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Tax News & Views Remains Undone Roundup

December 16, 2023
money puzzle

Key Takeaways

  • Tax fixes don’t get done
  • ERC guidance in the pipeline
  • Clean energy tax credits are out
  • Mileage rates published
  • 1099 cluster
  • IRS money fight
  • CAMT stuff
  • The Danger Zone

Capitol Hill Recap: Tax Bill Put on Ice – Jay Heflin, Eide Bailly:

Lawmakers are not expected to pass tax legislation this year that would include the Big Three (R&D expensing, expanding the 163(j)-interest deduction and upping Bonus Depreciation to 100%) as well as modifications to the Child Tax Credit (and possibly tax credits for constructing middle/low-income housing)...

Lawmakers will now apparently continue tax negotiations on provisions where there has been no agreement for nearly two years. The goal is to reach an agreement and pass tax legislation early next year, which is a head-scratcher.

Congressional tax lawmakers and staff have repeatedly said in closed-door meetings (i.e., no press allowed) that the focus in 2024 will be on examining the expiring TCJA (Tax Cuts and Jobs Act) tax reform provisions and decide what stays and what goes. 

Offsets will likely be a big part of the TCJA discussion and could include a new form of taxation. Then, in 2025, Congress would vote on the tax legislation. That’s the current plan. Of course, plans change, especially in Congress, which is nothing if not inconsistent.

Speaking of housing tax credits:

Low-Income Housing Tax Credit: Opportunities to Improve Oversight - Jill Naamane, Government Accountability Office:

The U.S. has a widespread shortage of affordable housing. The Low-Income Housing Tax Credit (LIHTC) is the largest source of federal assistance for developing affordable rental housing. It provides tax credits typically through state and local housing finance agencies to developers and private investors to develop affordable housing.

FWIW: The debate over what to do about the TCJA provisions is expected to occur after the 2024 elections and the outcome of those elections will have a huge impact on what tax reform provisions stay or go. The elections will also change the face of the tax-writing committees because a lot of tax lawmakers are calling it quits.

Democratic Tax Writers to See Shake-up Ahead of 2025 Cliff - Samantha Handler and Chris Cioffi, Bloomberg ($):

Senior Senate Finance Committee Democrats well-known for their bipartisan dealmaking are set to leave Congress at the end of their terms, setting up a face lift ahead of a critical cliff when much of the US tax code is up for rewriting…

Changes are also afoot on the House side on Ways and Means. Rep. Earl Blumenauer (D-Ore.), who has served in Congress for nearly three decades, is retiring, as well as Reps. Brian Higgins (D-N.Y.), Dan Kildee (D-Mich.) Wenstrup, and Ferguson.

FYI: Wenstrup and Ferguson are Republicans.

As talks begin on TCJA extension, keep an eye out for offsets as extending these provisions will not be cheap and the government is already soaked in red ink:

Lawmakers Are Mulling Up to $2.3 Trillion in Borrowing – Committee for a Responsible Federal Budget:  

So far, this year, lawmakers have enacted $1.3 trillion of ten-year debt reduction (see our debt thermometer) – the most since 2011. But policies under consideration for passage in the coming months could erase these savings. We estimate these policies could add up to $675 billion to the debt if enacted on a temporary basis and up to $2.3 trillion if made permanent.

Just for fun, below is the type of nonsensical quotes that lawmakers give reporters who must then report them (lawmakers name omitted on purpose).

On the fate of the tax bill:

“It could come together, and it could come together overnight… But, right now, it’s too early to know.”

If you don’t know, then how do you know that it could come together overnight?

 

IRS Expects Interest in ERC Withdrawal to Pick Up Soon – Jonathan Curry, Tax Notes ($):

The IRS has seen some taxpayer interest in its employee retention credit claim withdrawal program, but the real test of taxpayer interest is likely still to come, according to IRS Commissioner Daniel Werfel.

“We are certainly seeing material activity with respect to withdrawal,” Werfel told reporters December 14 after his keynote remarks at a tax conference cosponsored by the George Washington University School of Law and the IRS. The commissioner didn’t have concrete numbers handy, but he pledged to provide an update when the IRS rolls out its settlement initiative in the next few weeks.

That settlement initiative will provide a way for ERC claimants who have already received their refund to repay the funds and avoid penalties. The withdrawal numbers are likely to go up once that initiative rolls out, Werfel said.

