Navigating the Final Biden Treasury/IRS Guidance
Over the last week, the Treasury Department and Internal Revenue Service released numerous regulations and other guidance spanning multiple aspects of the tax universe. Below is a table listing the released regulations and guidance and where to find them in today’s issue of Taxation and Representation.
| Title | IRC Section(s) | Guidance Type | Date Filed | T&R Section |
| Clean Electricity Production Credit and Clean Electricity Investment Credit | 45Y, 48E | Final regulations | Jan. 7 | Energy-Tax Mainlines |
| Clean Electricity Low-Income Communities Bonus Credit | 48E(h) | Final regulations | Jan. 8 | |
| Credit for Qualified Commercial Clean Vehicles | 45W | Proposed regulations | Jan. 10 | |
| Clean Fuel Production Credit | 45Z | Notice of forthcoming proposed regulations (Notice 2025-10) and guidance on emissions rates (Notice 2025-11) | Jan. 10 | |
| Certain Disregarded Payments and Dual Consolidated Losses | 1503(d) | Final regulations | Jan. 10 | Tax Worldview |
| Classification of Digital Content Transactions and Cloud Transactions | 861 | Final regulations | Jan. 10 | |
| Source of Income from Cloud Transactions | 7805 | Proposed regulations | Jan. 10 | |
| Certain Partnership Related-Party Basis Adjustment Transactions as | 6011 | Final regulations | Jan. 10 | 1111 Constitution Ave |
| Micro-Captive Listed Transactions and Micro-Captive Transactions of Interest | 6011 | Final regulations | Jan. 10 | |
| Tax on Certain Gifts and Bequests from Covered Expatriates | 2801 | Final regulations | Jan. 10 | At a Glance |
| Base Erosion and Anti-Abuse Tax Rules for Qualified Derivative Payments on Securities Lending Transactions | 59A, 6038A | Proposed regulations (REG-107895-24) | Jan. 10 | |
| Definition of Employee for Purposes of Certain Employment Taxes | 530, 3509 | Revenue Ruling | Jan. 8 | |
| Catch-Up Contributions | 401(k), 403(b), 414(v) | Proposed regulations | Jan. 10 |
2025’s Tax Writers
2025’s Tax Writers
On Jan. 7, the House Democratic Caucus officially named the three members that would fill the vacancies of the House Ways and Means Committee minority, confirming that the positions would be occupied by three former members of the committee: Reps. Tom Suozzi (D-NY), Stacey Plaskett (D-VI) and Brendan Boyle (D-PA).
Rep. Tom Suozzi (D-NY)
Tom Suozzi has served as the representative for New York’s 3rd congressional district since February 2024. He also served as the district’s representative from 2017 to 2023, serving on the Ways and Means Committee from 2019 to 2023. Prior to serving in Congress, he was active in Nassau County politics, serving as mayor of Glen Cove from 1994 to 2001 and as Nassau County executive from 2002 to 2009.
Rep. Suozzi has long made the restoration of the state and local tax (SALT) deduction a top issue, both during his 2024 congressional campaign and his earlier tenure in Congress, writing in a press release after his reappointment to the Ways and Means Committee that he would “champion the priorities that matter most to hard-working families, particularly the urgent need to restore the SALT deduction.” He authored bills like the SALT Deductibility Act (H.R. 613), which would remove the $10,000 SALT cap from the Tax Cuts and Jobs Act (Pub. L. 115-97). Suozzi has also been active on energy-tax issues, leading a letter calling for retention of a $4,500 tax credit for union-built electric vehicles in the Build Back Better Act and introducing the Incentivizing Solar Deployment Act of 2021 (H.R. 5175), which would expand the Section 45 Production Tax Credit to solar energy producers.
Del. Stacey Plaskett (D-VI)
Stacey Plaskett has served as the delegate from the U.S. Virgin Islands’ at-large district since January 2015. She previously served on the Ways and Means Committee from 2021 to 2023, becoming the first member from a U.S. territory to serve on the committee. Prior to serving in Congress, Plaskett was a practicing attorney, including having a role as counsel for the assistant attorney general for the Department of Justice Civil Division.
