Here’s what you should know about this week on the Hill: The IRS could get another $1 billion to do its job, legislators take on inflation, and recent Senate hearings you should know about.
This Week on the Hill
The spending bills continue to make their way through Congress, and several new bills have been introduced to help combat the impact of rising inflation and help workers save for retirement.
- The appropriations bill to fund the government for fiscal year 2023 continues to make its way through the House, as the Democrats' proposed budget was voted out of House Appropriations Financial Services and General Government Subcommittee last Thursday.
- The bill includes $13.6 billion in IRS funding, an increase of $1 billion from the agency’s current funding. The goal behind the increased funding is to help the IRS improve customer service and increase audits on “big corporations and the wealthy who are not paying their fair share in taxes,” per House Appropriations Committee Chair Rosa DeLauro.
- House Ways and Means Committee Chair Richard Neal says that the appropriations bill is not the place to include a SALT fix. A group of Democrats asked that the spending bill include a provision barring the IRS from ruling against state workarounds on the SALT deduction cap, but Chairman Neal thinks that’s not the right solution for this issue and should be included in a tax bill instead.
- The Senate has not yet introduced its version of fiscal year 2023 spending bills.
- Sens. Mitt Romney, Richard Burr, and Steve Daines introduced the Family Security Act 2.0, which would provide a monthly cash benefit of $350 per month for each young child and $250 for each school-aged child. Payments would also be available to pregnant mothers, four months prior to a child’s due date.
- How would this be paid for? The bill proposes to eliminate the SALT deduction, reform the Earned Income Tax Credit, eliminate the Head of Household filing status, and eliminate a portion of the Child and Dependent Care Credit.
- A group of Republican senators introduced the Middle-Class Savings and Investment Act, which seeks to help lower- and middle-income Americans against rising inflation.
- The proposed bill would exclude from tax the first $300 ($600 for married couples) of interest income; double the size of the 0% tax bracket for long-term capital gains and qualified dividends; raise the threshold for the 3.8% net investment income tax for joint filers from $250,000 to $400,000; and increase the “saver’s credit” maximum an individual may receive for contributing to qualified retirement accounts.
- To pay for this, the bill proposes to extend the $10,000 SALT deduction cap through 2028 (originally set to expire in 2025 under the Tax Cuts and Jobs Act).
- Senate Finance Committee Chair Ron Wyden is expected to introduce a bill that would impose a new federal surtax on oil companies that have a profit margin higher than 10%. This means oil companies could end up paying federal taxes as high as 42% on profits considered “excessive” (21% corporate rate + a new 21% surtax). No official proposal or legislative text has been released yet.
- Sen. Wyden’s proposal would also eliminate last-in, first-out accounting for oil and gas companies with at least $1 billion in revenue starting in 2023.
- In the House, Representative Jamaal Bowman is also trying to gather Democrats to introduce a new tax on oil and gas profits.
- Sen. Wyden also introduced a new retirement bill, the Enhancing American Retirement Now (EARN) Act, which would increase the required age for mandatory distributions, modify participation requirements for long-term, part-time workers, and allow retroactive first-year elective deferrals for sole proprietors. Read a section-by-section summary of the proposed bill here.
- To pay for certain provisions in the bill, the committee added an amendment to adopt a modified version of the Charitable Conservation Easement Program Integrity Act of 2021, which would deny a charitable tax deduction for qualified conservation contributions made by certain passthrough entities, i.e., syndicated conservation easements, if the amount of the contribution exceeds 2.5 times the passthrough owner’s relevant basis in the entity that made the donation. Unlike the version in last year’s reconciliation bill, this amendment would not be retroactive to the date the IRS identified syndicated conservation easements as listed transactions.
- The EARN Act is one of the Senate versions of the retirement bill commonly referred to as SECURE 2.0. Earlier this month, the Senate HELP Committee advanced their own version of the legislation (RISE & SHINE Act) that would improve retirement coverage for part-time workers and facilitate access to workplace emergency savings accounts.
- SECURE 2.0 (Securing a Strong Retirement Act of 2022) is the version of the retirement bill passed by the House in March.
- Up next, a conference committee will attempt to combine the three bills into one and then hold floor votes in the House and Senate.
- House and Senate Leadership are expected to meet today in the House Speaker’s office to discuss the semiconductor/domestic manufacturing legislation (USICA). The goal is to pare down the package in order to get a deal by July 4 and pass the bill into law by the August recess.
In Case You Missed It
- Executives of the four major U.S. automakers wrote a letter to Congress, asking for a raise in the limit on tax credits for manufacturing electric vehicles and to phase out the credit only when the market has matured.
- The Senate Finance Committee held a hearing on the impact of the Wayfair decision where witnesses testified to the tax compliance burden put on small businesses by the different rules imposed by various states on remote sales. According to Sen. Wyden, “[A]s long as the Wayfair ruling stands, the Congress ought to step in and give small businesses some relief.”
- In Romana v. Commissioner of Internal Revenue, the Tax Court held that a woman’s expenses for buying and dry cleaning clothing resembling scrubs, as required to wear as a nurse for a plastic surgery clinic, qualify as a deductible business expense under Sec. 162.
- The IRS plans to expand voice bot options to help taxpayers verify their identity or modify a payment plan in order to avoid long wait times when contacting the IRS.
- President Biden called on Congress and states to suspend the federal gas tax for three months (through September), without taking any money away from the Highway Trust Fund. Although Senate Finance Committee Chairman Ron Wyden says he supports this effort, it is unlikely to pass in Congress. Some states, like Connecticut and New York, have already temporarily issued gas tax holidays.
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.