This transcript has been edited for clarity.

David D. Stewart: Welcome to the podcast. I'm David Stewart, editor in chief of Tax Notes Today International. This week: election-year scramble.

With the 2024 election looming on November 5, Congress is about to return from its five-week summer break, but there isn't much time to get down to business with only 13 working days before the six-week break heading into the election.

What can they get done in that short amount of time while making sure government funding doesn't run out on October 1? And will we see most issues booted to the lame-duck session or be left for the next Congress?

Here to talk more about this are Tax Notes Capitol Hill reporters Cady Stanton and Doug Sword. Cady, Doug, welcome back to the podcast.

Cady Stanton: Thanks for having us.

Doug Sword: Hi, Dave. Thanks.

David D. Stewart: So why don't we start off with this Tax Relief for American Families and Workers Act. What's going on with that?

Cady Stanton: Congress has been on recess for the past couple of weeks, but right before they left for recess, the Senate actually voted on the Tax Relief for American Families and Workers Act. It was a deal —just for context — that was written and negotiated by Senate Finance Committee Chair Ron Wyden, D-Ore., and Ways and Means Committee Chair Jason Smith, R-Mo. So the Senate actually voted on the deal in a cloture vote, a procedural vote on August 1, but that vote did fail.

So just as a brief recap on this bill, the House passed it in a pretty overwhelming vote at the end of January and Republicans in the Senate have opposed the bill for the past couple of months. So from January all the way through to August. So they kind of put a hold on that bill and promised to oppose it for a couple of reasons. But the primary reason is because of the expanded child tax credit provision in the bill and a specific sub-provision in that that allowed people who were going to claim the child tax credit to use a lookback income provision and use the previous year's income to qualify for the credit.

But the Republican senators have also cited issues with the retroactivity of some of the provisions of the bill and the employee retention credit provision. They've also cited just kind of this thought that "Maybe we shouldn't vote for this bill this year because we could get a better deal next year after the election, especially if we flip the Senate. So why should we settle for this deal now that we don't quite like?"

So with all of that context in place, Senate Majority Leader Charles E. Schumer, D-N.Y., brought the bill up for what was basically a show vote. He knew the vote was going to fail on August 1 just before the Senate left for recess until the beginning of September. And like I said, that vote failed. So with that failed vote, is the bill dead? Probably. I mean, it's kind of hard to say definitively but without any major changes the bill as it currently stands, if it came up for another vote, probably not in the best place without any big changes.

So there's no sign of change on Republicans' part to flip in support of the deal, which is important. But something to maybe think about is one of the changes between when that vote was and now, is that President Biden is no longer running for reelection. So with that in mind, there were some concerns when President Biden was running for reelection that if the bill came up it would be sending out these checks in October that would boost him as a presidential candidate.

Though an argument can be made that maybe that boost could still be helpful for Vice President Harris. It's not quite the same argument as when President Biden was running. Now again, like we said, is the bill totally dead? Not fully. There are ways that parts of the bill could be split off and possibly moved. Movement has been made on that, especially in the disaster tax relief section of the bill.

Rep. W. Gregory Steube, R-Fla., and Mike Thompson, D-Calif., used a discharge petition a few weeks ago or a few months ago, rather, to pass a separate disaster tax relief bill in the House that pulled apart that from the larger bill. And Sen. Maria Cantwell, D-Wash., has also indicated that she maybe hopes to pull apart the housing segment of the bill into its own bill as well, to try to move that. So piecemeal sections of the bill could still come up.

There's also something to think about for the end of the year in terms of the possibility of an extenders bill especially because there are a couple of different, especially business extenders that have a deadline for the end of the year that could vie for spots and must-pass legislation for the end of the year. And Doug and I broke that down in a recent article and there's actually maybe a couple more provisions than you would expect that people could be choosing from.

The other deadline to think about, though it's not likely tax would be attached to this, is that at the end of September is the deadline for the fiscal 2025 appropriations. And it's also very unlikely that the House and the Senate are going to pass all the appropriations bills by the end of September. But it is important to keep that deadline in mind because there will likely be a continuing resolution instead, which is a bill that would allow them to push that appropriations and funding deadline to be later and just give them more time to do that government funding.

