November 29, 2023
What to expect in Washington (November 29)
The House Ways & Means Committee has scheduled a markup for Thursday, November 30 (at 10 a.m.) of legislation including the United States-Taiwan Expedited Double-Tax Relief Act (H.R. 5988), which was introduced in October by Chairman Jason Smith (R-MO) and Ranking Member Richard Neal (D-MA) along with Senate Finance Committee leaders, which had just moved the bill through their committee.
The Senate Foreign Relations Committee has its own, different bill to authorize a US-Taiwan tax agreement. Chairman Ben Cardin (D-MD) previously said that bill would be pursued as a parallel effort to the Finance measure, which he noted will require a tax bill to move. A November 29 Tax Notes story cited Cardin as saying Senators are hoping to attach their two Taiwan tax bills to any suitable vehicle. "We don't think Taiwan is particularly controversial," he said. "So we're looking for the first engine that gets through that we're willing to get connected to. I don't think we're that concerned as to what vehicle that is; we'd just like to get it done."
The Staff of the Joint Committee on Taxation provided a description of the bill last night.
Bills on tax-exempt and charitable issues are also being marked up by Ways & Means.
Congress — With plenty of negotiations required between the House and Senate, on appropriations beyond the two-step January 19/February 2 deadline and other issues, Speaker Mike Johnson (R-LA) is set to attend the Senate GOP Steering Committee luncheon today. The Speaker has vowed that Congress will not rely on another short continuing resolution (CR) when funding runs out in January and February. The required reconciliation of House bills, to dial spending back to FY2022 levels and impose controversial policy riders, with Senate appropriations measures that meet and in some cases exceed FY2023 levels that are more than $100 billion higher, has some members bearish on a deal and forecasting a year-long CR. "Looks to me like we're heading toward a year-long CR," Senator John Cornyn (R-TX) said in a November 27 Politico report. "That's still my prediction. That's not good, but that's the hand we've been dealt."
In the absence of full-year appropriations bills, a Fiscal Responsibility Act (FRA) trigger would set FY2024 spending at enacted levels for defense and nondefense categories for FY2023, decreased by 1%. The FRA trigger trips on January 1, but a sequester order wouldn't be issued until April 30. Revised limits would revert to the original FRA limits if the full-year appropriations bills are enacted before then. The Congressional Research Service has noted (their italics for emphasis): "The revised levels would result in an increase in nondefense discretionary budget authority and a decrease for defense discretionary spending levels when compared with the original levels."
In remarks following the regular Tuesday Senate policy lunches, Senate Appropriations Committee Chair Patty Murray (D-WA) cited her work with Vice Chair Susan Collins (R-ME) in passing 12 bipartisan spending bills through Committee "that can actually become law," in contrast to the deep spending cuts and policy riders in the House bills. "I absolutely want Speaker Johnson to join us at the negotiating table, so long as he leaves partisanship at the door and is genuinely ready to work in good faith on reasonable bipartisan bills that address the challenges we are seeing around the world and address the needs of families here at home, including childcare, WIC, and much more," she said.
FAA, NDAA — Year-end issues are taking precedence, for now. The wheels are in motion for a Federal Aviation Administration (FAA) reauthorization and taxes measure (they currently expire December 31) in the Senate, where a Commerce Committee dispute over pilot training scuttled a markup in June and since. Commerce Chair Maria Cantwell (D-WA) and Senator John Thune (R-SD), who authored language regarding pilot training for eligibility to fly for a regional or major airline, have signaled that a deal could come together soon to allow a markup to proceed. The logjam previously left stakeholders predicting a one-year extension, as opposed to a five-year bill passed by the House and proposed at Senate Commerce. The measure by its nature already includes tax provisions, leading some members to speculate that it could carry a long-sought but still elusive tax package on TCJA pre-cliffs and extenders.
