Tax News & Views Reconciliation Punt Roundup

December 17, 2021

Senate Democrats look set to punt reconciliation bill to January – Suzanne Monyak, Jeffifer Shutt and Lindsey McPerson, Roll Call. “Senate Democratic Whip Richard J. Durbin signaled Thursday that Democrats plan to revisit the party’s sprawling $2.2 trillion social safety net and climate spending bill — initially slated for an aspirational pre-Christmas vote — in January.”

The Illinois Democrat deferred to Senate Majority Leader Charles E. Schumer to make any official announcements about the schedule, but nonetheless confirmed the realistic possibility of a reconciliation vote this month had evaporated.

'I'm truly disappointed. We had more than ample opportunity to reach … a Democratic agreement,' Durbin said. 'We missed that opportunity, but I'm not giving up.'

Biden Admits Build Back Better Likely Will Be Put Off to 2022 – Jennifer Epstein, Bloomberg ($). “President Joe Biden acknowledged that his $2 trillion economic proposal likely would not clear Congress this year, meaning that 2021 ends without a major accomplishment on social and climate policy. The president, in a statement released Thursday evening, expressed confidence that the measure would eventually pass and urged patience as negotiations continue with Senator Joe Manchin, a West Virginia Democrat who has raised objections to the package.”

‘My team and I are having ongoing discussions with Senator Manchin; that work will continue next week,’ Biden said in the statement. ‘It takes time to finalize these agreements, prepare the legislative changes, and finish all the parliamentary and procedural steps needed to enable a Senate vote.’

‘We will advance this work together over the days and weeks ahead,’ he added.

It is not clear how postponing the Senate vote into 2022 will impact effective dates for provisions in the bill. It is also not clear when, in 2022, the Senate will take up the bill and how the House will react to any changes that are made to it. 

Punchbowl News ($):

The Build Back Better Act is stalled, with no new deadline for the Senate to finish work on the massive $1.7 trillion package. President Joe Biden made it official Thursday night…

Biden: ‘My team and I are having ongoing discussions with Senator Manchin; that work will continue next week. It takes time to finalize these agreements, prepare the legislative changes, and finish all the parliamentary and procedural steps needed to enable a Senate vote. We will advance this work together over the days and weeks ahead; Leader Schumer and I are determined to see the bill successfully on the floor as early as possible.’

You’ll notice Biden’s statement doesn’t say anything about bringing BBB to the floor in January. Just ‘as early as possible.’ This is a recognition that legislating is hard and unpredictable. And a bill of this magnitude is especially difficult to get across the finish line.

President Biden wants the bill passed shortly after the Senate returns in January, but that deadline is more aspirational than consequential. 

White House: Biden wants bill passed 'as soon as Congress returns' – Morgan Chalfant, The Hill. “The White House said Friday that President Biden wants to see his signature climate and social policy bill advance “as soon as Congress returns” from recess in January, after negotiations hit a major roadblock in the Senate this past week.”


Another unanswered question is that Democrats have been arguing over this bill since March - eight months. Is postponing the vote into 2022 really going to change minds and bring the party together to support this bill? 

Manchin’s Hard Line Has Democrats Scrapping to Save Biden Agenda – Steven Dennis, Bloomberg ($). “President Joe Biden’s economic agenda will face a Hunger Games-like competition in January if Senator Joe Manchin sticks by his demands and forces Democrats to choose between dramatically shrinking the bill’s benefits or jettisoning most of them."

Democratic leaders on Thursday abandoned plans to pass the roughly $2 trillion social spending and climate plan before their Christmas break after it was clear that Manchin wasn’t on board. The West Virginia Democrat’s support is critical in the evenly divided Senate. But months of negotiations with Biden, including talks this week, have only hardened the resolve of the Senate’s most conservative Democrat.

Biden's Build Back Better bill suddenly in serious danger – Alexander Bolton, The Hill. "President Biden’s $2 trillion climate and social spending bill, which appeared to have strong momentum when it passed the House a month ago, now appears to be in real danger of collapsing in the Senate. Democratic senators now concede there is no chance of passing the Build Back Better Act before the end of the year, as they had hoped."

[T]here is also a chance the entire Build Back Better bill will have to be reworked to accommodate Sen. Joe Manchin’s (D-W.Va.) opposition to including a one-year extension of the expanded child tax credit in the bill… The West Virginia senator wants the bill to reflect the 10-year cost of the tax credit, which would require other tax hikes or spending cuts to prevent the official cost of the bill from rising heavily.

