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Tax Bill Latest: GOP Private Equity Carveout Amendment Approved
(Bloomberg) -- The Senate is still voting on a lengthy series of amendments to the Democrats’ $437 billion climate, health and tax package leading up to expected passage of the legislation as soon as Sunday afternoon.
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In one of the quirks of Senate rules being employed by Democrats to pass the bill with a simple majority, Republicans have the chance to offer scores of amendments. Most are designed to force Democratic senators to take politically fraught positions on contentious issues such as immigration and taxes.
In the 50-50 Senate, Republicans can force a change in the legislation with help from just one member of the Democratic caucus.
Extended SALT Cap Quickly Replaced by Democrats (3:00 p.m.)
Senate Democrats have voted 51 to 50 to strip out an extension of the $10,000 cap on state and local tax deductions inserted by Republicans and replaced it with their own new revenue-raising provision.
The vote on the amendment from Virginia Senator Mark Warner came after swing-state senators helped the GOP pass an amendment to the bill extending the SALT cap for one year in order to pay for a new carveout from the 15% corporate for private equity subsidiaries.
The Warner amendment extends for two years a measure in the tax code that limits how much in losses pass-through business can deduct each year.
Senate Democrats Replace SALT Cap in Bill (2:45 p.m.)
Senate Democrats have voted to to strip out an extension of the cap on state and local tax deductions inserted by Republicans and replaced it with their own new revenue raising provision.
The vote on the amendment from Virginia Senator Mark Warner came after swing state senators helped the GOP pass an amendment to the bill extending the SALT cap for one year in order to pay for a new carveout from the 15% corporate for private equity subsidiaries.
The Warner amendment extends for two years a measure in the tax code that limits how much in losses pass-through business can deduct each year.
Senate Approves Private Equity Carveout Amendment
The Senate approved a Republican amendment carving out subsidiaries of private equity firms from a new 15% corporate minimum tax on corporations with at least $1 billion in profits.
The amendment offered by South Dakota Senator John Thune passed on a 57 to 43 vote, after Democrats Kyrsten Sinema, Raphael Warnock, Jacky Rosen, Catherine Cortez Masto, Maggie Hassan, Jon Ossoff and Mark Kelly voted for it.
The Thune amendment would cover the estimated $35 billion revenue loss by extending for one year a $10,000 limit on state and local tax deductions that is set to expire in 2025. The SALT change makes the entire bill politically poisonous in the House, where a group of lawmakers from high-tax states have been pushing to raise the cap.
Democrats are expected to soon offer their own amendment to remove the SALT changes and replace them with another source of revenue.
Sinema Sends Democrats Scrambling for a Plan B (2:21 p.m.)
Senator Kyrsten Sinema’s support of an amendment creating a private equity carveout for the 15% minimum corporate tax sent Democrats scrambling for an alternative way to pay for the last-minute change. It appears they’ve settled on extending a measure in the tax code that limits how much in losses pass-through business can deduct each year.
The amendment, from South Dakota Republican Senator John Thune, would pay for it by extending the $10,000 cap on state-and-local tax deductions for another year, which would cause coastal Democrats to balk.
Democrats scrambled to find the pay-for on the fly after 15 hours of voting on amendments. Sinema sat on the floor alone at her desk, while Democrats huddled.
Sinema Considers GOP’s Private Equity Carveout (1:45 p.m.)
Senator Kyrsten Sinema is considering backing a Republican amendment that would create special tax treatment for the private equity industry in Democrat’s tax and climate bill, according to a person familiar.
Senator John Thune, the No. 2 Senate Republican, is planning to offer the amendment in the coming hours that would make the 15% corporate minimum tax apply to fewer companies owned by private equity firms.
Sinema is talking to Senate Majority Leader Chuck Schumer about how to address the minimum tax, said the person, who asked not to be identified because the talks are private. Senators are also discussing how to offset the cost of the carveout. Final passage on the bill is likely going to be delayed until those issues are resolved.
The South Dakota Republican is planning to offset the cost of creating a carveout for private equity by extending the $10,000 cap on state and local tax, or SALT, deduction, an important tax break for Democrats. Democrats are considering alternatives that aren’t politically toxic for their members.
Senators Discuss Last-Minute Tax Changes For Private Equity (12:16 p.m.)
Senator Joe Manchin huddled in the office of No. 2 Senate Republican John Thune to discuss a possible change to the 15% corporate minimum tax that would create a carve-out to benefit private equity companies.
The minimum tax levy only applies to companies earning at least $1 billion, but Republicans propose dulling that by allowing all the portfolio companies to be counted separately from the private equity owner. That change, which Democrats consider a massive loophole, would be offset by extending the $10,000 cap on state and local tax deductions for an additional year.
It’s a lose-lose proposition for Democrats. It offers tax breaks for private equity and it also offers an extension of the $10,000 state and local tax cap, which increases taxes for homeowners in many areas represented by Democrats.
