Taxation & Representation, November 17, 2021

Brownstein Hyatt Farber Schreck

Tax Tidbit

Bipartisan Infrastructure Bill Becomes Law. On Monday, President Joe Biden signed into law the Infrastructure Investment and Jobs Act, which contains $1.2 trillion in funding for traditional infrastructure projects likes roads, bridges, highways, public transit, railways, airports, water and wastewater as well as money for broadband, modernizing the electric grid, climate resiliency, environmental projects and electric vehicles. The bill also includes multiple tax provisions, some of which are highlighted below:

  • Information Reporting for Brokers and Digital Assets. Expands current information reporting rules—which generally require brokers to report to the Internal Revenue Service (IRS) and customers, certain information such as the customer’s identity, gross proceeds from sales and cost basis of assets. Under the proposal, brokers whose customers own digital assets (e.g., cryptocurrencies such as Bitcoin, Ethereum) would be required to report such information.
  • Termination of Employee Retention Tax Credit. Eliminates the Employee Retention Tax Credit for otherwise eligible businesses for the fourth quarter of 2021—the maximum value of the credit for that period under current law would be $7,000 per employee. Eligible recovery startup businesses are still eligible for the credit through the end of 2021.
  • Pension Smoothing. Corporate sponsors of single-employer defined benefit plans have the option of reducing the minimum required contributions to their plans for the next few years. This gives corporations more flexibility to deploy their capital in the most efficient manner for their particular business (e.g., use the additional capital to expand their business, build a factory, hire more workers, etc.).
  • National Motor Vehicle Per-Mile User Fee Pilot. Establishes a pilot program to test the feasibility of a per-mile user fee on drivers of motor vehicles as a potential alternative to the current motor fuels excise tax as the primary source of funding for the federal highway system.
  • Hazardous Substance Superfund. Reinstates and raises the price of feedstocks and products containing the chemicals as most of these taxes will be passed through to the ultimate consumer.

Click here for the full Brownstein Tax Policy Team summary and analysis of key provisions in the Infrastructure Investment and Jobs Act.

Infrastructure Implementation

With the bill now law, the White House announced last week that former New Orleans Mayor Mitch Landrieu will be responsible for overseeing its implementation. In the announcement, the White House touted Landrieu’s involvement in helping New Orleans recover from Hurricane Katrina and his commitment to racial equity during his mayoral tenure.

Landrieu, who will serve as senior advisor, said his “work will require strong partnerships across the government and with state and local leaders, business and labor to create good-paying jobs and rebuild America for the middle class,” adding that the investments will be focused on “combatting climate change and advancing equity.”

Since serving as mayor of New Orleans and lieutenant governor of Louisiana, Landrieu has been a visiting fellow at the Harvard Kennedy School of Government.

President Biden also signed an executive order establishing a task force to coordinate effective implementation of the new law. The task force will be co-chaired by Landrieu and National Economic Council Director Brian Deese and will be comprised of multiple administration offices and agencies. The task force will have the following six implementation priorities, according to a White House statement:

  • Avoiding public fund waste
  • Buying American and increasing the competitiveness of the U.S. economy by bolstering domestic manufacturing and manufacturing supply chains
  • Creating good-paying jobs, including prevailing wages and opportunities to join a union
  • Investing public dollars equitably, including through the Justice40 Initiative
  • Building resilient infrastructure that can withstand climate change
  • Coordinating effectively with state and local government

Legislative Lowdown

Build Back Better Act: Cost Estimates and Inflation. The House is potentially preparing to vote this week on the Build Back Better Act, the second half of President Biden’s legislative agenda. Speaker Nancy Pelosi (D-CA) and progressive Democrats are pushing for a vote in the coming days, but moderate Democrats are growing increasingly wary of supporting the package for several reasons, including public polls revealing waning enthusiasm, the victory of Glenn Youngkin in Virginia’s gubernatorial race and rising inflationary pressure.

While President Biden has repeatedly rebuffed inflationary concerns and claimed the package would instead counteract inflationary trends, moderate members like Sen. Joe Manchin (D-WV) have pointed with concern to the 6.2% annual rate of inflation reported last week by the Bureau of Labor Statistics.

House Democrats are currently in a pause as they wait for the Congressional Budget Office (CBO) to release additional cost estimates sought by moderates and the “additional financial information” asked for by progressives.

As of this writing, CBO has not released an estimate of the entire bill. It has only released estimates for the portions of the package under the jurisdiction of the Committee on Agriculture, the Committee on Homeland Security, the Committee on Oversight and Reform, the Committee on Science, Space and Technology, the Committee on Small Business, the Committee on Transportation and Infrastructure and the Committee on Veterans Affairs.

