Senate Majority Leader Chuck Schumer on 4 August announced that the Senate would begin consideration of the budget reconciliation health/climate/tax bill, the Inflation Reduction Act of 2022 (H.R. 5376), on 6 August, at which time the final version of the reconciliation bill will be introduced. The announcement was followed hours later by news that Senator Kyrsten Sinema would “move forward” on the budget deal. Senator Schumer later said he had the votes to pass the legislation. The bill remains under review by the Senate Parliamentarian, who will make the determination of whether the provisions may be enacted under budget reconciliation rules.
“We have agreed to remove the carried interest tax provision, protect advanced manufacturing, and boost our clean energy economy in the Senate’s budget reconciliation legislation,” Senator Sinema said on 4 August. It is not clear what changes will be made to the 15% corporate minimum tax proposal to “protect advanced manufacturing.” Senator Sinema also indicated she would work with Senate colleagues “to enact carried interest reforms.” Several reports indicate the budget deal includes a new excise tax on stock buybacks that would pay for the removal of the carried interest measure from the bill.
If the Senate passes the measure, the House is expected to reconvene to approve the bill sometime next week.
Senate Democrats spent the last week working behind the scenes to bring forward the proposal. There had been ongoing talks to win the support of Senator Sinema, the 50th Senate Democratic vote necessary to pass the bill under budget reconciliation rules.
Senate Republicans have come out strongly against the bill. Ranking Finance Committee member Mike Crapo on 30 July released congressional Joint Committee on Taxation (JCT) data that he said showed that of the US$313 billion1 in total revenue expected to come from the corporate minimum tax proposal, $155.6 billion would come from manufacturers; $29.1 billion from wholesalers; $15.3 billion from retailers; $36 billion from IT; $35.1 billion from holding companies; and $42 billion from all other industries. In response, Senate Finance Committee Chairman Ron Wyden and committee member Elizabeth Warren on 2 August released JCT data that they claim indicated “Big pharma, tech and apparel companies would account for half the revenue coming in from 'manufacturers' under the [budget bill’s] corporate minimum tax” proposal.
House Ways and Means Committee Republicans introduced a resolution dated 26 July that would require Treasury to produce documents showing the effects of the OECD2 BEPS3 2.0 Pillar One rules. According to the resolution, the Treasury Secretary would be compelled to provide the House with “Pillar One tax revenue modeling data and reports” on the impact of the BEPS 2.0 Pillar One agreement on reallocation of taxing rights, as well as the overall economic effects of the Pillar One agreement.
For additional information with respect to this Alert, please contact the following:
Ernst & Young LLP (United States), International Tax and Transaction Services, Washington, DC
- Arlene Fitzpatrick
- Joshua Ruland
For a full listing of contacts and email addresses, please click on the Tax News Update: Global Edition (GTNU) version of this Alert.
