Maverick Sen. Kyrsten Sinema (D-Ariz.) on Sunday supported a Republican amendment to shield businesses that rely on capital investments from private equity groups from the 15 percent minimum corporate tax that Senate Majority Leader Schumer ( DN.Y.) included in the Inflation Reduction Act. Senators Catherine Cortez Masto (D-Nev.), Maggie Hassan (DN.H.), Mark Kelly (D-Ariz.), Jon Ossoff (D-Ga.), Jacky Rosen (D-Nev.) and Raphael Warnock (D-Ga.) also voted for the amendment. The amendment was sponsored by Republican Sen. Whip John Thune (RS.D.), who says the 15 percent minimum corporate tax would raise taxes on businesses with less than $1 billion in revenue because it would apply to private equity groups that have corporate interests in these businesses.
The amendment would be paid for by a one-year extension of the cap on state and local tax deductions (SALT) that was a key feature of Trump’s 2017 tax cut and which Schumer pledged to repeal as majority leader.
The amendment could have jeopardized the final passage of the bill, as it would have hit residents of high-tax states like New York, New Jersey, Connecticut and California.
But Democrats quickly offered an amendment from Sen. Mark Warner (D-Va.) after the other amendment passed to make changes to the bill that would make it more palatable. The Warner amendment replaced the SALT cap extension with a different revenue-raising tax provision. Warner’s amendment was carried, with Vice-President Harris giving a tie. Some Democratic senators privately expressed disappointment Sunday morning that Sinema was backing away from the deal it announced with Schumer last week to cap the minimum corporate tax at 15 percent, allowing companies to continue to fully spend on major capital investments.
They said the amendment could scuttle the deal after Democrats held together for more than 14 hours of voting to defeat amendments on both sides of the aisle, including an amendment by Sen. Bernie Sanders (I-Vt.) to provide Extended Child Tax Credit of $300 per month for the next five years.
“If a Democratic senator signed any of the amendments, it could be problematic,” warned one Democratic senator who was dismayed to discover that Cinema was pushing to change the underlying bill.
Supporters of the Thune amendment, however, argue that the minimum tax included in the law to reduce inflation will potentially offset thousands of businesses that accepted investment partnerships with private equity firms during the pandemic, when credit from regular banks was tight. limited.
Sinema is concerned that small businesses such as nurseries and car dealerships in Arizona could be trapped in the minimum corporate tax if they have a partnership with a private equity firm that together with all of its affiliates has more than $1 billion in revenue, according to sources familiar with the discussions.
A source familiar with the tense behind-the-scenes negotiations says Schumer added language to the underlying bill on Saturday that expanded the scope of the 15 percent minimum corporate tax.
Technically, the revenue-raising provision is called a minimum book tax because it would require companies to report income based on generally accepted accounting practices that are stricter than required under current law, which includes various tax breaks and shelters that make it easier. for businesses to shield income from the IRS.
A person familiar with the timing of the changes to the Inflation Reduction Act said when senators first saw the new text of the bill on Saturday, it included for the first time language about “joint control” that would apply the minimum tax to partnerships consisting of multiple companies that alone do not earn $1 billion in annual profits.
The added language will raise an additional $35 billion in revenue over 10 years.
Meijer says Pelosi, Democrats hope Trump announces 2024 bid before midterms Rick Scott says it will be tough for Republicans to take Senate in 2022 Thune had proposed removing that language and paying for it by extending the SALT deduction cap for a year — but that could jeopardize the bill’s passage in the Senate by making it unacceptable to Schumer or another Democrat from a high-stakes state. tax like Sen. Bob Menendez (DN.J.).
This story was updated at 3:05 p.m