Tax Legislation Update

23 Aug 2021 Tax Legislation Update

Authored by: Gregory M. Ward, CPA, Haynie & Company Tax Manager

As you may have seen in the news over the past couple of weeks, Congressional Democrats have moved rapidly to advance 2 key pieces of legislation that embody the domestic policy goals outlined by President Biden. It is critical to remember that these are preliminary bills designed to facilitate debate and prompt the House to approve a related budget resolution. If this critical financial element comes to fruition, final bills can then be drafted with the potential to become law. This process could take months, and there is not yet any guarantee of tax law change. With this in mind, see below for the latest details on each:

$1.2 Trillion Bipartisan Infrastructure Bill

• Bill passed by Senate on August 10 via 69-30 vote
• Includes $550 billion in new spending to revitalize transportation infrastructure
• $110 billion for roads, bridges, and related projects
• $73 billion for electricity grid updates, mainly related to renewable energy transmission
• $66 billion for Amtrak and other rail projects
• $65 billion for high-speed internet access improvements
• $55 billion to upgrade water infrastructure, including pipes
• $39 billion for public transit
• $25 billion for airports
• Progressives were displeased about compromises on lead pipe replacement and clean energy

$3.5 Trillion Social Policy Budget Reconciliation Plan (“Human Infrastructure”)

• Bill passed by Senate on August 11 via 50-49 party-line resolution vote
• Budget reconciliation process has been used to avoid the need for a 60-person majority
• Proposed amounts would be allocated to Senate committees for use in policy goals
• $1.8 trillion to the Finance Committee for investments in working families, the elderly, and the environment (includes middle-class tax cut & prescription drug relief)
• $726 billion for universal pre-K education, childcare, tuition-free community college, investments in publicly funded colleges, workforce training, and other related benefits
• $332 billion for housing programs (down payment assistance, rental assistance)
• $198 billion for clean energy (home consumer rebates, federal procurement allotment)
• $135 billion for conservation, drought management, and forestry programs
• $107 billion for lawful residence of qualified immigrants and border security enhancements
• Theoretically no tax increases for families making less than $400,000 per year, although this assertion has been challenged based on changes to passthrough and capital gain taxes
• Centrist Senate democrats, such as Joe Manchin (D-WV) and Kyrsten Sinema (D-AZ), have signaled they will not support the bill as currently structured. Manchin wants the entire bill to be offset by revenue or spending savings, which he predicts will not exceed $2.0T.
• In the House, a group of nine moderates led by Josh Gottheimer (D-NJ) is applying pressure on party leadership to hold the infrastructure vote separately from the reconciliation vote
• Senate Budget Chairman Bernie Sanders initially supported a $6.0 Trillion proposal

House Speaker Nancy Pelosi has communicated plans to consider arguments and vote on these bills simultaneously. This decision will theoretically give the larger budget plan proposal a higher likelihood of success, given its lesser bipartisan support. Republican leadership is nearly universally opposed to the budget plan as it currently stands. They retain a bargaining chip in that Democrats will need to separately extend the debt ceiling with some bipartisan support by October 1 to avoid debt default.

House Speaker Pelosi set an October 1 target date for passing both pieces of legislation. We will continue to keep our clients aware of ongoing legislative developments in future newsletters.

Expectations and Planning

The regulatory process is inherently uncertain. But we do know a tax overhaul is coming sooner than later. Tax planning will be extremely important this year. We are here to put you in the best possible position to take advantage of new opportunities. Likewise, we can help shield you from new potential pitfalls and liabilities.

Our team is already staying on top of the tax changes. We have technology and training to help us comb through thousands of pages of regulations to best help you. Think of Haynie & Company as your steady and proactive guide as we take on the shifting tax policies together.

Resources

We’ve created a dedicated resource page for all news related to Biden’s potentials tax changes. View Now.

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