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April 12, 2024

What to expect in Washington (April 12)

The long runway of debate over tax policies ahead of the 2025 cliff, when Tax Cuts & Jobs Act (TCJA) individual and passthrough provisions expire and any number of current tax policies could be reconsidered, continues to play out in Congress. During the April 11 House Ways & Means Committee hearing, "Expanding on the Success of the 2017 Tax Relief to Help Hardworking Americans," the years-long relitigating of the TCJA continued: Republicans credited the bill for economic growth and poverty reduction, while Democrats and one witness said it mostly enriched executives and shareholders less likely to spend the tax savings. Rep. Lloyd Doggett (D-TX) observed the hearing illustrated two paths the US could take on tax: continuing tax cuts to increase the debt under GOP leadership or the 'fair share' tax policies promoted by Democrats.

There was similar debate about the Inflation Reduction Act (IRA), the Democrats' signature law that included hundreds of billions of dollars of energy tax credits. Republicans have, and are expected to continue to, propose repeal of some of the credits to pay for other priorities. Chairman Jason Smith (R-MO) said the credits benefit companies with over $1 billion in sales and EV tax credits are claimed predominantly by households earning six figures. Democrats have celebrated the IRA as an accomplishment and are increasingly looking to highlight the law ahead of the elections. Ranking Member Richard Neal (D-MA) juxtaposed the TCJA with the IRA, saying, "Democrats took a different path and now our economy is the strongest in the world … Our investments in America's workers and families have powered this record growth: new jobs in clean energy and manufacturing, lower health care and energy costs, and holding wealthy tax evaders accountable."

Additionally, Chairman Smith made some subtle pitches for the bipartisan Tax Relief for American Families and Workers Act (H.R. 7024) business tax and Child Tax Credit (CTC) bill that is stuck in the Senate, saying the Committee "has already made progress on pro-growth and pro-family tax policies." Members also raised issues related to the OECD-led global tax agreement, with Rep. Kevin Hern (R-OK) saying the Biden administration committed the US to a global tax agreement that could diminish US competitiveness and Congress must approve any such tax changes, which is made clear in the Constitution.

Partisan differences on the path forward for international tax were aired at the April 10 Senate Budget Committee hearing, "Sunny Places for Shady People: Offshore Tax Evasion by the Wealthy and Corporations." The hearing didn't break much new ground on the topic of offshore tax evasion and avoidance by corporations and individuals and the effect on the tax gap, which Ranking Member and former Finance Committee Chairman Chuck Grassley (R-IA) noted has been a focus of Congress for over 20 years. The 2010 Foreign Account Tax Compliance Act (FATCA) imposed new accountholder reporting rules and, Grassley said, the TCJA "combined anti-base erosion and profit shifting measures with a cut to the corporate tax rate" to help "intellectual property previously held offshore for tax reasons return to the U.S."

The Tax Foundation's Daniel Bunn said the TCJA sought to close the gap between the US and foreign tax burden through the corporate rate reduction, and GILTI and FDII promote US R&D and keeping IP in the US. Asked about the President's proposed GILTI reforms for Pillar Two compliance plus a 28% corporate tax, Bunn said they would increase the gap between domestic and foreign taxes and push corporations to develop and move IP offshore. "If the U.S. has a much higher tax burden through GILTI or the domestic corporate tax rate, then instead of continuing to bring IP back or keep IP here in the United States, we'll probably see some of those same games to move things offshore or to develop things offshore rather than do them here in the United States," he said.

Democrats feel not enough has been done to address offshore tax evasion and avoidance and criticized Republican efforts to roll back the IRA's IRS funding. Senator Chris Van Hollen (D-MD) discussed his Disclosure of Tax Havens and Offshoring Act (S. 638), to require disclosure of information on the tax jurisdiction, income, and assets of companies' constituent entities on a country-by-country basis.

Energy/climate — There has been reporting about Democrats wanting to raise the profile of the IRA energy credits for combating climate change amid perceptions that voters are unaware or disinterested. A story in the April 10 Wall Street Journal, "Biden Team Tries to Reverse Voter Apathy About Climate," said, "The Biden campaign and a collection of progressive groups … believe the president's record on climate change can boost his popularity with young voters," though "climate has never been a priority with voters." The energy credits, with domestic content and wage requirements attached, were promoted from their inception as an effort to replace fossil fuel-related jobs and encourage US energy industry manufacturing. The story said, "Biden administration officials say climate is an economic issue, and funding will create new jobs and industries in many communities. They are pushing to get cash out the door to show the economic impact."

