March 5, 2023
Americas Tax Policy: This Week in Tax Policy for March 3
This week (March 6-10)
Congress: The House and Senate are in session. The Senate will hold a procedural vote on a judicial nomination set for 5:30 p.m. on Monday, March 6.
POTUS Budget: President Biden will release his FY2024 Budget on Thursday, March 9. Treasury Secretary Janet Yellen is expected to appear before the Senate Finance Committee for the customary post-Budget release hearing the following week, on March 16.
Finance: The Finance Committee has scheduled a hearing on "Tax Policy's Role in Increasing Affordable Housing Supply for Working Families" for Tuesday, March 7. Witnesses:
Ways and Means: 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.
Federal Bar: The Federal Bar Association 2023 Tax Law Conference continues with virtual sessions including "Current Developments in International Tax" and "The OECD Pillars: Buckle Up!"
Last week (February 27-March 3)
Prelude to Budget release: President Biden told House Democrats at their retreat in Baltimore March 1 that he won't permit Republican leaders to portray themselves as fiscal conservatives and Democrats as spendthrifts in the debt limit debate. "We're not going to sit here and be lectured by those folks about fiscal responsibility. Nearly 25% of the entire national debt, which took over 200 years to accumulate … was added by my predecessor in four years." The President repeated previous comments that his FY2024 Budget to be released on Thursday, March 9, would reduce the deficit by $2 trillion through proposals that will stand in contrast to Republicans' unspecified spending cuts. House Speaker Kevin McCarthy (R-CA) "says he won't raise taxes on anyone, on the wealthy or big corporations, he just wants to cut programs, and what I suggested was, instead of making threats about the debt, which would be catastrophic, let's just lay out our budgets," the President said. Punchbowl has reported that House Republicans are releasing their Budget Resolution in April, but that McCarthy met with House Budget Committee Chairman Jodey Arrington (R-TX) this week. "It would be interesting to see what they want to cut and what their numbers add up to," President Biden said. The President has already outlined tax increases including dialing up the stock buyback excise tax and imposing a billionaire's tax as a deficit reduction alternative. In an address on affordable health care in Virginia Beach February 28, President Biden said, "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." He said of Republicans, "They want to cut taxes for the very wealthy, again. They want to cut taxes for large corporations."
Not all Democrats agree on holding a confrontational posture with Republicans on the debt ceiling without a conversation about the deficit. Senator Joe Manchin (D-WV) took to the Senate floor March 2 to say, "My Democratic friends don't want to say a word about our out-of-control spending and are outright refusing to even talk to Republicans about reasonable, responsible reforms. They want to pass a 'clean' debt ceiling bill without a commitment to fix anything. My Republican friends refuse to offer any specifics, and some have recklessly threatened default, which is something that absolutely has to be off the table. We will never solve this problem by each party running in the opposite direction." He said on Fox News: "I can assure you can't basically just tax your way out of debt. You can't borrow your way out of debt, and you can't cut your way out of debt. You can do a combination of all of those to a certain extent and manage your debt."
IRS Commissioner: The Senate Finance Committee approved the nomination of Daniel Werfel to be IRS Commissioner on March 2. The vote was 17-9, with three Republicans voting with Democrats in support: former Chairman Chuck Grassley (R-IA) and Senators Bill Cassidy (R-LA) and Todd Young (R-IN). Senator Thom Tillis (R-NC) supports the nomination but missed the Committee vote. The nomination, with bipartisan backing, is expected to be considered on the floor soon.
Ways and Means: 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:
Bloomberg Tax reported that House Ways and Means 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.
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."