While these scores shed some light into the cost of the package, many moderates are waiting for estimates of the largest portions, namely those provisions under the jurisdiction of the House Ways and Means Committee, the Energy and Commerce Committee and the Education and Labor Committee. CBO said on Monday it expects to publish the remaining estimates by the end of the day on Friday, Nov. 19.

Under budget reconciliation rules, the Senate cannot approve the package until CBO has released the final score. Some moderate Democrats who want to postpone passage point to this, arguing that since the bill will be prevented from final enactment until CBO releases its official score, there is no reason to rush House passage before the cost estimate is published.

Separately, Senate Majority Leader Chuck Schumer (D-NY) said in a Dear Colleague letter on Sunday that he and the Senate Budget Committee have been working with House and Senate committees and the Senate Parliamentarian on the “Privilege Scrub” of the Build Back Better Act to ensure it complies with Senate reconciliation rules and the instructions in the budget resolution. Schumer is aiming to complete that process and ensure the legislation adheres to Byrd Rule requirements by holding “Byrd Bath” meetings with the Parliamentarian this week. To be compliant, the text will have to meet certain requirements, including not increasing the deficit beyond the budgetary window, being within the jurisdiction of the committee making the recommendation and having only “merely incidental” budgetary effects, if any, among others.

Marijuana Momentum? On Monday, Rep. Nancy Mace (R-SC) introduced the States Reform Act, federal reform legislation to legalize cannabis. In a press conference, Mace said her legislation would make cannabis use under 21 illegal, deschedule and decriminalize cannabis, expunge criminal records for violations only involving cannabis and release those currently serving prison sentences (with exceptions for DUIs and drug traffickers), allow for research into the medical benefits of cannabis and allow the Department of Veterans Affairs to prescribe cannabis to veterans.

In addition to federally legalizing marijuana, the States Reform Act would impose lower tax rates on cannabis than some of the leading Democratic proposals. Below is a comparison of the various tax rates:

  • Cannabis Administration and Opportunity Act: 25.5%
  • MORE Act: 8%
  • States Reform Act: 3.75%

According to Mace, federal oversight would be conducted by the U.S. Department of Agriculture for cannabis growers and by the Alcohol Tobacco Tax and Trade Bureau for cannabis products.


1111 Constitution Avenue

IRS Launches New Tool for Withholding Agents. The IRS launched a new online tool Monday to help U.S. withholding agents comply with reporting and withholding requirements associated with Form 1042-S (Foreign Person’s U.S. Source Income Subject to Withholding). According to the IRS, the tool— which will be free for users—“is designed to accept Form 1042-S data in common file formats that can be generated by most withholding agents’ back office systems. After uploading the data, the user will receive a report indicating errors and potential errors.” However, even though the tool helps withholders identify potential errors, agents are ultimately responsible for making those changes prior to submission to the IRS.


At a Glance

  • Treasury Confirmations. The Senate is expected to advance multiple Treasury Department nominees this week, including Graham Steele to be an assistant secretary for Financial Institutions and Brian Nelson to be under secretary for Terrorism and Financial Crimes. 
  • PWBM BBB Estimate. The University of Pennsylvania Wharton Budget Model estimated the budget and macroeconomic effects of the Build Back Better Act. It found the bill would increase spending by $2.1 trillion over 10 years and increase revenue by $1.8 trillion, resulting in a $274 billion deficit over the decade.
  • IIJA Regulations. With the Infrastructure Investment and Jobs Act now law, the IRS is expected to move forward quickly on guidance for the reporting requirements for cryptocurrency holders language in the bill. According to former IRS employees, the IRS could issue proposed regulations related to this section within the next few weeks.

Brownstein Bookshelf

  • Rettig Op-ed. IRS Commissioner Charles Rettig published an op-ed last week in which he urged Congress to provide the agency with $80 billion. In the piece, he reiterated the Biden administration’s argument that “$400 billion in additional revenue can be generated over the next decade from enforcement efforts focused on high-end incomes, shrinking the tax gap.” He also wrote that “this figure is no surprise: If given the resources we need, we will be able to make a sizeable dent in noncompliance over several years.”
  • Forecasting IRS Funding Estimate. Ahead of the official CBO score for the Ways and Means portion of the Build Back Better Act, the New York Times published an article anticipating that the estimate would fall short of the administration’s expectations.

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.

© Brownstein Hyatt Farber Schreck | Attorney Advertising

Written by:

Brownstein Hyatt Farber Schreck
Contact
more
less

Brownstein Hyatt Farber Schreck on:

Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
- hide
- hide

This website uses cookies to improve user experience, track anonymous site usage, store authorization tokens and permit sharing on social media networks. By continuing to browse this website you accept the use of cookies. Click here to read more about how we use cookies.