United States (US) Senate Majority Leader Chuck Schumer said on the Senate floor on 9 December that Democratic meetings with the Senate Parliamentarian have concluded with regard to the proposed Build Back Better Act (H.R. 5376) and bipartisan “Byrd bath” meetings, “where both sides are together and make their case to the parliamentarian and argue back and forth” are expected to begin next week. (The so-called “Byrd bath” process is formal review by the Senate Parliamentarian during which Democrats and Republicans argue whether proposed provisions meet budget reconciliation rules and may be included in the bill.). This could put the bill on the Senate floor the week of 20 December, although there are members, including Senators Joe Manchin and Kyrsten Sinema who believe consideration will extend into January. The Majority leader earlier said that the Build Back Better Act budget reconciliation bill had to be completed before the end of 2021 because expanded Child Tax Credit payments expire at the end of December and must “continue uninterrupted.”

The Senate Finance Committee reportedly will release its piece of the proposed Build Back Better Act sometime today (10 December), albeit not a final draft. Committee Chairman Ron Wyden was quoted as saying the committee document would include both technical and substantive changes. The Chairman added that “negotiations are going to continue because there are still some outstanding issues,” including discussions related to the State and Local Taxation cap, among other provisions.

A senior Treasury official this week also commented on international tax regulatory guidance that will follow enactment of the Build Back Better Act. The official noted that there are few proposed international provisions that will take effect in 2022 – for example, related to the Base Erosion and Anti-abuse Tax and foreign tax credit changes – and those would be the first to be addressed. The official was quoted as saying that ideally the Government would like to issue proposed regulations, and finalize those regulations within 18 months. Provisions in the Act with delayed applicability date would allow time for stakeholder input.

Turning to treaty developments, 18 Republican members of the Senate Foreign Relations Committee on 7 December sent a letter to the Chairman and Ranking Member of the committee urging the committee to hold a vote on the proposed 2010 US-Chile income tax treaty. The treaty has been stalled in committee for nearly 12 years and repeatedly stymied by Senator Rand Paul, who has blocked consideration of a number of pending US tax treaties – including the Chilean accord -- due to privacy concerns. The senators wrote, “Without ratification of the Treaty, Chilean tax rates are due to increase on U.S. companies' Chilean operations and could reach a rate of 44.45 percent.”

Treasury’s Financial Crimes Enforcement Network (FINCEN) on 8 December published proposed regulations that would require certain entities to file reports with FinCEN regarding beneficial ownership, as required by the Corporate Transparency Act, which was enacted in January 2021. The purpose of the information reporting is to “help prevent and combat money laundering, terrorist financing, tax fraud, and other illicit activity.” The proposed regulations address who must file, when they must file, and what information they must provide to the US Government.

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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 | arlene.fitzpatrick@ey.com

Joshua Ruland | joshua.ruland@ey.com