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TAX TAKE: Another Shutdown Threat Puts Tax Policy in Slow Lane

Tax Alert

It's almost March, but it feels like Groundhog Day in Congress, since both chambers are facing the same issues and (even closer) deadlines with little progress to report. Absent legislative action, major parts of the government are set to shut down at midnight on Friday. 

The House and Senate are still far apart on the two long-term funding bills needed to close out fiscal year (FY) 2024. All signs point toward another short-term continuing resolution (CR) before the end of the week. Another tranche of temporary FY 2024 spending expires on March 8, which must be resolved or postponed via a CR to avoid a partial government shutdown. Addressing these funding deadlines is certain to consume most of the oxygen in Washington this week. 

The status of the funding bills is particularly important given that they represent the most viable legislative vehicle to carry the House-passed Tax Relief for American Families and Workers Act (H.R. 7024), which includes several business tax extensions, treaty-like provisions for cross-border taxation between the U.S. and Taiwan, and other tax relief. 

Unfortunately, there has been little Senate progress on the H.R. 7024, and it's clear the bill will need to be modified before it can clear the upper chamber. More than a few Senate Republicans are seeking to narrow the bill's expansion of the child tax credit (CTC), arguing its work requirements are too lax. The bill's lead advocate in the Senate, Finance Committee Chairman Ron Wyden (D-OR), has the opposite problem in his caucus, with some Democrats complaining the bill does too little to help struggling workers with children.

A final bill could be hashed out behind closed doors between Chairman Wyden and Ranking Member Mike Crapo (R-ID), though Senator Crapo has asked for a formal Committee markup to offer amendments. He warns that going straight to the floor would likely trigger a blizzard of amendments that would sink the bill. A markup offers a different set of obstacles and uncertainties, and even a pre-negotiated bill with bipartisan support brought before the Finance Committee faces risks. Democrats could offer amendments to expand the CTC, which would be tough for any Democrat to oppose, and any CTC expansion would erase Republican support for the bill. 

It's clear that every path forward for the tax bill has some lethal obstacles. They're not insurmountable, but action in early March doesn't look likely. If the government funding bills move forward in March, an amended tax bill may be in search of another moving legislative vehicle. #TaxTake

Upcoming Speaking Engagements and Events

Jorge will participate in a panel discussion of the Donor Advised Fund Research Collaborative's recently released National Study of Donor-Advised Funds (DAFs) at the United Philanthropy Forum's Foundations on the Hill 2024 conference today, February 26. 

Jorge and Loren will speak at the Federal Bar Association 2024 Tax Law Conference on March 1 and March 4-5, 2024. Jorge will participate in two panel presentations on March 1,"2024 Tax Legislative Update" and "IRS' Progress on Strategic Operating Plan/IRA Transformation Initiatives," and Loren will present, as a part of a panel, "The Interaction of Pillar Two and the Foreign Tax Credit" on March 5.    

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