13 October 2024

This Week in Tax Policy for October 14

This week (October 14-18)

Congress: The House and Senate are out of session until after the November 5 elections, scheduled to return on November 12.

Upcoming is the deadline for public comments to the House Ways & Means Committee Tax Teams, on October 15.

Last week (October 7-11)

Elections: The elections are less than a month away. Both presidential candidates and their delegates are focused on tax policy as a pocketbook issue that draws distinctions between the campaigns. Republican candidate Former President Donald Trump announced new proposals to prevent double taxation for expats and make auto loan interest tax deductible. In a 60 Minutes interview this week, Democratic candidate Vice President Kamala Harris said, on the matter of how her plans will be paid for, that she will "make sure that the richest among us, who can afford it, pay their fair share in taxes." Confronted with the notion that "Congress has shown no inclination to move in your direction," VP Harris disagreed, saying, "There are plenty of leaders in Congress who understand and know that the Trump tax cuts blew up our federal deficit."

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. In addition, Congressional Budget Office and Joint Committee on Taxation have provided some updated estimates on key tax proposals in President Biden's most recent budget plan that have also been embraced by Vice President Harris. The Committee for a Responsible Federal Budget is out with new estimates of the campaigns' tax proposals, finding that Vice President Harris's plan would increase the debt by $3.5 trillion through 2035, while Former President Trump's plan would increase the debt by $7.5 trillion. Both campaigns took issue with the estimates.

The latest CBO numbers, included in An Analysis of the President's 2025 Budget, estimate:

  • Raising the corporate income tax rate to 28% would raise $881 billion over the 2025–2034 period
  • Ensuring a minimum rate of taxation of global income, which covers global intangible low-taxed income (GILTI) revisions and replacing the base erosion and anti-abuse tax (BEAT) with an undertaxed profits rule, would raise $456 billion
  • Increasing the net investment income tax and Medicare tax rates, from 3.8% to 5% on net investment income and wage and self-employment income over $400,000 respectively, would raise $435 billion
  • Increasing the top marginal income tax rate to 39.6% for high-income taxpayers would raise $191 billion

JCT's estimate of the corporate rate increase to 28% was $469 billion lower than the Administration's estimate in the FY2025 Budget. The JCT's estimates in this regard have historically been lower than the Administration's. The last President's Budget estimates posted on the JCT Website, in 2022 for FY2023, projected the same corporate rate increase to raise $873.4 billion, compared to that year's Treasury Green Book projection of $1.315 trillion.

The CRFB report accounts for spending proposals in addition to tax incentives and revenue offsets. It estimates that extending expiring TCJA provisions only for those with income below $400,000, as VP Harris espouses, could cost $3 trillion over 10 years (the report also offers high- and low-end estimates, which in this case suggest a low of $2.05 trillion and a cost as high as $3.6 trillion). CBO has projected the extension for 10 years of all the TCJA expiring provisions to cost $4 trillion before interest costs are accounted for ($4.6 trillion once they are). CRFB said Former President Trump's plans to extend and modify the TCJA, which include reinstating the full State and local tax (SALT) deduction that is currently capped at $10,000, may cost $5.35 trillion. The report said the approach to extending TCJA provisions is among the largest sources of uncertainty in each candidate's plans.

Former President Trump's proposal for a 15% "Made in America" corporate tax rate for companies that make products in America may cost $200 billion, CRFB said. The report said Trump-proposed tariffs could raise $2.7 trillion over a decade, with $2.5 trillion from a 10% percent universal baseline tariff. On a non-TCJA issue, the report said VP Harris' plans for increasing taxes on capital income — which deviate from President Biden's proposal in calling for a 28% top capital gains and dividends rate, as opposed to ordinary income treatment — combined would generate $850 billion, or $700 billion without the repeal of stepped-up basis. Both candidates have embraced some version of exempting tip income from tax. CRFB said Harris' proposal, clarified by the campaign such that tips would not be exempted from the payroll tax and that income limits and various guardrails would help to contain the revenue loss, could cost $200 billion, while Trump's more expansive proposal may cost $300 billion.

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 30C 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 (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
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Contact Information

For additional information concerning this Alert, please contact:

Washington Council Ernst & Young

Document ID: 2024-1872