It was a relatively short week in Congress, and both chambers are out today. The House finished its business for the week on Wednesday, ahead of yesterday's funeral for Rep. Donald Payne, Jr. (D-NJ). The Senate cleared 81-10 a procedural vote on the Federal Aviation Administration (FAA) reauthorization and taxes bill (H.R. 3935). Amendments, transportation-related and off-topic, were piling up for potential consideration on one of the few remaining must-pass bills this year. Offering of amendments and consideration of the bill will continue with the goal of passing it next week. Second-ranking Senate Republican John Thune (R-SD) said there may need to be another short-term FAA extension beyond the current May 10 deadline.

The next Senate vote will occur on Tuesday, May 7 at 5:30 p.m. on the confirmation of Donna Ann Welton to be Ambassador Extraordinary and Plenipotentiary of the US to the Democratic Republic of Timor-Leste.

Senate Majority Leader Chuck Schumer (D-NY) said Wednesday, "Look, there are lots of people who have different amendments not relevant to the FAA that want to get them on — I'm one of those - but we have to get this done in a bipartisan way, and we'll figure out the best way to get it done." Amendments filed in the May 1 Congressional Record addressed topics including protection from abusive passengers, increased retirement age for pilots, establishment of a Sustainable Aviation Fuel Working Group with representatives from multiple federal agencies and clarifying airport revenue use of local general sales taxes.

As the Senate continued to process the FAA reauthorization legislation, a plan by leaders of the House and Senate banking committees to attach a bill regulating stablecoins, a form of cryptocurrency — along with a measure allowing cannabis businesses to use the banking system — appeared to have been halted by opponents seeking to keep the FAA bill "clean." House Financial Services Committee Chairman Patrick McHenry (R-NC) and Ranking Member Maxine Waters (D-CA) have been negotiating a bipartisan stablecoins bill (HR 4766) for more than a year and reportedly have agreed on language that satisfied the White House, Treasury and the Federal Reserve, and McHenry has been seeking to attach the bill to must-pass vehicles like the FAA bill. But Waters told Punchbowl News on May 1, "We know that putting our bill on FAA is maybe, almost a lost cause." Senate GOP leadership reportedly rejected Majority Leader Schumer's request over the weekend to include the stablecoins measure in the FAA bill's base text. Schumer had sought to include the crypto bill along with the Banking Committee-approved SAFER Banking Act (S. 2860), which would create a safe harbor for cannabis businesses to use the banking system, but that idea was rejected by Senate Minority Leader Mitch McConnell (R-KY) and other Republicans.

It remains to be seen if Democrats will try to offer the SAFER Banking Act as an amendment on the Senate floor next week. Sen. Roger Marshall (R-KS) has filed his Credit Card Competition Act (S. 1838) as an amendment, which would require banks with assets of more than $100 billion to allow at least two credit card networks (including one other than Visa or Mastercard) to be used on their credit cards.

Energy tax — Bloomberg reported that Treasury plans to issue as soon as today (Friday) final rules on IRC Section 30D EV excluded entities/foreign entity of concern (FEOC).

Meanwhile, Senator John Barrasso (R-WY) May 2 introduced the Eliminating Lavish Incentives to Electric (ELITE) Vehicles Act (S. 4237), to repeal the $7,500 tax credit for new electric vehicles (EVs), the tax credit for purchasing used EVs, and the federal investment tax credit for electric vehicle charging stations.

Politico reported House Foreign Affairs Chair Michael McCaul (R-TX) as saying Thursday that he is crafting legislation with Reps. Doris Matsui (D-CA) and Suzan DelBene (D-WA) for a new tax credit for microchip companies, to provide chip companies with a 25% research tax credit and expand the types of facilities eligible for the 25% manufacturing credit currently included in 2022's CHIPS and Science law.

Tax — On April 30, Rep. Michelle Steel (R-CA) introduced the Growing and Preserving Innovation in America Act (H.R. 8184), to repeal the scheduled reduction in the deduction for foreign-derived intangible income (FDII). Roll Call reported: "The deduction is likely to be part of the conversation next year as Congress grapples with how to address the expiration of many of the 2017 law's individual and small business tax cuts at the end of 2025. Steel's legislation would keep in place the 37.5% deduction permanently, rather than allowing it to drop to 21.9% at the end of next year, as it's scheduled to under the 2017 law. The current deduction lowers the effective tax rate on foreign-derived intangible income to 13.1%, compared to the corporate tax rate of 21%. The smaller deduction scheduled to take effect after 2025 would set the effective rate at 16.4%."

Banking — Also this week, it was reported that the heads of the prudential banking regulators — the FDIC, the Office of the Comptroller of the Currency (OCC), the Federal Reserve's head of supervision and the National Credit Union Administration — will testify later this month on both the House and Senate sides of the Capitol. The four regulators will testify at the House Financial Services Committee on May 15 and at the Senate Banking Committee on May 16. One issue sure to come up is the Fed's proposed "Basel III Endgame" capital rules, which would impose a 19% increase on the capital that the largest U.S. banks must hold to buffer against losses. Bloomberg reported this week that the regulators were unlikely to repropose the Basel III rule altogether and could finalize it (likely with substantial changes) as early as August. Such a move would come as a disappointment to critics who have called for the proposed rule to be abandoned and redone.

When asked about the report at his interest rate news conference this week, Fed Chairman Jerome Powell said regulators had not yet made a decision to finalize the capital rule with revisions instead of reproposing it. Bloomberg reported that officials are preparing to release as soon as next week a Quantitative Impact Study with a "compilation of data from banks" on how the Basel III changes could affect aspects of banks' businesses, which will figure into the regulators' cost-benefit analysis of the proposal.