Tax News Update    Email this document    Print this document  

This week (June 28-July 2)

Congress: The Senate is out of session for a two-week recess until July 12. The House is in session before a one-week recess the week of July 5.

Education: The House Ways & Means Oversight Subcommittee will hold a hearing on "Expanding Access to Higher Education and the Promise It Holds" on Tuesday, June 29 (2:00 p.m.)

Last week (June 21-25)

Infrastructure: President Biden and a bipartisan group including Senators Rob Portman (R-OH), Joe Manchin (D-WV), Mitt Romney (R-UT), and Kyrsten Sinema (D-AZ) announced a roughly $1 trillion infrastructure deal June 24 that would reauthorize the Surface Transportation Act that expires at the end of September and includes $579 billion in new spending over five years. While the plan omits most of the Administration's tax increase proposals, it calls for investment toward reducing the tax gap and reinstating Superfund fees for chemicals. Immediately, however, the agreement raised questions about the fate of the President's other physical infrastructure and income inequality proposals, and the tax increases the President has proposed to pay for those proposals. Upon emerging from the White House, both sides celebrated the agreement as a return to bipartisan deal-making, and Senator Susan Collins (R-ME) said the group agreed on "the price tag, the scope, and how to pay for it," which "was not easy." However, President Biden later said he agreed with House Speaker Nancy Pelosi (D-CA) that the infrastructure bill must move with a Democratic reconciliation bill expected to address issues like health care, caregiving, and climate change, and tax increases on corporations and high-income individuals aimed at paying for those changes. "If this is the only thing that comes to me, I'm not signing it. It's in tandem," he said. Assertively linking the two, as has been demanded by progressive Democrats wary of signing on to a modest roads & bridges bill, makes the outlook and timing for the proposals quite unclear. The Speaker said the House would not vote on an infrastructure bill until both that bill and a follow-on budget reconciliation bill are passed by the Senate: "There won't be an infrastructure bill unless we have a reconciliation bill, plain and simple." The President's qualifying support for the infrastructure bill with passage of a follow-on human infrastructure bill drew a rebuke from Senate Republican leader Mitch McConnell (R-KY), who said on the Senate floor, "Less than two hours after publicly commending our colleagues and endorsing the bipartisan agreement, the president took the extraordinary step of threatening to veto it." Details of the $579 billion in new spending are as follows:

Republican concerns: The strength of the deal was in question June 25 as Republican senators in the bipartisan group, consistent with Senator McConnell's earlier statement, challenged the President's "in tandem" comments. Politico reported Senator Bill Cassidy (R-LA) as feeling "blindsided" by the comments, and Senator Portman as making clear "linking the two pieces of legislation was not part of their deal with the White House." Senator Jerry Moran (R-KS) was reported as demanding assurances from Senators Manchin and Sinema that they will oppose a follow-on reconciliation bill. The Wall Street Journal noted that White House Press Secretary Jen Psaki didn't reiterate the President's demand that both bills come to his desk at the same time. "He fully expects, hopes, plans to sign both into law and he will leave it to leaders in Congress to determine the timeline and the sequencing," she said during the June 25 press briefing. Republicans, she said, must "decide if they are going to vote against a historic investment in infrastructure that's going to rebuild roads and railways and bridges in their communities simply because they don't like the mechanics of the process. That's a pretty absurd argument for them to make; good luck on the political front on that argument."

Tax gap: Politico reported Senate Finance Committee member Mark Warner (D-VA) as saying the tax gap proposal would provide the IRS an additional $40 billion/10 years to produce roughly $100 billion in additional tax revenue from enforcement, and the plan does not include the Biden administration's proposal to require financial institutions to produce more information about money flowing through their customers' accounts.

