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From the Hill: September 21, 2022

Read on for the September 21 edition of From the Hill, your rundown on the latest in tax policy and legislation.
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Lately on the Hill

  • Congress left town last week with little progress to show on the government funding bills, which is their main priority this month.
    • During the reconciliation bill negotiations, Senate Majority Leader Chuck Schumer and Sen. Joe Manchin agreed to attach Manchin’s reform proposal to a continuing resolution to keep the government funded until December. Manchin’s proposal would reform the permit process for energy projects. No formal proposal or legislative text has been released yet, but many Democrats have come out to say they don’t support attaching this proposal to a stopgap funding bill.
    • A group of progressive Democrats released a statement that they won’t support extensions for corporate tax provisions if Congress doesn’t also extend the Child Tax Credit.
  • Republicans continue to respond with their displeasure at the increased funding allotted to the IRS under the Inflation Reduction Act of 2022 (IRA).
    • Senate Finance Committee ranking member Mike Crapo introduced a bill to prevent the additional IRS funds from being used for audits of taxpayers with taxable incomes below $400,000.
    • Sens. John Thune and Susan Collins introduced the Increase Reliable Services Now Act to prohibit the IRS from hiring new enforcement employees until basic taxpayer service benchmarks, like improved phones services and more efficient tax return processing, are reached. The bill would also prohibit the IRS from using their increased funding to audit taxpayers with annual income of less than $400,000 at a greater rate than at the date of IRA enactment.
  • House Republicans plan to unveil their “Commitment to America” agenda later this week, including tax policy proposals like extending portions of the Tax Cuts and Jobs Act set to expire in coming years. If Republicans manage to take control of the House and/or Senate in upcoming midterm elections, this could indicate potential tax changes during the next session. 

In Case You Missed it

  • Treasury Secretary Janet Yellen outlined a six-month plan to overhaul the IRS, promising that taxpayers will see real differences during the next filing season and that audit rates will increase for top earners as a result of the additional IRS funding provided by the IRA.

  • The IRS’ Office of Chief Counsel released a memo stating that taxpayers who inaccurately represented their eligibility for the Paycheck Protection Program loan forgiveness, and subsequently had their loan forgiven even though they didn’t qualify for forgiveness, must include the forgiven amount in taxable income.

  • The IRS issued Notice 2022-39 with instructions on how taxpayers can claim a one-time alternative fuel credit for the first three quarters of 2022. The IRA extended this tax credit through 2024 (it expired at the end of 2021). 

  • The White House published a clean energy webpage to help taxpayers navigate the energy tax credits available under the IRA. 

  • Treasury Inspector General for Tax Administration issued a report finding that the IRS was delayed in processing refund applications for net operating losses under COVID-19 legislation, resulting in a significant backlog and costing the government $42 million in accumulated interest.

  • The White House released its first ever Comprehensive Framework for Responsible Development of Digital Assets, requesting regulatory agencies to “aggressively pursue investigations and enforcement actions against unlawful practices in crypto trading.”

  • Sen. Elizabeth Warren wrote a letter to Treasury, reiterating that it is “crucial that Treasury create the analytical basis for very strong oversight” of the cryptocurrency sector of finance. The letter includes policy suggestions.

  • The IRS issued proposed regulations implementing the Appeals process changes under the Taxpayer First Act of 2019 and providing guidance to taxpayers who received a deficiency notice and want to be referred to Appeals. 

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. 

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