Lately on the Hill
- Debt limit update. House Republicans passed the Limit, Save, Grow Act of 2023, which would raise the debt limit by $1.5 trillion or suspend it through March 31, 2024 (whichever occurs first), cap government spending for the next decade, and cut government spending to fiscal year 2022 levels. Here is a summary of the bill. The House is in recess until mid-May.
- Although House Speaker Kevin McCarthy (R-CA) said the bill would not be changed before it went to a floor vote, Republicans did make some amendments the night before voting was scheduled to begin including:
- Escalating proposed increased work requirements for social programs to begin in 2024 instead of 2025.
- Rolling back the repeal of certain biofuel tax credits and add a caveat that the repeal of certain Inflation Reduction Act credits for sustainable aviation fuel and alternative fuel taxes would not apply to taxpayers who made investment decisions based on the credits.
- The Joint Committee on Taxation estimates that repealing the Inflation Reduction Act green energy tax credits in the debt limit bill would raise $515 billion between 2023 and 2033.
- The Congressional Budget Office estimates that the budgetary effects of the House Republicans’ debt limit bill, if enacted, would reduce federal budget deficits by about $4.8 trillion between 2023 and 2033.
- Treasury Secretary Janet Yellen informed congressional leaders that the U.S. could default on its debt as early as June 1.
- What’s next? The ball is now in President Joe Biden’s court. McCarthy says House Republicans have done their job by lifting the debt limit, presenting the White House with their spending cut requests, and sending a bill to the Senate. Senate Minority Leader Mitch McConnell (R-KY) said Senate Republicans are going to stay out of this for now and let House Republicans and the White House figure it out. President Biden called McCarthy and asked to meet to discuss the debt limit on May 9. The meeting is expected to include top congressional leaders. Until now, the White House position has been that Biden would only sign off on a clean debt limit bill with no spending cuts attached.
- Senate Majority Leader Chuck Schumer (D-NY) announced yesterday in a Dear Colleagues letter1 that the Senate will begin to hold hearings this week to “expose the true impact of this reckless legislation on everyday Americans,” nicknaming the Republicans’ debt limit bill the “Default on America Act.” Democrats have been trying to unite on their messaging on how to approach these debt limit negotiations since some Democrats have called on the White House to come to the negotiation table with House Republicans. For example, Sen. Joe Manchin (D-WV) called on Biden to “negotiate now” and Sen. Bernie Sanders (I-VT) said Biden can start negotiating and that Sanders is open to looking at proposals on waste within the government. House Republicans said that if Senate Democrats don’t like the House Republicans’ plan, then they should pass their own version. As such, Schumer is adding both the House Republican debt limit plan and his own "clean" debt limit proposal on the Senate calendar. That way, if the White House and House Republicans can't come to an agreement, Schumer has a backup plan that would raise the debt limit with no spending cuts attached. However, McCarthy says a clean debt limit bill will not pass in the House.
- Although House Speaker Kevin McCarthy (R-CA) said the bill would not be changed before it went to a floor vote, Republicans did make some amendments the night before voting was scheduled to begin including:
- New tax bill in the works. House Republicans are working on a tax bill to include a variety of tax provisions, including retroactively repealing changes to Section 174 research and development (R&D) expensing (but not a permanent repeal), reinstating full bonus depreciation, and rolling back Tax Cuts and Jobs Act changes to how interest expense is computed under §163(j).
- Republicans also may pull in the child tax credit and low-income housing proposals favored by Democrats, since Democrats insist they won’t pass any corporate tax breaks without also bringing the expanded child tax credit. Housing tax policy also appears to have bipartisan support, so it is likely to make it into these negotiations to garner more votes for the overall tax package. There also appears to be bipartisan traction to move forward LIFO relief for dealerships.
- Although House Republicans want to have draft legislation done in May or June, it is unlikely that this bill will get any real traction until this fall when Congress goes through its annual appropriations negotiations for government funding. Even then, it is unlikely a standalone tax bill will make it further than the House. However, some House Republicans speculate that some of these tax policies, like R&D expensing, may yet make it into debt ceiling negotiations this month.
