October 18, 2023
What to expect in Washington (October 18)
Rep. Jim Jordan's (R-OH) candidacy for the House Speakership failed on the first vote of the full House October 17. Jordan received 200 votes, with 20 Republicans casting votes for other Republican members — Reps. Steve Scalise (LA), Kevin McCarthy (CA), Mike Garcia (CA), Tom Emmer (MN), Tom Cole (OK), and Thomas Massie (KY) — and one former Republican member of the House, Lee Zeldin (NY). All Democrats cast votes for their leader, Hakeem Jeffries (D-NY). Politico reported, "The Republicans who bucked Jordan are largely in three categories: those in vulnerable districts, defense hawks with concerns about military spending and appropriators wary of Jordan's history of voting against spending bills." Another vote could occur today at 11 a.m.
Fortunes began looking brighter for Rep. Jordan on Monday, as influential members including Armed Services Committee Chairman Mike Rogers (R-AL) pledged their support. But some members remained bruised over the dismissal of former Speaker McCarthy and then Majority Leader Scalise as his replacement. The October 17 Washington Post reported that Rep. Mike Kelly (R-PA), a Ways & Means member who voted against Rep. Jordan (and in favor of Scalise) on Tuesday, "became visibly upset as he struggled to make sense of why 'people who didn't get their way' — as in those who ousted McCarthy and blocked Scalise — should expect lawmakers like him to fall in line. 'This has nothing to do with Jim Jordan. This has to do with the integrity of the House Republican conference,' he said."
"While it was impossible to determine how, when or even if Republicans might emerge from their ongoing chaos, what was clear was that the House G.O.P. is badly stuck and in crisis, unable to settle on a leader at a time of international upheaval," said a New York Times analysis. "Adding to the uncertainty, Mr. Jordan, the hard-right rabble rouser who built his reputation around torpedoing compromises by mainstream Republicans that he found insufficiently conservative, was in the improbable position of having to haggle with those same colleagues to win their support."
There continued to be discussions in the background about granting Rep. Patrick McHenry (R-NC) additional powers as acting speaker. Rep. Kelly introduced a resolution that would allow the House to hold a formal election of McHenry as Speaker Pro Tempore and temporarily expand his powers until November 17 or until a new Speaker is elected. Punchbowl News reported this morning that Rep. David Joyce (R-OH) may file a motion to expand McHenry's powers today should Rep. Jordan's bid for the Speakership fail, and Democratic votes would likely be needed. The report said while other Republicans have been mentioned as possible nominees for Speaker, the difficulty of any one member to achieve 217 votes could dissuade other members from running.
Democratic leader Jeffries has expressed some openness to possibly supporting the move to grant Rep. McHenry additional authority, saying Tuesday that discussions could be accelerated if Rep. Jordan falls short of the requisite votes. Former Speakers Newt Gingrich and John Boehner last night came out in support of expanded powers for Rep. McHenry to end the gridlock and get the House back to business. The Wall Street Journal noted that McHenry serves as acting speaker "under post-9/11 rules requiring the speaker to list a temporary replacement in case of a vacancy. For McHenry to bring legislation to the floor, the majority of the House would have to vote to give him that authority, a step once seen as unlikely, but growing more viable."
Global tax — Treasury Secretary Janet Yellen said October 16 that the US won't be ready by the end of 2023 to sign the new multilateral convention (MLC) on Pillar one of the OECD/G20 Inclusive Framework BEPS 2.0 project. While "much of the treaty has been agreed to … there are some matters that are important to the United States and other countries that remain unresolved," and these "need to be resolved before the treaty can be signed, so these processes will take into next year," Yellen said, as reported by Politico.
Energy tax — In an October 16 letter to Sec. Yellen, a group of Democratic senators led by Sheldon Whitehouse (D-RI) called for forthcoming guidance on the Section 45V hydrogen tax credit to avoid "weak standards for what constitutes clean hydrogen." The letter said "45V must not be applied to hydrogen chemically derived from natural gas" nor "serve as yet another subsidy for the fossil fuel industry."
An EY Tax Alert, "IRS releases guidance on transferring clean vehicle credits," is available here.
Banking — In a development that could be consequential for the profits of larger banks, the Federal Reserve on Tuesday announced that it would hold a meeting on Wednesday, Oct. 25, on a proposal to revise the "interchange fees" that retailers pay to banks when customers use debit cards. Currently merchants pay larger debit-card issuers a capped fee of 21 cents plus 0.05% of the transaction amount, the level set by the Fed in 2011, the Wall Street Journal reported. But the 2010 Dodd-Frank Act gave the Fed authority to lower the cap for institutions with $10 billion or more in assets, if it determines that the costs for processing debit-card payments are declining. Sources told the Journal that the Fed's proposal next week would lower the cap. Merchants have been pressing the Fed for years to lower the interchange fee cap. The Fed's interchange proposal will go through a period of public comment and revision before being adopted sometime in 2024.
In another development Tuesday, the Fed also announced that it will meet on Tuesday, Oct. 24 to vote on finalizing rules that would update the 1977 Community Reinvestment Act (CRA), which targeted redlining practices by banks and requires them to service lower-income communities where they operate. The Fed's overhaul of the CRA is intended to reflect the rise of online banking services and other changes.
In other news, Politico reported that the Senate Banking Committee could hold a pair of hearings related to Israel, after Ranking Member Sen. Tim Scott (R-SC) urged the committee to bring in Secretary Yellen to testify on Iran sanctions. Chairman Sherrod Brown (D-OH) is also considering taking up legislation that would crack down on illicit cryptocurrency transactions in the wake of attacks on Israel, Politico reported. Sens. Jack Reed (D-RI), Mike Rounds (R-SD), Elizabeth Warren (D-MA), Mark Warner (D-VA) and Mitt Romney (R-MA) have sponsored bills that would require digital assets to comply with rules on anti-money-laundering and economic sanctions.
Congress — The House Ways & Means Committee has the following hearings on the schedule:
The Senate Finance Committee is holding a hearing, "Medicare Advantage Annual Enrollment: Cracking Down on Deceptive Practices and Improving Senior Experiences," today, October 18 (at 10 a.m.).
The EY Webcast, "Tax in a time of transition: legislative, economic, regulatory and IRS developments," is October 20. Register here.