BREAKING IT DOWN A LITTLE FURTHER: A number of potential hurdles stand in the way of this potential tax deal, but finding a larger bill to attach an agreement to is among the biggest challenges. That would in some ways be a multi-part challenge, too, if tax writers can eventually reach a basic consensus on a deal. They'd not only have to find that right legislative vehicle; they'd also have to convince congressional leaders that have other top priorities that a tax agreement should be part of it. As we noted, one particularly attractive vehicle might be a spending deal crafted ahead of that Jan. 19 deadline. But congressional appropriators and leaders have lots of issues they need to work through to reach that kind of agreement, as our Budget duo of Caitlin Emma and Jennifer Scholtes reported — seemingly once more increasing the odds of a shutdown. It’s also an open question of how deep talks over this particular tax deal can continue into 2024. For instance, advocates for the Child Tax Credit are hoping that taxpayers could claim an expanded version in the filing season this winter and spring, and it’s not clear when that would no longer be possible. Spending aside: During last year's debt ceiling negotiations, Republicans and Democrats agreed to pull back about $20 billion of the IRS funding that was given to the IRS as part of 2022's Inflation Reduction Act. But the "side deal" that would put those cuts into law is one of the hot-button spending topics that lawmakers still need to deal with, as Caitlin and Jennifer noted. Plus, House Republicans are now talking about wanting to accelerate those IRS cuts, as Punchbowl News reported on Monday. Let’s talk about offsets, too: On one hand, it would go against recent history if lawmakers decided to pay for the costs of this kind of tax bill — in short, that’s just not something they normally do. But Congress has also been perhaps even more obsessed with spending and budget matters than usual over the last year, particularly Republicans — and at least some especially conservative GOP lawmakers have suggested that they’re not all that interested in the sort of CTC expansion that might be pursued by Democrats. And while whether a tax bill ends up having to be offset remains to be seen, we know that negotiators have toyed around with the idea of cutting off benefits for the Employee Retention Credit as a way to help pay for a potential agreement, as Pro Tax’s Brian Faler reported last week. How exactly that could be done and how much money that could possibly raise are both questions that are still up in the air. But potentially targeting benefits from the pandemic response incentive to help pay for a tax bill certainly would add another dimension to the IRS’s efforts to tamp down on fraudulent efforts to claim the credit — and likely raise a further response from business groups who are lobbying the government to do more to approve legitimate claims for the ERC. “Retroactively ending this program to fund other government programs is a nonstarter for America's small businesses, many of which have waited more than three years for the IRS to process their legitimate tax credit filings,” said Casey Clark, the chief executive of the National Association of Professional Employer Organizations. RINGING IN PILLAR 2: It’s been quite a long time coming, and surely some people thought this day might never come — but as of now, parts of the global tax deal are officially in effect. Specifically, a series of governments are now starting to collect from the second pillar of that global agreement — which requires that bigger corporations pay effective tax rates of at least 15 percent. Those governments include Canada, Japan, South Korea and the U.K., among others. And as The Financial Times noted, countries known for offering attractive tax situations to large multinationals will also be taking part, like Barbados, Ireland and the Netherlands. Other countries are following close behind — legislatures in both Finland and France passed minimum tax measures in the dying days of 2023, as Bloomberg Tax noted. Among the countries not expected to be following close behind — the U.S., where it remains very difficult to see legislation enacting the minimum tax happening as long as Republicans have any power to stop it.
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