If Manchin gets his way on the Child Tax Credit, there literally will be no room for any other provision - beside tax increases. The Senator opposes the bill costing over $1.75 trillion. Extending the current Child Tax Credit would cost roughly that amount. This means the other benefits, like paid family leave or Medicare expansion, would need to be jettisoned from the bill. Manchin’s position is not sitting well with his party.

No. 2 Senate Democrat 'stunned' by Manchin's stance on child tax credit – Alexander Bolton, The Hill. “Senate Majority Whip Dick Durbin (D-Ill.) told reporters Thursday that he was 'stunned' to discover that Sen. Joe Manchin (D-W.Va.) is opposed to a one-year extension of the expanded child tax credit, a core component of President Biden’s agenda.”

Durbin said he’s 'frustrated and disappointed' while acknowledging that Biden’s sweeping social spending and climate bill doesn’t appear to be headed to the president’s desk anytime soon.

White House says double child tax credit payments possible in February – Naomi Jagoda, The Hill. “White House press secretary Jen Psaki on Friday said that the Biden administration would look into the possibility of making double child tax credit payments in February if the president's social spending package is enacted in January.”

‘If we get it done in January, we'd talk to Treasury officials and others about doing double payments in February as an option,’ Psaki said during a gaggle with reporters aboard Air Force One.


Manchin's opposition to the reconciliation bill is not limited to tax provisions. In fact, his opposition is so widespread that some wonder if he is against the entire bill, but refuses to publicly admit it. 

Manchin rejects offshore drilling ban amid broader standoff over Biden agenda – Jeff Stein and Anna Phillips. “Democratic plans to restrict new oil and gas development off both coasts and in Alaska’s Arctic National Wildlife Refuge have emerged as a new flash point in the Build Back Better bill, highlighting the party’s deep political schisms as it tries to advance the massive spending legislation.”

Sen. Joe Manchin III (D-W.Va.), a critical swing vote, has rejected a provision that would prohibit all future drilling off the Atlantic and Pacific Coasts as well as the eastern Gulf of Mexico, according to three people familiar with the matter who spoke on the condition of anonymity to discuss private deliberations. He also expressed surprise at top Democrats’ decision to include language ending an oil and gas leasing program in the pristine refuge, a longtime priority for party leaders and their environmentalist allies, but he has not indicated whether he will oppose it.


Are you sensing a theme to the Democrat who is opposed to many provisions in the legislation? (Hint: His last name rhymes with "linchpin.")


As if this bill doesn't already have enough problems:

CBO Underestimate -  Patrick Ambrosio and David Hood, Bloomberg ($). "The congressional office that analyzes the fiscal impact of bills underestimated how much part of the reconciliation bill would cost, a pair of Republican lawmakers claim."

Reps. Kevin Brady (R-Texas) and Jackie Walorski (R-Ind.) claimed the Congressional Budget Office made a 'highly questionable' assumption about expanding Supplemental Security Income eligibility to Puerto Rico residents.

'This critical assumption resulted in CBO excluding the entirety of the additional cost of expanding SSI to Puerto Rico in the Build Back Better Act, an estimated $10 billion, while at the same time failing to disclose this assumption in the published cost estimate,' the lawmakers said.


Reality Check: There is a lot of negative news about Biden's reconciliation bill, but it is too early to deem it dead. Remember, Obamacare was introduced in the summer of 2009 and went through a ton of lawmaker bickering before it was signed into law in March of 2010.  Just because congressional action on large pieces of legislation continues into a new year does not mean it is dead. 


Crypto Exchanges Enlisted by IRS as Ally in Tax Fight (Podcast) – Hamza Ali, Bloomberg ($). “Cryptocurrencies had a big year in 2021, with the asset class drawing in over $2.2 trillion of value. However, these gains have drawn scrutiny from tax authorities.”

The U.S. in particular has made efforts in recent months to develop rules that would require cryptocurrency exchanges to track the activity of traders to assess their tax compliance.