Punchbowl News reported last night, "If the Commerce Committee passes the FAA bill, it could be attached to the NDAA measure, several senators said. That would make sure it's enacted before the Dec. 31 deadline." The report said while Senate Majority Leader Chuck Schumer (D-NY) has said the National security supplemental would be on the floor next week (December 4), "there's a real likelihood that the NDAA package will go first."
Prior to Thanksgiving, the Senate voted to go to conference with the House on the National Defense Authorization Act. Senate Armed Services Committee Chairman Jack Reed (D-RI) said Tuesday: "The NDAA is critical to our national security and our military readiness, and I look forward tomorrow with meeting with my House colleagues in person to begin the process of negotiating a final vote which we can bring to both chambers. And we've already made good progress to that end." Several news outlets have reported that House Financial Services Committee Chairman Patrick Henry (R-NC) has threatened to block Senate elements of the NDAA if cryptocurrency provisions aren't included. He has proposed a statutory framework for digital asset regulation.
A November 27 Roll Call story cited off-Hill sources as saying the NDAA is a bill to watch, with some speculating that it likely will be a "proverbial Christmas tree" that may include "tax policy provisions and health care extenders." The report cited efforts to prevent Medicare rate cuts to physicians that take effect January 1, as well as the longtime push to address Section 174 R&D amortization (as opposed to expensing) and other business tax provisions that likely hinges on some expansion of the Child Tax Credit.
"But even if the tax committees can strike a deal, there are major roadblocks to getting it to President Joe Biden's desk by the end of the year, particularly after Congress kicked the next government funding deadline into January and by doing so took a typical legislative vehicle for tax measures off the table," the story said. "Any must-pass legislation this December will likely draw buzz as a potential home for the bipartisan tax deal, including a Federal Aviation Administration reauthorization that would already renew federal aviation taxes."
Tax — The aforementioned Tax Notes story cited Finance Committee members including Senator Thune, Ranking Member Mike Crapo (R-ID), and Senator Sherrod Brown (D-OH) as saying tax bill prospects have improved and talks have become more productive. Senator Brown was cited as saying there is optimism that wasn't present a month-and-a-half ago, but that time is a factor because of the 2024 filing season. "You can't wait much past December, maybe early January because of the tax season," Brown said. "We can't dramatically change tax law February 1 or something."
Energy tax — A November 28 Bloomberg Government report said, "Administration officials have discussed phasing in enforcement for the rules which would disqualify automobiles that use battery parts or minerals from China and other foreign adversaries from the full $7,500 incentive, Democratic Senator Debbie Stabenow said." Senator Stabenow said she "weighed in to express support for the concerns of the automakers," a constituency she has long advocated for. The report said, "Guidance expected this week by the Treasury Department will define which nations are foreign entities of concern and spell out details of how much content from foreign adversaries will be allowed in the electric vehicle battery supply chain."
National security supplemental — The House has passed an Israel-only national security supplemental measure with $14.5 billion in aid and an equal amount in IRS funding rescissions certain to be rejected by Senate Democrats. On Tuesday, Leader Schumer called for a bill to "deliver aid to Israel, aid to Ukraine, humanitarian assistance to help innocent victims in Gaza, and military capabilities in the Indo-Pacific. All these national issues - national security issues are related and should move together." He continued to bemoan Republican demands to include "hard right border policies" in the bill but said "Democrats are working to have a good faith conversation with Republicans on what both sides can agree on the border."
A story in the November 27 Wall Street Journal said, "Tightening the initial standard immigrants must meet when applying for asylum could form the basis of a bipartisan border agreement in the Senate, where a group of lawmakers is racing to strike a deal before the end of this year that could unlock billions of dollars in aid to Ukraine."
Nominations — The Senate Finance Committee November 28 approved 17-10 the nomination of former Maryland Governor (and Baltimore Mayor and presidential candidate) Martin O'Malley to be Commissioner of Social Security. This is another Finance-approved nomination that will await a full Senate vote, in addition to the nomination of Marjorie Rollinson to be Chief Counsel for the IRS approved by Finance November 2.