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March 15, 2024

What to expect in Washington (March 15)

Following some recent speculation that House Ways & Means Committee members would establish working groups to study issues ahead of the 2025 TCJA tax cliff, the Bloomberg Daily Tax Report (DTR) reported that Committee Republicans discussed formation of tax policy working groups on Wednesday and, specifically, member input on what issues the committee members seek to focus on. "It's going to require a lot more time because we're going to be working in a much more reduced window," Tax Subcommittee Chairman Mike Kelly (R-PA) said. "This is like cramming for your finals." Both Ways & Means and the Senate Finance Committee conducted bipartisan working groups in the years preceding the 2017 TCJA (2013 for the House, 2015 for the Senate).

Meanwhile, Ways & Means Committee field hearings are back. The Committee has scheduled a hearing Monday, March 18 at 2 p.m. on "Access to Health Care in America: Ensuring Resilient Emergency Medical Care" in Denton, Texas.

The Ways & Means Committee has also scheduled:

  • a hearing on Wednesday, March 20 at 2 p.m. with HHS Secretary Xavier Becerra
  • a Thursday, March 21 at 2 p.m. Joint Social Security and Work & Welfare Subcommittee Hearing with the Commissioner of Social Security, Martin O'Malley

The Senate Finance Committee has scheduled its customary post-Budget release hearing with Treasury Secretary Janet Yellen on the President's Budget for Thursday, March 21 at 10 a.m. Secretary Yellen isn't expected to appear before Ways & Means until early April, after the Spring recess March 25-April 5.

On Thursday (March 14), the Finance Committee heard testimony from HHS Secretary Becerra on President Biden's FY 2025 budget request for the department. During the hearing, lawmakers and Becerra discussed a range of topics from drug pricing to community health centers and behavioral health to HHS' role in caring for unaccompanied minors. Democrats generally spoke favorably of the budget request and actions HHS has taken to implement the Inflation Reduction Act's provisions to reduce drug costs, while Republicans spoke critically of the law and several raised concerns about processes related to unaccompanied minors.

Tax — There has been some movement on the Tax Relief for American Families and Workers Act (H.R. 7024), though the two sides appear no closer to a resolution to address Republican criticisms of the bill, including the lookback provision allowing the use of prior-year earnings to calculate the Child Tax Credit (CTC). Punchbowl News reported that Chairman Ron Wyden (D-OR) made an offer that drops the provision and substitutes another CTC proposal to benefit low-income families, which Ranking Member Mike Crapo (R-ID) rejected. Second-ranking Senate Republican John Thune (R-SD), the vote-counting Whip, was quoted as being bearish about prospects for the bill. "I don't think our members are in a place where there would be a significant enough vote," Thune said. "So there would have to be some real significant changes, which I'm guessing Democrats would be unwilling to make."

DTR reported on GOP requests to drop the lookback provision, "In exchange, Democrats requested replacing it with a refundability policy that would achieve the same reduction in child poverty and two other unspecified items that Republicans had requested." A main question has been whether, if the bill were put on the Senate floor without changes, the requisite number of Republican Senators (probably 9 or 10) aside from the Finance Committee members with concerns would vote for it. Senator Thom Tillis (R-NC), a main detractor of the bill who gave a very detailed statement of concerns during a March 12 manufacturing hearing, was quoted as saying, "We have people that are sympathetic to the bill that can be convinced to not let it go to the floor unless our voice has been heard."

Under the bill, IRC Section 174 R&D expensing (as opposed to five-year amortization) and the prior calculation for IRC Section 163(j) interest deductibility would be restored retroactive to 2022 and through 2025, and the bonus depreciation phasedown would be forestalled through 2025. Tax Notes reported this morning that some Senate Finance Republicans have concerns about retroactivity of the provisions, adding to what is a seemingly growing list of problems with the bill.

Following the Monday, March 11 release of President Biden's FY2025 Budget that envisions strengthening Medicare funding as "gaps in the law that allow some pass-through business owners to avoid Medicare taxes would be eliminated and Medicare tax rates would be increased," a New York Times column said the Budget "clearly signaled Democrats' vision for the future — in particular, their belief that we can preserve the solvency of Social Security and Medicare by raising taxes on high incomes rather than by cutting benefits. And it draws a stark contrast with the vision of Donald Trump, who appeared to say during an interview with CNBC that he would seek to cut those programs."

Global tax — In the wake of a March 7 House Ways & Means Tax Subcommittee hearing on Pillar One of the OECD BEPS 2.0 project that focused on a Joint Committee on Taxation (JCT) report showing the proposal would have resulted in a loss in US Federal receipts of $1.4 billion in 2021 had it been in effect, House Committee on Ways and Means Chairman Jason Smith (R-MO) and Senator Crapo issued a joint statement March 13 saying in part:

"By month's end, the Biden Administration may commit to signing a global deal that surrenders U.S. taxing rights, in exchange for other countries' promise to not impose certain discriminatory taxes on American businesses. However, JCT's analysis provides ample reasons why the Administration should not sign on to the current version of the deal. JCT estimates the U.S. will lose billions of dollars under this deal which overwhelmingly affects American companies. Moreover, according to JCT, this deal would 'increase complexity,' undermine 'tax sovereignty,' introduce 'distortive behaviors,' and create 'inefficient incentives.' Those terms do not inspire confidence … "

Congress — Senate Majority Leader Chuck Schumer (D-NY) this week told reporters that once the Senate has completed work on a series of must-pass spending bills, he would like to return to a list of bills with bipartisan support on the floor. According to Politico, which interviewed Schumer and other Democrats, this list includes: a House-passed tax deal; a rail safety bill responding to the disaster in East Palestine, Ohio; cannabis banking legislation; a new farm bill; a package of community health center funding; action to lower drug prices; a new FAA bill; and possibly the RECOUP Act on bank executive accountability. "Some Democrats even want another try on the bipartisan border deal that Republicans blocked," Politico reported. But the Senate may have something else on its plate: Punchbowl reported from the House Republican retreat that Speaker Mike Johnson (R-LA) on Thursday (March 14) said the House plans to send the impeachment articles against Department of Homeland Secretary Alejandro Mayorkas to the Senate after Congress wraps up the appropriations process. House Republicans impeached Mayorkas on Feb. 13, but have yet to transmit the articles to the Senate. The Senate is expected to quickly dismiss the charges against Mayorkas, which only requires a simple majority vote. "Either way, Senate action on the impeachment articles likely won't be until mid-April," Punchbowl reported. "Both chambers are scheduled to leave for a two-week recess on March 22, not returning until the week of April 8."

The House has been out of session since Wednesday morning due to the House Republican retreat at the Greenbrier resort in West Virginia, and is scheduled to return to session on Tuesday, March 19. The Senate is in pro forma session today and the next vote is on Tuesday, March 19, at 5:30 p.m. on confirmation of Nicole Berner to be United States Circuit Judge for the Fourth Circuit.

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For additional information concerning this Alert, please contact:

Washington Council Ernst & Young