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This Week (August 8-12)

Congress: The Senate is aiming to consider the Inflation Reduction Act over the weekend, with final passage possible late Sunday night or overnight into Monday. The House is planning to reconvene to consider a Senate-passed reconciliation bill on Friday, August 12.

Competitiveness: The White House announced that President Biden will sign the CHIPS & Science competitiveness bill on Tuesday, August 9.

WCEY Alerts will be published as the Senate and House consider the Inflation Reduction Act, but This Week in Tax Policy will be on hiatus until September.

Last Week (August 1-5)

Reconciliation: The Senate is set to consider over the weekend the Inflation Reduction Act (IRA) health-climate-tax bill after Senator Kyrsten Sinema (D-AZ), the key 50th vote for a reconciliation bill in the evenly split Senate, announced late August 4 that she will support the bill after she secured changes. The changes include dropping the increase in the carried interest holding period for capital gains treatment to five years (from three) and changing the corporate alternative minimum tax (CAMT) proposal to preserve depreciation deductions for certain manufacturers. "We have agreed to remove the carried interest tax provision, protect advanced manufacturing, and boost our clean energy economy in the Senate's budget reconciliation legislation. Subject to the Parliamentarian's review, I'll move forward," she said. The Senate is "on track to begin consideration of the bill" August 6, Senate Majority Leader Chuck Schumer (D-NY) said during an August 5 news conference, adding he believes the revised bill will receive the support of the entire Democratic Conference. Senator Schumer said two pieces of the previous $313 billion corporate alternative minimum tax proposal were taken out "but most of it stays in" and $258 billion remains. The Wall Street Journal reported August 5, "Democrats also pared back elements of a 15% minimum tax on large, profitable corporations. Instead of denying manufacturers the tax benefits of accelerated depreciation, the new agreement will preserve it for at least some manufacturers." Senator Schumer also said "we are adding in an excise tax on stock buybacks that will bring in $74 billion," which is $50 billion less than the $124 billion estimate for the stock buyback proposal in the House-passed BBBA. It remains unclear exactly how both provisions have been changed.

Senator Schumer previously announced the Senate will next convene at noon on Saturday, August 6; the latest compromise version of the reconciliation bill will be introduced on Saturday; and a motion to proceed to the IRA is expected Saturday afternoon. Twenty hours of debate will follow, culminating with the vote-a-rama rapid-fire series of amendment votes, possibly setting up final passage late Sunday night or overnight into Monday. Politico August 5 reported Senator Chris Coons (D-DE) as saying the vote-a-rama is "going to start later than we imagine, it's going to run longer than we would hope and it's going to be more painful getting out of here than any of us have any reason to expect." Sen Joe Manchin (D-WV) said of the reconciliation bill August 4, "We will land the plane … I'm not sure exactly when … but we'll land it," CBS News reported. Senator Sinema's announcement — capping more than a week of speculation over whether she would support the bill and what changes to the original Schumer-Manchin compromise her support would require — seemed to secure requisite support for the bill that can pass the Senate with only Democratic votes. Majority Leader Steny Hoyer (D-MD) announced that, assuming the Senate passes the bill early in the week, the House will convene on Friday, August 12, to take up the legislation. [With proxy voting still allowed in the House, a relatively small number of members would be required to return to Washington]. If Democratic leadership plans come to fruition, the bill that has been discussed by Democrats in Congress for over a year will be on a glidepath to enactment, albeit at a much smaller size than originally envisioned.

Republican views: Republicans have been signaling that they intend to make Democrats take tough votes during the vote-a-rama. Senator Schumer said, "they're going to do lots of amendments, we don't know what else they will do" — possibly referring to requiring the reading of the revised text on the floor — but he believes the bill will have 50 votes at the end of the day. During an August 5 Republican news conference, Senator Lindsey Graham (R-SC) suggested Republican Senators are still aggrieved over the July 27 announcement of a revived reconciliation bill so closely following, earlier that day, Senate approval of the CHIPS & Science bill. (Republicans had previously suggested they wouldn't agree to that measure if reconciliation was still alive, and 17 Republicans voted for the bill as reconciliation appeared dead.) "So, what will vote-a-rama be like? It'll be like hell," he said. At the news conference, Republican Whip John Thune (R-SD) called out some specific climate policies that, he suggested, appear frivolous and amount to spending that is "not a priority for the American people" given the inflation they are experiencing. "We will be offering a lot of amendments designed to target these specific areas of the bill," he said. Senator Thune also called on Senators Manchin and Sinema to oppose a "wrap-around amendment" that can be used by Democratic leaders to clear away amendments that have been agreed to during the vote-a-rama.

In a WSJ op-ed published before the announcement suggesting there will be depreciation exemptions for some manufacturers, Senator Rob Portman (R-OH) repeated Republican arguments that the corporate alternative minimum tax (CAMT) would be passed on to average Americans through lower wages and higher prices. He also said, "The U.S. tried a minimum book tax in the 1986 tax reform, and Congress repealed it in 1989 because lawmakers realized the dangers of mixing reporting for tax and financial purposes. Two such dangers are that it creates an incentive for companies to alter their financial statements to reduce taxes and risks politicizing the body in charge of setting accounting standards, the Financial Accounting Standards Board, which should be kept free from lobbying."

Climate: The IRA would extend the section 45 production tax credit for electricity from renewable resources, section 48 investment tax credit, and biodiesel and alternative fuels credits through 2024, then transition to technology-neutral emissions-based credits. It includes extensions of the 45Q carbon oxide sequestration credit, 48C advanced energy property credit, and credits for energy efficient homes, plus new credits for nuclear power, hydrogen, and sustainable aviation fuel. EV credits would be offered for new, used, and commercial vehicles with income and MSRP limitations. Bloomberg Government reported on the fact that the bill "would reinstate and increase a long-lapsed tax on crude and imported petroleum products to 16.4 cents per gallon … The Superfund tax, which previously stood at 9.7 cents per barrel until it lapsed at the end of 1995, is paid by refiners and other importers to help fund the clean-up of hazardous waste sites. In addition to increasing the tax, the Senate proposal would index the fee to inflation."

Senate Finance Committee Democrats released a section-by-section summary of energy provisions, which is here.

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

Foreign tax credit regulations: An EY Alert, "Technical corrections to foreign tax credit regulations offer relief from cost recovery rules and include other impactful changes," has been posted here.

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