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January 17, 2021

Americas Tax Policy: This Week in Tax Policy News for January 15

This Week (January 18 - 22)

Congress: Both the House and Senate are scheduled to be out until January 19. Inauguration Day is January 20.

Yellen hearing: The Senate Finance Committee will hold a hearing on the nomination of Janet Yellen to be Treasury Secretary on January 19 at 10 a.m.

Last Week (January 11 - 15)

Biden economic plan: On January 14, President-elect Joe Biden announced a $1.9 trillion "American Rescue Plan," the first step in a two-step plan of rescue and recovery "to build a bridge to the other side of the crisis we face to a better, stronger, more secure America." The plan includes more than $400 billion to combat the pandemic through a national vaccination program, increased testing and tracing, and additional funding for schools to help them reopen safely, along with $350 billion in funding to state and local governments experiencing budget shortfalls. It also includes $1,400 direct payments, enhanced unemployment benefits, federally mandated paid leave, and various other supports for individuals, small businesses, and communities. Tax increases proposed during the campaign aren't expected in this bill. The January 15 Wall Street Journal (WSJ) said, "The president-elect won't offer spending-cut or tax-increase offsets for his plan and will instead rely on federal borrowing, according to a Biden official." Tax provisions are limited to childcare credit, EITC, and Child Tax Credit expansions long sought by Democrats, specifically:

  • increasing tax credits for childcare to as much as half of spending for children under age 13, or a total of up to $4,000 for one child or $8,000 for two or more children, refundable and available in full to families making less than $125,000 a year and partially up to $400,000 per year;
  • making the Child Tax Credit fully refundable for one year, increasing the credit to $3,000 per child ($3,600 for a child under age 6) and making 17-year-olds qualifying children for the year;
  • expanding the Earned Income Tax Credit for one year to raise the maximum amount for childless adults from roughly $530 to close to $1,500, raising the income limit from about $16,000 to about $21,000, and eliminating the age cap for older workers so that older workers can claim the credit.

Reaction: The plan has thus far generated enthusiasm from Democratic leaders but criticism from Republicans, including House Ways & Means Committee Ranking Member Kevin Brady (R-TX), who suggested the plan is out of touch with the country's economic needs; Senator Marco Rubio (R-FL), who said the enormity of the plan impedes prospects for another round of checks; and Senator Pat Toomey (R-PA), who is opposed to additional checks. "In particular, sending another $1,400 to children, the deceased, and tens of millions of workers who haven't missed a paycheck, like federal and state employees, is senseless and will likely slow down a recovery in employment. It was a bad idea two weeks ago and it's a bad idea now," said Toomey, a Finance Committee member who is not running for reelection in 2022. Senator Joe Manchin (D-WV), a key centrist given the narrow margin in the chamber, is similarly wary of additional payments unless they are narrow and targeted, and he favors employment-related assistance and job creation through infrastructure investment.

Process: Biden is expected to first try to move the package, or a piece of the package, he presented on January 14 in a bipartisan manner — which will require 60 Senate votes — but if Republican support doesn't materialize quickly, Democrats could turn to budget reconciliation. That process allows simple majority passage in the Senate, meaning the support of all 50 Senate Democrats plus the tiebreaking vote of VP-elect Kamala Harris, but it can take longer because Congress must agree to a budget resolution with reconciliation instructions. There are two opportunities to employ this process in calendar year 2021, because an FY2021 budget resolution has not been processed for the current fiscal year, and an FY2022 budget resolution will be available for the upcoming fiscal year. A January 13 WSJ story said if Democrats move a first bill through reconciliation, they have an incentive to pack party priorities into the package because of the limits on how many such bills they can pass. A New York Times story on incoming Senate Budget Committee Chairman Bernie Sanders (I-VT) said that because budget reconciliation will begin with instructions in a budget resolution, "The nature of the process effectively gives Mr. Sanders a leading role in deciding how expansive — and expensive — Mr. Biden's ambitions for new taxes and spending will be." While Sanders won't force Medicare for All or other progressive proposals, "he does intend to test the legal bounds of how reconciliation can be used so that Democrats can pass policies that go beyond traditional budget items and address 'structural problems in American society.'" In an energy-focused Politico interview published January 14, Senator Manchin, asked about the potential for aggressive use of budget reconciliation, said: "Let me be very clear with you: I'm the most bipartisan person. I haven't changed. I won't change. OK? I believe that anything I can do that helps heal my country and our country and your country and we start governing in a bipartisan way is the way to go forward. That's it. You can take that any way you want to. Any way you want to interpret it." A WCEY Alert on reconciliation is available here.

