July 30, 2021
What to expect in Washington (July 30)
The Senate, having cleared a procedural hurdle on the bipartisan infrastructure agreement, may pass the bill the week of August 2, after debate and amendments. Bill text hasn’t been released but could be today, Punchbowl News reported. As outlined, the deal would provide $550 billion in new spending – which, combined with routinely authorized transportation funding, is $1 trillion over five years – offset predominately with unused COVID funds but also with new pay-fors like cryptocurrency IRS information reporting, so-called “pension smoothing” and a delay of the Medicare rebate rule. After a month of negotiations, sticking points like an infrastructure bank and tax gap funding were dropped, and transit money was pared back.
Senate Majority Leader Chuck Schumer (D-NY) has warned that weekend work may be necessary prior to the August recess, and members are expecting the chamber to be in this weekend. Another vote for the Senate to get on the bill will occur as soon as today, and additional votes on the substitute amendment – the current vehicle is the House-passed surface transportation bill, which will be substituted with text of the bipartisan bill – with requisite debate time in between will be required before final passage.
Until the bill text is released, details are unknown on provisions like information reporting requirements for cryptocurrency. Politico reported that digital assets would be added to requirements for businesses to report cash payments above $10,000 to the IRS, and the definition of broker would be updated “to reflect the realities of how digital assets are acquired and traded.” Bloomberg reported Senator Rob Portman (R-OH) as saying the measure would “deal with the reality that digital currency is more and more common” and “everybody’s been talking about the appropriate way to provide more reporting in particular.” IRS Commissioner Charles Rettig said in April that the tax gap could exceed $1 trillion per year, far above the $441 billion estimate for 2011 - 2013, when people were “generally unaware of the term cryptocurrency.”
The infrastructure deal has been described as a win for Republicans by some, though the substance has been criticized elsewhere, including the Wall Street Journal editorial page. In the face of criticism, Senator Portman said in a WSJ op-ed that the deal averted the major tax increases President Biden proposed for infrastructure. “When the Biden administration turned its attention to infrastructure earlier this year, it proposed a $2.65 trillion ‘infrastructure’ bill with destructive tax increases and billions in spending unrelated to core infrastructure…” he said. “A bipartisan group of senators said we could support a real infrastructure bill. The Democrats’ coming partisan tax and spending spree must be opposed, but infrastructure is different.”
House outlook – Despite Senate progress, House Speaker Nancy Pelosi (D-CA) has said she won’t bring the bill to the floor until the Senate passes a Democratic only health/climate/education/care bill that has been envisioned to cost $3.5 trillion, though moderate Senator Kyrsten Sinema (D-AZ) is objecting to a bill of that size. Senator Sinema’s comments rankled progressives already wary that the bipartisan effort diluted the impact of infrastructure legislation. “From what we have heard, having seen no text, this bill is going to be status quo, 1950s policy with a little tiny add-on,” House Transportation & Infrastructure Chairman Peter DeFazio (D-OR) said in the New York Times (NYT).
Reconciliation – Leader Schumer said July 29 he now has support for the FY2022 budget resolution from all 50 of the chamber’s Democrats, meaning the resolution could be considered as early as next week. Under optimistic scenarios, a vote-a-rama capping consideration could occur Thursday night and the August recess could begin August 6 as scheduled. Senator Sinema’s comments didn’t threaten that timeline – she said, “I will support beginning this process, [but] I do not support a bill that costs $3.5 trillion” – but do portend the difficulty leaders face in crafting a massive bill that can win the support of all 50 Senate Democrats and most House Democrats. Chairman Sanders previously acknowledged that drafting reconciliation instructions was holding up the resolution. House Majority Leader Steny Hoyer (D-MD) said July 29 members may come back in August to vote on the resolution, as the House is set to begin its scheduled August recess today. “We don’t want to have the budget sitting out there,” he said, Roll Call reported.
Climate – A July 28 New York Times (NYT) story said the White House sees the infrastructure bill, with “climate resilience” provisions to adapt roads and bridges to stronger storms, as a “first step” toward a larger climate effort in the follow-on reconciliation bill. “Democrats intend to build significant climate programs into that second bill, including a provision that would essentially pay electric utilities to generate energy from nonpolluting sources, and tax incentives for consumers to buy electric vehicles,” it said.
Congress – Former Senator Carl Levin (D-MI) passed away, and a NYT obituary called him “the Senate Scourge of Corporate America,” for his chairmanship of the Permanent Subcommittee on Investigations, which he held off and on up until his retirement in 2014. He oversaw pre-TCJA era PSI hearings on profit shifting and inversions. He was also half of a brother duo on the Hill, with former Rep. Sandy Levin, the top Democrat on Ways & Means.
Today, July 30 (12:00 p.m.), is the EY Webcast, “Tax in the time of COVID-19: Update on legislative, economic, regulatory and IRS developments.” Register.