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June 14, 2023

Ways & Means approves tax bills on TCJA cliffs, clean energy rollbacks

The House Ways & Means Committee approved three separate tax packages during a lengthy markup June 13, the "Tax Cuts for Working Families Act," "Small Business Jobs Act" and "Build It in America Act" that, when combined into the "American Families and Jobs Act," fulfill Chairman Jason Smith's (R-MO) commitment to develop a tax-based economic package springing from field hearings the committee held earlier this year in West Virginia, Oklahoma and Georgia. The final votes on the bills along party lines came after Republicans defeated a host of Democratic amendments addressing issues such as wage requirements and international tax.

The tax bills released by Chairman Smith wouldn't be expected to be enacted as-is, given that the TCJA "pre-cliffs" relating to expensing of R&D costs, interest deduction limitations under IRC Section 163(j), and 100% expensing, remain mired in a partisan standoff over a child tax credit (CTC) expansion sought by Democrats, who are also opposed to rolling back clean energy provisions from the Inflation Reduction Act (IRA) that Republicans want to use as revenue offsets. However, the bills could represent the House GOP's negotiating position for talks later this year aimed at constructing a year-end tax extender package.

Democrats gave indications of their positions through amendment votes and inquiries during the markup. At the start of debate on the Tax Cuts for Working Families Act, Ranking Member Richard Neal (D-MA) said he would like to begin serious negotiations on a package that could gain bipartisan support. He suggested the bills reported out of the Committee aren't likely to be taken up on the House floor in the immediate future and may amount to messaging bills. "There's opportunity here to find a path forward for all of us," Rep. Neal said.

As was alluded to, consideration of the bills on the floor could be controversial. The Washington Post said the tax effort "could become a major liability for Republicans and another headache for Republican leadership," because Freedom Caucus members — who have already held up recent floor activity over opposition to the debt limit bill — "are criticizing the idea of moving forward with hundreds of billions of tax cuts shortly after House Republicans demanded major cuts to spending in exchange for lifting the debt limit."

The basic contents of the bills and amendments to each are as follows:





Tax Cuts for Working Families Act (H.R. 3936) approved 24-16

renames the standard deduction the guaranteed deduction, adds a new bonus guaranteed deduction of $2,000/individual and $4,000/married filing jointly, phased out at a 5% rate for taxpayers with modified AGI of $200,000/individual and $400,000/married filing jointly


  • make CTC expansion permanent (DelBene) ruled nongermane
  • addressing SALT tax deduction cap (Pascrell)

defeated on 14-24 vote

  • restore charitable giving deduction for nonitemizers and raise cap to $4,600 for individuals and $9,200 for joint filers (Schneider) defeated on 15-24 vote

Small Business Jobs Act (H.R. 3937) approved 24-18

- increases the independent contractor information reporting threshold under sections 6041 and 6041A to $5,000 in a calendar year

- reverts to the previous de minimis reporting exception for commercial payments to third party settlement organizations of $20,000

- for the IRC Section 1202 exclusion for gain on sale of qualified small business stock:

  • shortens the holding period
  • provides a holding period tacking rule with respect to a qualified convertible debt instrument
  • extends exclusion for IRC Section 1202 gains to stock in S corporations

- increases maximum IRC Section 179 small business expensing amount to $2.5m and phase-out threshold amount to $4m

- establishes rural opportunity zones


- phase out IRC Section 1202 small business stock exclusion by $5 for each $100 by which gross income exceeds $1m (Beyer) defeated on 16-23 vote

Build It in America Act (H.R. 3938) approved 24-18

- TCJA cliffs, reverts through 2025 (retroactive) to prior policy on:

  • R&D expensing in place of the IRC Section 174 R&D five-year amortization requirement
  • IRC Section 163(j) interest deduction limitation (EBITDA threshold)
  • 100% bonus depreciation

- Supply chain security:

