cover the cost of end-of-2025 TCJA expirations and has called for tariffs and terminating Inflation Reduction Act (IRA) funds. VP Harris continues to call for "fair share" tax increases on corporations and high-income individuals. Asked during a September 25 MSNBC interview where revenue will come from for priorities like a Child Tax Credit (CTC) expansion or assistance for first-time homebuyers if corporate taxes can't be raised because of a GOP-controlled Senate, Harris said, "We're going to have to raise corporate taxes. We're going to have to make sure that the biggest corporations and billionaires pay their fair share." She further said, "I work with a lot of CEOs, I have spent a lot of time with CEOs," and they "agree that people should pay their fair share." Further, Harris said, "Part of my plan for the economy is investing in new industries in a way that we have active partnership with the private sector. I have worked with the private sector my entire career." An op-ed in the September 24 Wall Street Journal, "A U.S. National Debt Crisis Is Coming," said: "Over the past half-century, interest payments on the federal debt averaged 2.1% of GDP, compared with 3.1% this year. If current trends continue, the annual interest payment will reach $1.7 trillion — 4.1% of GDP — by 2034. The CBO is required to base its estimates on current law, which includes a planned termination of many of the 2017 tax cuts next year. Extending those tax cuts would make the deficit and debt projections even worse. The budget office projects that defense spending, which has averaged 4.2% of GDP over the past 50 years, will shrink to 2.8% by 2034. The growing burden of interest payments, including to foreign creditors, makes it harder to afford the national security we need." Tax Court: The Senate September 23 confirmed by a 69-17 vote the nomination of Rose Jenkins to be a U.S. Tax Court judge. This was the third Tax Court nomination approved by the Senate, with the other two approved in July. Another three nominations were approved by the Finance Committee in July and await floor votes. Remote sales tax: During the September 25 Senate Finance Fiscal Responsibility and Economic Growth Subcommittee hearing, "Providing Small Business Relief from Remote Sales Tax Collection," Subcommittee Chair Maggie Hassan (D-NH) asked about protections for small business in the wake of the Wayfair decision, which are reflected in a discussion draft she is releasing. She said sales tax collection has hit small businesses especially hard in states that don't have sales taxes like New Hampshire and, "It is past time for Congress to take steps to alleviate these burdens and lower costs for small businesses." Senator Hassan said Congress should: require out-of-state governments to increase the simplicity and consistency of sales tax laws for remote sellers; ensure that out-of-state sales tax paperwork is as simple as possible; and require state governments to provide small businesses with no-cost compliance services. Ranking Member Chuck Grassley (R-IA) raised concerns about states that aren't Streamlined Sales and Use Tax Agreement (SSUTA) members not enacting reforms to limit burdens on interstate commerce and businesses ignoring their obligation to collect and remit sales tax, making a case for adoption of simplification requirements. Full Committee Chairman Ron Wyden (D-OR) said, "small businesses in Oregon have been just tied up in a sea of red tape since the decision in Wayfair allowed other states to require them to collect sales taxes on online purchases. You almost have to be an accounting Einstein to collect taxes for 10,000 different jurisdictions." As Politico noted, it isn't clear whether the remote sales tax issue can be taken up next year when Congress will be faced with other pressing tax issues with the expiration of some TCJA provisions. Partnerships: During the September 25 Hamilton Project and Tax Law Center at NYU Law Webinar, "Taking on tax: Modernizing partnership taxation," Chairman Wyden said the partnership rules were written years ago and, with Congress expected to look at issues driving activity in the private sector around tax next year, it would be "legislative malpractice" to ignore partnerships. Chairman Wyden proposed partnership tax changes in a 2021 discussion draft. A Hamilton Project-NYU Tax Law Center policy proposal made recommendations including supplementing related party basis shifting regulation with additional legislation. IRA guidance tracker: This list describes select IRS guidance related to the Inflation Reduction Act (IRA). CAMT
Stock buyback excise tax
Domestic Content Bonus
EVs
Sustainable Aviation Fuel
Transferability
Direct pay
30 Alternative Fuel Vehicle Refueling Property Credit
45Q carbon sequestration credit
45V clean hydrogen credit
45X Advanced Manufacturing Production Credit
45Y, 48E clean electricity credits
45Z Clean Fuel Production Credit
Low-income Communities Bonus Credit
Advanced Energy Project Credit
48 ITC
45L Energy Efficient Home Credit
Wage and apprenticeship
Energy Community Bonus Credit
45J Nuclear Credit
CHIPS Act 48D Advanced Manufacturing Investment Credit
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