May 11, 2022
What to expect in Washington (May 11)
A May 10 Washington Post story said last week's 90-5 Senate vote on a motion to instruct conferees to the Bipartisan Innovation Act to preserve R&D expensing, rather than the IRC Section 174 five-year amortization that took effect this year, is "a preview of upcoming battles over trillions of dollars in provisions that are set to expire over the next several years" under the TCJA. While liberals "argued Democrats should not agree to reinstate it without some concession from the GOP, such as an extension of the Child Tax Credit or an increase in the corporate tax rate … Democrats' willingness to support the measure raises questions about dozens of similar debates that await as provisions of Trump's tax law begin to expire. A popular deduction on interest expenses, for instance, is set to shrink. Another fight looms over tax deductions on large capital investments. Global tax rates on large corporations are set to increase in 2026."
Tax — Bloomberg Tax reported Senate Finance Chairman Committee Ron Wyden (D-OR) as saying Tuesday that he strongly supports including the R&D tax provision in the competitiveness bill. "We want to make sure that we are as competitive as possible in dealing with China and tough global markets," Wyden said. The first House-Senate conference meeting on the Bipartisan Innovation Act is set for Thursday, May 12.
Customary post-Budget release tax hearings, which allow members to ask questions about Budget proposals, were not held at the Ways & Means and Finance committees following the release of the FY2023 Budget March 28 but may be scheduled soon. Politico Morning Tax reported, "Yellen tentatively is scheduled to testify before the Senate Finance Committee on June 7, according to congressional aides. She is also expected at a hearing with the House Ways and Means Committee around that time as well."
Inflation — Amid suggestions that the White House needs to write a climate/tax/prescription drugs reconciliation proposal that Senator Joe Manchin (D-WV) can support, rather than Manchin authoring a proposal, President Biden delivered remarks on inflation May 10 and said, "My plan is to lower everyday costs for hardworking families and lower the deficit by asking large corporations and the wealthiest Americans to not engage in price gouging and to pay their fair share in taxes." The President contrasted his plans with the tax increase proposals of Senator Rick Scott (R-FL) and other Republican policies. He laid out specific proposals on energy and prescription drugs, and the White House issued a fact sheet enumerating them. "To reduce our dependence on foreign oil and reckless autocrats like Putin, I'm working with Congress to pass landmark investments to help build a clean energy future as well — from tax credits for businesses to produce renewable energy to tax credits for families to make their homes more energy efficient," he said.
The Wall Street Journal reported, "The remarks were Mr. Biden's most pointed to date, after months of focusing primarily on touting his own agenda and accomplishments. He claimed congressional Republicans wanted to increase taxes on many Americans and sunset programs like Social Security and Medicare … "
White House Press Secretary Jen Psaki said that today "the President will visit a family farm in Kankakee, Illinois, with the Secretary of Agriculture, Tom Vilsack, to discuss the impact of President Putin's invasion of Ukraine on the rise in food prices at home and abroad. He's going to talk about the support we need to continue to give to farmers to help continue to produce more and more domestically to help address the food shortages that we're seeing in some parts of the world."
Ukraine/COVID funding — A nearly $40 billion Ukraine funding bill, seen as an urgent priority by members of both parties, is speeding through Congress. A $10 billion-plus COVID funding package for tests, therapeutics, and vaccines is not, with Democrats opting not to couple the measure with the Ukraine funding and the issue complicated by GOP efforts to extend the Title 42 border policy. "Senate Republicans won't allow a Covid funding bill to pass without a Title 42 vote," Punchbowl reported, noting that a "Big Four" meeting with House Speaker Nancy Pelosi (D-CA), House Minority Leader Kevin McCarthy (R-CA), Senate Majority Leader Chuck Schumer (D-NY), and Senate Minority Leader Mitch McConnell (R-KY) about a new COVID package is expected.
The House approved the Ukraine funding 368-57 late May 10. The Senate could vote later this week.
Trade — Senate Finance Committee Chairman Wyden, Ranking Member Mike Crapo (R-ID) and other members of both parties May 10 called on the U.S. Trade Representative (USTR) to improve transparency and consultation with Congress on trade negotiations, citing negotiations to waive intellectual property rules at the World Trade Organization where details became public before Congress was briefed or shown the text of the agreement. It follows letters from Committee Republicans calling on the Administration for better coordination with Congress on global tax negotiations.
Financial services - The Senate May 10 confirmed 51-50, with VP Harris casting the tie-breaking vote, Lisa Cook to be a Member of the Board of Governors of the Federal Reserve System.
Also May 10, the Senate Banking Committee held a hearing on "The Financial Stability Oversight Council Annual Report to Congress" with Secretary Yellen. In one exchange, Senator Bill Hagerty (R-TN) raised the leak of confidential taxpayer information to ProPublica, which has published stories based on the data. "More than a year has passed since the leaks … Can you update this committee … where you are with respect to the investigation in terms of the source of the leaks … and how it continues to be published?" Yellen told him, "I really wish I could update you. I really am anxious to see some results here as well. I regret that I'm not able to do so … "
Congress — The Senate holds a procedural vote today, May 11, on S. 4132, to permit a woman to determine whether to continue or end her pregnancy and permit health care providers to provide abortion services.
Longtime Ways & Means member Tom Reed (R-NY), who previously announced he wouldn't seek re-election, resigned May 10 to take a job in the private sector. The House Republican Steering Committee is expected to meet in the coming weeks to fill Ways and Means Committee vacancy created by Reed's resignation. As Politico reported, Rep. Antonio Delgado (D-NY) has announced plans to resign to become Gov. Kathy Hochul's lieutenant governor, setting up two special elections in New York.
Friday, May 13 (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.