June 26, 2022
Americas Tax Policy: This Week in Tax Policy for June 24
This Week (June 27-July 1)
Congress: The Senate will next convene on Monday, July 11, at 3:00 p.m. The House has a Committee Work Week next week and is out the following week.
The 2022 OECD USCIB Tax Conference is being held in Washington June 27-28.
While House and Senate floor activity is paused for the next two weeks, This Week in Tax Policy won’t be published, though Alerts will be issued as events warrant.
Last Week (June 20-24)
Reconciliation: The two-week congressional break comes amid an uncertain outlook for a budget reconciliation bill and the USICA-COMPETES competitiveness conference committee. Senate Majority Leader Chuck Schumer (D-NY) and Senator Joe Manchin (D-WV) met again June 22 over a slimmed-down reconciliation package, but there is no clarity on if or when there will be a bill and what it will include. Punchbowl reported June 23 that Senator Manchin said a deal isn’t particularly close and is non-committal on the extension of enhanced ACA premium tax credits due to expire. “The most important thing, if they’re going to do anything, take this inflation as seriously as you can take it because it’s the most serious thing we have going right now. And you have to get your house in order and get that under control. And it’s paying down debt. That means you gotta start paying down debt,” Senator Manchin said. “You don’t have a lot of options to do a lot of other things. So you have to be realistic about what you got. … And I supported [ACA subsidies] in the regular bill. But the bottom line is there’s only so many dollars to go around. And the rest of it – you saw the big package and the wish list they have on climate. I don’t know what [Democratic leadership and the White House are] going to do.”
Biden administration officials have continued to call for a prescription drugs, energy, and deficit reduction package to fight inflation. On ABC’s This Week June 19, Treasury Secretary Janet Yellen said President Biden “stands ready to work and is encouraging producers of oil and refined products, gas, to work with him to increase supplies, to bring gas prices and energy prices down. And if Congress will work with him to enact some of the administration’s programs, we can bring down other costs that are burdening households, like prescription drugs, healthcare costs, increase the supply of affordable housing. We clearly have a housing problem in the United States, and we need to address it by building more affordable housing.” National Economic Council Director Brian Deese said on CBS’s Face the Nation that Senator Schumer “is working with his caucus to try to get a final package in place and we’re hopeful that we’ll see progress on that in the coming weeks.”
Energy: President Biden asked Congress to suspend Federal gasoline and diesel taxes ($.18 and $.24/gallon) through the end of September, though Republicans and key Democrats are skeptical. In April, House Speaker Nancy Pelosi (D-CA) said 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.” Ways & Means Chairman Richard Neal (D-MA) said in Punchbowl June 22, “I’m not committed to it. I want to talk to the speaker about it, and we’re going to go back and forth. I want some assurance that the money is going to go to the consumer.” Reconciliation talks between Senators Schumer and Manchin also have energy issues as a focus. Senator Manchin said June 21 a $4,500 bonus tax credit for vehicles assembled at a US facility that operates under a union-negotiated collective bargaining agreement is no longer part of the negotiations, Bloomberg reported. “It’s gone,” he said. The report further said, “In recent weeks, Manchin has said he doesn’t like the existing EV tax credit structure because U.S. companies have run out of credits or will soon run out of credits and foreign companies will continue to get subsidized.” A group of automakers last week asked Congress to expand the EV credit and allow more than 200,000 qualifying sales per company.
Competitiveness: Tax-writing committee leaders met again June 23 to discuss USICA-COMPETES trade items. Politico reported on Thursday that House Speaker Nancy Pelosi (D-CA) and her leadership team “have stepped up their personal engagement in recent days to resolve the differences between the House and Senate versions of the bill,” warning members that more of their pet provisions may have to drop to ensure the overall legislation can pass before the end of the summer. “Many moderate Democrats are hoping to campaign on the bill and its $52 billion for domestic semiconductor manufacturing, the sources said, and their desire to get a bill over the finish line is driving some of leadership’s haste on the bill.” The continued impasse over the trade title has led congressional leaders to consider ditching the trade provisions altogether so they can pass the semiconductor funding sooner. But some trade provisions enjoy support in both chambers, like reauthorization of the Generalized System of Preferences and the Miscellaneous Tariff Bill, Politico reported.
