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Taxation & Representation. Prepare for 2025: Senate GOP Creates Tax Working Groups - Pat Soldano

Senate Finance Committee Republicans Form Working Groups in Preparation for 2025: Following the April 24 formation of Tax Teams by House Ways and Means Committee Republicans, Senate Finance Committee Republicans created their own working groups on May 23. The groups are intended to help Finance Committee Republican members prepare for the expiration of key tax provisions of the Tax Cuts and Jobs Act (TCJA, Pub. L. 115-97 ) in 2025, as well as other tax issues likely to be on the table.

Sen. Casey Writes Letter Urging Expansion of Hydrogen Tax Credit: On May 24, Sen. Bob Casey (D-PA) urged President Biden to expand the regulations governing the Section 45V Clean Hydrogen Production Tax Credit to allow more businesses to be able to claim the credit. The credit, expanded as part of the Inflation Reduction Act, is designed to incentivize the production of hydrogen fuel for use in manufacturing, transportation and other industries. Sen. Casey emphasized in the letter  that the proposed regulations released by the Department of the Treasury and Internal Revenue Service (IRS) have “confused and dismayed the clean energy industry upon which the success of the U.S. hydrogen economy depends.” He called for several changes to the proposed rules, including the addition of a pathway for producers to use coal mine methane to qualify for the credit, allowing producers to use “foreground” data in the model to measure emissions accurately and reward cleaner hydrogen producers, and permitting relicensed nuclear power plants to qualify as “additional power,” ensuring that nuclear power is not penalized in the administration of the credit.

Yellen Signals Unwillingness to Greenlight Pillar One Tax Agreement: At a Group of Seven finance ministers’ meeting on May 22, Treasury Secretary Janet Yellen said the United States will not sign the current draft of the Organization for Economic Co-operation and Development (OECD) Pillar One global tax agreement. She cited outstanding issues related to rules governing transfer pricing regulations and the notion that India and China have not been sufficiently involved in the ongoing negotiations. Transfer pricing provisions are governed under Amount B of the agreement. Current disputes include whether the proposed simplified transfer pricing rules would be mandatory and other issues related to the scope of the agreement. Secretary Yellen noted that transfer pricing is “an area where there’s a lot of uncertainty for multinationals, and … an area where there’s tremendous tax disputes,” making consensus imperative. She added that India has refused to engage on the issue, and China has been “all but absent” in the current negotiations. Negotiators have until the end of June to finalize provisions and collect sufficient signatures for Pillar One to take effect. Failure to enact Pillar One may lead to the proliferation of digital services taxes (DSTs) in a number of countries, which will disproportionately increase tax burdens on U.S. multinational businesses and may lead to global tax instability.

IRS Direct File Program to Become ‘Permanent’ Option Starting in 2025: On May 30, the Internal Revenue Service (IRS) announced  that the agency will make the Direct File “pilot” permanent, starting in the 2025 tax-filing season. The program was piloted this year and allowed 19 million eligible taxpayers in 12 states to file their federal tax returns without charge directly with the IRS through government-operated tax filing software. The agency also stated that it will seek to expand the program, expressing an interest in allowing more states to partner with the Direct File program. The IRS said it is also looking into ways to expand eligibility of the pilot program, with a focus on increasing the number of credits available to working families filing through the program. Additional details about the program’s expansion will be revealed in the coming months.

Hassan, Budd Introduce Bill to Expand Retirement Tax Incentives: On May 24, Sens. Maggie Hassan (D-NH) and Ted Budd (R-NC) introduced the Retirement Investment in Small Employers (RISE) Act (S. 4398 ), which would lower the tax rates of businesses with fewer than 10 employees that create retirement accounts for their workforce, raising the minimum Section 45E retirement-plan start-up credit from $250 to $2,500 per employee. Sen. Hassan said that the legislation would “help more small businesses and their employees thrive,” and Sen. Budd said the bill would “empower individuals to take control of their financial future.” Companion legislation (H.R. 6007 ) was introduced in the House by Reps. Claudia Tenney (R-NY) and Dan Kildee (D-MI) on Oct. 19, 2023.

JCT Releases Overview of Federal Tax System for 2024: On May 23, the Joint Committee on Taxation (JCT) released a report  summarizing the federal tax system in effect for 2024. The report includes discussions of the present-law federal tax system as it applies to the individual income tax; corporate income tax; estate, gift and generation-skipping transfer taxes; social insurance taxes; and major excise taxes.

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