February 10, 2023
What to expect in Washington (February 10)
Scrutiny of the OECD-led global tax agreement continues from the House Ways and Means Committee Republican leadership. In a letter this morning to OECD Secretary-General Mathias Cormann, Chairman Jason Smith (R-MO) defended the global intangible low-taxed income (GILTI) regime and said other countries are considering a minimum tax only if they can impose the "fundamentally flawed" Under Taxed Profits Rule (UTPR) on US companies. He warned that the UTPR would target US tax incentives like the R&D credit "as well as the operations of American companies in third-party jurisdictions." Chairman Smith said House Republicans "will aggressively pursue tax and trade countermeasures to protect American jobs, sovereignty, and tax revenues."
At the other end of the Ways and Means dais, for the fourth consecutive Congress, Ways and Means Committee Member Lloyd Doggett (D-TX) and Senate Finance Committee Member Sheldon Whitehouse (D-RI) introduced the No Tax Breaks for Outsourcing Act. Newly this year, they put the measure in the context of, "Were it not for the Trump tax law, the U.S. would not have hit the debt limit so soon." The bill would:
Taking the opposite view of revenue under the Tax Cuts & Jobs Act (TCJA), Senate Finance Committee Ranking Member Mike Crapo (R-ID) pushed back against Democratic assertions that corporations are not paying their fair share of tax following a January GAO report on average effective tax rates of large corporations before and after the 2017 law. The TCJA shouldn't be viewed as part of the problem in the debt limit debate, Crapo argued; rather, it's part of the solution. "Despite reduced corporate and individual tax rates, revenues reached an all-time high of $4.9 trillion last year. If Congress preserves and builds on those pro-growth tax reforms, it would help reignite our economy and restore fiscal sustainability."
The Senate Finance Committee noticed a "Hearing to Consider the Nomination of The Honorable Daniel I. Werfel, of the District of Columbia, to be Commissioner of Internal Revenue for the term expiring November 12, 2027" for Wednesday, February 15 (10:30 a.m.).
The Committee also scheduled a February 16 trade hearing, "Ending Trade that Cheats American Workers by Modernizing Trade Laws and Enforcement, Fighting Forced Labor, Eliminating Counterfeits, and Leveling the Playing Field."
Senate Finance Committee Chair Ron Wyden (D-OR and Ranking Member Crapo February 9 announced subcommittee assignments. Senator Michael Bennet (D-CO) will chair the tax subcommittee and Senator John Thune (R-SD) will serve as Ranking Member.
An EY Alert, "OECD's Pillar Two Administrative Guidance raises implications for US multinationals," is available here.
POTUS — After calling out GOP proposals to reduce Social Security and Medicare benefits during Tuesday's State of the Union Address, President Biden took the message on the road, visiting Tampa to, as the White House said, "contrast his commitment to protecting and strengthening Medicare and Social Security and lowering prescription drug prices, with Congressional Republicans' plans to cut these programs."
A White House fact sheet provided as examples:
In Wisconsin February 8, the President said of Republicans, "I found it interesting that when I called them out on it last night, it sounded like they agreed to take these cuts off the table … I'll believe it when I see it and their budget is laid down with their cuts they're proposing. But it looks like we negotiated a deal last night on the floor of the House of Representatives."
On CBS News February 8, Senator Thune said there is agreement there won't be cuts to Social Security and Medicare, but the debt limit debate provides an opportunity to discuss how to strengthen the programs. "There are a lot of younger Americans today who understand that, if something isn't done, Social Security isn't going to be around for them," he said. He mentioned Sen. Cassidy's Social Security reform bill.
The Republican Study Committee recommended in its 2023 budget that eligibility ages for Social Security and Medicare be raised.
The New York Times reported, "President Biden traveled to Florida on Thursday afternoon with a political gift he had not been expecting before Tuesday night's State of the Union speech. The perfect foil. Republican outbursts during his address to Congress — and Mr. Biden's real-time exchange with heckling lawmakers about the fate of Social Security and Medicare — gave him exactly that, and he eagerly tried to use the episode to his advantage on Thursday in an event before a small audience of supporters here. Standing in front of two huge American flags and a sign that said 'Protect and strengthen Medicare,' the president made clear he relishes the fight on the issue. 'I guarantee it will not happen,' Mr. Biden said of cuts to the entitlement programs."
Republican leaders are trying to steer attention away from members' proposals and towards the top-down assertion that there will be no benefit cuts. Senate Republican Leader Mitch McConnell (R-KY) — who has suggested the debt limit stalemate that is the context for spending cut discussions is House Republicans' fight to wage — said in a radio interview Thursday that Speaker McCarthy said Social Security and Medicare "are not to be touched and I've said the same. And I think we're in a more authoritative position to state what the position of the party is than any single senator."
IRA implementation — As much as President Biden is battling Republicans over potential entitlement cuts, he is facing some intraparty skirmishing over implementation of the Inflation Reduction Act (IRA), which touched off with Senator Joe Manchin (D-WV) — an integral architect of the bill — taking exception to the Treasury/IRS announcement that the Section 30D new consumer vehicle tax credits wouldn't be based on battery and mineral requirements until guidance is issued. Manchin has reportedly spoken to Treasury Secretary Janet Yellen over the matter.
Politico reported February 8, "Manchin's grievances go beyond just the tax credit. He dislikes the public perception of the law he insisted on calling the Inflation Reduction Act, which he sees as an energy security measure rather than a climate change-fighting one — a distinction with a political difference in a deep-red, fossil-fuel state like West Virginia. Notably, the Manchin-backed law also requires new sales of oil and gas leases that his progressive colleagues might otherwise have opposed … 'So they're gonna basically starve us out of energy that we have a tremendous, abundant supply of because of their aspirational thoughts?' Manchin said of fellow Democrats who want to quickly transition the nation away from oil and gas. 'I will continue to fight and I'll do everything I can to make sure the public knows what they're doing … '"
Health - On Thursday (February 9), the Senate Judiciary Committee advanced five bipartisan bills that aim to lower prescription drug costs. The bills aim to lower prescription drug costs by cracking down on drugmaker tactics to extend patents, improving patent coordination between the U.S. Patent and Trademark Office and the Food and Drug Administration (FDA), and requiring the Federal Trade Commission (FTC) to examine potentially abusive practices by pharmacy benefit managers. The Committee previously advanced each of the five bills at different times over the last two years. During the hearing, lawmakers from both sides of the aisle raised concerns that the bills would give the FTC too much authority and could hinder innovation.
On February 22, there is an EY Webcast on policy, compliance, tax and federal funding reporting updates for entities operating within the US health sector.