Taxation & Representation, June 22, 2022

Brownstein Hyatt Farber Schreck

SCHEDULING NOTE: Taxation & Representation is publishing on Wednesday this week because of the Juneteenth federal holiday. The newsletter will not be publishing next week or the following week due to the two-week Independence Day congressional recess. Publication will resume on Tuesday, July 12. 

Legislative Lowdown

Build Back Better Outlook. Congressional Democrats are still hoping they can pass some version of the Build Back Better Act (BBBA), the budget reconciliation vehicle to advance some of President Joe Biden’s legislative policies, prior to the August recess. Due to Sen. Joe Manchin’s (D-WV) concerns over inflation and outsized congressional spending, a revised package will include less spending and contain deficit reduction provisions. Manchin continues to push for two-to-one deficit reduction.
Discussions between Senate Majority Leader Chuck Schumer (D-NY) and Manchin have continued, with the duo meeting as recently as last week. According to reports, the two are reviewing a potential agreement in detail. The discussions have focused largely on health provisions, such as an extension of Affordable Care Act (ACA) subsidies and drug pricing, energy policy and payfors. On the energy policy front, a $4,500 bonus tax credit for electric vehicles made with domestic union labor was a sticking point. Earlier today, Manchin indicated that the provision was “out.”
President Biden has also been engaged in negotiations, recently meeting with Schumer and House Speaker Nancy Pelosi (D-CA) in order to reach a deal.
Schumer is laying the groundwork for potential action in the coming weeks. His staff is meeting with the Senate parliamentarian to prepare for a vote in July or early August. This timeline is achievable, according to Senate Finance Committee Chair Ron Wyden (D-OR), who has reportedly been directly involved in discussions. Wyden said last week he is “spending a significant amount of time every day on it” and that he thinks it can get “done before the August break.”
White House Weighs Plan to Counter Inflation. As inflation continues to climb, President Biden is working on legislation to provide Americans relief. Over the weekend, National Economic Council Director Brian Deese said the president is considering a legislative package to help Americans combat inflationary pressure. According to Deese, the White House is “working very closely with congressional leadership, with Senate leadership on that” package and is hoping to “see progress on that in the coming weeks.”
President Biden also announced his support for a suspension of the 18.4-cents-a-gallon federal gasoline tax to provide relief at the pump. Wyden lent his support for the idea, saying earlier this week “it should absolutely be on the table.” However, it is unlikely to gain the congressional support necessary to become law, and multiple members of Congress, including Democrats, have already come out against the proposal.
Senate Finance Considers EARN Act. The Senate Finance Committee held anexecutive session on Wednesday to consider the Enhancing American Retirement Now (EARN) Act.
The EARN Act, introduced by the committee chair on Friday, would help American save by encouraging employees to enroll in retirement savings plans, among other measures. A full section-by-section of the legislation can be found here.
Wyden said the bill has received input from committee’s ranking member, Sen. Mike Crapo (R-ID), as well as Sens. Rob Portman (R-OH) and Ben Cardin (D-MD), indicating the bill could receive bipartisan support in committee. According to theJoint Committee on Taxation, the EARN Act would generate $539 million in revenue. Next, the EARN Act and other retirement security legislation moving through Congress will be compiled into a single package.
In the Senate Health Education Labor and Pensions (HELP) Committee, lawmakers are working on their own retirement package. Specifically, Committee Chair Patty Murray (D-WA) and Ranking Member Richard Burr (R-NC), have been coordinating on a package.
Retirement security legislation is widely viewed among congressional tax staffers as having bipartisan support, and a package is expected to move by the end of this year. Some lawmakers, such as Sen. Chuck Grassley (R-IA), expect the retirement security language to ultimately be included in a year-end appropriations package.
Earlier this year, the House passed the Securing a Strong Retirement Act (H.R.2954), also known as “SECURE 2.0,” which would promote retirement security by providing for the automatic enrollment of employees in certain plans and increasing the age at which participants are required to begin receiving mandatory distributions, among other provisions.

