February 4, 2022
What to expect in Washington (February 4)
The Senate left until Monday without agreement from House and Senate appropriators on an omnibus appropriations bill for the remainder of FY2022, making it likely a short-term continuing resolution will be necessary to fund the government beyond the expiration of current funding two weeks from now, on February 18. Senator Joe Manchin (D-WV) continued to say this week that a wholly new spending and tax bill must be constructed following the demise of the House-passed Build Back Better Act (BBBA); he wants government funding and elections reform bills done prior to the rebuilding effort. The House votes today on the America COMPETES Act competitiveness bill, and House Majority Leader Steny Hoyer (D-MD) said he hoped a House-Senate agreement between that and the Senate-passed USICA could emerge “within a 30-day period.”
These developments add up to a full February agenda in Congress and raise questions over whether there will be much opportunity for progress on a post-BBBA new climate/social spending/tax bill this month, though some discussions have begun. The end of February also brings the target date President Biden has set for selecting a Supreme Court nominee who would be subject to the Senate confirmation process, then the State of the Union Address March 1, and release of the Administration’s FY2023 budget and “Greenbook” of tax proposals at some point.
Tax – Tax remains a focus, as Senator Manchin reiterated that his priority is to “fix the tax code” as the nation passed a new marker on the federal debt. “Take care of the debt. $30 trillion should scare the bejesus out of your generation,” he said in a February 3 NBC story. In limbo along with the fate of the post-BBBA bill are time-sensitive tax provisions embedded in the House-passed bill, including some energy tax extenders, delaying the TCJA cliff on IRC Section 174 R&D amortization, and the 15% GILTI rate and country-by-country calculation to bring the US into compliance with Pillar Two of the OECD-led tax deal.
The Wall Street Journal February 3 reported on US business concerns that aspects of the Pillar Two model rules “would make domestic tax breaks less valuable for some U.S.-based companies, potentially limiting the effectiveness of incentives for research, exports and low-income housing” under rules that “let other countries impose taxes if multinational companies pay too little at home.” The story said, “Under proposed rules, large companies could benefit from domestic tax breaks until their rates got down to 15%. Below that threshold, other countries could impose what is known as a ‘top-up tax’ on those companies and make up the difference.”
Reps. Chellie Pingree (D-ME) and Tom Reed (R-NY) February 3 introduced the Accelerating Charitable Efforts (ACE) Act to ensure funds donated to donor-advised funds (DAFs) are made available to charities within a reasonable period of time and speed up donation timelines. Angus King (I-ME) and Chuck Grassley (R-IA) sponsor the Senate bill.
Competitiveness/supply chain – The House is set to vote today on the America COMPETES Act, which is comparable to the U.S. Innovation and Competitiveness Act (USICA) that passed the Senate in 2021. Both include over $50 billion in funding for CHIPS Act semiconductor R&D, National Science Foundation (NSF) provisions, and a long list of duty suspensions and reductions. Some items that were embedded in the BBBA are in the House bill, including Trade Adjustment Assistance (TAA) and a tax provision to make permanent the Health Care Tax Credit for health insurance costs. There are climate provisions addressing climate diplomacy, to support initiatives by nations at risk of adverse effects of climate change, and solar component manufacturing supply chain assistance funds for a DOE a grant and loan program. The Wall Street Journal reported, “Senate sponsors predicted that many of the House proposals will have to be removed to ensure Senate passage,” and Senate Majority Leader Chuck Schumer (D-NY) as saying lawmakers will “have much more work to do to bridge our two proposals together.”
Government funding – Top Democratic and Republican appropriators have been meeting regarding an agreement on discretionary spending levels for defense and non-defense spending as well as policy riders, and Punchbowl reported February 3 that those issues remain outstanding. Roll Call said Congress is headed for a stopgap funding measure of a currently uncertain duration to allow talks to continue. “We haven’t resolved anything yet,” Senate Appropriations Committee Ranking Member Richard Shelby (R-AL) said.
Health – During a Ways & Means Health Subcommittee hearing February 3, Rep. Vern Buchanan (R-FL) emphasized that telehealth can be a powerful tool to increase access for patients with disabilities and chronic conditions and said essential pandemic-era telehealth flexibilities should be made permanent. Chairman Lloyd Doggett (D-TX) said he wants to soon mark up the Telehealth Extension Act he sponsors with Rep. Buchanan and others, to permanently remove site-based and geographic restrictions that have a disproportionate impact on patients with disabilities and to extend a broad range of services permitted via telehealth under emergency waivers.
Election reform – Politico has reported that a group of Senators have broken into smaller groups to discuss this issue and, according to Senator Manchin, “the groups include the [Electoral Count Act], presidential transitions and contingent elections, protection of election workers and officials, voting practices and rights and the Election Assistance Commission and Help America Vote Act (HAVA) security grants.” The whole group is set to meet again virtually today for a status update.
Today, February 4 (12:00 p.m.) is the EY Webcast, “Tax in the time of COVID-19: Update on legislative, economic, regulatory and IRS developments.” Register.
Check out the latest edition of Washington Council EY’s podcast, DC Dynamics! In Episode 8: “Which way is up?” host Ray Beeman interviews Rebecca Burch to examine the intersection of US and international tax policy; specifically, how the US and US-based multinational companies will be treated under the OECD two-pillared global tax agreement, which is very connected to the currently stalled BBBA.