Employee Retention Credit Guidance Coming in Weeks, Werfel Says - Lauren Vella, Bloomberg ($):

The IRS expects to issue guidance in the coming weeks on a settlement program for a pandemic-era credit that’s proved to be rife with fraud and overstated claims, IRS Commissioner Danny Werfel said Thursday.

The agency is planning to issue guidance and procedures on the voluntary settlement program for the employee retention credit in the “ballpark” of the 2023 year end or the beginning of 2024, Werfel told reporters at a conference in Washington, D.C., hosted jointly by the IRS and George Washington University.

 

U.S. Tax Credits to Spur Clean Energy Face Scrutiny Over Chinese Investments – Alan Rappeport, New York Times ($):

The Biden administration on Thursday outlined its plans for deploying billions of dollars’ worth of tax credits for manufacturers that produce clean energy products in the United States. The incentives are a key part of President Biden’s strategy to reduce America’s reliance on countries like China for production of electric vehicles.

The proposed rules, released by the Treasury Department, explain how corporations can gain access to the most generous subsidies contained in the 2022 Inflation Reduction Act. The incentives, which are expected to provide companies with more than $100 billion of savings over a decade, are intended to encourage businesses to produce solar panels, process minerals and make electric vehicle components in the United States.

Treasury Floats Regs For Clean Energy Manufacturing Credit – Kat Lucero, Law360 Tax Authority ($):

The credit amount depends on the type of product, according to proposed rules. For example, the amount for a photovoltaic cell is equal to4 cents multiplied by the cell's capacity, which is measured in direct current watts. A photovoltaic cell is the smallest semiconductor part of a solar panel that converts sunlight into electricity.

For critical minerals, the credit amount is equal to 10% of the costs incurred by the manufacturer, according to the proposed rules. Treasury and the Internal Revenue Service said they want to provide incentives for adding value to the critical mineral. Therefore, a company's mere purchase of raw materials that enable it to produce an eligible critical mineral is not an activity that adds value, according to the proposed rules.

The Treasury document in here.

 

IRS Issues Standard Mileage Rates for 2024 – Eide Bailly. “The IRS has released (Notice 2024-08) the 2024 standard mileage rates. The rates are used to determine the deductible costs of using a vehicle for business, charitable, medical, or moving purposes. The new rates are effective January 1, 2024.”

 

Taxpayers May Still Receive 1099-Ks in January – Lauren Loricchio, Tax Notes ($):

Some taxpayers may receive Forms 1099-K in January 2024 despite the IRS’s decision to delay lowered 1099-K reporting thresholds, according to an IRS official.

For third-party settlement organizations that have performed backup withholding under section 3406(a) for a payee during calendar year 2023, it is still required to file a Form 945 and a Form 1099-K with the IRS and furnish a copy to the payee if total reportable payments to the payee exceeded $600 for the calendar year, said Kelly Stephenson of the IRS Small Business/Self-Employed Division.

In other circumstances, payment apps and online marketplaces are still only required to send Forms 1099-K to taxpayers who receive more than $20,000 and have over 200 transactions, instead of just payments over $600, Stephenson explained.

Need help?

Year-End – Form 1099 Compliance – Eide Bailly:

Please submit your 1099 information through the My Eide Bailly portal by January 10, 2024.

 

IRS Upgrades Should Deter Further Funding Cuts, Werfel Says – Asha Glover, Law360 Tax Authority ($).

Congress might halt efforts to claw back more of the nearly $80 billion funding boost the Internal Revenue Service received under the Inflation Reduction Act if the agency is transparent with the improvements it is making with the money, IRS Commissioner Daniel Werfel said Thursday…

"I think the more we can demonstrate that with funds we're easier to reach, with funds we're holding all people accountable for what they owe — including the wealthy — and then we're stepping in and protecting taxpayers from these very nefarious scams … I think cooler heads will prevail," Werfel said. "And they'll say, 'Yeah, I think it's in the best interest of the United States to have a well-functioning tax agency versus an underperforming one.'"

Um, has Werfel met the members of Congress who want to take the agency down? The mantra of a former congressional leader was that he wanted to reduce the size of the IRS to the point that he could hold it in his hands and drown it in a bathtub.

