Bipartisan infrastructure bill moves forward

On July 28, 2021, the Senate voted 67-32 to invoke cloture on the roughly $1 trillion bipartisan infrastructure bill, titled the Infrastructure Investment and Jobs Act, allowing debate on the bill to commence. Prior to the vote, Senators received a 57-page summary of the bill; the proposed legislative text has not yet been released.

The bipartisan bill is significantly different from the original $2.6 trillion infrastructure outline proposed by President Joe Biden. Many tax provisions initially discussed as part of the plan are not contained in the Senate framework. That does not necessarily mean those that are not included have been abandoned. Instead, the revenue offsets incorporated into this package are likely the only ones that garnered sufficient bipartisan support for passage. More significant changes to the tax code and revisions to the Tax Cuts and Jobs Act (TCJA) are likely to be addressed in the larger $3.5 trillion reconciliation bill Democrats are currently negotiating and drafting.

Potential tax provisions

The bipartisan infrastructure bill contains three tax provisions: one expense and two “pay-for” provisions.

Sec. 48C, qualifying advanced energy project credit (expense) – The infrastructure bill includes $8 billion in new appropriations for Sec. 48C credits. This credit is available as a 30% investment tax credit to manufacturers and other industrial users to retool, expand or build new facilities that make or recycle energy-related products or to reduce their process-related greenhouse gas emissions. Half of these funds are set aside for use in communities where coal mines and power plants have closed or that have not previously received the credit.  

Cryptocurrency (pay for) – Included in the bill’s outline is a new reporting requirement for digital assets, including cryptocurrency. The definition of a broker will be expanded to include those who operate trading platforms for crypto and other digital assets, thereby requiring such transactions to be disclosed to the IRS. The Joint Committee on Taxation estimated that proper reporting of digital assets to the IRS will bring in approximately $28 billion in revenue.

Extending interest rate smoothing for defined benefit pension plans (pay for) – Pension smoothing, a practice originally introduced as a “pay-for” in a 2012 infrastructure bill, allows sponsors of defined benefit plans to apply higher interest rates in assessing future liabilities. This allows for a lower estimate of future liabilities and leads to a reduced annual contribution to pension plans (resulting in a smaller income tax deduction). Absent an extension, this provision expires in the 2020 plan year. The extension of this provision is projected to bring in $2.9 billion in revenue.