Taxes
Legislation Limbo Tax Bill’s Uncertain Future
President Biden’s Build Back Better Act has proven controversial, and whether it (or a smaller version of the tax bill) will pass remains uncertain. By William D. Elliott
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he end of 2021 was confusing when it came to federal tax legislation. House Democrats passed President Joe Biden’s Build Back Better Act (BBBA) on Nov. 19, 2021, but the Senate was unable to pass the legislation. Speaker of the House Nancy Pelosi and Senate Majority Leader Chuck Schumer kept saying a tax bill would be enacted by Christmas. The house of cards collapsed Dec. 19 when Senator Joe Manchin said he would not vote for the “mammoth” 2,000-plus page BBBA, essentially killing it. Biden then issued a statement officially ending all negotiations of the BBBA. Congressional leaders remain optimistic that a tax bill can pass in early 2022, but the BBBA’s precarious tax status has many real estate investors and real estate business people wondering whether their tax fears will come to pass, and when. Questions over the near-term future of taxes add to the economic uncertainty already present because of inflation and the new COVID-19 variants.
BBBA’s Open Issues Apart from Manchin’s refusal to support the BBBA and the question of whether he is willing to negotiate a smaller-scale
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BBBA (see sidebar), several issues would need to be addressed before any tax legislation could be considered. One of the biggest is the proposed expansion of the child tax credit. Second, any changes to BBBA will need to conform to the Senate’s budget reconciliation rules. Third, the limit or cap on the deduction for state and local property taxes (commonly called the SALT deduction cap), will need to be determined. Timing of legislation is an issue. On the one hand, politicians want to score a legislative victory before the mid-term elections, even if that means a reduced or scaled-back bill. On the other hand, voting for a large tax-and-spend legislative package becomes problematic as the November elections approach. All of this suggests a tax bill sooner rather than later, if at all.
Key Dates and Timelines Several key dates could force legislative action. The State of the Union address was March 1. Government funding expired Feb. 18, under the current agreement. The most probable deadline, though, is the end of March (the end of the first quarter of 2022), by which time any tax legislation TG
