House passes infrastructure bill, advances Build Back Better bill

The House of Representatives has passed the $1.2 trillion Infrastructure Investment and Jobs Act (the Infrastructure Act), commonly referred to as the bipartisan infrastructure bill. The Infrastructure Act now heads to the White House for signature where it is expected to be signed as soon as President Joe Biden receives it. The House also passed a rule allowing it to bring to the floor its version of the president’s Build Back Better (BBB) agenda. Additional action by the House is not expected before the Congressional Budget Office (CBO) scores the bill, which could take one to two weeks. It is anticipated the CBO score will confirm earlier estimates that the bill is fully paid for by revenue offsets. Assuming that is correct and the House passes the BBB bill, it will then head to the Senate where it faces an uncertain future.

The Infrastructure Act is the largest infrastructure investment in decades. It also contains three tax provisions: the termination of the employee retention credit (ERC) as of Sept. 30, 2021, an interest rate smoothing extension for pension plans, and new reporting requirements for digital assets. Under the new law, the definition of a broker will be expanded to include those who operate trading platforms for cryptocurrency and other digital assets. In addition, brokers will be subject to new reporting requirements for purchases, sales, transfers and transactions involving cryptocurrency.

For a discussion of the tax changes in the Infrastructure Act, see our previous alert.

Build Back Better

The BBB contains major tax change proposals, which you have no doubt read about over recent weeks, including a surtax on millionaires, a corporate minimum tax, changes to the business interest limitation rules, expansion of the net investment income tax, and a variety of other provisions designed to raise revenue in order to fund the bill’s expenditures of roughly $2 trillion.

Notably, several anticipated provisions of the original BBB agenda did not make their way into the final bill, including some hallmarks of President Biden’s domestic agenda. These include corporate and ordinary individual rate changes, a capital gains tax rate increase, the short-lived billionaire tax as well as the step-up in basis rule modifications following a taxpayer’s death, reductions in the estate tax exemption and changes to the grantor trust rules.

The bill could be altered after it proceeds to the Senate, requiring the House to approve any changes before the bill goes to the president’s desk for signature. Unlike the Infrastructure Act, the BBB has received only Democratic support to date. Without bipartisan support, the bill can only pass the Senate using the reconciliation process, which will require the support of all 50 Democratic senators. At this time, Sen. Joe Manchin of West Virginia, arguably the driving force behind reducing the price tag of the BBB from the original cost of $3.5 trillion, has yet to signal his support of the current bill. Consequently, amendments are expected as negotiations continue. Rulings by the Senate parliamentarian as to whether some BBB provisions are eligible for inclusion in a reconciliation bill are also anticipated.