Speaker Pelosi and Senate Leader Schumer released a statement following a meeting of the Big Four bipartisan, bicameral leadership on the COMPETES/USICA conference June 21: “It is critical that the Congress act swiftly and decisively to lower families’ costs, energize American manufacturing and strengthen America’s competitiveness now and for the future. Today, we had a bipartisan, bicameral meeting of the Congressional Leadership to discuss the path forward with the bipartisan innovation conference. On behalf of House and Senate Democrats, we expressed our belief that there is no reason that we should not pass this bill through Congress in July. Democrats have already made accommodations in the name of reaching an agreement…” In addition to urgency for reaching agreement due to political factors, there has been reporting in the New York Times that chip makers, who stand to benefit from $52 billion in funding under the measure, are “privately warning lawmakers that failure to do so could prompt them to take their manufacturing plants elsewhere.” The story further said, “As lawmakers in the House and Senate have spent months haggling over more than a thousand other provisions in that larger package, chip executives have become increasingly anxious about if and when their incentives will materialize. And they have become increasingly vocal in warning lawmakers that the United States risks falling behind other nations…”
Global tax: Treasury Secretary Janet Yellen said June 20, at a discussion with Canadian Finance Minister Chrystia Freeland in Toronto, that when countries start implementing a global minimum tax on multi-national companies, other nations will need to follow along or risk losing tax revenues, Reuters reported. “When some countries opt into this (minimum corporate tax) and put these taxes in effect, it’ll begin to be more and more that see that it’s in their interest to join up,” Yellen said.
After Hungary opposed the Pillar 2 minimum tax directive at the June 17 ECOFIN, a member of the Hungarian parliament and political director for the Prime Minister said in a commentary in the June 22 Wall Street Journal: “The European Union is entering a time of economic crisis. The war and sanctions are causing unprecedented challenges: rising interest rates and inflation, spiking food and energy prices, and supply-chain disruptions. Governments must make their countries’ economic interests the priority and address the cost-of-living crisis. Adopting the European Commission’s minimum-tax directive now would be a profound mistake.” Because tax directives require unanimity among the 27 EU member states, Hungary’s lone objection makes the fate of the directive, and enactment of the global minimum tax in Europe, unclear. While there are mechanisms that could allow at least some members states to move forward with the directive, it appears that the French presidency of the EU will end at the end of this month without adoption of this priority of the presidency, and it’s unclear whether the Czech Republic, which takes over in July, will have much better luck getting all member states on board.
Retirement: The Senate Finance Committee June 22 approved by a unanimous 28-0 vote the Enhancing American Retirement Now (EARN) Act, intended to be folded into ‘SECURE 2.0’ retirement legislation. Like the bill passed by the House March 29, the Earn Act includes provisions on 403(b) multiple employer plans, part-time workers, treating student loan payments as elective deferrals eligible for employer matching payments, and insurance-dedicated exchange-traded funds. While the House bill would increase catch-up contributions to $10,000 ($5,000 for SIMPLE plans) between ages 62-64, the Senate Finance bill would permit participants to elect to contribute the additional amount between ages 60-63. Both bills would also increase the age for required minimum distributions from 72 to 75 and remove required minimum distribution barriers for life annuities. Details of many provisions, including effective dates, differ between the House and Senate bills. Politico June 22: “lawmakers have a ways to go until they reach a final deal on retirement, something that is most likely to happen after November’s midterms. The House and Senate approaches have some definite overlap and a similar price tag, but an aide to Sen. Michael Bennet (D-Colo.) told our colleagues … that about 40 of the roughly 70 provisions in each chamber’s bills are different.”
The Committee adopted 23-5 an amendment by Senator Steve Daines (R-MT) to accelerate the effective date of the exclusion of changes to certain disability-related first responder payments, offset by the Charitable Conservation Easement Program Integrity Act (S. 2256) to impose a limitation on the tax deduction for qualified conservation contributions made by certain partnerships if the amount of the contribution exceeds 2.5% times the sum of each partner’s relevant basis in the partnership. The proposal was modified to apply only to contributions made after the date of enactment, as opposed to the December 2016 effective date in the bill as introduced.