On November 5, 2021, the House finally managed to pass the $1 trillion, bipartisan infrastructure bill (2,740 pages) that was passed by the Senate on August 10, 2021. House progressives agreed to decouple this bill from the larger reconciliation bill (i.e., the Build Back Better Act) because they secured a written agreement from moderate Democrats that they agree in principle with it but are waiting to see that the revenue estimates line up with the White House’s estimates of the cost of the bill. President Biden is expected to sign the infrastructure bill without delay.
What Does This Mean From a Tax Perspective?
There are three key takeaways from this development. First, there is a provision in the infrastructure bill that terminates the employee retention credit (ERC) at the end of Q3 2021. It will prevent businesses, other than recovery startup businesses, from claiming the ERC in Q4 2021. So if your business has been reducing its employment tax withholdings in anticipation of receiving the ERC in Q4 2021, then you should begin to repay these obligations because there will be no Q4 ERC.
Second, the infrastructure bill requires brokers to report transactions in digital assets like cryptocurrency, starting with returns that are required to be filed in 2024. This is expected to prevent taxpayers from failing to report and from under-reporting gain on the sale of such assets (and revenue estimates predict it will raise $28 billion over 10 years).
Third, the passage of the infrastructure bill makes it substantially more likely that the reconciliation bill will become law. President Biden made promises to House Democrats and assured them the reconciliation bill would be passed in the House during the week of November 15, 2021, when revenue estimates are due to be completed. Exactly what will be included in the reconciliation bill, however, is unclear. There has been a lot of back and forth on the tax provisions of that bill, and negotiations appear ongoing.
Contact Withum’s team of professionals if you have any questions or concerns.