Skip to main content

From the Hill: February 13, 2024

Questions remain on what the Senate may do in regard to tax-relief legislation.
banner background

Here’s a look at recent tax-related happenings on the Hill, including the status of tax-relief legislation, a scheduled vote on the SALT Marriage Penalty Elimination Act, and a new bill that would enhance the Child and Dependent Care Credit.

Lately on the Hill

The lightning pace of legislative action on the Tax Relief for American Families and Workers Act of 2024 (Act) over the last couple of weeks slowed down as the Senate began its recess from February 12 through February 23. Coupled with the House’s recess beginning February 19 through February 27, questions remain as to whether Congress can collectively meet the March 1 and 8 deadlines for the continuing resolution on appropriation bills. Additional delays on the appropriation bills could further disrupt passage of the Act as these bills have been considered likely vehicles for its enactment. Without a legislative vehicle, a standalone tax bill is subject to amendments by members of the Senate. Any amendments would subject the Act to another vote by the House, potentially killing it altogether. Republican members of the Senate Finance Committee have made clear their intentions to legislate the Act and have particular concerns with provisions for the Child Tax Credit. What remains to be seen is how other Republicans in the Senate would vote on the measure, despite what the vocal members of the Senate Finance Committee are saying. Timely enactment may depend on whether Senate leadership can come to a unanimous consent agreement restricting debate time and the number of amendments, and if there is a groundswell of Republican support among the rank-and-file members.

Scheduled for the House this week is a vote on the SALT Marriage Penalty Elimination Act, which includes a one-year amendment for the taxable year beginning after December 31, 2022 and before January 1, 2024, providing a cap increase from $10,000 to $20,000 on deductions for state and local taxes for married filing joint taxpayers with adjusted gross income under $500,000, as well as a hearing with IRS Commissioner Danny Werfel on the delay of the new $600 Form 1099-K reporting threshold, which left some lawmakers questioning his authority to do so.

Sen. Bob Casey (D-PA) introduced the Child and Dependent Care Tax Credit Enhancement Act of 2024, which would amend for taxable years beginning after December 31, 2023, Section 21(a) of the Internal Revenue Code similar to the temporary provisions that existed for this code section for taxable year 2021. Section 21 provides a tax credit equal to 35% of employment-related expenses, incurred by the taxpayer to be gainfully employed, where there are one or more qualifying individuals with respect to the taxpayer. A qualifying individual with respect to the taxpayer is a dependent under the age of 13, or a dependent or spouse who is physically or mentally incapable. Employment-related expenses include such things as household services and expenses for the care of a qualifying individual, e.g., dependent care centers.

The new bill would increase the credit from 35% to 50% and introduces a stepped phase-out limitation. For taxpayers with adjusted gross income (AGI) exceeding $125,000 (the current AGI threshold is $15,000), the credit would begin phasing out by one percentage point for each $2,000 above the $125,000 AGI threshold, not to be reduced below 20%. In addition, once a taxpayer’s AGI exceeds $400,000, the 20% phaseout percentage begins to reduce one percentage point for each $2,000 above the $400,000 AGI threshold. The amount of the employment-related expenses allowed to be considered also increases from $3,000 to $8,000 for one qualifying individual and from $6,000 to $16,000 for two or more qualifying individuals. The current statute requires that married couples file a joint return to claim the credit, with special provisions for married individuals living apart and filing a separate return. The new proposed legislation provides for married couples filing separate returns to determine the credit percentage and the number of qualifying individuals for each spouse as if the individual had filed a joint return with their spouse. The aggregate amount of credit for each spouse cannot exceed the amount that would have been allowed had the spouses filed jointly. For calendar years beginning after 2024, the $125,000 AGI threshold and the amount of employment-related expenses allowed to be considered for the credit would now be indexed for inflation. The credit also is refundable for taxpayers with their principal place of abode in the U.S. for more than one-half of the taxable year.

Noteworthy Decisions

A microcaptive insurance company was an insurance company in name only and its premiums were “nonsense” as the petitioner played an insurance version of the “Showcase Showdown from the Price is Right.” Swift v. Commissioner, No. 13705-16, T.C. Memo 2024-13.

Bernard Swift purchased insurance policies for his businesses from microcaptive insurance companies that also were under his control. Swift deducted the insurance premiums while also avoiding tax on the premium income under §831(b). The IRS scrutinized the arrangement and determined that the microcaptives were used for purposes of “tax avoidance and financial planning.” The IRS disallowed the deductions and assessed accuracy-related penalties. The court noted it had “serious reservations” concerning the reasonableness of premiums as they seem to have been based on the §831(b) $1.2 million threshold rather than based on an arm’s-length negotiation. The court stated, “Swift had a long history of playing the microcaptive insurance version of the ‘Showcase Showdown’ from the Price is Right: obtaining premiums close to, but not over, the limit imposed by section 831(b) or a pre-set target.” The court held in favor of the IRS determining that the microcaptives did not operate as an insurance company and that the premiums were “nonsense.”

