February 27, 2023
What to expect in Washington (February 27)
The Senate is back today (Monday, February 27) after a week away. Senator James Lankford (R-OK) will be recognized to deliver Washington's Farewell Address, and there is a vote at 5:30 p.m. on a procedural motion related to a judicial nomination. According to the Senate Website, "No Senate tradition has been more steadfastly maintained than the annual reading of President George Washington's 1796 Farewell Address … The Senate tradition of reading the address aloud in the Chamber began on February 22, 1862, as a morale-boosting gesture during the darkest days of the Civil War … Every year since 1896, the Senate has observed Washington's birthday by selecting one of its members, alternating parties, to read" it.
Punchbowl reported on Friday, "Schumer will have to decide fairly soon on whether he'll burn valuable floor time on Biden's nominee for U.S. ambassador to India, Eric Garcetti. The Senate Foreign Relations Committee could vote on his nomination as early as next week. Several GOP senators have said they'll object to a time agreement on Garcetti," the former L.A. mayor. Other upcoming Senate business could include a Finance Committee vote on the nomination of Daniel Werfel to be IRS Commissioner. Politico Morning Tax suggested the vote could come as soon as this week. Responses to questions for the record from the Committee's February 15 hearing have been posted.
The House returns today after a two-week recess, and there are votes on the suspension calendar after 6:30 p.m. Other business this week includes H.J. Res. 30, providing for congressional disapproval of the rule submitted by the Department of Labor relating to "Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights." Rep. Andy Barr (R-KY) introduced the Resolution to nullify the DoL rule related to environmental, social, governance (ESG) investing in employer-sponsored retirement plans.
House Democrats are holding their retreat in Baltimore at the end of the week (March 1-3), including an address from President Biden on Wednesday, according to the Washington Post, which also reported that the President will speak at the regular Tuesday Senate Democratic party luncheon. The President is set to release his FY 2024 Budget proposal next Thursday, March 9.
Punchbowl reported a White House official as saying regarding the House Democratic retreat: "The president will discuss how to keep bringing jobs back to America at an historic rate, keep lowering costs like prescription drugs and energy, and further cutting the deficit by having rich special interests pay their fair share. He will reiterate his promise to release his budget to the American public, and his call on Republicans to do the same. He will also highlight that congressional Republicans are now threatening to trigger a catastrophic default if they are unable to take health coverage away from millions of families."
Tomorrow (February 27) at 10 a.m., the House Ways and Means Committee will mark up the Views and Estimates Letter to the Committee on the Budget, Oversight Plan for the 118th Congress, and H.R. 1163, the "Protecting Taxpayers and Victims of Unemployment Fraud Act."
Bloomberg Tax reported that, while no announcement has been made, the second Ways and Means Committee field hearing will be March 7 in Oklahoma City, with a focus on the oil and gas, agribusiness, and manufacturing industries, and discussion of tax policies related to those sectors. A separate report said Oversight Subcommittee Chairman Dave Schweikert's (R-AZ) hearing priorities include how the OECD-led global tax deal has come together. "Schweikert added that he'll want to hear from Treasury officials and academic experts on how the deal's 15% minimum tax would work with the US tax code and whether there have been 'backdoor' negotiations," the report said.
An organizational meeting for the Joint Committee on Taxation to be held at 2:00 p.m. on Wednesday, March 1.
At the end of the week is the Federal Bar Association 2023 Tax Law Conference, including a legislative panel and keynote remarks by Tom West, Deputy Assistant Secretary, U.S. Department of the Treasury. https://www.fedbar.org/event/taxlaw23/
Trade — While the new Congress is conducting its business and preparing for the release of the President's Budget, there are also questions about implementation of the Inflation Reduction Act (IRA), including the critical mineral and battery component EV requirements that require a certain percentage to be derived from the US or a country with which the US has a free trade agreement, or recycled in North America.
Treasury Secretary Janet Yellen said February 24, on the sidelines of a G20 finance meeting in India, that future limited free trade agreements focused on battery minerals with the European Union and other allies wouldn't need approval from Congress. Reuters reported: "Treasury already is allowing leased electric vehicles to qualify under commercial EV tax credit rules, a move that Yellen said would cover most vehicles for now. Over time, she said she hoped that trade agreements would allow more sold vehicles to qualify over time. 'It would be an agreement that we think would not require the agreement of Congress,' she said adding that Congress intended 'a kind of friend-shoring approach' for critical minerals … '"
"We've also discussed the possibility of forming critical minerals-free trade agreements that would enable Europe to qualify as a free trade partner," Sec. Yellen said in the New York Times. The report said the IRA "does not specify how a free trade agreement is defined; Ms. Yellen said she thought it would be possible to devise more limited pacts so that the consent of Congress was not required. 'It would be an agreement that would not require the agreement of Congress,' Ms. Yellen said, adding that she believed such agreements would be aligned with the intent that Congress had when it passed the law. 'I think the word 'free trade' was meant to mean reliable friends and partners with whom we can feel we have secure supply chains.'"
Energy — The IRA's US-centric requirements have been criticized by European and other nations, but concerns may be waning. A story in the weekend Wall Street Journal said EU EVP Margrethe Vestager, who is in charge of the nations' response to the law, said "a closer analysis of the subsidies suggests the main threats to European competitiveness will be limited to a handful of sectors" and that energy regulation will temper European companies' investment in the US. The report said measures proposed by the EU to "help boost the attractiveness of the continent to businesses being lured by the U.S. subsidies" have "reassured some European business leaders." Vestager said while some European companies in industries related to EV materials and wind turbines could be lured to the US through subsidies, other IRA credits may not have a significant impact on Europe's industry. "The U.S. subsidy is quite generous, but hydrogen is not easy to transport," she said.
Here at home, Senator Joe Manchin (D-WV) has criticized the Treasury announcement that the EV credit won't be based on the new requirements until guidance is issued. On Fox Sunday Morning Futures, Senator Manchin reiterated that the IRA "was intended totally to give us all the energy that we need right here and use the processes of what we do in America to make sure that we're energy-independent and we're secure to remain the superpower of the world. And you can't do it if you're depending on other foreign supply chains to produce your energy too. So, this is what the bill is intended. This is what I'm stressing every day to make sure that happens and watching the administration, how they administer."
Politics — Democrats' 2024 election fortunes were buoyed some by Senator Jon Tester's (D-MT) February 22 re-election announcement, though the party still faces a tough Senate map, with 20 Democrats up for re-election plus two independents who caucus with the Democrats and Democrat-turned-Independent Kyrsten Sinema (I-AZ). The Washington Post updated its reporting to say, "Of the six states Biden won by less than three percentage points in 2020, Democrats have to defend seats in five of them," including Arizona. Further, the report said, "Adding to Democrats' problems is the absence of obvious opportunities to play offense. They won't be able to target any states that were blue in 2020, and perhaps their best opportunities are in red Texas and Florida."
The other five seats in states where President Biden won by less than three percentage points in 2020: