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Prospect for Passage of Several Tax-Related Bills This Year Remains Uncertain

By:
Ruth Singleton
Published Date:
Jun 22, 2022

GettyImages-1324617091-Capitol-Congress

As 2022 approaches its midpoint, there remains great uncertainty about the prospects for the passage of Build Back Better and other tax-related legislation before the year ends, Accounting Today reported. The Build Back Better legislation, originally an ambitious package meant to significantly bolster the social safety net,  has now shrunk from $3.5 trillion to under $2 trillion. If it is to pass through budget reconciliation, it must move by Sept. 30, when the current budget resolution expires. 

The uncertainty arises for several reasons. One is that it is a midterm election year, which makes compromise more difficult. Another is that it is unclear whether Sen. Kyrsten Sinema (D-Ariz.) will support the reduced proposal, and her vote is needed for Democrats to achieve a majority. A third is that Congress will go on recess over the Fourth of July and August, leaving little time for negotiations. Build Back Better tax provisions still under discussion include green energy provisions, additional infrastructure provisions after passage of the 2021 infrastructure legislation, and extension of some of the individual tax breaks enacted during COVID-19, such as the Premium Tax Credit, the Child Tax Credit, and the Earned Income Tax Credit. 

Also being discussed as part of this legislation is a corporate minimum tax of 15 percent, which would also support Pillar Two of the Organization for Economic Co-operation and Development’s efforts to discourage multinational corporations from taking advantage of differential rates from jurisdiction to jurisdiction 

In addition, according to Accounting Today, Congress is considering taking action with respect to the following legislation: 

Tax Cuts and Jobs Act  

Many of the provisions of the Tax Cuts and Jobs Act (TCJA) had end dates in order for  the bill to pass under budget reconciliation in 2017. So, unless Congress acts, research-and-development expenses must be capitalized with five-year amortization starting Jan. 1, 2022. Proposals include permanent immediate expensing or delaying capitalization for another four years. Another provision under the TCJA would start the phaseout of 100 percent bonus depreciation in 2023. Proposals being considered would make this provision permanent or at least postpone the phaseout for a few more years. In addition, under the TCJA, the calculation of the interest expense deduction limitation under IRC  Sec. 163(j) will be based, starting this year, on earnings before interest and taxes and will drop the inclusion of depreciation and amortization. Proposals in Congress would permanently preserve the inclusion of depreciation and amortization in the calculation.  

China competition legislation  

Proposals for China competitiveness legislation aim to promote domestic production of important goods that Congress does not believe the United States should rely on China to supply. There is discussion of including a tax section in the legislation, but there is also concern that a tax section could bog down passage.  

Russian invasion of Ukraine  

Congress is also considering tax legislation that would bar companies that pay taxes to Russia and Belarus from receiving foreign tax credits or other benefits. This legislation has bipartisan support and only requires the proper legislative vehicle to attach to for passage.  

SECURE 2.0  

Since passage of the Setting Every Community Up for Retirement Enhancement (SECURE) in 2020, Congress has been working on some bipartisan additional changes to the tax provisions related to retirement. The Senate Finance Committee is working on its own version of the legislation.  

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