Clean Energy Credits, AI Deepfakes, and the $460 Billion Bill
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Tax Policy/News:
March 6: New regs for manufacturing investment, clean energy credits
The Treasury and the Internal Revenue Service (IRS) have unveiled final regulations and guidance concerning the elective payment options for the advanced manufacturing investment credit, as well as for a facet of elective payment elections linked to specific clean energy credits.
Established under the CHIPS Act of 2022, this credit encourages semiconductor and semiconductor manufacturing equipment production in the U.S. Taxpayers meeting eligibility criteria can opt for an elective payment election, either as a refundable payment against taxes or as a direct payment for partnerships and S corporations.
The regulations outline procedures for the mandatory pre-filing registration process essential before choosing the elective payment route.
Additionally, regulations address applicable entities opting for elective payment elections for certain clean energy credits, which, starting from tax year 2023, can offset federal income tax liabilities.
Applicable entities include tax-exempt organizations, state and local governments, among others.
Proposed regulations also address certain unincorporated organizations' elections to be excluded from partnership tax rules, offering exceptions and allowing them to make elective payment elections.
Notice 2024-27 solicits further input on situations involving elective payment elections for clean energy credits obtained through transfers, known as chaining.
Economic News/Policy:
March 10: How soon will the Fed cut interest rates? Inflation report this week could help set timing
The February consumer price index (CPI) is anticipated to reflect another monthly increase in prices, sustaining elevated annual inflation levels and keeping the Federal Reserve cautious about near-term interest rate cuts.
Conversely, retail sales are expected to rebound after a sluggish January, presenting a more optimistic economic outlook. However, Americans' perceptions of the economy and inflation are likely to remain steady or slightly diminish in March due to rising gasoline prices and stock market volatility.
While inflation has receded from pandemic-induced highs to around 3%, progress toward the Fed's 2% target has been slow. Core CPI measures have shown persistent increases, especially in service costs, despite modest fluctuations in goods prices.
Forecasts suggest that consumer prices overall are anticipated to rise by 0.4% in February, primarily driven by costly gasoline, maintaining annual inflation at 3.1%.
Core prices are also expected to increase, largely attributed to rising service costs offsetting moderate declines in used car prices.
Although inflation is gradually moderating, Americans continue to perceive it as a significant economic concern, potentially influencing the Fed's interest rate decisions later in the year.
Retail sales, a crucial component of economic activity, are expected to rebound, contributing to overall economic resilience despite inflationary pressures.
Consumer sentiment, reflecting perceptions of the economy and personal finances, has improved but may experience a slight decline in March due to factors such as higher gas prices and uncertainty regarding rate cut timelines.
March 8: Senate sends $460B bill to avert shutdown to Biden’s desk just hours before deadline
On Friday, senators passed a $460 billion bill to fund various government agencies for the remainder of fiscal year 2024, sending it to President Biden for his expected signature.
This move averted a shutdown just hours before the deadline, following months of Congressional struggle to approve full-year spending bills. The legislation includes funding for departments like Veterans Affairs, Agriculture, and Transportation.
Despite bipartisan efforts and tough negotiations, this bill is only the first of two batches of spending bills Congress aims to pass this month, with the remaining six bills, covering areas such as Defense and Homeland Security, posing potential challenges for bipartisan agreement.
The passage was preceded by last-minute drama over amendments, ultimately resolved through an agreement that led to the bill's approval.
Both parties have claimed victories in the bill, with Democrats highlighting funding increases in key areas like housing and nutrition assistance, while Republicans emphasize cuts to nondefense funds and additional resources to combat fentanyl.
However, not all Democrats are satisfied with the bill, with some expressing concerns over concessions on GOP-backed provisions related to veterans' gun rights, leading to a portion of the party voting against the package.
Despite the challenges, this marks the first full-year funding bills sent out of the divided Congress since Republicans regained control of the House in late 2022.
Technology:
March 10: AI deepfakes are part of the 2024 election. Will the federal government regulate them?
Days before New Hampshire's primary, deceptive political tactics emerged, including a robocall resembling President Joe Biden and manipulated media circulated by the Trump campaign.
Despite concerns about the impact of AI-generated content on elections, the Federal Election Commission (FEC) has yet to regulate deepfakes, with action anticipated "later this year."
Advocacy groups like Public Citizen urge FEC clarification on AI-generated content violating existing regulations.
While some states have passed laws requiring disclosure of deepfakes in political ads, bipartisan federal efforts seek standardized disclaimers.
However, challenges persist in enforcing regulations effectively, raising ongoing concerns about safeguarding electoral integrity.
