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December 11, 2023

What to expect in Washington (December 11)

The House and Senate are back today for what is scheduled to be their last week in session before the holidays. A temporary Federal Aviation Administration (FAA) extension into March and House-Senate conference agreement on the National Defense Authorization Act (NDAA) are expected to be considered by both chambers this week. It's unclear what else can get done with a dwindling number of legislative vehicles and the $110.5 billion national security supplemental mired in complicated border talks. Tax-writers are now setting their sights on a potential early January opportunity for a tax package that could address IRC Section 174 R&D, 163(j) interest deductibility, expensing, the Child Tax Credit (CTC), extenders, etc.

Supplemental — The White House has warned it is running out of money to help Ukraine, whose president will meet with lawmakers in Washington this week. Last week, Senate Republicans, who insist on including border policy changes in the supplemental addressing Ukraine and Israel funding, said they were encouraged when President Biden said he was willing to do "significantly more" on border security and they say he needs to become more personally involved on the high stakes issue. Democrats and Republicans have failed to reach agreement an immigration deal multiple times over the past two decades, and while the issue is politically fraught, circumstances may have changed somewhat for Democrats.

"Some Democrats are also feeling increased pressure to negotiate as members of their own party, including the governors of New York and Illinois, continue to plead with Biden to send them more money to handle the swelling migrant populations in their states or stem the flow of people coming," said a story in today's Wall Street Journal. "Sen. Kyrsten Sinema, the Arizona independent who is one of the negotiators, also has been outspoken in demanding the administration recognize the size of the challenges facing border officials."

Senate Republicans have said they are not insisting on the House-passed H.R. 2, but there is some question over whether House Republicans will accept provisions that are less stringent than their own bill. "Speaker Johnson has not given me the red line of what it has to be on this. Obviously, it's got to be able to pass the Senate. But it is the challenge. The House Republicans laid out a very good proposal, very thorough, covered a lot of issues, had no Democrats," lead Senate negotiator James Lankford (R-OK) said on Face the Nation. "Obviously, we're not going to get 20, 30 Democrats in the Senate or a Democratic White House to be able to sign that. But that doesn't mean we just sit and do nothing. We've got to be able to solve this crisis."

On the same program, OMB Director Shalanda Young said of Republicans, "They push for too much. They push for an H.R.2, which, as the senator pointed out, all Democrats voted against. The White House had a veto threat. You can't have everything your way in a negotiation. Democrats and Republicans have to vote for this bill. So, I agree. It's time to cut a deal that both sides can agree to."

Senator Chris Murphy (D-CT) said on Meet the Press, citing urgency in providing Ukraine funding, "So this has to be resolved right now, which is why Republicans have to be reasonable. We are not going to solve the entire problem of immigration between now and the end of the year, but we can make a down payment."

NDAA — On the NDAA, the Saturday Washington Post reported, "The $886 billion package, compromise legislation agreed to by negotiators from the Republican-led House and Democratic-led Senate, strips away a number of contentious provisions … that hard-right lawmakers had rammed into the lower chamber's bill despite withering complaints from members of both parties. If it passes, as appears likely, the outcome will symbolize a defeat for the GOP's raucous right flank."

The Senate reconvenes today (Monday, December 11) at 3 p.m., with a procedural vote on a judicial nomination at 5:30 p.m. The NDAA conference agreement is set for a Senate vote, then will be taken up by the House.

FAA — The Airport and Airway Extension Act of 2023, Part II, to extend the FAA authorization and taxes through March 8, is on today's House schedule.

Health care — The House this week is scheduled to vote on health care bills: the Lower Cost, More Transparency Act, the SUPPORT Act, and the PREEMIE Reauthorization Act of 2023. On Thursday, December 14 at 10 a.m., the Senate Health, Education, Labor & Pensions Committee will hold a hearing on "What is Fueling the Diabetes Epidemic?" The Committee will hold a markup of health care legislation on Tuesday, December 12 at 10 a.m.

Tax — On Wednesday, December 13 at 2 p.m., the Ways & Means Oversight Subcommittee will hold a hearing on "Growth of the Tax-Exempt Sector and the Impact on the American Political Landscape."

Today (December 11), comments are due to Treasury on the draft text of the OECD Pillar One Multilateral Convention (MLC).

Also today, comments are due to IRS on EV transferability regulations.

Webcasts — Wednesday, December 13 (12 p.m. ET) is the EY Webcast, "Spotlight on BEPS 2.0: developments and practical implications for US MNEs."

Friday, December 15 (12 p.m. ET) is the EY Webcast, "Tax in a time of transition: legislative, economic, regulatory and IRS developments."


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For additional information concerning this Alert, please contact:
Washington Council Ernst & Young
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