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May 8, 2024

What to expect in Washington (May 8)

How Senate consideration of the Federal Aviation Administration (FAA) five-year reauthorization and taxes bill (H.R. 3935) will unfold remained unclear as the chamber began its workweek last night. Senate leaders were expected to put forward a substitute changing language regarding airline passenger refunds, Reuters reported. Amendments have been filed on transportation, tax, and other issues as leaders continue to negotiate an agreed-upon set of amendments to vote on amid reports that House Republican leaders don't want the bill, which is based on House-Senate compromise language, loaded with Senators' priorities.

Punchbowl reported May 7 that online safety and radiation compensation bills are among the off-topic proposals that some members are pushing for inclusion. "Other senators have asked for votes on bipartisan measures including the Credit Card Competition Act and an extension of the Affordable Connectivity Program," the report said. "But House GOP leaders are actively trying to prevent non-germane bills from hitching a ride to the FAA reauthorization."

Senator Ron Wyden (D-OR) filed an amendment reflecting the House-passed Tax Relief for American Families and Workers Act (H.R. 7024) and its improvements to the child tax credit, extension of TCJA pre-cliff tax incentives to promote economic growth (R&D expensing, and more generous interest deduction calculation and bonus depreciation), rules for US taxation of residents of Taiwan, disaster tax relief, and improvements to the low-income housing tax credit. Senate Republican leaders would be expected to object to any effort to add the tax bill. Another amendment, filed by Senator Roger Marshall (R-KS), would require the Board of Governors of the Federal Reserve System to prescribe regulations relating to network competition in credit card transactions, mirroring the Credit Card Competition Act (S. 1838).

Politico reported last night, "Senate Democrats are hotlining a potential package of amendments to the FAA bill that would include a vote on an amendment striking language in the underlying bill expanding long-haul flights at Ronald Reagan Washington National Airport and another related to facial recognition technology at airports." According to the report, other amendments that could potentially be teed up for a vote include those from Senators Marco Rubio (R-FL) (amendment #1926 - Homestead Air Reserve Base); Chuck Grassley (R-IA) (#1949 - anti-fraud and abuse recommendations); Markwayne Mullin (R-OK) (#1944 - expansion of the FAA BEYOND Program); Maggie Hassan (D-NH) (#1990 - airport universal changing stations); Patty Murray (D-WA) (#1934 - pilot programs for sound insulation repair and replacement); Rand Paul (R-KY) (#1952 - high volume port); and Mike Lee (R-UT) (#1999 - funds for the TSA).

An FAA extension past the current May 10 deadline may be necessary, either for a short period or until the start of the next Congress, though Senate leaders would be expected to try to get as close as possible to an agreement for consideration before proposing an extension for a bill that has been under deliberation in Congress for nearly a year. There are currently no votes scheduled in the Senate, which will recess at midday for the weekly party caucus lunches.

Tax — Morning Tax reported House Ways & Means Committee member Randy Feenstra (R-IA) and other GOP tax writers as saying, in the context of the 10 committee "Tax Teams" announced on April 25 to primarily study TCJA provisions expiring at the end of 2025, that the tax discussions next year won't necessarily be confined to just those issues. Feenstra and Rep. Kevin Hern (R-OK), who chairs the Global Competitiveness team, said that the global minimum tax remains top of mind for many in the GOP as Treasury continues to push for implementation of Pillar Two. Hern noted that countries could start offering more refundable tax credits or direct subsidies in place of other credits disallowed by the minimum tax, a point he raised during the April 30 Ways & Means hearing with Treasury Secretary Janet Yellen.

Global tax — A May 3 panel at the American Bar Association Tax Section meeting included discussion of whether a double benefit may arise from the Pillar Two calculation from a dual consolidated loss (DCL) that existing DCL rules would eliminate when there is a foreign use of the loss. The IRS stated in Notice 2023-80 (released in December) that losses prior to 2024 (referred to as legacy losses in the Notice) wouldn't be considered a foreign use. The panel included government speakers, one of whom suggested the Treasury Department and IRS continue to think through the interaction of the DCL rules with the GloBE Model Rules from a policy perspective.

