10/11/22

US: Businesses can expect more pushback on taxes from new Congress, says KPMG.

As published on cfodive.com, Wednesday 9 November, 2022.

The results of the midterm elections are still being tallied, but a panel of KPMG tax experts said Wednesday that businesses could expect some pushback against certain Biden-era policies in a new Congress.

Control over the Senate — which will likely be decided in a runoff election in Georgia in December — may cast a shadow over year-end tax deal negotiations, John Gimigliano, principal-in-charge, federal tax legislative and regulatory Services at KPMG, and Jennifer Acuna, principal at KPMG for federal, legislative and regulatory services, said.

Earlier this year, CFOs had been preparing for the possibility of a renewed push for a range of new or higher corporate taxes from the Biden administration. Large companies have also been grappling with the implications of the 15% Corporate Alternative Minimum Tax which was part of the Inflation Reduction Act signed into law in August.

If Democrats retain control of the Senate, that could affect the dynamic of tax negotiations, and perhaps mean less pressure for party alignment around corporate tax rates and international tax changes, one panelist noted.

But if Republicans gain more political leverage, as they appear to be on track to do, that could in contrast, lead to more pushback on tax and IRS-related issues, the panelists said.

For example, the Organization for Economic Co-operation and Development’s (OECD) proposal for a global minimum corporate tax rate could face more opposition if Republicans have greater control.

“Republicans have been really vocal about their opposition to the OECD deal, especially House Republicans,” Acuna said. “[There] would have to be a really compelling Republican ask in the bill in order to get them to swallow that bitter pill.”

Republicans could also push for revisiting IRS funding, panelists said. “I do think you’re going to hear Republicans talk about that,” particularly using the budget and powers of the purse to potentially rescind IRS funding, said Gimigliano.

One environmental, social and governance (ESG) initiative that could face pushback is the renewable energy credit component of the Inflation Reduction Act.

Scrutiny from Republicans could “put a lot of pressure on the IRS … to make sure that there’s no fraud or there’s no improper claiming of credits,” said Gimigliano. “Republicans are going to watch very closely to make sure that particular provision is not being abused.”