David D. Stewart: Now, one of the biggest events coming in the tax world here is the expiration of the Tax Cuts and Jobs Act. Many provisions will be sunsetting in 2025. I've heard this called Taxmageddon, sometimes it's called the "Super Bowl of Taxes." So is there anything new on what we can expect from this looming threat?

Doug Sword: No, Dave, there's nothing really new on this. I mean, TCJA is still set to expire at the end of next year. And the Tax Foundation is still forecasting that if that occurs, 62 percent of households would see a tax increase and that's nine times more than would see a tax cut. Republicans are still claiming that Democrats want to see everybody's taxes go up and will let TCJA expire. And Democrats are still counterclaiming that nearly all the benefits of an extension will go to the rich and to large companies. I know you'll be shocked that neither claim is true.

The next decision point for Americans on this is the election. We won't know how either a lame-duck package or TCJA extension will proceed until election results are in. The first thing to be considered is election politics will determine when an omnibus spending bill is done. There's already some support for pushing the omnibus into next year, which would likely end any chances for a tax extender's package. A December omnibus, on the other hand, might be able to accommodate tax extenders.

As for TCJA, both parties are preparing for a clean sweep on Election Day followed by a reconciliation bill that would deal with taxes in their own particular partisan idiom. It seems more likely Republicans will sweep than Democrats because of how favorable the Senate map is to Republicans. But it also appears that divided government is a definite possibility and no one seems to be preparing for a bipartisan TCJA extension.

Meanwhile, on the campaign trail, it's become all about taxes. Between TCJA extensions and niche tax proposals, like no one having to pay taxes on Social Security benefits or a $6,000 child tax credit for newborns, both campaigns would add trillions to the debt. In short on all this, the campaigns appear to be trying to outdo each other on taxes and have forgotten all the forecasts that the federal government is on an unsustainable debt trajectory.

David D. Stewart: So where do things stand on an issue that's kind of a major but also somewhat of a sleeper issue, the IRS budget?

Doug Sword: Government funding is set to run out after September 30, and we are where we usually are this time of year. We are nowhere near a deal on government budgets. This will be the 28th year in a row that Congress will have failed to do the one thing the Constitution requires it to do and that is to pass a spending package on time.

So what will happen in September is the House and Senate will avert a government shutdown and pass a continuing resolution that will extend funding at current levels into the new fiscal year. They'll set a deadline for that continuing funding to end, and that deadline is aimed at forcing an agreement on an omnibus on all 12 spending bills. Maybe that will happen in December, maybe it will take a new president and new Congress to do it next year.

As for the IRS in particular, the House Appropriations Committee advanced a partisan bill to cut the IRS budget by 18 percent. No Democrats voted for that. That would be a $2.2 billion cut with $2 billion coming out of enforcement. The House leadership scheduled a floor vote in late July on the bill, but they pulled it when they realized the GOP caucus wouldn't stick together to pass the bill.

Meanwhile, the Senate Appropriations Committee unanimously supported a financial services bill that would keep IRS funding flat at $12.3 billion. That hasn't come to the Senate floor yet, and it won't because the Senate hardly ever passes the financial services bill. Sen. Chris Van Hollen, D-Md., the chair of the Financial Services Appropriations Subcommittee, which oversees the IRS budget, expects the Senate's unanimously passed budget to win in negotiations because their bill is unanimous and the House bill is partisan and they expect there will again be a flat budget for the IRS.

That's exactly what happened last year when the House wanted a 9 percent IRS cut and the Senate appropriators passed a flat budget. It's also possible that in negotiations Republicans will again push for clawbacks of more of the IRS's Inflation Reduction Act funds. If you remember, $21.3 billion out of the about $80 billion in IRA funding was clawed back during last year's budget talks. All that said, if Republicans sweep the table in November, it's probably a pretty safe bet that IRS funding will be a target in any GOP reconciliation bill.

David D. Stewart: There's been some change in personnel up on the Hill. Could you talk about the openings on the House Ways and Means Committee and the Senate Finance Committee?

