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March 27, 2022

Americas Tax Policy: This Week in Tax Policy for March 25

This week (March 28-April 1)

Congress: The House and Senate are in session. The President's FY2023 budget proposal will be released and sent to Congress on March 28, though tax and health hearings have not been scheduled at Ways & Means and Finance. The House Ways & Means Committee will hold a hearing on the "Biden Administration's 2022 Trade Policy Agenda" on Wednesday, March 30 (at 10:00 a.m.), and the Senate Finance Committee will hold a similar trade hearing on Thursday, March 31 (at 10:00 a.m.).

Competitiveness: Senate Majority Leader Chuck Schumer (D-NY) set up two votes for Monday, March 28 to complete the 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. While Senator Schumer previously suggested that some Republicans were delaying the process, Punchbowl reported that Monday's votes were set after Senator Bernie Sanders (I-VT) dropped his opposition. Senator Sanders slowed the process over opposition to the $50 billion in CHIPS Act semiconductor funding and funds for a moon rocket project. "To get Sanders to stand down, Schumer promised that he would be allowed two votes on 'motions to instruct' conferees to the House-Senate negotiations" to strike the two proposals, the report said.

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.

Treaties: A Senate Foreign Relations Committee vote on a long-lingering tax treaty between the US and Chile was postponed until March 29. It is among treaties that may require reservations to account for enactment of the base erosion and anti-abuse tax (BEAT) in the 2017 TCJA, though it hasn't publicly been made clear how that issue will be handled. Consideration of the prior batch of tax treaties (Switzerland, Luxembourg, Spain, Japan) faced objections from Senator Rand Paul (R-KY) that were overcome. 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."

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."

Last week (March 21-25)

Reconciliation: The push for a post-BBBA reconciliation bill may be back on after Senator Joe Manchin (D-WV) said in early March that he could back a bill that splits revenue, including from tax changes, between deficit reduction and spending on climate initiatives. The Washington Post reported late March 24 that Senator Manchin "has restarted talks with fellow Democrats about reviving the party's climate and social spending bill, according to two people familiar with the matter, as administration officials search for oil and gas policies that could make the measure more palatable to him. Manchin, who has traveled in the past week with Energy Secretary Jennifer Granholm and Interior Secretary Deb Haaland, has told staff members and colleagues that the legislation must be voted on before senators leave town in August … " Axios reported March 24 that Senator Manchin "told a group of climate activists and energy executives he's open to supporting revised Build Back Better legislation narrowly addressing three issues: climate change, prescription drug prices and deficit reduction. Why it matters: Manchin's private comments during a closed-door dinner Monday are a clear indication he's serious about returning to the negotiating table, but for a much smaller version of President Biden's initial $3.5 trillion proposal … "

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 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: 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.

During a BDI/Business at OECD (BIAC) International Tax Conference March 23, Pascal Saint-Amans, Director of the OECD Centre for Tax Policy and Administration, suggested that while Pillar Two of the BEPS 2.0 project may not be implemented by some countries, it's important to get a critical mass of nations implementing it and for other countries to recognize its legitimacy.

An EY alert, "OECD releases Commentary and illustrative examples on Pillar Two Model Rules," (which summarizes the commentary) is available here.


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