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April 6, 2022

What to expect in Washington (April 6)

There continues to be speculation about a post-Build Back Better Act reconciliation bill, with some senators saying a package needs to come together by Memorial Day. Politico Morning Tax cited as complicating factors differences between Senators Kyrsten Sinema’s (D-AZ) and Joe Manchin’s (D-WV) tax positions – Sinema is against tax rate increases, which left the House-passed BBBA funded with provisions like a corporate minimum tax and high-income surcharge – uncertainty over whether both Manchin and Sinema want an agreement, and whether the White House will get more involved to shepherd a deal across the finish line. Axios reported: Senator Sinema has told donors a path to revival is unlikely; “no one’s reached out to Sinema about the contours of the slimmed-down deal;” and she is saying “most of her focus is on the $10 billion COVID-19 relief bill, the so-called China competition legislation” and the Electoral Reform Act.

Tax – The European Union, with France in the Presidency, couldn’t garner the necessary unanimous support for its Pillar Two minimum tax directive, calling for implementation at the end of 2023, during the April 5 ECOFIN meeting, with Poland objecting. “The Polish revenue chief said that despite amendments, Warsaw still had concerns that the minimum tax could enter into force without the new rules preventing big multinationals from booking profits in the most favourable countries,” Reuters reported. French Finance Minister Bruno Le Maire said it would be back on the agenda at the next meeting, which is set for May 24.

The Wall Street Journal reported Poland’s deputy finance minister as saying, “We strongly believe that we should be mindful of placing an additional burden on European businesses without ensuring the digital giants are fully taxed.” The directive was amended before the previous meeting to include a statement confirming the commitment of all Member States to the ongoing process on Pillar One, but Poland continues to maintain that a statement of intent is not strong enough. Le Maire said in the report, “A legally binding link is not possible.”

House and Senate Republican tax-writers issued a statement saying trouble in the EU doesn’t bode well for implementation elsewhere.

EY Tax Alerts on FY2023 Budget proposals on partnerships and high net-worth individuals are available: EY Tax Alert 2022-0550 and EY Tax Alert 2022-0548.

Competitiveness – Punchbowl reported that with 14 House committees of jurisdiction for the America COMPETES Act (H.R. 4521), the conference committee with the Senate-passed USICA (S. 1260) that lawmakers are inching towards could have upwards of 90 members. The report noted that formal conference committees have been rare in recent years. The House and Senate more typically exchange bills without such a process, and the last major policy conference committee of note was the TCJA. “The last notable negotiation was during Donald Trump’s presidency on the 2017 GOP tax cut. And that was really Republicans negotiating with Republicans. This current bill is wide open,” the report said.

Digital assets – An EY Tax Alert discusses the President’s FY2023 Budget proposals on cryptocurrency:

  • Extending the nonrecognition rules for securities loans to loans of actively traded digital assets
  • Increasing information reporting by certain financial institutions and digital asset brokers for purposes of exchanging information with other jurisdictions
  • Requiring taxpayers to report foreign digital asset accounts under IRC Section 6038D
  • Amending the mark-to-market rules for dealers and traders to include digital assets

On Thursday, April 7, Treasury Secretary Janet Yellen will deliver remarks on digital assets policy and, an advisory said, “make the case for a consistent and comprehensive policy framework that promotes responsible innovation of digital assets and appropriately assesses and mitigates the risks they may pose,” She will “discuss principles that will guide Treasury’s approach to digital asset policymaking and Treasury’s work as part of President Biden’s Executive Order, ‘Ensuring Responsible Development of Digital Assets.’”

Health – On April 5, the IRS issued a proposed rule to address the Affordable Care Act’s so-called “family glitch,” which prevents workers whose employer-provided family coverage exceeds about 10% of household income (indexed annually) from qualifying for premium tax credits (PTCs) on the exchanges for their covered dependents if the employee receives an offer of affordable self-only coverage. Under the proposed rule, IRS would change the definition of affordability for spouses and dependents, enabling them to qualify for PTCs if the employer does not offer an affordable family plan. The rule makes no changes to the affordability for employees, meaning it is possible that family members would be eligible for PTC, but the employee would not. While the IRS did not include an estimate of the rule’s potential impact on the coverage market, the Biden administration estimated 200,000 uninsured people would gain coverage and up to one million could see their coverage become more affordable. IRS will accept public comments for 60 days and hold a public hearing on June 27 to discuss the proposed changes. If finalized, the rule would go into effect on January 1, 2023, meaning the subsidies would be available to people during the annual open enrollment period.

Senate Majority Leader Chuck Schumer (D-NY) April 4 announced, with Senator Mitt Romney (R-UT), a deal on a $10 billion COVID package towards vaccines, therapeutics, testing, and research, but they could not agree on the $5 billion in global health funding. Politico reported that the funding could only sustain COVID-related efforts for a few months, setting up additional negotiations on the issue over the summer. Senate consideration this week seems doubtful given the packed agenda and issues over immigration. During a Finance Committee hearing, HHS Secretary Xavier Becerra called on members to provide the funds.

Congress – The Senate may vote on Judge Ketanji Brown Jackson to be a Supreme Court Justice as soon as Thursday. Rep. Fred Upton (R-MI) announced on the House floor April 5 that he will retire at the end of this Congress, becoming the 16th House Republican to retire or run for other office and sit out the midterm elections, compared to 31 Democrats who have made such announcements. Upton becomes the fourth of the 10 Republicans who voted to impeach former President Trump following the January 6 attack on the Capitol to retire from Congress.


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For additional information concerning this Alert, please contact:
Washington Council Ernst & Young
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