December 21, 2022
What to expect in Washington (December 21)
The Senate has taken a procedural vote to begin debate on the $1.7 trillion omnibus appropriations bill set to move through Congress before members depart for the holidays at the end of the week and before the expiration of government funding on December 23. The vote Tuesday was 70-25 in favor of the Motion to Proceed to the House message to accompany H.R. 2617 (the legislative vehicle for the Consolidated Appropriations Act FY2023). The bill, unveiled in the early morning hours of Tuesday, includes:
The bill does not include business tax provisions like relief from the IRC Section 174 R&D amortization requirement or modifications to IRC Section 163(j) — both of the TCJA cliffs that took hold this year — tax extenders, or an expanded Child Tax Credit (CTC). Democrats insisted on a CTC expansion as a condition of supporting business tax items, and a deal with Republicans couldn't be struck.
The debate over the CTC and other tax items is poised to continue next year, though a resolution is unclear. "Republicans have already said they're turning to next year to extend or make permanent some key business tax breaks, including one for research and development costs and more favorable rules for interest expenses and capital expenditures," Bloomberg Tax reported. "Some Democrats are staying firm that they won't give businesses tax breaks without an expanded child tax credit."
Senate Finance Committee member Michael Bennet (D-CO) tweeted December 20: "GOP leaders sent a lump of coal to America's children this year — they refused to even discuss a deal for kids and businesses. I will continue to oppose cutting taxes for corporations without passing an expanded Child Tax Credit."
The Wall Street Journal editorial page opined, "At least Republicans blocked Senate Majority Leader Chuck Schumer's cannabis-financing bill and an expansion of the child tax credit. But Congress also failed on the one bipartisan provision that might help the economy next year: a reinstatement of full deduction for business research and development expenses."
Senate Majority Leader Chuck Schumer (D-NY) said Tuesday members should act to complete consideration of the bill well before the Friday deadline, for reasons including the looming snowstorm that will complicate holiday travel, The Washington Post reported. Conservatives could slow the Senate process, and some in the House warned Senate counterparts that supporting the measure would doom Senate bills in 2023. Punchbowl said the bill will get through the Senate today or tomorrow and the House can act swiftly, in a day's time.
Amendments (nine of them) are being hotlined in the Senate and how they will be handled is unclear right now. Members, including Sen. Shelley Moore Capito (R-WV) who are seeking relief from the third-party network transactions reporting threshold reduction to $600 under the American Rescue Plan Act, either through a delay or an increase in the threshold, gained some political heft from Capito's counterpart, Senator Joe Manchin (D-VA). On CNBC, Manchin said Senator Bill Hagerty (R-TN) has an amendment for a $10,000 threshold (though it is not one of the nine hotlined). "This is the best relief we can get for people," he said.
House guidance to members said a vote on the omnibus could come as early as Thursday, and the House will stay in session until the consideration of Senate Amendment to H.R. 2617 is completed.
Tax — Treasury has announced a timeline for providing additional information on key tax provisions of the Inflation Reduction Act (IRA). By December 31, 2022, Treasury intends to provide: (1) frequently asked questions for consumers on the tax credit for energy-efficient home improvement projects and residential energy property; (2) initial guidance on the corporate alternative minimum tax; (3) initial guidance on the stock buyback excise tax; and (4) information on the anticipated direction of the critical mineral and battery component requirements that vehicles must meet to qualify for IRA tax incentives.
Notice 2023-06 provides guidance on the new sustainable aviation fuel credits.
Global tax — On December 20, the OECD released a new Pillar One consultation document relating to DSTs and similar measures, two consultations on Pillar Two addressing the GloBE tax return and dispute resolution, and a separate document on Pillar Two safe harbors.