Administration and Congressional Leaders Unveil New Framework on Reconciliation Package

Updates as of 11/4/21 can be found by clicking here!

The Administration and Congress are urgently trying to move ahead with their reconciliation package and infrastructure bill. The Administration and Congressional leaders changed the plan late last week in hopes they could strike a deal. Here are the latest developments as we wait for decisions from Washington:

On October 28, 2021 (the morning of their departure for meetings with world leaders in Europe), the Administration issued the “framework” of a $1.75 trillion revised reconciliation plan. Note that it is just that: a framework. It contained high-level themes of a reworked “Build Back Better” (BBB) plan. The revisions scale the initial version back – from the $3.5 trillion plan adopted by the House Ways & Means Committee in mid-September to about half that original amount. The bill is 1,600+ pages, which is 1,000 pages less than the earlier Ways & Means Committee proposal. Most tax items are toward the back of this bill (if you’re curious).

This framework has not yet been fully agreed on by the progressive and moderate groups in Congress, and it is currently unclear if all parties support it. It is also unsure whether Senators Manchin (West Virginia) and Sinema (Arizona) are on board with the major revisions to the reconciliation package. Negotiations and discussions will continue.

Shortly after the framework was issued, the House Rules Committee released the legislative text of the updated BBB plan and additional resources. This provided the specific details that many members of Congress were looking for. You can find the framework and legislative text of the bill linked for your reference. 

The idea of releasing this framework and legislative text was that the Administration and Congressional leaders anticipated this plan would be sufficient to satisfy the progressive wing and allow for a vote on the infrastructure package. They hoped to arrange a vote on the bill last week; however, this did not happen. The progressive group had concerns with the framework and wanted other items added to the bill. They objected to any vote on the infrastructure bill. So, the drama and discussions continued.

As noted above, the latest framework has been scaled down from the earlier version. There were reductions in the spending portions of the reconciliation package and significant changes in the tax items within the BBB plan. Below is a list of selected items included in the BBB framework, as well as selected items from the House Ways & Means Committee proposal that were excluded from this latest BBB legislation:


  • A Corporate Minimum Tax of 15% for large corporations. This tax would apply to large corporations with financial statement income of more than $1 billion. This new tax focuses on income reported on a company’s financial statements but not on their tax returns. The tax would begin in 2023.
  • An Individual Surtax on Higher Income Taxpayers of 5% on adjusted gross income (AGI) over $10 million per year; and an additional 3% for AGI over $25 million. The 5% surtax would apply to a trust or estate with income over $200,000, and the 3% would kick in with income over $500,000.
  • An Excise Tax of 1% on Corporate Stock Buybacks (for publicly traded companies).
  • Sales of Qualified Small Business Stock (QSBS – Section 1202) can obtain a 100% gain exclusion if the stock is held for more than five years. The House Ways & Means Committee proposal would reduce this 100% exclusion to 50% for taxpayers with AGI greater than $400,000 for sales of QSBS stock after September 13, 2021. The framework would do the same.
  • Relief for R&D expenditures beginning in 2022 from the 60-month amortization provision added by the Tax Cuts and Jobs Act. These expenditures would continue to be currently deductible under the framework, but the 60-month amortization would begin in 2026.
  • The framework kept what was proposed in the House Ways & Means Committee bill with the 3.8% Net Investment Income Tax (NIIT). This tax would apply on trade or business income for taxpayers with taxable income in excess of $500,000 for married couples and $400,000 for single taxpayers.
  • The framework also retained the proposed changes on Large Loss Limitations in the House Ways & Means Committee bill. These disallowed losses would carry over to the following year.


