On Friday, November 5th, the House passed (228-206) the Infrastructure Investment and Jobs Act (the Infrastructure Bill, the Bill). The Bill passed in the Senate (69-30) back in August. Congress has moved the legislation to President Biden, who is expected to sign the Bill into law quickly.
The Infrastructure Bill does not impose any new taxes; however, we are watching movement on the Reconciliation Bill closely. The Reconciliation Bill does include numerous tax changes proposed to support “human infrastructure” initiatives. We expect to see some movement on that soon and will issue updates accordingly.
The Bill ends the employee retention credit (ERC) for the fourth quarter of 2021, meaning wages paid after September 30, 2021, are not eligible for the credit. We are waiting for guidance to be issued on how to determine how funds will be returned and if penalties will be waived for those who may have qualified and reduced tax deposits as a result. The early sunset of September 30th does not apply to recovery startup businesses.
The Infrastructure Bill infuses $550 billion in new funding into transportation, broadband, and utilities.
The Bill’s investments include:
- $110 billion in roads, bridges, and other major projects
- $73 billion in electric grid and power infrastructure
- $66 billion in passenger and freight rail
- $65 billion in broadband
- $55 billion in water systems
- $50 billion in Western water storage
- $39 billion in public transit
- $25 billion in airports
- $21 billion environmental remediation projects
- $17 billion in ports and waterways
- $15 billion in electric vehicles
- $11 billion in road safety
The Infrastructure Bill will add around $256 billion to the US’s deficit over ten years, according to the Congressional Budget Office’s estimates. These investments will be funded by, among other things, unspent COVID-19 relief funds, funds from the unemployment insurance fund, and funds from tax enforcement efforts related to cryptocurrency transactions.
The Infrastructure Bill includes some provisions affecting the tax treatment of cryptocurrency transactions.
The Bill includes cryptocurrency provisions that clarify:
- Virtual currencies are considered capital assets
- All transfers between brokers, sales, and transactions are subject to cost basis reporting to the IRS
- Net gains are taxable as short-term or long-term capital gains
We hope to see some resolution on the Reconciliation Bill by next week. According to Rep. Josh Gottheimer’s statement on Friday, he and four other Representatives are committed to end the holdout and vote on the Reconciliation Bill “as expeditiously as [they] receive fiscal information from the Congressional Budget Office – but in no event later than the week of November 15th,” as long as there are no inconsistencies with the White House’s preliminary budgetary estimate.
My team at ARB will be watching the situation closely and will issue updates as negotiations ensue. Visit our COVID-19 Financial Resource and Tax Center for additional information, and feel free to contact me if you have questions.
Holly Ferguson is a principal at ARB and the Practice Leader of the firm’s Accounting & Attest, Manufacturing, and Credit Union Services Teams. She provides industry-specific services for manufacturers, distributors, credit unions, businesses, and nonprofit organizations. Throughout her career, Holly has provided businesses with financial reporting consulting services, assisted with transactional accounting and consulting related to business acquisitions/sales, and analyzed implications and strategic implementation of new accounting standards. She is the former Treasurer on the Board of Directors and Finance Committee of the Manufacturers Association of Maine.