Lately on the Hill
The Senate is back at work this week and the House returns next week. However, Congress will only meet 11 days between now and midterm elections, primarily to focus on passing appropriations bills to fund the federal government for FY 2023. Technically, Congress must pass this series of funding bills by September 30, but they’ll likely end up passing a continuing resolution instead to fund the government through December and then vote on final funding bills before the holiday recess.
On August 16, President Biden signed the Inflation Reduction Act of 2022 (IRA) into law, ending an 18-month effort by the Democrats to pass their social, economic, tax, and climate policies through the reconciliation process. Up next, taxpayers and tax practitioners are awaiting further guidance from the IRS and Treasury on how to implement the new tax laws included in the IRA.
Although Congress was out on recess in August, there are a few updates you should know about:
- Sen. Joni Ernst wrote a letter to the Treasury inspector general for tax administration (TIGTA) asking to update two previous audits dealing with IRS employee tax compliance and matters related to conduct and job performance.
- The letter cited two specific TIGTA audits: "Improvements Are Needed to Ensure That Employee Tax Compliance Cases Are Adjudicated Consistently" and "The Internal Revenue Service Continues to Rehire Former Employees with Conduct and Performance Issues."
- This is likely in response to the increased IRS funding included in the IRA.
- President Biden issued an executive order instructing the Department of Education to forgive up to $20,000 of student loan debt for low- to middle-income borrowers, among other changes to the federal student loan program.
- More guidance is expected from the Department of Education on how this program will be implemented.
- Eligible borrowers should consider state tax implications if their debt is canceled under this program. The forgiven amounts should be exempt from federal income tax under the American Rescue Plan Act.
- Sen. Ron Wyden wrote a letter to Lombard International, one of the market leaders in private placement life insurance (PPLI), inquiring about the company’s marketing materials promoting PPLI policies to “minimize or eliminate estate taxes” and “defer or potentially eliminate income tax or any tax reporting associated with investment activities.”
- This is part of Wyden’s ongoing investigation of PPLI policies and how they can be used to evade taxes.
- House Democrats are considering tightening up disclosure requirements for Supreme Court justices in potential legislation to be revealed this month. This would likely be included in the Democrats’ proposal to ban members of Congress (and their spouses and senior staff) from trading stocks.
For now, everyone is watching the polls as we head into midterm elections, which will determine if Republicans or Democrats take (or maintain) control of the House and/or Senate. The results will determine if we see any further tax law changes for the rest of the year.
IN CASE YOU MISSED IT
- The IRA introduces several new tax credits relating to electric vehicles. In response, the IRS issued preliminary guidance on claiming the tax credit under section 30D, as the IRA adds a new requirement that qualifying electric vehicles must go through final assembly in North America.
- The Department of Energy published this list of Model Year 2022 and early Model Year 2023 electric vehicles that may meet the final assembly requirements.
- Treasury also released an initial FAQ regarding changes to the electrical vehicle tax credit.
- The IRS is seeking public input on best practices for conducting video conferences with taxpayers and tax professionals who have cases pending before Appeals.
- The IRS added a new campaign to its Large Business and International Active Campaigns list, focusing on distributions in excess of a partner’s basis. In general, partners that report distributions from partnerships must have adequate outside basis in order to receive liquidating or non-liquidating distributions not subject to gain recognition.
- The IRS issued Notice 2022-36 providing penalty relief to millions of taxpayers for certain 2019 and 2020 returns that were filed late. Click here for a complete list of eligible tax forms.
- Beginning August 2022, smaller charities that are eligible and choose to file Form 990-N, Electronic Notice for Tax-Exempt Organizations (e-Postcard), must sign into the IRS modernized authentication platform to e-file Form 990-N.
- The IRS updated the digital asset question on page 1 of the draft Form 1040 for 2022 to ask if at any time during 2022, taxpayers received digital assets as a “reward, award, or payment for property or services” or “sell, exchange, gift, or otherwise dispose of a digital asset.”
- Beginning September 25, the IRS will implement a new electronic fingerprinting process for e-file applicants. Individuals will be required to use the IRS authorized vendor for fingerprinting. Each new Principal and Responsible Official listed on a new e-file application or added to an existing application needing fingerprints must schedule an appointment with the IRS-authorized vendor. More information here.
- The IRS announced tax relief for Mississippi water crisis victims. See a complete list of recent disaster relief announcements here.
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.