  • You may recall the House Ways & Means proposal to increase the top individual tax rate of 37% to 39.6%, but this change was not part of the latest BBB framework.
  • The Ways & Means Committee proposal would raise the 20% rate on capital gains and dividends to 25% for sales after September 13, 2021. The framework would not make any changes with capital gains.
  • The Ways & Means Committee proposal would raise the 21% corporate tax rate to 26.5% beginning in 2022. The framework would not make any changes in corporate tax rates.
  • The framework excludes any estate tax changes and includes no revisions in grantor trusts. There was much publicity surrounding the Ways & Means Committee proposal on estate tax changes, as these changes would have cut back the estate tax exemption and the tax planning with certain grantor trusts (Life Insurance Trusts and Intentionally Defective Grantor Trusts – IDGTs). There were also proposed changes on property valuations in an estate, but these too were pulled from the framework.
  • The Ways & Means proposal offered a number of changes directed at large IRAs and Roth IRAs. The proposal would preclude Roth IRA conversions and also limit “Back-door Roth IRAs,” but the framework did not include the Roth IRA proposed changes.
  • The Ways & Means proposal included several changes related to “carried interests.” Among the changes were an extension from three to five years for the long-term capital gain holding period for holding certain partnerships interests. The three-year holding period would still apply for taxpayers with AGI of more than $400,000.The proposal would also expand the capital gains treatment to additional assets that would be subject to this longer holder period. These proposed changes would have impacted private equity firms, but the framework did not include any of these changes for carried interests.
  • The framework does not include IRS bank account reporting but retains large IRS enforcement and compliance efforts. This has been a major area of discussion over the past several months. It looks as if direct bank account reporting is not part of the framework package, but there are other tax compliance and audit initiatives. This is expected to generate roughly $400 billion of extra tax revenue.
  • The framework does not contain any adjustment or repeal of the $10,000 SALT limitation. This item is still being debated in Congress.

Next Steps

The BBB negotiations remain fluid in Congress. The items in the revised plan could be modified, other provisions could be added or other items could be removed. Nothing is final at this point. Several of the key unresolved issues are as follows:

  • SALT Limitation Repeal or Revision. As noted above, this was not incorporated in the framework but remains a contentious issue. Several proposals are under consideration, including one that would remove the limitation for five years (2021 through 2025) and then reestablish the limitation for five years in 2026. Some members of Congress, including Senator Sanders believe this SALT proposal is too much, but there are several members of Congress that will not vote for the final BBB legislation unless there is repeal of the SALT limitation. This SALT issue remains elusive, and the talk goes on.
  • Prescription Drugs. The framework did not include any relief for prescription drug costs as part of Medicare. An agreement was reached on November 2 that would limit price hikes on drugs to the rate of inflation and cap out-of-pocket costs for seniors on Medicare to $2,000 per year. This feature will be added to the BBB.
  • Family Leave. A family leave plan was not part of the framework, but it was part of the Ways & Means proposal. There are still several in Congress, including Speaker Pelosi, trying to put a leave program of some type back into the BBB legislation. On November 3, leaders indicated a revised four-week family leave program would be added to the BBB. Details of this leave program are not yet available.
  • CBO Score. Another development on November 2, a group of five key House members requested that any agreed upon legislation be analyzed and scored by the Congressional Budget Office (CBO) before a vote in the House. Further, the House members seek a 72-hour waiting period before the vote is taken. The demands by this group could extend an already tight timeline for Congressional leaders.
  • Results of November 2 Elections. Another reason Congressional leaders and the Administration wanted this legislation to pass sooner was they hoped it would boost them in various elections on November 2, 2021. Pundits are now analyzing the results of these elections, especially the governor’s race in Virginia, to speculate on the impact of the elections on the reconciliation package and infrastructure bill. It may double the efforts of leadership to get these bills finalized, but it may also make several moderates think twice about supporting these measures. Something else to keep an eye on.

The House is once again hoping to vote this week on the infrastructure bill and the BBB reconciliation package. The infrastructure bill might be approved in the House and then move to the president, as the Senate already passed this bill in August. The reconciliation package then needs to pass in the House and Senate. With narrow margins in the House and Senate, passage of any reconciliation bill remains up in the air.

The drama continues. Stay tuned – we will keep you posted.


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