Earlier this year President Biden and his administration introduced The American Jobs Plan, which focuses on investment in infrastructure, and The Made In America Tax Plan and The American Families Plan, which is informing the Reconciliation Bill process.
Much of the focus since the administration’s release of these plans has been on whether Congress has the support necessary in both chambers to push them forward. As there are potentially significant tax considerations that accompany both of these pieces of legislation, below is an update on where each bill stands today.
On August 10, the Senate passed their version of a bipartisan Infrastructure Bill by a vote of 69-30. This scaled back version of The American Jobs Plan is approximately $1.2 trillion, significantly less than the spending in the original proposal. This bill does not include any of the significant tax law changes for businesses or individuals outlined by the administration in The Made In America Tax Plan and The American Families Plan. However, a couple of the revenue raisers included in the Infrastructure Bill are worth noting from a tax perspective:
- Required information reporting on digital assets beginning for returns and statements filed after December 31, 2023; and
- Reducing the applicability of the employee retention credit from December 31, 2021, to September 30, 2021.
Despite bipartisan support in the Senate, the bill has been held up in the House of Representatives by members who want to tie this bill to a larger spending bill — the Reconciliation Bill. Just this week the House agreed to bring the Infrastructure Bill to a vote by September 27; however, there is no guarantee a vote will actually occur if the Reconciliation Bill is not progressing.
The larger spending bill, including the tax law changes called for in The Made In America Tax Plan and The American Families Plan, that has held up the Infrastructure Bill in the House does not have bipartisan support. Therefore, it would have to be passed through the reconciliation process to avoid a filibuster in the Senate.
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Reconciliation requires a simple majority vote, which currently the Democrats have in both the House and Senate, with Vice President Harris serving as the tiebreaker in the Senate. However, it does not appear that all Senate Democrats are on board with such a large spending package and accompanying tax changes. Due to the 50/50 split in the Senate and lack of any Republican support, a single holdout by a Democrat in the Senate would prevent the Reconciliation Bill from passing.
Even though Senate Democrats may not have unanimous support for the ultimate Reconciliation Bill, they did pass a $3.5 trillion budget resolution by a vote of 50 to 49 in early August. The passing of a budget resolution is the first step in the process of a reconciliation bill, directing various Senate and House committees to draft legislation as instructed. This particular resolution instructs the committees to fully cover the cost of the bill through tax increases and enhanced IRS enforcement. Just this week the House voted along party lines to pass the resolution. The timing of the bill as well as the likelihood of passage at its current cost is uncertain.
While the Infrastructure Bill awaits its September 27 vote in the House and the Reconciliation Bill process moves forward, we will continue to follow further developments closely. These bills, whether in their current or scaled back version, could significantly impact individuals and businesses tax strategies.
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