September 22, 2021
What to expect in Washington (September 22)
The House late September 21 approved 220-211 a continuing resolution (CR) to extend government funding from September 30 to December 3 and suspend the debt limit until December 16, 2022. The bill isn’t expected to pass the Senate, despite including disaster and Afghan resettlement aid, because Republicans won’t support the debt limit increase. There is little more than a week remaining for Congress to take action to avert a government shutdown. Senate Republicans would support a ‘clean’ CR but that will likely leave Democrats to use the reconciliation process to act on the debt limit, requiring more processing of the budget resolution and two Senate vote-a-ramas.
Democratic leaders are also trying to navigate the path forward on the Senate-passed infrastructure bill, which would extend highway funding also expiring September 30, and a massive budget reconciliation bill that must be whittled down. House Budget Committee Chairman John Yarmuth (D-KY) said leaders were aiming for mid-week decisions on the reconciliation bill, and the best-case scenario is that it could come to the floor late next week. Politico reported President Biden will be hosting a meeting with House Democrats today, and meet with House Speaker Nancy Pelosi (D-CA) and Senate Majority Leader Chuck Schumer (D-NY) at 2 p.m. The series of meetings will include moderate Reps. Josh Gottheimer (D-NJ) and Stephanie Murphy (D-FL) and progressive Rep. Pramila Jayapal (D-WA), as well as Democratic senators.
Rep. Murphy was quoted in the Washington Post as saying she didn’t think detailed negotiations among Democrats had even started “in order for us to achieve that very ambitious deadline” of September 27. House Majority Leader Steny Hoyer (D-MD) said yesterday the next two weeks will be critical to passing both the infrastructure and reconciliation bills, and those bills will be key to the party’s success in the midterm elections, according to CNN, which also reported Rep. Alexandria Ocasio-Cortez (D-NY) as saying she wouldn’t vote for the infrastructure bill until the reconciliation bill passes both the House and Senate. Some moderate members say without swift passage of the infrastructure bill – which has been on ice for more than a month since Senate passage, with the House setting a September 27 target to vote on the bill in conjunction with the FY2022 budget resolution – there won’t be a reconciliation bill.
In a September 20 letter, Speaker Pelosi braced members for cuts to the $3.5 trillion-plus in recommendations from 13 committees, touching on health and caregiving issues affecting many Americans from, as the New York Times said, cradle to grave. “The President and Senate Democrats sent us a budget resolution with a cap of $3.5 trillion. I have promised Members that we would not have House Members vote for a bill with a higher topline than would be passed by the Senate,” she said. “Hopefully, that will be at the $3.5 trillion number. We must be prepared for adjustments according to the Byrd rule and an agreed to number.” The Post reported the Speaker as saying of dueling ultimatums regarding the reconciliation bill, “We are the Democratic Party. That’s who we are … The beauty is in the mix.”
The resolution of the four issues and implications for essential functions in the US – for the government to keep running, Treasury to borrow, and transportation projects to continue – are confounding even longtime members and congressional observers. Senator Mark Warner (D-VA), a moderate whose profile has risen in the context of the infrastructure and reconciliation bills, called it “a little bit like a Rubik’s cube on steroids ... It’s complicated,” The Hill reported. House Transportation & Infrastructure Committee Chairman Peter DeFazio (D-OR) said, “I’ve been here for cliffs and crises and wars and this is gonna be the biggest mash up we’ve ever had since I’ve been here...and I have no idea how it all works out and that’s it,” according to the September 21 Punchbowl, which reported there is the possibility all the issues get addressed together.
Tax - The Senate will vote at 2:45 p.m. today on the confirmation of Lily Batchelder to be Assistant Secretary of the Treasury for Tax Policy (presuming the Senate clears an earlier procedural vote). Confirmation will help as President Biden continues to communicate with the Hill on his tax agenda, and Treasury regulatory activity would be expected to pick up.
Politico Morning Tax reported on mutual fund industry opposition to the “ETF” proposal in Senate Finance Committee Chairman Ron Wyden’s (D-OR) package of partnership tax reforms to align RICs with the general requirement that gain be recognized upon distribution by a corporation of built-in gain property. “Wyden said that was nonsense, swiping back that the provision ‘exempts retirement accounts entirely’ from the plan. ‘We’re only talking about the taxable accounts of the wealthiest investors,’ he added.”
Ireland wants a proposed 15 percent global minimum tax rate on corporate profits to be a ceiling, not a floor — and it doesn’t want to accept any deal until it’s clear what the U.S. Congress will authorize, Irish officials said Monday, Politico reported. “I am very clear that it is not appropriate for Ireland to be in the agreement now. That may continue to be the case,” Irish Finance Minister Paschal Donohoe said at a Dublin press conference alongside EU Economy Commissioner Paolo Gentiloni. “But equally we are working very hard to see if an agreement is possible that would allow Ireland to join.”
Final regulations (TD 9956) under IRC Sections 250 and 951A address how to calculate qualified business asset investments for qualified improvement property under the alternative depreciation system. Transition rules in TD 9956 address the impact that NOL carrybacks allowed under the CARES Act have on loss accounts. Taxpayers affected by the final regulations include: US shareholders of controlled foreign corporations; domestic corporations eligible for deductions for foreign-derived intangible income and global intangible low-taxed income; and taxpayers claiming credits or deductions for foreign income taxes.
Washington Council EY’s new “DC Dynamics” podcast looks at what’s coming up in US tax policy, with the past as a guide, and puts current developments in political and policy context.
On Friday, September 24 (12:00 p.m.), is the EY Webcast, “Tax in the time of COVID-19: Update on legislative, economic, regulatory and IRS developments.” Register