Cady Stanton: Absolutely. Something to think about with both of these committees is that because the election is going to have such a big impact on the makeup, it's a little bit like reading tea leaves here on exactly what it'll look like next year. But there are a couple of scheduled retirements and then a few other changes, like you said, in personnel on these committees that's worth taking a look at in terms of who might fill those seats.

So starting first with the Ways and Means Committee, there are two Ways and Means Democrat retirements occurring this year, Rep. Earl Blumenauer, D-Ore., and Rep. Daniel T. Kildee, D-Mich. Rep. Bill Pascrell Jr., D-N.J.,  recently died, his seat on the committee is open as well. The vacancies on these committees, especially in Ways and Means, particularly, are filled in reverse order by those who were on the previous Congress when Democrats had the majority but lost their seats because there were fewer seats for Democrats on the panel.

So with that in mind, what we've heard is that Rep. Steven Horsford, D-Nev., is likely to take Pascrell's seat on the committee for the next couple of months and possibly going into next Congress. Next year with those Blumenauer and Kildee seats available, we've heard that Rep. Brendan Boyle, D-Pa., and then Delegate Stacey E. Plaskett of the Virgin Islands as well are kind of set up because they've previously been on the committee to possibly take those seats.

On the GOP side, there are two scheduled retirements, people who aren't running for reelection in November, and that's Rep. Brad R. Wenstrup, R-Ohio and Rep. A. Drew Ferguson IV, R-Ga. We've heard that Rep. Rudy Yakym III of Indiana is kind of set up to take that first vacant seat. And then we've heard a ton of other names for the other ones, so kind of hard to pinpoint who might be the other person to take that. Now, again, like I said, big impact here is going to be the November elections.

So hypothetically, should the House flip and Democrats take control, the Republicans on the committee would have to dump six members. They would have six seats that they would no longer have control over. So those six members who would lose spots would likely be:

• Reps. Mike Carey (Ohio),
• Nicole Malliotakis (N.Y.),
• Randy Feenstra (Iowa),
• Beth Van Duyne (Texas),
• Michelle Steel (Calif.), and
• Blake Moore (Utah), in that specific order.

Now, the Democrats would get eight additional seats in that hypothetical, but they'd all go through the Democratic Steering Committee in the House in terms of those selections.

So something Doug and I have been reporting on recently that's pretty interesting is how that selection process is done and what the considerations are. And something that we've heard from quite a few members is, a lot of thought is given to regionalism and geography for selecting these seats. So for example, on the Ways and Means Democrats side, Representative Kildee from Michigan is retiring, leaving this kind of lack of representation on the committee from that specific state, which might leave some representatives who represent Michigan possibly in a better position to take that seat to make sure that that representation is maintained.

Another consideration, especially for Democrats on Ways and Means, is overall diversity. So we've heard that the Congressional Hispanic Caucus is also pushing to have another member on the Ways and Means panel. They currently have Reps. Jimmy Gomez (D-Calif.) and Linda Sànchez (D-Calif.), so that's something that's going to be considered as well. And then another representative who's trying to get his seat back on the panel is Rep. Tom Suozzi (D-N.Y.). He was on the Ways and Means Committee before he gave up his seat when he ran for governor of New York. So he's trying to get that seat back now that he has his seat in Congress after Representative George Santos was ousted previously.

Now turning over to the Senate, definitely not as big of a committee, but still some open seats that we're taking a look at. In Senate Finance there's going to be three retirements. Those are:

• Sen. Benjamin L. Cardin (D-Md.),
• Sen. Diane Savino (D-N.Y.), and
• Sen. Thomas Carper (D-Del.).

And then there's a fourth open seat because of the recent resignation of Senator Robert Menendez (D-N.J.).

So in terms of who might fill those seats overall, we've heard Senators Cory Booker (D-N.J.), Bernie Sanders (I-Vt.), Gary Peters (D-Mich.), and Tina Smith (D.-Minn) have all been floated as names. So those are different people who might end up taking those seats. And then thinking about Menendez's resignation, that actually went to effect during the recess, so on August 20. And it's unclear whether Wyden or Schumer might try to fill his seat before the election.

