Tax proposal possibilities in the Build Back Better plan
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Tax proposal possibilities in the Build Back Better plan

May 16, 2021 · 3 min read · AICPA & CIMA Insights Blog

Tax proposal possibilities in President Biden’s Build Back Better plan

With strong interest in potential tax changes in Washington, such as the Biden Administration’s Build Back Better tax proposals, the AICPA is prepared to play a role. We await more specific proposal details before developing our positions and believe there are three ways the proposals and the broader infrastructure plans could advance in Congress. Before explaining those potential scenarios, here is what we know about the content and timing of possible tax changes.

Content and expected timing for tax proposals

  • The Build Back Better agenda is a three-pronged approach to COVID-19 relief, infrastructure investments and domestic priorities. It focuses on families and expands on legislation that was recently signed into law — the American Rescue Plan, and encompasses legislation recently announced, American Jobs Plans (AJP) and American Families Plan (AFP).

  • The Made in America Tax Plan, which effectively serves as the possible list of “pay-fors” for AJP, would implement corporate and international tax reforms to address profit-shifting and offshoring incentives and to level the playing field between domestic and foreign corporations.

  • The AFP focuses on social spending and human infrastructure. To pay for additional spending, AFP includes tax proposals focused on upper-income individuals.

  • The AFP also contains a tax administration provision of interest to the profession that the AICPA has commented on that would allow the IRS authority to regulate paid tax return preparers.

  • Regarding potential international tax legislation, Senate Finance Committee Chairman Ron Wyden (D-OR) is likely to lead the deliberations and, in early April, introduced a framework to overhaul international taxation. Also, Secretary of the Treasury Janet Yellen suggested countries agree on a global minimum tax rate for large companies.

  • House Ways and Means Committee Chairman Richard Neal (D-MA) also will play a role, and introduced his Building an Economy for Families Act, a plan that permanently extends worker and family-related refundable tax credits from the American Rescue Plan Act. (Press release, one-pager, discussion draft section-by-section, discussion draft full text — part 1 and part 2)

  • Remarks from administration officials indicate a hesitancy to retroactively raise taxes. Speaker of the House Nancy Pelosi (D-CA) has publicly stated her hope that the House will pass relevant legislation before the July 4 recess. But it is highly unlikely that a legislative tax package would be effective before 2022.

Tax proposal scenarios

Ultimately, several competing political forces and procedural limitations will determine how tax changes are considered legislatively. Given what we know, the three most likely scenarios for tax proposals in 2021 and early 2022 are:

Scenario 1 — Bipartisan “hard” infrastructure plan with limited tax increases passes with support from both parties and is signed into law

In this scenario, the Biden Administration, Democratic leadership and Republican moderates would quickly agree to a smaller, more traditional infrastructure package focused on roads, bridges, airports and broadband. With moderate congressional Republicans recently proposing to spend $568 billion on the package and the administration wanting to spend over $2 trillion, a negotiated middle ground would likely be above $1 trillion with no major tax increases. This legislation, which would move by regular order in both chambers, would almost certainly be followed by a bill that leverages the budget reconciliation process to pass less traditional infrastructure investments accompanied by significant tax increases. It is uncertain if moderates in both parties would be willing to vote for the first bill knowing that a larger bill is on the horizon.

Scenario 2 — One reconciliation bill containing AJP and AFP priorities, including major tax changes, passes on partisan basis and is signed into law

In this scenario, bipartisan negotiations on a smaller infrastructure package would have broken down. Administration and congressional leaders would decide to combine top priorities from the AJP and AFP into one plan and use the budget reconciliation process — requiring a simple Senate majority — to pass it through Congress.

Differences amongst members of the Democratic Caucus regarding specific priorities (e.g., SALT deduction cap repeal, size and scope of tax changes, provisions — such as a federal minimum wage increase — important to progressive members and may not be able to move by reconciliation) would be resolved as committees assemble components of a larger package. An FY2022 budget resolution with reconciliation instructions would pass and votes on the final package would fall largely on party lines.

Scenario 3 — Two reconciliation bills, one for traditional infrastructure priorities and accompanying business tax increases and another for human infrastructure and accompanying individual tax increases, are passed on a partisan basis and signed into law

In this scenario, the administration and Democratic leadership would receive a clear and positive ruling from the Senate Parliamentarian allowing for the already-passed FY2021 budget resolution to be revised to generate different reconciliation instructions. This would allow for one reconciliation bill focused on traditional infrastructure measures and business tax increases and another reconciliation bill (using a FY2022 budget resolution) focused on human infrastructure measures and individual income tax increases. The two bills would pass on a partisan basis.

Tax reform will continue to be an evolving story and an interesting spring, summer and likely fall are ahead. We will continue to analyze, advocate, and inform members as developments occur. For more information on recent tax advocacy initiatives, visit our website.

Eileen Sherr, CPA, CGMA, M.T.,

Lauren Pfingstag, MBA,

Eileen Sherr, CPA, CGMA, M.T.

Eileen Sherr is a Director – Tax Policy & Advocacy of the Association of International Certified Professional Accountants (the Association, also includes and referred to as AICPA) in Washington, DC.

She assists in the development and implementation of the Association’s tax policy and advocacy, including the formulation, review, and submission to Congress, Treasury, and the IRS of tax technical and policy recommendations. She also plays a key role in the development of the Association’s testimony for tax-related Congressional hearings. She also represents the Association with various tax related organizations, including the American College of Trust and Estate Council (ACTEC), American Bankers Association Trust Tax Committee, and Tax Executives Institute.

Ms. Sherr staffs the Association’s Tax Executive Committee and Trust, Estate, and Gift Tax Technical Resource Panel and its Foreign Trust Task Force; writes and presents on emerging tax legislative and regulatory issues; and interacts with government officials, other organizations, and the media.

Ms. Sherr obtained her Master of Taxation degree and Bachelors of Accountancy degree from The George Washington University. She is a Certified Public Accountant (CPA) and has earned her Chartered Global Management Accountant (CGMA) designation.

Ms. Sherr is a frequent speaker at national and state CPA society tax conferences and webcasts. Ms. Sherr has authored articles in The Tax Adviser, Journal of Accountancy, Journal of Accountancy Online, CPA Letter Daily, Practicing CPA, and Practical Accountant; has written blogs for AICPA Insights; has recorded podcasts, webcasts, and videos for the AICPA website; has been interviewed on CNN, Fox Business News, and Scripps; and has been quoted in the Wall Street Journal, New York Times, Washington Post, Forbes, Reuters, CBS News,, and many other publications.

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