The focus on Capitol Hill is increasingly turning to the election and the 2025 fiscal cliff as Ways and Means Republicans create tax reform working groups, the IRS commissioner testified for more funding, while tax extenders failed to gain any traction on an FAA reauthorization bill.
Wyden tries to buy ticket for extenders
Senate Finance Committee Chair Ron Wyden, D-Ore., attempted to attach the Tax Relief for American Families and Workers Act (H.R. 7024) to a bill reauthorizing the Federal Aviation Administration and related transportation taxes.
Attaching the extenders tax bill to the FAA reauthorization was a long-shot effort to overcome roadblocks from key Senate Republicans and squeeze the House-passed bill through to enactment. Senate leaders expressed reticence to attaching unrelated amendments to the major transportation bill; ultimately, Wyden’s amendment did not catch a ride with the air transportation bill. The extenders will likely remain stalled unless Wyden can resurrect talks with top Senate Finance Committee Republican Mike Crapo, R-Idaho or find enough Republicans to buck Crapo’s stance.
The underlying FAA bill still has tax provisions related to federal aviation, extending them through federal fiscal year 2028. The bill passed the Senate on May 9 but must still pass the House of Representatives.
- Three cents per gallon excise tax on noncommercial aviation gasoline
- Eight cents per gallon excise tax on noncommercial aviation kerosene
- 5% tax on the base ticket price
- $4.80 per person in domestic segment tax for a single takeoff and landing (indexed for inflation)
- $21.10 per person in international travel facilities tax for flights that begin or end in the U.S. ($10.60 for a flight that begins or ends in Alaska or Hawaii, indexed for inflation)
- 25% tax on the amount paid for transporting property by air
Ways and Means working groups
House Ways and Means Committee Chair Jason Smith, R-Mo., announced working groups for Republican members of the committee to prepare for next year’s expected fiscal cliff debate. These working groups are meant to form House Republican positions for next year’s debate, predicated on the sunsets of the majority of the Tax Cuts and Jobs Act.
There are 10 working groups, with overlapping topics. The full list of them can be found here. The process echoes a similar one from 2016, when former Ways and Means Committee chair and House Speaker Paul Ryan, R-Wis., encouraged House Republicans to formulate their governing vision for a Republican administration. The tax policy drafted in that process became the early basis for what would become the TCJA in 2017.
The working groups should provide more insight into House Republican priorities for next year’s tax debate, as most Republican members of the House were not in office in 2017, and only five current Ways and Means Committee Republicans were on the committee when the TCJA passed. Underscoring that turnover, Smith, the current committee chair, said at a May 8 event that some House Republicans want to raise the corporate tax rate, which would partially undo the corporate tax cut that was a key goal of the 2017 tax law.
Werfel back on the Hill
IRS Commissioner Daniel Werfel appeared again on Capitol Hill to request additional funding for the agency, this time before the Financial Services-General Government Subcommittee of the House Appropriations Committee.
During his May 7 testimony, Werfel heard skepticism about the IRS’s review of Section 501(c)3 nonprofits, with pointed questions about its review of organizations supporting pro-Palestine protesters. Members also questioned the IRS’s handling of employee retention tax credit claims. Werfel did not provide a timeline for when the agency might begin processing claims filed after its moratorium, saying that the agency received an extraordinary amount of ineligible claims. He stated that the agency would assess its inventory during and after the current filing season before resuming processing. According to the IRS commissioner, taxpayers have voluntarily withdrawn approximately $400 million worth of ERC claims during the moratorium.
Werfel asked the subcommittee, which helps determine IRS and broader Treasury funding levels, for more money (and “modest” reprograming authority for existing funding) to address potential shortfalls in IRS customer service starting in 2026. Despite the remaining $60 billion for the IRS from the Inflation Reduction Act, much of that is earmarked for enforcement because of the positive impact that increase was estimated to have on the federal government’s budget.
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