Here’s a look at recent tax-related happenings on the Hill, including a nonpartisan organization urging the next U.S. president to address the nation’s rising debt burden.
Lately on the Hill
Nonpartisan Budget Analysts Call for the Prioritization of the Nation’s Fiscal Trajectory
The Committee for a Responsible Federal Budget has released its take on the presidential candidates’ tax positions and their fiscal impact.1 Under the group’s estimates, Vice President Kamala Harris’ proposals would increase the national debt by $3.5 trillion, while former President Donald Trump’s plans would increase it by $7.5 trillion, through 2035.
The Committee “is a nonpartisan, non-profit organization committed to educating the public on issues with significant fiscal policy impact” and is made up of “the nation’s leading budget experts,” including past leaders of congressional budget committees and other government budget offices, according to its website.
Among Harris’ most expensive proposals are the extension of the Tax Cuts and Jobs Act of 2017 (TCJA) for those making less than $400,000 per year and the expansion of the Child Tax Credit and Earned Income Tax Credit at an approximate cost of $3 trillion and $1.4 trillion, respectively. An increase in the corporate tax rate from 21% to 28% would generate $900 billion, according to the estimate.
On the other hand, a trio of trillion-dollar Trump proposals to extend the TCJA, exempt overtime wages from tax, and terminate tax on Social Security benefits would collectively cost more than $8.5 trillion. The estimate also includes Trump’s proposed tariffs, projected to offset costs by $2.7 trillion.
While the cost of the candidates’ proposals is separated by a significant margin, the study points out that neither candidate “has put forward a plan to address [the] rising debt burden.”
If the proposals were to be enacted, by 2035 the debt would balloon to a record 133% of gross domestic product (GDP) under Harris’ plan and 142% under Trump’s initiatives. To put that into perspective, the study points out that the previous record set in post-World War II 1946 was 106%.
“Whoever wins the 2024 presidential election,” the study concludes, “will face an unprecedented fiscal situation upon taking office.” Considering the amount of debt soon exceeding 100% of GDP, interest on the debt now exceeding defense spending, and the asserted impending insolvency of Social Security and Medicare, the Committee urges leaders to make “our unsustainable fiscal trajectory a major priority.”
Trump Offers More Tax-Cutting Promises
Trump made new campaign pledges last week to end double taxation for American citizens living abroad, to treat interest paid on car loans as tax-deductible, and provide a deduction for generators.
In a short video, Trump sought to appeal to citizens residing in other countries who are subject to potential double taxation on their income by both the U.S. and the foreign country in which they reside.
During an October 10 speech at the Detroit Economic Club, Trump pitched proposals to not only make car loan interest tax-deductible for car owners, but also expand research and development tax credits for domestic auto manufacturers and bring back 100% depreciation on machinery and equipment.3
Posted on Truth Social, Trump offered a new deduction for home generators in light of recent natural disasters. He added that the deduction would be retroactive to September 1, 2024.
The Judicial Report
Companies sue for their claimed ERTC refunds plus interest as processing delays continue. MTH Enterprises LLC v. United States, N.D. Ill., No. 1:24-cv-9729.
Two related companies are suing the IRS in an Illinois district court, seeking more than $1.3 million in refunds related to the Employee Retention Tax Credit (ERTC). The filed complaint asserts their eligibility for the credit in the second and third quarters of 2021 when they experienced a decline in gross receipts.
Due to the September 14, 2023 moratorium on processing ERTC claims filed after that date, the plaintiffs contend that the IRS has effectively shut down the credit program in violation of the Coronavirus Response and Consolidated Appropriations Act of 2021.
In June 2024, the IRS announced the denial of tens of thousands of claims thought to be too risky while starting a new round of processing low-risk claims.
Due to the processing delays, some companies have begun suing the government for credits they feel confident are due to them.
From the Treasury & IRS
CAMT Proposed Regulations to Receive Clarifications & Corrections Soon
Technical corrections to proposed regulations regarding the corporate alternative minimum tax (CAMT) are forthcoming, according to Jeremy Aron-Dine, senior counsel of the IRS Office of Chief Counsel. At a District of Columbia Bar Taxation Community event held October 8, Aron-Dine discussed the need for clarification and error corrections to proposed regulations issued September 12, 2024. A timeline for release was not given; only that corrections are coming in the near future.4
Released Guidance
Final regulations (T.D. 9994) provide relief by turning off tax provisions under Section 367(d) when related to transfers of intangible property repatriated to the United States. For more information, see our FORsights™ article on the topic.
Proposed regulations (REG-113628-21) would exempt from federal taxation tribal entities wholly owned by Indian tribal governments. Also, these entities would be eligible for clean energy credits under the Inflation Reduction Act of 2022 through elective payment elections.
Revenue Procedure 2024-39 provides an automatic six-month extension to file a Form 990-T and any other relevant forms for purposes of making the elective pay election under §6417. The automatic extension even covers entities that did not timely file Form 8868 to apply for an extension.
IR-2024-263 announces an additional 400,000 ERTC claims are currently being processed, with eligible claims totaling approximately $10 billion. The IRS says that a “vast majority” of these claims will likely be eligible and approved after separating them out from those deemed ineligible. The announcement could be helpful, especially for businesses affected by recent hurricanes in the Southeastern U.S. and other natural disasters.
IR-2024-264 announces relief for individuals and businesses affected by Hurricane Milton in Florida, including those in counties that previously did not qualify for relief under Hurricane Debby or Hurricane Helene and those counties that already received relief under Debby but not Helene. These taxpayers have until May 1, 2025 to file tax returns and make tax payments.
IR-2024-265 grants penalty relief for sales or use of dyed diesel fuel in Florida due to Hurricane Milton. The relief is retroactive to October 9, 2024 and applies through October 30, 2024.
IR-2024-266 provides a bevy of IRS resources for those affected by recent hurricanes, including extending filing and payment deadlines, information on tax-free disaster payments, rules on special disaster distributions from retirement plans, availability of disaster loss deductions, etc.
IR-2024-268 announces relief for individuals and businesses affected by the Watch Fire for the San Carlos Apache Tribe in Arizona. These taxpayers have until February 3, 2025 to file tax returns and make tax payments.
The Financial Crimes Enforcement Network (FinCEN) has announced relief for calendar year 2023 filings of Reports of Foreign Bank and Financial Accounts (FBARs). Relief is extended to May 1, 2025 for victims of Hurricane Milton (FIN-2024-NTC6) and Hurricane Helene (FIN-2024-NTC4). Relief is extended to February 3, 2025 for victims of Hurricane Debby (FIN-2024-NTC2), Hurricane Beryl (FIN-2024-NTC1), and Tropical Storm Francine (FIN-2024-NTC3).
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.