March 23, 2022
What to expect in Washington (March 24)
A tax treaty between the US and Chile is set to be voted on during a Senate Foreign Relations Committee business meeting today at 10:00 a.m. It is among treaties that may require a reservation to account for the base erosion and anti-abuse tax (BEAT), though it hasn't been made clear publicly how that issue will be handled. A March 17 U.S. Chamber of Commerce letter in support of ratifying the treaty cited increased corporate tax rates in Chile as of 2014 and high taxes on US companies with Chilean operations, while "companies headquartered in the two dozen European, Asian, and Western Hemisphere countries with which Chile already has a tax treaty in force will benefit from a much lower tax rate and would thus secure a significant competitive advantage over their U.S. competitors."
The Senate Judiciary Committee confirmation hearings for Judge Ketanji Brown Jackson, President Biden's nominee for the Supreme Court, continue today. The President heads to Europe today.
Competitiveness — The Senate is set to hold another procedural vote at 10 a.m. this morning as part of the necessary process of amending the America COMPETES Act (H.R. 4521) with the text of the Senate-passed USICA (S. 1260) so the two chambers can go to conference and resolve differences between the bills. Senate Majority Leader Chuck Schumer (D-NY) previously suggested some Republicans were unwilling to waive procedural hurdles to expedite the process. Some have suggested that a potential conference agreement on the House COMPETES/Senate USICA competitiveness bills could lend itself thematically to inclusion of a delay in the TCJA IRC Section 174 R&D five-year amortization requirement (rather than expensing) that took hold in 2022.
Politico Morning Tax March 22 reported that another proposal being watched is Senate Finance Committee Chairman Ron Wyden (D-OR) and Ranking Member Mike Crapo's (R-ID) Facilitating American-Built Semiconductors Act (FABS Act; S. 2107) to allow a new tax credit for investment in a semiconductor manufacturing facility and semiconductor manufacturing property.
Tax — A March 22 Law360 article, "House Dems Pin Midterm Hopes On Developing Tax Agenda," said "Democrats likely will be making a legislative push in the tax arena after Congress completes work on" competitiveness legislation. The story cited Ways & Means Committee member Don Beyer (D-VA) as saying, broadly speaking, congressional Democrats probably have until about July to get whatever version of the former Build Back Better Act (BBBA) passed and sent to the White House. "He also indicated that renewable energy provisions that Manchin supports likely will be the basis for a deal with the White House … " the story said. "House Ways and Means Chairman Richard Neal, D-Mass., would love to 'get the green tax agenda done' even as a standalone bill, Beyer said. The final piece of tax work for this session of Congress likely will be passage of an extenders tax bill that lawmakers grapple with every year, Beyer said."
Global tax — Another Law360 story, "White House Still Committed to Pillar 2, Treasury Official Says," cited Rebecca Kysar, counselor to the assistant secretary for tax policy at Treasury, as saying during a University of California, Irvine School of Law symposium that the Biden administration is confident about meeting the terms of a new global tax deal, even though the BBBA hasn't passed Congress. "Even though the proposed framework didn't pass in 2021, we can do GILTI reform before that agreed-upon implementation date," Kysar said.
An EY alert, "OECD releases Commentary and illustrative examples on Pillar Two Model Rules," (which summarizes the commentary) is available here.
Retirement — Upon returning from recess next week, the House is expected to consider a bipartisan "SECURE 2.0" retirement bill anchored by a bill (H.R. 2954) approved by the Ways & Means Committee last year that includes an expansion of auto-enrollment and auto-escalation for certain plans, and an increase in the 'catch-up' contribution limit for individuals age 62-64. The package is expected to also include parts of an Education & Labor Committee-approved bill (H.R. 5891) that includes a provision to help people locate lost pension accounts when they change jobs. Senators Ben Cardin (D-MD) and Rob Portman (R-OH) sponsor a similar bill (S. 1770) — they of course crafted the retirement section of EGTRRA more than 20 years ago as House members — and the Finance Committee wants to put its fingerprints on an eventual package.
A CQ story said, "The Neal-Brady bill includes $27.4 billion in offsets to pay for the retirement incentives, which more than cover the cost, according to the Joint Committee on Taxation's estimate. The two biggest offsets involve designating 'catch-up' contributions for employees age 50 or older as post-tax contributions to Roth-style accounts, and allowing workers to direct their employer matches into the same post-tax accounts." The story cited Ways & Means Chairman Neal as saying he's expecting a "big vote" in the House and pointed to raising the age for requiring minimum withdrawals among aspects that make it "really sound legislation." He said, "It's really a huge advance for retirement savings."
The Senate HELP Committee will hold a hearing, "Rise and Shine: Improving Retirement and Enhancing Savings," on Tuesday, March 29 (at 10:00 a.m.).
Trade — United States Trade Representative Ambassador Katherine Tai and United States Secretary of Commerce Gina M. Raimondo announced an agreement to allow "historically-based sustainable volumes" of U.K. steel and aluminum products to enter the U.S. market without the application of Section 232 tariffs. A Wall Street Journal story, "U.S., U.K. Strike Trade Deal to End Tariffs on British Steel and American Whiskey," said the agreement will allow the U.K to ship steel and aluminum products to the U.S. without levies imposed under the former Trump administration, and the U.K. will in turn lift levies on American whiskey, motorcycles and tobacco.
On March 21 and 22 Ambassador Tai and United Kingdom Secretary of State for International Trade Anne-Marie Trevelyan hosted the first joint U.S./UK Dialogues on the Future of Atlantic Trade in Baltimore, addressing digital trade, durable supply chains, and other issues.