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Spotlight

Congress this week passed a long-negotiated $1.5 trillion, 2,741-page omnibus appropriations bill that does not include a tax title, meaning it does not address any tax extenders or Tax Cuts and Jobs Act cliffs. The spending bill will fund the federal government through the remainder of FY2022. The legislation, which now goes to President Biden for his signature, passed the Senate on 10 March and the House earlier in the week. Senate Finance Committee Chairman Ron Wyden had said there likely would not be a tax section in the Omnibus bill because some Democrats did not want to act on corporate tax provisions without items for individuals such as extending the expanded Child Tax Credit with monthly payments.

With regard to a post-Build Back Better Act reconciliation bill and other aspects of the congressional agenda, Senate Majority Leader Chuck Schumer released a letter on 7 March, saying that during March and April, "many Senate committees will hold new hearings and mark-ups on Democrats' cost-cutting proposals." With regard to reconciliation specifically, the Majority Leader wrote that "Senate Democrats have introduced additional legislative proposals to lower the rising cost of energy, prescription drugs and health care, and the costs of raising a family." The letter was seen by some as the first signal by Senate Democrats that they plan to bring forward a social spending and climate reconciliation package that is more in line with recent statements by Senator Joe Manchin.

A Treasury official this week confirmed that the US is committed to releasing long-awaited proposed previously-taxed earnings and profits (PTEP) regulations in 2022 that will address multiple areas, but that taxpayers should not expect their release until the latter half of the year. An Internal Revenue Service (IRS) official was also quoted this week as saying, however, that the coming PTEP regulations would not include rules on capital accounts "especially as [they] relate to GILTI."

An IRS official provided some insight this week into the December 2021 final foreign tax credit regulations. The official was quoted as saying that in a situation where a foreign jurisdiction divides a royalty into two parts based on payor location and the location of the use of the intellectual property, withholding tax on the portion based on the payor location may not be eligible for a US foreign tax credit. The IRS official said in this situation, no foreign tax credit would be available because the payor jurisdiction designation is not reasonably similar to US rules and does not meet the final regulations' attribution requirement.