Lately on the Hill
Happy New Year! This is the first edition of this year’s newsletter, and a lot has happened on the Hill since the last update. Congress managed to come together to pass a spending bill, and Treasury and the IRS issued lots of new guidance. Let’s catch you up to speed as the 118th session of Congress begins:
- Congress passed an omnibus bill to fund the federal government for fiscal year 2023. On December 23, the House voted mostly along party lines to pass the Senate version of the Consolidated Appropriations Act, 2023, which also included aid for Ukraine and changes to how presidential elections are counted.
- The only tax-related provisions are the Securing a Strong Retirement Act of 2022 (SECURE 2.0), which makes sweeping changes to retirement tax rules, and a disallowance of tax benefits for syndicated charitable conservation easements.
- The legislation also decreases the IRS budget by 2 percent for fiscal year 2023, compared to fiscal year 2022 (Democrats wanted to increase the IRS budget by 7.9 percent in their versions of the spending bill).
- Republicans struggled to unite behind a House leader. Everyone’s been watching the House in the last week as Republicans went through 15 ballots over the course of five days. This is more rounds of voting than any Speaker election since the Civil War because Kevin McCarthy kept coming up a dozen votes short. As a result, Republicans huddled together to come up with concessions to administrative rules on how the party will operate in this session, e.g., procedures for introducing amendments, a vote on the floor on the proposed term limits for House members, etc. The holdup was primarily due to 20 conservative Republicans who don’t want to see McCarthy as Speaker.
- Why this is this important? The House cannot administer oaths of office to new members or do any official business without first assembling a majority to back a Speaker of the House. So, this means no national security briefings, committee assignments or investigations, working on legislation, or even offering formal services to constituents until a leader is appointed. For the last century, this has been accomplished with just one vote, so this does not bode well for a Republican-led house this session. If Republicans had such a difficult time coming together to pick a leader, can they pass any legislation or make headway in 2024 elections, especially with only a four-vote margin in the House? We shall see!
- Remember, Democrats had similar interparty disagreements during the last session, but they still managed to come together at the last minute to pass legislation in line with their priorities. This session is bound to be interesting with divided parties and divided houses of Congress!
- After finally voting McCarthy in as Speaker early Saturday morning, the House passed a rules package on Monday which outlines Republican priorities for the current session and procedures to run the chamber.
- New IRS guidance under the Inflation Reduction Act (IRA). Treasury and the IRS released information to help taxpayers comply with new laws that went into effect on January 1, 2023:
- Guidance on the expected content of regulations regarding clean vehicles (Notice 2023-1)
- Interim guidance on the corporate stock repurchase excise tax (Notice 2023-2)
- Interim guidance on the new corporate alternative minimum tax (Notice 2023-7)
- Guidance on the sustainable aviation fuel credit under Sec. 40B (Notice 2023-6)
- FAQs on energy-efficient home improvements and residential clean energy property credits (FS 2022-40)
- FAQs on clean vehicle credits for new, previously owned, and commercial clean vehicles (FS-2022-42)
- Guidance on the incremental cost for the Commercial Clean Vehicle Credit (Notice 2023-9)
- A list of cars potentially eligible for 2023 clean vehicle tax credits under Sec. 30D
- An updated reference standard 90.1 for the Sec. 179D energy-efficient commercial building property deduction (Announcement 2023-1)
- In other legislative news:
- The House passed the Presidential Tax Filings and Audit Transparency Act of 2022 right before the holiday recess, which would require the IRS to examine and determine the correctness of a presidential income tax return while the president is in office (including tax returns of spouses, corporations, or partnerships controlled by the president or their spouse, and estates of the president or their spouse). The Senate did not take up the bill before the end of the session, so the legislation would need to start from the beginning of the process in the new session.
- The Senate unanimously passed the Supply Chain Disruptions Relief Act prior to the holiday recess. The bill would offer LIFO relief to new vehicle dealers; however, the House did not get around to voting on the bill before the session ended, so look for this legislation to come up again in Congress this year.
- Sen. Debbie Stabenow (D-Mich.) announced she will be retiring after this session. This opens up a seat in a swing state in the 2024 election, which is important since Democrats were able to very narrowly maintain a majority in the last election cycle. Sen. Stabenow is the most senior Democrat on the Senate Finance Committee.
- Congressman Jason Smith (R-MO) was selected as Chairman of the House Ways and Means Committee. In his statement, Rep. Smith said that the committee's agenda in this session will include using the tax code to strengthen supply chains, encourage domestic energy production, job creation, increasing wages for working families, better oversight of the IRS, and rolling back the $80 billion in IRS funding under the IRA.
- House Republicans passed the Family and Small Business Taxpayer Protection Act on Monday, which proposes to rescind the majority of the $80 billion allotted to the IRS under the IRA. Although this fulfills a campaign promise for the Republicans, this bill is unlikely to pass in the Democrat-controlled Senate.
IN CASE YOU MISSED IT
- The IRS issued the 2023 optional standard milage rates used to calculate the deductible costs of operating a vehicle for business, charitable, medical, or moving purposes. The business use amount increased by 3 cents per mile (to 65.5 cents per mile).
- The IRS will begin accepting all business tax returns at 9 a.m. ET on January 12, 2023. The IRS has not yet announced when it will open filing season for individual returns.
- The IRS provided updated guidance on accounting methods for specified research or experimental expenditures. See details about the initial guidance here.
- The IRS announced a delay in reporting thresholds on Form 1099-K under the American Rescue Plan of 2021, which lowered the reporting threshold for third-party settlement organizations from $20,000 to $600, and the new rule was to take effect for the 2022 filing season. As a result, e-commerce platforms, such as Etsy, Venmo, PayPal, and Cash App, will not be required to report tax year 2022 transactions on Form 1099-K. The IRS also updated the FAQs about Form 1099-K.
- The IRS finalized Schedules K-2 and K-3 form instructions for partnerships, including how to qualify for the domestic filing exception. These instructions are consistent with previous instruction drafts.
- The IRS announced that brokers are not required to report additional information with respect to dispositions of digital assets until final regulations are issued under Secs. 6056 and 6045A. The Infrastructure Investment and Jobs Act of 2021 increased reporting requirements related to cryptocurrency and related digital assets.
- The IRS released guidance for brokers to comply with final regulations relating to withholding on the transfer of an interest in a publicly traded partnership. This guidance will be implemented in future proposed regulations.
- The U.S. Government Accountability Office is asking Congress to consider clarifying advanced air mobility aircraft definitions for tax purposes as certain tax exemptions depend on aircraft type, e.g., “helicopter” versus “fixed-wing aircraft,” but, in light of advancements in aircraft design, some new aircraft may share features with both types.
- The IRS released a revised Schedule UTP, Uncertain Tax Position Statement, requiring corporations to include information on the statement about authoritative sources contrary to each UTP and the location of the position on the tax return. The IRS also made changes to the UTP instructions.
- The House Ways and Means Committee released former President Trump’s individual and business tax returns from 2015 through 2020.
- The IRS is expected to continue to have a backlog into the 2023 filing season, according to the Treasury Inspector General for Tax Administration.
- The IRS completed the final corrections of tax year 2020 accounts for taxpayers who overpaid their taxes on unemployment compensation they received in 2020. Some taxpayers received refunds, while others had the overpayment applied to taxes due or other debts. Affected taxpayers should receive a letter via mail.
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.