This follows the New York Times saying, "President Biden has done more than any president to tackle climate change, but strategists are grappling with an uncomfortable fact: Voters don't seem to know it."

On April 10, Treasury and IRS issued guidance, in the form of a supplemental notice of proposed rulemaking to December 26, 2023, rules on the hydrogen credit. The guidance provides information related to the collection of information for taxpayers to request an emissions value from the Department of Energy (DOE) to petition the Treasury Secretary for a determination of a provisional emissions rate (PER), which is important for purposes of determining the value of the credit.

Health — On April 10, the House Energy and Commerce Committee's Health Subcommittee held a hearing on "Legislative Proposals to Support Patient Access to Telehealth Services." During the hearing, lawmakers heard from a panel of witnesses including patient and Medicare beneficiary advocates, digital health care providers, and academics. Witnesses and lawmakers discussed 15 bills aimed at increasing patients' access to telehealth coverage. There was broad bipartisan agreement on the need to extend Medicare telehealth flexibilities, with most of the debate centered on ways to monitor and ensure care quality for a virtual service and the cost associated with extending or making permanent the current waivers.

Also on April 10, the Centers for Medicare & Medicaid Services (CMS) issued the fiscal year (FY) 2025 proposed rule for the Hospital Inpatient Prospective Payment System (IPPS) and Long-Term Care Hospital (LTCH) Prospective Payment System. In a press release, CMS Administrator Chiquita Brooks-LaSure said, "CMS is proposing changes that will create a more equitable and resilient health care system," adding, "Our proposals around payment and quality focus on rewarding better outcomes and supporting hospitals in their efforts to reach underserved communities and meet their needs." The rule proposes to increase FY 2025 acute care hospital operating payments by about 2.6%, compared with FY 2024.

Trade — Trade is getting some renewed focus in Congress amid a visit from the Japanese Prime Minister, with the two nations in a tussle over a proposed steel company acquisition, and a focus on the Administration's restrictions on certain imports. Next week, on Tuesday, April 16, is the Ways & Means hearing on the Biden Administration's 2024 Trade Policy Agenda with United States Trade Representative Katherine Tai. Punchbowl News reported April 10 that the Ways & Means Committee "is planning to take up a package of trade bills next week, including addressing the Generalized System of Preferences program, which is expired and benefits imports from developing countries."

During last year's Ways & Means trade hearing, Rep. Vern Buchanan (R-FL) said reauthorization of a Miscellaneous Tariffs Bill (MTB) and GSP package should be an "easy layup."

Congress — The Senate left for the week on Thursday afternoon. The Senate next reconvenes at 3 p.m. on Monday, April 15, with a vote at 5:30 p.m. in relation to the nomination of Ramona Villagomez Manglona to be Judge for the District Court for the Northern Mariana Islands.

House efforts to move separate bills reauthorizing the Foreign Intelligence Surveillance Act (FISA) and providing funding for Ukraine continue to be challenged by the opposition of conservative members, 19 of whom opposed the rule for consideration of the FISA bill April 10. The House may try again to move the FISA rule and bill today. Next week was also the planned timing of a vote on a bill to provide Ukraine funding more stringent terms than the Senate-passed measure. Some conservatives want border security addressed instead of or alongside the foreign aid, despite a border security package being left off to a Ukraine-Israel national security supplemental bill in February after former President Trump came out against the move. Speaker Mike Johnson (R-LA) was set to meet with Trump today.

Rules for consideration of legislation are up to the majority party to pass, with the minority traditionally voting 'no,' and rule votes have historically been a perfunctory part of the House process. Only in this Congress has opposition to rule votes by the GOP majority been deployed to express displeasure with leadership. "Until last year, no rule vote had failed for two decades, but in this Congress rebel Republicans have regularly stymied their own leaders on such votes," said an article in the April 11 WSJ.

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Washington Council Ernst & Young