August 8, 2022
OVERVIEW
The Senate just passed the Inflation Reduction Act on a party line vote on August 7, a bold measure to address climate change, corporate taxation, and health care. It is a $3.5 trillion budget reconciliation package that includes everything from electric vehicle tax credits to clean energy manufacturing to investments in environmental justice, a new 15% minimum tax on the income large corporations report to shareholders and a new 1% excise tax on companies’ stock buybacks, and extension of the enhanced federal premium subsidies for Obamacare and new Medicare power to negotiate prescription drug pricing. Also, the Senate released draft appropriations legislation for FY2023 on July 28, however, no Republicans were included in the process, so they are likely to change in the final negotiations with the House at the end of the year. See details in our report and please let us know any questions.
Federal Legislative Update
Congress is adjourning for the annual August recess. However, the Senate worked through the weekend to negotiate final terms with Senators Manchin and Sinema for the reconciliation package, the Inflation Reduction Act. On June 22, the House Committee on Appropriations approved its version of the FY23 Defense Appropriations Act, but the bill never made it to the floor prior to the House adjourning for the August recess. Instead, on July 20 the House passed a minibus of six appropriations bills, including Agriculture-FDA, Energy and Water, Financial Services, Interior-Environment, Military Construction and Veterans, and Transportation and Housing and Urban Development. On July 14, the House passed the National Defense Authorization Act, but the Senate has not followed suit. Finally, on July 28, the Majority leadership of the Senate Committee on Appropriations released a draft version of the FY23 Defense Appropriations Act, but did not take any further action in committee on the bills.
BUDGET & APPROPRIATIONS
Appropriations
The 12 House Appropriations Subcommittees have all introduced and considered their appropriations bills with the full committee acting on all bills, but only about half made their way to the floor. Meanwhile the Senate Democrats unveiled 12 draft appropriations bills and reports. They have not been considered in subcommittees and included little to no input from Republicans, so when Congress returns in the fall the House measures carry more weight in the negotiations process for the year-end omnibus.
Individual Bills
| BILL | HOUSE | SENATE |
|---|---|---|
| Ag-FDA | Subcomm Markup: June 15 Full Comm Markup: June 23 Passage: July 20 | No Date Set No Date Set |
| CJS | Subcomm Markup: June 22 Full Comm Markup: June 29 | No Date Set No Date Set |
| Defense | Subcomm Markup: June 15 Full Comm Markup: June 22 | No Date Set No Date Set |
| E & W | Subcomm Markup: June 21 Full Comm Markup: June 28 Passage: July 20 | No Date Set No Date Set |
| Fin Serv | Subcomm Markup: June 16 Full Comm Markup: June 30 Passage: July 20 | No Date Set No Date Set |
| Homeland | Subcomm Markup: June 16 Full Comm Markup: June 24 | No Date Set No Date Set |
| Interior | Subcomm Markup: June 21 Full Comm Markup: June 28 Passage: July 20 | No Date Set No Date Set |
| LHHS | Subcomm Markup: June 23 Full Comm Markup: June 30 | No Date Set No Date Set |
| Leg. Branch | Subcomm Markup: June 15 Full Comm Markup: June 22 | No Date Set No Date Set |
| MilCon - VA | Subcomm Markup: June 15 Full Comm Markup: June 23 Passage: July 20 | No Date Set No Date Set |
| S/F Ops | Subcomm Markup: June 22 Full Comm Markup: June 29 | No Date Set No Date Set |
| THUD | Subcomm Markup: June 23 Full Comm Markup: June 30 Passage: July 20 | No Date Set No Date Set |
| NDAA | Subcomm Markup: June 8 & 9 Full Comm Markup: June 22 Passage: July 20 | June 13 & 14 June 15 & 16 |
The Senate passed the $3.5 trillion Inflation Reduction Act on a party line vote on August 7, a bold measure to address climate change, corporate taxation, and health care. The Inflation Reduction Act touches several sectors:
- Climate Change
- Taxes
- Health
Climate Change
Highlights include:
- A production tax credit (PTC) for electricity generated from renewable energy sources, which would be extended for facilities that begin construction before January 1, 2025. The credit would be increased for facilities located in “energy communities” that: have an unemployment rate at or above the national average for the previous year; had direct employment in or tax revenue derived from the coal, oil, or natural gas sectors; or are a census tract where a coal mine or coal-fired electric generating unit has closed. The PTC for geothermal, solar, and wind facilities would also be extended.
