Lately on the Hill
- Debt limit update. The top four congressional leaders—House Speaker Kevin McCarthy (R-CA), House Minority Leader Hakeem Jeffries (D-NY), Senate Majority Leader Chuck Schumer (D-NY), and Senate Minority Leader Mitch McConnell (R-KY)—met with President Joe Biden at the White House today to discuss the debt limit. However, it is not expected that a deal will be reached at this meeting.
- The House, Senate, and President Biden will all be in the same town for only five business days this month (today through May 16). The Senate goes on recess May 22 and the House recesses the following week. And then we’re at the “x” date, since Treasury Secretary Janet Yellen estimates the government may be unable to pay its bills as early as June 1. The Bipartisan Policy Center estimates that the "x" date is likely to occur between early June and early August of 2023, as quarterly tax receipts due June 15 may help buy more time.
- House Democrats have a backup plan in case McCarthy and Biden are unable to come to an agreement: back in January, Democrats introduced a bill in the House with the intent of using it as a vehicle to force a clean debt limit increase if needed. After Yellen’s announcement, Democrats filed a special rule to force floor consideration of this shell bill via discharge petition. There are a few obstacles to navigate:
- At least five Republicans would need to go along with this plan.
- Under the special rule, Democrats need to get 218 signatures to bring the bill for a floor vote, but they can’t start getting signatures until May 16.
- Senate Republicans continue to say they support McCarthy and that they’re not currently a relevant player, even though there is a small, but reluctant, open window to a potential 30-day debt limit extension to give all the parties more time to negotiate. A group of 43 Republican senators sent a letter to Schumer expressing their commitment to oppose raising the debt ceiling without substantive spending and budget reforms.
- New bills introduced. Here is a roundup of some of the latest tax-related bills introduced in Congress:
- Reps. Andy Kim (D-NJ) and Tim Burchett (R-TN) introduced the Access Business Credit (ABC) Act, which would allow smaller community banks to exclude qualified interest received by a lender for small business loans from their gross income for tax purposes.
- Rep. Nick LaLota (R-NY) plans to introduce the SALT Fairness and Deduction Act,1 which would raise the state and local tax (SALT) cap from $10,000 to $60,000 for single filers and $120,000 for joint filers.
- A bipartisan group of senators introduced the Collegiate Housing and Infrastructure Act of 2023 (CHIA), which would allow tax-exempt charitable and educational organizations, such as national fraternities and sororities, to use tax-deductible charitable contributions to build, maintain, or improve their not-for-profit student housing.
- Sens. Patty Murray (D-WA), Roger Wicker (R-MS), and John Boozman (R-AR) introduced the Nurse Corps Tax Parity Act of 2023, which would not require nurses in the federal Nurse Corps to pay federal income tax on their student loan forgiveness and scholarships.
- A bipartisan group of senators introduced the Taiwan Tax Agreement Act of 2023, which would authorize the Biden administration to negotiate and conclude a tax agreement with Taiwan.
IN CASE YOU MISSED IT
- A group of senators is asking IRS Commissioner Daniel Werfel how the agency is going to address AI-generated tax scams.
- The U.S. Senate Permanent Subcommittee on Investigations is requesting communications and records from KPMG regarding its audits of Silicon Valley Bank, Signature Bank, and First Republic Bank. KPMG issued clean audits for each bank in the weeks before the banks failed.
- Senate Majority Leader Chuck Schumer (D-NY) announced a new initiative to begin working on a bipartisan China competition bill that would build off the CHIPS and Science Act of 2022. There are five key policy focuses:
- Limiting the flow of advanced technology to the Chinese government.
- Curtailing the flow of investment to the Chinese government.
- Securing domestic economic investment.
- Underscoring the U.S.’ commitment to economic allies and maintaining partner alignment.
- Safeguarding U.S. allies’ and partners’ security and maintaining the U.S. strategic alliances.
- The IRS plans to update how Section 752 liability allocations are reported on Schedule K-1 of Form 1065 this fall.
- The IRS is seeking recommendations for items to be included in the agency’s 2023-2024 Priority Guidance Plan.
- The IRS announced changes coming soon to help small businesses interact with the IRS, including the upcoming launch of business online accounts, the ability to respond to certain notices online, and new simplified, mobile-friendly forms.
- The IRS published proposed regulations providing guidance on the application of the transfer for valuable consideration rules and associated information reporting requirements for reportable policy sales of interests in life insurance contracts to exchanges of life insurance contracts qualifying for nonrecognition of gain or loss, as well as to certain acquisitions of interests in life insurance contracts in transactions that qualify as corporate reorganizations.
- As part of its budget proposal for fiscal year 2024, the White House is proposing a 30% excise tax on the electricity used by firms in cryptomining.
- The Institute of Internal Auditors sent a letter2 to Congress asking for sweeping changes to internal audit policies at U.S. crypto exchanges.
- In ES NPA Holding, LLC v. Commissioner, T.C. Memo 2023-55, the U.S. Tax Court held that a partnership did not have to recognize income upon receipt of an upper-tier partnership interest because the partnership’s interest was a profits interest as defined under Revenue Procedure 93-27, which the partnership received in exchange for providing services to or for the benefit of the partnership.
- Sen. Kirsten Gillibrand (D-NY) is asking the IRS to provide updates regarding the backlog of unprocessed Employee Retention Credit claims.
- Upcoming hearings you should know about:
- The Senate Finance Committee will hold a hearing on Thursday, May 11 at 10 a.m. ET titled “Cross-border Rx: Pharmaceutical Manufacturers and U.S. International Tax Policy.” This is part of Senate Finance Committee Chair Ron Wyden’s (D-OR) ongoing investigation into how big pharmaceutical companies may be taking advantage of tax code loopholes to avoid paying U.S. taxes.
- The House Committee on Agriculture will hold a hearing tomorrow, May 10 at 9:30 a.m. ET titled, “The Future of Digital Assets: Measuring the Regulatory Gaps in the Digital Asset Markets.”
- The House Committee on Science, Space, and Technology will hold a hearing tomorrow, May 10 at 2 p.m. ET titled “Return on Unprecedented Investment: An Analysis of the Department of Energy’s Implementation of the IIJA, the IRA, and the CHIPS and Science Act.”
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.