Legislative roundup: Guidance challenges and extenders vote

Congressional tax writers remain largely focused on preparing for 2025 tax deliberations, though action is possible on near-term tax priorities like the revival of multiple tax benefits for businesses and a Congressional Review Act resolution on this year’s EV tax credit rule-making by the Biden administration. 

Extenders before August?

The chances for a full Senate vote on the House-passed extenders bill appear to be increasing while the prospect of that vote being successful may be diminishing. The Tax Relief for American Families and Workers Act (H.R. 7024) passed the House in resounding 357–70 bipartisan vote on Jan. 31, but the bill failed to move in the Senate due to objections from key Republican senators.

Negotiations over a broad bipartisan agreement appear dead for now, but Senate Majority Leader Chuck Schumer, D-N.Y., will reportedly hold a floor vote on the bill. He originally said he would not bring the bill to the floor unless he was confident it would have enough Republican support, but after he told the Senate in remarks made June 18 that he continues to work with Senate Finance Committee Chair Ron Wyden, D-Ore., on the legislation, speculation has grown that he may want to force a vote for messaging reasons.

The temporary expansion of the child tax credit is a priority for most Democrats and is considered politically popular. The bill also contains standard disaster-related tax relief for certain areas of the country impacted by man-made or natural calamities over the last several years, including the areas of Ohio affected by a Feb. 3, 2023, train derailment and subsequent chemical leak. A vote could also jam Republicans by forcing them to vote against business tax relief favored by many of their constituents.

If a vote is held, it is possible the bill picks up enough Republican support to pass, but it doesn’t seem particularly likely. Senate Republicans who may nominally support of many aspects of the bills policies may largely vote against the bill due to internal and external political considerations. Sen. Mike Crapo, R-Idaho, the top Republican on the Senate Finance Committee, still appears to oppose the legislation for a variety of reasons, and leadership has so far largely backed him. It may be difficult for rank-and-file Republicans to defy him, especially as passage could result in checks from the child tax credit mailed in October before the election.

The legislation would retroactively restore Section 174 research and experimentation expensing, the more generous calculation of the Section 163(j) limitation on the net interest deduction, and full bonus depreciation. A retroactive end to employee retention tax credit claims, included in the bill to both combat rampant fraudulent claims and provide a budget-neutral score for the bill, may net the government less money on paper due to the amount of time lapsed since the bill passed the House of Representatives. 

EV guidance

The House Ways and Means Committee advanced a Congressional Review Act resolution aimed at rejecting the Biden administration’s regulations around sourcing of raw critical mineral materials for electric vehicle credits.

The measure was introduced by Reps. Carol Miller, R-W.Va., and Jared Golden, D-Maine, but advanced favorably on a party line vote as Golden does not serve on the committee. The measure could go to the House for a full vote, and there is also some Democratic support in the Senate, including Sen. Sherrod Brown, D-Ohio, and former Democrat Sen. Joe Manchin, I-W.Va. The resolution would likely face a presidential veto while Biden is in office, but could do better under a Republican administration. It also may offer a preview other CRA challenges to tax regulations depending on the outcome of the election.

University nonprofits

The Ways and Means Committee also advanced three bills aimed at higher education matters. These bills were drafted in part due to reaction to the political fallout from university protests around the current war between Israel and Hamas, and passed largely along party lines. While none are likely to become law during this Congress, they are part of a broader trend of increased bipartisan scrutiny by the Ways and Means Committee towards the tax treatment of some nonprofits: