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This week (November 25-29)

Congress: The House and Senate are out for the Thanksgiving holiday.

In floor remarks November 21, current Senate Majority Leader Chuck Schumer (D-NY) enumerated the items Congress must address after the Thanksgiving break and before year end: “When the Senate returns after Thanksgiving, Senators can expect a very busy few weeks to finish our work before the end of the year. Both sides must continue working together to keep the government open beyond the December 20th deadline … We must also pass the annual defense authorization bill, to provide for our troops and hold the line against America’s adversaries abroad … We also hope to make progress on the farm bill, to avoid going over the so-called dairy cliff at the end of December … Another issue we hope to get done is disaster aid. Both sides know we need to act, because both sides represent states that have been impacted by disaster.”

With Congress away next week, This Week in Tax Policy won’t be published, but WCEY Alerts will be issued as events warrant.

Last week (November 18-22)

2025 tax cliff: With Republicans in Congress planning to act early in 2025 on a budget reconciliation bill focused on extensions of TCJA end-of-2025 expiring provisions and other issues, House Majority Leader Steve Scalise (R-LA) said during a November 19 press conference that he “assembled all of the committee chairs last week to go through what we will be doing in budget reconciliation starting in January. This is going to be a busy process next year.” He continued, “We laid out a very aggressive first 100-day agenda addressing the things that would get our country moving again, that would focus on lowering costs and getting our economy moving, making sure there is no tax hike next year. If Congress takes no action, the Tax Cuts and Jobs Act under President Trump, many of those provisions from 2017 would expire, leading to a large tax hike on families.” Other Republican leaders are similarly warning of the consequences of inaction on TCJA provisions and confirming that two separate budget reconciliation bills will be available for enacting GOP-only proposals with a simple majority vote in the Senate in the next Congress — they will hold a 53-vote majority next year — rather than the 60-vote filibuster threshold that would apply to a tax bill considered under divided government. “We’ll have two bites at the reconciliation apple in the next calendar year,” Representative Jodey Arrington, a Texas Republican and the chairman of the House Budget Committee, said in a November 19 New York Times story. “And so we’ll have plenty of opportunity to reignite growth through pro-growth policies and include fiscal reforms.” Congress didn’t pass a budget for FY2025, and that resolution can provide for one reconciliation bill prior to the end of FY 2025 on September 30, 2025, with another for FY2026, which begins on October 1, 2025. The story said: “Republicans are still figuring out how they could split their ambitions into distinct packages of legislation. One option under discussion is to focus an initial bill on extending the expiring tax cuts. Without an extension, popular provisions like lower marginal income rates and a larger standard deduction would end next year, amounting to a tax increase on Mr. Trump’s watch. Once those provisions are extended, lawmakers could turn to Mr. Trump’s campaign tax promises, like a lower corporate tax rate for American manufacturers as well as broader topics like immigration and spending cuts, and fold those into a second piece of legislation later in the year.”

Scope of tax bill(s): Asked on Fox News November 21 whether the tax agenda Republicans envision will be limited to TCJA extensions or encompass some of President-elect Trump’s tax proposals, House Ways & Means Committee Chairman Jason Smith (R-MO) said: “So what our tax teams have been doing, Neil, is looking at the provisions of TCJA from 2017 to see if they worked the way that they were supposed to, should they be tweaked or modified, and to address that. But, also, the president campaigned on numerous different tax provisions, such as the no tax on tips, tax on Social Security, overtime incentives for manufacturing in the United States. So, there’s a whole list of things, so we’re looking at everything when we’re moving forward on this economic package.” In a separate Fox Business interview, Chairman Smith said, “We are ready at the Ways and Means Committee on day one to pass a tax bill.” He further said, “One of the biggest tax breaks that is going to expire at the end of next year is something that they refer to, Maria, as Section 199A. I call it the Small Business deduction. It affects pass throughs, LLCs, Subchapter S’s, and that’s a 20% deduction to try to give it equal parity to the corporation rate. That will completely expire.”