David D. Stewart: All right, and on another issue of personnel, what is going on with Tax Court nominees?

Cady Stanton: Another great question and something that has a possible likelihood of coming back up in the short period of work for the Senate between the recess and going into the election. So just to kind of rewind and give some general context here. Earlier in the year, Biden nominated six people for Tax Court judge positions. Among those six, two so far, Kashi Way and Adam Landy, have been confirmed by the full Senate in pretty lopsided votes. They receive overwhelming support and were sworn in earlier this month according to the Tax Court.

As for the other four, when they might get a full vote in the Senate hasn't quite been scheduled yet. So one of them, Rose Jenkins, was approved by the Senate Finance Committee actually back in June, and she's the most likely to have a full vote in the Senate soon after the chamber reconvenes on September 9. Now the remaining three, Jeffrey Arbeit, Cathy Fung, and Benjamin Guider, it's unclear when the votes for their nominations in the full Senate might be held.

But all three have also received confirmation votes from the Senate Finance Committee, that was back on July 25, and there wasn't any major pushback to their nominations. Now, if all of these judges are confirmed, that actually brings the Tax Court to its full complement of 19 judges for the first time in 19 years. And in that interim, some special and senior judges have been trying to take up the slack for those vacancies, especially as the court continues to try to address some of the backlog of cases that was created during the pandemic.

Now thinking about appropriations, as Doug mentioned, the Tax Court appears unlikely to get kind of its full budget request from Congress for fiscal 2025. So that just means that they'll probably have to dip into some of the Inflation Reduction Act money that they received to kind of fill all the books here.

David D. Stewart: All right, well Cady, Doug, it's always great to have you here and I'm sure we'll have you back when we have some election results to sort through, but thank you so much.

Doug Sword: Right. Thanks, Dave.

Cady Stanton: Thanks for having us.

David D. Stewart: And now coming attractions. Each week we highlight new and interesting commentary in our magazines. Joining me now is Acquisitions and Engagement Editor in Chief Paige Jones. Paige, what do you have for us?

Paige Jones: Thanks, Dave. In Tax Notes Federal, Anne Duke and Ellen Best compare scenarios for starting Social Security distributions at different ages. Hale Sheppard explores key timing issues in the context of employee retention credit disputes.

In Tax Notes State, Bethany Hunsaker and Nicole Bryant examine the retail delivery fees enacted by Colorado and Minnesota. Nikki Dobay discusses a new Oregon tax ballot initiative and how it can affect taxpayers.

In Tax Notes International, Jeremy Raphael identifies how the pillar 2 minimum tax may apply to a U.S. tax-exempt organization's subsidiary. Bruce Zagaris examines the recent regulatory developments that make Bermuda's international financial services industry so successful.

And finally, in featured analysis, Marie Sapirie examines the public comments on proposed regulations implementing the tech-neutral clean energy tax credits after Loper Bright.

David D. Stewart: That's it for this week. You can follow me online @TaxStew, that's S-T-E-W, and be sure to follow @TaxNotes for all things tax. If you have any comments, questions or suggestions for a future episode, you can email us at podcast@taxanalysts.org. And as always, if you like what we're doing here, please leave a rating or review wherever you download this podcast. We'll be back next week with another episode of Tax Notes Talk.

Tax Analysts Inc. does not provide tax advice or tax preparation services. The information you have seen and heard today represents the views of the presenters, which may not be the same as those of Tax Analysts Inc. It may include information obtained from third parties, and Tax Analysts Inc. makes no warranties or representations of any kind and is not responsible for any inaccuracies. Nothing in the podcast constitutes legal, accounting, or tax advice. The tax laws change frequently, and neither Tax Analysts Inc. nor the presenters can guarantee that any information seen or heard is accurate. Also, due to changing tax laws, any information broadcast or downloaded after its original air date may no longer represent the current views of the presenters. If you have any specific questions about any legal or tax matter, you should always consult with your attorney or tax professional.

All content in this broadcast is protected under U.S. and international laws. Copyright © 2024 Tax Analysts Inc. Unauthorized recording, downloading, copying, retransmitting, or distributing of any part of the podcast is strictly prohibited. All rights reserved.