There are few things that the U.S. Congress does better than nothing. And after being off to a slow start in 2021, Harry Truman’s “do-nothing Congress” label affixed in 1948 was quite apt for this 117th Congress.
President Biden was promising New Deal-type infrastructure and social spending legislation, harking back to the days of President Franklin Roosevelt. After passing the $1.9 trillion American Rescue Plan Act in February 2021, a law many believe contributed to inflation, Democrats on Capitol Hill largely re-sorted to infighting as they watched their president’s approval ratings fall.
In late 2021, however, Congress started its engines and passed a $1.2 trillion infrastructure law that is now starting to send federal dollars around the country on the nation’s highways and other projects. In 2022, lawmakers passed a postal reform bill, the first gun regulation in generations and, of course, re-named the occasional post office.
Then this summer, in a bipartisan vote, the U.S. Congress sent President Biden the $280 billion CHIPS and Science Act, a manufacturing bill focused on semiconductors and America’s supply-chain resiliency. That new law includes billions in grants to U.S. businesses that recipients will begin seeing in early spring 2023. The new law has the possibility to fundamentally alter the pathway for advanced manufacturing in the U.S. for the coming decade.
While the manufacturing bill received bipartisan support, the Inflation Reduction Act passed with only Democratic votes and came with a price tag of $485 billion between its sending and tax incentives for industry and consumers. This mislabeled law reshapes the climate-change and energy-policy land-scape in Washington, providing billions in tax promotions and grants to mobilize industry to embrace renewable energy sources and develop new technologies.
Politics aside, all businesses should contact a qualified CPA to identify which tax credits and deduc-tions apply to their facility – incentives being made available often for activities a company may already undertake. One example is the advanced manufacturing production credit, which benefits companies manufacturing components for renewable energy sources. The law also includes an energy-efficient commercial buildings deduction, clean electricity incentives, and credits for clean hydrogen and nuclear projects.
Now we pause for some math. $1,900,000,000 + $1,200,000,000 + $485,000,000 + $280,000,000 = a lot of spending. This $3.865 trillion in federal government dollars will go out the door over the coming years and dwarfs the $793 billion (in 2020 dollars) New Deal spending in 1933-1940 and the World War II Marshal Plan of $144 billion combined.
The narrative may not reflect the reality, but this 117th U.S. Congress was among the busiest I’ve seen in my three decades working in Washington, D.C. But that was then and this is now with an elec-tion day behind us and many defeated members of Congress being forced to vote during this lame-duck session in which we find ourselves.
The U.S. House and Senate failed yet again on September 30 to pass legislation to fully fund the fed-eral government prior to the end of the fiscal year. Not wanting to break tradition, this marked the 23rd consecutive year that Congress failed to pass the spending bills, one of its few jobs prescribed in the Constitution.
Lawmakers left Washington, D.C. as expected for the campaign trail with 35 Senate races up for grabs and all 435 seats in the U.S. House of Representatives in contention. This is nothing new. Every two years the jet fumes are quite pungent in the weeks leading to an election.
What sets this year apart from others, however, is that we expect this lame-duck session to rank as possibly the most active in a decade – even coming after a robust regular session for this Congress. As it sounds, the lame duck refers to members of Congress, some defeated, returning to Washington, D.C. after an election to conclude the business of that session. This can be a humbling time for those who lose their seats, as some of them will vacate their physical offices in December yet still be expected to vote and participate in congressional activity.
A busy lame duck is not a testament to lawmakers’ work ethic but rather a window into legislation they failed to move in the nearly two years prior.
Funding the federal government, possibly through a single omnibus spending bill, is likely to occur in December. While the election outcome could derail those plans, companies reliant on federal contracts or funding for projects from defense to job training will likely see resolution prior to the new year.
In addition to federal spending, lawmakers could send bills to President Biden to reform the Electoral Count Act, expedite federal energy permitting and codify same-sex marriage. Top of mind for many businesses is what Congress will do about expired tax provisions.
On Jan. 1, 2022, the Research and Development Tax Credit changed from allowing companies to immediately expense the R&D in that year to amortizing their costs over five years. Lobbyists are work-ing to extend the R&D credit retroactively and allow immediate expensing for all of 2022 and 2023, with a broader goal of including full expensing through 2025. We do have a high confidence of success for restoring the R&D credit, but we are also working on restoring 163(j) deduction of business interest with depreciation and amortization.
Another area of concern for businesses is the pending phase-out of 100% expensing under bonus depreciation, which is slated to drop to 80% beginning on Jan. 1, 2023. In addition to the tax extensions, we could also see trade language covering China tariffs and a range of export and import areas of concern.
Even for many of us who follow Congress closely, the amount of work accomplished by lawmakers so far and the balance left on the table is quite significant. Regardless of your position on the spending and legislation, this 117th Congress has been anything but “do-nothing” and is still on the hunt in the lame duck.