Senate passes debt ceiling bill, sending it to Biden to sign into law – Rachel Siegel, Marianne LeVine, John Wagner and Leigh Ann Caldwell, Washington Post:
The Senate late Thursday night passed a bipartisan bill to suspend the debt ceiling and curb federal spending, sending the legislation to President Biden to sign into law in time to avert an unprecedented U.S. government default.
The deal cleared the House on Wednesday night and is now on track to take effect by Monday, when the government would no longer be able to pay all of its bills without borrowing more money. Senators scrambled to vote before the weekend, even as a handful of frustrated lawmakers pushed for votes on amendments that risked slowing the process.
Senate Approves Debt Limit Deal, IRS Clawbacks – Doug Sword and Cady Stanton, Tax Notes ($):
The bill, the Fiscal Responsibility Act of 2023 (H.R. 3746), includes a $1.4 billion rescission of IRS funds, but what it doesn’t include is a side agreement reached by House Speaker Kevin McCarthy, R-Calif., and Biden to shift $20 billion of the nearly $80 billion granted to the IRS in the Inflation Reduction Act (IRA, P.L. 117-169) out of the agency over the next two annual spending bills, for a total cut of $21.4 billion.
Whether or not the “side agreement” comes to fruition is an open question.
Next up in the House: A tax bill.
Capitol Hill Recap: Debt Deal Done(ish), Tax Package Up Next – Jay Heflin, Eide Bailly:
House Ways and Means Chairman Jason Smith (R-Mo.) said after Congress approves a debt ceiling bill his committee would act on an economic plan that would include tax measures… The bill is expected to allow for R&D expensing, expand the 163(j)-interest deduction, and return Bonus Depreciation to 100%. These provisions are now called the ‘Big Three’ by congressional staffers.
These provisions have bipartisan, bicameral support. But getting them passed through Congress will likely depend on passing an expansion of the Child Tax Credit.
Also, the bill is rumored to include an expansion to Section 179 expensing, health and trade provisions.
Assuming all kinks can be worked out, time is tight for passing this legislation through Congress:
- Congress will basically have to pass this bill by the end of July,
- Lawmakers in both chambers are expected to recess for the entire month of August,
- When they return in September, they will be hard pressed to fund the federal government beyond September 30th or face a partial shutdown of the federal government,
- Come October, year-end bills will be discussed and it’s unclear if this tax bill will be part of that discussion.
Analysis-US debt-ceiling deal dooms Biden's revolutionary tax plans - David Lawder, Yahoo Finance:
Barring an unlikely Democratic sweep of the White House and both chambers of Congress in 2024, major changes to the U.S. tax code are now seen as largely off the table until the end of 2025, when the 2017 individual tax cuts expire. Then, tax experts predict lawmakers will be forced to agree on a major tax revamp.
‘Things are getting set up for a big fiscal cliff in 2025. That's the next opportunity for major changes,’ said William McBride, vice president of federal tax policy for the Tax Foundation, a conservative think tank in Washington.
The individual tax cuts in the 2017 tax reform bill expire at the end of 2025. In 2026, the entire individual tax code essentially becomes a 'tax extender.' The lift to extend all of these provisions will be Herculean. It would not be surprising if these provisions are extended one-year at a time, just like the other extenders. Why? Because extending them for 10 years will cost trillions of dollars, and support for such an expensive bill is politically risky for lawmakers - especially since they just increased the federal government's ability to take on more debt.
Biden's green energy tax breaks hurt America and help China (Opinion) – Senator Mike Crapo (R-Idaho), Fox News:
Members of Congress on both sides of the aisle have long recognized the need to reform our energy tax laws. But rather than work on stakeholder-informed, bipartisan energy tax policies that would support a technology-neutral approach, Democrats pursued a partisan path through their misnamed Inflation Reduction Act (IRA).
Crapo notes in the article that congressional bookkeepers recalculated the cost of tax provisions in the Inflation Reduction Act (IRA) and found that they were basically double to what they calculated when these provisions were enacted last August.
Additional attempts to undo these provisions are likely. Will those changes become law? Unclear at this point.
Clean Energy Companies Race to Prepare Tax Credit Applications - Erin Slowey, Bloomberg ($):
The guidance is extensive, tax professionals said, and companies will have to weigh the likelihood of getting funding with the overall costs of putting together an application and the funding’s impact on a project’s viability.
Eide Bailly can help:
Energy Services – Eide Bailly:
Overcome existing challenges and be agile in the face of new ones with enhanced industry support and forward-thinking strategies.
IRS Mulls Relief Under SECURE Act 2.0 for Retirement Distributions – Lauren Vella, Bloomberg ($):
The IRS is mulling guidance under SECURE Act 2.0 that would provide relief to taxpayers who accidentally or inadvertently took minimum distributions from their retirement accounts earlier than required.
Laura Warshawsky, deputy associate chief counsel at the IRS’s Office of Chief Counsel, said on Thursday the agency was considering issuing guidance similar to Notice 2020-51, which addressed taxpayer issues with the SECURE Act, under the new retirement law. She was speaking at the Federal Bar Association’s Insurance Tax Seminar in Washington.
Notice 2020-51 is here.
