Magnifying Glass Looking at the Ocean

2022 has been the year that things seemed to return to a bit of normalcy in the tax world, as many of the COVID-19 legislative tax provisions and relief programs expired in 2021. However, this year was still full of changes. Let’s take a quick look back at the legislative and regulatory developments over the last year, and what we’re still waiting on from the Hill.

Legislative Developments in 2022

Most of the year was spent in anticipation of Democrats passing the Build Back Better Act, which was passed by the House at the end of 2021 but stalled in the Senate until August 2022. Ultimately, Democrats were able to rally together and pass a slimmed-down version of the Build Back Better agenda in the Inflation Reduction Act of 2022 (IRA) via the reconciliation process. The bill includes several of the Democrats’ social, tax, and climate policy goals. Here is a webinar series on the tax provisions in the IRA.

In July 2022, Congress also passed the Creating Helpful Incentives to Produce Semiconductors (CHIPS) and Science Act of 2022 to promote domestic manufacturing of semiconductor chips. The bill includes an investment tax credit to help build semiconductor manufacturing facilities and appropriates billions of dollars to invest in developing domestic manufacturing capabilities, research and development (R&D), and workforce development programs. The U.S. Department of Commerce is expected to release applications for CHIPS Act funding in February 2023.

Regulatory Guidance Issued in 2022

On the regulatory front, some of the guidance we’ve seen so far in 2022 includes:

Finally, a Few Year-End Reminders from the IRS:

  • A warning to employers to beware of third parties promoting improper Employee Retention Credit claims. Some third parties are taking improper positions related to taxpayer eligibility for and computation of the credit and often charging large upfront fees or a fee that is contingent on the amount of refund calculated by the third party.
  • Taxpayers earning income from selling goods and/or providing services may receive Form 1099-K, Payment Card and Third-Party Network Transactions, for payment card transactions and third-party payment network transactions of more than $600 for the year. Prior to 2022, this threshold was $20,000.
  • Multiple groups of victims of natural disasters have been granted tax filing relief. You can find a complete list of impacted taxpayers here.

What We’re Still Waiting On

Retirement reform was a policy that received bipartisan support this year but hasn’t become law yet. The Enhancing American Retirement Now (EARN) Act passed out of Senate committee unanimously and is ready for a floor vote in the Senate. The House passed similar retirement legislation last spring (the Securing a Strong Retirement Act of 2022). Due to the bipartisan support on this front, expect congressional action on these bills in the coming year.

Cryptocurrency also made legislative headlines with multiple bills introduced in Congress on this front, including:

  • The Digital Commodities Consumer Protection Act of 2022, which proposes to give the Commodity Futures Trading Commission (CFTC) new tools and authorities to regulate digital commodities.
  • Legislation to clarify the digital assets reporting requirements signed into law as part of the Infrastructure Investment and Jobs Act.
  • The Virtual Currency Tax Fairness Act, which proposes to exempt crypto owners from reporting personal transactions under $50 or when there is less than $50 in gain.
  • The Responsible Financial Innovation Act, which would create clear definitions of digital assets, assign regulatory authority over digital asset sport markets to the CFTC, and create a structure for taxation of digital assets.
  • Legislation to prohibit the U.S. Labor Department from limiting investment options for workplace retirement savers. 

Although none of these bills have become law yet, there is a strong chance this issue will be taken up in a future session of Congress, so it is important for taxpayers to be aware of the policy proposals in the pipeline for future negotiations.

At the time of publication, Congress also has not yet provided a legislative fix to the changes in R&D expensing. Due to a provision included in the Tax Cuts and Jobs Act, beginning in 2022, taxpayers must now capitalize and amortize U.S.-based R&D expenses over a period of five years and non-U.S. R&D expenses over 15 years. Taxpayers and tax professionals have been expecting Congress to retroactively extend the option for taxpayers to elect to deduct R&D expenses under §174. An outstanding potential legislative vehicle for this policy is the tax extenders package that Congress traditionally takes up at the end of each calendar year.

On the regulatory front, the IRS is working on issuing IRA regulations. In October, the IRS asked the public to provide comments on various provisions in the IRA by November 4, 2022, since Treasury is prioritizing portions of the IRA that Congress set deadlines on, beginning with 2023. The agency also is focusing on guidance related to the wage and apprenticeship requirements associated with several of the IRA provisions. These requirements will go into effect 60 days after initial guidance is published.

With the passage of the IRA, midterm elections changing the makeup of Congress, high inflation, and an upcoming presidential election in 2024, next year promises to be a busy one for tax policy. Make sure to subscribe to our weekly newsletter, From the Hill, to stay up to date on tax legislation and regulatory developments.

If you have questions or need assistance, please reach out to a professional at FORVIS or submit the Contact Us form below.

See more 2022 Year-End Tax Planning articles.

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