Tax News & Views Energy Guidance Released Roundup

May 12, 2023

US Releases Made-in-America Rules for Clean Energy Tax Credits - Erin Slowey, Bloomberg ($):

The IRS and Treasury issued guidance Friday on a clean energy tax credit boost for companies that source materials in the US.

President Joe Biden’s tax-and-climate law offers an optional 10% tax credit boost for clean energy developers who can prove that all of their iron and steel, and 40% of the components of their facility, are made in America.

Those lucrative incentives hinge on developers getting access to the US source materials, for which demand already far surpasses what the country produces.

The Notice is here.


Lawmakers Revive Push to Expand Low-Income Housing Tax Credit - Samantha Handler, Bloomberg ($):

A bipartisan group of House and Senate lawmakers are reviving a push to expand the Low-Income Housing Tax Credit program, with tweaks to account for properties receiving Inflation Reduction Act benefits and to improve data sharing among federal agencies… The bill would increase the amount of credits allocated to each state, reinstating a 12.5% increase that was made in 2018 but expired in 2021.

This provision could become part of the effort to expense R&D outlays, expand the 163(j) interest deduction, and allow 100% Bonus Depreciation. However, certain lawmakers want to make these adjustments only if the Child Tax Credit is also expanded. Other lawmakers, who oppose the Child Tax Credit expansion. want to switch it with an increase in the Low-Income Housing Tax Credit.

More on this subject:

Capitol Hill Recap: Debt Ceiling debate, R&D Talks, Economic Plan in the Works – Jay Heflin, Eide Bailly:

There is bipartisan, bicameral support to pass the Big Three: R&D expensing, expanding 163(j), and allowing 100% Bonus Depreciation.

However, these provisions are not expected to pass Congress unless the Child Tax Credit is also modified.

Democrats I have spoken to say that swopping-out the Child Tax Credit for the Low-Income Housing Tax Credit will not work. The reason is because Republicans support the Low-Income Housing Tax Credit, so they would sacrifice nothing to enact the modifications to the business tax breaks. Democrats, on the other hand, would sacrifice expanding the Child Tax Credit. In short, both sides need to sacrifice something to enact the business tax breaks.  


Biden-McCarthy Meet Delayed as Aides Make Progress on Debt Talks - Justin Sink and Billy House, Bloomberg ($):

The delay signals that staff-level talks on energy permitting reform and government spending have yielded progress, according to people familiar with the talks. The speaker said Biden planned to meet with him and other congressional leaders next week, though neither side specified a date.

McCarthy told reporters at the Capitol that the leaders agreed it would be 'more productive' for staff to proceed with their discussions. Senate Majority Leader Chuck Schumer, likewise, said he believed talks ‘are moving along.’

Punchbowl News ($):

Topics that have been discussed include permitting reform, spending caps and rescinding unspent Covid funds. Republicans are pushing new work requirements for federal social welfare programs, but that seems far less likely to happen.

Taxes might enter the conversation. From Eide Bailly’s current Recap:

On taxes, House Minority Leader Hakeem Jeffries (D-NY) said on May 11th that taxpayers earning less than $400,000 a year should not be hit with a tax increase to increase the debt limit. However, he thinks that tax increases for those earning above this threshold should be on the negotiation table in raising the federal government's borrowing authority.

'[President Biden’s budget] will cut the deficit by $3 trillion, on a moving forward basis… in part [by] making sure that we end wasteful subsidies to big oil and end wasteful subsidies to Big Pharma,' Jefferies said… 'If my Republican colleagues really want to have a conversation about how we meet the needs of the American people and reduce the deficit in a fiscally responsible way, it’s impossible to have that discussion without talking about revenue.'  

(BTW: Jefferies means taxes when 'subsidies' and 'revenue' are mentioned.)


Lawmakers Renew Call for Easier Banking for Legal Cannabis Firms - Jarrell Dillard, Bloomberg ($). “Advocates argued before the Senate Banking Committee on Thursday that granting legal protections from federal drug laws to banks that serve cannabis dispensaries and related businesses allowed under state laws would cut down on crime and tax evasion.”

‘Forcing legal businesses to operate in a cash economy is terrible for accountability, but it’s great for crime,’ said Senator Jeff Merkley, an Oregon Democrat who sponsored the SAFE Banking Act. ‘It has left these businesses and all that are connected to them open to violent crime, open to money laundering, employee theft, tax fraud and more.’

The fight to legalize pot at the federal level is focused on the Senate because the House last year voted to legalize marijuana nationwide. Here's the problem: Laws that passed either chamber in 2022 are no longer active. For the House to legalize weed it would have to pass another bill. Also, the House in 2022 was run by Democrats - and only three Republicans voted to legalize weed. Republicans now control the House and it is not clear if there is enough support to pass a bill legalizing pot in the current Congress. 


Can They or Can’t They? Debate Rages Over IRS Direct File – Doug Sword and Jonathan Curry, Tax Notes ($):

The IRS is days away from releasing a study of the costs and feasibility of running its own free online direct-file tax return program. But the question the costly study won’t answer is whether the IRS has the legal authority to do so.

Last month, Senate Finance Committee Ranking Member Mike Crapo raised the point:

IRS Tax Chief urges Lawmakers to Regulate Tax Pros – Jay Heflin, Eide Bailly:

The Inflation Reduction Act (IRA) gave the IRS $15 million to study whether it should prepare tax returns. [IRS Commissioner] Werfel informed the Committee that the study will be completed by mid-May.

‘No decision has been made on moving forward with direct file solution,” Werfel said.

