May 2021 Volume 3

WASHINGTON UPDATE

• eliminating deductions for Foreign Derived Intangible Income (FDII); • denying deductions on foreign payments that could strip profits out of the United States if they are based in a country that does not adopt a strong minimum tax; and • introducing a new 15 percent minimum tax on “book income” for the largest corporations. The Politics of the Possible: Where Do We Go from Here? The forging industry would undoubtedly benefit greatly from a major infrastructure plan such as this, for what has been suggested is a comprehensive blueprint comprising of countless capital intense projects all of which would require a great deal of planning, materials, and the need for capital equipment to execute. Many of these projects will have to rely on our industry to supply them with the specialized forgings necessary for construction. So when one reads that $50 billion is sought to invest in semiconductor research and manufacturing, this benefits us because what they’re actually talking about is providing grants to companies to build complex fabrication factories to produce microchips – factories that cost billions of dollars to construct and require a great deal of specialized materials and equipment. Again, the plan outlined above is a suggested framework from the White House. If a bill passes, it will look different than what has been suggested. And passage is not imminent, nor guaranteed. Congress is now taking that blueprint and writing a bill, and so some of these details and amounts will be adjusted in the weeks and months ahead as negotiations continue over what can be passed.The most controversial and heated discussion will of course be over how to pay for it. It is very unlikely that raising the corporate tax rate to 28 percent will survive. In fact, there are a number of Democratic senators who are not in favor of such an increase. The corporate tax rate currently stands at 21 percent. If an increase is enacted (and that is a big “if ”), look to it going to no more than 25 percent. So here’s what to expect next: look to the House of Representatives to legislate first. Plan for that chamber to write a bill that looks very similar to the White House plan (or potentially larger than $2 trillion, perhaps even as high as $2.5 trillion) with payfors that will include a corporate tax rate increase close to 28 percent. They will pass that bill before July 4th. It is highly doubtful that any Republicans vote for such a package, but this will set the ceiling fromwhich negotiations can continue. Meanwhile, the Senate will attempt to work in a bipartisan fashion to see what, if anything, can garner 60 votes. As regular readers of the Washington Update know, the Senate has a procedural tool called “cloture” (aka “the filibuster”) that requires 60 senators to vote positively before a debate can begin on any legislation. The Senate currently stands even at 50 Republicans and 50 Democrats, which means Democrats control the chamber as Democratic Vice President Kamala Harris serves as President of the Senate and is responsible for casting a tie-breaking 51st vote. So there needs to

Climate Resiliency The plan calls for $50 billion in dedicated investments to improve infrastructure resilience, safeguard critical infrastructure and services, and maximize the resilience of land and water resources to protect communities and the environment. Community Improvement The plan would invest $111 billion to replace 100 percent of the nation’s lead pipes and service lines, while also looking to upgrade and modernize America’s drinking water, wastewater, and stormwater systems; tackle new contaminants; and support clean water infrastructure across rural America. It also recommends investing $213 billion to produce, preserve, and retrofit more than two million homes, commercial buildings, schools, childcare facilities, veterans’ hospitals, and federal buildings. This would include building and rehabilitating more than 500,000 homes for low- and middle-income homebuyers. RevitalizingManufacturing & Supply Chain Enhancement With the stated goal of advancing “U.S. leadership in critical technologies” and upgrading America’s research infrastructure, the American Jobs Plan would seek to invest: • $50 billion to create a new office at the Department of Commerce dedicated to monitoring domestic industrial capacity and funding investments to support production of critical goods; • $50 billion in semiconductor manufacturing and research; • $50 billion for a technology directorate at the National Science Foundation (NSF), focusing on areas including semiconductors, advanced computing, advanced communications technology, and advanced energy technologies; • $30 billion in additional funding for research and development that spurs innovation and job creation, including in rural areas; and • $40 billion in upgrading research infrastructure in laboratories across the country, including computing capabilities and networks. Workforce Development The plan would set aside $100 billion in workforce development programs targeted at underserved groups and getting students on paths to careers before they graduate from high school. It would look to do this by pairing job creation efforts with next generation training programs; targeting workforce development opportunities in underserved communities; and building out the capacity of the existing workforce development and worker protection systems. Paying for It In order to pay for all of the above, the White House is suggesting that Congress raise $2 trillion over 15 years by: • increasing the corporate tax rate from 21 to 28 percent; • doubling the rate applied to Global Intangible Low-Taxed Income (GILTI) from 10.5 to 21 percent and implementing it on a country-by-country basis;

FIA MAGAZINE | MAY 2021 5