December 18, 2022
Americas Tax Policy: This Week in Tax Policy for December 16
This week (December 19-23)
Congress: The House and Senate are in session, facing a December 23 expiration of government funding.
Last week (December 12-16)
Government funding: The House and Senate approved a one-week continuing resolution (CR) to extend government funding through December 23, as Congress prepares to try to pass an omnibus appropriations bill next week before departing for the holidays. "With Republicans set to take control of the House in early January and retiring lawmakers eager to pass a final set of funding and legislative priorities, Democrats and several Republicans have labored to complete the spending package before the congressional term ends, rather than leaving one to be finished in the new year," the New York Times reported. After many weeks of negotiation, top congressional appropriators December 13 announced agreement on a spending framework for an omnibus bill. Details of the agreement haven't been announced. Punchbowl reported that text of the omnibus isn't expected to be released until Monday and that, "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." A subsequent report cited Senators Mike Lee (R-UT) and Rand Paul (R-KY) as among those with concerns that the omnibus text will not be readied in time for an adequate review before votes, and who therefore could be poised to exercise procedural objections to slow the process.
Tax: Inclusion of any tax items isn't completely clear, though members expressed optimism that a SECURE 2.0 retirement package would be included. Thursday evening was said to be the deadline for members to reach agreement on tax and retirement items for inclusion. House Ways & Means Ranking Member Kevin Brady (R-TX) said in Politico December 14 that he believes appropriators are leaving room in the omnibus for a very narrow tax title, but that the retirement reform bill could move without the inclusion of any other tax items, such as R&D expensing, modifications to IRC Section 163(j), and an expanded Child Tax Credit. Tax Notes December 15 reported Rep. Brady as saying he believes leadership is prepared to put the retirement package into the omnibus if the mini-tax-title is derailed. "Besides the expensive marquee items being debated, a package of much smaller tax extenders, such as renewing an expired three-year amortization period for racehorses age two and younger, is being considered," the report said. Politico Morning Tax reported about relief from the third-party network transactions reporting threshold reduction to $600 under the American Rescue Plan Act, "Lawmakers in both parties have shown an interest in offering taxpayers some relief from that requirement, though it would be difficult for any one single provision to slip through with so many others likely on the outside looking in."
Bloomberg Tax cited Senate Finance Committee chair Ron Wyden (D-OR) as saying Democrats "haven't been able to get enough traction" on a deal that includes an expanded child tax credit and business tax breaks, in a December 14 report citing Republicans as saying they will make relief from the IRC Section 174 R&D amortization requirement a priority next year. There has been bipartisan interest in acting on relief from the IRC Section 174 R&D amortization and IRC Section 163(j) TCJA cliffs, but Democrats have insisted 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. Politico reported second-ranking Senate Republican John Thune (R-SD) as saying December 13, "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."
Global tax: On December15, the Council of the EU (i.e., the EU Member States) unanimously adopted the Directive ensuring a global minimum level of taxation for multinational enterprise (MNE) groups and large-scale domestic groups in the Union (the Directive). This adoption follows a Permanent Representatives Committee II meeting (COREPER II) held on December 12 where EU Member States' ambassadors reached unanimous agreement on the Directive and made the decision to advise the Member States to adopt the Directive via written procedure. The text in the adopted Directive is the version that was published by the Czech EU Presidency on November 25. The adopted version includes only editorial changes following a legal-linguistic review by the EU institutions, as compared to the previous compromise text of June 21. EU Member States have until December 31, 2023, to transpose the Directive into national legislation with the rules to be applicable for fiscal years starting on or after December 31, 2023, with the exception of the backstop Undertaxed Profits Rule (UTPR) which is to be applicable for fiscal years starting on or after December 31, 2024. An EY Tax Alert has details.
In a December 15 letter to Treasury Secretary Yellen, Senate Finance Committee Ranking Member Mike Crapo (R-ID), Senate Foreign Relations Committee Ranking Member Jim Risch (R-ID), Ways & Means Ranking Member Brady and several other Republican members of Congress said, in part: "For the past two years, the Biden Administration has routinely made commitments in the OECD negotiations it has no authority to fulfill. Despite Treasury's actions to date, it cannot dictate U.S. tax law or compel Congress to act … While some may believe that implementation by foreign countries of the model rules, including the UTPR, will lead the United States to follow suit, Congress's hand will not be forced. Nor will Congress sit idly by as U.S. companies and profits are taxed in a manner inconsistent with U.S. law and our bilateral tax treaties."
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.