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Senate passes bipartisan infrastructure bill; debate to begin on FY 2022 budget resolution

August 2021

In brief

The Senate today voted 69 to 30 to pass a $1 trillion bipartisan infrastructure bill (H.R. 3684, the INVEST in America Act) that includes $550 billion in new spending on highways, bridges, waterways, transit, airports, the electric grid, and broadband. The legislation resulted from months of negotiations by President Biden and a group of Democratic and Republican Senators to reach an agreement to increase spending on infrastructure without tax rate increases. The Senate bill includes other tax and non-tax offsets, including a new cryptocurrency information reporting requirement that is the subject of ongoing debate and a measure reinstating Superfund excise taxes on chemicals.  

Following passage of the infrastructure bill, the Senate began debate on a fiscal year 2022 budget resolution that would provide reconciliation instructions for legislation to be considered later this year featuring up to $3.5 trillion in spending and tax relief provisions that would be offset in part by corporate and individual tax increases. Senate Majority Leader Chuck Schumer (D-NY) has stated that he will continue to delay the start of a scheduled August recess until the Senate has completed work on the budget resolution.   

The House currently is in recess until mid-September. House Speaker Nancy Pelosi (D-CA) has stated that the House will not act on the Senate infrastructure bill until work has been completed on a budget reconciliation bill. At this point, it appears that the House and Senate could take some months to pass a final reconciliation tax bill before the end of this year.

Observation:  President Biden and moderate Democrats in the House and Senate may push for final passage of infrastructure legislation before all work is completed on a reconciliation bill. Approval of a budget resolution with reconciliation instructions by both the House and Senate might be seen as a significant enough legislative milestone to clear a path for earlier action on the infrastructure legislation. Approval of a budget resolution with identical reconciliation instructions by both chambers would provide the procedural protections needed to enact a reconciliation spending and tax bill with only Democratic votes. Support of all 50 Democratic Senators and virtually all House Democrats would be needed to pass such legislation over the objections of Congressional Republicans. 

Action item: Corporations and individuals should assess the potential effects of increased federal support for infrastructure on the US economy. At the same time, stakeholders should continue to communicate with policy makers on the potential effects of President Biden’s tax increase proposals on their employees, job creation, and investments in the United States. 

In detail

Senate passes bipartisan infrastructure bill

The Senate-passed infrastructure bill extends current transportation authorization legislation and related fuel excise taxes while increasing current funding levels by $550 billion over the next eight years. Under the legislation, current federal highway-related excise taxes are extended through September 30, 2028.

With the addition of $550 billion in new funding, the overall package provides $1 trillion over eight years for infrastructure improvements that include highways, bridges, waterways, transit, airports, the electric grid, and broadband. The legislation is intended to reduce permitting time for larger infrastructure projects while maintaining environmental standards. The bill’s sponsors also have stated that the legislation makes investments on infrastructure needed for a low-carbon economy and helps to reduce emissions and improve the environment.

Non-tax offsets for the additional $550 billion for infrastructure spending include rescinding unused funding from COVID-19 relief bills, delaying a scheduled change in Medicare prescription drug rebate rules, revenue from future spectrum auction sales and other government assets, and projected revenue gains generated from the expected economic growth effects of infrastructure improvements. 

Tax offsets include:

  • A new cryptocurrency information reporting requirement 
  • Reinstatement and modification of Superfund excise taxes on chemicals
  • Extension of interest rate smoothing options for defined benefit plans
  • Modifications to private activity bond provisions (for additional financing of projects)
  • Sunsetting the COVID-19 employee retention tax credit after September 30, 2021.

The Senate completed its action on the infrastructure legislation without resolving a disagreement over the scope of new proposed cryptocurrency reporting requirements. Senate Finance Committee Chairman Ron Wyden (D-OR), Finance Committee member Pat Toomey (R-PA), and Senator Cynthia Lummis (R-WY) filed an amendment to the cryptocurrency proposal that would narrow the definition of “broker” with respect to digital asset third-party reporting requirements. Senators Rob Portman (R-OH), Mark Warner (D-VA), and Krysten Sinema (D-AZ) proposed a different cryptocurrency amendment that reportedly is supported by the White House.

In a floor statement, Senator Portman indicated that efforts were being made to reach an agreement on a compromise amendment that would clarify the definition of a cryptocurrency broker. However, procedural objections were raised to considering additional amendments by unanimous consent before the final Senate vote to pass the infrastructure legislation. Senators Sinema and Portman also inserted in the record a Joint Committee on Taxation technical explanation of the underlying cryptocurrency reporting provision.

The cryptocurrency provision is one of many which the House may address when it considers the Senate infrastructure bill. Both chambers must agree on a final identical version of the legislation before it can be signed by President Biden.  

The Congressional Budget Office (CBO) has projected that the bill would increase the federal deficit by $256 billion over 10 years. CBO notes that some of the proposed offsets do not count for budget scoring purposes, and CBO staff have not estimated the macroeconomic effects that the legislation might have on federal revenues.

