Tax News Update    Email this document    Print this document  

House Democratic leaders are eyeing May for Committee-level consideration of legislation reflecting President Biden’s Jobs Plan – which is proposed to be paid for with corporate tax increases, including a 28% rate, a minimum tax based on book income, and international changes – and senators of both parties are testing the waters of bipartisanship to determine whether that approach or a Democrat-only budget reconciliation process is how the package can move forward.

Punchbowl news reported House T&I Chairman Peter DeFazio (D-OR) as suggesting his Committee could mark up its portion of the bill the fourth week in May and looking ahead to the fiscal year-end expiration of the highway authorization as a hard deadline. DeFazio said April 15, “[T]here is only one part of [the president’s proposal] that has a drop dead date and that’s surface transportation. And a drop dead date of October 1st. So, that’s my major focus.” Speaker Pelosi has targeted July 4^th or at least the start of the August recess for House passage. No word on timing from Ways & Means, which will consider the revenue portion.

An editorial in today’s Wall Street Journal (WSJ), “The Country-by-Country Tax Canard,” said, “The Biden plan would go country-by-country, meaning that for each jurisdiction in which a company does business it would have to compute its Gilti taxable profit, work out any local tax credits, and then figure the tax due. Progressives favor this approach because they think the aggregate method allows companies to use higher tax payments in high-tax jurisdictions to offset tax windfalls in low-tax jurisdictions. But it’s not that simple.” The WSJ said the CbC proposal would “introduce vast new complexity” and remove the “mitigation” of “a flaw in the 2017 version of Gilti …” that “doesn’t allow companies to carry losses forward or back.”

Infrastructure – Moderate Republican senators developing a more modest alternative to the President’s plan are calling for creativity in finding revenue provisions that can gain bipartisan support. The WSJ reported on a virtual meeting April 15 on a potential roads & bridges proposal in the $600 billion-$800 billion range. Top Senate EPW Republican Shelley Moore Capito (R-WV) said, “I think what you’re going to see … is a conceptual Republican bill that we think addresses the core issues that we’ve talked about, along with the way that we would say you could pay for it without raising taxes.” Senator Chris Coons (D-DE), a Biden ally, said of a potential two-part approach, “We would take, let’s say $800 billion, of it out, move that as a bipartisan bill, partly paid for with fees, and then several weeks later pass by reconciliation a Democrat-only bill that would do the rest of that agenda.”

Senator Capito said on PBS April 14, “I don’t want to see us go back to raising taxes to where we're going to stagnate, possibly, the progress that we have made. But the big question is, how do you pay for it? We know the gas tax is a declining resource. So, let’s look at things like vehicle miles traveled or ways that electric vehicles would pay their fair share for the use of the roads. And so I think we’re going to have to get creative here…” Likewise, Senator Susan Collins (R-ME) was cited by the WSJ as saying “we need to be creative,” and that coming up with pay-fors is easier with a smaller package.

Bloomberg April 15 reported on Democratic and Republican House members forming a bipartisan group – with 21 Democrats and nine Republicans as founding members – to push for a repeal of the $10,000 cap on state and local tax (SALT) deductions, quoting Ways & Means member Tom Suozzi (D-NY) as saying, “We are trying to build a diverse group of people.” Democratic members have repeatedly suggested they may not support any version of the Jobs Plan that omits repeal.

Fossil fuels taxes – On April 15, Senator Bernie Sanders (I-VT) and Rep. Ilhan Omar (D-MN) introduced the End Polluter Welfare Act to eliminate dozens of tax provisions for oil, gas, and coal in a plan they said could raise $150 billion over 10 years. It is the latest example of a bill introduced in Congress to reflect a tax proposal from the Administration, though this bill appears to go beyond what the White House envisions. President Biden’s Made in America Tax Plan calls for elimination of fossil fuel subsidies without listing provisions, but an April 7 Treasury report suggested that part of the plan would raise $35 billion/10 years. For reference, the Obama administration’s proposal to eliminate fossil fuel tax preferences in the FY2017 budget was projected to raise about $38 billion/10 years.

Brady retiring – Top House Ways & Means Republican Kevin Brady (R-TX) April 14 announced that his current 13^th term will be his last, acknowledging that a GOP rule keeping him from serving in the top spot on the Committee next year, possibly returning as chairman, influenced the decision. Rep. Brady’s chairman’s mark kicked off consideration of the TCJA in 2017 and he shepherded the package through a multi-day markup and bicameral negotiations. His 2015 PATH Act made several extenders provisions permanent, facilitating tax reform by keeping the cost of extensions from requiring revenue in the reform bill. Rep. Brady is widely described by the press corps as one of the nicest members in Congress and he has been a fixture on the Republican congressional baseball team.

The announcement touched off a race for the top Republican spot on the Committee, between Reps. Devin Nunes (R-CA), Vern Buchanan (R-FL), Adrian Smith (R-NE), and potentially others. Rep. Buchanan released a statement saying, “At the appropriate time, it would be an honor to be considered for the chairmanship of the Ways and Means Committee when we win back the House in 2022.”

Ways and Means holds a hearing, “In Their Own Words: Paid Leave, Child Care, and an Economy That Failed Women,” on Wednesday, April 21 (noon).

Treasury/IRS have invited recommendations for items to be included on the 2021-2022 Priority Guidance Plan.

Today, April 16 (12:00 p.m.), is the EY Webcast, “Tax in the time of COVID-19: Update on legislative, economic, regulatory and IRS developments.” Panelists will provide updates on: (i) The US economy and tax policy; (ii) Breaking developments; and (iii) What’s happening at the IRS. Register.

On Thursday, April 22 (4 p.m.), join EY tax and tax policy leaders for “Potential US international tax reform: A discussion of Biden’s Made in America Tax Plan, OECD BEPS 2.0 developments and other recent proposals.” Register.

———————————————