TAX TAKE: One Way or Another: How Could A Lame Duck Tax Package Come Together?
Last week's high-profile primaries in North Carolina and Pennsylvania kicked off a busy midterm election season guaranteed to bring more than a few surprises. Let's fast-forward past November 2022 and look at some factors that can influence the likelihood of a post-election lame duck tax package getting signed before January. It's important to note up front that the existence of such a legislative vehicle, and its potential scope, is highly dependent on a host of factors – the majority of which are completely outside the control of the Congressional tax-writing committees.
- Outcome of the Elections: The tone and outcome of the midterm elections will certainly impact both parties' willingness to work with each other after November 8. If Democrats lose control of at least one chamber of Congress, they likely will be incentivized to work with Republicans and pass a lame duck package on a bipartisan basis, knowing that a reconciliation bill as part of the fiscal year 2024 budget will be politically impossible. Republicans will also be incentivized to "clear the deck" before entering a period of divided government.
- An Available Legislative Vehicle: It's unlikely that a tax bill would move on its own in lame duck – as a result, Congressional tax-writers will be looking for a moving legislative vehicle to attach a tax title, with an omnibus appropriations bill being the most likely candidate.
- A Critical Mass of Needed Tax Provisions: With the fate of the Build Back Better Act up in the air and uncertainty as to whether a tax title will be included in the China competition bill conference report, policymakers may not have the ability to address tax provisions in any other bill prior to lame duck, creating that critical mass of outstanding items necessary to push a tax title forward.
- One or Two Critical "Must Pass" Tax Provisions: Tax legislation is often driven by one or two must pass provisions that are time sensitive, particularly in lame duck. In the past, extensions of items such as the R&D tax credit and the individual alternative minimum tax patch served as the drivers for the inclusion of larger tax titles at year-end. The need to address R&D amortization and the section 163(j) interest expense deduction limitation calculation may be viewed as must pass in light of the fact that changes to these provisions already went into effect as of the beginning of this year.
Next week, we will take a deep dive into the potential components of a lame duck tax title and try to identify those must pass provisions that are essential to getting a package across the finish line this year. #TaxTake
Upcoming Speaking Engagements and Events
On June 1, Loren will co-chair "Domestic Recent Tax Developments and Changes in the Tax Environment," a panel discussion at the IFA USA-Italy Joint Meeting.
Loren will speak on the "International Tax Update" panel at the 2022 Texas Federal Tax Institute Annual Conference in San Antonio on June 8.
On June 14, Loren will speak at the TPMinds International 2022 Summit in London on a panel titled "Latest U.S. Tax Developments."
Loren will speak on the "Transfer Pricing Debate" panel at the 2022 NABE Transfer Pricing Symposium on July 19.
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