March 17, 2021
What to expect in Washington (March 17)
The Senate Finance Committee announced a hearing on the impacts of US international tax policy on American jobs for Tuesday, March 23. Witnesses include Treasury Deputy Assistant Secretary (Tax Analysis) Kimberly Clausing, Ph.D., who was critical of the Tax Cuts and Jobs Act (TCJA) as an academic.
The Committee’s March 16 hearing, “Made in America: Effect of the U.S. Tax Code on Domestic Manufacturing,” mostly focused on the how the year-end TCJA cliffs on 174 R&D amortization and 163(j) interest deductibility will hurt manufacturers, and the role of manufacturing tax incentives like a proposal for a reconstituted 48C credit. Witnesses agreed the R&D and interest deductibility changes are problematic, various supply chain issues exposed by the pandemic were discussed, and Republican members warned against a corporate tax rate increase that Democrats may propose to pay for infrastructure.
The hearing also showed how eager members were to talk about the issues, with 20 members questioning witnesses over three hours. Chairman Ron Wyden (D-OR) said it will be critical to look at changes to the 2017 tax law, improving supply chains and creating jobs is a “premier issue” for bringing the parties together, and that he would work with Republicans on a package to make US companies more competitive. EY Tax Alert 2021-0570 has more details.
Treasury staff announcements yesterday included UPenn’s Natasha Sarin as Deputy Assistant Secretary for Microeconomics, Office of Economic Policy. She has co-written tax op-eds with former Treasury Secretary Larry Summers such as, in 2019, discussing alternatives to the wealth tax and 70% top individual rate being called for by some Democrats, including addressing 1031 exchanges, eliminating stepped-up basis, broadening the estate tax base, increasing the statutory corporate tax rate to 25%, and imposing “a per-country corporate minimum tax rather than a global minimum tax.”
A 2020 Washington Post op-ed called for the Schedule M-3, which reconciles the differences between income reported to shareholders and income taxed, to be released by the IRS or for the SEC to compel disclosure for greater transparency.
The Wall Street Journal reported this morning that Senate Budget Committee Chairman Bernie Sanders (I-VT) today will introduce a bill for “an additional tax on corporations where the CEO is paid more than 50 times the median worker.”
Congress – The House Ways & Means Committee will hold a “Members’ Day” hearing on March 23, and press reports suggested infrastructure will be the focus.
In an ABC interview, President Biden said he wanted to revert to the “talking filibuster” in the Senate and require opposing members to stay on the floor, rather than the current version that allows other business to be conducted while bills are being held up. Senator Joe Manchin (D-WV) recently suggested he is open to the idea. Other Democrats want filibuster repeal to move their agenda in the 50-50 Senate.
GOP Leader Mitch McConnell (R-KY) yesterday warned of a “100-car pile-up” in the Senate if Democrats move to repeal the filibuster. Also, asked during a March 16 news conference about Budget Committee Chairman Bernie Sanders’ (I-VT) intent to move an infrastructure bill via reconciliation, Senator McConnell said: “the Trojan horse will be called infrastructure, but inside the Trojan horse will be all the tax increases” being talked about. “They want to raise taxes across the board, and the only way I think they could pull that off would be through a reconciliation process. They have one more of those available to them, and my suspicion is they will try to jam everything they can enter into that bill and call it an infrastructure bill…” he said.
Health – The Washington Post reported that today Reps. Pramila Jayapal (D-WA), the chair of the Congressional Progressive Caucus, Debbie Dingell (D-MI) and 109 co-sponsors will hold a kickoff event for a Medicare-for-all bill. President Biden did not embrace the proposal during the campaign, and the story said, “Allies fear the single-payer health-care bill will distract from Biden’s other priorities, with many Democrats and independents saying they’d prefer to keep their private health plans and Republicans heavily opposed to the idea.”
Xaxier Becerra is likely to be confirmed as HHS secretary on Thursday, Senate Majority Leader Chuck Schumer (D-NY) said.
PPP – Schumer also said “the House will send us a bipartisan bill on PPP” and “I just hope our Senate Republican friends will agree to pass the PPP extension without delay so that small businesses that need our help won’t fall through the cracks.” The PPP Extension Act of 2021 (H.R. 1799), approved by the House 415-3, would extend the PPP application deadline from March 31 to May 31, and the SBA would have until June 30 to process applications.
Trade – USTR nominee Katherine Tai is likely to get a confirmation vote in the Senate today.
On Friday, March 19 (12:00 p.m.), is the EY Webcast, “Tax in the time of COVID-19: Update on legislative, economic, regulatory and IRS developments.” It’s been one year since we first launched this webcast series to discuss how businesses can navigate the tax policy environment in the time of COVID-19. Now that a year has passed, we will explore how everyone – from the IRS to tax departments to other countries – has been responding. Join our panelists for a conversation about how to continue effectively 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.