The ongoing talks have the potential to delay the final vote. Democrats are concerned Senator Kyrsten Sinema will vote for the Thune amendment and it will pass, according to one person familiar with the situation.
Both Thune and Manchin said that negotiations were ongoing.
GOP’s Johnson, Rubio Targeted for Insulin Vote (11:20 a.m.)
Democrats immediately attacked Senators Ron Johnson of Wisconsin and Marco Rubio of Florida, who are up for re-election, over their votes to strip a $35 insulin cap from the tax bill.
“Republicans have just gone on the record in favor of expensive insulin,” Oregon Senator Ron Wyden said. “After years of tough talk about taking on insulin makers, Republicans have once against wilted in the face of heat from Big Pharma.”
Voting with Democrats to keep the provision were Senators Bill Cassidy, Susan Collins, Josh Hawley, Cindy Hyde-Smith, John Kennedy, Lisa Murkowski and Dan Sullivan. The 57-43 vote was shy of the 60 needed.
The bill retains a $35 per month for out-of-pocket insulin co-pay under Medicare even though the GOP succeeded in removing the cap for private insurance.
GOP Strips Insulin Out-of-Pocket Cap From Bill (10:50 a.m.)
Republicans successfully stripped a proposed $35 per month cap on out-of-pocket spending on insulin for patients enrolled in private insurance from the tax and climate bill.
The Senate parliamentarian had ruled that the provision, sponsored by Georgia Democratic Senator Raphael Warnock, is not primarily related to the federal budget. That gave the GOP a chance to raise a procedural objection.
Waiving the rules required 60 votes to succeed. Seven Republicans sided with Democrats to keep the insulin cap in the bill, but that was not enough. Democrats plan to use the GOP move to strip the insulin cap in the fall midterm campaigns.
Many in the GOP supported an amendment from Louisiana Senator John Kennedy to instead provide government funding to subsidize insulin purchases for low income individuals.
Medicaid Funding Kept Out of Democrats’ Bill (9:11 a.m)
Warnock failed in an attempt to add funding to the bill to cover expansion of Medicaid eligibility in states that refused to expand the program with Obamacare funds.
The Medicaid provision was part of the $2 trillion House version of the bill, but it ended up being cut during months of talks with West Virginia Democratic Senator Joe Manchin. Republicans objected to the bill citing Senate budget rules and a motion to waive the objection failed with 94 votes against it and only five in favor.
Senator Ron Wyden said that to preserve the rest of the bill, the amendment must be defeated even though failing to address Medicaid is a “moral abomination.” Warnock, in a tough re-election fight this fall has made Medicaid expansion a signature issue.
Cruz Amendment to Strip IRS Funding Fails (8:45 a.m.)
Democrats defeated an amendment from Texas Republican Senator Ted Cruz to strip extra funding for the Internal Revenue Service from the bill.
The proposed amendment was one of several offered by Republicans targeting the portion of the package that would give the IRS roughly $80 billion in extra funding. It failed on a 50-50 vote.
Republicans have expressed concerns that the IRS funding would lead to an increase in audits of middle-class taxpayers and small businesses. Democrats argue that the funds would allow the IRS to crack down on tax avoidance by the wealthy and to improve customer service.
Sanders’ Bid to Hike Corporate Tax Rejected (8:09 a.m.)
Vermont independent Bernie Sanders failed in an attempt to raise the corporate tax rate for large companies to 28% in order to pay for expanded child tax credits through 2026.
The 97 to 1 vote against Sanders’ amendment reflects a determination by many Democrats to resist any changes to the bill in order to keep pushing it through to passage, even for a provision that most in the party would favor.
A House-passed bill would have provided one year of expanded child tax credit payments of up to $300 per month, but the provision died in the Senate due to opposition from West Virginia Democratic Senator Joe Manchin.
Democratic Senator Michael Bennet of Colorado, the chief proponent of the expanded child tax credit, urged a “no” vote, saying the amendment would kill the underlying bill. He vowed to work with both parties to revive the benefit.
Democrats Fend Off GOP Changes to Legislation (6:12 a.m.)
As the sun rose on Washington Sunday, the Senate wasn’t near being done with a marathon series of amendment votes on the Democrats’ landmark tax, climate and drug pricing bill.
Democrats have stayed unified during the overnight session to beat back multiple Republican amendments and attempts by progressive independent Bernie Sanders of Vermont to expand social programs in the bill.
Among the rejected amendments were GOP attempts to shield the middle class from tax audits, strip a new fee on fossil fuels to fund environmental cleanup and to attach environmental permitting changes to the bill.
More amendment proposals are expected. At the current rate, Senate passage of the legislation wouldn’t happen until midday.
Democrats Turn Back Immigration Amendment (2:58 a.m.)
Democrats blocked an effort by Republicans to force a continuation of the Covid-era immigration policy known as Title 42 -- which a number of Democrats have said they support -- lest they risk the underlying bill.
