Test vote on ‘chips-plus’ bill teed up in Senate

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Test vote on ‘chips-plus’ bill teed up in Senate

Posted July 19, 2022 at 1:56pm, Updated at 4:51pm

Senate Majority Leader Charles E. Schumer pledged to move ahead with a procedural vote Tuesday afternoon on legislation that would, at minimum, fund semiconductor manufacturing grants and tax incentives through 2026. 

But senators were still negotiating over the size and scope of the “plus” part of what’s become known as the “chips-plus” package, with Schumer putting the onus on Republicans to rally enough support on their side for a separate title dealing with authorizations for science agencies. 

The current plan, as Schumer outlined it, is to hold a test vote on a motion to bring up the shell legislative vehicle for the as-yet-unfinished bill. Since the vehicle will be a “message” that’s already passed one or both chambers, it only takes a simple majority to open the measure up for debate. That outcome isn’t in doubt, senators on both sides of the aisle said.

What is still in question, however, is whether more than 60 senators vote for the motion, which would signify there’s broader support for add-ons that could break a filibuster later during a cloture vote.

“The first vote … will be the test vote whether to include science in the bill,” Schumer told reporters. “If we get ample votes that we can be confident that the cloture vote, which will occur after that in a day or two, will succeed with science in it, I will put that as the amendment.”

If the first test vote falls short of 60, however, that will signal that broad-enough support exists only for the core of the chips bill that’s circulated in recent days.

That skinnier measure would provide $54 billion in mandatory appropriations over five years —mainly for semiconductor manufacturing and research, but also for 5G wireless deployment — and a multiyear 25 percent investment tax credit for semiconductor plants estimated to cost $24 billion. That’s substantially slimmed down from expansive competition package the Senate and House approved separately and went to conference on earlier this year.

Sen. Todd Young, R-Ind., who is among the Republicans pushing for the science provisions, said Schumer has specifically asked him to provide 15 GOP “yes” votes for the motion.

A slimmer package like that would contain much of what the semiconductor industry has been clamoring for.

R&D deduction push

But as always with any legislative train leaving the station, there’s still a last-minute push for add-ons. For example, senators are considering restoring a more generous tax break for companies’ research and development spending, Young told reporters.

As of this year, companies must deduct their domestic R&D expenses over five years instead of all upfront, making the tax break less lucrative. Young said senators are considering retroactively delaying the onset of the requirement until after 2022, a shift that would only cost $2 billion over a decade. That’s because while it would cost far more upfront, it would then score as raising revenue in future years.

Young characterized the proposal as “baby steps” and a “base hit.”

The change to mandating companies take their deduction over five years was a part of Republicans’ 2017 tax law, but reversing the move has broad bipartisan backing.

Senate Finance Chair Ron Wyden, D-Ore., and ranking member Sen. Michael D. Crapo, R-Idaho, had both been pushing to get the provision attached to a broader economic competitiveness package being negotiated between the House and Senate before it stalled and leadership turned to a slimmer chips-focused bill.

Young and Sen. Maggie Hassan, D-N.H., introduced a bill to restore the immediate deduction and expand other R&D incentives, and a House version from Rep. John B. Larson, D-Conn., has more than 100 co-sponsors.

A four-year delay of the switch was included in Democrats’ budget reconciliation package, estimated to deliver roughly $125 billion in tax benefits to businesses through 2025. Over a decade, the government’s cost would drop to $4 billion as companies would lose deductions in future years they’d otherwise claim.

While preserving full, immediate R&D expensing is popular among Democrats, some don’t want to move forward on the issue while party priorities to aid lower- and middle-income families like the child tax credit remain stalled. 

If lawmakers don’t tuck it into the chips bill, the R&D delay could also move as part of an end-of-year tax package to extend expired tax provisions and other outstanding tax provisions with enough bipartisan support. Even if there is a one-year retroactive fix for the research deduction, Crapo said, it should still get another renewal as part of a year-end tax bill.

Senate Minority Whip John Thune, R-S.D., said it was more likely the R&D provision ends up in a year-end tax package than attached to the chips bill. “I think that gets fixed one way or the other,” Thune said.

‘Real-time discussion’

Other provisions were still in play, including the funding authorizations for the National Science Foundation, Energy Department Office of Science and more that have bipartisan support, putting the timing of further action a little up in the air.

“That is a real-time discussion, and I am wide open to a lot of other important provisions, especially the Commerce [Committee] title, a lot of great work was done there,” Sen. Mark Warner, D-Va., said Tuesday, adding it depends on GOP appetite for add-ons. “If the market will bear more, I will be supportive because there are other good initiatives.”

Crapo said there won’t be a trade title attached to the chips-plus bill, though he said it could potentially move as part of a year-end package along with leftover tax provisions. “I’d love to do it as a combo, but I’m not ruling out any options,” Crapo said.

As for other provisions still stuck in the House-Senate conference on the broader competitiveness bills, Schumer said lawmakers would be able to revisit those. 

“I’m committed to getting the conference done when we return after the August state work period,” Schumer said. 

The chips-plus measure is expected to receive broad bipartisan support, though it’s not clear what can be done to get Senate Budget Chairman Bernie Sanders, I-Vt., on board.

Negotiators included a ban on using funds appropriated in the bill for stock buybacks and paying dividends to shareholders, but that falls short of what Sanders has sought, which is a five-year ban on corporate beneficiaries buying back their own stock at all.

Sanders also wants the legislation to bar companies that receive funds from outsourcing jobs and to compel them to remain neutral in collective bargaining disputes. He also wants the government to take equity stakes in firms that receive aid.  If his conditions aren’t met, Sanders is considering raising a budget point of order that the measure isn’t offset under the chamber’s pay-as-you-go rules, a Democratic aide said.

That point of order would require 60 votes to waive, which is the threshold to break a filibuster in any case so it should be achievable if there are enough votes to pass the underlying bill. 

Known unknowns

How expansive the package ultimately looks appeared uncertain as of Tuesday afternoon, as a number of top Republicans expressed concern about voting for the motion to get on the legislative vehicle without knowing what’s in it.

“I’m not going to vote to proceed until I know what we’re proceeding to,” Minority Leader Mitch McConnell said Tuesday. “I want to see what we’re voting on because I’m assuming it’s not going to be open for amendment.”

Thune, normally his caucus’ top vote counter, couldn’t say what the procedural vote would look like.

“Schumer’s created this weird kind of process where he’ll determine what’s in the bill based on how many votes are put up for it on the motion to proceed,” Thune said. “It’s a very strange take on something of this consequence, but that’s definitely what at least … our members are being told.”

When the bill goes to the House next week, it’s also expected to pass. But Ways and Means Republicans on Tuesday outlined concerns they have with the measure. 

Ways and Means’ top Republican, Texas Rep. Kevin Brady, said on a call with reporters that he’s opposing the chips-plus bill because of the semiconductor investment tax credits, which he said are excessive, unnecessary “government checks” and lack guardrails to prevent investment from shifting to China. 

“I think this is a missed opportunity to help shore up the competitiveness of a broad range of industries to help them compete and win against China, not just one,” Brady said.

But Ways and Means GOP members aren’t united in opposing the broader chips-plus bill at this point. Pennsylvania Rep. Mike Kelly is still reviewing the Senate package but is eager to “restore the broken semiconductor chip supply chain,” according to his spokesperson Matt Knoedler.

David Lerman and Paul M. Krawzak contributed to this report.  

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