May 26, 2021
What to expect in Washington (May 26)
Infrastructure talks between the White House and the Republicans are expected to continue for a while longer despite the two sides being far apart on the size of a bill and some Democrats urging leaders to cut bait and act big solely on a Democratic basis, through the budget reconciliation process. In addition to suggestions that President Biden wants a bipartisan bill, it’s been observed that reaching a bipartisan compromise on transportation and broadband investment would reduce the cost of a potential follow-on Democrat-only budget reconciliation bill, and that exhausting all avenues for compromise may be important for getting members like Senator Joe Manchin (D-WV) on board for a reconciliation bill.
During the May 24 White House press briefing, Press Secretary Jen Psaki, who previously said the Administration wanted progress toward a bipartisan Memorial Day, said of whether there will be a determination to move by budget reconciliation around then, “We’re not quite there,” adding that the White House is in touch with Senator Capito and committee ranking members. She said May 25 that the $303 billion surface transportation bill being marked up by the Senate EPW Committee today “is a great down payment.” The Capito group is set to present a $1 trillion plan on Thursday, free of TCJA rollbacks.
On moving by reconciliation, Senate Majority Leader Chuck Schumer (D-NY) said May 25, “it has always been our plan regardless of the vehicle to work on an infrastructure bill in July… we hope to move forward with Republicans but we’re not going to let them saying no stand in our way.” Punchbowl reported that Democrats won’t try to move another reconciliation bill under the FY2021 budget resolution (with a deadline of September 30) and will use the FY2022 resolution, to move infrastructure or items left out of a potential bipartisan highway/water bill. “Debate over infrastructure could drag well into the fall, which will put it on a collision path with the government funding and debt-limit skirmishes,” the report said.
The New York Times reported Senator Manchin as saying, “There’s no magic date and there’s no magic time… We have to find something reasonable, and I’m always looking for that moderate, reasonable middle, if you can.” He is part of the bipartisan group of senators, separate from the Capito group, led by Senator Mitt Romney (R-UT), and including moderates Susan Collins (R-ME), Rob Portman (R-OH), and Kyrsten Sinema (D-AZ) “who are discussing their own infrastructure proposal that could surface should the talks between Senate Republicans and Mr. Biden fail. The group is considering a narrower infrastructure plan than Mr. Biden’s, paid for in part through revamping user fees, including the gas tax and a new fee for electric vehicle drivers, and repurposing funds from the pandemic relief bill.”
Tax – Bloomberg was the latest to report that “signs are mounting that anxiety among congressional Democrats will significantly temper any [tax] increases,” and negotiations could go on for months because the spending level that needs to be funded from tax increases is unclear. House leaders may want a clear idea of what can pass the 50-50 Senate before moving. “As closely as we can align ourselves with Senate thinking and administration thinking, the better off we are going to be,” said Ways & Means Chairman Richard Neal (D-MA). “That’s why I’ve been so deliberative about not thinking out loud about tax policy. I’ve been very guarded on it and I’m going to stay that way” until a consensus is reached among Democrats and on the panel, he said.
A May 24 Tax Notes article suggested that if Democrats want to move substantial tax changes proposed by President Biden they should look to the run-up to the TCJA, which was motivated by Republicans’ failure to repeal the ACA and aided by the groundwork laid by former Ways & Means Chairman Dave Camp, reflected in the TCJA. “’To this day, I wonder if the TCJA would’ve happened if they’d been able to repeal the ACA,’ said Ray Beeman of Washington Council Ernst & Young. ‘But because they couldn’t do it, it created this imperative for the TCJA that may not have otherwise existed.’”
The May 25 Senate Finance Committee (SFC) hearing on the nomination of Lily Batchelder as Assistant Treasury Secretary for Tax Policy featured discussion of international tax changes proposed by President Biden and the OECD BEPS 2.0 negotiations. Senator Rob Portman (R-OH) expressed concern about the Administration’s proposal to double the global intangible low-taxed income (GILTI) rate to 21% – which, with the proposed retention of the 20% foreign tax credit (FTC) haircut for GILTI, would make the rate 26%-plus – and its effect on US companies’ competitiveness. Batchelder responded that no other country has a minimum tax exactly like ours, but they have anti profit-shifting provisions analogous to GILTI like:
Ranking Member Mike Crapo (R-ID) expressed concerns about changing the GILTI rate ahead of an OECD agreement, and in a May 24 letter asked Treasury Secretary Yellen for more information regarding Pillar 1 of the OECD BEPS 2.0 negotiations, including how many US companies would be affected, which companies would be treated as “in scope,” the magnitude of profits that would be reallocated, and the effect on US tax revenues.
President Biden’s FY2022 budget is set for release on Friday, May 28, along with the Treasury “Green Book.”
Energy – Senator Sheldon Whitehouse (D-RI) announced during the nominations hearing that Chairman Ron Wyden (D-OR) is trying to put together a proposal for a price on carbon emissions.
The SFC posted a list of 135 amendments filed for today’s markup of Chairman Wyden’s Clean Energy for America Act to consolidate current renewable energy provisions and provide tax incentives for:
The mark includes the Stabenow-Manchin extension and modification of the Section 48C 30% credit for investment in qualified property used in a qualified advance energy manufacturing project, including re-equipping an industrial facility with equipment designed to reduce greenhouse gas emissions. It would also end fossil fuels provisions, including several that were also proposed to be repealed in the Obama administration FY 2017 budget, including the enhanced oil recovery credit, credit for producing oil and gas from marginal wells, etc. The overall score after including offsets is over $200 billion. The package also includes a living wage requirement for facilities to qualify for the tax credits in a section titled “Workforce Development Requirements.”