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May 19, 2021

What to expect in Washington (May 19)

The Senate Finance Committee announced a hearing on nominations including Lily Batchelder for Assistant Treasury Secretary for Tax Policy on Tuesday, May 25 (9:30 a.m.), which will likely include detailed discussion on various tax issues. Batchelder has written on inheritance taxes and approaches to increasing taxes on wealthy Americans, among other topics. The Biden FY2022 budget release follows on May 27, though traditional plans for the Treasury Secretary and other officials to testify before tax-writing and other committees isn’t clear because it is right before a holiday weekend and one-week congressional recess.

Secretary Yellen re-upped the Administration’s call for corporate tax hikes to pay for infrastructure during a U.S. Chamber of Commerce event May 18, saying, “We believe the corporate sector can contribute to this effort by bearing its fair share … At the same time, we want to eliminate incentives that reward corporations for moving their operations overseas and shifting profits to low-tax countries.” The Wall Street Journal (WSJ) said Yellen repeated her call for a global minimum corporate tax to “stop the race to the bottom.”

Republican senators led by Senate Environment & Public Works Ranking Member Shelley Moore Capito (R-WV) met with White House officials May 18 to provide an update on a previous $568 billion offer that precludes tax increases (the President was at an EV plant in Michigan). Punchbowl News reported Senator Capito as saying there’s a “ways to go” to get a deal, the White House will come back with a proposal of its own based on the Senate GOP’s draft, and there was more talk of projects than pay-fors “because we really need to find out what we’re gonna pay for it before we figure out how we pay for it.”

President Biden declared during the EV center visit, “I’m a car guy” – he has a 1967 Corvette in Goodwood Green – and pitched the job-creating potential of the green energy elements of his infrastructure plan (which are likely to be left out if a bipartisan deal is reached): “If we act to save the planet, we can create millions of good-paying jobs, generate significant economic growth and opportunity to raise the standard of living…“

During a May 18 Senate Finance Committee hearing on “Funding and Financing Options to Bolster American Infrastructure,” Democratic senators including Chairman Ron Wyden (D-OR) made the same argument as Sec. Yellen regarding corporate tax increases. Senator Debbie Stabenow (D-MI) said corporate users of roads must pay their fair share, and zero is not it. Republicans continued to say they wouldn’t entertain TCJA changes and pushed for a fee on EVs, arguing that drivers of the vehicles tend to be wealthier and benefit from a tax credit while not paying the gas tax. Senator Sherrod Brown (D-OH) suggested, as President Biden and Speaker Pelosi have, that the parties could come together on the tax gap as a pay-for. There was significant discussion of bond issues, and Wyden said he and Ranking Member Mike Crapo (R-ID) both support a revival of Build America Bonds, or governmental bonds eligible for certain tax advantages.

Senator John Cornyn (R-TX) discussed the possibility of a vehicle-miles-traveled (VMT) tax for trucks. A CBO witness said a fee on EVs, which are 1% of vehicles on the road, wouldn’t go a long way toward the amount of money lawmakers want to raise for infrastructure. Members of both parties asked about broadband, which Republicans seem amenable to including with a roads & bridges package given, as Senator Chuck Grassley (R-IA) noted, its increased societal importance during the pandemic. Senator Grassley, a former chairman who has overseen prior efforts to settle on pay-fors for transportation spending, expressed confidence in a bipartisan deal and the Biden-Capito negotiations.

Today, May 19 (10 a.m.), the House Ways & Means Committee holds a similar hearing on “Leveraging the Tax Code for Infrastructure Investment.”

The White House is signaling a willingness to test the waters of bipartisanship on infrastructure for a few more weeks, until around Memorial Day. Some Democrats want to pull the plug now, including Senator Kirsten Gillibrand (D-NY), who fears “we might lose our coalition for human infrastructure” and wants to move a bill by budget reconciliation, Politico reported.

On timing, a House Transportation & Infrastructure markup of surface transportation legislation has slipped until after Memorial Day as staff sort through more than 2,000 earmarks, which provide funds for projects in members’ districts and which Democrats are reviving this year. On other scheduling, House Majority Leader Steny Hoyer (D-MD) May 18 said the chamber will process their appropriations bills in July.

Tax – Politico May 16 reported that some in the business community are confident of heading off “almost all of these tax hikes by pressuring moderate Democrats in the House and Senate. And they think progressive Democrats don’t really care about the costs of new programs and will be happy to push through as much spending as they can and then run on tax hikes in 2022 rather than actually pass them this year.” A follow-up report cited unnamed sources in suggesting “moderates have communicated to leadership they want as few votes as possible at the end of the day and ideally just want to vote on a 25 percent [corporate] rate.”

A report in The Hill Newspaper on infrastructure financing challenges referenced revenue aspirations regarding the tax gap. “Experts warn though that the issue is too complex to rely on for funding the infrastructure package although it would theoretically raise revenues without raising taxes. ‘If you’re just throwing money at the IRS, that’s not going to be scored as raising revenue,’ said Ray Beeman, principal and co-leader of Washington Council Ernst & Young and former tax counsel for the House Ways and Means Committee. ‘The tax gap is a bit of a magic unicorn. They talk generically about closing the tax gap but when you get into what it is you have to do to actually close the tax gap, it gets really hard, really fast.’”

During the regular Tuesday post-lunch press briefing, Senate Majority Leader Chuck Schumer (D-NY) voiced continued support for relief from the TCJA $10,000 SALT deduction cap in an infrastructure bill (which also probably can’t happen in bipartisan bill). “I am strongly for the SALT repeal – [that] the cap be removed – and we’ll do everything I can to get it done...” he said. “It was a dagger into the heart of Blue States.”

The European Commission May 18 adopted a Communication on Business Taxation for the 21st century. 

The IRS announced (IR-2021-115) new guidance (Notice 2021-31) on a tax credit, added under the American Rescue Plan Act of 2021, that is available to employers, plan administrators and health insurers for providing COBRA continuation health coverage to certain individuals. Notice 2021-31 provides information on how the credit is calculated, who is eligible, what the premium assistance period is, and more to help employers, plan administrators and insurers understand the credit. 


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For additional information concerning this Alert, please contact:
Washington Council Ernst & Young
   • Ray Beeman (
   • Gary Gasper (
   • Heather Meade (
   • Kurt Ritterpusch (