Legislative Update. Last week was a hectic, activity-filled time in the House as there was finally a floor vote on Friday, November 5, 2021. We saw activity with both the “Build Back Better” (BBB) Act and the infrastructure bill. More details below:
Build Back Better (BBB – H.R. 5376)
Following the November 2, 2021 elections, Congressional leaders felt a sense of urgency to act, and seemed to modify their tactics this week as a result. Instead of trying to craft a precise bill that both the House and Senate would support, they decided to make several changes to the BBB to secure enough votes for passage in the House, and then let the Senate deal with it. Here is the latest on the BBB:
- As you may recall, the BBB was modified on November 3 and then again on November 4. With the recent changes, we now have what we are calling the BBB (version 4.0).
- The main tax change in the BBB (version 4.0) was to increase the SALT (State and Local Tax) deduction from $72,500 to $80,000 (for married filing jointly and single taxpayers) and $40,000 (for married filing separately and trusts/estates). The $80,000/$40,000 deduction would apply in tax years 2021 through 2030. The SALT limit would drop back to $10,000 in 2031.
- On November 5, House leaders attempted to secure a floor vote on the BBB. They ran into a roadblock, as several moderates demanded that the Congressional Budget Office (CBO) issue its “score” on the BBB. (A score is a financial report by the CBO analyzing the total spending in the bill.) However, the CBO score will likely not be completed for another one to two weeks. Thus, House leaders agreed late on November 5 to postpone any vote on the BBB until the CBO score was received.
- Once the CBO score is received, this will likely dictate what steps the House takes next:
- If the CBO score for the BBB is in line with what House leaders and the Administration have reported (~ $1.5 – $2.0 trillion), then the leaders will plan a House vote on the BBB shortly thereafter.
- However, if the CBO score for the BBB shows total spending that is much higher, say $3+ trillion, then House leaders will have a delicate decision to make. Do they cut program spending, raise taxes or a combination of these? Any revisions risk losing some of the support they now have. This may take additional time for Congressional leaders to determine how to proceed.
- So, whatever the CBO score is will drive the next steps in the House.
- Late on November 5, the House passed several procedural votes on the BBB. This was not an actual vote on the BBB itself; rather, the House adopted voting rules in the House when the BBB is brought up for final passage – again, likely the week of November 15.
- Senate: the Senate waits in limbo to see what happens in the House. If the House passes the BBB during the week of November 15, then the Senate will entertain the BBB and do its work. Senate changes to the BBB are possible.
Infrastructure Bill (“Infrastructure Investment and Jobs Act” – H.R. 3684)
- While House leaders postponed a vote on the BBB on Friday, they did move ahead with a vote on the infrastructure bill (on November 5). This bill had passed the Senate in August but was put in a holding pattern in the House by progressives wanting assurances that the BBB would receive sufficient support.
- Progressives were set to block the November 5 vote on the infrastructure bill. However, late in the day, a compromise was reached with Speaker Pelosi to allow the bill to go to vote, and the progressives agreed to not block it.
- The infrastructure bill was adopted on Friday night (11/5) by a vote of 228-206. Thirteen Republicans voted for the Infrastructure bill and six Democrats voted against the bill. With Congressional approval in hand, the infrastructure bill moves to the president for his signature.
- All of our attention has been focused on the BBB and the tax changes that may (or may not) take place that we might have forgotten about the tax items in the infrastructure bill. You may recall that there were not major individual or business tax changes in the bill. But there were still several tax and revenue changes, including the following:
- New cryptocurrency information reporting requirements on “brokers:” About $28 billion is projected to be collected from enhanced cryptocurrency reporting. Some of this new reporting has been controversial and will need to be ironed out with IRS guidance.
- Early end to the Employee Retention Credit (ERC): This is a refundable payroll tax credit, and the bill eliminates the ERC for the fourth quarter of 2021. Uncertainty surrounds this, as we are nearly halfway through the quarter now.
- Reinstatement and modification of superfund excise taxes on chemicals.
- Extension of interest rate smoothing options for defined benefit plans.
- Modifications to private activity bond provisions.
- A copy of the legislative text of the infrastructure bill is linked for your reference, along with the revenue estimates from the Staff of the Joint Committee on Taxation (JCT) in Congress.
This week will be a little quieter on the BBB front than the last two weeks have been. All attention is focused on the release of the CBO score in the next week or so. We will keep you posted. Please contact your Sikich advisor with any questions.