June 8, 2022
What to expect in Washington (June 8)
Senator Joe Manchin (D-WV) told CNN June 6 that a deal on a slimmed-down reconciliation bill that he has been discussing with Senate Majority Leader Chuck Schumer (D-NY) is not close at hand; climate and energy issues are not close to being resolved; and that dealing with inflation is the main issue for him. "There's no deal," he said. Senator Manchin suggested "the administration is having a hard time and the climate people are having a hard time coming to agreement" on energy and climate provisions, and repeated earlier comments that Medicare prescription drug negotiation and price caps is an "easy one for us to do."
Meanwhile, Treasury Secretary Janet Yellen and Senate Finance Committee Democrats were united in their messaging at a budget hearing that clean energy proposals and prescription drug reforms to lower consumer costs are part of their approach to fighting inflation. Manchin and Schumer have focused their talks on inflation, and President Biden has said it is a top priority, laying out in a May 30 Wall Street Journal editorial steps including "passing clean energy tax credits … giving Medicare the power to negotiate with pharmaceutical companies and capping the cost of insulin." Manchin was at the White House June 7 and stood over the President's shoulder as he signed veterans' bills after some banter from Biden at the outset.
Global tax — Asked by Senator Pat Toomey (R-PA) at the June 7 Finance Committee budget hearing about the magnitude and implementation of Pillar One of the OECD-led global tax agreement, Secretary Yellen said it will have a small revenue impact, positive or negative, depending on details still being worked out. She said of a multilateral agreement to implement Pillar One, "the ratification requires Congress's approval, I think there's no doubt about it, but the form that that needs to take is still to be determined."
Politico: "It is unclear whether Yellen was referring Tuesday to rewriting treaties — which would require a two-thirds approval in the Senate — or something short of that, which would probably need 60 votes. Lawmakers could potentially override treaties with legislation. The specifics of Pillar One are still being negotiated, and it's unclear when the administration will be ready to submit a plan to Congress. 'We look forward to consulting with Congress as to the appropriate process to obtain such approval once the multilateral convention is ready for signature,' a Treasury official said … "
The Ways & Means FY2023 Budget hearing with Secretary Yellen is today at 10 a.m.
A June 7 New York Times story, "A Tax Deal, in Trouble," said, "legislators in both the U.S. and Europe are now struggling to pass the laws needed to make good on the promises embedded in the [global] deal. And no tax changes are likely to pass on their own, without the more politically popular spending programs also passing. In the U.S., the central problem is that Senate Democrats cannot agree on the spending proposals — on energy, drug prices and other issues — that would accompany the tax changes … Polish officials have expressed technical concerns, but officials elsewhere in Europe and in the U.S. believe that Poland is actually seeking leverage in a dispute with the E.U. over pandemic aid money. If both the United States and Europe cannot manage to comply with the agreement, the global deal is likely to unravel."
An EY Alert, "OECD releases public consultation documents on tax certainty under Amount A for Pillar One," is available here.
FTC regulations — Secretary Yellen also said at the Finance Committee hearing she would be willing to work with Congress regarding concerns about the January 2022 foreign tax credit (FTC) regulations but doesn't think the effective date of the regulations will be delayed, as companies have requested. Under questioning from Senator Rob Portman (R-OH), who said a one-year delay has been suggested, Secretary Yellen said the regulations are very important to protect critical interests of the US and the fundamental principle is the US should allow a credit for foreign taxes only where the foreign taxing jurisdiction has the primary right to tax the income. Senator Portman said Treasury is poised to make changes to the cost recovery and royalty withholding parts of the rules, but not creditability regarding withholding taxes on services. Changes to the regulations could apply retroactively, Yellen said.
A group of CFOs wrote to Secretary Yellen June 6 regarding the foreign tax credit regulations, saying: "foreign withholding taxes for many service payments and royalties are not creditable under the Final Regulations. The inability to claim a tax credit for these withholding taxes provides a tax incentive for U.S. companies to provide services and develop patents and other intellectual property in a foreign country rather than in the United States to avoid double taxation. This could result in the loss of valuable U.S. jobs … "
State tax — The Finance Committee has scheduled a hearing, "Examining the Impact of South Dakota v. Wayfair on Small Businesses and Remote Sales," for Tuesday, June 14 (at 10 a.m.). Witnesses represent GAO, the Streamlined Sales Tax Governing Board, the Sales Tax Institute, and businesses.
Cryptocurrency — Senators Cynthia Lummis (R-WY) and Kirsten Gillibrand (D-NY) June 7 introduced the Responsible Financial Innovation Act on cryptocurrency issues that, among other things, requires the IRS to adopt guidance or clarifications on long-standing issues in the digital asset industry, including disposition of forks and airdrops, merchant acceptance of digital assets, digital asset mining and staking, charitable contributions of digital assets and the legal characterization of payment stablecoins as indebtedness.
The WSJ: "Congressional aides said the bill has little chance of advancing this year through the Senate, which is controlled by Democrats. Similar legislation introduced by crypto-friendly lawmakers in the House has languished."
Retirement — The Senate HELP Committee is scheduled to mark up on Tuesday, June 14, the RISE & SHINE Act intended to be incorporated into 'SECURE 2.0' retirement legislation, which would allow employers to offer emergency savings accounts and improve communications to retirement plan participants and transparency around lump-sum buyout offers for pension plan participants. The bill addresses topics covered in the House-passed retirement bill, including 403(b) multiple employer plans and increased access to plans for part-time workers.
Workers Comp — The House June 7 approved 325-83 H.R. 6087, a bill to permit physician assistants and nurse practitioners to treat patients in the Federal Workers Compensation program.
Elections — Rob Menendez, Jr., the son of Senator Bob Menendez (D-NJ), June 7 won the Democratic primary for the House seat his father once held and that is being vacated by Rep. Albio Sires (D-NJ).