May 13, 2022
What to expect in Washington (May 13)
A May 11 Law360 story discussed how "the upcoming expiration of the GOP's 2017 tax overhaul law could present Democrats with an opportunity to force action" on a global minimum tax. Sen. Ben Cardin (D-MD) said movement on the OECD global tax deal in Congress is likely to run concurrently with Democrats' desire to reopen the TCJA and that Finance Committee members have had general discussions about Pillar Two but have not taken any specific actions. "Two things are going on. You have the movement toward a minimum international tax, which makes sense to level the playing field. Secondly, we have the adjustments we have to make because of the policies of [the] 2017 tax law that we strongly disagree with," he said. EY's Ray Beeman was quoted as saying of lawmakers being required to deal with the TCJA tax provisions that will expire in 2025, "I think it's going to have a force of attraction and suck in every other issue that people have with international tax, corporate rates and more."
This followed earlier reporting in the Washington Post that the overwhelming 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 on expiring TCJA provisions. And there are lingering questions about what legislation can carry tax provisions this year: the competitiveness bill, a revived reconciliation bill, or a year-end tax bill. Despite most senators from both parties voting for last week's motion on R&D, the first meeting of the House-Senate competitiveness bill conference May 12 revealed a rift over how much tax policy, if any, to include in the bill.
Both the chairman and ranking member of the Senate Finance Committee — Sens. Ron Wyden (D-OR) and Mike Crapo (R-ID) — made clear Thursday that they will seek to add a new investment tax credit for semiconductor plants, included in the Facilitating American-Built Semiconductors (FABS) Act (S. 2107) that Wyden introduced last year. That provision was not included in either the House or Senate-passed versions. Sen. Crapo told reporters that including FABS would be "significant in … making sure our semiconductors are manufactured here." Roll Call reported Senator Mark Warner (D-VA) as also advocating for the proposal: "We may have to wrestle with this one a little bit. I do think we need a tax title." Wyden and Crapo both also support a delay in the 2017 TCJA's Section 174 five-year amortization requirement to preserve R&D expensing that was in effect prior to this year.
However, House Ways and Means Committee Ranking Member Kevin Brady (R-TX) said, "I see no need for a tax title in this Conference Report, especially one favoring a single industry. If at all, we should confront the brazen 'Made in China 2025' plan for industrial and technological dominance by unleashing all of America's innovation and economic might across myriad industries." (Brady's statement was seen by many as referring to the FABS Act and not directed specifically to the R&D credit amortization proposal.) Senator Crapo acknowledged that adding any tax language could open the door to tax proposals from many other negotiators. "If we try to put any tax provisions in, then people will try to fill it up with all of their unrelated tax policies, and I'm against any unrelated tax policy," Crapo told The Hill. "There were those who said [Thursday] that they didn't want to see any tax provisions in the bill, so there's still a big debate over that."
There are a total of 107 conferees: 26 Senators (divided evenly between Democrats and Republicans) and 81 House members (50 Democrats joined by 31 Republicans).
COVID funding — Politico reported this morning that with additional COVID funding stalled in Congress, "Among the sacrifices being weighed are limiting access to its next generation of vaccines to only the highest-risk Americans — a rationing that would have been unthinkable just a year ago, when the White House touted the development and widespread availability of vaccines as the clearest way out of the pandemic. But as the government's cash reserves dwindle, officials are increasingly concluding that these types of difficult choices will soon have to be made. And they are quietly preparing to shift responsibility for other key parts of the pandemic response to the private sector as early as 2023."
Ukraine funding — A nearly $40 billion Ukraine funding bill approved by the House late Tuesday hit a snag in the Senate Thursday, as Senator Rand Paul (R-KY) called for Inspector General-level oversight of how the money is spent. The Senate stands adjourned until 3:00 p.m. on Monday, May 16, following which they will take a procedural vote related to the Ukraine bill.
"Senator Rand Paul of Kentucky on Thursday single-handedly delayed a bipartisan effort to quickly send $40 billion in aid to Ukraine, which Congress had tried to fast-track amid the escalating brutality of Russia's war," the New York Times reported. "The Senate needed unanimous consent to waive procedural hurdles and approve the humanitarian and military aid package, which the House passed 368-to-57 on Tuesday. Mr. Paul, a Republican and a libertarian who generally opposes U.S. spending on foreign aid, objected, halting what had been an extraordinary effort to rapidly shepherd the largest foreign aid package through Congress in at least two decades."
Financial services - The Senate May 12 confirmed 80-19 the nomination of Jay Powell to be Chairman of the Board of Governors of the Federal Reserve System for a term of four years (reappointment).
Congress — S. 4132, to permit a woman to determine whether to continue or end her pregnancy and permit health care providers to provide abortion services, failed to clear a procedural vote, 49-51, in the Senate May 11. All Republicans voted nay, as did Democrat Joe Manchin (D-WV).
On Wednesday, May 18 (10:00 a.m.), the House Ways & Means Oversight Subcommittee will hold a hearing on "Taxpayer Fairness Across the IRS."
Speaker Pelosi announced, "Next week on the Floor of the House, we will have another piece of our 'lowering costs for the American people' legislation … the Consumer Fuel Price Gouging Prevention Act" to enable the President "to issue an energy emergency declaration, making it unlawful to increase gas and home energy prices in an exploitive and excessive way … "
Today, 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 .