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Tax changes take shape in Build Back Better Act framework deal

October 29, 2021 / 14 min read

On October 28, the White House and Democratic leadership in Congress announced a framework deal on the Build Back Better Act (BBBA). Our tax experts discuss what’s happening in Congress, and what we know and don’t know about the BBBA. 

Editor's note: The developments discussed in this piece were part of the legislative process leading to enactment of the Inflation Reduction of 2022. Please see our capstone article about that legislation for details about the final changes included in that bill.

On Oct. 28, 2021, the White House and Democratic leadership in Congress announced a framework deal on the Build Back Better Act (BBBA). This reflects an evolution of the BBBA as core provisions continue to be modified during negotiations. Updated legislative text also emerged in the House, which largely corresponds with the framework deal. Although many steps remain in the process for the BBBA to become law, the framework represents a significant step forward. Here are our initial reactions to what these developments mean and what’s expected to come next.

What happened?

On September 15, the House Ways and Means Committee approved preliminary tax provisions of the BBBA. Since that time, the bill’s progress has slowed due to ongoing negotiations among Democratic members of Congress and the White House. A new breakthrough occurred on October 28 with the release of a framework deal. A few hours later, the House Rules Committee released updated legislative text that appears to follow much of that framework. However, that legislative text has not yet been publicly agreed to by key members of the House and Senate and that updated bill is not yet ready for a vote on the House floor.

We discussed the previous House Ways and Means draft of the BBBA in an alert describing the key tax proposals, a follow-up alert addressing the top surprises, quiet proposals with big impacts, and the expected proposals, and an alert discussing the estate, gift, and trust proposals.

What do we know about the framework and updated BBBA legislative text?

The BBBA framework includes broad social, environmental, and economic investment programs. The framework also makes significant changes to key tax provisions included in the previously released version of the BBBA. The most impactful clarifications from the framework and revised legislative text include:

What might be excluded and what’s unclear?

Many tax proposals have been discussed by the Biden administration and Democratic leadership in Congress throughout 2021. The framework and updated text of the BBBA include a limited subset of those tax proposals. Based on current reporting, it appears that most of the tax proposals currently excluded are unlikely to be included in a final bill. However, the complete exclusion of those proposals will not be determined until Congress completes its deliberations. In the interim, the most significant tax provisions excluded from the framework are:

What’s next?

Amid BBBA negotiations, the bipartisan Infrastructure Investment and Jobs Act (Infrastructure Act) has been waiting for a final vote in the House since the Senate passed the bill on August 10. Democratic leadership has pushed for a final vote on the Infrastructure Act, but so far has been unable to convince enough members of the House to proceed with a vote in the absence of an agreement on the BBBA. The recent developments, including the framework announcement and updated legislative text, are significant developments in the path toward enactment of both the Infrastructure Act and the BBBA. However, complicated negotiations remain as Democratic leadership moves from the broad framework agreement to the creation of final legislation.

The next two weeks are expected to be critical to determining whether these bills will ultimately be enacted. Congress recently took action to extend the debt ceiling, government funding, and surface transportation funding, but those extended deadlines are all set to expire in early December. As such, all efforts are focused on continued resolution of the remaining disputes on the BBBA among Democratic members of Congress.

Continue to monitor our Outlook on Tax Rates and Policy Changes for updates as the BBBA works its way through Congress.

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