Senate Democrats pass reconciliation package

After months of negotiating, the Senate yesterday passed legislation to address selected portions of the Biden administration’s agenda for climate change, healthcare and tax policy. The final legislation passed after review by the Senate parliamentarian and with the participation of Vice President Kamala Harris to cast the deciding vote in the evenly divided Senate.

Following negotiations with Sen. Kyrsten Sinema (D-Ariz.) and a weekend of voting on various amendments, several changes were made to the bill. Among other things, tweaks were made to a provision regarding the book minimum tax (which affects corporations with income more than $1 billion)—including additional favorable adjustments for depreciation, selected amortization and controlled groups. Changes originally proposed to the taxation of “carried interest” were dropped and not included in the final bill. To offset the revenue effects of these changes, a 1% stock buyback excise tax on public companies and an extension of the excess business loss limitations were added to the bill.

Importantly, while the legislation adds $80 billion to the Internal Revenue Service’s budget to improve tax compliance, enforcement and service, a controversial reporting provision—that would have required banks to report information on gross inflows and outflows on customer accounts above a certain de minimis level—was omitted from the reconciliation package. ABA, together with other financial trade groups and bank customers, had vigorously opposed the proposal last year.

The bill now moves to the House for consideration, where a vote is expected as early as Friday.