House Bill’s ‘Revenge’ Tax Can Advance, Senate Referee Rules

A ‘revenge’ tax provision spooking Wall Street can remain in the GOP tax-and-spending bill as it moves through the Senate, the House’s top GOP tax writer told reporters.

House Ways and Means Committee Chair Jason Smith (R-Mo.) said the provision, known as Section 899, had been “approved” by the Senate’s parliamentarian.

That signals the proposal is within the scope of instructions the Senate wrote in the budget framework for the bill and can remain in the measure as it moves from the House to the Senate. The provision is one of several being vetted before the bill is transferred to the upper chamber.

The House voted last month to clear its version of the bill by a one-vote margin, but the legislation has remained in the House as congressional aides work with Senate Parliamentarian Elizabeth MacDonough to ensure there are no provisions in it that would jeopardize its privileged status under the budget reconciliation process.

If something outside the scope of the budget framework is left in when it heads to the Senate, the GOP can no longer use the reconciliation process that would allow the bill to pass with only a simple majority in the Senate.

Section 899 would boost taxes on foreign-owned companies operating in the US that are from parent countries that impose “unfair” levies on American businesses. Businesses have raised concerns about the provision, arguing it would cost the US jobs and stifle economic growth by reducing foreign investment in the US.

There were questions about whether Section 899 adhered to reconciliation requirements because it could be interpreted as a treaty override. That would be ruled out of scope, since the Senate Foreign Relations Committee, where tax treaties are considered, wasn’t included in the reconciliation instructions.

Checking for ‘Fatal Flaws’

While Section 899 has gotten the green light, Smith said the parliamentarian’s review process of the House bill is still ongoing.

“They’re checking on some fatal flaws,” Smith said. “If an issue comes up, they’ll pull it out.”

Democrats were seeking the Senate parliamentarian’s review on whether items like a low-income housing tax credit provision and adoption credit-related tribal proposal would need to come out before it arrived in the Senate.

If the parliamentarian determines that items are problematic, the House may need to take a second vote on the bill to remove those items. House leadership hasn’t yet said whether such a vote will need to happen.

An enrollment resolution vote will likely be necessary, but there’s a lot of uncertainty on how it gets taken, according to a source familiar with the issue. It’s most likely to take place within a vote for a rule for the debate of a different House bill.

The decision on whether the House needs to vote again depends on the types of changes needed. And what those changes are is still being evaluated, the source said.

Though the novel retaliatory tax can remain in the bill for now, senators are talking about tweaking it.

Senate Majority Leader John Thune (R-S.D.) told reporters earlier this week that the chamber would examine the potential impact before passing the measure.

Section 899 is also still vulnerable to a rules challenge in a later phase of the reconciliation process. Once the bill is stripped of anything that would make it dead on arrival, Democrats can still challenge individual provisions through the Senate’s so-called Byrd rule over whether they primarily affect spending or revenue.