Treasury and the Internal Revenue Service (IRS) have announced increased enforcement in connection with employee retention tax credit (ERTC) claims. The agencies are warning about more scrutiny as a result of what they call massive fraud in the pandemic-era tax rule. Now, some in Congress are pushing back, concerned that legitimate claims are not being paid as a result of this increased scrutiny. In addition, Congressional tax writers are looking at the ERTC as a possible source of offsetting revenue for the emerging tax bill (see story below).

Currently there are two principal tracks for tax legislation in 2024. The first is an emerging $78 billion package aimed at providing a combination of business and individual tax relief in certain discreet areas. The second is a bigger picture bill that would address the fact that more than half the tax code is scheduled to expire at the end of 2025. Both have significant implications for NAIFA members and their clients.

On December 6, the tax-writing House Ways & Means Committee’s Subcommittee on Tax Policy held a hearing to look into extending those 2017 Tax Cuts and Jobs Act (TCJA) individual and estate tax provisions that are set to expire as of 2026. There was, of course, the predictable partisan squabbling over “tax cuts for the wealthy” as compared to “tax cuts that stimulate economic growth.” But there was also considerable evidence that there is bipartisan support for a fair number of the TCJA’s provisions, and for some other tax cut ideas.

The issue of “wealth taxes”—particularly whether investment wealth in the form of unrealized gains can be subject to current income tax liability—is swirling in Washington this month. Both the Supreme Court and Congress are confronting the issue.

Laying the groundwork for more proposals to reduce or eliminate the growing economic gap between the wealthy and working American families, both the Senate Budget and Finance Committees held hearings on the wealthy’s tax liability. The Budget Committee hearing was held on November 8; the Finance Committee hearing was November 9.

On September 20, the House Budget Committee, by a party-line 20 to 14 vote, approved a fiscal year (FY) 2024 budget that balances the federal budget within ten years, and calls for a commission to deal with entitlements. It also provides for permanence and/or extension of the Tax Cuts and Jobs Act (TCJA) individual and estate tax rules. Generally, these TCJA tax cuts expire in 2026.

The U.S. Supreme Court (SCOTUS) has received scores of briefs on whether it is constitutionally permissible for the United States to tax unrealized income. The briefs are in connection with a case now pending before SCOTUS, Moore v United States, which raises the issue of whether unrealized income can be subject to current tax liability. The case has significant implications for cash value life insurance, and for long-held investments.

On August 29, Treasury/the Internal Revenue Service (IRS) proposed rules expanding tax reporting of cryptocurrency transactions. Generally, the proposed rules would require cryptocurrency exchanges to disclose detailed information on their clients’ transactions starting in 2026.

On July 7, the Departments of Labor (DOL), Health and Human Services (HHS), and the Treasury (the “tri-agency” reg) released a proposed regulation that would significantly and adversely impact short-term limited duration (STLD) and fixed payment (e.g., indemnity) health insurance.

On July 27, Rep. Lloyd Smucker (R-PA), a key member of the tax-writing House Ways & Means Committee, introduced legislation to make permanent the 20 percent deduction for noncorporate business income. The bipartisan bill, H.R.4721, the Main Street Tax Certainty Act, has 99 cosponsors.

On July 24, the Internal Revenue Service (IRS) issued a final rule concerning required repayment of overpaid employment tax credits. Generally, the final rule will treat amounts paid by the government that were in excess of the correct amount as amounts that must be repaid as late payments of taxes due, subject to the usual interest and penalties rules.

On July 27, the House Ways & Means Committee’s Subcommittee on Oversight held a hearing on delays in processing employee retention tax credit (ERTC) claims, and on reports of widespread fraudulent claims for the pandemic-era tax credit.

On June 13, House Ways & Means Republicans approved the American Families and Jobs Act, consisting of three bills described as an “economic growth” package. The three bills were approved on party-line votes, with Republicans supporting and Democrats opposed. The three bills were announced on June 9 by the committee’s chairman, Rep. Jason Smith (R-MO).

House Ways & Means Committee Chair Rep. Jason Smith (R-MO) says his committee will propose a tax package by late May or in June. The package will reflect priorities discussed at the committee’s field hearings (so far, four have been held outside of Washington), and will prioritize “working families and small businesses.” Currently, this effort appears to be entirely Republican-generated and supported.

Rep. Adrian Smith (R-NE) has introduced bipartisan legislation that would allow use of health savings account (HSA) funds to pay for in-home long-term care. The bill has 11 bipartisan cosponsors.

On April 18, Sen. Bernie Sanders (I-VT) reintroduced his “tax-the-rich” bill, the “For the 99.5 Percent Act,” in the Senate. The bill was reintroduced in the House by Rep. Jimmy Gomez (D-CA). The bill would impose higher estate tax rates on those who inherit more than $3.5 million.