Second step: During his address, President-elect Biden said: "Next month, in my first appearance before a Joint Session of Congress, I will lay out the second step, my Build Back Better Recovery Plan. It will make historic investments in infrastructure and manufacturing, innovation, research and development, and clean energy. Investments in the caregiving economy and in skills and training needed by our workers to compete and win the global economy of the future." (Note, a president's first-year address is not referred to as a State of the Union address.) The second bill, beyond the coronavirus rescue bill outlined January 14, is more likely to include proposed tax increases and, because of broader partisan divides on tax and the policy issues intended to be addressed therein, more likely to require the budget reconciliation process. The New York Times said January 14 of plans for future action, "Biden plans to unveil another, larger set of spending proposals in February, and he began laying the groundwork to finance those efforts by raising taxes on corporations and the rich" in highlighting during the speech how the wealthy have gotten wealthier during the pandemic. "The second package is expected to be centered on job creation and infrastructure, including hundreds of billions of dollars of spending on clean-energy projects like electric vehicle charging stations, along with health care and education spending," the report said.

Finance Committee priorities: In a January 12 media call, incoming Senate Finance Committee Chairman Ron Wyden (D-OR) detailed his economic and tax priorities for the Committee and said he wants to "roll back the corporate tax giveaways in the 2017 bill," end incentives to ship jobs overseas, reward companies that invest in the United States, and address what he said are the "many problems" with the structure for taxing multinational corporations created in the 2017 Tax Cuts & Jobs Act (TCJA). Senator Wyden said he is working on a framework for corporate taxes and he will be sharing that "fairly shortly." Set to return to the chairmanship he held when Democrats lost the Senate in 2014, Wyden said he wants to work, as well, in a bipartisan way on infrastructure, reiterating that the issue should have been the first priority for President Trump. He continued to advocate for the Clean Energy for America Act that would consolidate the current 44 energy incentives into three technology-neutral provisions to encourage clean electricity and transportation, and energy efficiency. Based on accounts of the call, on both corporate and individual taxes, Senator Wyden said the goal is for corporations and wealthy individuals to pay their "fair share" — a long-time Democratic principle — and roll back "giveaways" from the TCJA. Wyden — who for years has called for parity in the taxation of investment income earned by wealthy Americans and employment income — said he will continue to work on his mark-to-market proposal, under which capital gains income would be taxed at the same rates as wage income and applicable taxpayers would be taxed annually on unrealized gains. Revenue raised from the proposal, Wyden said, would go to shoring up the finances of the Social Security program. Wyden called for capital gains tax reform and said he is on the "same wavelength" as President-elect Biden, who has called for ending the lower capital gains tax rate for households with annual income above $1 million. Senator Wyden additionally said he wants to roll back "giveaways to millionaires and billionaires" and close the carried interest "loophole."

At the leadership level, in a January 12 letter to members on priorities for this Congress, incoming Senate Majority Leader Chuck Schumer (D-NY) said the chamber would consider legislation to confront the climate crisis through "clean infrastructure and manufacturing," work on fixing and improving health care and child care systems, and "fight to restore workers' rights and fairness in our tax code."

Ways & Means report: A January 11 Ways & Means report on "Inequities in U.S. Policy and Society" discusses the EITC and Work Opportunity Tax Credit and calls for full availability of the Child Tax Credit.

Personnel: The WSJ January 12 reported, "Mr. Biden's transition team said career officials would be put in place at most cabinet departments and in some subcabinet agencies following his inauguration next week. The move will enable Mr. Biden to prevent any of President Trump's political appointees from staying at the helm of cabinet agencies past Jan. 20 … "

On January 14, President-elect Biden named Nadiya Beckwith-Stanley, a Policy Advisor on the Biden-Harris Transition and former Associate in the Tax group of Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates in Washington, DC, as Special Assistant to the President for Budget and Tax Policy.

The House Republican Steering Committee selected Reps. Carol Miller (R-WV), Kevin Hern (R-OK) and Lloyd Smucker (R-PA) for the Ways and Means Committee, to fill 2 seats due to retirements and another attributable to the tightened party ratio in the House. They need approval by the Republican Conference.

Global tax: The OECD held a two-day public consultation meeting on the BEPS 2.0 Reports January 14-15. During the first session, Pascal Saint-Amans, director of the OECD's Centre for Tax Policy and Administration, said "we are, in a sense, in waiting mode to get signals from the US" given the presidential transition, and that hopefully the new Treasury Department will participate in the G20 finance ministers' meeting at the end of February or at a later meeting.

The BEPS 2.0 project aims to stave off unilateral digital services taxes (DSTs), viewed as unfairly targeting US tech companies and opposed by US lawmakers from both parties. On January 14, the United States Trade Representative issued findings in Section 301 investigations of DSTs adopted by Austria, Spain, and the United Kingdom, concluding that each of the DSTs discriminates against U.S. companies, is inconsistent with prevailing principles of international taxation, and burden or restricts U.S. commerce.

Fines & penalties: On January 12, the IRS released final regulations (TD 9946) on the limitations on deducting fines, penalties, and other amounts paid to governmental entities (and other identified entities) under IRC Section 162(f) and the related reporting requirements under IRC Section 6050X. The final regulations revise Treas. Reg. Section 1.162-21 and add Treas. Reg. Section 1.6050X, in light of the changes made by the TCJA to the rules governing the deductibility of fines and penalties (which expanded the types of payments that are denied a deduction under IRC Section 162(f), carved out certain exceptions, and established certain reporting requirements on the part of government and nongovernmental entities).