Revenue offsets: Republican plans for addressing extensions of TCJA end-of-2025 expiring provisions and perhaps other issues, including tax proposals put forward by President-elect Trump during the campaign, and how to pay for them — or not pay for them — are coming into greater focus. On Fox Business November 20, incoming Senate Finance Committee Chairman Mike Crapo (R-ID) doubled down on his previous contention that extensions of current tax policy needn’t be offset, continuing to cite the end-of-2012 extension of the Bush tax cuts. “Barack Obama, when he faced this same question — when President Bush’s tax cuts were expiring — did the same thing I’m proposing. That is to say, if you’re just extending current law, we’re not raising taxes or lowering taxes,” he said. “To say that is a $4 trillion deficit is ridiculous. There is a difference between a tax increase and $4 trillion of spending, and we just have to get that message out to America.” Crapo continued, “We’re going to have to take the bold steps of saying to the American people that we are not going to let $4 trillion of tax hikes happen and that it’s not going to increase the deficit.”

Other proposed revenue sources are raising concerns among some members. During a November 20 Bloomberg Government event, House Ways and Means Trade Subcommittee Chairman Adrian Smith (R-NE) expressed some nervousness about proposed tariffs and using the revenue for budgetary purposes. He suggested that there is some notion that tariff revenues would go to agricultural producers to offset retaliation from tariffs. Punchbowl News reported on a November 19 meeting among Ways & Means Committee Republicans during which members asked several questions about tariffs, likely reflecting that, “For some Republicans, voting to slap big-time tariffs on foreign-made goods would be politically painful. That’s because they’d almost certainly trigger retaliatory tariffs that would hit key GOP constituencies — namely, agriculture,” the report said. Also in the report: “I keep going back to the fact that I’m not a huge fan of tariffs,” Rep. Adrian Smith said. “I believe they, however, need to be a tool in the toolbox. The question is how should they be used, and I think we’re set to have some good discussions on it.” There were previous reports about Trump advisors discussing with Ways & Means GOP leaders the prospect of at least partially paying for a tax bill with tariff revenue.

Disaster relief: President Biden wrote to House Speaker Mike Johnson (R-LA) November 18 calling for nearly $100 billion in disaster relief funding for an “expeditious and meaningful Federal response to Hurricanes Helene and Milton and other natural disasters” — including fires in Maui, tornados in Mississippi, Iowa, and Oklahoma, and rebuilding bridges, including in Maryland — plus funding for the Small Business Administration’s (SBA) disaster loan program, which has been completely exhausted. Disaster relief could get attached to an appropriations package, and the legislative wheels began turning for lame-duck legislation as Congress prepared to break for Thanksgiving and return in December with a pre-holiday deadline for a government funding bill. With the Tax Relief for American Families and Workers Act (H.R. 7024) — addressing the IRC Sections 174 and 163(j), and bonus depreciation, along with Child Tax Credit (CTC) changes and a Taiwan tax bill — having stalled in the Senate, the House in May approved disaster tax relief provisions as a separate bill, and there are now efforts to attach that measure to a broader disaster bill. The Federal Disaster Tax Relief Act (H.R. 5863) by Rep. Greg Steube (R-FL) would allow losses from federally declared disasters that occur from January 1, 2020, through the date of enactment to be deducted from income taxes without itemizing and without a reduction based on adjusted gross income, and exclude compensation for losses from some wildfire disasters and the East Palestine, Ohio, train derailment from gross income. Morning Tax November 19 said: “There are still discussions to be had about potentially pairing the funding request and the tax bill, which would offer special deductions for losses stemming from disasters and an exclusion for wildfire payments. There already has been some chatter about the disaster tax bill getting attached to a year-end funding measure.” Tax Notes reported Senate Finance Committee Chair Ron Wyden (D-OR) as saying senators have been engaged in conversations about disaster tax relief and that he hopes they will be as eager as he is to address emergency disaster recovery funding in the coming weeks.

Next administration: In a November 20 Wall Street Journal op-ed, Elon Musk and Vivek Ramaswamy, picked to head a new Department of Government Efficiency (DOGE), cited an EPA-related Supreme Court ruling and the Loper Bright ruling that overturned the Chevron doctrine that generally required federal courts to defer to agency interpretations of ambiguous statutory provisions, and said: “DOGE will work with legal experts embedded in government agencies, aided by advanced technology, to apply these rulings to federal regulations enacted by such agencies. DOGE will present this list of regulations to President Trump, who can, by executive action, immediately pause the enforcement of those regulations and initiate the process for review and rescission.” The op-ed also discussed a potential reduction in the federal agency workforce.

Press reports said President-elect Trump was preparing to announce hedge fund manager Scott Bessent as his selection for Treasury Secretary nominee.

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 (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