Two more days to pass the spending bill. A coming blizzard may encourage Congress to pass the giant $1.7 trillion continuing resolution as early as Thursday. House Speaker Pelosi is urging Democrats to support the “urgent and necessary” bill, while a bloc of House Republicans is calling on their Senate colleagues to withhold their support. Some GOP senators are threatening a series of amendments to slow the bill. But most lawmakers want to head home for the holidays. Senate leaders hope their chamber can vote today.
Riding along: a big retirement savings package. While most tax proposals on lawmakers’ wish lists failed to make the final cut, Secure 2.0 did. TPC’s Howard Gleckman describes the good, including incentives for small businesses to create worker accounts, more 401(k) auto enrollment, and a new Saver’s Match to replace the current Savers Credit. And the bad, including new windfall tax breaks for high-income workers and retirees such as another delay in Required Minimum Distributions. And the ugly, a budget gimmick that makes the bill look revenue neutral.
More Roth-related savings incentives too. The Wall Street Journal (paywall) takes a closer look at that budget gimmick. The legislation allows people with Roth 401(k)s to skip required distributions starting in 2024, and allows workers to save up to $2,500 in rainy-day Roth accounts. The money could be withdrawn penalty- and tax-free. The bill would also allows savers to roll up to $35,000 from 529 plan accounts into Roth IRAs if the 529 accounts have been held for at least 15 years.
The spending bill also would freeze IRS funding. Tax Notes reports (paywall) that the omnibus spending bill would cut the IRS budget by 2 percent, providing the agency with $1.3 billion less in fiscal year 2023 than House and Senate Democrats proposed. The bill cuts the IRS budget to $12.3 billion by zeroing out the agency’s $275 million business system modernization budget.
And it would crack down on syndicated conservation easements. Owners can take a tax deduction for preserving natural land. But syndicators and their clients have been abusing the rules by claiming deductions that far exceed the real value of the property. The IRS has struggled to keep up but the spending bill includes deduction limits and some modest additional reporting requirements.
What didn’t make it in the spending bill. Efforts to expand the Child Tax Credit and restore key business tax breaks including first year expensing for capital equipment and research costs all fell out. Efforts to raise the reporting threshold from $600 for 1099-K income also died. All of these issues will be back on the table next year but getting any kind of tax bill passed will be tough.
The House Ways & Means Committee voted to release copies of former President Trump’s tax returns. The panel is likely to make public partially redacted returns. Republicans, who will take control of the House in two weeks, unanimously opposed the decision. The panel says the IRS did not perform mandatory audits during the former president’s first two years in office and never completed any audits while he served. Democrats on the committee urge Congress to adopt a new law ordering mandatory IRS reviews of presidential taxes and the public release of some information.
Is a green trade war on the horizon? Europeans are furious that the US added hundreds of billions in tax subsidies for domestic production of green energy and alternative fuel products, including electric vehicles. Now, European Union officials warn they may respond by adopting their own subsidies.
Guidance on that other IRA. Treasury promises guidance by the end of next week on two key business tax provisions of the Inflation Reduction Act. Firms are waiting to see how Treasury fills in the gaps of the IRA’s book minimum tax and its stock buyback tax. It also promised an FAQ feature on home energy tax credits.
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