American Rescue Plan Act
Prior to his inauguration on January 20, 2021, then President-elect Biden released a framework proposal to further help the country deal with the ongoing pandemic and to boost its economic emergence from the pandemic with the rollout of vaccines. The American Rescue Plan Act was passed by Congress on March 10, and it largely aligned with that framework. It included extensions of enhanced unemployment relief, increased funding for COVID-19 testing and vaccination programs, aid to state and local governments, and assistance to schools to help get students back into classrooms. The Act also included several tax provisions, including a third round of direct stimulus payments, enhancements of many personal credits meant to benefit people with lower incomes and children, extensions of highly popular payroll tax credits for employers first instituted at the beginning of the pandemic, and changes related to retirement plan funding.
Infrastructure Investment and Jobs Act
Soon after the American Rescue Plan Act was signed into law, President Biden released his American Jobs Plan. This next step forward was meant to fulfill many promises made during his campaign. It included massive investment is physical infrastructure, commitments to clean energy, and an investment is what was termed “human infrastructure,” which included investments in jobs training, education, and social programs, all paid for by tax increases on corporations and higher-income individuals. However, bipartisan discussions soon developed on a classic infrastructure bill, that would eventually become the Infrastructure Investment and Jobs Act. After quick passage in the Senate in August, the bill languished in the House for months as the progressive wing of the House Democrats refused to support it without movement on the climate and social spending provisions left out. After months of negotiations, those provisions were made into the proposed Build Back Better Act, and the Infrastructure Investment and Jobs Act was passed and signed into law in November. While the Act did not contain many tax provisions, it did include provisions related to private activity bonds, excise taxes, and an extension of highway trust fund provisions. Notably, the Act also called for increased reporting requirements on cryptocurrency transactions, as well as an earlier termination of the employee retention credit for businesses closed due to the ongoing COVID-19 pandemic. For the most part, the tax changes do not come into effect until 2022, at the earliest.
Build Back Better Act
With the deal struck on the Infrastructure Investment and Jobs Act, House Democrats turned their attention to the recently drafted Build Back Better Act. On November 19, the House passed a $1.75 trillion dollar version of the bill almost entirely along party lines. This version includes a massive investment in green energy, largely through tax credits, extension of popular provisions included in the American Rescue Plan Act, including a one-year extension of the increased and advanceable child tax credit, and an increase in the cap on the state and local tax deduction, all paid for with a corporate minimum tax and a surcharge on individual incomes over $10 million. Since the House passed the bill, there has been no further action. With the Senate divided equally between Democrats and Republicans, even using the budget reconciliation rules which only requires a simple majority for approval in the Senate, the proposal cannot lose a single Democratic vote. At the time of publication, there are no negotiations ongoing. However, reports make it seem that there is still a deal that can be made, so the Build Back Better Act could become law sometime during the early months of 2022.
Comment: Wolters Kluwer covered these pieces of legislation throughout 2021 as they were passed. Further analysis of the Acts can be found in prior Wolters Kluwer Tax Briefings, or on CCH® AnswerConnect.