A stock purchase transaction between son and parents deemed a gift for the difference between the value of the stock and the purchase price. Huffman v. Commissioner, No. 3255-16, 3256-16, 3261-16, T.C. Memo 2024-12.

Chet Huffman entered into right-to-purchase agreements to purchase shares in a corporation he jointly owned with his parents, Lloyd and Patricia Huffman. The agreements stipulated that the price of the shares would not exceed $5 million and provided that the agreements were “not compensatory in nature, rather the purpose [was] to retain the ownership of” the corporation within the family. When Chet exercised the right to purchase the stock, the value far exceeded the $5 million purchase price. The IRS valued the shares at approximately $31.3 million and issued a notice of deficiency contending that the price differential constituted a gift. The Huffmans argue that the agreements were valid business arrangements and should be conclusive as to the value of the shares. The court referenced §2703(a)(1), which requires that the value of property must be determined without regard to “any option, agreement, or other right to acquire or use the property at a price less than the fair market value of the property (without regard to such option, agreement, or right).” Furthermore, the court held under §2512(b) “where property is transferred for less than adequate and full consideration in money or money’s worth, the amount by which the value of the property exceeds the value of the consideration is deemed a gift.”

Other Important Developments

IRS Technical Guidance

  • Revenue Procedure (Rev. Proc.) 2024-13 provides tables for limitations on passenger automobile depreciation deductions and dollar amounts used to determine passenger automobile lessee income inclusions for calendar year 2024.
  • IR-2024-33 provides information on revised FAQs for Form 1099-K, Payment Card and Third Party Network Transactions. In November 2023, the IRS delayed the new $600 reporting threshold for calendar year 2023, allowing the previous threshold of more than $20,000 and more than 200 transactions.
  • The IRS is requesting comments to do with Forms 2848 and 2848 (SP) Power of Attorney and Declaration of Representative.
  • The IRS is requesting comments concerning Rev. Proc. 2024-4. Taxpayers, nonprofit organizations, and state and local governments can request determination letters and letter rulings from the IRS under this guidance.


  • IR-2024-35 announces relief for individuals and businesses affected by storms, flooding, landslides, and mudslides in certain areas of West Virginia currently including Boone, Calhoun, Harrison, and Kanawha counties. These taxpayers have until June 17, 2024 to file tax returns and make tax payments. The relief also applies to extension, although any extension filed between April 15 and June 17 will have to be paper filed.
  • IR-2024-34 provides information on the Employer-Provided Childcare Tax Credit, including a link to a new webpage explaining the credit. The credit is up to $150,000 per year to offset the costs of qualified childcare facility expenditures and qualified childcare resource and referral expenditures.
  • IR-2024-32 announces relief for individuals and businesses affected by storms and flooding in certain areas of Maine currently including Androscoggin, Franklin, Hancock, Kennebec, Oxford, Penobscot, Piscataquis, Somerset, Waldo, and Washington counties. These taxpayers have until June 17, 2024 to file tax returns and make tax payments. The relief also applies to extension, although any extension filed between April 15 and June 17 will have to be paper filed.

Continued Coverage of the Inflation Reduction Act (IRA)

  • Rev. Proc. 2024-12 extends the period for providing seller reports for sales of vehicles qualifying for the §30D Clean Vehicle Credit and §25E Previously Owned Vehicle Credit. For vehicle sales in calendar year 2023, the seller must provide the report to the IRS by February 15, 2024. For sales for which the vehicle is placed in service by the taxpayer between January 1 and January 16, 2024, reports must be filed no later than January 19, 2024. For sales for which the vehicle is placed in service by the taxpayer on or after January 17, 2024, the seller must file the report through the IRS Energy Credits Online Portal within three calendar days.
  • A coalition of businesses that “represent every step of the supply chain for battery storage and electric vehicle manufacturing,” wrote a letter to Treasury Secretary Janet Yellen concerning the §45X Advanced Manufacturing Production Tax Credit.1 The letter asks for consideration to the credit inclusion of domestic extraction of critical minerals. Current guidance provides credits for the conversion and purification of critical minerals but omits the actual extraction of the materials. The letter notes the impact the guidance also has on the §30D New Clean Vehicle Tax Credit, which has content manufacturing requirements requiring that battery components and critical minerals be sourced from domestic sources. The letter argues to maximize the objectives of the §30D credit, §45X should include the cost for critical mineral extraction to incentivize domestic production.

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.


Related FORsights

Like what you see?
Subscribe to receive tailored insights directly to your inbox.