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TAX TAKE: House and Senate to Come Together on China Competition Bill: Could It Become the Next Major Tax Vehicle?

Tax Alert

Last week, with bipartisan support, the Senate took two important votes to advance H.R. 4521, the America COMPETES Act. The bill is aimed at increasing U.S. competitiveness and boosting manufacturing, particularly in the semiconductor industry. The legislation has the support of the White House, and these key Senate votes mean that the House of Representatives and Senate will soon begin a formal House-Senate conference to consider differences between the America COMPETES Act and S. 1260, the United States Innovation and Competition Act (USICA), which the Senate passed last June.

While tax incentives have not been a focal point in the America COMPETES/USICA discussions to date, it is expected that the Facilitating American-Built Semiconductors (FABS) Act, which creates a 25 percent investment tax credit spurring the semiconductor sector, will feature in the negotiations. Importantly, the FABS Act has bipartisan and bicameral support, particularly from key members of the Senate Finance Committee and the House Ways & Means Committee, some of which are likely to be conferees of the House-Senate conference.

Should the FABS Act be considered in the conference, that could very well open the door to additional tax proposals aimed at incentivizing American manufacturing. Among them is full expensing for R&D costs, which expired on December 31, 2021. Full expensing was an issue discussed during a Senate Commerce Committee hearing last week. Other pending tax items with bipartisan support, such as tax extenders and the section 163(j) interest expense deduction limitation change, could also be considered depending on the scope of any potential tax title.

It will be important to monitor closely these House-Senate negotiations in the coming weeks, especially as it could open the door for policymakers to consider other tax proposals important to the business community. As the Build Back Better agenda remains in limbo, America COMPETES/USICA provides an opportunity for President Biden and Congressional Democrats to score a significant legislative victory before the November mid-term elections. As such, it may be the best possible vehicle for tax provisions looking to attach themselves to "must pass" legislation. #TaxTake

Upcoming Speaking Engagements and Events

On April 26, Marc will moderate a panel titled "Retirement Policy's Path Ahead: 2022 Legislative Outlook," at the ERIC Spring 2022 Virtual Policy Conference.

Loren will speak about international tax agreements at the American Petroleum Institute's 87th Annual Federal Tax Forum on May 4.

Marc will present "Federal Tax Policy Update," at the Manufacturers Alliance Tax Council Spring Meeting on May 19.

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