New Life For The Build Back Better Plan And Its Tax Provisions?

As MSCI’s partners at the S-Corp Association reported, Sen. Joe Manchin (D-W.Va.) has breathed new life into the debate about President Joe Biden’s Build Back Better (BBB) plan.

Specifically, Sen. Manchin outlined a new, slimmed-down version of the bill that contains provisions to control prescription drug costs and change U.S. tax law.

Sen. Manchin suggested his bill could move through the U.S. Senate under reconciliations rules that allow legislation to pass with only 50 votes, instead of the 60 needed to overcome a filibuster. (Procedurally, any rewritten plan would have to comply with the reconciliation rules outlined for BBB, including instructions regarding the total cost of the bill.)

Sen. Manchin said he has “come to that conclusion” that changing the tax code to make corporations pay “their fair share” can only be done with Democratic votes. That statement is a departure from Sen. Manchin’s previously-held position that Democrats would need to attract support from Republican lawmakers in order to gain his own support for BBB.

Still, to get the bill through the Senate, Democrats also would need support from Sen. Kyrsten Sinema (D-Ariz.) who prefers surtaxes and corporate minimum taxes over raising individual and corporate tax rates. For private companies, even a narrow bill could present an enormous amount of tax policy risk. MSCI will closely watch these developments.

As a reminder, MSCI has worked with its partners at several business trade associations to oppose the tax increases, and the onerous labor and employment provisions, that are included in this legislation. On the tax side, for corporations, the outline calls for:

• Creating a “book tax,” or new 15 percent corporate alternative minimum tax in the form of a tax on financial statement income;
• Placing new limitations on companies’ ability to deduct interest on business loans;
• Imposing a new excise tax on stock buybacks; and
• Implementing a higher global minimum tax that would be more complex and that would subject more foreign income to the tax.

For pass-through entities, the outline calls for several new surtaxes, including:

• A 3.8 percent net investment income tax applied to business income greater than $400,000 (single) or $500,000 (married);
• A five percent surtax on individuals with adjusted gross incomes (AGIs) totaling more than $10 million; and
• An additional three percent surtax on AGIs totaling more than $25 million.

Regarding labor and employment policy, the bill includes:

• Penalties for violations under the National Labor Relations Act;
• Personal liability for company officers and directors for labor violations; and
• Mandatory neutrality agreements for direct care grants.