The Bloomberg Daily Tax Report (DTR) followed up on the comments May 6, saying: "US multinational companies may lose the ability to deduct up to hundreds of millions of dollars' worth of losses incurred from their income starting this year under the new global minimum tax. The loss in deduction can arise from the interaction of the 15% minimum tax rules, known as Pillar Two, and US rules that prevent companies from 'double dipping' — getting deductions on losses in the US and another jurisdiction on the same income. The IRS hasn't announced how it will rule on the issue." The report further said: "Practitioners said the IRS shouldn't consider the OECD's safe harbor to be a foreign use because businesses don't use it to compute their tax liability and that it's not an income taxing regime."

Social Security & Medicare — The annual Social Security trustees report said the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds combined would be able to pay 100% of total scheduled benefits until 2035, one year later than reported last year. "This year's report is a measure of good news for the millions of Americans who depend on Social Security, including the roughly 50 percent of seniors for whom Social Security is the difference between poverty and living in dignity — any potential benefit reduction event has been pushed off from 2034 to 2035," said SSA Commissioner Martin O'Malley.

A May 6 Peter G. Peterson Foundation post, "Social Security Faces Serious Financial Shortfalls, and Other Takeaways from The Trustees Report," said, "If lawmakers act soon to address the trust fund shortfalls, they will be able to phase in changes gradually and responsibly in a way that does not harm vulnerable populations. However, delaying reform would require larger changes to the program. If action is not taken until 2035, the tax increases or benefit reductions required to stabilize the program's financing would be nearly 20 percent larger than if action were taken today."

The Medicare trustees report said the Hospital Insurance (HI) Trust Fund will be able to pay 100% of total scheduled benefits until 2036, five years later than reported last year. CMS Administrator Chiquita Brooks-LaSure said, "The Biden-Harris Administration has taken action to reinforce the program and propose enhancements that would extend its solvency while strengthening benefits."

The May 7 Washington Post said improvements in the forecast for the programs "may not last and can't change an overall bleak picture, the trustees said, and Congress still must act to stabilize the programs to prevent cutting off benefits from tens of millions of seniors or plunging the nation into insurmountable debt … Lawmakers, with eyes on November's elections, say they could face a rare window to enact sweeping fiscal reforms in 2025, as President Biden pitches new taxes on the wealthiest Americans for a slew of new social safety net programs and Republicans eye extending trillions of dollars in Trump-era tax cuts."

Health — The House Ways & Means Committee is marking up telehealth and rural hospital bills today. A news release from Committee Republicans said: "Recently introduced legislation from Ways and Means Committee members takes aim at improving access to health care in America, particularly in rural and underserved areas. The package of bills addresses critical issues affecting patients by preserving and improving vital telehealth and health-at-home access, advancing solutions to prevent rural hospital closures — including expanding the rural emergency hospital designation, ensuring access to ambulance services, and addressing the shortage of doctors and nurses in rural America."

Some of the bills were introduced May 6, including:

  • H.R. 8244, by Rep. Ron Estes (R-KS), seeks to ensure appropriate approval for certain skilled nursing facility and nursing facility nursing aide training and competency evaluation programs under the Medicare and Medicaid program; and
  • H.R. 8246, by Rep. Jodey Arrington (R-TX), to modify the criteria for designation of rural emergency hospitals.

Also introduced May 6, H.R. 8260, by Rep. Brad Wenstrup (R-OH), would extend acute hospital care at home waiver flexibilities. "This important legislation includes a 5-year extension of the Acute Hospital Care at Home program to allow participating providers to continue furnishing services that enhance access to care," a release said. "This bill will allow for the expanded delivery of hospital-level care for Medicare beneficiaries in the comfort of their own home."

Hearings — The Ways & Means Committee has scheduled a Field Hearing on Empowering Native American and Rural Communities for Friday, May 10 at 9 a.m. (Mountain Time) in Scottsdale, Arizona, which is in Rep. Dave Schweikert's (R-AZ) district.

Friday, May 10 is the EY Webcast, "Tax in a time of transition: legislative, economic, regulatory and IRS developments."

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Washington Council Ernst & Young