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This week (November 14 - 18)

Congress: The first item on tap upon the Senate's return the week of November 14 had been expected to be the National Defense Authorization Act, which the House passed over the summer. However, Bloomberg reported November 10 that Senate Majority Leader Chuck Schumer (D-NY) is instead planning to focus on judicial nominations. House and Senate Republicans are scheduled to hold their leadership elections on November 15 and 16, respectively.

Last week (November 7 - 11)

Elections: Control of the House and Senate has remained undecided for days following the midterm elections on November 8 in a historically unusual development that has put both short-term and long-term policy expectations on ice for the time being. Republicans are seen as holding more favorable odds than Democrats for ultimately controlling the House in 2023. Punchbowl reported November 10, "Top Democrats maintain that control of the House is still in play despite the fact that Republicans have claimed victory already." Politico reported November 11: "Republicans still have a wider path to the House majority than Democrats — but it's narrowed a lot over the past 24 hours. As the vote count continues, particularly in mail-heavy Western states, Democrats continue to win most of the contested races, keeping them in the hunt and meaning news organizations won't declare a winner in the overall fight for the chamber." A November 11 Washington Post analysis said while Republicans lead in the number of called races, "Most of the yet-to-be-decided districts are out West — read: Arizona, California, Nevada, Oregon and Washington — where the vote counting is slower, and most lean blue. That region has upward of 10 clearly blue seats that don't have enough votes in to be called, but are very unlikely to flip." Washington Post and NBC models both project Republicans to hold about 220 seats, just over the 218 needed for control, and the NBC forecast is plus or minus seven, meaning Democrats prevailing is essentially within a margin of error.

Regarding the Senate, Nevada and Arizona remained too close to call and, depending on the outcome of those races — which could remain unknown into the weekend and beyond — Senate control could come down to a December 6 Georgia runoff, as it did in the 2020 election. The Arizona Senate race is said to favor Senator Mark Kelly (D-AZ). AZ Central reported that Kelly led opponent Blake Masters by nearly 115,000 votes, or 5.6 percentage points, and there are roughly 500,000 ballots still to be counted statewide. Regarding the Nevada race, The Hill reported that Senator Catherine Cortez Masto (D-NV) trails Adam Laxalt by just under 9,000 votes, giving Laxalt a 1-point lead at 49% to 48% with 10% of votes in the state still needing to be counted.

Leadership elections: Despite the unsettled outcome, both parties are moving toward leadership elections for the next Congress. Democrats have signaled that their leadership elections will be held November 30, after Thanksgiving, and it remains to be seen if current Speaker Nancy Pelosi (D-CA) will seek to remain at the top of the House Democratic leadership line-up. House Republican leadership elections, including the Republican nomination for Speaker, majority leader, whip, and others, are set for November 15. These elections are conducted by a secret ballot of Republican members and candidates must win a majority of the vote to be selected. The nominee for Speaker, however, must also be backed by a majority of the entire House in a public vote on January 3, once the new Congress is seated. Current GOP Leader Kevin McCarthy (R-CA) is the frontrunner for Speaker should Republicans ultimately control the chamber, though, as has been foreshadowed in press stories over the past two months, the Freedom Caucus could complicate McCarthy's bid for Speaker and significantly steer the House agenda in a narrowly held Republican majority. Rep. Scott Perry (R-PA), the current Freedom Caucus chair, was quoted in the November 11 Wall Street Journal as saying, "We want to support a leadership team that supports more member engagement." The report cited other members as saying it is not a foregone conclusion that Rep. McCarthy wins the Speakership and that no one currently has the requisite 218 votes that will be necessary in January. The power of the Freedom Caucus is seen as being increased with a House Republican majority that could number in only the single digits, and the group is expected to seek representation on the GOP Steering Committee and input into what members sit on committees. It is possible that the Steering Committee meeting to consider committee chairmanships may not occur until after the January 3 vote for Speaker, if Republicans win control of the House.

In the Senate, Republicans are planning to hold leadership elections on November 16. The current team led by GOP Leader Mitch McConnell (R-KY) has been expected to stay largely intact aside from choosing a replacement for fourth-ranking Senator Roy Blunt (R-MO), who is retiring. However, some GOP senators are objecting to holding the elections next week and hinting at some dissatisfaction. Senator Marco Rubio (R-FL) tweeted November 11: "The Senate GOP leadership vote next week should be postponed. First we need to make sure that those who want to lead us are genuinely committed to fighting for the priorities & values of the working Americans (of every background) who gave us big wins in states like #Florida." CNN reported that others are similarly calling for a delay, citing the Georgia runoff election, and that a letter circulating in Washington cites the fact that "a Red Wave failed to materialize."

Lame-duck session: Amid the unsettled outcomes of the elections, lawmakers are about to embark on a pivotal lame-duck session with decisions to be made on the NDAA, government funding, and potentially the debt limit. The outlook for the timing of and how massive or austere a spending bill — likely an omnibus appropriations measure — to fund the government beyond December 16 will likely come into greater focus as members begin to convene for business next week. It has been well-reported that, regarding a tax package, there may be a partisan standoff between Democrats who insist that the enhanced Child Tax Credit (CTC) be included if business tax items are to be addressed, and Republicans who say the 2021 CTC expansion was too expensive and rife with implementation problems. Less expensive options are likely available. In Politico Morning Tax November 10, House Ways and Means Committee Ranking Member Kevin Brady (R-TX), who is retiring, said he has been discussing a tax package with Democrats, but the CTC is a "big challenge."

WCEY's Ryan Abraham was quoted in Tax Notes as saying, "If we're going to see tax policy, the lame duck is the best chance to clear the decks to get 174, 163(j) done." The tax package could address the TCJA "cliffs" that took hold this year on the IRC Section 174 requirement for five-year R&D amortization and on the IRC Section 163(j) interest deduction calculation, plus the phasedown of bonus depreciation after this year, as well as non-energy tax extenders and other items.

FTC regulations: Tax Notes November 8 reported an IRS official as saying that proposed foreign tax credit regulations may be less than two weeks away. The report said: "'Though the notice of proposed rulemaking hasn't been released yet, it was largely done quite a long time ago,' Peter Blessing, IRS associate chief counsel (international), said November 7 at the 38th annual Tax Executives Institute-San José State University High Tech Tax Institute in Palo Alto, California. 'Certain aspects and certain parts of the process have kept it from being released, but I do expect it … in the next 10 days.' Blessing was referring to proposed rules that are expected to address royalties and cost recovery … " Regarding the corporate alternative minimum tax (CAMT) project, Blessing said good comments have come in but cautioned against optimistic expectations on timing. "There will be a notice of some kind this year, likely to cover none of the international issues, likely to cover more big picture — the ones that have been in the press about recognition transactions, nonrecognition transactions," he said. A second notice will probably come soon after the first — "not by the end of the year, but certainly in time for first-quarter stuff," he added, according to the report.

IRS leadership: President Biden will nominate Daniel Werfel to lead the Internal Revenue Service, the Washington Post reported. He served as acting commissioner in 2013.

Global tax: A November 6 Bloomberg article reported: "France is ready to move ahead on a global minimum tax on companies next year if a European agreement cannot be reached, Finance minister Bruno le Maire said in an interview with Le Parisien newspaper published Sunday. 'If no European solution emerges by December, France will implement a 15% global minimum corporate tax by early 2023, through a national law,' Le Maire said. France for five years has been promoting the measure 'against the tax optimization of large groups, both foreign and French,' he added.

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