Tax News Update    Email this document    Print this document  

There are increasing signs of pressure on Congress to act on year-end 2021 tax changes, many of which were addressed in the now-stalled Build Back Better Act (BBBA). These include energy tax extenders and the TCJA Section 174 requirement that R&D expenses be amortized over five years rather than expensed. Law360 February 8 reported of another TCJA cliff that wasn’t in the BBBA, “Several senior Republicans said they would insist on moving a renewal of the 2017 Tax Cuts and Jobs Act’s (115 P.L. 97) formula for capping deductible business interest expenses at the sum of 30% of earnings before interest, taxes, depreciation and amortization, or EBITDA, with any extensions of temporary tax breaks, or extenders.”

The story said, “A renewal of the more generous business interest deduction cap and extensions of other expired tax breaks could move as part of a fiscal 2022 omnibus spending bill or in other legislation.” The story cited Senator Roy Blunt (R-MO), as saying, “There will be an extenders package. My hope is that that would be part of it … The sooner we get the extenders done, the more you drive this year’s behavior.” In the House, Reps. Adrian Smith (R-NE) and Kevin Brady (R-TX) said Republicans would insist that the renewal of the EBITDA-based business interest deduction cap be included in any extenders package, Law360 said. Sen. Blunt and Rep. Smith are the Republican sponsors of House and Senate legislation that would preserve the EBITDA limitation.

Government funding – The House February 8 passed by a 272-162 vote a continuing resolution to extend government funding through March 11, which, following expected Senate passage, would give Democratic and Republican appropriators more time to forge an agreement on defense and non-defense discretionary spending levels and policy riders and complete an omnibus appropriations bill for the rest of the fiscal year.

Politico reported, “Top appropriators continued to near a bipartisan ‘topline’ deal on Tuesday to slate the overarching budget caps for military and non-defense agency spending, as well as ground rules for hashing out the details of a final package. Once they strike that compromise, spending leaders are expected to quickly wrap up a sweeping 12-bill bundle to fund the federal government through September. ‘We have come a long way. We’re real close,’ said Sen. Richard Shelby (R-Ala.), his party’s top appropriator in the Senate. On the other side of the Capitol, House Appropriations Chair Rosa DeLauro (D-Conn.) echoed his assessment: ‘We are close.’”

Tax – Roll Call is the latest to report on potential renewal of the Employee Retention Tax Credit, which was terminated as of September 30 under the infrastructure bill enacted in November. The report cited Senator Ben Cardin (D-MD) as saying, “It’s on the table depending on how we proceed on COVID relief, and it’s also on the table in terms of tax issues. So it’s being talked about, but there’s been no decisions made on that.” The story said Senate Finance Committee Chairman Ron Wyden (D-OR) is particularly interested in the ERTC.

Senators Michael Bennet (D-CO), Cory Booker (D-NJ), Sherrod Brown (D-OH) and Raphael Warnock (D-GA), and Reps. Rosa DeLauro (D-CT) and Suzan DelBene (D-WA) held a news conference February 8 calling for the extension of the expanded Child Tax Credit (CTC) and Earned Income Tax Credit. The CTC, especially, was a focus of BBBA negotiations. Senator Joe Manchin (D-WV) suggested inclusion of a one-year extension masked the cost of the policy over the long term and called for income limits and work requirements.

Senator Warnock said, according to Punchbowl News, “What are the work requirements for the tax cuts given to the richest of the rich in 2017? Where are those work requirements? Where’s the means testing for extending this? This is a tax cut. It’s just for ordinary people. And the moral question is why is the tax cut good for those who need it the least, but not the right thing for those who need it the most?”

Politico reported, “Sen. Mitt Romney on Tuesday raised the possibility of lawmakers cutting a bipartisan deal to expand the Child Tax Credit if Democrats’ bid to revive their own plan fails. Romney — who’s long backed a monthly payment program similar to the one Democrats are trying to resuscitate — said he’s been discussing the possibility of a deal with Democrats, including Sen. Joe Manchin (D-W.Va.).”

Senator Romney said in Roll Call, “Now that Build Back Better is in limbo or worse, there’s a growing series of discussions going on among members of the Senate at least, but also members of the House to say, ‘OK, let’s go back and look once again at family security and children and think about a way that we might pass something on a bipartisan basis.’” The report cited Romney as saying while many Democrats view the child tax credit as an anti-poverty program, he and GOP colleagues also view it as a way to make sure people who want to can have children and keep the U.S. population from shrinking.

During a White House event with Treasury Secretary Yellen February 8, VP Harris said, “we fought to expand the Child Tax Credit and the Earned Income Tax Credit as part of the American Rescue Plan” and “the President and I will keep fighting to extend these measures for years to come.”

During a February 8 House Ways and Means Oversight Subcommittee hearing on challenges facing taxpayers, National Taxpayer Advocate Erin Collins said, “The main problems taxpayers encountered last year – and likely will encounter this year – were return processing delays, correspondence processing delays, difficulty reaching the IRS by telephone, and inability to obtain information from Where’s My Refund? or Where’s My Amended Return.”

Infrastructure – The House Ways & Means Select Revenue Measures Subcommittee will hold a hearing on “Examining the Economic Impact of Federal Infrastructure Investment” on Tuesday, February 15 (2:00 p.m.).

———————————————