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February 18, 2021

What to expect in Washington (February 18)

The White House is focused on the $1.9 trillion COVID relief package and circumspect about the agenda to follow, which President Biden has said would focus on infrastructure. Asked about the order of things, Press Secretary Jen Psaki said February 17 the President is doing what he can to move the COVID bill "through Congress, to communicate with the American public … I would not expect him to lay out next pieces of his agenda until that package is through and signed and that relief is going out to the public. Infrastructure is certainly an issue he's had a long passion for. He does believe it creates good paying union jobs. He thinks they can be done as clean energy jobs. But we're going to focus on our efforts at this point in time on the American Rescue Plan." Biden met with labor leaders yesterday on current and future legislation.

Build Back Better plan — Psaki had previously said the broader agenda wouldn't be detailed until the COVID bill is done. The careful treading may reflect intraparty controversy over the next bill, which will be Democrats' second bite at the apple for using the reconciliation process (to pass the Senate with a filibuster-avoiding simple majority) and an opportunity to pack in party priorities using the political momentum of the Administration's first year. The Washington Post February 17 reported "advocates for issues from climate change to immigration push to get included;" a "cacophony of competing demands is already threatening to divide Democrats;" and "senior Democratic officials have discussed proposing as much as $3 trillion."

"Democrats are unified in principle on the need to address the nation's crumbling infrastructure and combat climate change, as well as other key goals of Biden's agenda. But they will face steep divisions on how to enact those policies, torn between climate hawks and moderates over how aggressively to reduce production of natural gas and whether to enact a tax on gas or carbon … " the Post reported. "Unlike with the pandemic relief efforts, Democrats are expected to try to pay for parts of the infrastructure package — possibly as much as half of it — through new tax increases on wealthy individuals and corporations. Those tax hikes could prove controversial, particularly if the U.S. economy remains in a rut, fueling intense opposition from Republican lawmakers and the business lobby, and potentially some moderate Democrats as well." (Other reports have said the bill could be largely deficit-financed, and that a March rollout is likely.)

American Rescue Plan — The COVID relief bill is being prepped for a House vote next week or weekend, after which it will probably be brought straight to the Senate floor with a focus on issues like whether the minimum wage increase to $15/hour can stay in. President Biden on CNN Tuesday night signaled a willingness to negotiate a phase in of the increase to, at first, $12 or $13 an hour.

The Wall Street Journal (WSJ) reported: "Senate Democratic staff have started holding preliminary meetings with the parliamentarian … to review the text of the House bill. They have offered some early materials on raising the minimum wage to the parliamentarian, who hasn't yet indicated whether it will be acceptable under reconciliation … More formal meetings and arguments on whether to include the minimum wage as part of the bill are expected next week."

Outreach on the Rescue Plan continues as VP Harris today hosts Democrats including Senate HELP Committee Chairman Patty Murray (D-WA) and "female advocacy organization leaders at 11:15 a.m. to talk [COVID] relief and women in the economy," Politico reported.

Hearings — Some high-profile nomination hearings are set:

  • Adewale O. Adeyemo to be Treasury Deputy Secretary, Senate Finance Committee, Tuesday, February 23 (10 a.m.)
  • Xavier Becerra to be Health and Human Services Secretary, Senate HELP Committee, Tuesday, February 23 (10 a.m.)
  • Becerra at the Finance Committee, February 24 (2:30 p.m.)

Today's hearings include:

  • House Ways & Means Oversight, "Free Tax Preparation Services During the Pandemic," at 2:00 p.m.
  • House Financial Services, "Game Stopped? Who Wins and Loses When Short Sellers, Social Media, and Retail Investors Collide," at noon.

Bills of interest:

  • On February 16, Ways & Means member Bill Pascrell (D-NJ) introduced H.R. 1068 to tax carried interest compensation at ordinary income rates and treat it as wage income subject to employment taxes, but retain the lower capital gains rate for private equity partners who invest their own money in their funds.
  • On February 2, Senators Jack Reed (D-RI) and Richard Blumenthal (D-CT) reintroduced the Stop Subsidizing Multimillion Dollar Corporate Bonuses Act (S. 178) to apply section 162(m) to all employees of publicly traded corporations so that all compensation is subject to a deductibility cap of $1 million. (The TCJA tightened 162(m) by eliminating a performance-based compensation exception and limiting ongoing deductibility of compensation, but the senators argued "more should have been done.")

On Friday, February 19, is the EY Webcast, Tax in the time of COVID-19: update on legislative, economic, regulatory and IRS developments (at 12:00 p.m. ET). The coronavirus (COVID-19) and the resulting economic crisis have made reacting to tax and trade developments more complicated and more difficult. To determine what information your company needs to know now, join our panelists for a series of conversations about operating the tax function in this time of National Emergency created by the COVID-19 virus. Panelists will provide updates on: (i) Elections, US economy and tax policy; (ii) What's happening at the IRS; and (iii) Breaking developments. Register.


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