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This week (November 18 - 22)

Congress: The House and Senate are in session.

Hearings: The Senate Banking Economic Policy Subcommittee has scheduled a hearing , "Tax Policy in 2025: Implications for the American Economy," for Wednesday, November 20 (2:00 PM). Elizabeth Warren (D-MA) chairs this subcommittee and is set to be full Committee ranking member in the next Congress. She also serves on the Finance Committee. During a September 18 Subcommittee hearing on "The Macroeconomic Impacts of Potential Tax Reform in 2025," Senator Warren 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."

The Joint Economic Committee has scheduled a hearing for Tuesday, November 19 (2:30 PM), on "Building on the Success of TCJA: The 2025 Tax Policy Debate." Witnesses include former Ways & Means Chairman Kevin Brady (R-TX).

While President-Elect Trump has been active making important cabinet selections since his election, the President-Elect's economic team has yet to take shape as we await his selections for Treasury Secretary, Commerce Secretary, National Economic Council Director, and USTR as well as the Chair of the Council of Economic Advisors.

Last week (November 11 - 15)

2024 elections, 2025 tax cliff: Since at least the spring, Republican leaders have said that, if they won a GOP trifecta in the elections, they wanted to act early in 2025 on a budget reconciliation bill focused on extensions of TCJA end-of-2025 expiring provisions and a much broader of swath of issues than reconciliation bills of the past. Now those aspirations are turning to action with Republicans having won control of the House (with at least 218 seats being called), and along with it the opportunity to use the budget reconciliation process to enact a bill with a simple majority vote in the Senate — they will hold a 53-vote majority next year — rather than the 60-vote filibuster threshold that would apply to the tax bill under divided government. The expectation is that Republicans want to try to move the tax bill before acting on debt limit legislation that will be required sometime mid-year after extraordinary measures are exhausted following the expiration of the current suspension (enacted in the June 2023 Fiscal Responsibility Act) on January 1, 2025. House Speaker Mike Johnson (R-LA) has said tax policy is a "Day One" priority. Senator John Thune (R-SD), the newly minted Senate Majority Leader for the next Congress and a longtime Senate Finance member (though the Majority Leader typically steps off committees), said on Fox News November 14 that "Speaker Johnson and the White House and Senate Republicans are aligned when it comes to the things that we need to do. And some of them deal with the economy. You know, that's taxes, that's regulations, that's energy dominance, and some of them deal with important issues like the southern border … " When asked whether reconciliation would allow a simple-majority threshold Senate vote for pieces of an immigration bill that deal with money and funding, Thune said, "So, the Democrats use it extensively. They did the so-called American Rescue Plan, the so-called Inflation Reduction Act, all under budget reconciliation at 51 votes. And they put a lot of really bad policy in there." Four of the six Republican leadership posts in the Senate will be filled by tax-writers from the Finance Committee next year, ahead of expected consideration of a budget reconciliation bill focused on extensions of end-of-2025 expiring TCJA provisions on the horizon.

The main focus now is speculation over forthcoming negotiations among Republicans to decide on a revenue target for the bill, determining how much of the cost of the bill will be paid for and how much will be added to the budget deficit. "The incoming Republican majorities in the House and Senate mean Trump can enact a tax bill without making concessions to Democrats," Bloomberg reported November 15. "Republicans will only be constrained by how much deficit spending the party's lawmakers and global financial markets can tolerate." A story in the November 12 Wall Street Journal (WSJ) looking ahead to a budget reconciliation bill under the GOP trifecta in Washington next year focused on the importance of "The Number," or "the maximum budget deficit increase that Republicans are willing to tolerate as they extend tax cuts scheduled to expire after 2025" and advance other priorities like border-security spending and energy policies such as expanded drilling on federal land. While House Republicans want to act early, Senator Ron Johnson (R-WI) said a "straight extension" of tax cuts would be a "mindless approach" and detract from the pursuit of rate-lowering, base-broadening tax policies. He also called for pumping the breaks on timing. "We've got a year. I'd rather take that year," he said. "The clock is ticking on this but we don't have to hop on this in the first few months."

Dynamic scoring or counting the economic growth resulting from tax policies — which President-elect Trump said would cover the cost of TCJA extensions prior to the election — and rolling back Inflation Reduction Act (IRA) credits appear to be the sources of revenue that could help meet whatever revenue target is decided on, though there are also discussions about whether tariffs could offset the costs of tax cuts. The New York Times on November 15 walked through three scenarios for a Republican tax bill in 2025: 1) maintaining the status quo, 2) enacting modest tweaks to the current system, or 3) an overhaul. "Perhaps the most significant change would be a tariff Trump has proposed for all imported goods. Republicans are discussing whether to pass such a tariff into law, though Trump could also likely enact it with executive authority. That tariff could help pay for the tax cuts, but … probably wouldn't raise enough to fully offset the cost," the report said. "Passing a tariff into law would make it impossible for a future president to remove them without help from Congress. It would also mark a fundamental change in fiscal policy in the United States. American policymakers have not treated tariffs as a way to generate revenue for the federal government in almost a century."

Additionally, Politico on November 15 reported that the Ways & Means Committee has discussed addressing "so-called round-tripping by American multinational companies that have foreign subsidiaries in low-tax territories like Puerto Rico or Bermuda," and use them to "book profits on goods or services they provide in the U.S." and take advantage of the "much lower rate under a global minimum tax passed by Congress in 2017" relative to the corporate rate. "We've had conversations with the pertinent players in this space, and certainly there's no ambiguity with the particular industries that this is most applicable to," Global Competitiveness tax team chair Rep. Kevin Hern (R-OK) said in the report. "There's some opportunity to look at this idea and this thought of round-tripping, as [it] is so eloquently called, and see how we can best clean it up if necessary."

A WCEY Alert, "Republicans to control Washington in 2025," is available here.

Next administration: President-elect Trump continued rolling out Administration nominees and appointees at a fast pace.

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
• September 12, 2024 — 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
• October 18, 2024 — Notice 2024-74 provides that a taxpayer who uses a 40BSAF-GREET 2024 safe harbor in Notice 2024-37 must use the October 2024 version of the model

Transferability

• April 25, 2024 — Final regulations (TD 9993) describing rules and definitions for the transfer of eligible credits in a tax 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
• October 24, 2024 - Final regulations (TD 10010) allowing taxpayers to include materials costs and extraction costs in production costs for applicable critical minerals and electrode active materials, provided certain conditions are met

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
• October 24, 2024 — Proposed regulations (REG-118264-23) provide procedures and requirements that a manufacturer of specified property must follow to be treated as a qualified manufacturer

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
• October 22, 2024 — Final regulations (TD 10009) provide additional clarity on the definition of what constitutes an "advanced manufacturing facility," including clarifying the inclusion of semiconductor wafer production in the definition of semiconductor manufacturing