April 8, 2021

Biden Administration's Made in America Tax Plan: Procedural Aspects

Part 1: Buckle Up for the Impact on International Tax Reform
Holland & Knight Alert
Alan Winston Granwell | Joshua David Odintz


  • A series of events in late March and early April have coalesced to set the stage for potential U.S. tax reform, particularly international tax reform this year, as early as late summer.
  • These events are 1) the introduction by President Joe Biden of the American Jobs Plan, a $2 trillion plan to modernize the nation's infrastructure, and the accompanying Made in America Tax Plan, the "pay for" the American Jobs Plan; 2) the active reengagement of the United States in the Organization for Economic Cooperation and Development (OECD) Inclusive Framework, and particularly the effort to reach an agreement with other countries on creating a global minimum corporate tax under Pillar 2 of the initiative; and 3) the April 5, 2021, ruling by the Senate parliamentarian that Democrats can use the budget reconciliation process three times before the midterm elections in 2022.
  • In the absence of bipartisan agreement, the opportunity to use the budget reconciliation process offers a pathway for the Democrats to pass the American Jobs Plan and the American Families Plan in two packages with only a simple majority vote in the Senate.

During the run-up to the November presidential election, then-candidate Joe Biden previewed his tax priorities to enact a more progressive tax code to roll back "giveaways" to wealthy individuals and corporations under the Tax Cuts and Jobs Act (TCJA) by having corporations and wealthy individuals pay their "fair share." His proposals, broad in scope, would impact corporations, international taxation, supply chains, selected industries and individuals.

Fast forward to now. On March 31, 2021, President Biden introduced the American Jobs Plan, an all-encompassing $2 trillion plan (to be expended over eight years) to create jobs and rebuild the country's infrastructure. (See Holland & Knight's previous alert, "American Jobs Plan Act of 2021: Summary," April 1, 2021.) In an accompanying document – Made in America Tax Plan – the administration in general terms presented tax proposals to pay for (over 15 years) the American Jobs Plan through the headline proposal of increasing the corporate tax rate from 21 percent to 28 percent, and, with respect to international items, increasing the global minimum tax for U.S. multinational corporations with foreign earnings to 21 percent (and making certain other changes), incentivizing U.S. job creation and investment, and disincentivizing offshoring of jobs/investments and shifting profits offshore, and increasing compliance.

Global Minimum Tax

In making these proposals, the Biden Administration urged the adoption of a minimum global corporate income tax rate so as to partially offset any detriments that might arise from the administration's proposed corporate tax increase and the concomitant increase in the taxation of the foreign profits of U.S. multinational corporations. In addition, the administration announced that it is working with the Group of 20 (G20) and the Organization for Economic Cooperation and Development's (OECD) Inclusive Framework to reach an agreement on a global minimum rate. The purpose of this engagement with the OECD is to level the playing field by providing a tax architecture for countries to join a global agreement that implements minimum tax rates so as to forestall the "race to the bottom" on corporate tax rates.

Impact of Senate Parliamentarian's Ruling on Budget Reconciliation Process

The American Jobs Plan is the first of a two-part package of the Biden Administration's Build Back Better plan. The second part – the American Families Plan – to be introduced in several weeks, deals with the individual/caregiving portion of the Build Back Better plan, and is proposed to be funded by increases in individual taxes.

When the president introduced the American Jobs Plan and the Made in America Tax Plan, he hoped that it would be possible to pass the legislation with bipartisan agreement under the normal legislative process known as "regular order," which requires a majority vote in the House and 60 votes in the Senate (to avoid the filibuster, a tactic employed in the Senate to prevent a measure from being brought to vote). However, so far, Republicans have voiced opposition to corporate tax increases. On the other side of the aisle, several Democrats have voiced opposition to any tax increases without a restoration of the state and local tax (SALT) deduction and voiced other concerns, including increasing the corporate rate to 28 percent.

In view of the foregoing, the budget reconciliation process is an alternative way to pass the American Jobs Plan and the Made in America Tax Plan, which only requires passage through a simple majority vote in the Senate and sidesteps the filibuster. (See Holland & Knight's previous alert, "Congress Passes Budget Resolution, Begins Reconciliation Process," Feb. 8, 2021.) However, apart from limits as to the items that may be included in a budget reconciliation bill, it was understood that there is a limit on the number of budget reconciliation bills that can be passed in a fiscal year. Budget reconciliation was used on March 10, 2021, to pass the $1.9 trillion American Rescue Plan Act of 2021 in fiscal year 2021.

That is why the ruling that Senate Majority Leader Chuck Schumer (D-N.Y.) sought from the Senate parliamentarian as to whether the budget plan that passed in February can be reopened is so important. The Senate parliamentarian advised that the Senate budget rules would allow the use of the budget reconciliation process more than once in a fiscal year.1 Fiscal Year 2021 ends on Sept. 30, 2021. In effect, the April 5 ruling creates additional opportunities to approve a bill without GOP support before the 2022 elections.

To reopen the Fiscal Year 2021 budget, both houses of Congress will need to pass an amended budget with revised tax and spending targets. The process will require debate time on the floor of the Senate, which could take 40 hours, followed by numerous votes on amendments that could last into the early morning (the so-called "vote-a-rama").

Notwithstanding this ruling, for the Democratic caucus to use budget reconciliation, there is the requirement that passage of tax legislation through reconciliation will require full support of the 48 Democratic members and the two independent members that caucus with the Democrats plus support of Vice President Kamala Harris. Achieving full support may be difficult in view of the disparate views of Democratic members from conservative states. In illustration, it has been reported that one Senator from a conservative state opposes the administration's plan to raise the corporate tax to 28 percent, favoring an increase, but only up to 25 percent; it further has been reported that, subsequently, the administration indicated it is not intransigent to discussing the appropriate rate.

From a timing perspective, Congress could try to pass the administration's plan before summer recess (scheduled to begin on Aug. 9, 2021). If Congress were unable to do so, then it could include the administration's plan as part of the debt limit legislation this fall. The debt limit is scheduled to expire in August, but with extraordinary measures, can be extended into the fall.

Next Up

In Part 2 of this alert, Holland & Knight will compare and contrast the U.S. Department of the Treasury description of the Made in America Tax Plan, released on April 7, 2021, to the International Tax White Paper – Overhauling International Taxation – prepared by Senate Finance Committee Chair Sen. Ron Wyden (D-Ore.), Sen. Sherrod Brown (D-Ohio) and Sen. Mark Warner (D-Va.). This latter plan provides somewhat different options to achieve international tax reform but is fully in accord with the overall policy objectives of the Made in America Tax Plan.


1 Technically, the Senate parliamentarian advised that pursuant to Section 304 of the Congressional Budget Act of 1974, budget resolutions can be revised if updated prior to the end of the fiscal year that they cover. So, the Democrats can go back and amend the resolution for fiscal year 2021 and include instructions for another reconciliation bill.

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem, and it should not be substituted for legal advice, which relies on a specific factual analysis. Moreover, the laws of each jurisdiction are different and are constantly changing. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. If you have specific questions regarding a particular fact situation, we urge you to consult the authors of this publication, your Holland & Knight representative or other competent legal counsel.

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