March 1, 2023
What to expect in Washington (March 1)
The Senate Finance Committee has scheduled a vote on the nomination of Daniel Werfel to be IRS Commissioner for Thursday, March 2 at 10:00 a.m. "He's going to pass and he's going to get bipartisan support," Finance Chair Ron Wyden (D-OR) said Tuesday, Politico reported. Two Republicans, Senators Thom Tillis (R-NC) and Todd Young (R-IN), have said they will support the nomination, which is expected to be approved by the full Senate.
The Finance Committee also scheduled a hearing on "Tax Policy's Role in Increasing Affordable Housing Supply for Working Families" for Tuesday, March 7. Witnesses:
The House Ways and Means Committee February 28 approved 24-17 along party lines an Oversight Plan for the 118th Congress calling for oversight of issues including:
A Views and Estimates Letter to the House Budget Committee was approved 24-16. In addition, H.R. 1163, the "Protecting Taxpayers and Victims of Unemployment Fraud Act," was approved 20-17 after 11 Democratic amendments were defeated.
The Ways and Means Committee has noticed its second field hearing "on the State of the American Economy: The Heartland," for March 7 at 9 a.m. Reports have said it will be held in Oklahoma.
House Democrats' retreat begins in Baltimore today, and President Biden is set to address the group.
An organizational meeting for the Joint Committee on Taxation is to be held at 2:00 p.m. today, March 1.
Global tax — During a February 27 OECD Tax Talk, Grace Perez-Navarro, Director of the OECD's Centre for Tax Policy and Administration, said on Pillar One, "the intense negotiations of the multilateral convention are well under way and we are still aiming for finalizing the convention by the middle of the year for signature." Pillar Two and the minimum tax have been made a reality, she said, and the EU, Australia, Canada, Columbia, Indonesia, Japan, South Korea, Malaysia, Mauritius, South Africa, Switzerland, Thailand, the UK, and the UAE have all taken steps to implement the minimum tax. Deputy Director Achim Pross said a peer review process starting this year will look at how countries are applying the 15% minimum tax rules "as they're in the process of being drafted."
Law360 reported, "Investors seeking to use new options for monetizing U.S. green energy tax credits don't yet know how those mechanisms will be treated by countries enacting the 15% global minimum corporate tax, tax professionals said. The OECD didn't address new options for monetizing U.S. green energy tax credits in recent guidance, leaving open questions about how those options will affect tax calculations under the OECD's Pillar Two minimum tax plan. The recent changes to a bevy of U.S. green energy tax credits to make them easier to utilize via so-called transferability and direct pay were not addressed in the latest administrative guidance on the Pillar Two global minimum tax developed by the [OECD]. For now, that leaves open questions about whether the value of those new options would be treated as an increase in taxable income or a decrease in tax payments in calculations to determine Pillar Two taxes."
CHIPS requirements — The Biden administration February 28 launched the first CHIPS for America funding opportunity for manufacturing incentives. A release said the Department of Commerce is overseeing $50 billion to revitalize the US semiconductor industry, including $39 billion in semiconductor incentives, and that applicants are also encouraged to claim the Advanced Manufacturing Investment Credit (Investment Tax Credit) administered by Treasury and IRS. The Administration said applications will be evaluated based on the extent of the applicant's commitments to refrain from stock buybacks, and "applicants requesting over $150 million in direct funding must also submit plans to provide both their facility and construction workers with access to affordable, accessible, reliable and high-quality child care." The guidance said "applicants are also prohibited by law from using CHIPS funds for dividends or stock buybacks."
A New York Times analysis said President Biden is using CHIPS money "to change how corporations behave. If semiconductor manufacturers want a piece of the nearly $40 billion in aid that Mr. Biden's administration began the process of handing out on Tuesday, they will need to provide child care for employees, run their plants on low-emission sources of energy, pay union wages for construction workers, shun stock buybacks and potentially share certain profits with the government. That decision is a bet on the power of the federal government to transform private industry. But it is also a distinct break from how the United States has traditionally engaged with corporate America. The president is essentially incorporating disparate policy objectives into a big spending bill that was sold as an effort to shore up a supply of semiconductors … "
House vote on DOL rule for 'ESG' investments in retirement plans — The House on Tuesday (Feb. 28) voted, 216-204, to pass a resolution under the Congressional Review Act (CRA) that would roll back a new Labor Department rule clarifying that retirement plan managers can consider environmental, social and corporate governance (ESG) factors when making investment decisions for those plans. All House Republicans supported H. J. Res. 30, sponsored by Rep. Andy Barr (R-KY), while Jared Golden (D-ME) was the only Democrat to support it. President Biden has vowed to veto the measure. The CRA allows repeal resolutions to pass the Senate under an expedited process that requires only a simple majority for passage. With all 49 Republican senators and Sen. Joe Manchin (D-WV) pledged to support the Senate resolution (sponsored by Sen. Mike Braun, R-IN), Democrats could lose the floor vote as Sen. John Fetterman (D-PA) is away from the Senate while he receives inpatient treatment. The Senate could act on the resolution as soon as this week.
The DOL rule, which took effect January 30, allows plan fiduciaries to consider ESG implications when choosing and monitoring investments, as long as they are in the best financial interest of plan participants and beneficiaries. The rule reverses a Trump-era rule that had confined employers to strictly financial "pecuniary" factors when investing workers' plans. Rep. Barr said the new rule would strap Americans with higher fees for less-diversified investments in lower-performing portfolios, adding, "Twenty-one percent of investors don't even know what ESG stands for." In its veto statement Monday evening (Feb. 27), the White House said the DOL rule "reflects what successful marketplace investors already know: There is an extensive body of evidence that environmental, social, and governance factors can have material impacts on certain markets, industries, and companies."
Debt limit — In an address on affordable health care in Virginia Beach February 28, President Biden said he told House Speaker Kevin McCarthy (R-CA) on the debt limit, "Instead of making threats about default, which could be catastrophic even if doesn't happen, because the markets around the world begin to hedge against it and it affects the economies, let's take that off the table. And let's have a conversation about how we're going to grow the economy, lower the costs, and reduce the deficit, each of us. I said: 'Let's lay out our respective budgets. On March 9, I'm going to lay down in detail every single thing — every tax that's out there that I'm proposing and no one making less than $400,000 is going to pay a penny more in taxes. But lay it out by March 9, everything, and what we're going to cut, what we're going to spend."
Health — On health care, President Biden said of Republicans, "They want to cut taxes for the very wealthy, again. They want to cut taxes for large corporations. They want to take back the power we just gave Medicare and Medicaid to negotiate, which would raise prices. And they would have huge [giveaways] to Big Pharma and cost taxpayers billions of dollars. And if they say they want to cut the deficit but their plans actually would explode the deficit, how are they going to make the numbers add up? What are they going to cut? That's the big question. For millions of Americans, healthcare hangs in the balance."
DoL — President Biden nominated Julie Su to be the next Secretary of Labor, replacing Marty Walsh.
In episode 13 of the WCEY podcast DC Dynamics, "Demystifying the Revenue Estimating Process," host Ray Beeman, from Washington Council EY, is joined by Robert Carroll, the head of EY's Quantitative Economics and Statistics ("QUEST") group, to discuss how the revenue estimating process plays into the tax policy legislative process.