Capitol Hill Recap: Disaster Tax Relief Bill to Hit House Floor

A successfully executed procedural maneuver means that House lawmakers will vote on disaster tax relief. 

What Went Down:

• The House will vote on disaster tax relief legislation.
• Speculation rules when talking about TCJA’s fate.
• Tax-exempt legislation gets the thumbs up from tax-writers.
• Senators act like House Members and introduce a tax bill.

Let’s Get To It:

Tax Bill Heads to House Floor

Legislation that will provide tax relief to victims of certain natural disasters will get a floor vote because of a procedural maneuver.

The maneuver? A Discharge Petition.

In short, a Discharge Petition is where a congress person sends a petition to fellow lawmakers and asks them to sign it. These petitions call for a House floor vote on a certain piece of legislation. If 218 House lawmakers sign the petition, the bill gets a floor vote.

The petition calling for a House floor vote on the “Federal Disaster Tax Relief Act of 2023” got 218 votes, which means it will be the subject of a vote on the chamber’s floor.

The legislation provides an exclusion from gross income for amounts received as qualified wildfire relief payments. It also broadens the scope of the term “qualified wildfire relief payment” and includes East Palestine train derailment payments as disaster relief. These changes would apply to major disasters beginning any time after the date of enactment of the 2020 Disaster Act.

Legislative outlook: The bill should get a floor vote in the House. Passage is likely. Once it travels to the Senate, it could pass there as well. In other words, this bill could become law if President Biden signs it.

The “Federal Disaster Tax Relief Act of 2023” was also included in the tax bill that passed the House in January. That piece of legislation also included R&D expensing and expanded the Child Tax Credit, to name a few of its provisions. The tax bill is currently stuck in the Senate, and the odds that the upper chamber will vote on it shrinks with each passing day.

Another bad omen for the tax bill is that the “Federal Disaster Tax Relief Act of 2023” has been stripped from it and will now get a House vote as a stand-alone bill. Stripping measures from stalled legislation is not a good sign that the stalled legislation will eventually receive a floor vote.

TCJA Talk

The Tax Council held its Annual Tax Policy & Practice Symposium this week where D.C. tax professionals gathered to learn about what the future holds for taxes.

Spoiler alert: Nothing was said at the Symposium that hadn’t already been uttered. Also, congressional tax staffers who normally speak at this event were not on the agenda.

For attendees, the big question was what Congress will do in 2025 about extending the expiring tax breaks in the Tax Cuts and Jobs Act (TCJA). The presenters didn’t have a clue on how to answer that question, so conjecture ruled the event.

Here is what was said about the future of the TCJA:

• It was stated by a presenter that House Ways and Means Chairman Jason Smith (R-Mo) – who wasn’t present at the event –expects the House to pass a TCJA extension bill in the first quarter of 2024.
  • The audience roared in laughter upon hearing this. The point: No one thinks the debate over TCJA extensions will be short.
• The 2024 elections will have a huge impact on how the debate goes on extending TCJA provisions.
  • If Democrats win the House, it is expected that TCJA extensions will only be for taxpayers earning less than $400,000 a year.
  • If Republican win the house, it is expected that TCJA extensions will be for all taxpayers.
    • The House will play in pivotal role in TCJA extensions because that is where tax legislation begins. The Senate can only amend a tax bill. It can’t create and pass one.
  • If the House and Senate are divided politically, then the debate over the TCJA extensions could slip into 2026, even 2027.
    • The reality that workers’ withholding taxes will increase in January of 2026 and that quarterly tax payments will skyrocket in April of 2026 is unlikely to push Congress into quickly addressing TCJA extensions.
    • The year 2026 is also an election year meaning the TCJA extension debate could stretch across two election cycles.

Legislative outlook: Lawmakers on the tax-writing committee are already working on how they would like to extend the expiring TCJA provisions. Hearings on the subject are expected to begin later this month.

Senate Finance Chairman Ron Wyden (D-Ore.), who spoke at the Tax Council Symposium, said that the tax bill that is currently stalled in the Senate is bad sign for how the tax debate will go next year.

“It’s pretty hard to build confidence in 2025 if we can't…get a smaller bill through Congress this year,” he said.

The current bill that is stalled in the Senate is expected to cost $78 billion. A TCJA extension bill could cost upward of $3.5 trillion.

Tax Committee markup

The House Ways and Means Committee this week held a markup on several bills affecting tax-exempt organizations. A “markup” is when Committee members debate, possibly amend, and vote on legislation. The bills’ chief aim is to ensure that donations from foreign entities don’t influence U.S. elections.

The votes on these pieces of legislation were as follows:

• The Foreign Grant Reporting Act (H.R. 8290), which would require tax-exempt organizations to disclose grants made to certain to foreign entities, passed the Committee by a 38-0 vote.
  • Amendment proposed to the bill:
    • Legislation that would clarify – exactly – which tax-exempt organizations would have to comply with the bill. It failed to be added to the underlying legislation by a 15-22 vote.
  • The End Zuckerbucks Act (H.R. 8291), which would forbid certain tax-exempt organizations from funding election organizations, passed the Committee by a 23-17 vote.
    • Amendment proposed to the bill:
      • Legislation that would require election officials to offer water to voters waiting in line to cast their ballots. The amendment failed to be added to the underlying legislation by a 17-24 vote.
    • The American Donor Privacy and Foreign Funding Transparency Act (H.R. 8293), which would require public reporting (generally Form 990) of foreign sources who contribute to tax-exempt organizations, passed the Committee by a 23-16 vote.
      • No amendments were offered to the legislation.
    • The No Foreign Election Interference Act (H.R. 8314), which outlaws tax-exempts from making contributions to political committees for 8 years after it received a donation from a foreign national, passed the Committee by a 39-1 vote.
      • No amendments were offered to the legislation.
    • The Taxpayer Data Protection Act (H.R. 8292), which would increase penalties for illegal disclosure of taxpayer information, passed the Committee by a 40-1 vote.
      • No amendments were offered to the legislation.

Legislative outlook: Normally when a committee marks up legislation, and then approves it, the next stop for the bill is a vote on the House floor. It is unclear if these bills will experience this fate. The most likely of these bills to get floor action would be the ones that were unanimously (or near-unanimously) approved by the Committee. The rest might be considered “messaging bills” that will not become law.

Bills approved by the House will travel to the Senate where it is unclear if they will receive a floor vote in that chamber. It is unclear how important these pieces of legislation are to Senate leaders, and unimportant bills rarely see floor action.

Introduced Legislation

Senators Todd Young (R-Ind.) and James Lankford (R-Okla.) this week introduced legislation modifying penalties for people who leak tax information of donors who contributed to nonprofit organizations.

The only reason this bill is included in the Recap is because its introduction captured a few headlines this week. But here’s the thing: Tax bills must begin in the House. This legislation began in the Senate.

Under the Constitution, tax bills must begin in the House. This bill seeks to “amend the Internal Revenue Code [IRC] of 1986 to modify the penalties relating to the disclosure of tax return information relating to contributors to certain tax-exempt organizations, and for other purposes.”

To amend the IRC, the legislation’s number needs to start with an H.R. (House of Representatives).  This bill starts with an S. (Senate).

Legislative outlook: For this bill to become law, the House would have to basically re-introduce it as an H.R. bill, and then receive approval from both chambers. Until that happens, the bill will likely remain on the shelf.

Pardon if this recap missed a monumental moment, but we can recap it next time!

Adios amigos!