Lawmakers are turning to other legislative priorities as discussions on a smaller reimagined version of the Build Back Better reconciliation bill have failed to produce any substantive results over the past several weeks.
Key holdout Sen. Joe Manchin, D-W.V., recently called the bill “dead,” though he later clarified that he meant the prior version and he could be open to starting from scratch on something new. However, no substantive negotiations appear to be taking place. Manchin has repeatedly raised numerous issues with a potential reconciliation bill, including macroeconomic concerns like inflation. Manchin reiterated these concerns last Thursday—after the Department of Labor released its January 2022 inflation statistics—stating, “Congress and the Administration must proceed with caution before adding more fuel to an economy already on fire.”
Manchin also has concerns with the procedure for the bill itself, calling for it to go through committees. If the process were to be resurrected from scratch, it could drastically change what a tax title looks like. Manchin recently said in a radio interview that he favors a 25% corporate rate and 28% capital gains rate—though both those provisions were removed from the prior version of the bill over objections from Sen. Krysten Sinema, D-Ariz.
President Joe Biden has acknowledged that he may have to sacrifice key priorities, including the enhanced child tax credit and increased spending on social community colleges, to get agreement from Manchin on an updated reconciliation bill. But while Biden and other Democratic lawmakers have been hoping for an updated package that includes 1) international tax reform (such as changes to the deduction for foreign-derived intangible income, the tax on global intangible low-tax income, and the base erosion and anti-abuse tax), 2) alternative energy credit extensions and enhancements, and 3) IRS funding increases and other revenue raisers, Manchin’s recent comments cast doubt on the likelihood of passage in the near future.
Nevertheless, while the reconciliation bill is stalled, there are still other legislative vehicles lawmakers could use to enact stalled tax priorities.
Congressional Republicans and Democrats last Wednesday agreed to a “broad framework” for an omnibus spending deal to cover the remainder of the fiscal year, though little specifics of the package are available at this time. Given the broad bipartisan support for retroactively postponing the amortization of research and experimental expenses under Section 174, lawmakers could attempt to attach a retroactive “fix” for that provision in the upcoming omnibus bill. Lawmakers could also address the fix in standalone bipartisan legislation or an innovation bill soon going to conference.
Other tax priorities may have to wait until later in the year. Postponing the addition of amortization and depreciation to adjusted taxable income for the Section 163(j) limit on the interest deduction could be paired with an “extender” tax package with expired provisions later in the year. There is also broad support for bipartisan retirement account legislation.
Businesses should remain apprised of developments on Capitol Hill, as legislation addressing several important tax provisions could move quickly in the coming months—even if the Build Back Better reconciliation bill continues to lose momentum.
Tax professional standards statement
This content supports Grant Thornton LLP’s marketing of professional services and is not written tax advice directed at the particular facts and circumstances of any person. If you are interested in the topics presented herein, we encourage you to contact us or an independent tax professional to discuss their potential application to your particular situation. Nothing herein shall be construed as imposing a limitation on any person from disclosing the tax treatment or tax structure of any matter addressed herein. To the extent this content may be considered to contain written tax advice, any written advice contained in, forwarded with or attached to this content is not intended by Grant Thornton LLP to be used, and cannot be used, by any person for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code.
The information contained herein is general in nature and is based on authorities that are subject to change. It is not, and should not be construed as, accounting, legal or tax advice provided by Grant Thornton LLP to the reader. This material may not be applicable to, or suitable for, the reader’s specific circumstances or needs and may require consideration of tax and nontax factors not described herein. Contact Grant Thornton LLP or other tax professionals prior to taking any action based upon this information. Changes in tax laws or other factors could affect, on a prospective or retroactive basis, the information contained herein; Grant Thornton LLP assumes no obligation to inform the reader of any such changes. All references to “Section,” “Sec.,” or “§” refer to the Internal Revenue Code of 1986, as amended.
More tax hot topics
No Results Found. Please search again using different keywords and/or filters.