By John KinsellaConsistent with many initial years of a presidential term, 2021 was an active year for considering potential changes in tax law. With the narrow Democrat majorities in both houses of Congress, each legislator is critical, especially in the Senate, where seats are split 50/50 between both parties. Accordingly, any individual senator can affect the potential advancement of legislation by committing or withholding his or her vote.
In November, the House of Representatives passed the Build Back Better legislation and forwarded it to the Senate for consideration. Included in the legislation are a variety of tax increase provisions that may affect banks and their shareholders. These potential changes include:
- A 15% book minimum tax (applicable to corporations with more than $1 billion in GAAP earnings);
- A 1% excise tax on stock buyback transactions;
- A 3.8% investment income tax on active participants in pass-through entities; including banks that operate as S corporations;
- A variety of international provisions;
- Increasing the state and local tax deduction cap from $10,000 to $80,000;
- An increase to IRS funding of roughly $80 billion over 10 years; and
- A variety of other individual and business tax provisions, including a surtax on the very wealthy.
While the legislation passed in the House, members of the Senate expressed concerns about the legislation, particularly with respect to various spending provisions and the potential long-term cost to taxpayers.
In December, Sen. Joe Manchin (D-W.Va.) announced that he was unable to support the House-passed legislation, effectively blocking BBB passage in 2021. As we begin 2022, significant uncertainty remains as to whether and when the legislation may advance. At this time, news reports indicate that negotiations are stalled. That said, the legislation contains initiatives that are key priorities for the Biden administration. As there is significant pressure from the White House and most Democratic lawmakers to “get something done,” ABA continues to monitor the legislation for timing and content.
John Kinsella is ABA’s VP of tax policy.