Budget resolution debate

The Senate is set to begin consideration of a fiscal year 2022 budget resolution that provides reconciliation instructions intended to advance parts of President Biden’s economic agenda that are not included in the Senate-passed bipartisan infrastructure bill. There can be up to 50 hours of Senate floor debate on the budget resolution, followed by a series of votes (commonly referred to as a ‘vote-a-rama’) on amendments. Since the Senate was scheduled to begin its August recess at the end of last week, Senators may not use all of the time permitted for debate on the budget resolution. 

The Senate budget resolution’s reconciliation instructions require the Senate Finance Committee to raise as much tax revenue as needed or reduce other budget outlays to offset the cost of the tax relief and spending proposals within the committee’s broad jurisdiction that are the subject of debate among moderate and progressive Democrats. The instructions give the committee flexibility on how it meets this requirement. According to a Senate Budget Committee staff summary of the resolution, "It is not possible to draft and score all of the expected policies prior to consideration of the budget resolution. Given that we will not have budgetary certainty for all of the expected policies prior to locking in the reconciliation instruction to the Finance Committee, the Budget Resolution will not require a specific level of revenue, outlay, or deficit amount in its reconciliation instruction." The budget resolution sets a non-binding deadline for the Finance Committee to report legislation by September 15. 

The Senate Finance Committee is expected to consider revenue-raising proposals offered by President Biden that include a corporate rate increase, international tax changes, an increase in the top ordinary individual income tax rate, and changes to the taxation of investment income. For more on the President’s tax proposals, see our PwC Insight

The Finance Committee also may consider additional revenue-raising proposals offered by members of Congress. For example, Finance Chairman Wyden recently released draft bills that (1) limit and modify the Section 199A 20% deduction for certain pass-through business income; (2) modify the treatment of derivatives and expand the scope of the mark-to-market rule; and (3) modify the treatment of carried interest income by investment fund managers and end the deferral of certain tax payments. 

The Budget Committee staff summary lists potential “investments” and “offsets” that the Finance Committee may consider but the resolution does not require action on specific proposals and specify which offsets will be considered. 

Examples of potential investments include: 

  • Paid Family and Medical Leave  
  • Affordable Care Act (ACA) expansion extension and filling the Medicaid Coverage Gap  
  • Expanding Medicare to include dental, vision, hearing benefits and lowering the eligibility age  
  • Addressing health care provider shortages (Graduate Medical Education) 
  • Child Tax Credit/Earned Income Tax Credit/Child Dependent Care Tax Credit extension  
  • Long-term care for seniors and persons with disabilities (Home and Community Based Services)  
  • Clean energy, manufacturing, and transportation tax incentives  
  • Pro-worker incentives and worker support  
  • Health equity (maternal, behavioral, and racial justice health investments) 
  • Housing incentives  
  • State and local taxation (SALT) cap relief  
  • Other investments within the jurisdiction of the Finance Committee 

Examples of potential offsets include:

  • Corporate and international tax reform  
  • Tax fairness for high-income individuals  
  • IRS tax enforcement  
  • Health care savings  
  • Carbon Polluter Import Fee

The House is not expected to consider a budget resolution until after that chamber returns in mid-September. Following adoption of a joint budget resolution by both the House and Senate with identical budget reconciliation instructions (which can be done with only Democratic votes), the House Ways and Means and Senate Finance Committees, as well as certain other committees, can begin drafting the reconciliation bill.  

Fiscal deadlines ahead

The House and Senate will be facing a number of fiscal deadlines when they reconvene in September. Congress next month is expected to consider a ‘continuing resolution’ to maintain funding for federal departments and agencies beyond September 30 when current government funding legislation expires. A temporary suspension of the federal debt limit expired July 31, and Treasury Secretary Janet Yellen has called on Congress to address the debt limit as soon as possible. According to CBO staff projections, the Treasury Department is expected to exhaust its ability to meet the government’s debt obligations by October or November. 

A debt limit measure potentially could be included in the budget reconciliation bill or could be addressed in September along with a short-term government funding continuing resolution. The pending Senate budget resolution currently does not address the debt limit. Senate Minority Leader Mitch McConnell (R-KY) has said that Republicans will not support a debt limit increase as part of government funding legislation. 

For more information

For the Joint Committee on Taxation staff revenue estimates for the infrastructure tax offsets, click here

For the Joint Committee on Taxation technical explanation of Portman-Sinema cryptocurrency reporting provision, click here

For the CBO report on the cost of the infrastructure legislation, click here:

For a nine-page summary of the proposed Senate budget resolution, click here. For the 92-page bill text of the budget resolution, click here.

Contact us

Pat Brown

Pat Brown

Washington National Tax Services Co-Leader, PwC US

Rohit Kumar

Rohit Kumar

Washington National Tax Services Co-Leader, PwC US

Todd Metcalf

Todd Metcalf

Principal, Tax Policy Services, PwC US

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