At a September 12 hearing, the Senate Finance Committee explored tax avoidance strategies used by the very wealthy. Strategies identified included lack of current tax liability on unrealized asset gains, step-up in basis, trust rules, and private placement life insurance (PPLI). This is a prelude to the looming 2025 tax bill debate.

Congress ended its summer break on September 9, returning to Washington to deal with the need to fund the U.S. government by midnight September 30. None of the 12 regular-order appropriations bills, which together fund the U.S. government’s discretionary activities for each fiscal year, have been enacted into law. None have passed the Senate, and only five have passed the House. Hence, there is no visible way Congress can enact many (if any) of these 12 bills before Fiscal Year (FY) 2024 ends on September 30.

The debt limit (the statutory limit on the amount the federal government can borrow) is currently suspended until January 2. That means unless Congress acts to raise the borrowing limit or further suspend the statutory cap on borrowing by January 2, the U.S. risks being unable to make timely payments on all of its obligations. Economists widely believe this would trigger worldwide economic catastrophe.

Both former President Trump and Vice President Harris announced economic and tax policy agendas earlier this month. Key implementing details are missing from both candidates’ plans, but the general outlines suggest a legislative battle over tax rules regardless of who wins the presidency. Both candidates’ plans have triggered predictions of big (as in trillions of dollars) revenue losses, although both candidates have also suggested ways that those losses would be contained if not offset. So, both pose risks for NAIFA tax issues.

Historically, the performance of the presidential candidates has a measurable impact on the fates of candidates down-ballot (Senate, House, and state races, too). Some presidential candidates have longer, stronger coattails than others (or act as a bigger drag on down-ballot races). A favorite discussion point among Washington insiders these days is the potential influence of candidates Trump and Harris on House, Senate, and state races. Here is what we know as of now.

On August 1, the Senate failed to invoke cloture (cut off debate) on HR 7024, the House-passed tax bill that would, among other things, cut off employee retention tax credit (ERTC) claims, and provide better depreciation and business interest tax rules. The failed 48 to 44 cloture vote makes it ever more unlikely that the bill—which passed the House on January 31 by an overwhelming 357 to 70 vote—can be enacted into law this year.

Congress has left Washington for an extended (lawmakers do not return until September 9) summer recess. NAIFA members are visiting with their Representatives and Senators at home.

When Congress returns to Washington on September 9, lawmakers will have less than three weeks to fund the government (and consider any other pre-election pending legislation). Plus, Representatives and Senators will be focused on the November 5 election, when partisan control of the House, Senate, and Presidency are all in play. So, most Washington insiders believe that Congress will punt on most, if not all, major decisions, leading to a fraught post-election lame-duck session.

On August 8, the Internal Revenue Service (IRS) announced it will again process 2021 Employee Retention Tax Credit (ERTC) claims. It says it has resolved many claims issues, so far resulting in 28,000 denials and many valid claim payments.

On July 25, Senate Finance Committee Chair Sen. Ron Wyden (D-OR), along with five colleagues, introduced legislation that would impose criminal penalties on “rogue” health insurance advisors who make changes to individuals’ Affordable Care Act (ACA) health insurance without the insureds’ knowledge or consent. The Insurance Fraud Accountability Act would impose fines on brokers who negligently provide incorrect enrollment information, and criminal liability if the provision of incorrect information is “knowingly and willfully false or fraudulent.”

On July 10, the House Education and Workforce Committee approved a Congressional Review Act (CRA) resolution to block the Department of Labor’s (DOL’s) new fiduciary-only rule. The CRA resolution, H.J.Res.142, would “disapprove the rule submitted by the Department of Labor relating to “Retirement Security by Rule: Definition of an Investment Advice Fiduciary (89 Fed. Reg. 32122 (April 25, 2024)), and such rule shall have no force or effect.”

A federal district court in Texas has stayed a Department of Health and Human Services’ (HHS’) Centers for Medicare and Medicaid Services (CMS) rule that sets a fixed administrative fee and consequently prevents payment to health insurance agents and brokers for advice recommending certain managed care plans. In Am. For Beneficiary Choice v. HHS and Council for Medicare Choice v. HHS, the court found that the plaintiffs demonstrated a substantial likelihood that they would prevail on the merits. The merits include plaintiffs’ claims that the rule would “upend the regulatory status quo, dramatically limiting administrative fees that Congress did not intend” for CMS to regulate.

In Moore v. United States, the Supreme Court (SCOTUS) sidestepped the question of whether it is constitutional to tax unrealized income—but four opinions (two concurring and two dissenting) suggest that at least four of the current SCOTUS justices might in another case find it is unconstitutional to tax income until it is realized.

Both House and Senate tax writers continue their preparations for the 2025 tax bill. More potential targets for revenue-raising tax provisions have emerged.

Last month Republican lawmakers introduced motions to block the new rule raising the salary threshold for the white-collar exemption to the Fair Labor Standards Act (FLSA) overtime (OT) rule. Rep. Tim Walberg (R-MI) introduced the Congressional Review Act (CRA) motion in the House; Sen. Mike Braun (R-IN) introduced it in the Senate.

On June 20, the Internal Revenue Service (IRS) said the 1.4 million pending employee retention tax credit (ERTC) claims are getting continued heightened scrutiny, with “the vast majority” of them showing risk of being improper. The agency announced it had completed a detailed review of the pending claims in order to protect taxpayers and small businesses, and said it resulted in plans to deny tens of thousands of improper high-risk ERTC claims. Now, the IRS has started a new round of processing lower-risk claims to help eligible taxpayers.

On July 9, the House Ways & Means Committee approved legislation, H.R.8915, to expand the kinds of education-related expenses that can be paid tax-free from a 529 plan. Among the bill’s provisions is one that would allow NAIFA members to use 529 funds for professional certifications or programs connected with obtaining a postsecondary credential, including those required to obtain a state license.

Congressional Review Act (CRA) resolutions to block the Department of Labor’s (DOL’s) newly finalized fiduciary rule have been introduced in both the House and Senate. It appears the motion may pass, but President Biden is virtually certain to veto it if it does pass.

House Ways & Means Committee Republicans have formed ten issue-specific “tax teams” to work on what to include in the looming 2025 major tax bill. Senate Finance Committee Republicans will tackle these issues in six “working groups.” Both say they “may” include Democrats in their deliberations at some point, but for now, it is an all-GOP effort.

Recurring revenue estimates of the cost of extending the expiring 2017 tax cuts suggest that revenue will play a major role in the debate over the upcoming tax bill in 2025. After at least five revenue estimates, all covering a 10-year period that includes 2028, projections of the revenue lost due to current tax rules keep going up.