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February 14, 2021

Americas Tax Policy: This Week in Tax Policy News for February 12

This week (February 15 - 19)

Congress:  The House is in the second of two "Committee Work Weeks" (i.e., no floor votes) and is expected to complete committee consideration of reconciliation bill elements before assembly by the Budget Committee.

Ways & Means hearing: On Thursday, February 18 (at 2:00 p.m.), the House Ways & Means Oversight Subcommittee holds a hearing on Free Tax Preparation Services During the Pandemic.

Last week (February 8 - 12)

Ways & Means COVID bill: After a two-day markup, the House Ways & Means Committee February 11 approved along party lines a COVID relief package — with direct payments, CTC/EITC/Child Care tax credit expansions, COBRA subsidies and ACA tax credit enhancements, and pension relief — that is half of the budget reconciliation bill reflecting President Biden's American Rescue Plan. Other committees have been marking up portions of the plan under their jurisdictions. The Ways & Means bill would extend the employee retention tax credit, as added by the CARES Act and expanded and extended in year-end 2020 legislation, through December 31, 2021 and modify the credit such that, beginning after June 30, 2021, it would be structured as a refundable payroll tax credit against the hospital insurance tax. The costliest elements of the Ways & Means portion, at a combined more than $531 billion over 10 years, are: a $1,400 refundable tax credit for each family member will be paid out in advance payments, similar to Economic Impact Payments in the CARES Act and year-end 2020 legislation; and a refundable and advanceable Child Tax Credit expansion to $3,000 per child ($3,600 under 6) that will take the form of IRS monthly payments, based on 2019/2020 tax return information. New Internal Revenue Service funding is provided for administration of the provisions. During the markup, no Republican amendments were approved, including Rep. Tom Rice's (R-SC) proposals for a Healthy Workplace Tax Credit and tax incentives for domestic pharmaceutical and medical supply production. Other tax issues were discussed but not the subject of amendments. Rep. Adrian Smith (R-NE) noted the provision to repeal section 864(f), creating an elective worldwide interest expense allocation regime, had nothing to do with COVID. The repeal of the worldwide interest allocation rules — enacted in 2004 and subsequently delayed before taking effect on January 1 of this year — would raise $22 billion over 10 years. Rep. Lloyd Doggett (D-TX) said he wanted to roll back the CARES Act excess business loss and NOL carryback provisions but would nonetheless support the bill. There were some tensions with the bill moving solely with Democratic support, but also some comity, with one Republican (Rep. Kelly) lauding Chairman Richard Neal's (D-MA) willingness to work with members, and Neal noting the challenges of a semi-virtual markup but also the sincerity and high-mindedness of deliberations.

What's next: House Speaker Nancy Pelosi (D-CA) said February 11, "We hope to finish our markups in committee this week, and then send it to the Budget Committee next week for them to work their will on it, then to the Rules Committee, and then to the floor, and we hope to have this all done by the end of February, certainly, on the president's desk in time to offset the March 14th deadline, where some unemployment benefits will expire." The Budget Committee assembles the bill. Following the House vote, the package could go straight to the Senate floor (bypassing committees, including Finance) for expediency's sake. If the Senate includes amendments, the two chambers must work out differences in order to produce a final bill. In the Senate, a focus will be on parliamentarian rulings on whether provisions stay within the boundaries set by the reconciliation process, including the minimum wage increase. Speaker Pelosi said the wage increase will be in the budget reconciliation bill sent over by the House, and Senate Majority Leader Chuck Schumer (D-NY) said he was working to keep it in. It will be difficult given opposition from Democrats Kyrsten Sinema (D-AZ) and Joe Manchin (D-WV). "The minimum wage provision is not appropriate for the reconciliation process. It is not a budget item. And it shouldn't be in there," Sinema said in a February 12 Politico story. Manchin has said he wants something closer to $11/hour. Other issues include some Democrats, including Manchin, wanting direct payments to target those in need; the House bill's income thresholds track with previous rounds of payments. "I just want to make sure we are targeted," Senator Tom Carper (D-DE) said in a CNN story that also quoted Senator Brian Schatz (D-HI) as saying of the House bill, "We will probably agree with 90% of it and then make some changes." Also, the House bill extends pandemic unemployment programs through August 29, but Biden proposed an extension through September and Senate Finance Committee Chairman Ron Wyden (D-OR) said he will push for that change.

Next after that: President Biden is expected to detail his "Build Back Better" plan in an address to Congress sometime over the next several weeks (not called State of the Union in a President's first year, by the way), but the White House has suggested the address on his broader agenda may wait until the current COVID package is enacted. White House press secretary Jen Psaki has said, of the COVID relief/stimulus bill: "There's urgency, as you've heard the President say and all of us say, in moving this package forward. … he also has plans to announce a Build Back Better agenda. And our plans would be to do that once we are at a point where it's — that can be the next priority … we don't have a date yet. It depends on when that date is and what the focus will be. And not working on it quite yet."