- The investment tax credit for renewable energy property would be extended and modified for facilities that begin construction before January 1, 2025 and include investments in energy storage technologies, qualified biogas property, and microgrid controllers. The credit would be increased for projects in energy communities and for solar and wind facilities that serve low- income communities.
- A new credit for the sale or use of a qualified mixture of sustainable aviation fuel through 2024.
- A new credit to produce clean hydrogen — based on lifecycle greenhouse gas emission rates — for properties that begin construction before 2023.
- New production and investment tax credits related to clean electricity. The credits would be based on carbon emissions. Both would be available for facilities placed in service after 2024 and phase out beginning in 2032 or when US emissions targets are achieved.
- A new credit for the domestic production of clean fuels that would be based on their carbon emissions. It would apply to fuels produced after 2024 and would phase out entirely after 2027.
- $10 billion in additional allocations for a program to award certifications for qualified investments in energy manufacturing facilities.
- Several existing tax incentives would be extended, ranging from carbon capture to biodiesel and alternative fuels to energy efficient improvements for residential property.
- Expansion of the electric vehicles tax credits.
- $12 billion for the Environmental Protection Agency to provide financial and technical assistance on projects to reduce greenhouse gas emissions.
- $8 billion for grants to offer assistance on greenhouse gas reduction projects in low-income and disadvantaged communities.
- $2.8 billion for EPA to provide environmental and climate justice grants for community-led projects to reduce GHG emissions and mitigate climate and health risks.
Taxes
Highlights include:
- 15% minimum tax in tax years after 2022 on the income corporations report on their financial statements, or “book income,” with some adjustments, applying to corporations with more than $1 billion in average annual income over a three-year period. The revised 15% minimum rate would increase revenue by $258 billion from fiscal 2022 through 2031.
- Corporations would pay the larger of the minimum tax or the statutory corporate tax — which is currently 21%.
- Reduced by depreciation deductions — deductions for the exhaustion or wear and tear of a physical property used for trade, business, or held to produce income.
- Reduced by amortization deductions — deductions for certain capital costs for non-physical assets over time — for wireless spectrum used in the business of a wireless telecommunications carrier and acquired after Decemeber 31, 2007, and before the measure’s enactment.
- 1% excise tax of the fair market value of any stock repurchase in a tax year by a publicly traded US corporation.
- $45.6 billion to the IRS for tax enforcement activities. It specifies that the IRS funding boost isn’t intended to increase taxes on any taxpayer or small business with a taxable income below $400,000 or any taxpayer not in the top 1%.
- CBO estimates that the IRS will collect about $203 billion resulting from the 10-year, $80 billion allocation for IRS tax enforcement and compliance.
Health
Highlights include:
- Extension through 2025 the temporary expansion of Affordable Care Act (ACA) health insurance premium tax credits under Public Law 117-2. The larger credits for those with household income between 100% and 400% of the federal poverty level (FPL), as well as expanded eligibility to those above 400% of the FPL, are scheduled to expire after 2022.
- The measure would direct the Health and Human Services Department (HHS) to establish a “Drug Price Negotiation Program” to negotiate a maximum price of high-cost prescription drugs beginning in 2026 for Medicare Part B, which covers medicines administered in a medical setting, and Part D, the program’s prescription drug benefit.
- New requirement that HHS identify 100 drugs without competition that have been on the market for seven years and biologics that have been on the market for 11 years, and that have the highest spending under Medicare. HHS would select 10 drugs from that list — or the maximum number eligible for negotiation that year if less than that — for negotiation in 2026 increasing to 20 drugs by 2029.
- Drugmakers would have to repay the government the difference in profits above the cost of inflation on Part B and Part D drugs dispensed to beneficiaries under Medicare Part B and Part D if they raise the price of a drug above inflation, beginning in 2023.
- The measure would also expand Medicare Part D premium subsidies for low-income seniors to those between 135% and 150% of the poverty line starting January 1, 2024.
- The measure would also direct HHS to enter agreements with drug manufacturers to provide discounts on certain drugs beginning 2025.
- The legislation would require coverage of vaccines with no cost-sharing or deductible under Medicare Part D beginning January 1, 2023 and retroactively reimburse Medicare Advantage plans the lost cost-sharing for 2023.