Green-Energy Tax Credits, Proposal Faces Rejection, Business Tax-Incentive, and More

House GOP Offers Repeal of Green-Energy Tax Credits and Expanded IRS Funding in Initial Debt-Ceiling Proposal. On Wednesday, April 19, House Republicans released the text of their proposal to avert the impending government default—the Limit, Save, Grow Act. The 320-page bill would raise the debt limit by $1.5 trillion or through March 2024, whichever comes first.

Republicans estimate their package would also lower the federal deficit by $4.5 trillion over the next decade by modifying several tax incentives, rescinding unspent COVID-19 appropriations and imposing work requirements on certain federal entitlement programs.
 

A significant portion of the long-term reduction in spending is achieved through a proposed reversal of every green-energy tax provision of the Inflation Reduction Act (IRA). This would effectively reset the energy-incentive landscape to the pre-IRA regime. Although the proposal would leave certain legacy energy investment and biofuel/electricity production tax credits intact at lower amounts, it would allow them to expire in 2024 and 2022, respectively. The proposed blanket repeal is a nonstarter for Democrats and is expected to sew further uncertainty in the renewable-energy sector. Moreover, as a result of this proposal, a greater percentage of energy producers are expected to elect to receive one-time investment tax credits due to increasing doubt in the long-term viability of current annually calculated production-based incentives. (Read the rest of the story)

Republican Proposal Faces Internal Frustration and Outright Rejection from Democrats. The GOP debt-limit package is not expected to receive endorsement from any Democrats in its present form and will undoubtedly fail to amass sufficient support to pass in the current divided government. However, the proposal provides the House Republicans an opening stance in budget negotiations, which are expected to continue in the lead-up to the July or August “x date”—after which point the Treasury Department may not be able to fulfill all of the government’s obligations.

Last week, President Joe Biden addressed the GOP proposal during a public appearance at a union hall in Maryland. In his speech, Biden dismissed the bill as an unrealistic offer that threatens a default “unless [Biden] agree[s] to all these wacko notions [Republicans] have” to cut the federal budget in exchange for preventing a default. Senate Majority Leader Chuck Schumer (D-NY) mirrored this sentiment, affirming that the package would not be considered in the Democratic-controlled Senate. House Minority Leader Hakeem Jeffries (D-NY) also said that no Democrats would support the proposal. (Read the rest of the story)

Lawmakers Introduce Business Tax-Incentive Extensions in Preparation for Potential Bipartisan Effort. Last week, bipartisan coalitions of House and Senate lawmakers introduced legislation to make permanent a pair of expired business incentives originally enacted in the Tax Cuts and Jobs Act (TCJA). While these standalone tax bills will not garner sufficient support to pass on their own, they may represent a renewed willingness by members to consider tax legislation in the 118th Congress.

The first effort concerns the recent shift in the calculation of the deduction for net business interest expenses under section 163(j). Through 2021, the deduction was limited to a maximum of 30% of a taxpayer’s earnings before interest, taxes, depreciation and amortization (EBITDA). Beginning in 2022, the provision reverted to allow taxpayers to deduct only net business interest expenses up to 30% of their earnings before interest and taxes (EBIT)—not taking into account depreciation or amortization. However, the new bills introduced last week, both titled the American Investment in Manufacturing Act, would retroactively restore the greater deduction allowance for tax years after 2021. In the Senate, the effort is led by Sens. Shelley Moore Capito (R-WV) and Kyrsten Sinema (I-AZ) and in the House by Reps. Adrian Smith (R-NE), Joe Morelle (D-NY), Kevin Hern (R-OK) and Brad Schneider (D-IL). (Read the rest of the story)

Werfel Testifies on IRS Budget, Leaves Some Senators’ Questions Unanswered. Last Wednesday, Internal Revenue Service (IRS) Commissioner Danny Werfel testified before the Senate Finance Committee on the Biden administration’s fiscal year 2024 budget request, as well as the IRS’ performance during the 2023 filing season. The hearing also focused on the IRS’ planned use of the $80 billion in additional funding provided by the Inflation Reduction Act (IRA).

Lawmakers questioned Werfel on myriad aspects of the IRS’ long-term Strategic Operating Plan (SOP), which was released on April 6. Despite ongoing calls for stronger IRS accountability, the SOP lacks significant, quantifiable success metrics for IRA-funded efforts. In his opening statement, Werfel said that the SOP purposefully does not answer every question in order to provide room for further improvements and cooperation with Congress. Moreover, he committed to providing the committee with a document in the next six weeks to supplement the SOP with “extensive details” on the IRS’ planned expenditures and hiring expectations across the entire 10-year budget period. (Read the rest of the story)

House Republicans Target High Costs of Green-Energy Tax Incentives. On April 19, the House Ways and Means Committee held a hearing concerning the Inflation Reduction Act (IRA) renewable-energy tax credits. In the hearing, committee Chairman Jason Smith (R-MO) referenced recent private-sector reports estimating the cost of green-energy tax incentives to be significantly higher than official budget predictions. Smith also expressed concern that the tax credits would “overwhelmingly flow into the pockets of large financial institutions, more so than any other industry.”  (Read the rest of the story)

Manchin Criticizes DOE’s Role in Green-Energy Tax Credit Implementation. At a Senate Committee on Energy and Natural Resources hearing last week, Secretary of Energy Jennifer Granholm testified on the Biden administration’s fiscal year 2024 budget request for the Department of Energy (DOE). In his opening statement, committee Chairman Joe Manchin (D-WV) expressed “concern that the DOE is asking for a more than 13% increase from 2023,” even though the agency received significant funding in recent legislation. (Read the rest of the story)

Brown and Hassan Working on Bill to Raise 1099-K Reporting Requirements. Last week, Sen. Sherrod Brown (D-OH) told reporters that he is working with Sen. Maggie Hassan (D-NH) on legislation to increase the current 1099-K reporting threshold to $10,000. Brown said that he and Hassan “expect Republicans to join [them] on [the bill],” and although “some people want to do a different number, … $10,000 seems to be an agreed-upon number.” (Read the rest of the story)

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Since 1995, Policy and Taxation Group has been the leading advocacy group working to reduce and eliminate estate tax, gift tax, and generation skipping transfer tax while blocking increased income tax and capital gains taxes, the creation of a wealth tax, and other hostile tax policies that punish hardworking taxpayers and success.

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