President Biden’s wants IRS to transform federal customer experience – Renu Zaretsky, Daily Deduction. “A broad, administration-wide executive order aims to improve federal customer experience and service delivery. Treasury is required to create online tools and services to ease tax payments and improve telephone-based taxpayer assistance. That includes a feature that allows taxpayers to request callbacks instead of waiting on hold and, often, being hung up on. The order also urges Treasury to consider expanding automatic direct deposit refunds, tax credit eligibility tools, and expanded electronic filing options.”

IRS Issues Guidance on Automatic Accounting Method Changes - Nicola White, Bloomberg ($). “Small taxpayers received updated guidance Thursday on requirements to obtain automatic consent to change accounting methods to comply with rules the Internal Revenue Service issued in January.”

Rev. Proc. 2022-9 reflects updated rules (T.D. 9942; RIN: 1545-BP53) that define which companies can use the cash accounting method and simpler methods for inventory, capitalization of certain costs, and long-term contracts.

IRS Remains Vulnerable to IT Security Breaches, Watchdog Says – Kaustuv Basu, Bloomberg ($). “The IRS is making progress in upgrading its information technology infrastructure, but remaining security flaws put taxpayer data at risk of inappropriate and undetected use, an agency watchdog found.”

The Treasury Inspector General for Tax Administration, in an annual report released Thursday, flagged issues with how the agency handles the privacy of taxpayer data, as well as problems with security policies and procedures.

IRS Recognizes Differences in Small Business Method Changes – Nathan Richman, Tax Notes ($). “The IRS’s procedural guidance for taxpayers applying the final rules on small business tax accounting exceptions from the Tax Cuts and Jobs Act distinguishes method changes forced by the statutory threshold from purely voluntary ones.”

Rev. Proc. 2022-9, 2022-2 IRB 1, released December 16, says it 'contains automatic consent procedures with special terms and conditions for taxpayers that are required by the Code to change their methods of accounting and for taxpayers that were required by the Code to change their methods of accounting, but subsequently requalify for the small business taxpayer exemptions.' 

IRS Modifies Exempt Organization Data Sources – Fred Stokeld, Tax Notes ($). “The IRS is modifying how it makes information on specific tax-exempt organizations publicly available.”

Beginning December 31, the IRS will no longer update data it provides on electronically filed Forms 990 in a machine-readable format on Amazon Web Services, the agency announced December 16.

Instead, the IRS will make the information available only on its Tax-Exempt Organization Search (TEOS) page, which can be found on 


You're a mean one, Mr...

New York Revives Property-Tax Lien Sales Paused During Pandemic – Donna Borak, Bloomberg ($). “One of the last acts of the outgoing administration of Mayor Bill de Blasio will be to sell the homes of New Yorkers who fell behind on their property taxes.”

After pausing tax-lien sales for most of the Covid-19 pandemic, New York City’s Department of Finance has scheduled a sale for Friday—just a week before the Christmas holiday. The administration decided to press ahead, despite calls by community advocates to delay the sales until residents impacted by Covid-19 can apply for federal aid to catch up on payments.

There were 7,500 single- family homes, condos and others on the lien sale list as of Dec. 10. Some properties could be removed prior to sale as homeowners rush to pay their tax debts and avoid foreclosure.


Outgoing Virginia Governor’s Budget Calls for End to Grocery Tax – Sam McQuillan, Bloomberg ($). “Virginia Gov. Ralph Northam unveiled a proposal Thursday that among several other tax relief measures would eliminate the state’s grocery tax—a policy backed by governor-elect Glenn Youngkin.”

Under a two-year budget proposal, Virginia would eliminate what the Democratic governor called its ‘regressive’ 1.5% sales tax on groceries, match up to 15% of the federal earned income tax credit for working families, and issue one-time tax rebates for individuals at $250 and married couples at $500. Localities would keep existing authority to charge a 1% sales tax on groceries under his proposal. Eliminating the grocery tax would allow Northam to make good on campaign promise that he said the state’s finances had previously prevented.

Washington Gov. Inslee Says No to Tax Cuts for Next Year – Michael Bologna, Bloomberg ($). “Washington Gov. Jay Inslee ruled out tax cuts under a budget proposal released Thursday, calling on lawmakers to instead use a healthy state surplus for programming to address poverty, homelessness, education, and climate change.”

The Democratic governor presented a supplemental budget for the second half of the 2021-2023 cycle that provides additional funds to reduce poverty, boost housing, expand K-12 learning supports, invest in the green economy, decarbonize buildings, and protect salmon habitat. The budget also envisions an extra $600 million for the state’s rainy day fund on top of the $574 million already budgeted.

