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Crapo Criticizes Attempts to Dismiss GOP Concerns on Tax Bill

Posted on Feb. 29, 2024

The Senate’s top Republican taxwriter attacked calls for his caucus to rubber-stamp the House-passed tax deal, calling on the bill’s authors to listen to their concerns before moving forward.

The window for that to happen and for a deal to be struck appeared to narrow February 28 after congressional leaders announced an agreement to advance the federal government’s fiscal 2024 budget by March 22. Year-end spending packages are the typical vehicle for tax packages when control of Congress and the White House is split.

Senate Finance Committee ranking member Mike Crapo, R-Idaho, criticized what he called efforts to pressure Senate Republicans into supporting the $79 billion tax deal without a chance to propose and discuss changes, and reiterated the prior-year income lookback provision of the expanded child tax credit as his primary concern with the bill.

“Chairman Smith was correct in his analysis of what the House of Representatives could support,” Crapo said in a February 28 statement, referring to House Ways and Means Committee Chair Jason Smith, R-Mo., who crafted the tax package along with Finance Committee Chair Ron Wyden, D-Ore.

“However, efforts to pressure the Senate to ‘take it or leave it’ and categorically dismiss a Senate regular order process have only amplified calls for changes and amendments. This was the risk of announcing a deal without my support and with no near-term path forward in the Senate,” Crapo said.

Crapo told reporters February 28 that he is working to get at least a majority of his Republican caucus to support the bill before backing it on the Senate floor, but that parsing “dozens” of issues and tweaks from members is proving to be a large task.

Clock Is Ticking

Both the tax and legislative calendars make any lengthy negotiations unlikely.

“If this is going to happen, it’s got to happen pretty quick here; the delay’s immensely frustrating for businesses out there,” said Dustin Stamper of Grant Thornton LLP. A trio of tax breaks in the bill are estimated to pump $125 billion into businesses in 2024, with much of that coming from retroactive changes for 2022 and 2023 taxes.

If businesses can’t file a Form 4466 “quickie refund” on 2023 estimated taxes by April 15, it could delay them getting the money for months, Stamper said.

When asked how close he is to assembling majority support, Crapo said he couldn’t gauge the number. A handful of Senate Republicans, including Roger Marshall of Kansas, Kevin Cramer of North Dakota, and Markwayne Mullin of Oklahoma have come out for the bill.

“I’m working on it, the issues senators have identified — there’s a ton of them,” Crapo said. “I’m just going around to every member and trying to figure it out.”

If a negotiated settlement doesn’t happen, that will likely force the hand of Senate Majority Leader Charles E. Schumer, D-N.Y., according to Rohit Kumar of PwC.

“At some point in this work period before March 22, Sen. Schumer will file cloture on a motion to proceed if a negotiated settlement doesn’t appear to be in the works,” Kumar predicted.

Schumer can argue that the Senate made a good-faith effort to reach a deal following the January 31 vote by the House and giving undeclared supporters an excuse to vote for the bill on the floor.”

“Because if this thing is not going to happen, it can’t be . . . because he never tried,” Kumar said of Schumer, who has almost complete control when it comes to bringing legislation to the floor. Otherwise, Schumer becomes “the one to take the blame for killing a bill that he himself actually supports,” he said.

But holding a vote, even a failed one, could be a win for Schumer. If a vote fails on a bill that is a top priority for the U.S. Chamber of Commerce, the National Association of Manufacturers, and other business groups, the bill will have died because 41 Republican senators voted against bringing it to the floor — assuming the bill gets unanimous support from Democrats, Kumar said.

To bring the bill to the Senate floor as a stand-alone requires 60 votes to eliminate the potential for a filibuster. If all 51 Democrats and their independent allies vote to end debate, only nine Republicans would need to join in.

“They can throw this on the floor at any point and dare Republicans to vote against it,” Stamper said.

Under that scenario, Republicans who support the bill but who’ve given Crapo the political room to negotiate might join with Democrats to bring the legislation to a floor vote.

