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Energy Industry Warns Projects in Danger if GOP Debt Bill Moves - Samantha Handler and Daniel Moore, Bloomberg ($):
House Republicans’ bill that would raise the debt limit and avoid a default on the government also would repeal many of the clean energy tax credits enacted by the Inflation Reduction Act. Tax professionals and energy analysts aren’t sounding an alarm just yet—the measure is dead on arrival in the Democratic-controlled Senate and would be vetoed by President Joe Biden.
It’s not just Democrats who oppose this bill because of what it proposes to do to energy tax credits.
Clawing back the tax credits is a tough sell even for some Senate Republicans. The popularity of some of the credits on the chopping block makes it unlikely the current proposal would be signed into law if the GOP gained control of the Senate and the White House in 2024, said Rohit Kumar, a former aide to Minority Leader Mitch McConnell (R-Ky.) and now a principal at PwC.
Some House Republicans are also not thrilled with the bill either.
Inside Baseball Alert: In January, House Speaker Kevin McCarthy (R-Calif.) vowed to return to “regular order” when passing legislation. He broke that promise on his first big bill:
So much for that promise: Debt bill talks again done in the backroom – Paul Kane, Washington Post:
For almost two months, Republicans of all stripes filed into House Speaker Kevin McCarthy’s office to cobble together a sweeping 320-page bill that would touch many aspects of domestic policy while also allowing the Treasury to continue borrowing another $1.5 trillion to fund the federal government.
Not a single committee held a hearing on a bill that would slash trillions of dollars from federal agency budgets and revoke clean climate tax credits. Not one committee held the traditional legislative markup to consider amendments and further debate on the measure. Not one Democrat had input into the measure.
Regular order is when a bill goes through the legislative process to become law (House committee hearing, then markup. House passes it. Senate committee hearing, then markup. Senate passes it. Policy differences between the bills are hashed-out in “conference.” An agreed-upon Conference Report is passed in the House, then the Senate, then signed into law).
Why does this matter? If the bill would have gone through regular order, Speaker McCarthy would have known the level of opposition in his own party to modifying the energy tax provisions. He now faces putting forward a bill that might not garner sufficient support for passage because Members of his own party opposite it.
McCarthy Says House Will Pass GOP Debt-Limit Bill This Week - Erik Wasson and Billy House, Bloomberg ($):
Speaker Kevin McCarthy said that the House will pass his $1.5 trillion debt-ceiling increase plan this week, but he dodged when asked if he has already secured the 218 Republican votes he needs… A person familiar with the counting said McCarthy hasn’t lined up enough votes as of Sunday to pass the bill, but the effort is making progress.
Werfel to Meet Ways and Means on Thursday - Chris Cioffi, Bloomberg ($):
The hearing is set to focus on accountability and transparency at the agency, and will likely include questions from Republicans about the Internal Revenue Service’s strategic plan for spending the $80 billion in supplemental funding it received in the Inflation Reduction Act. His appearance coincides with a House vote on a bill to address the debt ceiling, which includes already-passed legislation rescinding most of that funding, as well as clean energy credits that were included in the IRA.
Related:
New Coalition to Make Recommendations on IRS’s $80 Billion - Naomi Jagoda, Bloomberg ($):
The Taxpayers for IRS Transformation Project, which is being launched by the National Taxpayers Union Foundation, will hold events and issue papers in an effort to ensure the IRS spends its influx of money wisely and protects taxpayer rights...
New Study Shows Passthrough Deduction Promotes Tax Planning, Not Growth – Martin Sullivan, Tax Notes ($):
Using more than a decade’s worth of tax return data from thousands of passthrough business owners, a new study persuasively demonstrates that the section 199A deduction for qualified business income (QBI) has inspired much tax planning but not much job creation or investment. The study was presented on April 18 at the Columbia University Davis Polk & Wardwell Tax Policy Colloquium.
Treasury Lets Automakers Do the Math for EV Credit Eligibility - Gabrielle Coppola, Bloomberg ($):
Specifically, the law says vehicles can qualify for the full incentive if at least half of battery components are made in North America, and if 40% of the value of raw materials in the battery are extracted from or processed domestically, or in countries the US has free-trade agreements with.
The article notes that “Treasury was expected to make tough calls on thorny issues, like how to calculate the value of a battery component, or what constitutes a foreign entity of concern…”
It’s didn’t.
Instead, the government stayed light on details and heavy on talking points: the number of eligible EVs would go down in the short term, but grow in the long term as more domestic production comes online. And indeed, the number of models eligible for credits has been whittled down to about 20 nameplates listed on the government’s website. Roughly half of those only qualify for a $3,750 credit.
IRS Says No Tax Effects for Crypto Holders From Protocol Upgrade - Michael Rapoport, Bloomberg ($). “Holders of cryptocurrency don’t have to record a taxable gain or loss, or gross income, when the blockchain on which their cryptocurrency is held upgrades its protocols for how future transactions are validated, the IRS said Friday.”
Businesses Seek Shelter From State Taxes on ‘Nowhere Income’ - Michael Bologna, Bloomberg ($):
A growing number of states are examining corporate income tax changes waiving levies on so-called 'nowhere income'—profit thrown back onto a state’s tax rolls because it isn’t taxed in other jurisdictions.
Oklahoma and Oregon are both considering bills repealing their “throwback rules,” a common feature of state corporate income tax codes that permits a company’s home state to tax profits that aren’t taxed in another state. Arkansas plans to phase out its throwback rule by 2030 under a bill (HB 1045) recently signed by Gov. Sarah Huckabee Sanders (R). Three other states repealed their throwback rules in the last three years.
Minnesota House Sheds Modesty With Bold Tax Overhaul Plan - Michael Bologna, Bloomberg ($):
The Minnesota House Tax Committee approved a blockbuster omnibus tax bill that raises nearly $1 billion in new revenue from ultrawealthy taxpayers and multinational corporations. Meanwhile, Microsoft Corp. is seeking a $94 million Californiain come tax refund, and a state sales tax harmony group is crafting rules for transactions on digital goods.
SCOTUS to Decide Tax Forfeiture Limits in Minnesota Takings Case – Audrey Fick, Tax Notes ($):
The Supreme Court is being called on to decide when tax collection becomes theft in a case challenging a Minnesota county’s property tax forfeiture scheme.
Tyler v. Hennepin County involves the seizure and sale of a home for back taxes wherein the county retained the entire sale price beyond the taxes due. This practice is allowed in a dozen states, empowering localities and foreclosing agencies to retain any proceeds exceeding the tax debts as windfall.
From the “It's an Employees’ Market” file:
Accountant Shortage Leaves Some US Cities Without Credit Ratings - Nic Querolo, Bloomberg ($). The issue: “[L]ocal governments and utility systems” failed to “file financial information on time” and S&P Global Ratings withdrew their ratings.
A growing shortage of accountants has exacerbated issues for Marion and plagued dozens of cities and counties across the US. Marion saw its general obligation debt rating downgraded two notches in June and has struggled to file its financials on time. Other municipalities have recently seen their bond ratings deteriorate or disappear, threatening their ability to finance projects and borrow at affordable interest rates.
Happy National Pigs-in-a-Blanket Day! Love them pups! Especially when lightly dipped in brown mustard!