Del. Plaskett’s main issue has been improving the economic recovery and tax parity for citizens of U.S. territories, including the Virgin Islands. In her press release after her reappointment to the Ways and Means Committee, Plaskett said that her previous service on the committee resulted in “secur[ing] federal reimbursements in the American Rescue Plan Act for the Child Tax Credit and Earned Income Tax Credit in the Virgin Islands, which amounts to $20 million annually for our territory.” She has also authored several bills that highlight her legislative priorities, including a bill establishing a cover-over subsidy (a type of annual payment from the federal government) for fuel produced in the Virgin Islands and transported to the United States.
Rep. Brendan Boyle (D-PA)
Brendan Boyle has served as a representative from Pennsylvania’s congressional delegation since 2015, first representing the 13th congressional district from 2015 to 2019 and now representing the 2nd congressional district. He is currently the ranking member of the House Budget Committee. Prior to serving in Congress, Boyle was a member of the Pennsylvania House of Representatives.
During his congressional tenure, Boyle has authored and sponsored bills on a wide variety of tax and budget issues, including Social Security and Medicare, debt ceiling reform, higher education endowment tax reform, energy manufacturing and the taxation of ultra-high-net-worth individuals. He has also been active on labor tax issues, including the Tax Fairness for Workers Act, which would restore an above-the-line tax deduction for union dues and reinstates the miscellaneous itemized tax deduction for unreimbursed expenses attributable to performance of employee services. In his press release announcing his return to the committee, Boyle said his priorities include “protecting Social Security, lowering healthcare costs, [and] building an economy that works for everyone, not just the wealthiest few.”
Legislative Lowdown
Reconciliation State of Play: Debate Continues on Bill Strategy and Payfors: Despite House Speaker Mike Johnson’s (R-LA) intention to reach a final decision by Jan. 9 on how congressional Republicans would proceed with the budget reconciliation process, the House and Senate Republican Conferences remain divided on whether to pursue one, two or even three reconciliation bills for border, immigration, energy and tax issues, all top priorities for President-elect Donald Trump and his incoming administration. While initially signaling a preference for one bill, Trump has more recently remained open on the final strategy, stressing that it doesn’t matter how many bills congressional leaders pass because “the end result is going to be the same.”
Discussion among Republicans also continues over the extent to which a tax bill needs to be paid for, with House Ways and Means Committee Chairman Jason Smith (R-MO) weighing in on Jan. 6 saying that tariffs do not need to be legislated as part of the budget reconciliation process, noting that they can be viewed broadly as an offset for a tax bill. If tariff policy is left to the president, it would allow for greater flexibility for the president to use them to address non-tax issues; however, Congress would not be able to take into account any revenue related to such tariffs if they are imposed outside of the legislative process.
11 Senate Democrats Urge Republican Colleagues to Pursue Bipartisanship in TCJA Negotiations: Led by Sens. Catherine Cortez Masto (D-NV) and Mark Warner (D-VA), 11 Senate Democrats wrote a letter to Senate Majority Leader John Thune (R-SD) and Senate Finance Committee Chairman Mike Crapo (R-ID) urging them and the Senate Republican Conference to work with Democrats in navigating the renewal of the expiring tax provisions in the Tax Cuts and Jobs Act (TCJA, Pub. L. 115-97). The lawmakers note the difficulties in passing a tax bill, given the budgetary consequences of passing a clean TCJA extension, and warn against passing “a fully deficit-financed, partisan” bill that “could risk raising costs for families, driving up interest rates for Americans looking to purchase a home, and increasing borrowing costs for American businesses and consumers.” The senators urge bipartisan tax reforms, given some aligned priorities between some Democrats and Republicans to “reduce deficit concerns … promot[e] pro-family tax policy, … [and] ensure the permanence of a competitive tax code for American businesses.”
