{"id":4746,"date":"2022-02-04T11:54:42","date_gmt":"2022-02-04T19:54:42","guid":{"rendered":"https:\/\/familyenterpriseusa.com\/?p=4746"},"modified":"2022-02-04T11:54:52","modified_gmt":"2022-02-04T19:54:52","slug":"latest-bbba-update-salt-and-ctc-taxation-representation-and-tax-tidbit","status":"publish","type":"post","link":"https:\/\/familyenterpriseusa.com\/feusa\/latest-bbba-update-salt-and-ctc-taxation-representation-and-tax-tidbit\/","title":{"rendered":"Latest BBBA Update: SALT and CTC: Taxation & Representation and Tax Tidbit"},"content":{"rendered":"

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Latest BBBA Update: SALT and CTC.<\/strong>\u00a0In addition to the American Rescue Plan Act and the Infrastructure Investment and Jobs Act, the Build Back Better Act (BBBA) was the primary legislative focus in 2021. In the new year, however, the package has been pushed aside in favor of other policy objectives, such as appropriations, a U.S. innovation and competitiveness bill, and election reform, among other issues.<\/h2>\n

The most recent BBBA negotiation status update came on Tuesday, when Sen. Joe Manchin (D-WV), who was asked if he was engaged in discussions on the bill, said, \u201cNo, no, no, no. It\u2019s dead.\u201d When asked to clarify, Manchin said, \u201cIf we’re talking about the whole big package, that\u2019s gone.\u201d\u00a0Before the end of the day, Manchin\u2019s spokesperson said Manchin was referring to the House bill, not future negotiations, when he said the package was \u201cdead.\u201d Although no formal discussions have taken place in weeks, if not months, committee staff are continuing to take taxpayer feedback on various payfors and spending proposals. Even with Manchin\u2019s comments, informal discussions could begin this week, according to some familiar with discussions.<\/h3>\n

Manchin later added that new discussions must begin with a clean slate, suggesting that he was potentially open to a smaller version of the bill. Manchin also said \u201cwhatever we come up with\u201d will be a different bill. At the same time, however, Manchin signaled there could still be a deal on revising the tax code and lowering prescription drug costs, calling those two goals \u201cextremely doable.\u201d<\/p>\n

Despite the slow movement on BBBA, there have been a few policy developments with the package. Below is an update on developments related to the $10,000 cap on state and local tax (SALT) deduction and the Advanced Child Tax Credit (CTC) as they pertain to the BBBA.<\/p>\n

State and Local Tax Deduction<\/em><\/u><\/p>\n

Some congressional Democrats have said\u00a0off the record<\/a>\u00a0it would be \u201cokay\u201d if the effort to lift or remove the $10,000 SALT cap was ultimately removed from the BBBA. Sen. Martin Heinrich (D-NM) said \u201cI hope so\u201d when asked if SALT was on its way out of the package, adding that he is \u201cnot a fan of SALT.\u201d Sen. Mark Warner (D-VA) struck a similar tone, saying, \u201cEven though my state would be a beneficiary of a more generous SALT provision, since we\u2019re not able to\u2014unfortunately\u2014roll back the Trump tax cuts, it would be a little ironic to give folks in the $700,000 to $800,000 range a tax cut in this bill.\u201d<\/p>\n

According to reports, other unnamed Democratic senators involved in negotiations have said that lifting the SALT cap is unlikely to be included, especially since Manchin has issues with the proposal.<\/p>\n

Because BBBA discussions remain ongoing, however, it is unclear whether SALT has been definitively cast aside. It remains a top priority for Democrats from states like New Jersey and Connecticut. Sen. Bob Menendez (D-NJ) recently released a statement saying\u00a0that the potential elimination of the provision was news to him<\/a>\u00a0and that \u201cSALT remains higher in [his] list of priorities.\u201d<\/p>\n