Senator Mike Crapo (R-Utah), the Committee’s Ranking Member, was relieved to hear the Commissioner’s response. He also noted that the recently released IRS Strategic Operating Plan (as part of the IRA) includes a segment devoted to an IRS-run tax preparation program.  

‘Having the IRS acting as tax preparer, tax collector and tax enforcer raises significant conflicts of interest,’ Crapo said, adding, ‘Can we agree that the decision [to have the IRS prepare tax returns] is one that Congress can make, not the IRS independently?’

Werfel hedged, saying ‘I’m not sure where the legal authorities are.’

Looks like we're about to find out where the IRS stands on this issue. 


IRS takes steps to protect identity of workers in effort to deter personal threats – Fatima Hussein, Associated Press:

In an effort to deter threats aimed at IRS employees, the agency said Thursday it will start limiting workers’ personal identifying information on communications with taxpayers.

The change begins next month.

The Treasury Department’s inspector general for tax administration said in a report this week that it was ‘concerned that taxpayers and anti-government or anti-tax groups with malevolent intent may use the Internet or social media to track down and identify IRS employees, their families, their homes, and personal information to threaten, intimidate, or locate them for physical violence.’

IRS to Remove Employees’ First Names from Correspondence - Naomi Jagoda, Bloomberg ($):

The IRS plans to remove employees’ first names from manually-generated correspondence in order to provide them with more protections, according to a report from the Treasury Inspector General for Tax Administration released Thursday.

The agency agreed with TIGTA’s recommendation to replace employees’ first names with an appropriate title, and said it would implement the recommendation by June, the report said.

The report is here. Its findings are interesting:

Our survey of IRS managers who signed tax processing correspondence found that 11 (34 percent) of 32 IRS managers were contacted by taxpayers outside of normal business methods. However, none of the 11 managers contacted outside normal business channels reported that they or their families were threatened or intimidated because of these contacts.


Improving nationwide access to IRS Appeals; public input wanted – IRS:

The Internal Revenue Service Independent Office of Appeals today invited public input on how best to improve access to Appeals for taxpayers who do not live near an Appeals office.

Appeals resolves federal tax disputes without litigation in a way that is fair and impartial to taxpayers and the government. If a taxpayer's dispute with the IRS qualifies for an appeal, the office will review the issues with a fresh, objective perspective and schedule a conference.


Gov. Lee signs ‘single largest tax cut’ in Tennessee history into law – Caleb Wethington, WSMV4:

Governor Bill Lee has announced the signing of the Tennessee Works Tax Act, which is the “single largest tax cut in state history.”

Lee said this act will provide more than $400 million in savings for Tennessee families and businesses while supporting future economic growth. This legislation also includes a three-month grocery tax holiday which is slated to begin on Aug. 1.


Iowa Joins States With SALT Cap Workarounds for Businesses - Angélica Serrano-Román, Bloomberg ($):

Iowa Gov. Kim Reynolds (R) signed a measure to allow certain individuals to pay state income tax through their pass-through partnerships and S corporation businesses, her office said Thursday.

Under the bill (HF 352), the businesses could pay Iowa income tax at the entity level, instead of having their income passed through to individual owners for taxation. The individuals would get a state tax credit for the amount paid, easing the impact of the $10,000 federal limit on individual taxpayers’ deductions for state and local taxes.


Arizona Lawmakers Pass One-Time Income Tax Rebates - Angélica Serrano-Román, Bloomberg ($):

Arizona taxpayers would receive one-time income tax rebates this year under a bill headed to Gov. Katie Hobbs’s (D) desk Thursday as part of a budget deal reached with lawmakers.

The measure (SB1734) provides rebates for individuals who filed their 2020 tax returns by Oct. 15, 2021, and claimed a dependent tax credit on the return.


Democratic Massachusetts Governor Wants Tax Cuts to Stem Exodus – Maxwell Adler and Christopher Anstey, Bloomberg ($). “Massachusetts Governor Maura Healey said she’s prioritizing tax cuts and housing construction to stem an outflow of people and their incomes from the New England state.”

‘I want people to stay in Massachusetts; I want businesses to stay in Massachusetts,’ Healey, a first-term Democrat, said in an interview on Bloomberg Radio’s Baystate Business on Thursday.


IRS Committed to PTEP Reg Release by Year-End – Andrew Velarde, Tax Notes ($):

After years of missing its own timelines, the IRS is confident that proposed regs on previously taxed earnings and profits (PTEP) will come by year-end, but they might not answer all the questions on practitioners’ minds.

‘The PTEP reg project will happen this year. There will be a proposed reg by year-end,’ said Richard L. Reinhold of the IRS Office of Associate Chief Counsel (International).


From the “Buckle-Up, It’s going to be a Bumpy Ride” file:

Raytheon VP Says Tax Climate ‘Most Challenging We’ve Ever Had’ - Lauren Vella, Bloomberg ($):

The tax climate created by international and domestic tax measures has been challenging for the tax department at Raytheon Technologies, a top official at the company said Thursday.

‘Now the current climate—given the instability of the TCJA cliff coming in 2025, given what happened in the Inflation Reduction Act, as well as the global minimum tax—is, quite honestly, in my 33-plus years, it’s the most challenging environment we’ve ever had inside of the tax department and inside of the business,’ said Ross Kearney, corporate vice president of tax at Raytheon Technologies.


Hold my calls! Its National Nutty Fudge Day!

Expand Full Article

We're Here to Help

We are here to help
From business growth to compliance and digital optimization, Eide Bailly is here to help you thrive and embrace opportunity.
Speak to our specialists