New Jersey Housing Complex Wins Property Tax Dispute – Sam McQuillan, Bloomberg ($). “A New Jersey borough lost its bid to raise a holding company’s property tax valuation after a court found its calculation omitted key expenses.”

The New Jersey Tax Court on Tuesday affirmed an $8.8 million local property tax assessment of a Section 8 housing complex for tax years 2018 and 2019, after ruling that the borough’s $12 million appraisal—which was based on a 2018 income and expense statement—failed to take into account comparable market rents and operating expenses that were almost double in the previous year.

Mass. Justices Urged To Affirm Nonresident Capital Gains Tax – Asha Glover, Law360 ($). “The Multistate Tax Commission urged Massachusetts' highest court to affirm the state Appellate Tax Board's ruling that the state correctly assessed tax on an out-of-state corporation's capital gains from the sale of interest in a Massachusetts partnership.”

The MTC on Tuesday filed a brief in support of the state Department of Revenue. The intergovernmental agency said the Massachusetts Supreme Judicial Court should affirm the board's ruling that upheld the Revenue Department's decision to deny tax abatements on gains from VAS Holdings & Investments LLC's sale of interest in Cloud5 LLC.


Idaho Requires SALT Workaround Payments By Dec. 31 – Jaqueline McCool, Law360 ($). “For Idaho pass-through entities claiming a federal deduction for state and local tax payments, payments must be sent to the Idaho State Tax Commission by Dec. 31, the commission said.”

In a news release issued Wednesday, the department said that entities that later choose not to make the election to be taxed at the entity level as part of the state and local tax deduction cap workaround will have the amount they paid applied to other payments or refunded.

Menendez Seeks to Make Expanded SALT Deduction Retroactive – Laura Davison and Daniele Sirtori-Cortina, Bloomberg ($):

New Jersey Senator Bob Menendez says he’s seeking to make the expanded version of the state and local tax deduction retroactive to 2021.

FWIW, the House-passed bill increases the SALT cap to $80,000 and is effective for tax years beginning after 12/31/20. The Senate is expected to amend this provision. To what? Who knows?

Wayfair Blurred Line Between Due Process and Commerce Clause, Panel Says – Andrea Muse, Tax Notes ($). “The U.S. Supreme Court’s decision in South Dakota v. Wayfair Inc. made due process more relevant but blurred the line between the commerce clause and due process clause nexus analyses, panelists say.”

At a December 15 webinar during the New York University School of Professional Studies' Institute on State and Local Taxation, Brian Hamer of the Multistate Tax Commission said Wayfair had little direct effect on income tax commerce clause jurisprudence because most, if not all, observers believed that the commerce clause imposed no physical presence requirement on the authority of states to impose income taxes by 2018.

Hamer continued that the Court in Wayfair said due process and commerce clause standards may not be identical but have “significant parallels” when considering whether a state may levy a tax.


OECD to Publish Minimum Tax Model Rules on Dec. 20 - Isabel Gottlieb, Bloomberg ($). “The OECD will release model rules Dec. 20 for the recently agreed global minimum tax.”

Nearly 140 countries signed an agreement in October to create a 15% effective minimum rate for corporations, known as Pillar Two. A separate provision of the deal, Pillar One, provides for a reallocation of a portion of the largest multinationals’ profits to be taxed in more countries.

Governments are looking to begin the process of implementing the plans, and the model rules are designed to be taken up by legislatures around the world. The EU is planning to release a directive Dec. 22 requiring member countries to implement the minimum tax.

OECD Pillar 1 Replaces Digital Tax In EU Budget, Draft Says – Matt Thompson, Law360 ($). “The European Union will replace its proposed digital levy with residual profits reallocated to member countries under the so-called first pillar of a broader global tax agreement, according to a leaked draft of the EU budget seen Thursday by Law360.”

The draft says the revenue gap from the EU's recent decision to scrap the levy will now be made up by contributions from the share of taxable profits reallocated to each country under the deal reached by 137 nations in October. A senior Eurpoean Commission official confirmed Monday that the digital levy would be permanently removed from the EU's legislative agenda.


Happy National Ugly Christmas Sweater Day! My “Feliz Navi Dad” sweater is quite the keeper.

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