With the House and Senate both in recess last week, there were very few developments on the Build Back Better Act reconciliation bill, although the reports that the Congressional Budget Office (CBO) score of the bill will be delayed will certainly impact the process. Nevertheless, we continue on with part two of our top 10 questions (see part one here) for the upcoming reconciliation bill negotiations:

6. How will the tax package change? The scope and content of the tax package will largely be driven by the ultimate size of the bill, given that tax revenue is being used as the primary funding mechanism. A dramatic increase or decrease in the size of the bill by the Senate will have a corresponding impact on the size of the tax package. If the spending increases, the existing provisions in the House bill could be modified to generate more revenue or new revenue raising provisions from the Greenbook or the House Committee on Ways and Means-passed package could be considered. If the spending decreases and less tax revenue is needed, existing provisions in the House bill could be delayed, made more taxpayer friendly, or dropped entirely. 
7. What other changes are possible? Despite significant commentary, the tax provisions in the House Committee on Ways and Means-passed package that remain in the latest version of the Build Back Better Act have, as a general matter, only been modestly modified (particularly the international tax provisions, such as the section 163(n) proposal). We hope that consideration is given to more substantive changes in these provisions as the House and Senate negotiate a final package. In addition, we assume that technical changes, as well as the consideration of transition rules and effective date issues, will also receive due consideration.
8. What about the new tax increase provisions? At Senator Kyrsten Sinema's (D-AZ) insistence, the proposed individual, capital gains/dividends, and corporate rate increases from the House Committee on Ways and Means-passed package were dropped and replaced with a number of new provisions, including a corporate book income minimum tax, a one percent stock excise buyback tax, and an increased surtax on the wealthy. These new provisions have generated significant taxpayer concern, with perhaps the most concentrated efforts on the book income minimum tax. It is hoped that Congress recognizes the dramatic impact that this will have on taxpayers (particularly from a cash flow perspective). At a minimum, if the provision is retained, hopefully accommodations are made for industry-specific financial accounting rules and for taxpayers in capital-intensive industries where bonus depreciation results in significant book/tax differences. In addition, Congress should address the potential significant impact the proposed minimum tax would have on pension plans.
9. Are rate increases really off the table? It is anticipated that Senator Sinema will continue to object to the inclusion of rate increases, particularly given that the current bill contains other funding mechanisms. It is important to keep in mind that such increases, perhaps more modest than those contained in the House Committee on Ways and Means-passed package, could re-emerge at any time – particularly as a "stop gap" source of revenue if issues arise late in consideration of the bill. Never say never on rate increases until final passage of the bill.
10. Who are the main players? Senator Joe Manchin (D-WV) and Senator Sinema, in combination with Senate Majority Leader Chuck Schumer (D-NY), will continue to drive the timing, process and content of the reconciliation bill. House Speaker Nancy Pelosi (D-CA) and House Committee on Ways and Means Chairman Richard Neal (D-MA) will lead the House effort from a tax perspective, while being cognizant of the need to address the concerns of the Congressional Progressive Caucus (led by Representative Pramila Jayapal (D-WA)) and moderate Democrats (such as Representative Josh Gottheimer (D-NJ)).

These questions (and others) will need to be addressed in short order if the Administration and Congress hope to enact the Build Back Better Act before year end. #TaxTake

Upcoming Speaking Engagements and Events

Marc and Loren will present a Tax Legislative Update and Tax Policy Review to the Tax Executives Institute's Pittsburgh Chapter on November 18.

On November 30, Loren will speak on the North America panel at IFA's 2021 virtual event, "The Global Tax Agreement: The Two-Pillar Solution."

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