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The Senate Finance Committee released updated text of its title of the Build Back Better Act (H.R. 5376) budget reconciliation bill on Saturday afternoon that follows the House version pretty closely, with some technical and policy changes. As Finance Committee Chairman Ron Wyden (D-OR) noted prior to its release, negotiations are continuing because there are still some outstanding issues, including state and local tax (SALT) deduction cap relief, which is denoted with a placeholder in the SFC bill.

Among policy changes, for purposes of the new IRC Section 163(n) limitation on deductibility of business interest, the revised text provides for an election for the use of an alternative calculation of reported net interest expense using adjusted bases of assets instead of EBITDA. The bill also tightens the criteria for determination of inverted corporations under IRC Section 7874, which Politico reported is intended to pay for the interest deductibility revisions.

Addressing long-expressed concerns about adverse effects on pension plans, the corporate alternative minimum tax (CAMT) portion of the bill has been revised to exempt pension gains, providing that adjusted financial statement income will be adjusted to disregard any amount of income, cost, or expense that would otherwise be included on the applicable financial statement in connection with any covered benefit plan.

Politico: “Wyden made changes to Democrats’ proposed restrictions on business interest deductions for things like companies doing research and development in the U.S. He tried to offset the cost of that by reducing the threshold at which companies would become subject to anti-inversion rules designed to prevent corporations from avoiding U.S. taxes by moving their headquarters overseas.”

The Wall Street Journal: “Under the Senate changes, companies facing a new 15% minimum tax on their financial-statement income wouldn’t be taxed on income coming from net increases in the value of defined-benefit pension plans. Senators also proposed softening proposed limits on multinational companies’ interest deductions, and they would lighten the burden on companies with U.S. factories or research operations.”

An EY ITTS Alert on the changes is available here.

“While conversations are continuing, the committee is prepared for bipartisan meetings with the Senate parliamentarian next week,” Chairman Wyden said in the Saturday release. Majority Leader Chuck Schumer (D-NY) previously said bipartisan “Byrd bath” meetings, “where both sides are together and make their case to the parliamentarian and argue back and forth,” are expected this week, and that he wants the Senate to vote before Christmas.

 Schumer and others have cited the expiration of the expanded Child Tax Credit monthly payments as a reason to get the bill done yet in 2021. Axios reported, “Wyden said the bill must be passed no later than Dec. 28 in order for January federal support checks to be mailed to Americans.” The Axios report noted that some Democrats are bracing for the bill to get punted into 2022.

Politico Morning Tax reported, “Tax provisions aren’t supposed to be among the most hot-button issues before the parliamentarian this week” but “it wouldn’t be surprising if the GOP also wants the parliamentarian to take a deeper look at the Democrats’ proposal to give extra tax incentives for union-made electric vehicles.”

Senator Joe Manchin (D-WV) has yet to sign on to the bill and has raised concerns about inflation and the 10-year cost of temporary provisions if they are extended. He has expressed concerns about addressing paid leave in this bill and about the additional EV bonus credit for vehicles manufactured in unionized shops. President Biden said last week he would be meeting with Senator Manchin on the effort, and there have been reports the meeting could be as soon as today.

Friday, December 17 (12:00 p.m.) is the Webcast, “Tax in the time of COVID-19: update on legislative, economic, regulatory and IRS developments.” Register.

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