- New bills introduced. Here is a roundup of some of the latest tax-related bills introduced in Congress:
- Rep. David Kustoff (R-TN) introduced the Small Business Investment Act of 2023 to make it easier for small businesses to access financing by expanding §1202 eligibility to more businesses. Sen. John Cornyn (R-TX) introduced the companion legislation in the Senate.
- Reps. Julia Brownley (D-CA) and Brad Schneider (D-IL) introduced the Sustainable Aviation Fuel Act, which would extend the Inflation Reduction Act’s clean fuel production credit for sustainable aviation fuel through 2032, as well as create a new Investment Tax Credit to help finance new sustainable aviation fuel facilities and infrastructure.
- Reps. Pete Stauber (R-MN) and Angie Craig (D-MN) reintroduced the Volunteer Driver Tax Appreciation Act of 2023, which would increase the federal tax deduction mileage rate for volunteer drivers from 14 cents per mile to 65.6 cents per mile, i.e., the current business mileage rate.
- A bipartisan group in the House introduced the Tax-Free Pell Grants Act, which would increase the gross income exclusion for Pell Grants and expand the American Opportunity Tax Credit and the Lifetime Learning Tax Credit.
- Rep. Victoria Spartz (R-IN) reintroduced health care legislation with eight different bills impacting tax-exempt hospitals.
- Reps. Young Kim (R-CA) and Abigail Spanberger (D-VA) introduced the Cutting Paperwork for Taxpayers Act, which proposes to exclude from gross income any interest paid on individuals’ or small businesses’ tax overpayments. Currently, when the IRS is delayed by more than 45 days in providing a tax refund, interest begins accumulating on the refund. If this interest exceeds $10, the taxpayer receives a separate 1099-INT form and must pay taxes on that interest in the following filing season.
- Sen. Ron Wyden (D-OR) introduced the Presidential Audit and Tax Transparency Act, which would require sitting presidents and presidential nominees of major parties to release their tax returns to the public.
- Sen. John Thune (R-SD) reintroduced the Ending Duplicative Subsidies for Electric Vehicles Act, which would prohibit the automobile industry from double-dipping on federal subsidies, specifically electric vehicle (EV) tax credits, grants, and loans for EV manufacturing.
- Sens. Tim Scott (R-SC) and Mike Crapo (R-ID) introduced the IRS Accountability and Taxpayer Protection Act to modify procedural requirements for assessing penalties under §6751(b)(1) to protect taxpayers.
- Sen. Tom Cotton (R-AR) introduced the No EV Credits for Idle Allies Act, which would prevent European countries from benefiting from crucial mineral tax credits from the U.S. until they contribute an equal percent of gross domestic product in support of the war in Ukraine.
- Sen. Bob Casey (D-PA) introduced the Visitable Inclusive Tax Credits for Accessible Living (VITAL) Act, which would increase funding for the Low-Income Housing Tax Credit (LIHTC) program and require that states administering LIHTC construct at least 20% of their LIHTC units as accessible and/or walkable or rollable.
IN CASE YOU MISSED IT
- The Joint Committee on Taxation published a description of the energy-related tax changes under the Inflation Reduction Act.
- A group of senators, led by Sens. Tom Carper (D-DE) and Elizabeth Warren (D-MA), wrote a letter to IRS Commissioner Danny Werfel urging the agency to simplify the tax filing process and expand access to free e-filing options.
- Werfel spoke at a Senate Finance Committee hearing on April 19 in regard to the fiscal year 2024 IRS budget and the IRS’ 2023 filing season. Werfel said that the agency’s backlog of employee retention credits (ERCs) is in the 750,000 to 900,000 range (previously, the backlog exceeded 1 million cases). In a recent House Ways and Means Committee hearing, Werfel said his goal is to process 50,000 ERC cases per week.
- The IRS announced it will resume in-person public hearings on notices of proposed rulemaking. This was temporarily suspended during the COVID-19 pandemic and hearings have been held by phone instead since 2020.
- The Federal Reserve Board announced the results of its review of the supervision and regulation of Silicon Valley Bank, including the key takeaways on the causes of the bank's failure.
- The IRS released proposed regulations regarding certain repatriations of intangible property to foreign corporations under §367(d).
- Florida storm victims have until Aug. 15, 2023 to file various federal individual and business tax payments.
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.
- 1https://www.politico.com/f/?id=00000187-d6fc-dbff-a3df-fefcd5a30000