Here’s a look at recent tax-related happenings on the Hill, including Senate passage of the Federal Disaster Tax Relief Act of 2023 and President-elect Donald Trump nominating Billy Long for IRS commissioner.
Lately on the Hill
Senate Passes Federal Disaster Tax Relief Act of 2023 & VSO Equal Tax Treatment Act
The U.S. Senate advanced the Federal Disaster Tax Relief Act of 2023 and the VSO Equal Tax Treatment (VETT) Act on December 4. President Joe Biden is expected to sign both bills.
The Federal Disaster Tax Relief Act is intended to provide relief for those affected by hardships, including qualified wildfire disasters; hurricanes Ian, Helene, and Milton; and the East Palestine, Ohio, train derailment.
President-Elect Trump Nominates Long for IRS Commissioner
On December 4, the incoming Trump administration announced that it would nominate Billy Long for IRS commissioner, pointing to his experience in the real estate industry, his years in Congress, and his work as a small business and tax advisor. Long also has extensively promoted the Employee Retention Credit (ERC) introduced in the CARES Act of 2020, a policy that has been the subject of recent IRS scrutiny.1
Pending Senate confirmation, Long is set to replace the current IRS Commissioner Daniel Werfel, whose term was set to expire in 2027.
Faulkender Nominated for Treasury Deputy Secretary
On December 4, Michael Faulkender, a finance professor at the University of Maryland’s Robert H. Smith School of Business, was selected for Treasury deputy secretary, subject to Senate confirmation. Faulkender served as Treasury assistant secretary for economic policy in the first term of Trump’s administration.
The First 100 Days
The incoming administration is targeting an ambitious first 100 days in office; a reconciliation bill focused on defense, energy, and border security—in addition to a tax bill—are on the agenda.
House Speaker Mike Johnson indicated top priorities for the tax bill include restoration of immediate expensing for research and development expenses and full expensing of bonus depreciation, extending the current tax rate for the foreign-derived intangible income of U.S. corporations, as well as maintaining the elevated child tax credit and doubled standard deduction.2
The new administration also is focused on repealing credits for electric vehicles and IRS funding, both pillars of the Inflation Reduction Act (IRA). Trump also has indicated support for overturning the $10,000 state and local tax (SALT) cap established by the Tax Cuts and Jobs Act of 2017 (TCJA),3 potentially benefiting wealthy taxpayers located in states with the highest income tax and property tax rates.
The Judicial Report
Corporate Transparency Act Halted by Federal Court
A nationwide preliminary injunction against the Corporate Transparency Act (CTA) was given by Judge Amos L. Mazzant, III of the U.S. District Court for the Eastern District of Texas.4
The CTA requires the reporting of certain information identifying individuals who ultimately own or otherwise control certain entities to the Financial Crimes Enforcement Network (FinCEN). The database is intended to assist FinCEN and other permitted agencies to protect U.S. financial interests from illicit activity hidden behind shell companies or other complex ownership structures.
Previously, a federal district court held the CTA unconstitutional, but the U.S. Department of Justice appealed the ruling and FinCEN issued a notice stating that while the plaintiffs were not required to provide beneficial ownership information reports, the organization would still enforce the provisions of the act for others. This injunction from Mazzant differs from that of the federal district court, applying to all reporting companies nationwide.
The Justice Department filed a notice of appeal against the decision on December 5.
For more information, see our FORsights™ article, “Corporate Transparency Act Halted by Federal Court.”
Foreign Information Reporting Penalties Determined Not Assessable by IRS
The U.S. Tax Court found in Safdieh v. Commissioner that the IRS lacks the authority to assess and collect penalties for failure to furnish information with respect to certain foreign corporations and partnerships under Section 6038. The findings are in line with prior decisions handed down by the Tax Court, despite the reversal by the D.C. Circuit, which ruled the IRS had the statutory authority to assess and collect such penalties.
Foreign Tax Credits Offset Net Investment Income Tax Under U.S.-Canada Treaty
The U.S. Court of Federal Claims determined that a taxpayer was entitled to a tax refund, allowing foreign tax credits to offset net investment income tax liability under Article XXIV of the Convention between Canada and the United States of America with Respect to Taxes on Income and on Capital.
From the Treasury & IRS
Released Guidance
Final Regulations (T.D. 10015) provide guidance on the types of energy properties that are eligible to claim the §48 investment tax credit that was first introduced in the IRA. Under §48, taxpayers may receive a tax credit for a percentage of costs incurred when installing clean solar, wind, and energy projects. Any company that begins construction on such projects before the end of 2024 may still qualify for the credit. Following its expiration, the clean energy investment credit is expected to be replaced by “tech-neutral” credits. Final guidance on these types of credits is expected from the IRS before the end of the year.5
Final Regulations (T.D. 10014) under §752 provide guidance on the allocation of partnership recourse liabilities among partners and rules for related persons. Among other provisions, the regulations outline to what extent a partner is treated as bearing an economic risk of loss (EROL) for a liability and provides rules for situations where multiple partners bear EROL for the same liability (overlapping EROL). The Final Regulations apply to any liability incurred or assumed by a partnership on or after December 2, 2024, subject to exceptions for refinancing and binding contract provisions. Partnerships also may choose to apply the Final Regulations to all liabilities of the partnership provided the partnership consistently applies all rules from the Final Regulations to those liabilities.
Proposed Regulations (REG-105479-18) provide guidance under several Internal Revenue Code Sections, addressing previously taxed earnings and profits (PTEP) tracking under §959 and the impact of PTEP on the basis of stock in a foreign corporation under §961. In addition, the Proposed Regulations address the computation of foreign currency gains and losses with respect to distributions of PTEP under §986(c).
For more information, see our FORsights articles, “Proposed Regulations – Tracking PTEP Under Section 959,” and “Proposed Regulations: Long-Awaited Guidance on PTEP."
Proposed Regulations (REG-106595-22) except unmarked vehicles used by firefighters and rescue squad members from the substantiation requirements of §274. The Proposed Regulations seek to alleviate inconsistency in the requirement to track personal use between marked and unmarked emergency vehicles by emergency service employees who may be on call at all times.
Notice 2024-82 sets forth the 2024 Required Amendments List as it applies to individually designed §401(a) and §403(b) plans.
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.
- 1 “Taxwriters to Probe Trump IRS Pick’s Qualifications,” www.taxnotes.com, December 6, 2024.
- 2 “Trump Calls for Lifting SALT Cap; TCJA Tops Johnson’s 2025 List,” www.taxnotes.com, September 18, 2024.
- 3 I.d.
- 4 “Corporate Transparency Act Blocked Nationwide by Texas Court,” news.bloomberglaw.com, December 3, 2024.
- 5 “Treasury Pushes to Finalize Energy Credit Rules by This Year,” news.bloomberglaw.com, October 1, 2024.