More on Secure 2.0 from Eide Bailly:
Omnibus Bill Brings Expanded Changes for Retirement Savings - Melissa White, Eide Bailly:
Some of the more significant individual provisions include:
Changes to required minimum distributions:
- The current age for required minimum distributions (RMDs) is generally age 72. Prior to January 1, 2020, RMDs were required to begin at 70½. SECURE 2.0 increases the RMD age to 73 for individuals who attain age 72 after December 31, 2022 and age 73 before January 1, 2033. This means that for individuals who turned 72 in 2022, the first RMD must be taken by April 1, 2023. However, if an individual turns 72 in 2023, the due date for the first RMD will be April 1, 2025. The RMD age will further increase to 75 for individuals who attain age 74 after December 31, 2032.
The law includes measures: 1) establishing a budget for transportation and appropriating money for transportation purposes, including Department of Transportation, Department of Public Safety, and Metropolitan Council activities; 2) modifying various policy and finance provisions and establishing metropolitan region sales and use taxes; 3) modifying prior appropriations and authorizing the sale and issuance of state bonds; 4) amending Minnesota Statutes 2022, requiring Metropolitan Council to implement and enforce transit safety measures, and establishing an advisory committee, a task force, and a working group; and 5) amending provisions relating to tax exemptions, rates, returns, refunds, and credits for fuel and transportation activities.
California Disaster Victim Tax Breaks Advanced by Lawmakers - Laura Mahoney, Bloomberg ($). “The disaster relief bills and other tax policy measures passed their house of origin before a June 2 deadline and now will move to the other chamber for consideration. They must win final passage by Sept. 14 to reach Gov. Gavin Newsom (D). He hasn’t taken positions on the measures.”
WFH Saved Texas at Least $20 Million in State Incentive Payments - Sarah Holder, Bloomberg ($). “Texas businesses have forgone more than $20 million in state incentives over the past few years by allowing employees to work remotely the majority of the time, according to state leaders who are revising Texas’s economic development strategy for a post-Covid era.”
Portland Tops Cities Where High Earners Face Biggest Tax Hit - Jo Constantz, Bloomberg ($). “Earners who make $250,000 a year in Portland pay taxes that are 7.5% higher than those making $100,000. That’s the steepest hike in the country, according to an analysis of the 76 largest US cities by SmartAsset, a consumer-focused financial information provider.”
GOP Staffer Says Retaliatory Bill Could Be ‘First Step’ on Pillar Two - Lauren Vella, Bloomberg:
A GOP tax adviser for House Ways and Means Committee Chair Jason Smith (R-Mo.) said Thursday the retaliatory bill introduced in the House in response to the OECD-led global tax deal is “potentially the first step” in addressing what Republicans view as extraterritorial or discriminatory taxes.
Eric Oman, deputy chief tax adviser for Ways and Means, said Republicans were ‘frustrated’ and ‘disappointed’ with the lack of consultation of Congress “throughout the last few years” as progress on Pillar Two moved forward internationally.
House Ways and Means Republicans were supposed to travel to Europe this week to vent their frustration with Pillar Two. That plan changed when they had to remain state-side to deal with the debt ceiling.
It is rumored that this "retaliatory bill" Smith introduced last week will be included in the upcoming tax bill (mentioned above).
The Smith bill is here.
From last week's Recap:
Republicans on the House Ways and Means Committee explain their bill:
'The bill creates a reciprocal tax applicable to any foreign country that imposes unfair taxes on U.S. businesses and workers under the Organization for Economic Co-operation and Development (OECD)’s global tax deal.'
Treasury to Avoid Industry-Specific Book Minimum Tax Guidance - Lauren Vella, Bloomberg ($):
Treasury is looking to issue general solutions for all taxpayers complying with the new corporate alternative minimum tax rather than industry-specific guidance, a department official said Thursday.
‘There are some industry-specific things, but on the whole, we do prefer to find more general answers,’ Angela Walitt, attorney-adviser in the Treasury’s Office of Tax Policy, said at the Federal Bar Association’s Insurance Tax Seminar in Washington.
The CAMT is a 15% levy on corporations with an average three-year adjusted financial statement income of $1 billion or more.
From the "That's a Long Wait" file:
US-Chile Tax Treaty Passes Test at Key Senate Panel - Chris Cioffi and Isabel Gottlieb, Bloomberg ($):
A tax pact with Chile passed a key test surviving a Senate panel vote, after a foreign tax credit language dispute slowed progress.
The treaty dates back to 2010, but it’s been stuck in Senate purgatory awaiting a floor vote, even though it’s received a vote in the committee as recently as last year. With concerns that arose during this Congress smoothed over, both lawmakers and those in the business community applauded momentum toward approving the treaty.
Regarding the time it took to move this bill, I was a congressional reporter in 2010 and covered this trade deal. Right before I left reporting, I brought my son to the Capitol to show him the building. I had friends who were Capitol Police Officers at the time and they gave him a plastic police badge, which he loved. My son was four years old at the time. He is now about to head off to college. This trade bill was shelved for the entire time that my son went through elementary and secondary schools. That is a long wait for enactment.
Happy International Volkswagen Bus Day! How can you not be happy driving around in one of those buses?!?