April 29, 2022
What to expect in Washington (April 29)
President Biden April 28 outlined a $33 billion Ukraine funding request that Senate Democrats may pair with the $10 billion COVID funding package that has been stalled since before the recent two-week recess, in a bid to win the requisite 10 Republican votes for that measure to overcome the 60-vote Senate filibuster threshold. There have been warning shots over that approach, The Hill Newspaper reported: "Despite bipartisan support for new [Ukraine] assistance, Senate Republicans say they will block it if Democrats tie it to coronavirus relief that has been stalled over an entrenched fight over a Trump-era border pandemic policy." The President said Congress "can do it separately or together, but we need them both."
Reconciliation — Amid speculation about the revival of budget reconciliation talks, the publication Inside Health Policy reported Senator Joe Manchin (D-WV) as saying at an American Hospital Association conference, on whether he would support health care priorities like extending exchange insurance premium subsidies and expanding Medicaid in hold-out states, "If you don't fix the tax code, you don't do anything … You just can't continue to throw caution to the wind, it's not responsible. And people think you've got to do something, no?"
Senator Manchin is interested in a climate-focused reconciliation bill that addresses tax changes and deficit reduction, and an apparently separate effort to test whether Republican members will sign onto a bipartisan energy bill. The April 28 Wall Street Journal said, "Forging an agreement on energy policy that can win broad support from Democrats, who prioritize aid for clean energy sources such as wind and solar power, and Republicans, who want to support fossil fuels, will be challenging. Sen. Kevin Cramer (R., N.D.), who attended the meeting [with Manchin], said Republicans would oppose any plan that resembles Democrats' previous plans for reducing carbon emissions. 'That leaves maybe a fairly narrow band depending on what price people are willing to pay,' Mr. Cramer said."
Senate Majority Leader Chuck Schumer (D-NY), who met with Senator Manchin this week over what to do to confront inflation, seemed to favor the Democrat-only, reconciliation route for a bill. "If you want to get rid of inflation, the only way to do it is to undo a lot of the Trump tax cuts and raise rates," he said. "No Republican is ever going to do that. So, the only way to get rid of inflation is through reconciliation."
The tax-hiking approach continues to be criticized by Republicans as it was in the run-up to the House-passed Build Back Better Act (BBBA). Senate Republican leader Mitch McConnell (R-KY) said April 28, "This is literally Democrats' economic agenda for your family: High prices and less money … First they hurt you with inflation, and now they want to hurt you with tax hikes." In response, Democrats, including the President, are eager to point out the tax increase proposals of Republican Senator Rick Scott (R-FL).
Economy — Asked about the prospects for a recession, given the April 28 GDP report showing a contraction of 1.4% in the first quarter, the President said, "you always have to be taking a look and no one is predicting a recession now … some are predicting there may be [a] recession in 2023. I'm concerned about it, but I know one thing: that, you know, if our Republican friends are really interested in doing something about dealing with the economic growth, they should help us continue to lower the deficit … They should be willing to work with us to have a tax code that is actually one that works … "
House Speaker Nancy Pelosi (D-CA) and Senator Schumer April 28 announced "legislative efforts to lower gas prices" that the Speaker said would include "forceful action that will stop and hold accountable oil and gas companies for profiteering and manipulating markets. This is a top priority for all of us. The House and Senate are putting together our bills … " The effort is aimed at expanding Federal Trade Commission authority. She also said members are continuing conversations about efforts to lower food prices. The Speaker said there has been "some interest" in a federal gas tax holiday and while "it's good PR … there's no guarantee that the saving — the reduction in the federal tax — that would be passed on to the consumer."
Senator Sherrod Brown (D-OH) April 28 introduced a bipartisan bill (S. 4105) to provide tax relief to auto dealers experiencing inventory shortages due to global supply chain issues, addressing the Last-In First-Out (LIFO) inventory method that "can result in a large tax bill for dealerships that don't maintain a minimum level of inventory at the close of the year. The Supply Chain Disruptions Relief Act would provide a statutory determination that the requirements for a qualified liquidation under Section 473 have been satisfied for new motor vehicle dealers that have had a reduction of new vehicles held in LIFO inventory."
A bipartisan companion bill (H.R. 7382) was introduced in the House April 4 by Rep. Dan Kildee (D-MI), and Bloomberg Tax reported Kildee as saying he would try to get relief for car dealers on the competitiveness bill.
Competitiveness — The Senate April 28 voted 67-27 to go to conference with the House on the America COMPETES/USICA competitiveness bills and agreed to hold votes next week on 28 nonbinding motions to instruct conferees. These could include a motion by Senator Maggie Hassan (D-NH) calling for preserving R&D expensing, rather than the Section 174 5-year amortization that took effect this year. Senator Bernie Sanders (I-VT), who opposes the $52 billion in CHIPS Act funding in the bill, has a motion calling for beneficiaries of semiconductor funding to be prohibited from engaging in stock buybacks and outsourcing.
Hearings — On Wednesday, May 4 (at 2 p.m.), the Senate Finance Committee will hold a hearing, "Laws and Enforcement Governing the Political Activities of Tax-Exempt Entities."
Today, April 29 (at 12:00 p.m.), is the EY Webcast, "Tax in the time of COVID-19: Update on legislative, economic, regulatory and IRS developments." Register .