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President Biden's FY2022 budget and Treasury Green Book released May 28 provided details on the corporate tax increase proposals in the American Jobs Plan/Made in America Tax plan on infrastructure and individual tax increases in the American Families Plan, but not many proposals in other areas, as a bipartisan infrastructure deal is sought with plenty of tax increases on the table that Democrats in Congress have yet to fully back. We know (1) what's in the proposals but not (2) whether the President will reach a deal on infrastructure with Republicans, which would likely exclude tax increases, and (3) what combination of tax increases can be supported by Democrats in an infrastructure bill if bipartisan talks crater or, if they succeed, in a potential follow-on reconciliation bill on "human infrastructure" and maybe climate provisions.

Green Book — There is more detail on the President's energy plans and, in the international tax area, the changes to the GILTI tax regime have been expanded to include repealing the subpart F high tax exception and the statutory authority the Trump administration relied on to issue the GILTI high tax exclusion regulations. Also key are additional details on the workings of the SHIELD proposal that would replace the BEAT. The announcement that the "long-term capital gains and qualified dividends of taxpayers with adjusted gross income of more than $1 million would be taxed at ordinary income tax rates … effective for gains required to be recognized after the date of announcement" — which may mean the April 28 rollout of the Families Plan — was previewed by the Wall Street Journal and subsequently criticized in an editorial.

A WCEY Alert on the Green Book, updated to clarify how FDII repeal funds would be spent, is attached below and available here.

Signals from Democrats will be watched to determine which tax increase proposals may move in Congress, and how. There are already differences in approach between the chambers. Senate Finance Chairman Ron Wyden (D-OR) has put out an international tax framework roughly consistent with what the Administration proposes and is working on other proposals backed by the White House, such as on the tax gap. House Ways & Means Chairman Richard Neal (D-MA), meanwhile, has admittedly been more "deliberative about not thinking out loud about tax policy" and said he would stay "very guarded" until Democratic consensus emerges. In a May 28 statement, Chairman Neal, who has questioned the need to pay for infrastructure investment, praised the budget's "crucial investments" in a number of areas and said "Ways and Means Democrats will consider the administration's proposals carefully and look forward to working together to achieve our shared goals," without mentioning tax increases.

Several Biden campaign tax proposals were omitted from the budget. A Wall Street Journal story on the IRC Section 199A pass-through deduction said, "Administration officials haven't said why they haven't proposed curbing the break at this point" despite Biden campaigning on it. Senator Wyden "is working on a series of changes to the break that could sharply curb it for the highest-income households while opening it up to upper-middle-class service-business owners," it said.

Global tax — A May 31 Washington Post story said, "Finance ministers from Group of Seven nations meeting in London on Friday are expected to back President Biden's call for a global minimum tax on corporate profits." It continued, "Biden catalyzed the global tax debate this month by lowering to 15% from 21% his proposed worldwide minimum. If he can secure agreement from the world's leading democracies — en route to a broader global consensus later this year — it could eventually produce the most significant global tax shift in decades." Also, "Amid all these moving parts, the expected G-7 endorsement 'is good news in terms of the possibility of a global agreement,' said Michael Mundaca, U.S. national tax department leader for Ernst & Young. 'But it's still very early.'"

Reuters reported on a draft communique that says, "We commit to reaching an equitable solution on the allocation of taxing rights and to a high level of ambition on the rate for a global minimum tax."

Bipartisan negotiations — Congress is out this week but there will be additional White House-Republican infrastructure negotiations, which have been relatively free of enmity, owing in part to President Biden's 36 years in the Senate, record of bipartisan deals, and desire to broker one now. Fourth-ranking Senate Republican Roy Blunt (R-MO) was cited in an Axios report as saying Biden knows what he's doing and, "All of his training is as a senator who understands the importance of finding a place where everybody can be moving forward."

"I have had opportunities and dealings with him over the years, and he's a straight shooter," Senate Finance Ranking Member Mike Crapo (R-ID) said of Biden in the May 30 Washington Post. "If he gives you his commitment, you can count on it."

Punchbowl reported that President Biden will meet with Senate Environment & Public Works Ranking Member Shelley Moore Capito (R-WV), who leads the Republican negotiations, on Wednesday.

Transportation Sec. Pete Buttigieg said on CNN Sunday that despite the congressional recess, "it's very much going to be a work week for us and for the conversations that are ongoing with Congress. By the time that they return, which is June 7 … we need a clear direction. Certainly encouraging to see the healthy conversations that have happened over the last days and weeks, but the president keeps saying inaction is not an option. And time is not unlimited here."

While the two sides seem far apart — the current White House negotiating position is $1.7 trillion, almost double the latest Republican offer of $928 billion, with questions over the extent to which the GOP plan counts already allotted funds — some members suggest the President has set some fairly realistic parameters. Senate Banking Ranking Member Pat Toomey (R-PA), who is also on the Finance Committee, said on CNBC May 26 that President Biden signaled to Republicans that he could accept a plan between $1 trillion-$1.2 trillion. "I distinctly had the impression from him that that was a ballpark that he thought he would be able to live with," Senator Toomey said.

Democratic views — Some Democrats are not impressed with the Republican offer on infrastructure. "It's just not particularly genuine," said Sen. Sherrod Brown (D-OH) in Politico May 27. "They refuse to go big. Their leader has said they want Biden to fail. So we've seen these kinds of negotiations: slow walk, try to make it look like they're reasonable. They haven't been yet."

Prior to departing for the Memorial Day recess, Senate Republicans filibustered legislation on the January 6 commission, which reignited debate over whether the 60-vote filibuster threshold should be eliminated. The Post reported, "The most explosive showdown is likely to occur during the last week of June, when the Senate is expected to consider a Democratic measure designed to protect voting rights at a time when some Republican officials have sought to overturn election results." Some Democrats like Senator Ed Markey (D-MA) cite the need for the change to act on policy issues like climate change. Others say it is too soon to contemplate changing the rules. "We're not even six months into this administration. We've already passed a major bipartisan bill on hate crimes. We're about to pass another major bipartisan bill that will address research and innovation," said Senator Jeanne Shaheen (D-NH).

Timeline — Senate Majority Leader Chuck Schumer (D-NY) said May 28 the Senate will process a FY2022 budget resolution, which could unlock another round of budget reconciliation, in July. July is also when Senator Schumer said the Senate would consider infrastructure legislation, with or without Republican cooperation. When the Senate reconvenes on June 7, Democrats want a vote on H.R. 7, the Paycheck Fairness Act on equal pay for women, Schumer said.

On Friday, June 4 (12:00 p.m. ET), is the EY Webcast, "Tax in the time of COVID-19: Update on legislative, economic, regulatory and IRS developments." COVID-19 and the resulting economic crisis have made reacting to tax developments more complicated than ever. Join us for the next webcast in our series as we discuss how businesses can navigate the tax policy environment and continue to effectively operate their tax function in this time of crisis and change. Panelists will provide updates on: (i) The US economy and tax policy; (ii) Breaking developments; and (iii) What's happening at the IRS. Register.

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Biden FY22 budget/Treasury Green Book