February 11, 2022
Report on recent US international tax developments – 11 February 2022
There was little movement this week in Washington with regard to a new social spending, climate and tax bill, as Congress turned to other priorities. Senator Joe Manchin indirectly addressed the subject of a pared down spending bill following a high inflation report that was released on 10 February. Senator Manchin said: “the threat of inflation is real” and the United States (US) should “get serious about the finances of our country. … It’s time we start acting like stewards of our economy and the money the American people entrust their government with.”
Other moderate Senate Democrats are acknowledging that ongoing inflation will affect the scale of any social spending bill. Senator Tim Kaine said the latest inflation numbers will limit the size of any proposals and predicted they will focus on lowering the cost of living, pointing to a proposal to allow Medicare to negotiate prescription drug prices, expanded access to child care and pre-K and workforce development funding. “I think it [a social spending bill] will pass in a pared-down version,” Senator Kaine said.
With Congress focused on addressing US competitiveness legislation and electoral college reform, attention next will turn to President Joe Biden’s 1 March State of the Union Address for clues on how the Administration proposes to move forward.
At the same time, however, there are increasing signs of pressure on Congress to act on year-end 2021 tax changes, many of which were addressed in the now-stalled Build Back Better Act (BBBA). These include energy tax extenders and the Tax Cuts and Jobs Act (TCJA) Section 174 requirement that research and development expenses be amortized over five years rather than expensed. Another TCJA cliff that was not in the BBBA that some congressional Republicans are insistent must move forward is renewal of the Internal Revenue Code Section 163(j) 30% of adjusted taxable income limitation on the deduction of interest expense calculated taking into account EBITDA (earnings before interest, taxes, depreciation, and amortization).
For additional information with respect to this Alert, please contact the following:
Ernst & Young LLP (United States), International Tax and Transaction Services, Washington, DC