Here’s a look at recent tax-related happenings on the Hill, including Congress reconvening with fiscal year 2025 government funding on the docket.
Lately on the Hill
Legislators Reconvene With Government Funding on the Forefront
Congress reconvened this week after a five-week summer recess. Most prominent on the legislative docket is fiscal year 2025 government funding due by September 30. Only four times in about 50 years has Congress passed all required appropriations on time, with the last being in 1997. This year will be no exception as legislators in the House have already introduced a continuing resolution (CR) to extend 2024 fiscal year spending levels through March 28, 2025.
The Republican-drafted resolution also includes the Safeguard American Voter Eligibility Act (SAVE Act), which requires proof of citizenship to register to vote in a federal election. Controversial issues such as this are sometimes proposed within a continuing resolution given the importance of the CR. Parties may, therefore, attempt to include legislative priorities within a CR (regardless of their controversial nature) in hopes that they pass in the effort to avoid a government shutdown.1 Note that while legislative proposals can be included in CRs, they would not be allowed were appropriations bills to be passed in lieu of a CR.
House Speaker Mike Johnson (R-LA) plans to bring the bill to the House floor “as soon as possible.”
Harris Hails Small Business Tax Initiatives & Capital Gain Tax Increase
At a campaign event in Portsmouth, New Hampshire, Vice President Kamala Harris unveiled her plan to increase the long-term capital gains tax rate to 28% on taxpayers earning $1 million or more. “We will tax capital gains at a rate that rewards investment in America’s innovators, founders, and small businesses,” Harris promised. “We know when the government encourages investment, it leads to broad-based economic growth and it creates jobs, which makes our economy stronger.”
The increase falls below President Joe Biden’s proposal to tax capital gains at ordinary rates, which will increase to as high as 39.6% after 2025 unless changes are made by new legislation next year. Harris did not mention Biden’s related proposal of a 25% tax on unrealized gains for taxpayers with wealth (defined as assets minus liabilities) greater than $100 million.
Harris also touted new small business initiatives with the hopes of driving “25 million new small-business applications by the end of my first term. And to help achieve this, we will lower the cost of starting a new business.”
The small-business proposals call for increasing the startup expense deduction from the current limit of $5,000 to $50,000, providing financing at little to no interest, and simplifying tax filings by offering a standard deduction and a more streamlined form akin to the 1040-EZ that was retired as part of the Tax Cuts and Jobs Act.
“And so … as president,” Harris stated, “one of my highest priorities will be to strengthen America’s small businesses.”
Trump Ties Lower Corporate Taxes to Domestic Production in New York Speech
Former President Donald Trump addressed the Economic Club of New York last week, providing an additional caveat to his proposal to reduce the corporate tax rate from the current rate of 21% to 15% for domestic manufacturers only. “You have to make your product in America,” Trump said. “If you outsource, offshore, or replace American workers, you are not eligible for any of these benefits.”
The “America First” initiative falls in line with his tariff proposals, which have called for a minimum 10% universal tariff and a 60% tariff on Chinese imports. “There’ll be a big tariff on [foreign] product[s] because we want to make our goods in America, and most of them we can,” Trump said.
Bloomberg has totaled up the Republican nominee’s tax cut proposals, estimating a total cost of $10.5 trillion to extend the 2017 tax cuts within the Tax Cuts and Jobs Act, provide a $5,000 child tax credit, exempt Social Security and tips from taxes, and reduce the corporate tax rate to 15% for qualifying taxpayers.2 Addressing such concerns, Trump stated, “Under the Trump administration, we proved that targeted tax cuts do not increase the deficit. They reduce the deficit by growing the economy and raising revenue.”
From the Treasury & IRS
Released Guidance
Proposed Regulations (REG-105128-23) have received corrections. Originally published on August 7, 2024, the proposed regulations concern certain issues arising under the dual consolidated loss rules and the application of those rules to certain foreign taxes. Also included are rules regarding certain disregarded payments that give rise to losses for foreign tax purposes.
Proposed Regulations (REG-111629-23) have received corrections. Originally published on August 20, 2024, the proposed regulations are regarding the time for making and revoking certain elections relating to foreign currency gain and loss.
The period is reopening to submit comments or request a public hearing for a notice of proposed rulemaking (REG-120137-19) that was published on July 2, 2024. The proposed regulations relate to the payment of tax by commercially acceptable means and reflect changes to the law made by the Taxpayer First Act that would allow the IRS to directly accept payments of tax by credit or debit card without having to connect taxpayers to third-party payment processors. The period is reopened through September 24, 2024.
Revenue Procedure 2024-35 provides the applicable percentage table in Section 36B(b)(3)(A) for taxable years beginning in calendar year 2025. This revenue procedure also provides the indexing adjustment for the required contribution percentage §36B(c)(2)(C)(i)(II) for plan years beginning in calendar year 2025.
Notice 2024-65 requests comments on issues related to matching contributions (saver’s match contributions) under the SECURE 2.0 Act that are paid by the Treasury to applicable retirement savings vehicles on behalf of eligible individuals who make qualified retirement savings contributions.
The IRS is soliciting comments concerning the burden associated with the U.S. income tax return forms for individual taxpayers as well as soliciting comments on trust and estate income tax returns and related forms.
Upcoming Webinar
Between the election and the 2025 legislative sunsets, there is much to consider in the tax world. Join Forvis Mazars for a complimentary webinar as we provide an overview and planning considerations with these upcoming events in mind. Head into the year-end with information you and your business need to know. To register, click here.
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.