 

Supreme Court Stock Buyback Case Could Mean Big Estate Tax Bills - Caleb Harshberger, Bloomberg ($). “The outcome could have big implications for how companies and estates plan for the transfer of control after a shareholder dies—and on the size of the tax bill paid by the estate.”

 

PTEP Basis Notice on Liquidations, Inbounding Coming Soon – Andrew Velarde, Tax Notes ($). “The IRS is planning to release soon a notice on previously taxed earnings and profits (PTEP) — separate from long-awaited PTEP proposed regs — that will address basis issues for liquidations or inbounding of top-tiered controlled foreign corporations.”

 

Corp. Min. Tax Rules Expected In Early 2024, US Official Says – Natalie Olivo, Law360 Tax Authority ($):

Proposed regulations for the corporate alternative minimum tax are expected to be released in early 2024 and will address a wide range of issues, including the statute's potential to count offshore income twice, a U.S. Treasury Department official said Thursday.

Proposed regulations for the minimum tax, or CAMT, "will slip into the early next year," according to Natalie Punchak, attorney-adviser at Treasury's Office of Tax Policy. It's possible Treasury could issue an additional notice on the CAMT, but at this point the focus is on proposed rules, she said, speaking at an international tax conference in Washington, D.C., hosted by the Internal Revenue Service and George Washington University Law School.

No Proposed Regs on Corporate AMT by Year-End, Treasury Says – Chandra Wallace, Tax Notes ($):

The government could issue one more notice on the corporate AMT, Punchak said, but “at this point, our focus is on proposed regulations.”

On the stock buyback excise tax, Punchak held out hope that the expected package of proposed regs could still appear before December 31, although official publication in the Federal Register might not happen until January.

 

New Rules on Book Minimum Tax Foreign Tax Credit Ahead, IRS Says - Lauren Vella, Bloomberg ($). “Upcoming guidance from the IRS will detail if certain restrictions found in the foreign tax credit will be be included as part of the 15% book minimum tax rules, an official from the agency said Thursday.”

 

Financial Disclosures to Require Additional Details on Taxes – Nathan Richman, Tax Notes ($). “The Financial Accounting Standards Board released the finalized rule update including the contentious requirement for reporting companies to disaggregate information about where they pay taxes.”

The FASB document is here.

 

From the “Highway to the Danger Zone” file:

US Readies Long-Awaited Guidance on Sustainable Jet Fuel Tax Policy - Kim Chipman, Jennifer A. Dlouhy and Jennifer Jacobs, Yahoo! Finance:

The Biden administration as early as Friday will release high-stakes policy guidance that will help determine the economic viability of producing lower-emitting jet fuel from US corn and other crops.

The long-awaited guidance from the US Treasury Department is expected to help companies determine how and if they might qualify for tax credits tied to the production of sustainable aviation fuel, or SAF. Yet key details aren’t expected to be revealed until next spring, according to people familiar with the matter.

Alternative aviation fuel credit guidance issued by Biden administration bolsters ethanol industry – Rachel Frazin, The Hill. “Under the tax credit, fuels that reduce greenhouse gas emissions by at least 50 percent are eligible for a credit of $1.25 per gallon."

The IRS document is here

 

Happy National Ugly Christmas Sweater Day! This day is so popular that it has an international following!

Tips from National Day Calendar on what the sweater should include:

  • Animal or cartoon characters with a holiday theme give sweaters a kitsch feel. Think reindeer, snowmen, mice, kittens or elves.
  • Select ridiculous colors. The more they clash, the better.
  • Embellish. Scratch that. Over-embellish! Pom-poms, bells, felt, tinsel, or any other glittery, jingly items lying around the house.
  • Add a collar, dickey, or ruffle.
  • Electrify it! Put Rudolph to shame and go to the head of the team with bright, flashing lights!
  • Give it some 80s flair with shoulder pads.

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About the Author(s)

Jay Heflin Photo

Jay Heflin

Director of Legislative Affairs
Jay brings more than two decades of experience to his job as Director of Tax Legislative Affairs in Eide Bailly’s Washington D.C. office. Jay provides political intelligence and guidance to the firm on the progress of tax legislation on Capitol Hill. Prior to joining the firm, he was a director at the tax lobbying shop Federal Policy Group, LLC, where he tracked tax legislation in Congress and participated in lobbying efforts to amend tax legislation. Before joining the Federal Policy Group, he was a Congressional reporter for several news organizations where his beat was tax policy.