Lately on the Hill
- Debt limit update. There were too many cooks in the kitchen for the debt limit negotiations last week, so congressional leadership and the White House slimmed down the list of negotiators to the following: on behalf of the White House are Legislative Affairs Director Louisa Terrell, Office of Management and Budget Director Shalanda Young, and Counselor Steve Ricchetti; and House Speaker Kevin McCarthy (R-CA) chose U.S. Reps. Garret Graves (R-LA) and Patrick McHenry (R-NC) to negotiate on behalf of Republicans. In the meantime, President Joe Biden flew to Japan for the G-7 Summit to meet with other heads of state. Biden also was supposed to go to Australia and Papua New Guinea, but he cut his trip short due to ongoing debt limit negotiations. Biden and McCarthy met again yesterday. Although a final deal has not yet been reached, the parties are getting closer on details that should be able to pass through Congress.
- The House Freedom Caucus issued a statement1 that no further discussions should happen on the debt limit until the Senate passes the Limit, Save, Grow Act.
- Senate Finance Committee Chair Ron Wyden (D-OR) wrote a letter asking Biden to reject any proposals that would include imposing work requirements on social programs like Medicaid, Temporary Assistance for Needy Families (TANF), and food stamps.
- A group of Senate Democrats, led by Sen. Bernie Sanders (I-VT), wrote a letter asking Biden to reject the Limit, Save, Grow Act; stop negotiating with Republicans; and invoke the 14th Amendment and raise the debt limit. There is some doubt among legal scholars if the president legally has the authority to invoke the 14th Amendment.
- House Democrats have gathered 210 signatures for their discharge petition to force a floor vote on a clean debt limit bill. They need 218 signatures, but as of now, no Republicans are willing to join this effort.
- The Bipartisan Policy Center’s latest analysis2 estimates that the “x” date for when the federal government will be unable to pay its bills as most likely falling somewhere between early June and early August. Treasury Secretary Janet Yellen sent another letter to McCarthy yesterday, saying that "it is highly likely that Treasury will no longer be able to satisfy all of the government’s obligations if Congress has not acted to raise or suspend the debt limit by early June, and potentially as early as June 1.
- It could take up to four days to pass any legislation in the House since during negotiations for speakership, McCarthy promised that legislators can have 72 hours to review a bill before it goes up for a vote, and then the Senate also may need up to a week to line up the necessary votes. The House is on recess the week of May 29. The Senate also is on recess, but Senate Majority Leader Chuck Schumer (D-NY) warned senators to be ready to return to D.C. with 24 hours’ notice to vote on a debt limit bill if an agreement is reached.
- New bills introduced. Here is a roundup of some of the latest tax-related bills introduced in Congress:
- Reps. Chris Pappas (D-NH) and Dan Kildee (D-MI) introduced the Cut Red Tape for Online Sales Act, which would raise the 1099-K reporting threshold for goods sold on online marketplaces to $5,000.
- Rep. Maria Elvira Salazar (R-FL) and Sen. Marco Rubio (R-FL) introduced the Home Advantage for American Families Act, which would authorize the U.S. Department of the Treasury to issue reports for residential real estate transactions identifying the natural identities of foreign buyers. It also would increase the Foreign Investment in Real Property Tax Act (FIRPTA) of 1980 withholding tax on residential real estate to 30% for both foreign corporations and foreign individuals.
- Rep. Jodey Arrington (R-TX) reintroduced HR 3210, the Book Minimum Tax Repeal Act, which would repeal the corporate alternative minimum tax enacted under the Inflation Reduction Act. Sen. John Barrasso (R-WY) introduced companion legislation in the Senate last week.
- Rep. Earl Blumenauer (D-OR) and Sen. Sherrod Brown (D-OH) introduced the Bicycle Commuter Act of 2023, which would reinstate a provision allowing employees to receive a bicycle pre-tax benefit of up to 30% of employer-offered parking benefits. This provision was repealed in 2017.
- Sens. Dianne Feinstein (D-CA) and Marsha Blackburn (R-TN) introduced the Help Independent Tracks Succeed (HITS) Act, which would allow independent music creators—including musicians, technicians, songwriters, and producers—to deduct 100% of recording production expenses in the year they are incurred, rather than in later years.
- Sens. Chuck Grassley (R-IA) and John Cornyn (R-TX) introduced the No Fuel Credits for Batteries Act of 2023, which would bar electric vehicle equipment manufacturers from the renewable fuel program.
- Sens. Roger Wicker (R-MS) and Michael Bennet (D-CO) reintroduced the American Infrastructure Bonds Act of 2023, which would create a new class of “direct pay” taxable municipal bonds.
IN CASE YOU MISSED IT
- The IRS issued a report to Congress on the feasibility of an IRS-run free direct e-file return system, as directed by the Inflation Reduction Act (IRA). Treasury Deputy Secretary Adewale O. Adeyemo wrote a letter of support for the IRS’ efforts to pilot the e-filing system for the 2024 filing season and asked the IRS to remember to listen to taxpayers and earn taxpayers’ trust in every stage of this pilot. Republicans say the IRS can’t implement this system until Congress approves of its plan since the IRA only instructed the agency to investigate the feasibility of such a system, but Democrats say the IRS has authority to go ahead with a pilot.
- The IRS issued Revenue Procedure 2023-23 with 2024 inflation-adjusted amounts for Health Savings Accounts (HSAs).
- The IRS announced three new Large Business and International practice units focusing on (1) interest expense limitation on related foreign party loans under Section 267(a)(3); (2) dividend distribution with a debt issuance; and (3) interest expense limitation under §163(j) for controlled foreign corporations post-Tax Cuts and Jobs Act (TCJA). Practice units serve as job aids and training materials on tax issues for IRS staff and tax professionals.
- IRS Commissioner Daniel Werfel wrote a letter to Congress with the agency’s initial findings that Black taxpayers may be audited at higher rates than what would be expected given their share of the U.S. population.
- The Congressional Budget Office published an analysis of the budgetary implications of alternative assumptions about future tax policy changes on discretionary spending and revenue policies, including the impact of extending individual income tax provisions included in the TCJA past 2025.
- The House Financial Services Subcommittee on Digital Assets, Financial Technology and Inclusion held a hearing on proposed stablecoin legislation last week. Here is the Democrats’ version of this legislation and the Republicans’ proposed bill.
- Wyden is continuing the Senate Finance Committee’s investigation into tax evasion tactics by Credit Suisse. Last week, Wyden sent a letter to the U.S. Attorney General to investigate Swiss banks and bankers enabling taxpayers to evade U.S. taxes and expanded the investigation to four more international banks: Union Bancaire Privée (UBP), PKB Privatbank (PKB), Bank Leumi, and Andbank.
- The American Institute of CPAs sent a letter to the IRS with its suggestions regarding the IRS 2022-2023 Guidance Priority List.
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.