November 1, 2021
What to expect in Washington (November 1)
Speaker Nancy Pelosi (D-CA) instructed committees to complete their portions of revised text of the Build Back Better Act (H.R. 5376) budget reconciliation bill and be 'pens down' by Sunday, and the House could vote on the reconciliation bill and the bipartisan infrastructure framework as soon as Tuesday, November 2, the Washington Post reported. A later Axios story said the timeline will slip, as the Rules Committee process Monday for a floor vote Tuesday was being delayed. "'We have made extensive progress on Rx drugs and other key initiatives, which were not included in the text posted to Rules on Thursday,' a Democratic leadership aide told reporters. 'At this point, we will need additional time to craft language and get final agreement with all parties involved … We still intend to vote as early as possible this week.'"
The dust is still settling from release of a revised bill and White House framework last Thursday, October 28, and while Senators Kyrsten Sinema (D-AZ) and Joe Manchin (D-WV) — the focus of negotiations for weeks if not months whose views significantly shaped the proposal as it stands now — haven't offered a clear endorsement. (Manchin did say he won’t support the reconciliation bill without knowing how it will impact our debt and economy, and said, “we must allow time for a complete transparency and analysis.”) Rep. Pramila Jayapal (D-WA), the main voice for progressive Democrats in the House who held up a vote on the bipartisan infrastructure framework (BIF) last week, said on CNN Friday, "We enthusiastically and unanimously endorsed the framework that the president laid out. And that is a big deal. It was not the full bill text, but we endorsed it in principle despite the fact we had things we wish were in there." She met with Senator Sinema and said progressives "are in conversation with the two senators, and so I feel positive."
House-Senate interplay — Still unsettled is the interplay between House and Senate passage. If the House can pass the reconciliation bill, it's likely Senators will want to make further modifications, though Speaker Pelosi was seeking assurances last week that the Senate would vote on the exact same budget reconciliation bill brought before the House. Bloomberg reported overnight, "The biggest hurdle to quick action is that some Democratic senators are signaling they may seek changes to what the House passes, even though many Democrats in the lower chamber are reluctant to vote on any bill that might be amended by the Senate." The report said changes to the SALT deduction cap was one issue still under discussion.
On CNN State of the Union, Senator Bernie Sanders (I-VT) suggested a House-Senate agreement to move forward would be at the conceptual level. He said, "I think there has got to be a framework agreed upon in the Senate that all of us know is going to be implemented before the members of the House vote … You don't have to have all of the legislative language, but you have to have a statement which says A, B, C, D, and E is going to be in the package and 50 members of the Senate are supporting it."
There is the expectation that Senate changes following potential House passage would require a House re-vote. Longtime Senate budget staffer Bill Hoagland, now with the Bipartisan Policy Center, tweeted over the weekend, "I will venture that even if the House passes BBB reconciliation bill this week - they will be voting again on it around Thanksgiving. Senate will send back if for no other reason than Byrd and vote-a-Rama." He was referring to reconciliation rules that allow Senate passage by a simple majority after an unlimited burst of amendment votes that typically stretches overnight.
Politico reported on Saturday, "even after the House passes its version of the bill, which could happen as soon as next week, some Democrats insist that it's not the final word. 'This deal is not done until the Senate acts, said Senate Finance Chair Ron Wyden (D-Ore.), who still wants to add a billionaire tax to the bill that now includes a surtax on ultra high-income wage earners. 'There's a significant amount still to do.'" Still, the report said, "Several Democrats said that other than the ongoing negotiations on Medicare and tax relief for high-cost states, the current deal may be as good as they are going to get" with moderate Democratic Senators Sinema and Manchin.
A Washington Post analysis on the twists and turns of Democratic efforts to tax the wealthy said, "Eventually, [the] tax on individual billionaires got jettisoned instead for the surtax on those making $10 million. Wyden lamented this turn of events by noting that elite pro sports stars, who often make at least $20 million a year, would get hit with a new tax, but the billionaire owner of the team would be left harmless."
Health — Politico reported that "Democrats are zeroing in on a deal to lower prescription drug prices that the party hopes it could add to President Joe Biden's $1.75 trillion social spending bill as soon as Monday," in conversations involving a group of Senate Democrats, including Senator Sinema, House leadership and rank-and-file, and the White House. "The latest draft effort includes a redesign of Medicare Part D, drug negotiation and rebates … No deal was final as of Sunday morning, but there was some hope in the party of clinching one within the next 24-48 hours."
International tax — A New York Times article on G20 leaders' approval of the global tax agreement said, "Biden's proposed domestic minimum tax would exclude a few deductions, like for clean energy, but otherwise try to raise money from companies that have reduced their tax bills through a variety of incentives in the code like deductions for investment. The Biden administration estimates these measures, along with other changes to the international side of the tax code, will raise $350 billion in tax revenue over a decade."
An EY International Tax and Transactions Services "First Impressions" Alert on international tax provisions in the revised House "Build Back Better Act" released on October 28, 2021 is available here.
Energy — A story in the Saturday Washington Post said, "The tax-and-spending bill the White House hopes to pass within a matter of days would provide unprecedented levels of funding to combat climate change. But it would force the oil and gas industry to share the cost by raising more than $100 billion from fossil fuel firms over the next decade." The story said that while many Biden budget proposals to eliminate fossil fuel subsidies have not made it into the reconciliation bill, "the latest Build Back Better proposal includes two changes that will bring in significant revenue from oil and gas companies. One change would eliminate an oil and gas exception to a 2017 law that taxes foreign profits of U.S. companies. According to the White House's calculations, the adjustment would bring in as much as $84.7 billion over 10 years, depending on the corporate tax rate. The reconciliation proposal would also reinstate the tax on crude oil that was designed to support environmental cleanup efforts under the EPA's Superfund program but which expired in 1995. The proposal would generate an estimated $38 billion over 10 years."
G20 — The years-in-the-making OECD-led two-Pillar tax agreement to address how the largest and most profitable multinational enterprises (MNEs) should allocate their taxable profits to customer jurisdictions under Pillar One and set a 15% global minimum tax rate aimed at ensuring that MNEs pay a minimum level of tax under Pillar Two was endorsed by G20 leaders at the outset of their summit in Rome. "The deal is a key achievement for Treasury Secretary Janet Yellen, who made an international floor on corporate taxes among the top priorities of her tenure and pushed forcefully for swift action on a deal," the Washington Post reported. "The plan was already endorsed by the finance ministers of each country, but its official approval by the heads of state puts added pressure on the difficult task of turning what remains an aspirational agreement into distinct legislation."
Trade — Also at the G20, the United States and the European Union reached a deal to ease steel and aluminum tariffs on exports from the EU to the US that date back to the Trump administration, amid persistent challenges to global supply chains. "U.S. Commerce Secretary Gina Raimondo said Saturday that the arrangement would maintain the tariffs but would allow limited amounts of European imports to enter the U.S. tariff-free," the Wall Street Journal reported. "She said the EU would drop retaliatory tariffs in return
Climate — The WSJ story noted, "Climate change is another focus of the Rome summit, which will set the tone for two weeks of global talks on climate change in Glasgow, Scotland, that immediately follow the Rome meeting. The G-20 leaders are attempting to find a common position on how to best adhere to the 2015 Paris climate agreement. That agreement calls on countries to start reducing their greenhouse-gas emissions as soon as possible and achieve a climate-neutral world by midcentury."
On Friday, November 5 (12:00 p.m. ET), is the EY Webcast, "Tax in the time of COVID-19: Update on legislative, economic, regulatory and IRS developments." Register.