July 15, 2022
What to expect in Washington (July 15)
The Washington Post reported last night that Senator Joe Manchin (D-WV) "told Democratic leaders on Thursday he would not support an economic package that contains new spending on climate change or includes new tax increases targeting wealthy Americans or corporations." That likely leaves Medicare prescription drug negotiation and the extension of expanded ACA health insurance premium tax credits as the centerpiece of a reconciliation bill. "Manchin did tell Democratic leaders he was open to reforming federal laws that might lower prescription drugs costs for seniors … And [he] expressed support with Senate Majority Leader Charles E. Schumer (D-N.Y.), the party's chief negotiator, for extended subsidies that help keep health insurance costs down for millions of Americans for the next two years," the report said.
The development followed Senator Manchin's comments after the July 13 release of the BLS CPI report showing consumer prices up 9% in June over a year ago that he was more cautious and concerned about additional spending than ever. He has been raising concerns about inflation for the better part of a year, and his vote is necessary for a reconciliation package to pass in the 50-50 split Senate. Punchbowl had reported July 13 that Manchin said he was still willing to address Medicare prescription drug negotiation and ACA subsidies but questioned whether much was possible beyond that. "Is there any more we can do? I don't know. But I am very, very cautious. And I'm going to make sure that I have every input on scrubbing everything humanly possible that could be considered inflammatory."
The New York Times cited a Manchin spokeswoman as saying he believes it's time for leaders to "re-evaluate and adjust to the economic realities the country faces to avoid taking steps that add fuel to the inflation fire" and that "Senator Manchin has not walked away from the table." The report included a statement from Senate Finance Committee Chairman Ron Wyden (D-OR) saying, "I'm not going to sugarcoat my disappointment here, especially since nearly all issues in the climate and energy space had been resolved … This is our last chance to prevent the most catastrophic — and costly — effects of climate change."
Roll Call July 13 had reported Manchin as saying on tax increases, "I'm looking at anything that can basically make the [tax] system fair … I'm not looking at penalizing anybody. I don't think we should be raising taxes. But the bottom line is there's loopholes that can be closed."
In addition to an expansion of the Net Investment Income Tax (NIIT) to passthrough income, there had been discussions of including the 15% corporate alternative minimum tax (CAMT), perhaps in modified form, and proposals to align GILTI with the OECD BEPS 2.0 minimum tax (through a 15% rate and country-by-country calculation) that Manchin had reportedly expressed resistance to. Bloomberg Tax reported this morning, "On the international stage, Manchin's position puts US cooperation with a global tax overhaul in limbo. Democrats planned to use the major tax and spending package to bring the US into alignment on one of the two major parts of that agreement — a 15% global minimum tax."
Competitiveness — Following Senate Republican Leader Mitch McConnell's (R-KY) comments this week that the USICA-COMPETES conference committee is "stuck," Senator Schumer on July 14 said he would move to bring to the floor next week a much narrower bill focused only on chips manufacturing and a few other agreed-upon items. But even that effort may fail if Republicans filibuster Schumer's effort.
Schumer told senators to expect a floor vote as early as Tuesday (July 19) on moving to consider a stripped-down version of the China bill that would include the $52 billion in chips manufacturing incentives, a 25% tax credit for investments in semiconductor manufacturing (both for manufacturing equipment and construction of semiconductor facilities), money to speed the rollout of the 5G telecom network, and perhaps a few other provisions from the larger bills.
But Senator John Cornyn (R-TX), a leading supporter of USICA and a key ally of McConnell, told reporters that many Republicans would oppose moving forward with even a slimmed-down bill until Democrats ran out of time to pass their separate economic package. It was not clear if, after news of Senator Manchin shutting down climate and tax increase proposals, the prospect of a vastly smaller, health-focused reconciliation bill might ease the impasse between the parties and its effect on the separate China/chips negotiations.
Global tax — Tax Notes reported that the Czech presidency of the EU Council will "strive" during the summer to make sure an agreement on the implementation of pillar 2 of the OECD global corporate tax deal can happen in October. "We would like to achieve a Council position at the October Economic and Financial Affairs (ECOFIN) meeting as far as pillar 2 is concerned," Zbynek Stanjura, minister of finance of the Czech Republic, told members of the European Parliament during a July 13 economic dialogue.
Housing — On Wednesday, July 20, the Senate Finance Committee will hold a hearing, "The Role of Tax Incentives in Affordable Housing."
Today, July 15 (12:00 p.m.), is the EY Webcast, "Tax in the time of COVID-19: Update on legislative, economic, regulatory and IRS developments." Register .