February 7, 2021
Americas Tax Policy: This Week in Tax Policy News for February 5
This week (February 8-12)
Congress: The House and Senate will be in session. The Senate is conducting an impeachment trial.
Ways & Means markup: The House Ways & Means Committee is planning a multiday markup of COVID relief/stimulus legislation February 10-12. Punchbowl News reported, "The panel will work during normal business hours, 10 a.m. to 6 p.m., so Republicans cannot accuse Democrats of trying to rush something through in the dark of night."
OMB: on Wednesday, February 10 (at 10:00 a.m.), the Senate Budget Committee will hold a hearing on the nomination of Neera Tanden to be Director of the Office of Management and Budget.
Last week (February 1-5)
Budget unlocks reconciliation: A COVID relief/stimulus bill is set to move through Congress over the next month or so, possibly with only the support of Democrats. The Senate early February 5 approved the FY2021 budget resolution (S. Con. Res. 5) after an overnight session, unlocking the budget reconciliation process for President Biden's $1.9 trillion COVID relief/stimulus plan and allowing it to potentially, like the resolution itself, pass the Senate with 50 votes plus the tie-breaking vote of Vice President Kamala Harris. The House passed the Senate version and plans to begin writing the reconciliation legislation, including during a multiday mark-up at the Ways & Means Committee February 10-12. "With this budget resolution, we have taken a giant step to save lives and livelihoods," House Speaker Nancy Pelosi (D-CA) said February 5 prior to a meeting at the White House with President Biden. "Next week, we will be writing the legislation to create a path to final passage for the Biden American Rescue Plan, so that we can finish our work before the end of February." The Speaker told reporters she wants the House to send a measure to the Senate within two weeks. Democrats hope to have the COVID relief/stimulus legislation enacted before the mid-March expiration of pandemic unemployment programs. Key provisions under the Biden plan are $400 billion to combat the pandemic, $350 billion in state and local funding, $1,400 direct payments, and a $400/week UI add-on and extension of pandemic unemployment programs through September. The President said the $1,400 amount is non-negotiable, but income thresholds for qualification are. Tax provisions are limited to childcare credit, Earned Income Tax Credit (EITC), and Child Tax Credit expansions. Ways & Means Committee Chairman Richard Neal (D-MA) released a statement after the meeting saying in part, "From shoring up pension plans that have been jeopardized due to the pandemic to expanding tax credits to combat child poverty to sending more direct assistance to those who need it most, we are hard at work on the relief Americans deserve." About half of the proposed package falls under the jurisdiction of the tax-writing committees — the reconciliation instructions call for deficit increase proposals of $941 billion for Ways & Means, and $1.3 trillion for the Senate Finance Committee.
Senate amendments: Passage of the budget resolution followed the traditional "vote-a-rama" series of consecutive roll call votes on amendments offered after debate time expired, and in this case lasted about 15 hours. None of the amendments are binding, though they express the views of senators. Senator John Thune's (R-SD) modified "mobile workforce" amendment on the authority of States and jurisdictions to tax certain income of employees for employment duties performed in other States or jurisdictions was adopted by voice vote. Some of the amendments were TCJA-focused. Senator Chuck Grassley's (R-IA) amendment to block any increase in or elimination of the $10,000 limitation on the state and local tax (SALT) deduction if it is projected to result in a windfall for high-income individuals failed, as did Senate Finance Committee Ranking Member Mike Crapo's (R-ID) amendment calling for permanency of TCJA provisions for individuals and small businesses.
NOL concerns: Some House and Senate Democrats including Rep. Lloyd Doggett (D-TX) and Senators Sheldon Whitehouse (D-RI) and Sherrod Brown (D-OH) reprised their call to roll back CARES Act NOL provisions: repealing Section 2304 of the CARES Act, which removed a limit that prevented owners of pass-through businesses from using active business losses to offset nonbusiness income in excess of $500,000, such as capital gains income; and limiting the ability to carryback losses to businesses experiencing losses during the pandemic by allowing only losses from 2020 and 2019 to be carried back. Politico reported, "Business advocacy groups are quickly mobilizing to ensure their member companies keep tax refunds Congress made them eligible for less than a year ago. A few dozen organizations are circulating a draft letter of opposition they'll send soon to congressional leaders, in an attempt to pressure them against unraveling the tax benefit in the next Covid aid package."
Organizing resolution: The Senate February 3 approved an organizing resolution for the 117th Congress modeled after the agreement reached in 2001, the last time there was a 50-50 split. The development allowed Democrats to formally take control of committees, which are split with equal numbers of Democrats and Republicans. The agreement provides a procedure for bringing measures subject to a tie in committee to the Senate floor, and Senate Majority Leader Chuck Schumer (D-NY) said he intends to avoid relying on the "filling the amendment tree" practice that essentially shuts the other party out of offering and receiving votes on amendments. The Finance Committee will have 14 members on each side, including new members Senators Elizabeth Warren (D-MA) and John Barrasso (R-WY).
Corporate tax: President Biden is expected to detail his Build Back Better plan in an address to Congress this month, and Treasury Secretary Janet Yellen has suggested a corporate tax rate increase to 28% could be part of the infrastructure-plus plan. The President alluded to the plan prior to the February 5 meeting with House committee leaders, telling members, "Thank you for last night, yesterday, and what you're going to be doing on this Recovery Act. And I can hardly wait to sit down with Peter DeFazio to work on infrastructure. This is the next big piece." This plan could also move under reconciliation using another budget resolution, for FY2022. (As an aside, Bloomberg Government reported this week that "Democrats plan to use a House rule that treats a vote to adopt a budget resolution as a vote to suspend the debt ceiling for the entirety of the fiscal year.")
Regarding a corporate tax increase, Senate Finance Committee Chairman Ron Wyden (D-OR) said during a February 4 Bloomberg Tax event, "Our new president has framed this as something in the 20s and let's see what my colleagues on the Finance Committee are going to think of that." Asked what aspects of the tax code are most ripe for change, Chairman Wyden said, "Right up at the top of the list are the tax breaks for doing business overseas. There's an offshoring incentive, the whole GILTI regime … still makes it more attractive to business overseas than in the United States. Those international provisions really need to be overhauled." He previously said he is working on a framework for corporate taxes.
Individual tax: Regarding the top individual tax rate, Chairman Wyden said a number of his Finance colleagues will be focused on "bumping that up." A CNBC article on what to expect with Democrats in control and Senator Warren on the Committee noted her advocacy for a wealth tax and Chairman Wyden's proposal for mark-to-market taxation of capital gains. It said: "At first, the committee will focus on the messaging needed to facilitate tax reform — including an emphasis on how the rich got richer during the Covid-19 crisis. 'You've got to be able to lay that foundation,' Wyden said. 'You've got to be able to describe how people who are very, very wealthy billionaires … how is it that they can make these huge sums' during the pandemic, he added." Senator Warren tweeted: "My first order of business on the @SenateFinance Committee — the committee that leads tax and revenue policy in the Senate — will be to introduce legislation for a #WealthTax on fortunes above $50 million. It is time to make the ultra-rich pay their fair share."
Treasury: The Treasury Department February 3 announced the appointment of new members of key staff, including some from academia who have written and testified on corporate and international tax issues.
GREEN Act: House Ways and Means Select Revenue Measures Subcommittee Mike Thompson (D-CA) and the entire Democratic membership of the Committee February 4 reintroduced the Growing Renewable Energy and Efficiency Now (GREEN) Act, which was first introduced in June 2020 and subsequently approved by the House as part of a broader infrastructure measure. According to a summary, the bill:
Below is a timeline for guidance projects released by the IRS related to the TCJA.