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February 21, 2021

Americas Tax Policy: This Week in Tax Policy News for February 19

This week (February 22-26)

Congress: The Senate will be back in session. The House will continue taking steps to prep the COVID relief bill for a vote late in the week or over the weekend. The House Budget markup is February 22 (1:00 p.m.).

Senate Budget wage hearing: On Thursday, February 25 (10:15 a.m.), the Senate Budget Committee holds a hearing, "Should Taxpayers Subsidize Poverty Wages at Large Profitable Corporations?"

Nomination hearings:

  • 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, Wednesday, February 24 (2:30 p.m.)
  • Katherine Tai to be USTR, Senate Finance Committee, Thursday, February 25 (10:00 a.m.)

Hearings calendar available here.

Infrastructure: On Wednesday, February 24 (10:00 a.m.), the Senate Committee on Environment and Public Works holds a hearing, "Building Back Better: Investing in Transportation while Addressing Climate Change, Improving Equity, and Fostering Economic Growth and Innovation."

Last week (February 15-19)

Outlook for tax increases: The $1.9 trillion COVID relief reconciliation bill is being prepped for a House vote the week of February 22 with Senate consideration to follow as Democrats aim for enactment by the March 14 expiration of pandemic unemployment insurance programs. "We will meet this deadline," Majority Leader Chuck Schumer (D-NY) said in a February 19 letter to members. There is a tie-in to the broader agenda and prospects for tax increases because the White House is continuing to say the "Build Back Better" infrastructure-plus plan won't be detailed — the expectation is this would occur in President Biden's first address to Congress — until the "American Rescue Plan" COVID bill is enacted. 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." The contents of the next major bill from the Administration and the extent to which it would be paid for with tax increases isn't clear.

Treasury Secretary Janet Yellen, who in January suggested the infrastructure-plus Build Back Better plan may include a corporate tax rate increase to 28%, was asked about tax increases during a February 18 CNBC interview and said: "It would be a package that would probably be proposed later this year. And would involve spending and investments over a number of years in, you know, in infrastructure and education and training, things that would last for quite a few years. And probably tax increases to pay for at least part of it that would probably phase in slowly over time."

The Washington Post February 17 reported that "advocates for issues from climate change to immigration push to get included" in the package; a "cacophony of competing demands is already threatening to divide Democrats;" and 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.)

Groundwork for tax increases: Budget Committee Chairman Bernie Sanders (I-VT) is planning a series of hearings at the Budget Committee beginning with the February 25 "Should Taxpayers Subsidize Poverty Wages at Large Profitable Corporations?" The Washington Post reported, "On March 17, Sanders is planning a hearing on income and wealth inequality, followed by a March 24 hearing on 'making corporations and the wealthy pay their fair share of taxes' and an April 14 hearing on the costs of climate change," and said Sanders will use hearings to lay the groundwork for including tax increases in future bills. The story said Sanders expects the next major Democratic bill, on infrastructure, "to address 'structural problems' facing the country, including addressing student debt, remaking the federal tax regime and 'transforming our energy system,'" but noted bill parameters must be negotiated with other Democrats.

COVID relief: The next step for the $1.9 trillion COVID bill is assembly of the 12 committee-passed elements by the House Budget Committee on February 22, then on to the Rules Committee before a full House vote late in the week or over the 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, but was reported as earlier telling governors he doesn't think a wage hike can be done in the current bill because of reconciliation rules. Senator Kyrsten Sinema (D-AZ) has voiced opposition, saying the provision is not a budget item and not appropriate for reconciliation, and Senator Joe Manchin (D-WV) wants something closer to $11/hour. The Wall Street Journal (WSJ) reported, "Senate rules require that measures passed under it must have budgetary effects that aren't merely incidental to the policy aims. It isn't clear that raising the minimum wage will be considered permissible." In a February 15 letter to Chairman Sanders, who's making a case for the provision, the CBO said the wage hike encompasses a broader range of behavioral effects and affects a broader range of budget functions than provisions to nullify the ACA individual mandate and allow ANWR drilling included in the TCJA, which passed under reconciliation. The WSJ reported February 17, "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."

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.")

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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