Daily Deduction Rushing To Reconcile
Renu Zaretsky
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Will the Senate pass Build Back Better before ringing in the New Year? Majority Leader Chuck Schumer says there will “more long days and nights, and potentially weekends,” if the Senate is to finish its legislative agenda by the end of the year.

Avoiding a Byrd bath? Democrats are  trying to convince the Senate parliamentarian that key provisions of the  Build Back Better (BBB) Act comply with reconciliation rules that allow the bill to pass the Senate with a simple majority. Democrats need to convince the parliamentarian that provisions that expand Medicaid, allow Medicare to negotiate certain drug prices, and other measures have enough of an impact on federal spending that they do not violate the Byrd Rule. Among other things, it requires bills passed under reconciliation to have budgetary effects to be considered germane. 

One motivation to act this year: the CTC. Millions of families have gotten used to receiving an  expanded child tax credit each month. But they’d lose those benefits if the law is not extended by the end of the year. Their credits would shrink and could not be collected again until these families file their tax returns.  

Nunes to resign. Devin Nunes, the #2 Republican on the House Ways & Means Committee, announced he will resign from Congress at the end of the month. Since senior Republican Kevin Brady announced his retirement months ago, Nunes would have had in the inside track to become chair if the GOP wins control of Congress in 2022.  Next most senior members are Vern Buchanan and Adrian Smith. Nunes, who likely would have had to run in a new congressional district in 2022, reportedly will take a job with Donald Trump’s media company.  

Will big business catch a break in the BBB? Business groups want new exemptions from the House’s proposed minimum tax on income reported to shareholders, or “book income.” Pension lobbyists say plan contributions and the income earned on pension assets that shows up in annual 10-K filings would be taxable under proposal, Clean energy advocates want the cost of  solar, wind, geothermal, and other renewable energy properties to be fully depreciated in the year they are acquired, which would not be allowed for firms subject to the book tax. The House plan would apply only to about 150 of the nation’s largest companies. 

Working around that SALT cap. The Wall Street Journal reports (paywall) that private-equity managers and law firm partners are legally circumventing the federal $10,000 cap on state and local tax deductions. More than 20 states, including New York, developed workarounds to the cap. With the permission of the Trump Treasury Department, states allow partnerships to pay state taxes at the business level and not through the owners’ personal individual income tax returns. Thus, those taxes are exempt from the SALT cap.  

IRS issues guidance on retroactive termination of Employee Retention Credit. The Internal Revenue Service yesterday issued guidance (Notice 2021-65 ) for employers regarding the retroactive termination of the Employee Retention Credit (ERC). The infrastructure bill passed last month amended the law so that the ERC applies only to wages paid before October 1, 2021, unless the employer is a recovery startup business.

 

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