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December 14, 2022

What to expect in Washington (December 14)

Last night, top congressional appropriators announced agreement on a spending framework for an omnibus bill, without releasing details. House Appropriations Committee Chair Rosa DeLauro (D-CT) said, "We have a framework that provides a path forward to enact an omnibus next week. Now, the House and Senate Appropriations Committees will work around the clock to negotiate the details of final 2023 spending bills that can be supported by the House and Senate and receive President Biden's signature."

Republican Leader Mitch McConnell (R-KY) had said Tuesday that negotiators were "very close to getting an omnibus appropriations bill … [that] would meet the defense number of the NDAA without having to pay a bonus above what President Biden asked for, for domestic priorities of the Democrats." On timing, he said, "This needs to be finished no later than late evening on the 22nd. We intend to be on the road going home on the 23rd. We intend not to be back here between Christmas and New Year's. And if we can't meet that deadline, we'd be happy to pass a short-term CR into early next year."

The House today is set to pass a short-term continuing (CR) to carry funding from December 16 until the end of next week, amid calls from some Republicans for a short-term CR into early next year. "This one-week continuing resolution is an attempt to buy additional time for a massive lame-duck spending bill in which House Republicans have had no seat at the negotiating table," said a notice from Republican Whip Rep. Steve Scalise (R-LA) cited in the Washington Post. The Senate is set to pass the one-week CR on Thursday.

Punchbowl this morning: "Next week could be difficult. It will take the House a day or two to pass the omnibus. Speaker Nancy Pelosi can only afford to lose two votes. Very few — if any — Republicans will vote for it. Democrats will look for GOP members who aren't coming back next year for help. The Senate will need unanimous consent to get this bill finished in time. Any single senator can slow the process down."

Tax - Prospects for adding a tax package seemed to be dimming, though it's unclear if positive news on an omnibus deal could change that. There is bipartisan interest in acting on relief from the IRC Section 174 R&D amortization and IRC Section 163(j) TCJA cliffs and non-energy tax extenders, but Democrats insist on including a Child Tax Credit (CTC) expansion that Republicans are resistant to. "We'd like to do some tax things, but our caucus feels very strongly that the Child Tax Credit should be there as long as there are some corporate tax breaks, and so far, we don't have agreement from the Republicans," Senate Majority Leader Chuck Schumer (D-NY) said December 13.

A spokeswoman for Senate Finance Committee Chairman Ron Wyden (D-OR) said, "Republicans have refused to engage at all on the Child Tax Credit. In fact they made clear they would not negotiate on any deal that include the Child Tax Credit," according to Huffington Post.

A story in the December 13 Wall Street Journal said, "Lawmakers are struggling to reach bipartisan agreement on a year-end tax deal, and businesses and antipoverty advocates both look unlikely to get what they want. Republicans and many companies want to reverse, prevent or delay some tax increases on businesses that were scheduled in a GOP-backed 2017 tax law and that began taking effect this year. Democrats, who control the House and Senate, have expressed openness to some changes, but they want to expand the child tax credit at the same time. With just a few weeks remaining before the new Congress starts Jan. 3, key members of Congress haven't agreed to any such deal, lawmakers and aides said." The story said obstacles won't necessarily be removed next year when Republicans control the House. "The longer you pass on opportunities to solve problems, the bigger, the deeper the ditch you're in," Chairman Wyden was quoted as saying.

Politico reported second-ranking Senate Republican John Thune (R-SD) as saying, "I don't see it now — I'm certainly not getting good vibes on a tax title … There's a lot of expiring tax policy that needs to be extended, and which enjoys bipartisan support, but as is usually the case, there is a ransom to be paid when it comes to tax policy and the price [demanded by Democrats] may be too high."

Congress - The House and Senate have released 2023 calendars. Roll Call has a combined version.

Global tax — There was big news in the international tax world as the European Council announced December 12 that EU member states decided to advise the Council to adopt the Pillar 2 global minimum tax directive and the Committee of Permanent Representatives reached the required unanimous support. The directive must be transposed into member states' national law by the end of 2023.

Hungary dropped its months-long objection to the directive, apparently in conjunction with approval of its own recovery and resilience plan and a financial support package for Ukraine, after the Czechia EU president previously predicted the three elements would move as one package. However, Tax Notes reported that Poland "could not offer its support for pillar 2 at that time because it needed to conduct further analysis," which other member states hope will be in time for the written procedure for adopting the package, meaning by the evening of December 14. Poland previously dropped its opposition to the directive in June, at which time Hungary opposed it, citing the economic situation in Europe.

IRS - In Revenue Procedure 2022-42, the IRS has established procedures under IRC Section 30D(d)(3) governing agreements between qualified vehicle manufacturers and the Treasury regarding the production of automobiles that are eligible for a clean vehicle credit. The guidance also provides procedures for vehicle sellers that must report pertinent information to the IRS.

Federal Reserve — The Wall Street Journal: "The Fed will announce its policy decision at 2 p.m. ET. Investors expect the central bank to raise its key policy rate by half a percentage point, marking a slowdown from its recent pace of policy tightening."

Friday, December 16 (12:00 p.m.), is the EY Webcast, "Tax in the time of COVID-19: update on legislative, economic, regulatory and IRS developments." Register.


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