Hispanic Democrats have warned they could derail the package in the House if anti-immigration policies are added to it in the vote-a-rama, and Republicans have made clear they hope to add amendments that could bring down the bill.
The amendment by James Lankford of Oklahoma failed on a 50-50 vote.
Democratic Senator Jon Tester then offered a similar amendment, but one that didn’t comply with the budget rules, that needed 60 votes. It failed 56-44 but had the backing of Democrats Kyrsten Sinema and Mark Kelly of Arizona, Catherine Cortez Masto of Nevada, Raphael Warnock of Georgia, Maggie Hassan of New Hampshire and Tester.
Georgia Senators Support Sanders’ Medicare Amendment (2:25 a.m.)
Those votes came after a series of other failed amendments, including one by Vermont independent Bernie Sanders to expand Medicare benefits for dental, vision and hearing. Sanders’ amendment, which would have been paid for with higher income tax rates on high-earning Americans, including a restoration of the 39.6% tax bracket, was defeated 97-3, with only Warnock and Jon Ossoff of Georgia joining him.
Most Democrats have adopted a strategy of voting against all amendments to protect the bill, though Democrats facing tough re-election fights, like Warnock, have on occasion broken from that strategy on amendments where their votes would not impact the outcome.
Republican Oil, SALT Amendment Blocked (12:50 a.m.)
The Senate blocked an amendment by Senator Lindsey Graham of South Carolina to nix a 16.4 cents per barrel oil import fee and extend a cap on the state and local tax deduction.
Graham said his amendment would prevent a rise in gas prices. Democrats argued it amounted to less than a penny a gallon to pay for toxic cleanup.
But his amendment, defeated on a 50-50 party-line vote, also had a tax increase. It would have extended the $10,000 cap on the state and local tax deduction set in the 2017 GOP tax law by another year to 2027. That cap is unpopular with voters in high-tax states like California, New York and New Jersey.
Hassan instead proposed an amendment to nix the fees to pay for the Superfund program, but without the SALT tax increase to pay for it.
The Senate voted 55-45 to waive a budget point of order to allow the amendment, short of a 60-vote threshold. Three other Democrats who, like Hassan, face tough re-election fights in November joined her effort: Kelly, Cortez Masto and Warnock, as well as Sinema.
Democrats Hang Together in Early Sanders Test (12:10 a.m.)
In the first vote of the night, the Senate easily blocked an amendment by Sanders, the Budget chairman, to tie the cost of Medicare prescription drugs to the prices paid by the VA.
Sanders said his amendment would cut drug prices in half and save $900 billion. But Graham, the ranking Republican on the Budget Committee, raised a budget point of order against it.
The Senate voted 99-1 against Sanders’ effort to waive the point of order, killing the amendment. Sixty votes would have been required.
The early vote showed Democrats are united in their strategy of voting down all amendments -- even measures they would otherwise agree with -- in order to preserve all 50 Democratic votes for the underlying bill.
Minimum Tax Includes Special Treatment for Telecom (10:48 p.m.)
The bill text, released Saturday evening, contains a special carve-out in the corporate minimum tax for telecommunications companies that wasn’t included in previous versions of the bill.
The change makes the 15% minimum tax on financial profits less severe for telecom businesses, because they will be able to claim additional deductions when calculating the tax. The legislation also allows companies in all industries to claim tax breaks related to depreciating their equipment and facilities, a previously announced revision that Sinema requested in order to win her support.
Democrats Dare GOP to Strip Out Insulin Cap (10:06 p.m.)
Democrats included a $35 cap on insulin in the bill and are daring the GOP to strip it out.
The top Senate rules official has said the provision, authored by Warnock, is not eligible for the budget bill under Senate rules. But they kept it in the legislation.
Republicans can object to the provision and then Democrats will need 60 votes to waive the objection. Pennsylvania Republican Senator Pat Toomey said the GOP will likely object.
Manchin Ready to Reject GOP Amendments (7:00 p.m.)
During the marathon of amendment votes, it would only take one Democrat siding with all Republicans to change the bill.
Senator John Thune said the GOP will try to add amendments intended to rile progressive Democrats and make the bill harder to pass the House.
West Virginia Senator Joe Manchin, a moderate Democrat who has sometimes angered his party’s left wing, indicated he wouldn’t go. “I’m protecting the integrity of the bill” he said.
Thune said, “If he sticks to that he is going to make some votes that he regrets.”
Automakers Lost Fight Over Domestic Content (6:00 p.m.)
US automakers lost their fight to remove domestic content requirements from the vehicle tax proposal.
Michigan Senators Gary Peters and Debbie Stabenow told reporters that the changes they had sought were not made. Companies will have to comply with tough new battery and critical minerals sourcing requirements that could render the credits useless for years for many manufactures, the senators have warned.
Manchin insisted on the domestic supply chain requirements.
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