Lately on the Hill
- Republican tax package released. This is what everyone's been waiting for: The House Ways and Means Committee released legislative text for a trio of tax bills that the committee plans to mark up and vote on by June 16. This tax package is likely to pass through committee, and may even pass a House floor vote, given the Republican majority in the House (even after a group of conservative House Republicans intentionally held up Republican bills last week to show their displeasure with the final debt bill negotiated by Speaker Kevin McCarthy (R-CA)). However, a Republican tax package is likely dead on arrival to the Senate. Here’s what’s in the tax package:
- The Build It in America Act, which would roll back changes made by the Tax Cuts and Jobs Act to research and development expensing rules under Section 174 and the interest expense deduction under §163(j) and restore full bonus depreciation. These changes are proposed to be effective retroactively or provide transition rules, so it is yet to be determined how taxpayers will comply with the retroactive change in rules if this becomes law, but current thinking is that taxpayers would need to file amended returns (as is the precedent when Congress has made retroactive changes to tax law in the past). Congress is aware of the administrative burden that amended returns could place on the IRS, so other alternatives, like allowing an accounting method change, also are on the table.
- The Tax Cuts for Working Families Act, which would provide a bonus standard deduction for individual taxpayers ($4,000 for joint filers and $2,000 for single filers) on 2024 and 2025 returns.
- The Small Business Jobs Act, which would reset the Form 1099-K reporting threshold back to $20,000 from $600.
- To offset the costs of these tax policies, the bills propose repealing Superfund excise taxes and certain energy tax credits under the Inflation Reduction Act (IRA): the clean electricity production credit, the clean electricity investment credit, the previously owned clean vehicles tax credit, the qualified commercial clean vehicle tax credit, and a modification of the clean vehicle credit. Republicans tried to unsuccessfully repeal these IRA credits during recent debt ceiling negotiations.
- The committee also will mark up a recently signed trade agreement between the U.S. and Taiwan. The legislative text provides a foundation for establishing treaty-like benefits via the tax code.
- To play ball, Democrats and the White House will almost certainly insist that any tax package also include making permanent the expanded Child Tax Credit under the American Rescue Plan ($3,600 per year for children under 6 and $3,000 for children over 6). Coincidently, last week, a group of representatives reintroduced the American Family Act, proposing to make the expanded Child Tax Credit permanent. Jason Smith (R-MO), House Ways and Means Committee chair, is open to including this policy in a tax package if work requirements are attached.
- New bills introduced. Here is a roundup of some of the latest tax-related bills introduced in Congress:
- Reps. Nicole Malliotakis (R-NY) and Michelle Steel (R-CA) introduced the Working Families Tax Cut Act, which would rename the standard deduction the guaranteed deduction, and add a bonus amount of $3,900 for working families and $1,950 for single filers on 2024 and 2025 returns.
- Rep. Julia Brownley (D-CA) introduced the Mortgage Insurance Tax Deduction Act of 2023 and the Mortgage Debt Forgiveness Act of 2023, which would make permanent the deduction for mortgage insurance premiums and permanently allow taxpayers to exclude income from the discharge of debt on their personal residence.
- Rep. Carol Miller (R-WV) introduced the Methane Reduction and Economic Growth Act of 2023, which would amend §45Q to qualify methane to be acquitted equivalent to the capture of CO2.
- Rep. Beth Van Duyne (R-TX) introduced legislation that would impose a 60% excise tax on foreign buyers of U.S. farmland.
- Rep. Dan Kildee (D-MI) introduced the Modernizing Agricultural and Manufacturing Bonds Act, which would raise the maximum manufacturing bond size to $30 million from $10 million, modify the definition of a “manufacturing facility” to include high-tech manufacturing processes (including bio-technology, design, and formula development), and align the definition of “substantial farmland” in the federal tax code with existing law.
- Rep. John Garamendi (D-CA) introduced the No Corporate Tax Exemption for Professional Sports Act, which would strip professional sports leagues, including the PGA Tour, of their tax-exempt status under §501(c)(6).
- Sen. Catherine Cortez Masto (D-NV) introduced the Filing Relief for Natural Disasters Act, which would allow the governor of a state or territory to extend a federal tax filing deadline in the event of a state-declared emergency or disaster, which happens automatically for federally declared disasters.
