On December 2nd, the Senate passed a Continuing Resolution to fund the government for Fiscal Year 2022 through February 18, 2022, and sent it to President Biden for his signature, thus avoiding a government shutdown.
The House passed the Continuing Resolution earlier in the day.
After the Senate vote, the President signed the bill.
A continuing resolution through February 18th doesn’t necessarily mean that the government must be funded at last-year’s level through February 18th. Any appropriations bill enacted after December 2, 2021, and signed by the President, can provide funds for the government at any level Congress stipulates.
This includes the Build Back Better Act, an appropriations bill funding all branches of government for Fiscal Year 2022, which Democrats hope to pass around Christmas time if they can reach agreement with West Virginia Senator Manchin, who is the primary obstacle to agreement.
From a tax viewpoint many of the provisions which would have been so detrimental to small businesses and their owners were removed from the final House version of the BBB. In the final House bill, there was:
Now the action moves to the Senate. It’s too soon to judge what the Senate version will look like or even when it will be brought up, however it seems unlikely that any negative tax provisions will come in, particularly with Senator Manchin having the deciding vote. Senator Bernie Sanders (I VT) may have a lot to say but the Senators who will be most important are Joe Manchin (D WV) and Kyrsten Sinema (D AZ). Based on Senator Manchin’s comments, it is likely he will require some of the new social programs be pared back or eliminated which will reduce the cost of the bill. He has specifically mentioned having concerns with the paid leave program in the bill, as well as expanding Medicare, creating a methane emission fee and having a larger tax credit for union-made electric vehicles. Senator Sanders wants to expand the House version which expanded Medicare to cover hearing, to also include vision and dental. This will only happen if Senator Manchin is okay with it which is doubtful. He has already expressed concern that the country cannot pay for Medicare as it stands today let alone expanding it. It is possible that the Senate will cut back the House’s SALT provision so it is only available to those taxpayers who are below the $400,000 filing single and 450,000 filing jointly income thresholds. If the Senate did throw out SALT, it is quite possible that it would be brought back in conference.
Senator Manchin does not seem to be in any rush to bring the bill up until at least the end of the year because of his concerns with parts of the bill, inflation and the Senate’s busy schedule, including keeping the government open, raising the debt ceiling and getting a defense bill through. If Senator Manchin stayed with this timetable, then the conference would be in the spring. It is even possible that the Democrats in the Senate will fail to pass the bill. TIA anticipates that the Senate will ultimately pass a BBB bill but it will be a skinnier version than the House bill.
You may have noticed that for months Speaker of the House, Nancy Pelosi (D CA), tried to get a bill passed in the House that would be able to get through the Senate unchanged. When it became apparent that to get the infrastructure bill through the House the BBB bill would have to be decoupled from a version acceptable to the Senate, Speaker Pelosi freed the Representatives to pass the version they wanted. The House Democrats know this version will not get through the Senate and basically the House will have to adopt whatever comes out of conference.
It took a lot of work for a number of associations to get rid of the most damaging tax provisions (many of which would have hit upper middle class taxpayers as well as small business owners) but TIA was one of the first groups (as soon as we got word that the elimination of the step up in basis was in the works and a reduction in the estate tax exemption – a few years back) to start educating folks on the Hill as well as the other small business associations as to the damage these provisions could wreak. We also were one of a handful of associations to lead the charge against the potential harmful limitation of the 199A deduction. TIA also worked with many other associations including the Independent Community Bankers of America, to eliminate the overreaching provision of reporting banking transactions to IRS.
It’s probably too early to breathe a sigh of relief but we’ll know soon enough what the final version of the BBB will look like.