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April 29, 2024

What to expect in Washington (April 29)

The House and Senate cleared $95 billion in funding for Israel, Ukraine, and Taiwan and other aid last week, and there has been plenty of reporting on how House Speaker Mike Johnson's (R-LA) view on the issue evolved with the support from other top leaders, and on how President Biden has emerged from admittedly tough legislative battles in this divided Congress with victories.

Punchbowl News April 22: "Biden has gotten pretty much everything he's asked for from this Congress without having to concede much in return. True, it's taken a while … Yet in the end, Biden has emerged as the big winner. On government funding, on FISA, and now on Ukraine and Israel, Biden got what he wanted." A story in the April 22 Wall Street Journal on the Ukraine bill and a unionized labor development in Tennessee said, "Whether these victories will fuel momentum for Biden heading into the summer is unclear, as he still faces numerous challenges … The passage of the Ukraine and Israel aid package … showed the payoff from Biden's bird-dogging of the issue both in public and behind closed doors."

Tax — It's unclear whether these developments could have any impact on prospects for Senate consideration of the House-passed Tax Relief for American Families and Workers Act (H.R. 7024) business tax and Child Tax Credit (CTC) bill, but one argument against it from Republicans has been not wanting to hand President Biden an election-year victory, especially with control in Washington so pivotal for the 2025 tax cliff.

Democratic leaders kept pressing for Senate consideration of the bill, even with Congress mostly away last week, amid additional Republican concerns about the ERTC revenue offset and the precedent of including an offset in the package when looking ahead to the 2025 tax cliff. Finance Committee Chairman Ron Wyden (D-OR) said on social media April 25: "Every Senator has a duty to fight fraud & protect taxpayer dollars. My bipartisan bill w/ @RepJasonSmith is the only bill on offer that'll cut off the gushing firehose of fraud under the Employee Retention Tax Credit. If enough Senate Republicans will join us, we can get it done."

Tax Notes April 25 reported on the unfolding disparity over the need for revenue offsets between House Ways & Means Committee Republicans, all of whom backed the Chairman Jason Smith (R-MO)-co-authored H.R. 7024, and Senate Finance Republicans, some of whom have expressed an intention to rely on the economic growth potential for tax cuts. "Interviews with senior GOP leadership on the Senate Finance Committee show a deep commitment to the traditional idea that extending existing tax policy — particularly pro-growth tax policy — doesn't have to be paid for. In the House, where budget hawks hold greater sway, there has been a growing sense that with the national debt approaching $35 trillion, offsets, or pay-fors, for tax provisions must be more than an afterthought," the report said. "Which view takes precedence in next year's negotiations over the extension of expiring [TCJA] provisions likely will depend on election outcomes … "

President Biden said on social media April 23: "Donald Trump was very proud of his $2 trillion tax cut that overwhelmingly benefited the wealthy and biggest corporations and exploded the federal debt. That tax cut is going to expire. If I'm reelected, it's going to stay expired." It was widely noted that the President's FY2025 Budget explicitly calls for extending much of the TCJA for those with incomes below $400,000.

Ahead of the 2025 cliff, House Ways & Means Committee Republicans April 25 announced the formation of 10 Committee Tax Teams made up of Ways and Means Republican members to study TCJA provisions and identify legislative solutions:

  • American Manufacturing, chaired by Rep. Vern Buchanan (R-FL), who said the panel would "focus on expanding, revitalizing and reshoring American manufacturing — one of the largest sectors of the U.S. economy."
  • Working Families, chaired by Rep. Brian Fitzpatrick (R-PA)
  • American Workforce, chaired by Rep. Darin LaHood (R-IL)
  • Main Street, chaired by Rep. Lloyd Smucker (R-PA), who said, "I look forward to leading this effort to help small businesses grow, create jobs, and invest in their communities, by ensuring tax parity between corporations and small businesses."
  • New Economy, chaired by Rep. Dave Schweikert (R-AZ), who said it will "focus on supporting businesses by enhancing productivity and stimulating growth."
  • Rural America, chaired by Rep. Adrian Smith (R-NE), who cited TCJA "policies such as doubling the estate tax exemption, increasing the child tax credit and standard deduction, creating a new 20 percent deduction for passthrough small business income, and allowing 100 percent bonus depreciation for purchases of both new and used farm equipment."
  • Community Development, chaired by Rep. Mike Kelly (R-PA)
  • Supply Chains, chaired by Rep. Carol Miller (R-WV), who said she looks forward "to working with my colleagues to stop the encroaching global socialism perpetrated by the OECD."
  • U.S. Innovation, chaired by Rep. Ron Estes (R-KS), who said, "We need a tax code that reflects our creative spirit and encourages more homegrown research, experimentation, development and innovation — and makes it possible for the people and companies doing this cutting-edge work to make the U.S. their home base."
  • Global Competitiveness, chaired by Rep. Kevin Hern (R-OK), who said, "I look forward to addressing critical international tax policies that keep businesses in the U.S. and foster economic growth."

Punchbowl News reported last night (April 28) that each tax team is expected to hold its own roundtables and listening sessions, mostly outside of Washington, D.C. "For larger businesses, Rep. Kevin Hern's (R-Okla.) group focused on international tax is drawing a lot of interest," the report said. "And Rep. Ron Estes' (R-Kan.) panel that appears to be targeting issues like a lapsed research and development incentive is also getting attention … "

On April 25, IRS issued final regulations on the transferability of energy tax credits under the Inflation Reduction Act.

Global tax — The OECD April 25 published consolidated commentary to the Global Anti-Base Erosion (GloBE) Rules that incorporates Agreed Administrative Guidance that has been released by the Inclusive Framework since March 2022 up until December 2023 and "provides tax administrations and taxpayers with guidance on the interpretation and application of the GloBE Rules in order to promote a consistent and common interpretation and application of those that will facilitate coordinated outcomes for both tax administrations and MNE Groups."

Congress — The House is in at 2 p.m. today (Monday) for legislative business that includes suspension votes on a number of Small Business Committee bills plus the Clean Energy Demonstration Transparency Act (H.R. 1069), to require the Department of Energy to report semiannually to the Congress on the status of various demonstration projects, and the Carbon Sequestration Collaboration Act (H.R. 4824), to expand the research, development, and demonstration (RD&D) program on carbon dioxide sequestration at the DOE.

On Tuesday, April 30 at 10 a.m., the House Ways & Means Committee will hold a hearing with Treasury Secretary Janet Yellen.

The Senate is back at 3 p.m. tomorrow (Tuesday, April 30) with a vote on a judicial nomination at 5:30 p.m. Later in the week is expected consideration of the Federal Aviation Administration (FAA) reauthorization and taxes bill required to be enacted by the expiration of the current short-term measure May 10. House and Senate compromise legislation was released last night. There has been some reporting on prospects for unrelated bills to be attached to the FAA measure.

On Wednesday, May 1 at 9 a.m., the Senate Finance Committee will hold a hearing, "Hacking America's Health Care: Assessing the Change Healthcare Cyber Attack and What's Next."

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For additional information concerning this Alert, please contact:

Washington Council Ernst & Young