Insights from Washington: Finally! Draft Legislation
Some things changed and some have stayed the same. While I was away on vacation drinking wine and dreaming of living in Napa, the House finally passed the Infrastructure Investment and Jobs Act, also known as the infrastructure bill. Looking back, the bill passed the Senate in August and includes funding for improvements to the nation’s roads, bridges, public transit systems, railways, power grids, airports, broadband internet, and drinking water. Most of the tax provisions discussed in previous blogs are included in the Build Back Better Act, which has yet to move forward in the House of Representatives; however, there are a few key tax items to note in the infrastructure bill.
The two key tax takeaways are as follows:
- The Employee Retention Credit was terminated effective September 30, 2021. There are exceptions for “recovery startup businesses”; however, those need to have started their business after February 15, 2020 and their gross receipts cannot exceed $1 million.
- Impact: Companies planning on the credit for the 4th quarter will no longer receive this benefit. At this time, it is unknown if the IRS will provide a practical method for payment of unpaid employment taxes for those that continued to reduce payroll tax deposits before the bill was passed and waive penalties for late payment of such payroll tax deposits.
- Brokers are required to report transactions in digital assets like cryptocurrency, starting with returns to be filed in 2024.
- Impact: This is expected to prevent taxpayers from failing to report and from under-reporting gain on the sale of such assets.
Regarding the larger “Build Back Better” legislation, we are still waiting for things to move forward. On November 9, House Speaker Nancy Pelosi announced the plan is to pass the bill the week of November 15, 2021. However, the following day the Congressional Budget Office (CBO) announced it will not include the $400 billion of revenue the White House expected to be generated from increased IRS enforcement, complicating the question of whether the legislation will be fully “paid for” as President Biden has promised.
Last week, House moderates delayed a vote on the floor, saying they needed to make sure the official CBO analysis matched up with the White House’s cost projections. The office estimated the legislation scored so far would amount to direct spending outlays totaling $20.5 billion from 2022 to 2031. It is expected to score the overall bill in the coming weeks. The office said the funding in the areas scored thus far would not add to the deficit after 10 years, complying with a key rule for reconciliation process Democrats are using to pass the bill. It is unclear whether the recent information will continue to delay a vote in the House or whether the party will agree to move forward with a vote next week.
Once the House agrees to a vote, it will advance to the Senate. It is expected the House will not vote on the bill unless they are confident it will pass a vote in the Senate.
We will update you with any new developments in next week’s blog. If you have any questions, please contact us.