The tax package includes features supported by Republicans, including Finance Committee member James Lankford of Oklahoma, the author of the Accelerate Long-Term Investment Growth Now Act (S. 1117), which would roll back bonus depreciation’s phaseout, and Sen. Shelley Moore Capito of West Virginia, the lead sponsor of the American Investment in Manufacturing Act (S. 1232), which would relax net interest expensing calculations.

For Republicans, the key feature of the bill — the Tax Relief for American Families and Workers Act of 2024 (H.R. 7024) — which passed the House four weeks ago on a 357-70 vote, is a reinstatement of full domestic research and development expensing. That’s similar to provisions in the American Innovation and Jobs Act, cosponsored by 22 Senate Republicans.

The key provision for Democrats is an expansion of full refundability for child tax credits. The House bill also includes a beefed-up housing tax credit, disaster relief, and authorization for the administration to negotiate a Taiwan-U.S. tax agreement.

What Do They Want?

The necessity of surveying members came after the deal between Wyden and Smith went public without Senate Republican support, according to Crapo.

“Once the deal moved without us working out these issues, and it came over here in sort of take-it-or-leave-it mode, I made it clear that we were going to need to fix it,” Crapo said. “The Republican Caucus — which was the one that was standing outside, was left out — had a lot of opinions.”

Requests include previously reported issues with the lookback provision on the expanded child tax credit in the legislation, disapproval of an early end to the employee retention credit as an offset — a qualm of Finance Committee member Thom Tillis, R-N.C. — and the expansion of the low-income housing tax credit (LIHTC), Crapo told reporters.

“Every issue that you’ve heard about is a big one,” Crapo said.

Crapo reiterated his concern about the child tax credit’s prior-year income lookback provision as undermining the work requirement tied to the credit and changing it “from primarily working family tax relief into a government subsidy.”

But Republicans’ issues expand beyond what’s in the bill, Crapo said, such as technical corrections to the SECURE 2.0 Act of 2022 retirement legislation.

“Everything from traditional extenders to LIHTC to SECURE 2.0,” Crapo said. “I mean, the point is, there's just a lot of separate issues that need to get sorted out as well.”

Crapo said he is still working with other senators to reach consensus on a path forward, and it hasn’t been without challenges.

“But with each week that has passed, members have strongly voiced additional calls for numerous modifications, and there are also increasing concerns about making 2023 changes this far into the IRS tax filing season,” Crapo said.

Wyden said he’s been pleased with his conversations with senators about the tax deal since returning from recess but quashed the idea that there were current negotiations on changing the tax deal.

“If somebody knows where those negotiations are taking place, or the planet that they're on, refer me to it, because I'm not up on that,” Wyden said.

The View From Off the Hill

There are arguments to be made from competing camps about the dangers of or cushion for making substantial changes to a bill that passed with 84 percent of the vote in the House, said Jonathan Traub of Deloitte Tax LLP’s Washington National Tax office.

The argument from supporters of the bill is: “They have a bill with 357 some votes in the House and they don’t want to upset the apple cart too much with a lot of changes,” Traub said.

This is countered by those who want to open the bill to changes: “They have a bill with 357 some votes in the House and it’s got support to spare,” Traub noted.

While changes to the child tax credit could endanger Democratic support, adding a handful of tax extenders, such as three-year, rather than seven-year amortization of racehorses — a tax break that ended after 2021 — would add little more than $1 billion in costs to the package, Kumar said. Technical corrections to the retirement bill would be another addition falling into the “not a dealbreaker” category, Kumar said.

On bipartisan bills, both parties like to deliver a majority of their members on passage. The House passed the tax package with the support of 89 percent of Democrats and 78 percent of Republicans.

Crapo should have no problem matching the House’s 75 to 80 percent range of GOP support once he shows support for the bill, said Kumar.

“I think there are a bunch who support the bill, but don’t want to undercut whatever leverage he might have, so they’re kind of keeping their powder dry,” Kumar said.

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