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From the Hill: May 7, 2024

The House Small Business Committee held a hearing on the implementation and enforcement of Corporate Transparency Act.
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Lately on the Hill

Here’s a look at recent tax-related happenings on the Hill, including noteworthy decisions and a hearing by the House Ways and Means Committee.

House Hearing

It was Treasury Secretary Janet Yellen’s turn in the hot seat to field questions from the House Ways and Means Committee last week.

Yellen touted a “historic economic recovery” with sustained GDP growth, decreased inflation, and a robust labor market with an unemployment rate below four percent “for the longest stretch in over 50 years.” She highlighted key legislation implemented by the Biden administration, such as the CHIPS and Science Act and the Inflation Reduction Act of 2022, “creating economic opportunity for Americans across the country.” Yellen praised the increased funding for the IRS, which “has enabled us to combat tax evasion by the wealthiest Americans that costs our country over $150 billion a year.”

Committee Chair Jason Smith (R-MO) painted a different picture, hammering on inflation, which has caused a “4%” decrease in real wages, mortgage payments on a median priced home are now “nearly $1,200 higher per month,” and the prices at the pump are “50%” higher since President Biden took office. Smith called out the president’s position on allowing the expiration of significant provisions of the Tax Cuts and Jobs Act of 2017 (TCJA) passed during the Trump administration, which would “[break] his promise to not raise taxes on families making less than $400,000,” asserting that the average family of four making $75,000 would have “to pay an extra $1,500 to the IRS each year.”

“The president has been very clear that no family earning less than $400,000 will face a tax hike. He’s not proposed such a thing since he took office, and he’s not proposing to allow that to happen when parts of TCJA expire,” countered Yellen. The TCJA has many provisions geared toward low-income taxpayers, such as increases to the standard deduction and child tax credit, that expire at the end of 2025.

The imminent sunset of these and other consequential TCJA provisions, such as the Section 199A deduction for businesses and the increased estate and gift tax exemption, has been increasingly discussed on the Hill as lawmakers begin positioning for fervent debate in the coming months.

Senate Back in Session

The Senate reconvened last week after some time off, apparently ready to move on the Federal Aviation Administration (FAA) Reauthorization Act as lawmakers have released a bipartisan bill extending funding into 2028. The funding will run out on May 10 if the legislation is not passed.

To many, the FAA bill represents the last viable vehicle to pass the Tax Relief for American Families and Workers Act of 2024, which provides businesses relief from current requirements to capitalize research and experimental expenditures, favorable reductions to interest expense limitations, and provides 100% bonus depreciation on qualifying asset purchases. Beyond the May 10 bill, these significant tax provisions may not be addressed until after the November elections, further jeopardizing the ability to retroactively apply the benefits to earlier years.

Noteworthy Decisions

In the wake of the NSBA v. Yellen judgment on the constitutionality of the CTA, lawmakers held a hearing and introduced new legislation.

On April 30, 2024, the House Small Business Committee held a hearing on the Corporate Transparency Act (CTA).

The CTA requires certain companies to report beneficial ownership information to the Financial Crimes Enforcement Network (FinCEN) to aid efforts to combat illicit financial schemes often done under anonymous and often multilayered shell companies. In early March, a district court in Alabama ruled the act unconstitutional in a lawsuit by the National Small Business Association (NSBA). The ruling has reignited debate among lawmakers.

Committee Chair Roger Williams (R-TX) opened the hearing not criticizing the legislation itself but its implementation. He criticized regulations that have been “overly broad” and burdensome, asserting “nearly half” of required companies do not know what the CTA is or have ever heard of FinCEN. Williams noted that lawyers and accountants are wary of consulting companies on the rules because of how they are written and concluded, “This is a telltale sign that something has gone wrong in implementing this law.”

Tax Notes reported on a statement during the hearing from ranking member Nydia Velazquez (D-NY) defending the act: “too many small businesses being unaware of the reporting requirements is not enough reason to ‘demonize this law [or] fearmonger about regulatory impact.’” Velazquez also asked a hearing witness, Gary Kalman of Transparency International U.S., about the importance of the word “willful” when considering non-compliance with the CTA in an apparent effort to ease concerns. Tax Notes reports, “Kalman argued that under the willful standard, if a business did not know about the law and did not file, it would be wrong to suggest that that could lead to prosecution. ‘You have to know about the law and decide not to file.’ Adding that an accidental mistake on a submission would also not result in liability.”

Representative Warren Davidson (R-OH) introduced a bill entitled Repealing Big Brother Overreach Act to repeal the CTA. Bloomberg Tax reports Davidson said, “violating the personal privacy of American business owners by forcing them to disclose sensitive information. The [CTA] must be repealed. Congress must ensure that the federal government fits within the Constitution. That’s why I’m introducing this legislation and asking my colleagues to join me to pass it.”

Other Important Developments

IRS Technical Guidance

  • Final regulations (T.D. 9996) have been released providing guidance on the procedures to make certain allocations and elections related to the generation-skipping transfer tax under the Economic Growth and Tax Relief Reconciliation Act of 2001.
  • Revenue Procedure 2024-24 has been issued, providing private letter ruling request procedures applicable to Section 355 transactions. Section 355 describes the treatment of distributions of stock and securities of a controlled corporation. Notice 2024-38 has been published in conjunction with the revenue procedure soliciting feedback on its provisions due by July 30, 2024.


  • FS-2024-18, released by the IRS, reminds businesses that provisions of the SECURE 2.0 Act of 2022 potentially affect amounts reported on Forms W-2 beginning for tax year 2023. These provisions and sections of the act include de minimis financial incentives (Section 113), Roth Savings Incentive Match Plan for Employees (SIMPLE) and Roth Simplified Employee Pension (SEP) Individual Retirement Arrangements (IRAs) (Section 601), and optional treatment of employer nonelective or matching contributions as Roth contributions (Section 604).
  • In a bulletin to payroll professionals, the IRS reminded them that the Employee Retention Credit (ERC) withdrawal program is still available. Different than the ERC Voluntary Disclosure Program, which ended on March 22, 2024, the ongoing withdrawal program allows taxpayers to withdraw a claim that has not yet been paid as if the claim was never filed.

    Bloomberg Tax reports that John McInelly, an IRS official, said that the ERC Voluntary Disclosure Program may “reopen the program in a ‘reduced capacity.’ If the program reopens, it would not be as lenient as its predecessor, although he did not provide any further details.” The program so far has processed approximately $1 billion in faulty claims. It is still working “pretty feverishly” to get through its backlog of submissions dating back to January, according to Carolyn Schneck, counsel in the IRS Small Business/Self Employed Division.

Continued Coverage of the Inflation Reduction Act (IRA)

  • Final regulations (T.D. 9995) have been released by the IRS concerning Sections 25E and 30D credits for purchasing new and previously-owned clean vehicles. They also provide guidance on the transfers of credits by consumers to qualifying dealers. Guidance is provided to dealers on eligibility requirements to receive advance payments of the credits and rules on credit recapture. Rules regarding critical mineral and battery components are provided, including rules to comply with foreign entity of concern requirements.
  • Notice 2024-37 was released by the IRS, providing guidance and safe harbors for the §40B sustainable aviation fuel credits introduced in the IRA. The credit applies to certain fuel mixtures containing sustainable aviation fuel sold or used after December 31, 2022 and before January 1, 2025.

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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