Treasury and IRS Under the Spotlight at Upcoming Congressional Tax Hearings. On Wednesday, the House Committee on Ways and Means will hold a full-committee hearing to discuss the green-energy tax incentives enacted in the Inflation Reduction Act (IRA). At the same time, the Senate Finance Committee will convene a full-committee hearing in which Internal Revenue Service (IRS) Commissioner Danny Werfel will defend the Biden administration’s fiscal year (FY) 2024 budget request, as well as the IRS’ performance during the 2023 filing season.
In the House hearing, committee Republicans are expected to highlight new private-sector reports estimating the cost of green-energy tax incentives to be significantly higher than official budget predictions. Last week, committee Chairman Jason Smith (R-MO) previewed this effort in a press release referencing a Goldman Sachs report that projected the cost of the IRA’s energy and climate tax provisions to exceed $1.2 trillion over the next decade—more than three times the initial Joint Committee on Taxation revenue projections.
GOP lawmakers are also anticipated to scrutinize proposed regulations recently issued by the Treasury Department and IRS concerning the free-trade-agreement (FTA) requirements imposed by the section 30D clean-vehicle tax credit. In the last month, opponents have argued that the broad acceptance of FTAs under the rule will provide significant funding to Chinese battery and electric-vehicle manufacturers. In contrast, Democrats will likely focus on other aspects of the ongoing tax-incentive implementation process and the expected growth of the renewable-energy and clean-fuels industries.
In the Senate hearing, lawmakers will likely question Werfel on myriad aspects of the IRS’ long-term Strategic Operating Plan (SOP), which was released on April 6. Republicans have already voiced concern over several elements of the plan, including the lack of detail regarding target audit rates as well as proposed hiring beyond FY2024. Despite ongoing calls for stronger IRS accountability, the SOP is devoid of significant, quantifiable success metrics for IRA-funded efforts. In contrast to stark GOP opposition, Democratic lawmakers have remained muted in their public reactions to the SOP’s audit proposals and will likely focus their hearing questions on more popular elements of the plan, including taxpayer-services and business-system-modernization funding. For Brownstein’s complete analysis of the SOP, click here.
The senators will also examine the IRS’ tax-administration performance in FY2023. Despite claims from the agency that it is currently answering 85% of taxpayers’ phone calls, Republican lawmakers are likely to note findings from the Treasury Inspector General for Tax Administration estimating that only 29% of taxpayer calls reached a live person.
On Friday, members of the House Ways and Means Committee will travel to Peachtree City, Georgia, to hold a third field hearing on the state of the American economy. At the most recent field hearing in Oklahoma, several lawmakers questioned witnesses on the effectiveness of current federal agricultural policy, a topic that is likely to be a focus in the upcoming Georgia hearing.
SALT Advocates Issue New Proposal, Expecting Relief in Upcoming Tax Negotiations. Last week, Rep. Andrew Garbarino (R-NY) introduced legislation to eliminate the State and Local Tax (SALT) deduction cap. The current $10,000 limitation was imposed by the Tax Cuts and Jobs Act (TCJA) and is set to expire in 2025, along with several other tax provisions enacted by the 2017 bill. Before 2017, taxpayers who elected to itemize deductions were generally permitted to deduct the entirety of paid property, sales and state income taxes.
The new cap-repeal proposal has already garnered bipartisan support from 45 lawmakers, including seven other Republicans. GOP support for the bill is entirely comprised of representatives from California, New Jersey and New York—high-tax jurisdictions whose taxpayers would most benefit from a restoration of the pre-TCJA deduction allowance. Several co-sponsors are also members of the Congressional SALT Caucus, which is currently co-chaired by the bill’s sponsor, Garbarino, along with Reps. Young Kim (R-CA), Josh Gottheimer (D-NJ) and Anna Eshoo (D-CA).
While proposals to repeal the SALT deduction cap were also offered in the 116th and 117th Congress, advocates lacked the bipartisan support to attach the provision to any successful legislative vehicle. Notably, early versions of the Build Back Better proposal included a provision that would have raised the deduction limitation to $80,000, but the proposal was eliminated late in the reconciliation process to solidify support from Sen. Joe Manchin (D-WV).
Despite these previous failures, SALT advocates believe there is sufficient support to raise the cap in the 118th Congress. Following his bill’s introduction, Garbarino said that “[w]ith eight Republicans [co-sponsoring his bill], that puts direct pressure on Speaker McCarthy to take action.” Further increasing the likelihood that reform is considered in the 118th Congress, the new SALT caucus boasts bipartisan membership from a record nine members of the House Ways and Means Committee, which has primary jurisdiction over the issue.
Even if reform is not passed in this session, lawmakers must confront the SALT-cap issue in the upcoming 2025 debates over TCJA extensions. If margins in the House remain tight, SALT advocates are confident they will have the leverage to withhold support for any legislative package if it includes an extension of or permanence for the current cap. However, Gottheimer and other Democratic SALT advocates initially took this stance with their “no SALT, no deal” position during reconciliation negotiations—subsequently abandoning their opposition to support the IRA despite its lack of SALT relief.
About Brownstein Hyatt Farber Schreck
Brownstein Hyatt Farber Schreck is a unique law firm. Walk into any of our offices and you’ll immediately recognize a different type of energy. Complacency doesn’t have a place here. Flexibility and inspiration do. Our culture and enthusiasm allow our attorneys, policy consultants and legal staff to stay ahead of our clients’ needs and provide them with the resources they require to meet their business objectives.
We hope you've enjoyed this article. While you're here, we have a small favor to ask...
As we prepare for what promises to be a pivotal year for America, we're asking you to consider becoming a member.
The need for fact-based reporting of issues important to multi generational businesses and protecting a lifetime of savings has never been greater. Now more than ever, multi generational businesses and family businesses are under fire. That's why Family Enterprise USA is passionately working to increase the awareness of issues important to generationally-owned family businesses built on hard work, while continuing to strengthen our presence on Capitol Hill. The issues we fight for or against with Congress in Washington DC include high income tax rates, possible elimination of valuation discounts, increase in capital gains tax, enactment of a wealth tax, and the continued burden of the gift tax, estate tax and generation skipping tax.
Family Enterprise USA promotes generationally owned family business creation, growth, viability, and sustainability by advocating for family businesses and their lifetime of savings with Congress in Washington DC. Since 2007, Family Enterprise USA has represented and celebrated all sizes, professions and industries of family-owned enterprises and multi-generational employers. It is a bi-partisan 501.c3 organization. Family foundations can donate.
#incometax #taxseason #federaltaxpolicy #taxation #EstateTax #Deathtax #wealthtax #taxLegislation #CongressionalCaucus #CapitalGainsTax #incometaxrates #incometaxseason #taxrefund #taxreturn #incometaxreturn #gifttax #Generationskippingtax #InheritanceTax #repealestatetax #FamilyBusiness #promotefamilybusinesses #familyowned #supportlocalbusiness #womeninbusiness #AdvocatingForFamilyBusinesses #Generationallyowned #Multigenerationalbusiness @FamilyEnterpriseUSA @PolicyAndTaxationGroup @DitchTheEstateTax #FamilyEnterpriseUSA #PolicyAndTaxationGroup #DitchTheEstateTax