From the Hill will pause during the weeks of May 27 and June 3 in preparation for an exciting change. Forvis and Mazars will form a new global network, effective June 1, 2024. Read more about this new global network here.
Here’s a look at recent tax-related happenings on the Hill, including the Senate Finance Committee chair continuing to push for passage of the Tax Relief for American Families and Workers Act (Act), and the National Economic Council director reiterating President Joe Biden’s stances on Tax Cuts and Jobs Act (TCJA) provisions.
Lately on the Hill
For Wyden, Tax Bill Failure Is Not an Option
Senate Finance Committee Chair Ron Wyden (D-OR) refuses to give up on the Act.
“I’m not going to speculate about failing,” Wyden said at the Tax Council Policy Institute’s event titled “The Gathering Storm: 2025 and the Coming Tax and Fiscal Showdown,” reports Tax Notes. “We’re going to win on this because we’re doing what Congress has promised.”
Last week, Biden signed a bill funding the Federal Aviation Administration through September 2028. The bill did not include Wyden’s amendment to include the Act, which would have provided substantial tax breaks to business and families, including immediate deductions for research and an expanded child tax credit.
“Right now, I’m working with Majority Leader Chuck Schumer to get a time schedule,” Wyden said, referring to a Senate vote on a standalone tax bill.
Passage of the Act as a standalone bill has long been viewed as a difficult process, as it would likely be subject to debate and amendment, which the Senate has very little time for. Tax Notes reports, “The window, though, is narrowing to bring to the Senate floor a bill that would consume perhaps a week of floor time. The Senate is in session just 33 days until it takes its five-week August-September break. There’s a three-week session in September before adjourning until after the November elections, but those three weeks will likely be devoured by spending bills that must be passed or extended to avert a government shutdown after the September 30 end of the federal fiscal year.”
Senate Republicans appear content on waiting until after the November elections, when negotiations on extending the massive tax provisions of the TCJA will begin to happen in earnest before they expire at the end of 2025.
Brainard Reiterates Biden’s Positions on TCJA
“The expiration of Trump’s 2017 tax package next year will put tax fairness front and center,” said the president’s National Economic Council Director Lael Brainard during a recent speech.
Brainard reiterated the president’s “ironclad commitment” to not raise taxes on taxpayers making less than $400,000. Rather, the president’s agenda seeks additional tax cuts for workers and families, “paid for by asking corporations and those at the top to contribute more.”
Brainard called out the need to raise revenue to address the “fiscal hole” the nation finds itself in, especially considering the “aging of the population” and its associated monetary pressures.
Proposed in the president’s budget is an increase to the TCJA reduced corporate tax rate. The proposal would increase the corporate tax rate from 21% to 28%, still reduced from the pre-TCJA rate of 35%.
“As we approach next year’s tax debate, the stakes could not be higher for tax fairness and our nation’s fiscal future. The President is fighting for a fair tax system that gives tax breaks to the middle class and raises revenue by asking the ultra-wealthy and large corporations to pay their fair share,” concluded Brainard.
Noteworthy Decisions
Tax advisory firm Stenson Tamaddon, LLC filed a complaint in the Arizona District of the U.S. District Court requesting injunction relief requiring the IRS to resume processing claims for the Employee Retention Credit (ERC). Stenson Tamaddon, LLC v. United States et al., No. 2:24-cv-01123.
The ERC was introduced as an economic stimulant, incentivizing businesses to retain employees during the COVID-19 pandemic as part of the Coronavirus Aid, Relief, and Economic Security Act of 2020 (CARES Act).
The complaint targets IRS Notice 2021-20, issued in March 2021, which Stenson argues violates the Administrative Procedure Act. “Instead of issuing regulations, the IRS legislated improperly through guidance documents, thereby bypassing the mandatory notice-and-comment rulemaking process and eliminating the transparency and deliberation it offers,” the complaint said.
Stenson argues that the guidance improperly narrowed the legislation, “depriving” small businesses the tax credits they should be entitled to, and that the IRS’ reliance on the guidance as “infallible law” prevented thousands of taxpayers from receiving relief.
In addition, Stenson designates the September 2023 moratorium of processing new ERC claims indefinitely as “improper” and “unlawful.” Since the moratorium, the IRS has continued to process claims filed before the September cutoff but “at a greatly reduced speed.” According to Stenson, “The ERC program is effectively suspended in its entirety.”
The complaint further asserts, “The IRS has failed Congress and American businesses in its role as steward of the ERC program,” and asks that the court compel the IRS to resume processing ERC claims as the CARES Act and Internal Revenue Code require.
Other Important Developments
IRS Technical Guidance
- Proposed Regulations (REG-133850-13) have been issued by the IRS that would remove the associated property rule and similar rules on the interest capitalization requirements for improvements to designated property under Section 263A. In addition, the proposal modifies the definition of “improvement” for purposes of applying existing regulations, including the exceptions, safe harbors, and elections. Taxpayers may choose to apply the proposed regulations for taxable years after May 15, 2024 and on or before the date the final regulations are published. Be on the lookout for a published article from Forvis Mazars concerning these proposed regulations with additional detail and analysis.
- Final Regulations (T.D. 9997) have been released relating to the imposition of certain user fees (particularly preparer tax identification number or “PTIN” fees) on tax return preparers. The regulations reduce the user fee to apply or renew a PTIN from $21 to $11.
- Revenue Ruling 2024-12 has been issued providing the June 2024 various rates for federal income tax purposes, including the applicable federal rates (AFR), adjusted AFR, adjusted federal long-term rate, and the long-term tax-exempt rate.
- Notice 2024-40 has been released with guidance on the corporate bond monthly yield curve, spot segment rates, 24-month average segment rates, and the interest rate on 30-year Treasury securities.
- Notice 2024-42 updates static mortality tables to be used for defined benefit pension plans. The tables assist with calculating the funding target and other items for valuation dates occurring during the 2025 calendar year. In addition, a modified unisex version of the mortality tables is included for determining minimum present value for distributions with annuity starting dates that occur during stability periods beginning in the 2025 calendar year.
Miscellaneous
- IR-2024-141 announces relief for individuals and businesses affected by tornadoes in certain areas of Ohio, currently including Auglaize,, Crawford, Darke, Delaware, Hancock, Licking, Logan, Mercer, Miami, Richland, and Union counties. These taxpayers have until September 3, 2024 to file tax returns and make tax payments.
Continued Coverage of the Inflation Reduction Act (IRA)
- Announcement 2024-25 provides the unallocated solar and wind capacity limitation carried from 2023 into the 2024 Low-Income Communities Bonus Credit Program. Also provided are the distributions of the carried-over amounts among the facility categories, category 1 sub-reservations, and options for the 2024 application year.
- Announcement 2024-24 notifies taxpayers of the applicable Reference Standard 90.1 required under §179D(c)(2) as part of the definition of energy-efficient commercial building property.
- Notice 2024-41 has been issued modifying the domestic content safe harbor in Notice 2023-38 and provides a new elective safe harbor for determining the domestic content bonus credit amounts under Sections §§45, 45Y, 48, and 48E.
- The U.S. Department of the Treasury and the IRS announced that applications for the §48(e) Low-Income Communities Bonus Credit Program will open on May 28, 2024 at 9 a.m. ET. Information about the application process was provided by a public webinar on May 16. The tax credit program annually allocates 1.8 gigawatts of capacity of qualified solar or wind facilities in low-income communities. The 2024 program will allocate more than 2.1 gigawatts as about 325 gigawatts are rolling over from the prior year.
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.