May 2, 2022
What to expect in Washington (May 2)
The Senate is in session this week, but the House is out for a scheduled district work period. The Senate’s first roll call vote, at 5:30 p.m. today, will be a procedural motion related to the nomination of Joshua Frost to be Assistant Secretary of the Treasury for Financial Markets. The Senate will also hold votes this week on 28 nonbinding motions to instruct conferees to the America COMPETES/USICA competitiveness bill conference, possibly including one filed by Sen. Maggie Hassan (D-NH) calling for an expansion of the R&D tax credit for small businesses and preserving R&D expensing.
In the tax-writing committees, there is only one hearing. On Wednesday, May 4 (at 2 p.m.), the Senate Finance Taxation and IRS Oversight Subcommittee will hold a hearing, “Laws and Enforcement Governing the Political Activities of Tax-Exempt Entities.” A Joint Committee on Taxation report is available here.
A story in the weekend Wall Street Journal, “Republican Party, Big Business Drift Apart,” said “the rift extends into policy areas where business and Republican[s] long forged alliances. A handful of Republicans have said they are open to the possibility of higher corporate tax rates, which were cut to 21% under a landmark, Trump-backed bill in 2017. ‘I would not rule that out,’ Sen. Josh Hawley (R., Mo.) told the Journal. Sen. Marco Rubio (R., Fla.) also has said he doesn’t see the current corporate tax rate as sacrosanct and has proposed curbs on corporate stock buybacks.” The story also said that gone are the “days when Republicans worked more closely with big business with priorities like broad global trade agreements,” after the prior Administration supported tariffs and “steered many Republicans toward more protectionist policies.”
Another WSJ story discussed conservation easements, saying: “The IRS lost a crucial Alabama case after judges found deficiencies in decades-old regulations. A bipartisan bill limiting the most aggressive transactions hasn’t advanced in Congress, blocked from Democratic fiscal legislation by Sen. Kyrsten Sinema (D., Ariz.), whose office didn’t comment. Other efforts to police promoters and appraisers are moving slowly through courts. So even as the IRS issues warnings, deal makers tout tax breaks with an upbeat environmental touch…”
Regarding Senator Joe Manchin’s (D-WV) apparent two-track effort for a budget reconciliation bill with tax changes and a bipartisan energy bill, Politico reported: “The man in the center of it all says the blunt force of a party-line filibuster sidestep ‘is for taxes’ and that he’s ‘committed to an energy-climate bill that makes sense for the United States of America.’ So does Manchin want a bipartisan energy bill and a Democratic-only tax bill that includes some climate spending? ‘I’m keeping all options open.’” Senator Sheldon Whitehouse (D-RI), an advocate of climate change legislation, is skeptical that Republicans will sign on to a deal. “There’s literally nothing happening in the bipartisan effort. One Republican senator showed up at one meeting,” he said.
The Washington Post reported this morning, “there are growing fears in the White House that Biden will not be able to secure the deal he wants in Congress to address climate change, lower prescription drug costs and implement higher taxes on the wealthy… With many leaders in both parties expecting the Democrats to lose one or both chambers of Congress, White House officials worry Biden may miss his opportunity to pass legislation that addresses many of his party’s top priorities.”
Politico Morning Tax reported on a letter from Ways & Means Committee members led by Reps. Brad Schneider (D-IL) and Kevin Hern (R-OK) urging Treasury Secretary Yellen to continue discussing with the business community foreign tax credit regulations that have raised concerns over foreign taxes that may not be creditable. The letter asked Treasury to be “particularly mindful of how these changes could negatively impact U.S. companies’ competitiveness abroad,” and to consider offering companies safe harbors in certain situations.
An EY Alert, “OECD holds public consultation meeting on Implementation Framework for Pillar Two GloBE Rules,” has been posted available here.