This Week (December 13-17)

Congress: The Senate and House are in session. Both chambers are likely to take up a debt limit increase, facilitated by a process change that will allow simple majority passage in the Senate. The bipartisan “Byrd bath” for the Build Back Better Act (H.R. 5376) budget reconciliation bill is expected in the Senate.

Last Week (December 6-10)

Reconciliation process: Majority Leader Chuck Schumer (D-NY) said on the Senate floor December 9 that Democratic meetings with the Parliamentarian regarding the Build Back Better Act (H.R. 5376) budget reconciliation bill have concluded and bipartisan “Byrd bath” meetings, “where both sides are together and make their case to the parliamentarian and argue back and forth – we expect those to start next week.” Bloomberg reported Finance Committee Chairman Ron Wyden (D-OR) as saying Senate Democrats expect to soon release a “placeholder framework” for their version of the reconciliation package. Politico Morning Tax reported that Chairman Wyden said late Thursday he hoped to unveil new legislative text at some point Friday, but it wouldn’t be the final draft because some issues need to be worked out, including state and local tax (SALT) deduction cap relief. “It will have some technical corrections, it will have some substantial changes as well,” he said. “The negotiations are going to continue because there are still some outstanding issues.” In a December 6 letter to members, Senator Schumer maintained that he wants to get the bill done by Christmas and said, “Senate committees are preparing the Senate version of the bill by making necessary technical and ‘Byrd proofing’ edits to the House bill” and the goal is to “finalize the remaining committees over the course of this week and next.”

Some Senate committees have already posted their revised legislative text for their portions of the bill. However, it is expected that many of the key issues that need to be resolved in order to ensure the bill has 50 votes for passage on the Senate floor will not be included in this language; rather, when and if those issues are resolved, including the SALT deduction cap relief, the revisions will be included in a manager’s amendment that the Majority Leader would offer close to the end of the Senate’s action on the bill.

Reconciliation outlook: Prospects for Senate consideration largely hinge on Senator Joe Manchin (D-WV), who hasn’t committed to voting for the bill and has repeatedly expressed concern over moving quickly. Regarding his current thinking on voting for the BBB Act this year, Punchbowl News reported Senator Manchin as saying, “We haven’t even seen the complete scrub from the parliamentarian. We haven’t seen basically how it washes – the ‘Byrd Bath.’ And then we haven’t seen the final text. And they’re still negotiating with all different parts of it with [committees of jurisdiction].” Some Republican senators have been reported as expressing skepticism that the reconciliation process can be completed in time for a Senate vote prior to Christmas. Senator John Thune (R-SD) encouraged Democrats to recognize that deadline can’t be met because “as long as there is some belief on their side that they could possibly finish this before Christmas, I think that will keep dragging this process on,” Politico reported.

Appearing at the Wall Street Journal (WSJ) CEO Council December 7, Senator Manchin repeated his trepidation about moving quickly on the bill citing the significance of the tax changes it includes, making provisions temporary to mask their true cost, and inflation concerns. “The unknown we’re facing today is much greater than the need that people believe in this aspirational bill that we’re looking at,” he said. “We’ve gotta make sure we get this right. We just can’t continue to flood the market, as we’ve done.” Addressing two of Manchin’s concerns, the latest inflation report, the Consumer Price Index for November 2021, released on Friday showed inflation rose 6.8% from a year ago in November; and a CBO report said making permanent the provisions of the bill that sunset after several years would increase the deficit by $3 trillion over the 2022–2031 period rather than the $200 billion increase in the deficit forecast for the House bill. Democratic leaders and the Administration sought to downplay the significance of the CBO report. “The Republican-requested fake CBO score does not take into account the fact that President Biden and Democrats have committed that any extensions of the Build Back Better Act in the future will be fully offset, therefore ensuring BBBA will not increase the deficit,” Senator Schumer said.

Politico reported December 6 that some Democrats want to proceed with the BBBA even without a commitment of support from Senator Manchin. “My experience in this business is you have to bring it to a vote to finally see where you are. All this speculation notwithstanding, people have to face the reality of yes or no,” said Senate Majority Whip Dick Durbin (D-Ill.). Manchin’s had “more than enough time … there comes a point where the American people expect a result.”