  • repeals the Hazardous Substance Superfund excise tax for oil
  • provides for creditability of certain foreign taxes without regard to current foreign tax credit (FTC) regulations
  • imposes a 60% excise tax on purchases of U.S. farm and ranch land by entities from "a country of concern"
  • clean energy provisions repealed or modified:
  • repeal of clean electricity production credit
  • repeal of clean electricity investment credit
  • modification of clean vehicle credit
  • repeal of credit for previously owned clean vehicles
  • repeal of credit for qualified commercial clean vehicles

TCJA cliffs:


Supply chain:


Clean energy:


Total, H.R. 3938:


Total all bills: ~-$21b

- prevent favorable amortization rules for R&D conducted in certain nations (Neal) defeated on an 18-25 vote

- apply prevailing wage requirements to reinstated R&D expensing provisions (Sanchez) defeated on an 18-24 vote

- require cars to be manufactured in the US to get the EV credit and lift the manufacturer's cap (Kildee) defeated on a 17-25 vote

- deny benefits of relief from the three TCJA cliffs to companies that impose excessive fees or early termination fees, in addition to certain airline fees (Sewell) defeated on an 18-25 vote

- strike the termination of the hazardous substance superfund financing rate and strike repeal/modification of clean energy provisions (Blumenauer) defeated on a 18-24 vote

- apply GILTI on a country-by-country basis (Doggett) defeated on a 18-24 vote

- end tax-exempt status for the PGA (Thompson) defeated on a 18-24 vote

Also included in the markup was the bipartisan, bicameral United States-Taiwan Initiative on 21st-Century Trade First Agreement Implementation Act (H.R. 4004), which would approve the Agreement between the American Institute in Taiwan and the Taipei Economic and Cultural Representative Office in the United States regarding Trade between the United States of America and Taiwan, done on June 1, 2023. The bill was approved 42-0 after members widely expressed support.

H.R. 3937, Small Business Jobs Act

Rep. Don Beyer (D-VA) said the exclusion for gain on sale of qualified small business stock provision could be an unnecessary boon to high-income individuals.

Rep. Greg Murphy (R-NC) defended the establishment of rural opportunity zones as encouraging companies to go into areas they otherwise might not and provide jobs.

H.R. 3938, Build It in America Act

Chairman Smith suggested that clean energy provisions mostly benefit the wealthy, while Ranking Member Neal suggested the bill's tax provisions are a windfall to corporations and said the focus should instead be on expanding the Child Tax Credit.

Rep. Gwen Moore (D-WI) said there should be no mistake that addressing the TCJA cliffs costs money and that businesses would have been satisfied with a corporate tax rate higher than the 21% set under the TCJA.

Regarding the TCJA cliff on R&D expenses, Rep. Lloyd Doggett (D-TX) said the TCJA cliffs were of the Republicans' own making and were made in exchange for a corporate tax cut. He said the cost of the legislation must be paid for by increasing the corporate rate.

Rep. Ron Estes (R-KS), who sponsored the bill to restore prior law (before 2022) in R&D expensing, said jobs and economic opportunities follow favorable R&D tax policy.

Rep. Estes later cited the Joint Committee on Taxation as saying global implementation of Pillar Two of the OECD-led global tax agreement would cost the US Treasury $120 billion in lost tax revenue, and, if the US is forced to change its tax code to comply with Pillar Two provisions, it would still cost $52 billion. He said the global minimum tax would result in the egregious undertaxed profits rule (UTPR) and Chairman Smith has introduced legislation to combat such taxes, but Estes wants to go further.

Rep. Judy Chu (D-CA) expressed concern that the excise tax on purchase of farmland by countries of concern is discriminatory.

Regarding repeal of certain Inflation Reduction Act clean energy credits, Rep. Drew Ferguson (R-GA) said clean energy credits could be used to lower a corporation's tax, making Democrats' argument about other provisions in the bill unfairly aiding corporations hypocritical.

H.R. 3936, Tax Cuts for Working Families Act

Ranking Member Neal said the bill includes significant spending, which Republicans have roundly criticized Democrats for in the context of other bills.

Materials from the hearing are at available here.


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