Filing season: IRS announced that the nation's tax season will start on Friday, February 12, 2021, when the tax agency will begin accepting and processing 2020 tax year returns. The February 12 start date for individual tax return filers allows the IRS time to do additional programming and testing of IRS systems following the December 27 tax law changes that provided a second round of Economic Impact Payments and other benefits.

Below is a timeline for guidance projects released by the IRS related to the TCJA.


Federal Register Publication

Comment period end

Section 965 transition tax (TD 9846)

Final rules, February 5, 2019


Section 199A pass-through deduction (TD 9847)

Final rules, February 8, 2019


Section 956 inclusions for corporate US shareholders (TD 9859)

Final rules, May 23, 2019


Contributions in exchange for state or local tax credits (TD 9864)

Final rules, June 13, 2019


Section 951A (Global Intangible Low-Taxed Income - GILTI) and Related to Foreign Tax Credits (TD 9866)

Final rules, June 21, 2019


Bonus depreciation (TD 9874)

Final rules, September 24, 2019


Removal of Section 385 Documentation Regulations (TD 9880)

Final rules, November 4, 2019


Ownership Attribution for Purposes of Determining Whether a Person Is Related to a Controlled Foreign Corporation under section 954(d)(3) (TD 9883)

Final rules, November 19, 2019


Section 59A Base Erosion and Anti-Abuse Tax (TD 9885)

Final rules, December 6, 2019


Foreign Tax Credit (TD 9882)

Final rules, December 17, 2019


Investing in Qualified Opportunity Funds (TD 9889)

Final rules, January 13, 2020


Rules Regarding Certain Hybrid Arrangements (TD 9896)

Final rules, April 8, 2020


Treatment of Certain Interests in Corporations as Stock or Indebtedness (TD 9897)

Final rules, May 14, 2020


Guidance Under Section 6033 on Reporting Requirements of Exempt Organizations (TD 9898)

Final rules, May 28, 2020


Deduction for Foreign-Derived Intangible Income (FDII) and GILTI (TD 9901)

Final rules, July 15, 2020


Guidance Under Sections 951A and 954 Regarding Income Subject to a High Rate of Foreign Tax (TD 9902)

Final rules, July 23, 2020


Limitation on Deduction for Business Interest Expense (TD 9905)

Final rules, September 14, 2020


Limitation on DRD from Certain Foreign Corporations, Amounts Eligible for Section 954 Look-Through Exception (TD 9909)

Final rules, August 27, 2020


Additional Rules Regarding Base Erosion and Anti-Abuse Tax (TD 9910)

Final rules, October 9, 2020


Gain or Loss of Foreign Persons from Sale or Exchange of Certain Partnership Interests (TD 9919)

Final rules, November 6


Additional First Year Depreciation Deduction (TD 9916)

Final rules, November 5, 2020


Ownership Attribution Under Section 958 (TD 9908)

Final rules, September 22, 2020


Determining the foreign tax credit, etc. (TD 9922)

Final rules, November 12, 2020


Meals and Entertainment Expenses (TD 9925)

Final rules, October 9, 2020


Consolidated Net Operating Losses (TD 9927)

Final rules, October 23, 2020


Coordination of Extraordinary Disposition and Disqualified Basis Rules (TD 9934)

Final rules, December 1, 2020


Like-kind exchanges (TD 9935)

Final rules, December 2, 2020


Passive Foreign Investment Companies (TD 9936)

Final rules, January 15, 2020


Certain Employee Remuneration in Excess of $1,000,000 under Internal Revenue Code Section 162(m) (TD 9932)

Final rules, December 30, 2020


Section 451, timing of income inclusion under an accrual method of accounting (TD 9941)

Final rules, January 6, 2021


Business interest expense limitation under IRC Section 163(j) (TD 9943)

Final rules, January 19, 2021


Carried interest under Section 1061 (TD 9945)

Final rules, January 19, 2021


Section 45Q credit for carbon oxide sequestration (TD 9944)

Final rules, January 19, 2021


Guidance on Passive Foreign Investment Companies (REG-105474-18)

Proposed rules, July 11, 2019

September 9, 2019

Guidance on Hybrid Arrangements, Allocation of Deductions Attributable to Disqualified Payments, Section 951A (Global Intangible Low-Taxed Income) (REG-106013-19)

Proposed rules, April 8, 2020

June 8, 2020

Denial of Deduction for Certain Fines, Penalties, and Other Amounts (REG-104591-18)

Proposed rules, May 13, 2020

July 13, 2020

Guidance Under Section 954(b)(4) Regarding Income Subject to a High Rate of Foreign Tax (REG-127732-19)

Proposed rules, July 23, 2020

September 21, 2020

Guidance related to the Foreign Tax Credit (REG-101657-20)

Proposed rules, November 12, 2020

February 10, 2021

Passive Foreign Investment Companies and the Treatment of Qualified Improvement Property under the Alternative Depreciation System for Purposes of Sections 250(b) and 951A(d) (REG-111950-20)

Proposed rules, January 15, 2021

April 14, 2021


Contact Information
For additional information concerning this Alert, please contact:
Ernst & Young's Center for Tax Policy
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   • James Mackie (
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