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Senate consideration of the budget reconciliation bill (H.R. 1319) reflecting President Biden’s $1.9 trillion “American Rescue Plan” COVID relief package resumed this morning after Senator Ron Johnson (R-WI) compelled the reading aloud of the 628-page substitute amendment, which lasted beyond 2 a.m. A long series of roll call votes is slated to begin around noon. When consideration will end is unclear and may depend on whether Senator Johnson continues to use procedural privileges to express his opposition to the bill. “No matter how long it takes, the Senate is going to stay in session to finish the bill this week,” Senate Majority Leader Chuck Schumer (D-NY) said.

The substitute amendment includes changes from the House bill, including:

• an expansion of IRC Section 162(m) limits on the deduction companies can take for compensation, to deny the deduction for compensation in excess of $1 million for the eight highest paid employees, plus the CEO or CFO, at publicly traded companies;
• expanding the employee retention tax credit (ERTC) to “recovery startup businesses” (average annual gross receipts under $1 million); and
• increasing to 100% the proposed subsidies of insurance premiums for workers eligible for COBRA after they lost their jobs or had their hours reduced, through September 30 (subsidies were 85% under the House-passed bill).

The Joint Committee on Taxation revenue estimate of the Senate amendment shows the 162(m) expansion, which is proposed to replace another offset for pension relief in the House bill, would raise $7.8 billion over 10 years. The bill continues to include tax provisions like extension of the ERTC through December 31 and repeal of the Section 864(f) worldwide interest expense allocation election. Following expected Senate passage, a conference process to resolve House-Senate differences may be necessary or, at the least, a House vote on the Senate bill will be required, and leaders are trying to meet a March 14 deadline.

Build Back Better – There is a great deal of interplay between the current major bill in Congress and the next. Completion of the COVID bill is necessary before President Biden details the next bill – Build Back Better was initially outlined in July 2020, during the campaign – and it’s unclear whether it is infrastructure-only or broader, and to what extent it includes tax increases. After the President proposes his budget, the congressional FY2022 budget resolution is expected to provide for a second round of budget reconciliation, but there are concerns the process won’t work for infrastructure because of reconciliation rules.

Bloomberg reported House T&I Chairman Peter DeFazio (D-OR) saying there “is no possible way” an infrastructure bill can go through the budget reconciliation process after transportation projects in the districts of Speaker Nancy Pelosi (D-CA) and Rep. Elise Stefanik (R-NY) were dropped from the COVID package due to reconciliation rule violations. DeFazio suggested a suspension of the Senate filibuster or some other change to the current system because “if we stick with it, we’re not going to get anything done.”

There have already been calls by House progressives to ignore the Parliamentarian’s ruling on the minimum wage and while two high-profile moderate senators, Kyrsten Sinema (D-AZ) and Joe Manchin (D-WV), have vowed opposition to filibuster repeal, calls for that change continue. Senator Tina Smith (D-MN) tweeted: “The Senate needs to abolish the filibuster. It’s undemocratic. I’ve spent a long time thinking about this and I hope you read my thoughts."

The Washington Post reported this morning: “Pressure is building on President Biden, a longtime backer of traditional Washington rules, to do away with the filibuster and other procedures, as Democrats press him to seize what could be a fleeting moment of power to enact a progressive agenda … Democrats increasingly worry that popular pieces of Biden’s agenda will hit a wall in the Senate, including his plans for climate change, immigration, gun control, voting rights and LGBT protections. Failing to enact them, they fear, could be a political disaster for Democrats as well as a substantive one.”

Another issue eyed for the next package is immigration. Axios reported, “some Senate Democrats are hoping to tie key immigration provisions to the next big reconciliation push.” If House proposals on pathways to citizenship and green cards for farmworkers can’t get requisite Republican support in the Senate, “some Democrats hope to tack them on to whatever infrastructure and economic recovery package evolves this spring.”

The New York Times reported this morning that the COVID bill’s COBRA subsidies “do not preclude future legislation that could make public plans more available. Some congressional aides say they are already laying groundwork for the inclusion of a public option plan in a legislative package expected later this year.”

Tax – Pascal Saint-Amans, Director of the OECD Centre for Tax Policy and Administration, said during a webcast yesterday that there is consensus for countries to try to reach a global tax agreement by mid-2021, following recent signals by Treasury Secretary Janet Yellen regarding the project. Secretary Yellen told her G20 counterparts February 26 that the US was dropping the Trump Administration’s insistence that Pillar One of the OECD BEPS 2.0 project, addressing allocating MNE profits into market jurisdictions, be structured as a safe harbor. Her predecessor Steven Mnuchin insisted on such a plan in December 2019.

Today, March 5 (12:00 p.m. ET), is the EY Webcast Tax in the time of COVID-19: Update on legislative, economic, regulatory and IRS developments. The coronavirus (COVID-19) and the resulting economic crisis have made reacting to tax 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 crisis and change. Panelists will provide updates on: (i) US economy and tax policy; (ii) Breaking developments; and (iii) What’s happening at the IRS. Register. 

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