March 11, 2022
What to expect in Washington (March 11)
The Senate late March 10 approved 68-31 the House-passed $1.5 trillion omnibus spending bill (H.R. 2471) to fund the federal government through the remainder of FY2022 and provide $13.6 billion in aid to Ukraine. The vote came after Republican amendments to bar earmarks and prohibit funding for COVID vaccine mandates were defeated. The omnibus – which does not include a tax title, meaning it does not address any tax extenders or TCJA cliffs – now heads to the President for his signature.
A separate package of $15.6 billion in additional COVID relief funding was removed in the House over objections to the use of a state aid claw back as an offset. The House plans to vote separately on the COVID funding measure next week, though it would require 60 votes in the Senate and Republicans don’t support more COVID spending. “Since most bills require 60 votes to proceed in the 50-50 Senate, it is unlikely the coronavirus funding could pass Congress without being tied to a must-pass piece of legislation like the omnibus,” the Wall Street Journal reported.
House Democrats are continuing their issues conference/retreat in Philadelphia and President Biden is expected to deliver remarks today. Punchbowl reported that Rep. Pramila Jayapal (D-WA), chair of the Congressional Progressive Caucus, said during the event, on the issue of resurrecting a reconciliation bill from the demise of the House-passed Build Back Better Act: “I’m in the business of being an optimist in Congress, but I can’t tell you for sure that there is [a path forward] and I think we just have to figure it out and see what’s possible. I do think that … the hard reality of 50 votes in the Senate and 218 votes in the House is the reality we’ll have to focus in on. And the fact that there are some really good possibilities for things we can do where we are very much in line with Sen. Manchin. There’s also a Venn diagram of what Sen. Manchin supports and what Sen. [Kyrsten] Sinema supports. And where’s that? Where is that sweet spot? We thought we had it. Obviously, that didn’t work, but we’re working on it.”
The New York Times said, “Gone is the talk of a transformative agenda to remake the country’s social safety net that was once going to be the centerpiece of Democrats’ sales pitch to voters. The words ‘Build Back Better’ were all but forbidden among the groggy lawmakers who arrived after only a few hours of sleep.”
Global tax – The Treasury Legislative Affairs team responded to Senate Finance Republicans’ February 17 letter to Secretary Yellen raising concerns with global tax negotiations, including making GILTI harsher before other countries take any action on a minimum tax and Treasury not providing data or analysis of the effect of the OECD agreement on US revenue. The March 1 Treasury letter addresses Pillar One concerns and said, “we continue to believe that any U.S. revenue impact would be relatively small to non-existent” and negotiations regarding revenue sourcing and elimination of double taxation are ongoing. “The parameters for elimination of double taxation are particularly fluid,” the letter said. “Several methods are under discussion, and the design of a related element, the so-called marketing and distribution safe harbor (MDSH), is also unresolved.”
Bloomberg Tax reported, “The letter didn’t answer Crapo on how many U.S.-based companies would be affected directly by the reallocation of tax rights envisioned in the agreement, or what would happen if the deal wasn’t in place by the end of next year. [Deputy Under Secretary of the Treasury Jonathan] Davidson also wasn’t specific on how the administration intended to secure Congress’s approval of the pact.”
Politico Morning Tax reported March 10: “Crapo dismissed the letter as full of ‘high-level platitudes’ and pushed back on the ‘repeated but yet-to-be-substantiated claim’ that the OECD deal will have a limited impact on revenues. ‘Treasury once again failed to provide substantive responses to our important questions regarding the effect of the agreement on U.S. businesses and jobs,’ Crapo” said.
Tax Notes reported March 10, “During a preparatory meeting of the Economic and Financial Affairs Council (ECOFIN), eight member states opposed the French EU Council presidency’s compromise proposal on implementation of pillar 2 of the OECD’s global tax deal.” EU members need to transpose the EU draft directive into their own domestic law, and some are raising concerns over the link between Pillar One and Pillar Two as well as implementation of the Pillar Two rules by the agreed deadline of January 2023. The nonconsenting members are Estonia, Hungary, Latvia, Luxembourg, Malta, Poland, Slovakia, and Sweden. The French Presidency continues to state it believes it can reach agreement.
Tax – Senator Sheldon Whitehouse (D-RI) March 10 introduced the Big Oil Windfall Profits Tax under which large oil companies that produce or import at least 300,000 barrels of oil per day (or did so in 2019) would owe a per-barrel tax equal to 50% of the difference between the current price of a barrel of oil and the pre-pandemic average price per barrel between 2015 and 2019. The quarterly tax would apply to both domestically produced and imported barrels of oil.
On Thursday, March 17 (10:00 am), the House Ways & Means Committee will hold a hearing, “Oversight Subcommittee Hearing with IRS Commissioner Rettig on the 2022 Filing Season.”
Also, on Thursday, March 17 (at 10:00 am), the Senate Finance Committee will hold a hearing on “Examining Charitable Giving and Trends in the Nonprofit Sector.” Witnesses include Daniel Cardinali, President and CEO of Independent Sector, and Gene Steuerle of the Urban-Brookings Tax Policy Center.
Health - On Wednesday, March 16 (10:00 am), the Finance Committee will hold a hearing, “Prescription Drug Price Inflation: An Urgent Need to Lower Drug Prices in Medicare.”
Congress – A New York Times guest essay on the midterm elections by Thomas B. Edsall said, “According to strategists for both parties, the Democrats now have a 50-50 chance of retaining control of the Senate in the midterm elections, crucial for the appointment of federal judges, but nowhere near enough electoral strength to give them a shot at keeping their House majority.” The President’s party typically loses seats in the midterm elections. The essay cited Frances Lee, a political scientist at Princeton, as saying, “It would be a major historical anomaly if Democrats retain control of the House in 2022. One of the most predictable features of American politics is the loss of seats in Congress for the president’s party at the midterm… With Democrats’ margin so narrow, the party just cannot spare any losses.”
Both the House and Senate are in session next week (the House will be out the following week, beginning March 21). Senate business next week includes nominations, including Shalanda D. Young to be Director of the Office of Management and Budget (she is currently acting director).