Lately on the Hill
Members of Congress left Washington, D.C., last week for a two-week Easter and Passover recess. In their wake, here is a roundup of the latest tax-related happenings on the Hill:
- Debt limit update. House Speaker Kevin McCarthy wrote President Joe Biden a letter asking the White House to set a date to talk debt limit negotiations. President Biden sent back a letter of his own1 to McCarthy, saying he won’t schedule a meeting until House Republicans release their official version of the fiscal year (FY) 2024 budget. House Republicans were expected to release their proposed budget in April, but now are saying the spending cut blueprint may not be available before Congress takes up raising the debt limit in June, so they want to continue debt ceiling negotiations apart from FY 2024 budget negotiations. This is a notable policy shift since Republicans previously insisted on tying cuts to the federal budget to any debt limit increase. If the White House doesn’t come to the negotiating table, House Republicans are preparing to move ahead on their own debt limit plan without the president’s input. They’ll likely use McCarthy’s letter to Biden as a starting place for any debt limit legislation. Or another alternative floated by House Republicans: passing a short-term debt ceiling increase with minor budgetary savings provisions.
- House Republicans pass energy package. Last Thursday, the House passed the Lower Energy Costs Act, which includes proposals like repealing the natural gas tax and all restrictions on importing and exporting natural gas, reforming the National Environmental Policy Act permitting process to streamline federal reviews, and a variety of other energy-related policies. Republicans are indicating this to be their top priority and are likely going to try to get some of the energy policies in this package included in debt ceiling negotiations.
- SALT cap changes are on the table again. Republicans are breathing life into increasing the limit on the state and local tax (SALT) deduction. In January, Rep. Michael Lawler (R-NY) introduced the SALT Marriage Penalty Elimination Act, which proposes to increase the amount a married couple filing a joint tax return may deduct as state and local taxes from $10,000 to $20,000. Recently, this bill has risen to the top of what could potentially be added into a tax extenders package as both Republicans and Democrats show willingness to come to a bipartisan solution on this issue.
New Bills Introduced
Here are the latest bills introduced in the House and Senate:
- Reps. David Kustoff (R-TN) and Dutch Ruppersberger (D-MD) introduced the Investing in Our Communities Act to restore tax-exempt advance refunding for municipal bonds.
- Reps. Ron Estes (R-KS) and Dan Kildee (D-MI) introduced a resolution condemning the foreign Digital Services Taxes introduced by France, Canada, and Colombia. The congressmen say these taxes “unfairly target U.S. digital firms and hamper American ingenuity.”
- Reps. Linda T. Sánchez (D-CA) and Brian Fitzpatrick (R-PA) introduced the Renewable Natural Gas Incentive Act, which would provide a tax credit for renewable natural gas used in heavy-duty vehicles like buses and freight trucks.
- Reps. Abigail Davis Spanberger (D-VA) and Mike Gallagher (R-WI) reintroduced the Strengthening Supply Chains Through Truck Driver Incentives Act, which proposes to establish a refundable income tax credit for qualified commercial truck drivers. This bill was previously introduced in April 2022.
- Sen. James Lankford (R-OK) introduced the Accelerate Long-Term Investment Growth Now (ALIGN) Act, which proposes to make permanent the Tax Cuts and Jobs Act provision that allowed businesses to fully expense new investments in the year of purchase. This provision began phasing out at the end of 2022 and will expire at the end of 2026. Rep. Jodey Arrington (R-TX) introduced a companion bill in the House.
- Sen. John Thune (R-SD) and 40 other Republican senators reintroduced the Death Tax Repeal Act to permanently repeal the federal estate tax. This is the third time this bill has been introduced in the Senate.
- Sens. Todd Young (R-IN) and Mike Braun (R-IN) introduced the Don’t Weaponize the IRS Act to prevent the IRS “from being used as a political weapon against conservative non-profit groups” by removing the requirement to report donor names and addresses.
IN CASE YOU MISSED IT
- The IRS issued Notice 2023-29, describing certain rules that the IRS intends to include in forthcoming proposed regulations for determining what constitutes an energy community for the production and investment tax credits in the Inflation Reduction Act.
- The IRS issued proposed regulations related to certain requirements that must be met for critical minerals and battery components for the new clean vehicle credit under the Inflation Reduction Act. As a result of this guidance, the IRS updated the frequently asked questions (FAQs) for the clean vehicle credits. Ahead of this release, Sen. Joe Manchin (D-WV) wrote an op-ed for the Wall Street Journal2 criticizing the Biden administration’s implementation of the Inflation Reduction Act and claiming some of the Treasury’s proposed guidance on electric vehicle (EV) credits is not in line with legislative intent. Manchin is so passionate about this that he threatened to sue the Treasury Department over its handling of EV guidance.
- In Revenue Ruling 2023-02, the IRS confirmed that the basis adjustment under Section 1014 generally does not apply to the assets of an irrevocable grantor trust not included in the deceased grantor’s gross estate for federal estate tax purposes.
- The White House issued a fact sheet urging federal regulators to consider certain reforms to restore safeguards and supervision of large regional banks, including annual supervisory capital stress tests, expanding long-term debt requirements to a broader range of banks, and implementing stronger capital requirements for banks with assets between $100 billion and $250 billion.
- In response to investor demands, FASB issued a proposal on March 15, 2023 that would add new income tax disclosures for all entities.
- FASB also issued a fast-tracked exposure draft on accounting for certain crypto assets.
- The Senate Finance Committee released a report based on its two-year investigation of Credit Suisse AG. The committee’s findings alleged that Credit Suisse violated key terms of its plea agreement with the U.S. Department of Justice, foreign bank account report violations, and other ways that the bank played a role in U.S. tax evasion schemes. The report calls on the IRS to “crack down on foreign bankers, attorneys and finance professionals who facilitate tax evasion.”
- The Treasury Inspector General for Tax Administration released a report highlighting actions needed to improve the completeness, development, and review of IRS tax gap estimates.
- Mississippi and Arkansas storm and tornado victims now have until July 31, 2023 to file various federal individual and business tax returns and make tax payments.
- The IRS continues to add to its 2023 Dirty Dozen list with the addition of a reminder to tax pros and other businesses to beware of spearphishing and tips to avoid dangerous common scams; that taking tax advice on social media can be bad news for taxpayers, plus schemes circulating involving tax forms; a warning to stay clear of shady tax preparers, plus tips on carefully choosing tax professionals; a reminder to watch out for Offer in Compromise “mills” where promoters claim their services are needed to settle IRS debts; a warning to watch out for schemes aimed at high-income filers, including Charitable Remainder Annuity Trusts and monetized installment sales; and a warning to beware of promoters peddling bogus tax schemes aimed at reducing taxes or avoiding them altogether.
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.