Lately on the Hill
- Senate introduces a continuing resolution to fund the government through December 16. Congress returns to D.C. tomorrow and will vote on the proposed resolution before Friday, which is when current government funding expires.
- Sen. Joe Manchin introduced his reform proposal, the Energy Independence and Security Act of 2022, which Senate Majority Leader Chuck Schumer agreed to attach to a continuing resolution as part of the reconciliation bill negotiations. The bill proposes changes to how energy projects are approved.
- Schumer filed cloture for a continuing resolution bill that includes Manchin’s proposal. But the Senate is not expected to have 60 votes to pass this bill, since Sen. Bernie Sanders and Republicans have said they won’t vote for a funding bill with Manchin’s proposal attached. If that happens, Democrats can try to pass a funding bill without Manchin’s proposal. Republicans are pushing for funding only through January so that if Republicans win a majority in the Senate and/or the House in midterms, they have more influence on what’s included in the FY 2023 funding.
- A summary of the proposed bill is available here.
- House committee advances Social Security bill with bipartisan support. The House Ways and Means Committee unanimously recommended for a House floor vote the Social Security Fairness Act of 2021. This bill proposes to repeal two provisions of the Social Security Act: the windfall elimination provision (which reduces Social Security benefits for retired or disabled workers with less than 30 years of Social Security-covered employment if they also receive a pension) and the government pension offset (which in various instances reduces survivors' benefits for spouses, widows, and widowers who also receive government pensions of their own).
- Republicans take on Ivy League university endowments. A group of House Republicans introduced the Higher Education Accountability Tax (HEAT) Act, aimed at Ivy League universities. The bill seeks to stop tuition increases incentivized by President Biden’s student loan forgiveness plan. This bill proposes to:
- Increase the tax levied on annual university endowment profits from 1.4% to 10%.
- Increase the number of universities that must pay the tax, expanding the threshold to all private colleges and universities with an endowment valued at $250,000 per student (down from $500,000). Review the list of the 65 impacted colleges and universities here.
- Further increase the annual tax on eligible endowments to 20% for universities and colleges that raise the net price of attendance above the rate of inflation over the preceding three years.
- Bill introduced in the House to make permanent Tax Cuts and Jobs Act of 2017 (TCJA) tax provisions. Congressman Vern Buchanan introduced the TCJA Permanency Act to make permanent tax cuts for individuals and small businesses originally enacted in the TCJA. Without Congressional action, 23 different provisions included in the TCJA are set to expire after 2025. Here are some of the highlights of this bill:
- Permanently lowers individual tax rates
- Preserves the 20 percent deduction for small businesses
- Maintains the higher standard deduction
- Locks in the doubled child tax credit
- Permanently simplifies the tax filing process
IN CASE YOU MISSED IT
- A group of Republican leaders wrote a letter to the IRS with a list of questions on how the agency plans to spend its Inflation Reduction Act funding without increasing audit rates on households making $400,000 or less.
- The Treasury Inspector General for Tax Administration issued another report, outlining the flaws in how the IRS collected the one-time deemed repatriation tax under Sec. 965.
- The IRS updated information on the Work Opportunity Tax Credit, available to employers that hire designated categories of workers who face significant barriers to employment. The update includes information on the pre-screening and certification process.
- Senate Finance Committee Chair Ron Wyden is continuing to send letters to corporations of interest in his investigation into the use of private placement life insurance arrangements as a way for the wealthy to avoid paying taxes. The latest round of inquiries went to Prudential Inc, Zurich Insurance Group, and the American Council of Life Insurers.
- The IRS Chief Counsel’s Office issued Field Attorneys 20223401F addressing whether funded research is eligible for the Sec. 41 R&D credit. For the contracts at issue, the IRS determined the contracts were funded, because payment was not contingent on the success of the research, and the taxpayer did not retain substantial rights to use or exploit the results of its research. As such, the taxpayer was not allowed to take the R&D credit.
- Hurricane Fiona victims in all 78 Puerto Rican municipalities now have until February 15, 2023 to file various federal individual and business tax returns and make tax payments.
- The IRS published a new technical guide for tax-exempt business leagues.
- In T.C. Memo 2022-97, the Tax Court held that S corporation shareholders were not entitled to a deduction on their personal returns for a payment of the corporation’s property taxes and utility expenses that the taxpayers made on behalf of the S corp.
- A U.S. District Court in New York ordered a bank to hand over to the IRS records on U.S. customers of a digital asset trading platform who may owe tax on unreported crypto transactions.
- Republicans unveiled their “Commitment to America” platform ahead of the upcoming midterm elections. For tax, the highlights include extending or making permanent the following TCJA provisions: individual income tax rates, bonus depreciation, the qualified business income deduction, and the $2,000 child tax credit (many of the TCJA tax provisions are set to expire by 2025).
This newsletter features developing content that is subject to change at any time. It does not constitute legal or tax advice. Consult your professional advisors prior to acting on the information set forth herein.