Senate bill boosts tech; other tax legislation being considered

After months of negotiations, the Senate passed legislation aimed at strengthening the artificial intelligence, biotechnology research and semiconductor industries. This $280 billion bill incorporates many parts of the Senate’s previously drafted bipartisan United States Innovation and Competition Act of 2021 (USICA aka CHIPS-plus) including over $52 billion for semiconductor facilities plus a 25% tax credit for semiconductor manufacturing.  

Currently, the House is expected to pass the Senate version of this bill, allowing President Biden to sign it into law before the House adjourns for its August recess. However, there may be a final attempt to resurrect certain provisions from the previous House-passed version. This would delay final passage until the fall and hinder the ability of some members to tout a bipartisan success during the summer campaign season.

Other legislative developments

Build Back Better/reconciliation

Several weeks ago, we believed there was a chance for a scaled-down Build Back Better (BBB) agenda to pass via reconciliation before midterm elections; however, the legislation has now been further paired down to contain only Medicare prescription drug pricing provisions and a two-year extension of certain Affordable Care Act subsidies. After the July inflation report, Sen. Joe Manchin (D-W. Va.) indicated he preferred to delay negotiations on any tax increases until fall. In a 50-50 Senate, with no Republican support for any reconciliation bill, Manchin’s reservations effectively ended all current BBB efforts. Whether the Senate will attempt to revitalize portions of the BBB agenda, including climate provisions or tax increases, is currently unknown.

Tax extenders

The breakdown of any substantial BBB legislation creates an opening for tax extender legislation. The House Ways and Means Committee and Senate Finance Committee have recently begun bipartisan discussions, possibly setting the stage for a return of over 40 temporary tax provisions that expired at the end of 2021. Key tax extenders that may be renewed include:

• Research and development expensing and/or a refundable credit extension
• Child and dependent care tax credit enhancement
• Child tax credit increase
• Credit for qualified fuel cell motor vehicles expansion and/or enhancement