After months of negotiating, Sens. Chuck Schumer (D-N.Y.) and Joe Manchin (D-W.Va.) announced an agreement on proposed legislation to address selected portions of the Biden administration’s agenda for climate, health, deficit reduction and tax. The draft legislation is now under review by the Senate parliamentarian to ensure that the language meets the procedural requirements of the reconciliation process in the Senate. This process would allow the legislation to advance with a simple majority vote, which the Democrats could accomplish with the participation of Vice President Kamala Harris.
The draft legislation is expected to raise approximately $739 billion in revenue through a combination of tax increases on corporations and selected taxpayers, prescription drug pricing reform and IRS tax enforcement. Approximately $433 billion will be expended on energy security and climate change and an extension of Affordable Care Act subsidiaries. The balance of roughly $300 billion raised would be directed toward deficit reduction.
The most significant tax increase is in the form of a 15% corporate book minimum tax—a provision that was included in the Build Back Better legislation passed by the House late last year. Importantly, for participants in tax credit transactions like low income housing, there is a carve out from the operation of the minimum tax.
Notably, several other important provisions that ABA has been closely tracking were not included in the package, including corporate tax rate increases, stock buyback excise taxes, net investment income tax on active participants in pass-through entities, additional information reporting requirements and international tax provisions. The Senate is expected to consider the bill next week.