Here’s a look at recent tax-related happenings on the Hill, including a third continuing resolution to avoid a shutdown, tax legislation advancing with House committee approval, and identification of federal tax provisions expiring in 2024 through 2034.
Lately on the Hill
Congress has once again narrowly averted a government shutdown by passing yet another continuing resolution pushing government-funding deadlines to March 1 and 8. The third continuing resolution simply extends the prior fiscal year’s spending limits, except for a couple of technical modifications, and does not contain any other legislation such as Ukraine assistance, border funding, or highly sought-after tax legislation as many had hoped for. Approximately half of Republicans—including the House Freedom Caucus—voted against the resolution, while Democrats decisively voted for it. Ahead of passage of the continuing resolution, Senate Majority Leader Chuck Schumer (D-NY) and House Speaker Mike Johnson (R-LA) agreed on a $1.66 trillion topline spending level, although how to divide that amount among the remaining 12 appropriation bills has yet to be determined. The House will have about six weeks (three of which are in recess) to come to an agreement or face another short-term extension.
Government-funding negotiations may overshadow prioritization of the long-awaited tax legislation, the Tax Relief for American Families and Workers Act of 2024 (Act), which the House Ways and Means Committee approved by a 40-to-3 vote late last week. The Act seeks to provide relief to working families through an expanded child tax credit and spur business innovation and growth through increased deductions for research and experimental expenditures, business interest, and depreciable business assets. Furthermore, the Act asserts increased global competitiveness with treaty-like provisions with Taiwan, provides further assistance for disaster-impacted communities, expands access to affordable housing, and increases Form 1099 filing thresholds. In an effort to provide a revenue-neutral bill, the Act also dramatically increases penalties on COVID-Employee Retention Tax Credit (ERTC) promoters (a new defined term) related to illegitimate claims of the Employee Retention Credit and shortens the claim period to end after January 31, 2024. For a detailed summary of the legislation, read our article, “Tax Relief Proposal Text Now Released.”
During the hearing on the legislation, several amendments failed, and several more were presented and then withdrawn, giving insight into a number of representatives’ priorities, e.g., SALT cap adjustments and a broader Child Tax Credit, and setting the stage for future tax-related negotiations. The measure was approved containing the original bipartisan provisions already agreed upon by House Committee on Ways and Means Chair Jason Smith (R-MO) and Senate Finance Committee Chair Ron Wyden (D-OR). The legislation now moves to the rest of the House as early as the week of January 29. Whether this bill can proceed as a “standalone” bill remains to be seen as it would be subject to amendments in the Senate, tampering expectations for expedited passage. Alternatively, the bill may be included with other legislation, including the fiscal year 2024 appropriations (now delayed into early March), or the Federal Aviation Administration bill also due in March, putting into jeopardy retroactive application of certain bill provisions as it moves further from the tax-filing season beginning in late January.
The Joint Committee on Taxation has released JCX-1-24, which identifies federal tax provisions expiring in 2024 through 2034. Notably, there are 10 provisions expiring in 2024, including airport and airway trust fund excise taxes and biofuel and renewable energy-related credits and incentives (many of which were replaced by provisions of the Inflation Reduction Act). 2025 provides the most expansive list of expiring provisions, including the significant changes introduced by the Tax Cuts and Jobs Act of 2017 such as modifications to individual income tax rates, miscellaneous itemized deductions, qualified business income deductions, and the increase in estate and gift tax exemption.
Other Important Developments
IRS Technical Guidance
- Notice 2024-22 addresses Pension-Linked Emergency Savings Accounts (PLESAs) established in the SECURE 2.0 Act and effective for plan years beginning after December 31, 2023. This initial guidance provides information regarding anti-abuse rules and invites comments on this provision of the act. PLESAs are individual accounts in defined contribution plans designed to encourage emergency savings for employees. See also IR-2024-11 for more information.
- Notice 2024-21 contains guidance on the corporate bond monthly yield curve, spot segment rates, 24-month average segment rates, interest rates on 30-year Treasury securities in effect for plan years beginning before 2008, and the 30-year Treasury weighted average rate.
- Notice 2024-18 provides information concerning requirements and procedures for administrative exemptions for filing certain returns and documents electronically pursuant to final regulations provided by T.D. 9972 generally applicable beginning January 1, 2024.
- Final regulations (RIN 1545-BK95) issued by the IRS set forth requirements on minimum present value applicable for certain defined benefit pension plans relating to changes made by the Pension Protection Act of 2006. The regulations affect participants, beneficiaries, sponsors, and administrators of defined benefit pension plans.
- The comment period has been extended to February 15, 2024 for proposed regulations (REG-142338-07) related to excise taxes on taxable distributions made by a sponsoring organization and certain fund managers from a donor-advised fund as originally published in November 2023.
- The comment period for proposed regulations (REG-122319-22) on the dispute resolution process under the No Surprises Act has reopened until February 5, 2024. The proposed rules, originally published in November 2023, established requirements related to the federal independent dispute resolution process.
- Revenue Ruling 2024-03 provides the various applicable federal rates in addition to other rates and percentages for federal income tax purposes for February 2024.
- Announcement 2024-4 provides guidance concerning the expanded definition of “cash” to include digital assets under the Infrastructure Investment and Jobs Act. The announcement clarifies that digital assets are not required to be included when determining whether cash received is in excess of the $10,000 reporting threshold as reported on Form 8300. The IRS intends to finalize proposed regulations released in 2023 providing guidance on the matter. See also IR-2024-12 for more information.
Tax-Exempt Organizations
- IR-2024-15 alerts certain tax-exempt organizations that Form 990-T and Form 1120-POL will not be able to be electronically filed until March 17, 2024 due to system upgrades. Organizations filing Form 990-T due during the period January 15, 2024 to March 15, 2024 should request an automatic extension and electronically file, as required, beginning March 17, 2024. If the extended due date falls within this time period, the organization should include with the late-filed Form 990-T a request penalty abatement and reference that e-filing was not available as of the due date of the return. Form 1120-POL filers may paper file.
- TG 14: State-Chartered Credit Unions and Mutual Reserve Funds – IRC Section 501(c)(14) issued by the IRS discusses tax-exemption criteria of credit unions and mutual reserve fund organizations under §501(c)(14).
- TG 48: Unrelated Business Income Tax has been issued by the IRS providing guidance on unrelated business income and unrelated business income tax under §511 through §515.
Miscellaneous
- The Financial Crimes Enforcement Network (FinCEN) has added additional questions and answers to its FAQs regarding new beneficial ownership reporting requirements. New topics include companies created or registered in U.S. territories, companies with ownership disputes, companies with corporate entity ownership, individuals “primarily responsible” for filing creation or registration documents, third-party courier or delivery service delivering creation or registration documents, company applicants, applicant’s photograph exclusion for religious reasons, individuals without permanent residential residence, ownership interests controlled by an exempt entity, and use of FinCEN identifiers.
- The Pension Benefit Guaranty Corporation (PBGC) has released the variable rate premium for payment years beginning in 2024.
Continued Coverage of the Inflation Reduction Act (IRA)
- Notice 2024-20 announces the IRS’ intention to release proposed regulations providing eligible population census tracts for qualified alternative fuel vehicle refueling property as required for the credit under §30C. Taxpayers may rely on sections 4 and 5 of the notice until the proposed regulations are released.
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.