Trump Meets with SALT Caucus Republicans: Last weekend, President-elect Donald Trump held meetings at Mar-a-Lago with several groups of Republicans, including House Republicans representing districts in the high-tax states of California, New York and New Jersey who are concerned about the cap on the state and local tax (SALT) deduction. Trump was reportedly receptive to the members’ requests for SALT reform, telling them to negotiate a “fair number” with other congressional Republicans. Negotiations are expected to be comprehensive, given the opposition to SALT reform by many Senate and House Republicans.
Ideas for SALT reform include raising the SALT deduction limitation from $10,000, eliminating the cap altogether, indexing it to inflation, or eliminating the so-called “marriage penalty” and allowing joint filers to claim a $20,000 deduction—a proposal advanced by SALT reform advocate Rep. Mike Lawler (R-NY) in the SALT Fairness and Marriage Penalty Elimination Act (H.R. 232), which he reintroduced on Jan. 8.
Energy-Tax Mainlines
Treasury Department, IRS Issue Final Regulations on Sections 45Y and 48E Technology-Neutral Tax Credits: On Jan. 7, the Treasury Department and Internal Revenue Service (IRS) issued final regulations for the Section 45Y Clean Electricity Production Credit and the Section 48E Clean Electricity Investment Credit, both of which were enacted as part of the Inflation Reduction Act (Pub. L. 117-169). The final regulations remain largely the same as last year’s proposed regulations, with only modest changes to the requirement that energy facilities placed in service after Dec. 31, 2024, must have zero greenhouse gas emissions in order to qualify for the credit. The regulation differentiates between two types of energy facilities: (1) combustion and gasification (C&G) facilities; and (2) non-combustion and gasification (non-C&G), which the regulations apply to many of the current technologies, including wind, solar, hydropower, geothermal and nuclear. These two categories have different methodologies for determining their emissions. While combustion and gasification facilities must account for anticipated net lifecycle greenhouse gas emissions, including the full scope of fuel and feedstock production as well as any indirect emissions, the regulations provide that non-C&G facilities are required to take into account only emissions resulting from the production of electricity.
The regulations will take effect when published in the Federal Register on Jan. 15. Under current law, the technology neutral credits will remain in effect until the latter of 2032 or until greenhouse gas emissions are 25% of 2022 levels.
Treasury Department, IRS Issue Proposed Regulations on Low-Income Communities Bonus Credit Program: On Jan. 8, the Treasury Department and Internal Revenue Service (IRS) issued final regulations concerning the Section 48E(h) Clean Electricity Low-Income Communities Bonus Credit Amount Program, established by the Inflation Reduction Act (Pub. L. 117-169). Section 48E(h) will replace the Section 48(e) Low-Income Communities bonus credit starting in 2025. The program is set to allocate 1.8 gigawatts of annual clean electricity capacity through 2032, with potential extensions depending on national greenhouse gas emission levels. The program aims to lower energy costs and promote clean energy investments in underserved areas. The final rules expand eligible technologies to include zero-emissions sources such as hydropower, geothermal and nuclear, alongside solar and wind. They also provide bonus credits of 10 or 20 percentage points on top of the 30% Clean Electricity Investment Credit for qualifying projects. Additional changes clarify eligibility for low-income residential housing projects, ensure financial benefits for low-income households, and prioritize emerging clean energy businesses in the application process.
Treasury Department, IRS Issue Final Regulations on Section 45W Commercial Vehicles Credit: On Jan. 10, the Treasury Department and Internal Revenue Service (IRS) issued proposed regulations on the Section 45W Qualified Commercial Clean Vehicles Credit, established by the Inflation Reduction Act (Pub. L. 117-169). Section 45W provides a tax credit for each qualified commercial clean vehicle placed in service during the taxable year. The credit amount is determined as the lesser of (1) 30% of the taxpayer’s basis in the clean vehicle (15% for vehicles powered by an internal combustion engine (ICE)) or (2) the incremental cost compared to a similar internal combustion engine (ICE) vehicle. The maximum credit allowed is $7,500 for vehicles with a gross vehicle weight rating (GVWR) of less than 14,000 pounds and $40,000 for vehicles exceeding this weight threshold.