1111 Constitution Avenue

Robots Are Taking Over the IRS. The Internal Revenue Service (IRS) has struggled with customer service via telephone in recent years. IRS Commissioner Charles Rettig, for instance, recently told lawmakers the agency can answer only about 20% of calls it receives. IRS officials place much of the blame for this on lackluster resources, particularly not having enough personnel to answer the phones.
The IRS has been working on a solution: automated bots. In a news release Friday, Darren Guillot, IRS deputy commissioner of small business/self employed collection and operations support, said the bots are already being widely used at the agency. Guillot said that “to date, the voice bots have answered over 3 million calls. As we add more functions for taxpayers to resolve their issues, I anticipate many more taxpayers getting the service they need quickly and easily.” Guillot also reported that bots, which have a 40% satisfaction rate, have saved about 20 minutes per call.
Rettig said the automated bots are "part of a wider effort at the IRS to help improve the experience of taxpayers" and that the IRS will "continue to look for ways to better assist taxpayers, and that includes helping people avoid waiting on hold or having to make a second phone call to get what they need.” He added: “The expanded voice bots are another example of how technology can help the IRS provide better service to taxpayers."

Global Getdown

House Republicans Want FTC Changes. House Ways and Means Committee Republicans, led by Ranking Member Kevin Brady (R-TX), called on the Biden administration to make changes to final foreign tax credit (FTC) regulations released in December 2021 to address mounting concerns from U.S. businesses.
In a letter last week to Treasury Secretary Janet Yellen, all 18 committee Republicans said the final regulations “run contrary” to the congressional intent that taxpayers be able to apply foreign tax credits to protect against double taxation. The signers also charged that the three days between issuance of the regulations and their effective date made it “impossible” to assess the new rules given the fundamental changes to the creditability requirements made by the new regulations.
The letter said the Treasury Department’s delay in clarifying the guidance has levied undue burdens on taxpayers who want to comply. Because of this, the Republicans requested that the administration expedite the release of proposed modifications to the regulations and consider comments by taxpayers. To provide time for that process to conclude, committee Republicans urged the Treasury Department to delay the implementation of the new regulations and apply the Jan. 1, 2023, effective date that applies to the Puerto Rico Law 154 excise tax under the final regulations currently.
Hungary Leaves EU Hungry for Deal. In the lead up to the meeting last week of the European Union’s Economic and Financial Affairs Council, which oversees EU tax policy, France persuaded Poland to drop its objections to the EU directive to align the bloc with the 15% global minimum tax under the Pillar Two agreement negotiated by the Organisation for Economic Cooperation and Development last year. While Poland’s acquiescence was expected to allow for the required unanimous vote to adopt the Pillar Two directive, Hungary unexpectedly changed its position and vetoed the measure.
In discussing the “no” vote, Hungarian Foreign Minister Péter Szijjártó said last week, "Europe is in deep enough trouble without the global minimum tax.” He later added that Hungary is "not supporting a hike in taxes for Hungarian companies, and we’re not willing to put jobs in danger."
The Czech Republic takes over the EU’s council of ministers rotating six-month presidency in July, and the Pillar Two directive could be considered again at the Economic and Financial Affairs Council’s July 12 meeting. Failing that, it will meet again after the summer break on Oct. 4.

At a Glance

  • Malerba for U.S. Treasurer. President Biden has tapped Lynn Malerba to be the U.S. treasurer, a position with oversight of the U.S. Mint, the Bureau of Engraving and Printing and Fort Knox.
  • Look Intuit. Sen. Elizabeth Warren (D-MA) and Reps. Katie Porter (D-CA) and Brad Sherman (D-CA) sent a letter this week to the Treasury Inspector General Rich Delmar, Treasury Inspector General for Tax Administration (TIGTA) Russell George and Federal Trade Commission Inspector General Andrew Katsaros asking for an investigation into “Intuit’s abuse of the revolving door.”

Brownstein Bookshelf

  • House Republicans Want UNAX Brief. House Ways and Means Committee Republicans sent a letter last week to the IRS commissioner and TIGTA asking for a briefing about their ability to “track and refer for prosecution cases of willful unauthorized access of confidential, federal taxpayer information (UNAX) and unauthorized disclosure of confidential, federal tax information by IRS employees, contractors, and outside parties.”

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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