Infrastructure: Treasury Secretary Janet Yellen has suggested a corporate tax rate increase to 28% could be proposed in what is expected to be the infrastructure-plus "Build Back Better" package, but the intention to pay for the bill has since become less certain. "In recent days, Biden administration officials and a top congressional Democrat have opened the door to an infrastructure bill that is not offset by tax increases and instead adds more to the budget deficit, which they hope could bring more Republican support … ," the New York Times reported February 12. Ways & Means Committee Chairman Neal said in the report that "there could be" tax increases attached to an infrastructure bill this spring. "Mr. Biden proposed tax increases to pay for those plans during the campaign, but in recent days, some of his economic aides have hinted privately that some or all of the infrastructure package could be deficit financed," the story said. President Biden and Vice President Harris February 11 met with Senate EPW Chairman Carper and Ranking Member Shelley Moore Capito (R-WV), as well as senior members Ben Cardin (D-MD) and James Inhofe (R-OK). (Note, Carper and Cardin are also Finance Committee members.) Carper tweeted, "I'm putting together a bipartisan bill that reduces greenhouse gas emissions, creates jobs to strengthen our economy, and moves us to a cleaner, safer future. There is no time to waste." Last year, Republicans criticized a House Democratic infrastructure bill for including a green energy title.

Neal at TCPI: During a recorded address that aired during the TCPI conference February 12, Chairman Neal said to pay for the President's agenda there needs to be some borrowing, as well as a tax system that fairly raises revenue and "allocates the responsibility of paying for the common good." He said he agrees with Sec. Yellen that the near-term focus must be on recovery, not raising taxes. Neal said TCJA provision expiration "fiscal cliffs" may call for reconsidering some of the decisions of the 2017 tax reform law. On international tax, Neal said the Democratic caucus "isn't especially unified regarding US taxation of multinationals" — some view it as a source of potential revenue, some want to reexamine TCJA provisions, and he anticipates exploring options for investment incentives while monitoring negotiations at the OECD. He said it is clear after meeting with President Biden February 5 that, as soon as the current round of relief is put in place, Democrats plan to proceed with the infrastructure initiative that he wants to include a revival of the Build America Bonds (BABs) program. In an interview portion, Chairman Neal said he believes bipartisan support is possible on the issue and noted that infrastructure "used to be the easiest thing to do" in Congress. (It's been widely observed to have gotten harder with disagreements over funding sources and introduction of tangential issues like climate change.) Neal also said transitioning away from fossil fuels is going to require tax incentives. On the topic of a corporate rate increase, he said harmonization of rates with the OECD makes some sense and, while nothing has been decided, the economic downturn "ought to cause us to be careful." Chairman Neal made clear that he objects to retroactive taxation and noted the importance of putting the pandemic and recession behind us.

Budget timing: In addition to President Biden's address to Congress, the timing is also unclear for an FY2022 budget rollout. First-year presidents' budgets can be in "skinny" form, then detailed later, in the spring, and the expectation is that the Biden administration will bring back Treasury "green books" that detail tax proposals. Press Secretary Psaki said February 10 that "there were some challenges that came about during the transition in terms of a bit of intransigence from the outgoing administration and lack of cooperation, as it related to OMB on the budget process. So, we expect there to be a delay … in the release of his first budget. I don't have an exact timeline of when that will be though." For historical reference, President Trump submitted a "skinny budget" for FY2018 on March 16, 2017, followed by a detailed proposal on May 23, 2017; President Obama outlined the FY2010 budget on February 26, with a detailed proposal and "green book" released on May 7, 2009.

Reaching out: The New York Times reported on President Biden conducting outreach with the business community on the rescue plan February 9, including with the U.S. Chamber of Commerce and CEOs of specific companies. "Over the course of about 90 minutes, the group discussed the minimum wage, expanding the use of earned-income tax credits, and other ways to help stimulate the economy … " the report said. Press Secretary Psaki said, "I would expect that this is the first of many engagements the president will have directly with leaders from the business community … it's more of a discussion about the country and the economic downturn that we've gone through. The president wants to lay out all of the specifics of his plan, hear feedback from them, as he has with many different groups over the past couple of weeks." The President was meeting with governors and mayors February 12 regarding the American Rescue Plan, which includes $350 billion in state and local funding under Oversight Committee's portion of the reconciliation bill.

Staff announcement: Finance Committee Ranking Member Mike Crapo (R-ID) issued an announcement on Committee staff for tax and other issues.

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


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