The proposed regulations outline methods for determining the incremental cost. Taxpayers may rely on safe harbor amounts from existing IRS guidance or Department of Energy (DOE)-published values for vehicles placed in service during 2023 and 2024. Alternatively, they may use a manufacturer’s written determination of incremental cost or apply a formulaic approach comparing powertrain costs for clean and ICE vehicles, adjusted by a Retail Price Equivalent (RPE) multiplier. This powertrain-based calculation ensures the credit focuses on differences attributable to clean propulsion technology. The Treasury Department and the IRS, in collaboration with the DOE, plan to issue RPE safe harbors tailored to various vehicle market segments to further refine this methodology.
Eligibility criteria for vehicles are also clarified in the proposed regulations. Vehicles must be used exclusively for trade or business purposes, with only minimal personal use allowed, and partial credits are not available. Additionally, vehicles that have already qualified for a clean vehicle credit under Section 30D are ineligible for the Section 45W credit. Vehicles acquired for leasing purposes qualify if they are used as part of the taxpayer’s trade or business and are not intended for resale.
According to the Treasury Department release, the regulations aim to provide consistency in the application of the credit, aligning its scope with the clean energy objectives of Section 45W while addressing variability in vehicle costs and market segments. Public comments will be accepted through the Federal Register until March 15, and a public hearing has been scheduled for April 28.
Treasury Department, IRS Issue Notices Concerning Section 45Z Clean Fuel Production Credit: On Jan. 10, the Treasury Department and the Internal Revenue Service (IRS) issued Notice 2025-10 and Notice 2025-11, outlining forthcoming regulations for the Section 45Z Clean Fuel Production Credit, enacted as part of the Inflation Reduction Act (Pub. L. 117-169). Section 45Z incentivizes the production of clean transportation fuels that achieve at least a 50% lifecycle greenhouse gas (GHG) emissions reduction. The credit covers fuels such as ethanol, biodiesel, hydrogen and sustainable aviation fuel, among others. The notices provide details on eligibility, emissions calculations and compliance requirements for taxpayers seeking to claim this credit.
Notice 2025-10 announces the Treasury Department’s intent to propose regulations addressing the 45Z credit, effective for fuels produced domestically after Dec. 31, 2024, and sold by Dec. 31, 2027. (The notice includes the text of draft proposed regulations in an appendix.) To qualify for the credit, taxpayers must meet several conditions, including:
- Producing transportation fuels with a lifecycle GHG emissions rate of no more than 50 kilograms of CO2e per mmBTU;
- Ensuring fuels are produced at a qualified facility and sold to an unrelated party in a qualifying manner; and
- Registering as a clean fuel producer at the time of production.
The forthcoming regulations are expected to formalize the use of the updated 45ZCF-GREET model for calculating emissions rates, replacing prior methodologies. Special rules are also expected to address anti-stacking provisions, production attribution for facilities with multiple owners, and recordkeeping requirements. The notice emphasizes that a taxpayer does not need to own the facility where the fuel is produced to claim the credit.
Notice 2025-11 provides guidance on calculating emissions rates, a crucial factor in determining the 45Z credit amount. Taxpayers may use either (1) the 45ZCF-GREET model, which has not yet been released by the Department of Energy (DOE) but is expected to offer consistent and accurate emissions rate determinations for various fuels and production pathways; or (2) CORSIA methodologies (default or actual), specifically for sustainable aviation fuels (SAF).
Taxpayers must use the most recent version of these models available on the first day of the taxable year, with an option to adopt updated versions released later in the year. DOE is expected to release updated models before Jan. 17.
Tax Worldview
Treasury Department, IRS Issue Final Regulations on Certain Disregarded Payments and DCLs: On Jan. 10, the Treasury Department and Internal Revenue Service (IRS) issued final regulations concerning certain disregarded payments that give rise to deductions for foreign tax purposes and avoid the application of the dual consolidated loss (DCL) rules. The final regulations apply, with some changes, proposed regulations issued in August 2024 that concern disregarded payment loss (DPL) rules, including the anti-avoidance rule and deemed ordering rule that are also relevant for DCLs with regard to foreign uses of DCLs and DPLs. The final rules provide a de minimis exception to DCL and DPL rules, establish that DPL rules should not apply to minority interests, narrow the definition of a foreign use for DPL purposes, and provide transitional relief dependent on future developments from the Organisation for Economic Co-operation and Development (OECD) and other foreign jurisdictions.