Child tax credit payments: Senator Schumer December 9 reiterated that the BBB Act needs to get done in 2021 because the ARPA expanded Child Tax Credit payments expire at the end of December. “During the holiday season, American families are looking for every option to lower costs, make ends meet, so the best thing we can do is pass Build Back Better before some critical tax breaks from the American Rescue Plan – above all the Child Tax Credit checks – come to premature end,” he said. Ways & Means member Suzan DelBene (D-WA) has been expressing the same sentiment on the House side. She said during a Punchbowl interview December 8, “We absolutely have to do it by the end of the year. There’s a consequence to not getting it done earlier... The longer we wait, the longer we are not providing those resources.”

CAMT: The House reconciliation bill’s 15% minimum tax on book income for corporations with annual adjusted financial statement income over $1 billion – which was included in the House bill after Senator Kyrsten Sinema (D-AZ) rejected tax rate increases – remains controversial and the subject of significant press and trade association attention. A December 7 WSJ story said of the tax: “For many companies, the biggest problem will be accelerated depreciation for capital investments, often tied to high-paying manufacturing jobs. The large upfront tax deductions for accelerated depreciation are bigger than companies’ expenses for book-income purposes, so those deductions would be harder to claim under the minimum tax. Similarly, companies with past losses can usually use those as tax deductions against current income. The plan allows the use of losses generated starting in 2020 but generally not older ones, which could be a problem for recent startups that turn profitable.” The limitation on the use of losses also will have an impact on more mature companies carrying losses on their books for a variety of reasons, including some financial institutions with financial crisis losses. A December 6 Roll Call story said, “Since it became clear in late October that the 15 percent minimum tax could make its way into the bill after what seemed to be a quixotic attempt by progressive lawmakers and the Biden administration, groups representing businesses and tax professionals have hurried to lobby for tweaks. Proponents of the tax are standing by its current structure and carve outs, which would allow businesses to continue to benefit from incentives like tax credits for research and development and low-income housing and clean energy investments. But pension plan contributions and ’phantom income’ associated with pension assets that shows up in annual 10-K filings couldn’t be deducted, nor could the cost of depreciating solar, wind, geothermal and other renewable energy properties.” A Washington Post story reported there are concerns with the provision among some at both Treasury and the White House, but a Treasury spokesperson stood by the provision as sound policy.

Energy: One focus of the current Senate process is the House bill’s EV credit bonus of $4,500 for manufacturing in unionized shops that Senator Manchin opposes given that it excludes manufacturers beyond the Big 3 automakers, including one with a facility in West Virginia. The provision was to be reviewed by the Senate Parliamentarian this week, Senator Ben Cardin (D-MD) said in a Bloomberg report noting that changes are under consideration in light of Manchin’s objection and the possibility the parliamentarian rules the provision doesn’t comply with a ban on using budget reconciliation measures to advance policy changes with “merely incidental” budgetary impacts. The Washington Post reported on prospects for energy provisions given the Byrd bath and concerns by Senator Manchin, who says he thinks another provision, the methane fee, “would be duplicative of new methane regulations from the Environmental Protection Agency.”

Debt limit: The Senate December 9 approved a bill (S. 610) that will allow the Senate to increase the Federal debt limit by a simple majority vote. The process change was appended to a bill that includes an extension of the 2% Medicare sequester moratorium through the end of March, which passed 59-35 under a 50-vote threshold after clearing an earlier procedural vote that required 60 votes and drew support from 14 Republicans. The House and Senate must vote on a separate bill to increase the debt limit, likely early next week. The process change was necessary because Republicans won’t vote for an increase.

Ways & Means: Rep. Devin Nunes (R-CA), next in line to become Ways & Means Chairman if Republicans win control of the House, announced he is leaving Congress to join former President Trump’s social media company. The company announced Monday he would join in January 2022. Elected in 2002, Nunes joined Ways & Means in 2005 when the Committee Chair was Bill Thomas, a mentor to Rep. Nunes. Following the announcement, there has already been jockeying among Republicans to become Ways & Means Chairman if the party wins back control of the House in the 2022 midterms. The Committee chairmanship is not necessarily determined by seniority, and there have been examples of members leapfrogging over more senior colleagues over the years. Politico reported, “The next two most senior members on Ways and Means, Reps. Vern Buchanan of Florida and Adrian Smith of Nebraska, have already started talking to members of the Steering Committee — a little-known but highly influential GOP panel that decides committee assignments and leaders — about their interest, according to multiple lawmakers.” Punchbowl News reported this morning that Rep. Buchanan has projected confidence in winning votes for the post from the Republican Steering Committee, and that Rep. Jason Smith (R-Mo.) is also interested in the chairmanship.

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