The US House (314-117) and Senate (63-36) this week passed the Fiscal Responsibility Act of 2023 (H.R. 3746), a debt ceiling bill agreed to by President Biden and House Speaker Kevin McCarthy (R-CA). The deal came just days before the 5 June deadline that Treasury Secretary Janet Yellen cited as the potential date the US could default on its debt. The bill suspends the statutory debt ceiling through 1 January 2025, along with applying curbs on government spending and claw-backs of IRS and COVID-19-related funding. According to the Congressional Budget Office, the bill would reduce deficits by $1.5 trillion over the 2023–2033 period relative to May 2023 baseline projections under caps to discretionary funding provisions in the bill.

The bill would rescind $1.4 billion of the Inflation Reduction Act's $80 billion in increased IRS funding. The bill now goes to the President for signature.

As expected, House Ways and Means Committee Chairman Jason Smith (R-MO), joined by every Republican on the Committee, introduced legislation on 25 May aimed at discouraging countries from adopting the BEPS 2.0 Pillar Two Undertaxed Profits Rule (UTPR). The Defending American Jobs and Investment Act would increase taxes on the US businesses of companies headquartered in countries that enact the UTPR.

The legislation is unlikely to be enacted in this Congress, as it would require bipartisan support and the support of the Biden Administration. Rather, Committee Republicans hope the introduction of the bill will encourage the OECD and the Inclusive Framework participants in Pillar Two to reconsider introduction of UTPRs in their own domestic legislation.

The Senate Foreign Relations Committee on 1 June voted out of committee (20-1) the proposed US-Chile tax treaty. The approved agreement includes two reservations and a declaration. Text of the resolution of advice and consent to ratification can be found here. Senate Majority Leader Chuck Schumer (D-NY) earlier this week said ratification of the treaty is crucial for access to critical minerals such as lithium.

And a bipartisan group of House members introduced a resolution on 25 May calling for legislation to prevent double taxation between the US and Taiwan, with the goal of providing treaty-like benefits through the tax code. The resolution follows the Senate's introduction of the Taiwan Tax Agreement Act of 2023, which would authorize the Biden Administration to negotiate a tax agreement with Taiwan.

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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

Published by NTD’s Tax Technical Knowledge Services group; Carolyn Wright, legal editor