Treasury Department, IRS Issue Regulations Concerning Digital Content Transactions, Cloud Transactions: On Jan. 10, the Internal Revenue Service (IRS) issued final regulations on the classification of digital content transactions as well as so-called “cloud transactions,” which are transactions involving on-demand network access to computing and other similar resources. The classifications provided in the regulations are intended to apply to the international provisions of the Internal Revenue Code. The final regulations provide that these transactions will be based on a predominant character rule, meaning that transactions with multiple elements are expected to be treated as one transaction rather than treated individually. The final regulations also make minor modifications to proposed regulations issued in August 2019.
In conjunction with the final regulations, the Treasury Department and the IRS also released proposed regulations for determining the source of income of cloud transactions for international tax purposes. The proposed regulations establish that gross income from a cloud transaction is sourced as service income dependent on where the service is performed, with the determination made through a formula that takes into consideration the intangible property factor, the personnel factor and the tangible property factor. The proposed regulations also provide that assets and personnel of the relevant taxpayer or entity should be considered, rather than assets of related persons. Comments and public hearing requests must be submitted through the Federal Register by April 14.
1111 Constitution Avenue
Treasury Department, IRS Issue Final Regulations on Basis Shifting Reporting Rules: On Jan. 10, the Treasury Department and Internal Revenue Service (IRS) issued final regulations on the disclosure of partnership related-party basis adjustment transactions, which could be considered transactions of interest (TOIs) subject to reporting requirements (and significant penalties for failure to report) if they meet certain criteria. The regulations narrowed the scope from proposed regulations issued in June 2024 by increasing the monetary threshold for a basis increase in a TOI from $5 million to $25 million (for tax years earlier than 2025) and $10 million (for tax year 2025 and after). The final rules also limit retroactive reporting for open tax years to a six-year lookback window and provide additional time to file necessary disclosure statements for open tax years. Finally, the final rules also exclude many owners from publicly traded partnerships from being subject to disclosure requirements and make other minor changes. The proposed regulations were subject to heavy pushback from stakeholders as being overly broad and unnecessarily burdensome for small and family-owned businesses, with many transactions by non-abusive businesses likely to be subject to the disclosure requirements. While the Treasury Department and the IRS suggest that efforts were made to address such criticism, the final rules may still be subject to judicial review or the Congressional Review Act in Congress.
Treasury Department, IRS Issue Final Regulations Concerning Micro-Captive Transactions: On Jan. 10, the Treasury Department and Internal Revenue Service (IRS) issued final regulations on identifying micro-captive transactions or substantially similar transactions as listed transactions or transactions of interest (TOIs), both of which are reportable transactions. The final regulations provide that material advisors and other certain participants must file disclosures with the IRS or else may be subject to significant penalties for failure to disclose. Taxpayers required to disclose must use the Form 8886, Reportable Transaction Disclosure Statement, and material advisors required to disclose must use the Form 8918, Material Advisor Disclosure Statement. The final regulations largely adopt proposed regulations issued April 2023, with some modifications.
New York Expands State Direct File System: On Jan. 3, Gov. Kathy Hochul (D-NY) announced that the state’s Direct File Tool will be expanding, allowing more New York residents the opportunity to file their state tax returns for free. Eligibility for the New York State Direct File and the Internal Revenue Service (IRS) Direct File programs are different. New York residents eligible for both programs who choose to use them will still need to reenter information on the New York State Direct File platform after completing their federal return with Direct File; the systems do not transmit federal and state returns concurrently.
At a Glance
Treasury Department, IRS Issue Final Regulations on Taxation of Gifts and Bequests from Expats: On Jan. 10, the Treasury Department and Internal Revenue Service (IRS) released final regulations regarding the application of Section 2801 of the Internal Revenue Code to U.S. citizens and certain trusts that receive gifts and bequests from U.S. expatriates. The final regulations largely adopt proposed regulations from September 2015 that determine the effective tax rate and taxable value of covered gifts and bequests from expatriates. The final regulations also address income tax effects, information reporting and recordkeeping requirements, and other miscellaneous issues.
