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Tax is playing a role in the back-and-forth over government funding, with a group of Senate conservatives calling for a continuing resolution (CR) only into early 2023 so Republicans can leverage uncertainty over funding for the remainder of the fiscal year ending September 30, 2023, to try to knock out the $80 billion IRS funding boost that was included in the Inflation Reduction Act (IRA). Senator Ted Cruz (R-TX), who played a primary role in the 2013 government shutdown, was cited in The Hill newspaper as suggesting the next Republican Speaker, who is expected to be Rep. Kevin McCarthy (R-CA), could use his leverage to block funding for IRS enforcement, and called funding for new IRS agents a "major issue."

Cruz and Senators Rick Scott (R-FL) — who challenged the efficacy of Senator Mitch McConnell's (R-KY) leadership after Republicans were unsuccessful in winning control of the Senate — Mike Lee (R-UT) and Mike Braun (R-IN) wrote to McConnell November 30, "We believe it would be both imprudent, and a reflection of poor leadership, for Republicans to ignore the will of the American people and rubber stamp an omnibus spending bill that funds ten more months of President Biden's agenda without any check on his reckless policies."

Senator McConnell November 29 said he and other leaders want an omnibus funding bill through the end of the fiscal year and acknowledged some members may prefer a year-long CR but didn't directly address the question of a short-term CR so that Republicans can put their own stamp on the legislation. Rep. McCarthy did not rule out a short-term CR and other House Republicans have said the government funding or debt limit fiscal deadlines could be used to force action on IRS funding or other issues.

Most of the discussion among Senate appropriators has been on the partisan dispute over defense and non-defense discretionary spending. Punchbowl reported Senate Appropriations Ranking Member Richard Shelby (R-AL) as saying it may take until December 23 to process an omnibus if one comes together.

The top editorial in the December 1 Wall Street Journal said: "Congressional sources tell us Democrats are asking for $150 billion in additional spending, split roughly between defense and non-defense. That's not counting the White House's separate demand for $9 billion more in Covid funding; a bipartisan push for $38 billion in Ukrainian aid; the annual "tax extender" dance; or the left's child-tax credit expansion (at least $100 billion annually)."

Regarding prospects for a tax package, House Ways & Means Committee Ranking Member Kevin Brady (R-TX) reupped his insistence that the focus be on bipartisan items like relief from the IRC Section 174 R&D amortization TCJA cliff, and his skepticism over enhancing the Child Tax Credit as Democrats insist upon. "Brady said Tuesday that [the] child tax credit is a costly provision, noting that extending the research tax breaks until 2025 would cost about $20 billion compared to the cost of extending the child tax credit changes, which would be an estimated $120 billion each year," according to a Law360 report. "'Certainly, there's a mismatch in cost between the bipartisan tax provisions and the child tax credit,' Brady said. 'I think we're going to need to refocus where there's bipartisan opportunity.'"

"We're just beginning to have discussions on taxes," Senate Finance Committee Chairman Ron Wyden (D-OR) said in a Bloomberg Daily Tax Report (DTR) story on advocacy efforts for relief from the third-party network transactions reporting threshold reduction to $600 under the American Rescue Plan Act. Until Tuesday's Big Four congressional leaders meeting with the President, "when there was a sign of life with respect to the spending issue, I wasn't convinced there'd be much of a path for taxes," he said.

Congress — The Senate December 1 approved 80-15 a resolution approving the rail labor agreement reached between the White House, railroads, and unions, sending the measure to the President for his signature and averting a rail strike within a week. A separate measure adding a week of additional paid leave to the deal did not have requisite support. The New York Times explained, "It was the first time since the 1990s that Congress had used its power under the Constitution's commerce clause, which allows it to regulate interstate commerce, to intervene in a national rail labor dispute. Leaders in both parties said they were reluctant to do so, and some lawmakers — particularly progressives — were deeply frustrated about being called upon to override the will of rail workers pressing for basic workplace rights."

The House is set to vote this morning on H.R. 8876, the Jackie Walorski Maternal and Child Home Visiting Reauthorization Act of 2022, and is set to take up the National Defense Authorization Act (NDAA) next week. The Senate next convenes at 3 p.m. on Monday, December 5, with a nomination vote at 5:30 p.m.

Tax — A December 1 DTR story on the IRS energy wage and apprenticeship requirements notice released on November 29 said, "the guidance didn't give stakeholders all the details needed to comply" and that IRS plans to issue proposed regulations and more guidance. "In order to maximize their piece of the tax credits provided in the Inflation Reduction Act, investors have to pay laborers and mechanics working on their project the prevailing wage — a rate set by the US Department of Labor based on the local hourly pay plus fringe benefits — and use trained workers who have participated in a DOL-official registered apprenticeship program to complete a certain percentage of the project," the story said. "The guidance covers when construction will need to be started, how much time a taxpayer has to finish the project, what reporting is required, and what to do if a prevailing wage isn't already established to meet the labor requirements."

Global tax — A December 1 Tax Notes story said ECOFIN, the group of EU finance ministers, may need to hold additional meetings even if Hungary drops its opposition to the global Pillar Two proposal "now that the European Commission has greenlighted its recovery and resilience plan." Member state representatives were to discuss Pillar Two issues December 1 ahead of an Economic and Financial Affairs Council meeting December 6. ECOFIN could adopt the Hungarian recovery plan on December 12. "A second ECOFIN meeting dedicated to pillar 2 and the Hungarian recovery plan could be scheduled in December, depending on the outcome of the discussion between the permanent representatives," the story said.

A subsequent story said: "The Hungarian permanent representative to the EU told his peers that the country still hasn't changed its position on pillar 2 of the global tax deal ahead of an Economic and Financial Affairs Council meeting. During a December 1 meeting of the Committee of Permanent Representatives (COREPER), Hungary reportedly reiterated its opposition to pillar 2. Officials have suggested that Hungary is using its veto of pillar 2 to get its recovery plan approved."

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