July 20, 2022
What to expect in Washington (July 20)
Not so fast on ruling out a reconciliation bill with climate policies and tax increases, according to some top Senate Democrats, after Senator Joe Manchin's (D-WV) announcement last week that he couldn't support proposals beyond health care given inflation concerns. "I haven't walked away from anything, and inflation is my greatest concern, because of how it's affected my state, people of my state and all over this country. And that's all I have to say. I don't know what tomorrow brings," Manchin said July 18, CNN reported.
Keeping hope alive for a climate package, Senate Finance Committee Chairman Ron Wyden (D-OR) released a statement July 18 saying, in part: "Conversations on clean energy must continue to preserve our options to move forward. Nearly all of the clean energy credits have already expired, and it will be difficult to extend them at the end of the year. Even if we reach an agreement with Republicans on an extension, it will likely be for only a handful of years, far short of the permanent reform we could achieve in our package. Without long-term certainty, investment in clean domestic energy will fall far short of what is necessary … "
Axios reported July 19: "Democratic leaders still plan to move quickly on legislation that lowers the cost of prescription drugs and provides subsidies for the Affordable Care Act — and get it to Biden in early August before Congress leaves for recess. But if June's 9.1% inflation rate cools off enough to keep Manchin interested, they could take a final shot at the climate provisions he forced them to abandon this month. "We're open to it, whatever the vehicle may be," Senate Majority Whip Dick Durbin (D-Ill.) said. "There is a second possibility." Bloomberg reported that if a health-focused reconciliation bill is processed, that would likely preclude another reconciliation bill that addresses taxes under the FY2022 budget, and an FY 2023 budget would likely need to be processed to provide another set of reconciliation instructions.
Durbin has long expressed skepticism over efforts to negotiate with Senator Manchin and said July 18, "My major frustration is I think Joe should have made his position a hell of a long time ago," The Hill reported.
Senator Manchin on Friday said he wouldn't agree to a broader reconciliation bill now — not before seeing the July inflation numbers, which are scheduled for release on August 10. He said he would want to see the July CPI figures drop to 7-8% year-over-year, and they will demonstrate to lawmakers if they are on track with the recent discussions or need to adjust.
Meanwhile, House Speaker Nancy Pelosi (D-CA) is prepping her members to accept whatever the Senate can pass on reconciliation and USICA-COMPETES, even if bills fall short of previous aspirations. She said in a July 18 Dear Colleague letter, "we are constantly striving to bring a COMPETES bill to the Floor as well as address the new developments on the Reconciliation bill. In both cases, we must accept the good and continue our negotiations for more … The health provisions of a potential Reconciliation package are essential, as we must act to reduce the cost of prescription drugs. It is of the highest priority for House Democrats that we continue our fight to save the planet For The Children, as this is an issue of health, jobs, security and values."
Today, President Biden will deliver remarks in Somerset, Mass., on climate change at a former power plant that will now produce transmission cables for offshore wind, the Wall Street Journal reported. The president will announce "additional actions he will take to tackle the climate crisis and secure a clean energy future," according to White House press secretary Karine Jean-Pierre, but she downplayed prospects for an announcement this week on a national climate emergency.
Two of the main story lines since Manchin's comments last week put the future of a reconciliation bill beyond health care provisions even more in doubt have been Democratic climate policy aspirations being dashed and questioning the future of the OECD-led global tax agreement after Manchin specifically said he took changes to bring GILTI in line with the Pillar Two 15% minimum tax off the table during the negotiations, to preserve the competitiveness of US companies.
Global tax — A July 18 New York Times story on the potential inaction on international tax changes said, "Failure to get agreement at home creates a mess both for the Biden administration and for multinational corporations. Many other countries are likely to press ahead to ratify the deal, but some may now be emboldened to hold out, fracturing the coalition and potentially opening the door for some countries to continue marketing themselves as corporate tax havens." The story also said some countries opting to act "poses risks for U.S. companies, including the chance that their tax bills could go up, given an enforcement mechanism that the Treasury Department helped create to nudge reluctant countries into the agreement. If the United States doesn't adopt a 15 percent minimum tax, American companies with subsidiaries in participating countries could wind up paying penalty taxes to those foreign governments."
The story quoted Barbara Angus, the global tax policy leader at Ernst & Young, as saying a failure by the United States to comply with the deal would have "significant implications" for American companies. "'For this framework to work as it's intended, there really does need to be consistency and coordination,' said Ms. Angus, who is also a former chief tax counsel on the House Ways and Means Committee," the NYT reported.
Kimberly Clausing, who recently stepped down as Treasury's deputy assistant secretary for tax analysis, tweeted July 19, "the agreement is smart. It has an enforcement mechanism (the UTPR) that will encourage countries to adopt. If some countries have the courage to lead, others will have strong incentives to follow."
NPR reported of Treasury Secretary Janet Yellen July 19: "It could potentially take years for the U.S. to pass the initiative, Yellen acknowledged in a Tuesday interview with Morning Edition. But she says it's too important not to revisit — and believes that as other countries adopt a minimum corporate tax, they will incentivize Congress to pursue legislation that will bring the U.S. into compliance too."
USICA/'Chips-Plus' — The Senate on Tuesday night voted, 64-34, to proceed to a slimmed-down version of the semiconductor/China competition bill, with a bicameral conference committee having become bogged down. A vote to end debate on the bill is expected as early as Thursday, with final votes early next week. Presuming the Senate passes the bill, the House would take up Chips-Plus next week.
Majority Leader Chuck Schumer (D-NY) had told senators that if the motion to proceed to the bill, now called "Chips-Plus," received 60 votes or more, the text of the bill would have a wider scope than simply the semiconductor subsidies that are widely popular. Schumer, Sen. Todd Young (R-IN), Sen. Kyrsten Sinema (D-AZ) and others had assembled a 1,000-page substitute amendment that is 10 times as long as the alternative, narrow chips bill Schumer originally filed, which would have come to the floor if the motion to proceed had not received 60 votes.
But given the strong vote, in addition to more than $52 billion in grants and incentives for companies building semiconductor fabrication plants in the U.S., and a multi-year 25% investment tax credit for semiconductor plants (estimated to cost $24 billion), the bill will include a number of "science and commerce" provisions drawn from the Senate-passed USICA bill. These include $500 million for an international secure communications program; $200 million for worker training; and $1.5 billion for public wireless supply-chain innovation. The larger bill also would establish a directorate for technology and innovation in the National Science Foundation to support basic and applied research and bolster education in science, technology, engineering and mathematics.
Although Young earlier Tuesday had floated the prospect of including a tax provision that would have (for one year, retroactively) restored expensing of research and development costs (as opposed to five-year amortization), the R&D provision was not included in the substitute amendment. Roll Call reported that Senate Finance Committee Ranking Member Mike Crapo (R-ID) said that because of disagreements on trade provisions, those would be left out for future negotiation in a separate vehicle. The Republicans who voted for the motion to proceed were: Roy Blunt (MO), Shelley Moore Capito (WV), Bill Cassidy (LA), Susan Collins (ME), John Cornyn (TX), Steve Daines (MT), Lindsey Graham (SC), Bill Hagerty (TN), Rob Portman (OH), Mitt Romney (UT), Mike Rounds (SD), Ben Sasse (NE), Thom Tillis (NC), Roger Wicker (MS) and Sen. Young. Among those caucusing with Democrats, only Bernie Sanders (I-VT) opposed the motion to proceed.
Housing — Today, July 20, the Senate Finance Committee will hold a hearing, "The Role of Tax Incentives in Affordable Housing."