Tax News & Views Capitol Hill briefing. June 18, 2021 In this issue: Bipartisan Senate infrastructure ‘framework’ adds backers, Democrats plot budget reconciliation strategy ...... 1 Taxwriters focus on international issues, tax gap at FY 2022 budget hearings ...................................................... 6 House OKs corporate governance package with country-by-country financial reporting mandate ...................... 9 Bipartisan Senate infrastructure ‘framework’ adds backers, Democrats plot budget reconciliation strategy The prospects for an infrastructure package negotiated by a bipartisan group of senators appeared to brighten this week as more than one-fifth of the upper chamber lent its support to that effort; still, Senate Democratic budget writers and party leaders began plotting a path forward for a fiscal year 2022 budget resolution with reconciliation instructions that potentially could be used to move infrastructure-related provisions and tax policy changes to President Biden’s desk without Republican support. Tax News & Views Page 1 of 11 Copyright © 2021 Deloitte Development LLC June 18, 2021 All rights reserved. Bipartisan ‘framework’ details emerge Details of the Senate infrastructure “framework” – which was negotiated by a group of 10 senators led by Sen. Kyrsten Sinema, D-Ariz., and Sen. Rob Portman, R-Ohio – began to emerge over the weekend of June 12, and negotiators on both sides of the aisle discussed its parameters with their respective colleagues over the course of this week. The bipartisan group, which also includes moderate senators such as Democrat Joe Manchin of West Virginia and Republican Mitt Romney of Utah, came together as prior infrastructure talks between President Biden and a group of GOP senators led by Shelley Moore Capito of West Virginia, began to founder and ultimately broke down on June 8. (For prior coverage, see Tax News & Views, Vol. 22, No. 29, June 11, 2021.) URL: https://dhub.blob.core.windows.net/dhub/Newsletters/Tax/2021/TNV/210611_1.html According to a two-page summary of the plan that began circulating on June 16, the package would call for $973 billion in spending over five years (the typical span of a highway reauthorization bill), and about $1.2 trillion over eight years. By contrast, President Biden’s infrastructure-focused American Jobs Plan called for about $2.2 trillion in spending over eight years, though the White House did reduce that figure considerably during negotiations with Sen. Capito. URL: https://static.politico.com/0a/08/398515524e38ab4807521dcfbd92/bipartisan-infrastructure-framework-two- pager-final-7.pdf The bulk of the spending would be focused on roads, bridges, rail and mass transit projects, and airports and waterways, with significant amounts also devoted to building out and updating energy, broadband, and water infrastructure. On the financing side, the Senate bipartisan framework leans heavily on repurposing previously approved coronavirus relief funding toward infrastructure and by tapping into public-private partnerships, an infrastructure bank, private activity bonds, and direct-pay municipal bonds to draw in private capital. Although the framework generally avoids tax increases, it does call for measures to increase revenue collections by addressing the tax gap (presumably by directing additional enforcement dollars to the Internal Revenue Service), imposing an annual surcharge on electric vehicles, and indexing to inflation the current excise tax rate on gasoline. It also would “adjust” customs user fees, which may imply simply extending certain fees beyond their otherwise scheduled expiration. It is important to note, however, that certain reports on June 17 suggested that the summary made public the day before is still evolving – especially as it relates to its suggested policies around the gas tax and the user fee on electric vehicles, which may have been dropped in the latest plan presented to the White House. (The administration in the past has rejected gas tax increases and new user fees on the grounds that they would fall on the low- and middle-income income taxpayers that the president has vowed to shield from tax hikes.) 