- Sens. Bill Cassidy (R-LA) and Masto introduced the Affordable Housing Bond Enhancement Act, which would make changes to the Mortgage Revenue Bond program and Mortgage Credit Certificates to improve access to tax credits for first-time homebuyers.
- Sens. Mike Crapo (R-ID) and Michael Bennet (D-CO) introduced the Water and Agriculture Tax Reform (WATER) Act of 2023, which would allow mutual water storage and delivery companies to maintain their tax-exempt status, even if they receive more than 15% of their revenue from nonmember sources, as long as the funds are reinvested into maintenance, operations, and infrastructure improvements.
- House committee advances multiple bills. The House Ways and Means Committee passed a bill that would extend Airport and Airway Trust Fund excise taxes through September 2028 and designate certain airports as ports of entry, and the following bills impacting small businesses, which means these bills are one step closer to a vote on the House floor during this session:
- The Custom Health Option and Individual Care Expense (CHOICE) Arrangement Act, which would allow employers to provide tax-advantaged funds to reimburse employees for buying their own health insurance on the individual market.
- The Small Business Flexibility Act, which would require Treasury to notify small businesses of different coverage options available to them.
- The Chronic Disease Flexible Coverage Act, which would allow employers to offer pre-deductible coverage of 14 chronic care health services for employees using a high-deductible health plan.
- The Telehealth Expansion Act of 2023, which would permanently allow pre-deductible coverage of telehealth services for high-deductible health plans.
- The Paperwork Burden Reduction Act, which would allow employees to access health insurance coverage forms online.
- The Employer Reporting Improvement Act, which would provide employers with relief from Affordable Care Act reporting requirements.
IN CASE YOU MISSED IT
- The IRS issued Notice 2023-42, which grants penalty relief for corporations that did not pay estimated tax in connection with the new corporate alternative minimum tax.
- The IRS issued proposed regulations identifying certain Malta personal retirement scheme transactions as listed transactions, a type of reportable transaction. Material advisors and participants in these listed transactions would be required to file disclosures with the IRS and be subject to penalties for failure to disclose.
- The IRS reassured California taxpayers that they continue to have an automatic extension until later this year to file and pay their taxes for those covered by disaster declarations in the state.
- The IRS is considering options for helping taxpayers with improper Employee Retention Credit (ERC) claims, including soft letters, education, audits, electronic filing of amended Forms 941, and criminal investigations.
- Reps. Brad Sherman (D-CA) and Stephen Lynch (D-MA) are asking Treasury and IRS to release proposed regulations on the reporting requirements imposed by the Infrastructure Investment and Jobs Act for cryptocurrency brokers.
- A group of Republicans on the House Ways and Means Committee is asking Treasury Secretary Janet Yellen to provide a briefing on Germany’s taxation of U.S. intellectual property registered in Germany. German tax law imposes a withholding tax on royalty payments for patents and trademarks registered in Germany.
- The OECD released a crypto-asset reporting framework.1
- The Senate Finance Committee will hold a hearing tomorrow, June 14 at 10 a.m. ET, on the anti-poverty and family support provisions in the tax code.
- Treasury issued a memo with core principals and an implementation plan for promoting fair and effective compliance and enforcement.
- Treasury and the Office of Management and Budget (OMB) signed a memorandum of agreement that tax regulations will no longer be reviewed by the Office of Information and Regulatory Affairs (OIRA).
- Yellen spoke at the third meeting of the Treasury Advisory Committee on Racial Equity, highlighting the committee’s progress to address structural inequities in the U.S. economy as the IRS and Treasury implement the American Rescue Plan and the Inflation Reduction Act.
- The Center for American Progress published a report on how taxpayers can take advantage of the direct pay and transferability of tax credits under the Inflation Reduction Act.2
- The Joint Committee on Taxation published a report (JCX-10-23) describing present law and data relating to federal income tax provisions that impact small businesses.
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.
- 1“International Standards for Automatic Exchange of Information in Tax Matters, Crypto-Asset Reporting Framework and 2023 Update to the Common Reporting Standard,” oecd.org
- 2“Understanding Direct Pay and Transferability for Tax Credits in the Inflation Reduction Act,” americanprogress.org, June 5, 2023