Something Is Better than Nothing
It appears Democrats are going to proceed with a smaller reconciliation bill that includes allowing Medicare to negotiate prescription drug pricing and extending Obamacare premium subsidies for two more years.
- Once the Senate Parliamentarian signs off on the draft text submitted for her review to ensure the bill complies with reconciliation rules, Democrats will likely spend this week further drafting the legislative text and then strategizing for vote-a-rama (the Senate process that includes voting and debate of a budget resolution).
- Senate Majority Leader Chuck Schumer plans to finish the reconciliation bill by the end of next week before the Senate adjourns for the August recess. The Senate leaves for its recess on August 5, and the House is out of office July 29 through September 13.
- Note, the Senate may stay late to get this bill done, and the House could come back during recess to vote on the reconciliation package if the Senate passes something while the House is in recess. There is a special election happening in Minnesota on August 9, which could lose the Democrats a seat in the House, bringing down their majority margin to just three votes—hence the incentive for Democrats to get things done ASAP.
- Since the Build Back Better Act climate provisions appear to have hit a dead end in Congress, the White House is considering declaring a climate emergency, which would give the Biden administration executive authority to redirect funds for clean energy projects, restrict offshore oil drilling, and release military construction funding for the Pentagon under the National Emergencies Act.
CHIPS Act Expected to Pass Congress This Week
Congress is cautiously optimistic that they’ll be able to pass the CHIPS Act before they leave for their August recess.
- The $280 billion semiconductor package is quickly making its way through Congress. The bill is expected to pass a Senate cloture vote today (this is a procedural vote that limits further consideration of a bill to 30 hours in order to end a filibuster), clearing the way for the bill to go to a vote on the Senate floor this week.
- The House is expected to take up the bill once it passes the Senate and before the House goes on recess at the end of this week.
- The most recent version of the bill includes:
- 25% investment tax credit for semiconductor manufacturers
- $500 million for an international secure communications program
- $200 million for worker training
- $1.5 billion for public wireless supply-chain innovation
- Funding for research to bolster scientific education and create regional technology hubs
- $20 million to increase U.S. Supreme Court security
- More info on the provisions is available in this section-by-section summary
- What’s out: For a moment, there was hope that the retroactive extension of 100% R&D expensing would make it into the CHIPS Act. But alas, it has not, so the next potential legislative vehicle for this will be the tax extenders package that Congress is expected to take up at the end of the session.
In Case You Missed It
- The House passed a six-bill appropriations package, which includes a proposal to increase IRS funding by $1 billion (an 8% increase over the IRS’ current budget) and Treasury funding by 15%. The Senate has not yet announced its plans for the 12 annual spending bills to fund the government for the 2023 fiscal year, which begins October 1. Note, Republicans categorically oppose increasing IRS funding, and Sen. Manchin has not confirmed his position on this issue.
- Senate Democrats introduced the Cannabis Administration And Opportunity Act, which seeks to federally decriminalize, regulate, and impose taxes on cannabis products. This updated draft includes a top excise tax rate of 25% on certain cannabis products, and a tax credit for smaller cannabis businesses to pay half the excise tax rate of larger cannabis companies.
- The IRS released a five-year strategic plan outlining its goals for fiscal years 2022 through 2026.
- The cryptocurrency bill introduced by Sens. Cynthia Lummis and Kirsten Gillibrand is unlikely to progress in Congress until next year.
- Sen. Chuck Grassley introduced the Family and Community Inflation Relief Act of 2022, which would adjust for inflation the credit amounts and phase-out thresholds for the Child Tax Credit, the Non-Child Dependent Credit, the American Opportunity Tax Credit, the Lifetime Learning Credit, and the Student Loan Interest Deduction. To pay for this, the proposal includes an extension of the current cap on the SALT deduction.
- The Senate Finance Committee is considering legislation, including the Affordable Housing Credit Improvement Act of 2021, to expand existing tax credits and create new ones to confront the national shortage of affordable housing. This likely won’t move out of committee until next year.
This newsletter features developing content that is subject to change at any time. It does not constitute legal or tax advice. Consult your professional advisors prior to acting on the information set forth herein.