Treasury Department, IRS Issue Proposed Regulations on BEAT Rules for QDPs on Securities Lending Transactions: On Jan. 10, the Treasury Department and Internal Revenue Service (IRS) released a notice of proposed rulemaking concerning the base erosion and anti-abuse tax (BEAT) imposed on certain large corporate taxpayers with respect to qualified derivative payments (QDPs) made to foreign-related parties. The proposed regulations address the treatment of QDPs made with respect to securities lending transactions and required reporting. Comments and public hearing requests must be submitted through the Federal Register by April 14.
IRS Issues Guidance on Defining Employees for Certain Employment Taxes: On Jan. 8, the Internal Revenue Service (IRS) issued Rev. Rul. 2025-3 and Rev. Proc. 2025-10, providing clarification on and modification to the definition of an employee for purposes of determining employer liability for certain employment taxes, including the Federal Insurance Contributions Act (FICA) taxes, Railroad Retirement Tax Act (RRTA) taxes, Federal Unemployment Tax Act (FUTA) taxes, and income tax withholding practices. The revenue ruling applies Section 530 of the Revenue Act of 1978 (“Section 530”) and Section 3509 of the Internal Revenue Code to determine whether employers must remit unpaid taxes at renewed rates if they fail to deduct and withhold employee income taxes in certain situations. The revenue procedure clarifies the definition of an employee under Section 530 for the purpose of filing requirements and reasonable basis safe harbor rules.
Treasury Department, IRS Issue Proposed Regulations on Catch-Up Contributions and Other SECURE 2.0 Provisions: On Jan. 10, the Treasury Department and Internal Revenue Service (IRS) issued proposed regulations covering the Roth IRA catch-up rule and other retirement provisions from the SECURE 2.0 Act. The IRS earlier announced an administrative transition period until 2026 to implement the Roth IRA catch-up contribution rule. The regulations outline requirements about which participants are required to designate any catch-up contributions made as Roth contributions. The regulations also provide guidance on increasing the catch-up contribution limit as designated by the SECURE 2.0 Act. A public hearing has been scheduled for April 7, and public comments on the proposed regulations are due to the Federal Register by March 14.
Crapo Outlines Priorities for Republican Majority in Finance Committee: In a press release announcing the new leadership of Senate Finance Committee, Chairman Mike Crapo (R-ID) outlined his priorities for the 119th Congress. With respect to tax matters, his priorities include building on the Tax Cuts and Jobs Act (TCJA, Pub. L. 115-97) and preventing crucial TCJA provisions from expiring; ensuring the Internal Revenue Service (IRS) continues its focus on taxpayer service; and enacting legislation to provide relief from double-taxation on cross-border investment between the United States and Taiwan. Other non-tax priorities include negotiating effective trade deals, ensuring access to affordable health care and protecting Social Security.
Brownstein Bookshelf
NTA Releases Annual Report to Congress: On Jan. 8, National Taxpayer Advocate (NTA) Erin Collins released the 2024 NTA Annual Report to Congress, in which she discusses the improvements the Internal Revenue Service (IRS) has made with regard to taxpayer service initiatives, while also highlighting challenges the agency has yet to overcome. Collins stated in the report that while “the taxpayer experience has noticeably improved,” there are still critical issues, including the processing of Employee Retention Tax Credit (ERTC) claims and the resolution of Identity Theft Victim Assistance (IDTVA) cases.
Hearings and Events
House Ways and Means Committee
On Jan. 14, the House Ways and Means Committee held two hearings: a committee organizational meeting for the 119th Congress and a hearing titled “The Need to Make Permanent the Trump Tax Cuts for Working Families.”
Senate Finance Committee
On Jan. 16, the Senate Finance Committee will hold a nomination hearing for Treasury Secretary nominee-designate Scott Bessent.