21 senators on-board so far: Although the prospects in general for bipartisan infrastructure negotiations have ebbed and flowed over the past several weeks, the Senate framework appeared to be picking up support late Tax News & Views Page 2 of 11 Copyright © 2021 Deloitte Development LLC June 18, 2021 All rights reserved. this week. As of June 17, a total of 21 senators – 10 Democrats and 11 Republicans – were said to have lent their formal backing to the high-level framework. (The roster of Democratic supporters includes Independent Sen. Angus King of Maine, who caucuses with the Democrats.) Twenty of those senators released a statement June 16 expressing support for the framework “that provides an historic investment in our nation’s core infrastructure needs without raising taxes.” URL: https://www.portman.senate.gov/newsroom/press-releases/senators-statement-infrastructure Another notable Republican not among the 21 public supporters so far – Senate GOP Whip John Thune of South Dakota – lent cautious support to the bipartisan talks on June 16. “I think they’ve tried hard to come up with something that structurally accommodates both the imperatives of Republicans and Democrats…and they’ve done a good job with it,” Thune told reporters. Framework crosses the Capitol: In another notable development, Sens. Sinema and Portman, along with a handful of other key negotiators of the bipartisan Senate framework met with the House Problem Solvers Caucus on June 17 to discuss the plan. The Problem Solvers Caucus – led by Rep. Josh Gottheimer, D-N.J., and Brian Fitzpatrick, R-Pa. – is a group of roughly 60 more centrist-minded Democrats and Republicans. The group released its own $1.2 trillion infrastructure plan on June 9 that broadly resembles the Senate framework. URL: https://problemsolverscaucus.house.gov/media/press-releases/problem-solvers-caucus-unveils-building-bridges- bipartisan-physical But progressives raise concerns… Building Republican support will prove critical if, after evaluating the framework in the coming days, President Biden and Democratic leaders choose to continue to give space for a bipartisan deal rather than revert to a Democrat-only infrastructure approach that more closely resembles Biden’s American Jobs Plan and his American Families Plan. (For prior coverage of the American Jobs Plan, which proposes to finance “hard” infrastructure investments with an array of tax increases on businesses, see Tax News & Views, Vol. 22, No. 19, Apr. 9, 2021; for prior coverage of the American Families Plan, which focuses on what the administration has characterized as “human” infrastructure investments in areas such as paid family and medical leave, universal child care, access to pre-kindergarten education, and free community college, financed mainly by tax increases on certain upper-income individuals and expanded funding for IRS enforcement efforts, see Tax News & Views, Vol. 22, No. 23, Apr. 30, 2021.) URL: https://dhub.blob.core.windows.net/dhub/Newsletters/Tax/2021/TNV/210409_1.html URL: https://dhub.blob.core.windows.net/dhub/Newsletters/Tax/2021/TNV/210430_1.html That is because many progressive Democrats are becoming increasingly concerned that any bipartisan deal will fall short of fully addressing the nation’s infrastructure needs, fear such a bill will not aggressively implement policies designed to address climate change, and feel that Democrats should lean into the president’s Tax News & Views Page 3 of 11 Copyright © 2021 Deloitte Development LLC June 18, 2021 All rights reserved. proposals to finance his plans by raising taxes on corporations and wealthy individuals – policies that they feel are popular among the general public. Due to Democrats’ razor-thin majorities in both the House and Senate, in essence every defection by a progressive Democrat would have to be balanced out by the addition of a GOP supporter in order for a bipartisan deal to clear Congress. “I would prefer bigger. I think this is a once-in-a-career type of opportunity to do what has to be done,” said House Ways and Means Committee Chairman Richard Neal, D-Mass. “…We should take advantage of the moment. The public is on our side. The momentum is with us.” Other progressives are skeptical that certain moderate Democrats – Sens. Manchin and Sinema, in particular – would be there to support a subsequent reconciliation bill that includes Democratic priorities not addressed in the more narrowly focused bipartisan infrastructure framework. “It’s either going to happen and we know 100 percent for sure that it’s going to happen, or it’s not going to happen,” Rep. Alexandria Ocasio-Cortez, D-N.Y., said on June 15. “And I think that certainty of that second piece is going to determine a lot on our stances on the bipartisan piece.” Rep. Mark Pocan, D-Wis., echoed those sentiments. “[I]f anything would proceed – and people are saying there’s going to be other bills that will come – I think the expectation from many of us will be, well, then those things either come first, or there is some more ironclad way to guarantee it’s going to happen,” Pocan said. But that ironclad guarantee seems unlikely to materialize. Sen. Manchin, for his part, indicated June 16 that he would not promise his support for a subsequent reconciliation package without first seeing its details. “I’m not committing to that. I’m not committing to anything.