Lately on the Hill
A week into the lame duck session, here’s what you need to know:
- It’s official: In the new year, Republicans will take control of the House, while Democrats will maintain control of the Senate. As a result, each party has been trying to figure out its leadership structure.
- In the House, the top three Democrats, Speaker Nancy Pelosi, Majority Leader Steny Hoyer, and Majority Whip Jim Clyburn stepped down from their leadership roles, ushering in a new, younger generation. The three leaders plan to remain in Congress to serve as mentors or in lower-profile leadership roles. Their successors are predicted to be Reps. Hakeem Jeffries, Katherine Clark, and Pete Aguilar. On the Republican side, the leadership line up is expected to be Kevin McCarthy as speaker, Steve Scalise as majority leader, and Tom Emmer as majority whip.
- Senate leadership is expected to remain the same, with Sen. Mitch McConnell leading the Republicans and Sen. Chuck Schumer leading the Democrats.
- Reps. Jimmy Gomez and Pramila Jayapal, along with 58 other House Democrats, are urging House leadership to not include corporate tax breaks, e.g., changes to R&D expensing, bonus depreciation, and interest expensing, in any must-pass bill or tax extenders bill unless the legislation also includes expanding the Child Tax Credit and the Earned Income Tax Credit.
- Sens. Chuck Grassley and John Thune introduced the IRS Funding Accountability Act, which proposes to give Congress a direct say in how the IRS spends its Inflation Reduction Act funding by requiring the IRS Commissioner, within 60 days after the bill is enacted, to submit a plan to Congress detailing how the $80 billion will be spent. Expect to see a lot more of this type of legislation introduced in the next session of Congress as Republicans in the House and the Senate continue their focus to reign in IRS spending under the Inflation Reduction Act and investigate IRS operations.
- Sens. Ron Wyden and Jeff Merkley introduced legislation to address “systematic injustices within the American Opportunity Tax Credit (AOTC),” which proposes to repeal the lifetime ban that prohibits students with felony drug convictions from claiming the AOTC.
IN CASE YOU MISSED IT
- Treasury and the IRS issued proposed foreign tax credit regulations with guidance on the reattribution asset rule for purposes of allocating and apportioning foreign taxes, the cost recovery requirement, and the attribution rule for withholding tax on royalty payments.
- IRS published Rev. Proc. 2022-39, allowing some large corporate taxpayers and partnerships to disclose errors on previously filed tax returns before an IRS audit begins to avoid accuracy-related penalties.
- The Treasury Inspector General for Tax Administration issued a report on IRS’ taxpayer digital communication tools, finding that the IRS could do more to plan and implement a taxpayer digital communication program that meets taxpayers’ needs.
- Among other recommendations, the IRS Advisory Council’s Public Report urges the IRS to further engage with members of Congress to increase awareness and confidence in the IRS’ modernization plans and to focus on the taxpayer’s perspective, especially in light of the $80 billion in additional funding allocated to the agency under the Inflation Reduction Act.
- The Government Accountability Office (GAO) released the results of its financial audit of the IRS, concluding that the agency financial statements "are fairly presented in all material respects, and although internal controls could be improved, IRS maintained, in all material respects, effective internal control over financial reporting as of September 30, 2022."
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.