The Fiscal Responsibility Act of 2023 that includes a suspension of the debt ceiling through early 2025, curbs on government spending, claw-backs of IRS and COVID-related funding, and many other items, was approved by the Senate last night on a 63-36 vote. The strong 314-117 House vote the night before all but removed any question of whether the measure would pass the Senate, and lingering concerns of Senators were sorted out through an amendment process that, given the strong support for the bill and urgency of the debt limit issue, was quickly conducted. The basic components of the bill, which now goes to the President for his signature, are as follows:

Prior to the vote on final passage, the Senate conducted votes on amendments that all failed, as expected, given the widely held view that it would be problematic to amend the bill and send it back to the House. Votes on amendments included those to:

• provide adequate funding for defense and increase the rescission of funding for the IRS
• remove the sunset on work requirements (i.e., make them permanent)
• provide appropriate adjustments to the discretionary spending limits, in the event of funding under a continuing resolution
• strike Section 265 to empower OMB to unilaterally waive a provision referred to as "administrative PAYGO"
• remove the language to expedite approval of the Mountain Valley Pipeline

How the bill came together last weekend after months of inaction, during which Republicans and Democrats disagreed over whether the debt limit was even negotiable, is a study in legislating and has produced accolades for both Speaker Kevin McCarthy (R-CA) for his tenacity in winning a deal that addresses many of the issues that House Republicans targeted in the Speakership election suspense in January; and for President Biden, who has a history of bipartisan dealmaking and whose skilled negotiating team was lauded even by Republicans.

For instance, the claw-back of IRS funding was long targeted by Republicans and viewed as an attempt to make the bill more palatable to conservatives, but, for Democrats, the funding will be used to soften some of the spending cuts. "The White House says the debt deal also includes a separate agreement to take $20 billion from the IRS over the next two years and divert those funds to other nondefense programs," the AP reported. "Biden administration officials are offering assurances that the spending cuts secured by Republican negotiators will have minimal impact on the agency's operations over the next few years."

Regarding the Mountain Valley Pipeline language that was opposed by key members of the Virginia delegation — but not to the degree that they would vote against the bill — and supported by West Virginia Senators including Joe Manchin (D), "House Republicans and their aides also played a key role in securing language in the debt ceiling deal to fast-track the project's completion," The Washington Post reported. "White House officials agreed to include the language to honor a promise they made to Manchin last summer. The debt ceiling deal would approve all of the outstanding permits for the Mountain Valley Pipeline within 21 days of the bill's passage."

Treaties — The Senate Foreign Relations Committee June 1 voted out the US-Chile tax treaty 20-1, with Senator Rand Paul (R-KY) the lone vote against, according to the Bloomberg Daily Tax Report. Senator Paul has long expressed concern about tax treaties over privacy concerns, though a US-Spain treaty was ratified in 2019 after then-Majority Leader Mitch McConnell (R-KY) devoted floor time to the matter and Senator Paul was afforded amendment votes, including on information sharing standards. Senate Majority Leader Chuck Schumer (D-NY) earlier this week said ratification of the treaty is crucial for access to critical minerals like lithium.

Energy tax — Treasury and the IRS May 31, in Notice 2023-44, provided additional guidance clarifying and modifying Notice 2023-18, which established the IRC Section 48C(e) program to allocate $10b in credits for investments in eligible qualifying advanced energy projects.

Global tax — Upon retweeting a Reuters story regarding Vietnam's tax rules May 31, Senate Finance Committee Ranking Member Mike Crapo (R-ID) said, "The global tax code negotiated at the OECD condemns tax competition but blesses government subsidies. This deal is already sparking a global subsidy free-for-all." The Reuters story said, "companies are pushing Vietnam to introduce a multi-million-dollar reform that would compensate them for higher levies they face from next year under a global overhaul of tax rules."

Congress — Leader Schumer announced that the next Senate vote will occur on Tuesday, June 6, at 5:30 p.m. Committee business scheduled for next week includes:

• On Wednesday, June 7, the Senate Committee on Finance and Committee on Small Business and Entrepreneurship will hold a roundtable, "Tackling Tax Complexity: The Small Business Perspective," though it is not open to the public and will not be broadcast.
• On Tuesday, June 6, the House Small Business Economic Growth, Tax and Capital Access Subcommittee will hold a hearing on "American Ingenuity: Promoting Innovation Through the Tax Code."

———————————————