Lately on the Hill
Here are your latest legislative updates:
- Congressional stock trading ban makes a comeback. Reps. Abigail Spanberger (D-VA) and Chip Roy (R-TX) are trying to bring back their bill, the Transparent Representation Upholding Service and Trust (TRUST) in Congress Act, to ban members of Congress, their spouses, and dependents from trading stocks while in office. This bill failed to make it to a House floor vote in the last session but has strong prospects in this session since there is bipartisan support for this policy. The bill already has 35 co-sponsors in this session (by the end of the last session, the bill had 75 co-sponsors). Sens. Jon Ossoff (D-GA) and Mark Kelly (D-AZ) introduced companion legislation in the Senate: the Ban Congressional Stock Trading Act.
- What if there was no more income tax or the IRS? Rep. Earl L. “Buddy” Carter (R-GA) introduced the Fair Tax Act, which proposes to eliminate the tax code, replace the income tax with a 23% sales tax and abolish the IRS. Versions of this bill have been introduced in every session of Congress since 1999. Usually, these bills don’t even make it out of committee, but word on the street is that as part of negotiations to get votes for Kevin McCarthy as Speaker of the House, an agreement was reached to take this bill to a floor vote in this session.
- Congress wants to make sure university coaches are paying their taxes. A report by the House Ways and Means Subcommittee on Oversight found that two out of nine universities surveyed would not disclose or did not pay the excise tax enacted under the Tax Cuts and Jobs Act (TCJA), which imposes a 21% tax on the top five highest-paid employees of a nonprofit organization if they earn more than $1 million per year.
- The way the law was written, public universities argue they can opt out of this tax by claiming tax-exempt status as a governmental unit, versus a nonprofit organization under Section 501. There appears to be bipartisan appetite to fix this loophole as part of the list of TCJA updates Republicans want to take up in this session.
- That debt ceiling is coming up sooner than expected. Treasury Secretary Janet Yellen estimates that the U.S. will reach its borrowing limit this week. Previously, there was hope that the debt ceiling debate could wait until later in the year since bipartisan agreement is needed to raise the debt ceiling again. Republicans aren’t fans of raising the debt limit and usually end up asking for spending cuts to social programs, including Social Security, Medicare, and Medicaid, in exchange for raising the debt limit.
- During negotiations to secure McCarthy as House Speaker, Republicans agreed that any increase to the debt ceiling must be accompanied by federal spending cuts and discretionary spending must be capped at fiscal year 2022 levels (which would result in a decrease of about $130 billion to federal agencies). So, if the beginning of this session is any indication, expect lots of negotiations and concessions, and a strong potential for the U.S. to default on its debt.
- Note, Yellen is expected to remain in her post for the remainder of President Biden’s term, at the request of the president, so she will be a prominent voice in the debt ceiling debate that is set to start sooner than expected.
- A bit of whiplash with 1099-K reporting requirements. After the IRS delayed the effective date for the new 1099-K reporting requirements, Rep. Carol Miller introduced the Saving Gig Economy Taxpayers Act, which seeks to revert the reporting requirements back to $20,000 and 200 transactions per year.
- New subcommittees you should know about. Now that House leadership is in place, Republicans are forming and staffing committees and subcommittees. Two subcommittees of note include a bipartisan committee focused on U.S. competition with China, which will be chaired by Rep. Mike Gallagher (R-WI), and the Subcommittee on Digital Assets, Financial Technology and Inclusion, which will be chaired by Rep. French Hill (R-Ark.). The committees will have the authority to hold public hearings.
IN CASE YOU MISSED IT
- President Biden wrote an op-ed for the Wall Street Journal calling on Republicans and Democrats in Congress to unite against Big Tech.
- A coalition of cryptocurrency organizations penned an open letter to Congress asking legislators to “defend privacy” by “ensuring constitutional and humans rights are protected online and offline, working to identify and correct power imbalances, champion privacy protecting capabilities such as end-to-end encryption and safeguarding data privacy and security.”
- In ILM 202302012, the IRS concluded that a qualified appraisal is required for cryptocurrency charitable contributions over $5,000 if a taxpayer wants to claim a Section 170(a) deduction. As such, taxpayers may not rely on the value reported on a cryptocurrency exchange.
- U.S. Chamber of Commerce President and CEO Suzanne P. Clark gave her State of American Business keynote on January 12, in which she outlined how government can fulfill its role to support businesses, but also warned that government regulatory overreach harms innovation and limits economic growth.
- The National Taxpayer Advocate issued her 2022 annual report to Congress, which included asking the IRS “to be transparent about its plans and outcomes” for the $80 billion in funding the agency received under the Inflation Reduction Act, and listing the top 10 most serious problems encountered by taxpayers in dealing with the IRS.
- The National Taxpayer Advocate also released the 2023 Purple Book with 65 legislative recommendations “to strengthen taxpayer rights and improve tax administration.” The recommendations include authorizing the IRS to establish minimum competency standards for tax return preparers, restructuring the earned income tax credit, modifying documentation requirements for charitable contributions, and requiring that math notices describe the specific reason(s) for the adjustment.
- The IRS updated FAQs related to the §163(j) deduction for business interest expense.
- The IRS announced that tax filing season officially opens January 23. Taxpayers have until April 18 to file 2022 tax returns—that’s three days “extra” since April 15 falls on a Saturday this year and Washington, D.C. observes Emancipation Day on Monday, April 17. The IRS promises this filing season will go much more smoothly since the agency received additional funding, hired 5,000 more customer service representatives, and reduced its backlog.
- California storm victims have until May 15, 2023 to file federal individual and business tax returns and make tax payments.
- A few reminders on upcoming tax-related due dates:
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.