From the Hill: February 14, 2023
Lately on the Hill
Here are your latest legislative updates:
- State of tax. President Biden gave his 2023 State of the Union address last week, and tax policy was a highlight of the speech. The president outlined three general tax proposals: quadrupling the new 1% stock buyback excise tax on publicly held companies, introducing a “billionaire minimum tax” to tax the unrealized gains from capital assets, e.g., stocks, bonds, privately held companies of high-net worth individuals, and extending the expanded Child Tax Credit. House Republicans are saying it’s a hard no for them on the first two of Biden’s policies, but they’re open to negotiations around the Child Tax Credit in exchange for votes on business tax extenders that didn’t make it into year-end legislation in the last Congress.
- Your weekly debt limit update. During his State of the Union speech, President Biden called out Republicans for trying to propose Medicare and Social Security funding cuts. That drew some audible disagreement from Republicans, so Biden appeared to negotiate on live TV: “So folks, as we all apparently agree, Social Security and Medicare are off the books now, right? … We got unanimity.”
- After that back and forth, Republicans have been on the speaking circuit defending themselves that they had already previously agreed to not draw in Medicare and Social Security cuts into debt ceiling negotiations and instead their focus is on targeting “waste” and “inefficiencies” in the federal budget. In the meantime, Rep. Matt Gaetz (R-FL) is trying to pitch his idea of adding new work requirements for Medicaid as one of the ways to decrease federal spending in exchange for raising the debt limit. Republicans will need to come up with more spending cut suggestions soon, because achieving their goals will be hard to do without raising taxes or cutting defense or entitlement program spending.
- Broadband bill re-introduced. Reps. Jimmy Panetta (D-CA) and Mike Kelly (R-PA) along with Sens. Mark Warner (D-VA) and Jerry Moran (R-KS) reintroduced the Broadband Grant Tax Treatment Act. This legislation proposes to amend the tax code so that funding for broadband deployment from the Infrastructure Investment and Jobs Act and the American Rescue Plan would not be considered taxable income. This legislation was introduced in the last Congress and has bipartisan support.
- Manufacturing bill introduced in the House. Rep. Chip Roy (R-TX) introduced the Bring Entrepreneurial Advancements to Consumers Here in North America (BEAT CHINA) Act, which would:
- Provide tax incentives to manufacturers that relocate from a foreign country to the U.S.
- Make non-residential real property purchases by manufacturers that relocate to the U.S. eligible for full and immediate expensing, e.g., bonus depreciation
- Make 100% bonus depreciation permanent (this provision begins to phase out this year)
- Allow qualified manufacturers to exclude from gross income any gain earned on the disposition of assets in their country of origin.
IN CASE YOU MISSED IT
- The Senate Finance Committee scheduled a hearing for Wednesday, February 15 to consider President Biden’s nomination of Daniel Werfel as the commissioner of the IRS.
- The SALT caucus is back, but this time with new co-chairs: Reps. Josh Gottheimer (D-N.J.), Andrew Garbarino (R-N.Y.), Young Kim (R-Calif.), and Anna Eshoo (D-Calif.). This coalition’s goal is to repeal the $10,000 cap on state and local tax deductions, so expect them to speak up in any negotiations where tax provisions are at stake.
- The White House published the Biden Administration’s “Roadmap to Mitigate Cryptocurrencies’ Risks,” which highlights what agencies are doing on the regulatory front to “ramp up enforcement” and “issue new guidance.” Notably, the roadmap draws guardrails on the type of legislation Congress should take up when it comes to digital assets. According to the Biden Administration, Congress should focus on passing laws to expand regulatory authority, strengthen transparency and disclosure requirements, and increase penalties for violation of finance rules, but not pass laws that would allow mainstream institutions, like pension funds, to invest in cryptocurrency.
- After some confusion about the taxability of state tax payments at the federal level, the IRS informed taxpayers that they do not need to report these payments on their 2022 federal income tax returns. Last year, some states issued refunds and rebates to their residents—similar to the federal stimulus payments during the COVID-19 pandemic—in order to help offset the impacts of inflation and the pandemic. This means that people in the following states do not need to report these state payments on their 2022 tax return: California, Colorado, Connecticut, Delaware, Florida, Hawaii, Idaho, Illinois, Indiana, Maine, New Jersey, New Mexico, New York, Oregon, Pennsylvania, and Rhode Island.
- The AICPA issued its “wish list” of 61 tax legislative proposals that Congress should address in this session. This includes technical fixes to the tax code and proposed policies to simplify existing provisions.
- At the American Bar Association Midyear Tax Meeting, a Treasury official indicated guidance on changes to R&D expensing for the 2022 tax year is not imminent, so corporate taxpayers should not let the lack of guidance on this issue be the reason for delaying filing their tax returns. To date, the only guidance taxpayers have received is the IRS allowing taxpayers to use the automatic accounting method change procedures for capitalization of R&D expenses.
- Individual taxpayers filing their Form 1040-X, Amended U.S. Individual Income Tax Return, are now able to receive their tax refund by direct deposit. Previously, refunds from amended returns were issued only through a paper check.
- House Ways and Means Committee Chairman Jason Smith is asking Treasury and the IRS to provide a copy of their plan on how they intend to spend $80 billion in funding under the Inflation Reduction Act. Treasury Secretary Janet Yellen instructed the IRS to complete this plan by February 17, 2023.
- Chairman Smith also wrote to the OECD Secretary General that House Republicans will not “tolerate” any “backroom deal” reached by the Biden Administration and the OECD because it will “result in fewer jobs and less prosperity for millions of American families.” The OECD is working on implementing a global minimum tax of 15%.
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.