Advanced Child Tax Credit<\/em><\/u><\/p>\n

Like SALT, efforts to extend the Advanced Child Tax Credit (CTC) have run into a Manchin-sized hurdle. Manchin has suggested the CTC might be too costly for the BBBA\u2014a concern of his that has been exacerbated by recent inflationary trends. Moreover, Manchin wants to tie work requirements to the credit\u2014something that other Democratic lawmakers have largely opposed. Even President Joe Biden has recently said that he is \u201cnot sure\u201d if the CTC will be included in the package. However, because the CTC is such a high priority for congressional Democrats, many are reportedly willing to accept Manchin\u2019s demands to see the extension over the finish line.<\/p>\n

More concessions have recently come from House Majority Whip Jim Clyburn (D-SC), who suggested last week that Democrats should accept a lower income threshold for the CTC, proposing the credit be targeted at individuals making below $75,000 annually. He also urged Manchin to \u201ccome forward with a bill for the child tax credit that\u2019s means-tested,\u201d adding that he thinks \u201cit would pass\u201d and that Manchin would \u201cget it through the Senate\u201d and that his Democrats \u201ccould get it through the House.\u201d<\/p>\n

In the meantime, Democratic senators continue pushing for the administration to include the CTC in its BBBA negotiations. In a\u00a0letter<\/a>\u00a0to President Biden and Vice President Kamala Harris last week, several Democratic senators, including\u00a0Finance Committee Chair Ron Wyden (D-OR) and Banking Committee Chair Sherrod Brown (D-OH), said, \u201cThe consequences of failing to extend the CTC expansion are dire, particularly as families face another wave of the COVID-19 pandemic.\u201d They asked the White House to work to extend the Advanced CTC \u201cas a centerpiece\u201d of the BBBA.<\/p>\n

Potential IRS Funding Boost.\u00a0<\/strong>The Senate version of the BBBA contains nearly $3.2 billion for the IRS to improve taxpayer services. However, with negotiations on that package stalled, lawmakers are exploring other avenues to boost IRS\u00a0funding, such as the annual appropriations process.<\/p>\n

Sen. Chris Van Hollen\u00a0(D-MD), chair of the Senate Appropriations Subcommittee on Financial Services and General Government and leader of\u00a0the subcommittee responsible for IRS funding, said he \u201cwould like to see taxpayer services get a bigger boost because of exactly the kind of backlog we\u2019re in.\u201d<\/p>\n

However, this received pushback from Sen. Richard Shelby, ranking member on the Senate Appropriations Committee,\u00a0who characterized the boost as among the \u201cpartisan reforms\u201d in the Democratic proposal. Other Republicans have also pushed back, arguing that much of the nearly $2 billion for \u201cnecessary expenses for the Internal Revenue Service\u201d enacted under the American Rescue Plan Act (ARPA, P.L.117-2) has not yet been spent. Among such lawmakers is Rep. Kevin Brady (R-TX), ranking member on the House Ways and Means Committee, who said in a\u00a0Jan. 19 letter<\/a>\u00a0to IRS Commissioner Charles Rettig that the IRS \u201ccrisis is not due to a lack of funding.\u201d<\/p>\n

The government is currently operating under a continuing resolution (CR) set to expire on Feb. 18. If Congress fails to act before then\u2014by either enacting another CR or passing new appropriations language\u2014the government will be forced to shut down. Appropriators have been in negotiations to reach an agreement on appropriations legislation, and there is optimism that an agreement can be reached on an omnibus prior to the CR deadline, although another short-term CR might be required to provide lawmakers with additional time to finalize all the details.<\/p>\n

Lawmakers Push Treasury and IRS for Taxpayer Relief.<\/strong>\u00a0A bipartisan and bicameral group of lawmakers is pressing the Treasury Department and the IRS to provide leniency for taxpayers who incur penalties stemming from IRS mail backlog issues. In a\u00a0letter<\/a>\u00a0to Treasury Secretary Janet Yellen last week, about 200 lawmakers explained how internal IRS backlog concerns have contributed to taxpayers erroneously accruing automatic penalty notices because IRS officials have not yet opened properly filed correspondence. This has left taxpayers confused and frustrated.<\/p>\n

In response, the lawmakers asked the IRS to:<\/p>\n