March 6: OpenAI fires back at Elon Musk in legal fight over breach of contract claims
OpenAI has responded to Elon Musk's lawsuit, asserting that the Tesla CEO previously supported the company's move to establish a for-profit unit.
The response includes historical email exchanges purportedly showing Musk suggesting a merger between OpenAI and Tesla, labeling Tesla as OpenAI's potential "cash cow."
Musk allegedly endorsed the idea of raising billions of dollars for OpenAI's endeavors, emphasizing the need for significant capital investment. OpenAI contends that Musk's lawsuit, accusing the company of deviating from its altruistic mission, stems from his dissatisfaction with not having majority equity, initial board control, and the CEO position at OpenAI.
Despite initial alignment on the creation of a for-profit entity, disagreements arose over control, leading to the breakdown of negotiations between Musk and OpenAI. Musk's lawsuit accuses OpenAI of becoming a Microsoft-controlled subsidiary, highlighting a shift from its original mission.
OpenAI plans to seek dismissal of Musk's breach of contract claim. Meanwhile, Microsoft filed a motion to dismiss a lawsuit from The New York Times alleging copyright infringement, arguing against the portrayal of AI's impact as doomsday scenarios akin to past industry fears. Musk and Tesla have yet to comment on the matter.
Energy and Environmental Policy/News:
March 6: 10 states file legal challenge to SEC climate disclosure rule
West Virginia Attorney General Patrick Morrisey spearheaded a coalition of 10 states in challenging new regulations mandating public companies to disclose climate-related risks and direct greenhouse gas emissions.
The Securities and Exchange Commission (SEC) passed the climate disclosure rule in a 3-2 vote, set to be effective in 2026, following extensive scrutiny and criticism from the business sector.
Morrisey, along with Georgia, led the legal petition filed in the U.S. Court of Appeals for the 11th circuit, joined by several other states. Criticism of the rule revolves around concerns of governmental overreach, potential infringements on First Amendment rights, and adverse impacts on businesses and investors.
Despite SEC Chair Gary Gensler's portrayal of the rule as beneficial for investors and issuers, opponents argue it could deter companies from going public, increase compliance costs, and jeopardize American business competitiveness.
The rule also faces challenges from Senate Banking Committee members and environmental groups over its alleged inadequacy in requiring emissions disclosures from supply chains and product use.
The SEC's stance under Gensler has drawn significant opposition from various quarters, including threats of litigation from multiple entities, highlighting the contentious nature of the regulatory landscape.
ICYMI:
March 11: Biden budget would cut taxes for millions and restore breaks for families. Here's what to know.
President Joe Biden's proposed 2025 budget aims to deliver tax relief to millions of families, low-income workers, and senior citizens by reviving programs such as the expanded Child Tax Credit (CTC) that proved effective during the pandemic.
The budget seeks to finance these tax breaks by increasing taxes on corporations and the wealthy, including proposals to reverse some of the tax cuts implemented by former President Donald Trump.
Under Biden's plan, deficits would be reduced by $3 trillion over a decade, with new taxes projected to generate $4.9 trillion in revenue.
While presidential budgets serve as political statements and face hurdles in Congress, they outline the administration's priorities, and Biden would likely continue to advocate for these tax changes if reelected.
The proposed policies include reinstating the expanded CTC, expanding the Earned Income Tax Credit (EITC) to include more low-wage workers and older Americans, and introducing new programs such as affordable childcare and voluntary preschool for 4-year-olds.
These initiatives would be funded through higher taxes on high-income individuals and corporations, with proposed measures including raising the corporate tax rate to 28%, implementing a minimum tax for billionaires, and increasing the highest individual income tax rate to 39.6%.
For Fun:
March 8: Bumblebees Can Learn Complex Tasks through Social Interaction, New Study Says
In a groundbreaking study published in Nature on March 6, 2024, Dr. Alice Bridges and Professor Lars Chittka from Queen Mary University of London, alongside colleagues, revealed a significant discovery regarding buff-tailed bumblebees (Bombus terrestris), demonstrating their ability to socially learn and solve complex tasks beyond their individual capacities.
The study involved a two-step puzzle box that bees could only open by performing two actions in sequence to access a sweet reward. While individual bees struggled to solve the puzzle on their own, those that observed a trained conspecific could learn the entire sequence, even without a reward for the initial step.
This challenges previous assumptions about the exclusive nature of complex social learning and cumulative culture in humans, suggesting that even insects possess the potential for cultural transmission and innovation.
This finding not only sheds light on animal intelligence and social learning but also opens new avenues for exploring the evolution of cumulative culture across the animal kingdom.