Decoding the Senate Finance Committee’s Build Back Better text

By Lauren Vahey and Eileen Reichenberg Sherr, CPA, CGMA

Just over a week ago, the AICPA highlighted several issues important to the accounting profession in the House-passed reconciliation bill (H.R. 5376) that garnered public feedback from our tax advocacy group and volunteers. Now that the Senate Finance Committee has released language for its portion of the reconciliation bill and the AICPA submitted comments on it, we want to help you understand how this text, which encompasses the vast majority of tax policy proposals currently under congressional consideration, has changed from the House version and could evolve in the coming weeks as the Senate parliamentarian and key Democratic senators make important decisions.

Big picture: The Senate Finance Committee text is not much different from the language passed by the House. Small policy changes, such as tweaking the corporate profits minimum tax language to create a carveout for pensions and striking a measure that would have imposed a federal tax on vaping products, were made alongside a handful of technical changes. Changes unlikely to earn the support of all Senate Democrats, like a new billionaire's tax and partnership reforms, were avoided as Democratic congressional leadership races to secure intra-party agreements and finalize legislative text.

Most importantly, the version released on Dec. 11 represents another step in the reconciliation legislation development process rather than a final product. The text has not been fully vetted by the Senate parliamentarian, who must still determine which provisions are extraneous to the budget and, therefore, need to be struck from the bill in order for it to be passed under the budget reconciliation process, which requires only 51 votes.

Placeholder language for a SALT "fix," rather than final language, was added as senators struggle to compromise on which taxpayers should benefit from a higher cap on the deduction for state and local taxes. Sen. Joe Manchin, D-W.V., whose vote is necessary to pass a reconciliation bill, has not yet agreed to vote for any package.

If this is simply another step in the process, what comes next and when might this bill actually pass?

President Joe Biden is speaking with Manchin early this week about the construction and content of the bill in a bid to secure his vote. To secure the senator's vote, Democrats must, and are expected to, agree to drop paid family leave language from the bill — a major change from the House-passed bill. The Senate parliamentarian is expected to make final rulings on acceptable language by the end of this week. Both of these processes will inevitably narrow the bill's scope and cost, meaning that fewer rather than more tax provisions are likely.

Senate Majority Leader Chuck Schumer, D-N.Y., has made repeated statements about passing a bill before Christmas. This ambitious timeline presupposes that the House, which can only lose three Democratic votes when passing bills on party lines, will vote to pass the bill between Christmas and New Year's Day so the president can quickly sign it into law. This remains plausible, especially as House members are still allowed to vote by proxy rather than in person.

If final action on the bill slips into 2022, monthly advance child tax payments might be delayed, and congressional leaders and aides would have to review and potentially adjust several effective dates; redraft the bill; and have the bill reestimated and rescored by the Congressional Budget Office and the Joint Committee on Taxation. Those steps would all take time, leaving the bill in a dangerous legislative purgatory with no concrete deadline to force action. We expect Democratic lawmakers to work hard to pass the bill before the end of calendar year 2021, but we are prepared — as AICPA members should be as well — for final action in 2022.

Lauren Vahey is director–AICPA Congressional and Political Affairs, and Eileen Reichenberg Sherr, CPA, CGMA, M.T., is director–AICPA Tax Policy & Advocacy. To comment on this article or to suggest an idea for another article, contact Ken Tysiac (Kenneth.Tysiac@aicpa-cima.com).

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