Timing: Movement on a reconciliation bill will require the House and Senate agreeing to the same FY2022 budget resolution with reconciliation instructions. Senate Majority Leader Chuck Schumer (D-NY) said he hoped to hold Senate votes on both the infrastructure bill and the FY2022 budget resolution in July. That could leave the development of the reconciliation bill to the fall and potentially push enactment of the two-part legislation until later in the year. Approval of the budget resolution will unlock the reconciliation process to allow the "human infrastructure" and climate bill to pass the Senate with 51 votes, maybe with the support only of 50 Democratic senators plus the VP. Senator Schumer explained that the budget "sets the big reconciliation numbers" and the "second part of the process … has to be to write all the details, which takes a while. OK, but the first step will be finished in July."

Debt limit: Punchbowl News reported on a meeting yesterday including House Ways & Means Committee Chairman Richard Neal (D-MA), Treasury Secretary Janet Yellen, National Economic Council Director Brian Deese, and Senate Finance Chairman Ron Wyden (D-OR) to discuss pay-fors for infrastructure and the federal debt limit, which is reinstated August 1 after a two-year suspension. Extraordinary measures can extend the must-act date on the debt limit until later in the summer or the fall. Secretary Yellen said during a Senate Appropriations hearing June 23, "It's possible that we could reach that point while Congress is out in August and I would really urge prompt action on raising the limit or suspending it." Democrats had been eyeing the reconciliation bill as a vehicle to increase the limit, which would avoid winning the support of Republicans who could, as in the past, seek spending cuts in exchange. How the debt limit can be addressed is as yet unclear given still-uncertain outlook for the infrastructure and budget reconciliation bills. Meanwhile, Surface Transportation Act and government funding expire on September 30. Appropriators have said a continuing resolution will likely be required to fund the government past that date, and a short term extension of the Surface Transportation Act could be attached along with a debt limit increase, but that would require bipartisan agreement. It could leave lawmakers working toward a year-end funding deal, which could have other measures attached. The Neal-Yellen-Wyden group also discussed "overhauling the international tax code to end incentives to ship jobs overseas, and instead reward companies that invest in American workers," Bloomberg reported.

Chairman Wyden: Bloomberg also reported that following a ProPublica report on how wealthy Americans are utilizing Roth IRAs to shelter considerable amounts of income, Chairman Wyden released a statement saying, "IRAs were designed to provide retirement security to middle-class families, not allow mega-millionaires and billionaires to avoid paying taxes … As we continue to look at ways to make the tax code more fair and finance critical investments in the American people, I'll be revisiting this proposal." On CNN June 23, Chairman Wyden noted the SFC is working on "major policies, major initiatives to make the tax code fairer, to create incentives to reduce carbon, and we've got proposals to lower the cost of medicine. So, we are just going to keep moving forward with those major efforts."

Energy: Two energy tax bills were introduced June 21 -

- S. 2140 (Sen. Ossoff), to establish the advanced solar manufacturing production credit

- H.R. 4024 (Rep. Pascrell), to establish a tax credit for production of electricity using nuclear power.

Trade: The White House June 24, citing concerns over forced labor in China, blocked selected imports of solar panel materials from the Xinjiang province of China. U.S. Customs and Border Protection (CBP) issued a "withhold release order" (WRO) on silica-based products (the material used for solar panels) made by Hoshine Silicon Industry Co., Ltd., a company located in Xinjiang, and its subsidiaries. It is possible that a broader region wide WRO could be issued by CBP later in the year.

The Senate Finance International Trade, Customs and Global Competitiveness Subcommittee held a hearing June 22 on the 'Strategic Benefits of a Multilateral Approach to Trade Policy in the Asia-Pacific Region'. The hearing largely focused on U.S. multilateral trade engagement in Asia vis-à-vis China, and a review of the U.S. decision to withdraw from the Trans-Pacific Partnership trade agreement in 2017. That agreement entered into force without the U.S. as the re-named Comprehensive and Progressive Trans-Pacific Partnership. Reportedly, China has begun exploring the possibility of joining the 11-member nation trade bloc. The Biden administration has not prioritized trade agreements and is unlikely to pursue joining the CPTPP in the near-term. In a related development, the UK began this week formal negotiations to accede to the CPTPP according to UK Trade Minister Liz Truss.

———————————————