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August 3, 2022

What to expect in Washington (August 3)

A major question regarding the Inflation Reduction Act health-climate-tax bill is whether Senator Kyrsten Sinema (D-AZ) will support it and what changes she may demand. Senator Joe Manchin (D-WV) said August 2 he is "exchanging text back and forth" with Senator Sinema, and Senate Majority Leader Chuck Schumer (D-NY) is "working with all the caucus" to get buy-in from all 50 members to get the budget reconciliation bill to the floor later this week, The Hill reported. The story said: "Manchin said he's open to considering changes suggested by Sinema, including on a proposal to close the carried interest tax loophole, one of his priorities. 'We're just basically exchanging back and forth whatever I have that she hasn't seen. And our staffs are working together very closely,' he said."

On timing, the Medicare prescription drug negotiation language is still before the Parliamentarian, and climate and tax titles are to follow. Consideration of the bill is still planned for this week and into the weekend, culminating with the vote-a-rama rapid-fire series of amendment votes backed up against the start of the August recess. Leader Schumer said on the floor August 1, "Over the coming days, both sides will continue conversations with the Parliamentarian in order to move forward the bipartisan Byrd bath process. Our timeline has not changed, and I expect to bring this legislation to the Senate floor and to begin voting this week."

Politico reported August 2 that Schumer is promising to bring the measure up for consideration "even before the full package can be scrubbed," meaning the Parliamentarian's review could continue while the bill is on the floor. The report said: "Schumer has told his caucus to prepare to stay in through the weekend to finish up the package … The process of vetting Democrats' drug pricing provisions by the parliamentarian has taken more than a week (and is expected to continue into today). And after that, there's still the tax and climate portions to wrangle over. Staff on both sides of the aisle are expecting to have consecutive meetings with the parliamentarian through at least Wednesday … " It also said, "A notice sent out about the floor schedule said that the fine-tooth-comb evaluation of the bill's compliance with Senate rules for budget reconciliation would 'likely continue throughout consideration of the bill and could happen in real time.'"

Punchbowl reported August 2: "There's hope that the Senate could begin a vote-a-rama later in the week, possibly this weekend, but the situation is confusing. Senate Finance Committee Chair Ron Wyden (D-Ore.) wouldn't divulge much about Democrats' progress with the Senate parliamentarian, other than to say he'd barely left his desk since Thursday. Yet it seems that the Parliamentarian Elizabeth MacDonough hasn't even issued full guidance for the Medicare prescription drug pricing section of the package yet, and that review has been going on for more than a week. So it's unclear how long the rest of the 'Byrd bath' for this package will take. The Byrd Rule controls reconciliation in the Senate."

A separate Politico report August 2 said: "Senate Democrats will probably start a climactic series of votes on their party-line energy, tax and health care bill this week with very little public indication of where Sen. Kyrsten Sinema stands. They're willing to risk it. While all of Washington waits on the Arizona Democrat, her previous treatment of high-profile issues shows she's unlikely to make any statement about how she sees the deal written by [Manchin and Schumer] — at least until it's on the floor. If the past is prologue, she'll also be a wild card on amendments that Republicans may offer in a bid to alter the bill on the Senate floor during votes later this week."

A Washington Post editorial encouraging Senator Sinema not to sink the bill said while she was left out of the Schumer-Manchin talks, "The deal, nonetheless, is largely in line with the preferences she laid out in past negotiations: from its relatively modest reforms to prescription drug pricing to action on climate to the 15 percent corporate minimum tax rate estimated to raise $313 billion. Indeed, that the legislation neglects broader hikes on the highest-income Americans is itself a form of concession. There is, however, a big exception. The closure of the carried interest loophole … "

An EY Alert, "Inflation Reduction Act of 2022 includes many provisions related to energy transition and renewable energy," is here.

CAMT — In his floor statement, Leader Schumer pushed back against Republicans pointing to JCT figures that the corporate alternative minimum tax would increase taxes on those earning below $400,000 annually. "They are sounding alarms that this bill will raise taxes on American families, but it does not. Here is the plain truth: The bill will not raise any taxes — any taxes — on families making under $400,000 a year. Instead, it will close loopholes long exploited by the largest corporations that essentially give them lower tax rates than many nurses, firefighters, teachers," he said.

Senate Finance Committee Chair Wyden and Senator Elizabeth Warren (D-MA) released additional data provided by the Joint Committee on Taxation (JCT) intended to rebut the Republican claims. "About half of the 15 percent corporate minimum tax paid by 'American manufacturers' would include well-known tax dodgers in the pharmaceutical and technology industries, as well as other outsourcers like the apparel industry, where 97 percent of clothing sold in the U.S. is made in overseas factories." [Senator Warren proposed a "Real Corporate Profits Tax" of 7% on a corporation's book income over $100 million during the campaign for the 2020 Democratic presidential nomination, introduced a bill last August, and said in May "We've got 50 Democrats ready to do this."]

A Wall Street Journal editorial on the CAMT said, "Often the putative tax gap emerges because the law allows companies to write down their investment costs faster on their tax returns than accounting rules permit for financial statements. Congress created the exemptions, deductions, credits and depreciation schedules that also reduce companies' taxable earnings specifically to encourage certain kinds of capital expenditure. Sens. Schumer and Manchin partially admit this, because their bill preserves some of those provisions. Research-and-development tax credit, the low-income-housing credit, various production credits, green energy credits — the gang's all here. Instead the minimum tax tries to negate accelerated depreciation on business investment. Is punishing investment really a good idea on the edge of recession?"

On another matter, it said, "The Biden Administration is enamored with this OECD minimum-tax plan and wants Congress to pass it. But there's now a significant risk that passing the Schumer-Manchin plan while European countries adopt the OECD scheme could lead to punishing taxes for U.S. companies. This would happen if European governments don't treat the U.S. law as equivalent to the OECD plan — which European governments might not, since the laws are so different."

Axios reported that the National Association of Manufacturers and the Arizona Chamber have launched an ad buy in Arizona pressuring Senator Sinema to oppose the CAMT.

The Congressional Research Service published an "In Focus" briefing document on "The Corporate Minimum Tax Proposal."


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