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May 10, 2024

Report on recent US international tax developments - 10 May 2024

US House Ways and Means Committee Chairman Jason Smith (R-MO) this week was quoted as saying some Republican caucus members may favor increasing the corporate tax rate upon the expiration of the Tax Cuts and Jobs Act (TCJA) in 2025 and may join Democrats on the issue. According to the Chairman: "There are people on both sides of the aisle that believe that the corporate tax rate is not enough." Another major issue that will need to be addressed within the Republican Party when the TCJA is revisited in 2025 will be whether "pay-fors" will be necessary. According to Chairman Smith, "Without a doubt one of the biggest challenges that will be discussed, debated, and decided in 2025 is: Should taxes be paid for or should they not be paid for?"

He added that whether Congress acts through reconciliation or in a bipartisan approach, every tax provision will be on the table with the expiration of the TCJA. "Nothing is permanent," he reportedly said.

Addressing the House-passed, but stalled Tax Relief for American Families and Workers Act of 2024 (H.R. 7024), Chairman Smith indicated he remains hopeful the bill will pass the Senate. Although Senate Majority Leader Chuck Schumer (R-NY) has so far declined to bring the bill to a floor vote, some Senate Republicans believe that the Majority Leader eventually will bring the legislation to a vote.

The Congressional Budget Office (CBO) also this week released forecasts that show the cost of extending TCJA individual and passthrough provisions at the end of 2025 has increased from last year's CBO estimate, to roughly $4 trillion over 10 years. The higher price tag is detailed in this year's version of the report on Budgetary Outcomes Under Alternative Assumptions About Spending and Revenues.

A senior Treasury official said at a 4 May American Bar Association (ABA) Tax Section meeting that proposed regulations on the Corporate Alternative Minimum Tax (CAMT) — at least on the corporate side — are in a very advanced stage. He suggested further work is needed, underscoring how the corporate provisions will interact with tax accounting, international tax, and partnerships in the broad-based package.

The official further said Treasury is running through how potential pitfalls will interact from a policy perspective. Once the package is proposed, he said the government will seek comments on how the rules fit together. According to the official, the collective notices issued over the past year and a half have built a cohesive package that incorporates many past comments. The package will be further improved after proposed regulations are issued and additional comments are received, he said.

Also in regard to the CAMT, other US officials this week were quoted as saying the recent penalty waiver for companies that fail to make their CAMT quarterly payment could be further extended. The IRS issued Notice 2024-33 in April, waiving the penalty under IRC Section 6655 for a corporation's failure to pay estimated tax payments attributable to a portion of a corporation's CAMT due on or before 15 April 2024, or 15 May 2024 (for fiscal-year taxpayers whose tax year begins in February 2024). This was the second time the IRS has waived the penalty. In June 2023, the IRS waived the penalty for the 2023 tax year.

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Contact Information

For additional information concerning this Alert, please contact:

Ernst & Young LLP (United States), International Tax and Transaction Services, Washington, DC

Published by NTD’s Tax Technical Knowledge Services group; Carolyn Wright, legal editor

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