[House Report 117-518]
[From the U.S. Government Publishing Office]
117th Congress } { Report
HOUSE OF REPRESENTATIVES
2d Session } { 117-518
======================================================================
RESOLUTION OF INQUIRY DIRECTING THE SECRETARY OF THE TREASURY TO
PROVIDE CERTAIN DOCUMENTS IN THE SECRETARY'S POSSESSION TO THE HOUSE OF
REPRESENTATIVES RELATING TO THE IMPACT OF THE OECD PILLAR ONE AGREEMENT
ON THE UNITED STATES TREASURY
_______
September 28, 2022.--Referred to the House Calendar and ordered to be
printed
_______
Mr. Neal, from the Committee on Ways and Means, submitted the following
ADVERSE REPORT
together with
DISSENTING VIEWS
[To accompany H. Res. 1269]
The Committee on Ways and Means, to whom was referred the
resolution (H. Res. 1269) of inquiry directing the Secretary of
the Treasury to provide certain documents in the Secretary's
possession to the House of Representatives relating to the
impact of the OECD Pillar One agreement on the United States
Treasury, having considered the same, reports unfavorably
thereon without amendment and recommends that the resolution
not be agreed to.
CONTENTS
Page
I. SUMMARY AND BACKGROUND...........................................2
A. Purpose and Summary................................. 2
B. Background and Need for Legislation................. 2
C. Legislative History................................. 3
II. EXPLANATION OF THE BILL..........................................3
III. VOTES OF THE COMMITTEE...........................................3
IV. BUDGET EFFECTS OF THE BILL.......................................4
A. Committee Estimate of Budgetary Effects............. 4
B. Statement Regarding New Budget Authority and Tax
Expenditures Budget Authority...................... 4
C. Cost Estimate Prepared by the Congressional Budget
Office............................................. 4
V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE HOUSE.......4
A. Committee Oversight Findings and Recommendations.... 4
B. Statement of General Performance Goals and
Objectives......................................... 4
C. Information Relating to Unfunded Mandates........... 5
D. Advisory Committee Statement........................ 5
E. Applicability to Legislative Branch................. 5
F. Congressional Earmarks, Limited Tax Benefits, and
Limited Tariff Benefits............................ 5
G. Hearings............................................ 5
H. Applicability of House Rule XXI, Clause 5(b)........ 5
I. Tax Complexity Analysis............................. 5
J. Duplication of Federal Programs..................... 6
VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED............6
VII. DISSENTING VIEWS.................................................7
I. SUMMARY AND BACKGROUND
A. Purpose and Summary
H. Res. 1269 requests that the Department of the Treasury
provide the House of Representatives information that refers or
relates to (1) United States Pillar One tax revenue modeling
data and reports estimating the impact of the OECD Pillar One
agreement on reallocating taxing rights from the United States
to foreign jurisdictions, or (2) the economic effects of the
OECD Pillar One agreement on the U.S. Treasury.
B. Background and Need for Legislation
On July 26, 2022, H. Res. 1269 was introduced by
Representative Kevin Hern. H. Res. 1269 is a resolution of
inquiry, which is a means infrequently used by the House of
Representatives to obtain certain factual information from the
Executive Branch. Under clause 7 of rule XIII, a resolution of
inquiry is subject to a motion to discharge from committee if
the resolution is not reported by the committee to which it was
referred within 14 legislative days of its introduction.
Accordingly, the Committee on Ways and Means scheduled a markup
of H. Res. 1269 within the 14-day period.
In October 2021, the member countries of the OECD/G20
Inclusive Framework on Base Erosion and Profit Shifting (BEPS)
issued a statement describing a two-pillar international tax
reform. This statement was agreed to by every major global
economy, including the United States.
Pillar One of the two pillar international tax reform
consists of Amount A and Amount B. Amount A would provide for
the re-sourcing of revenue from large, highly profitable large
multinational enterprises to the end market jurisdiction where
goods or services are used or consumed. Amount B would provide
a simplified approach to applying the arm's length principle to
in-country baseline marketing and distribution activities.
Pillar One implementation would include a binding agreement
among the participating states to eliminate unilateral measures
that discriminate against U.S. companies.
In July 2022, the OECD Secretariat published a progress
report on Pillar One. The public consultation document included
several policy options and questions in respect to Amount A of
Pillar One and invited the public to comment on the questions
raised in the progress report. In September 2022, the OECD
hosted a public consultation meeting focused on these
questions.
The Committee reported the resolution adversely because,
among other flaws, no agreement has been reached among the
members of the Inclusive Framework concerning key elements of
either Amount A or Amount B of Pillar One. Key parameters of
the Pillar One agreement have yet to be reached, and as such
any estimate of the revenue impact would be premature. The
resolution also refers only to the revenues allocated from the
United States to foreign jurisdictions but does not take into
account revenue allocated either from foreign jurisdictions to
the United States or among non-U.S. jurisdictions. In addition,
it does not take into account the economic benefits of greater
tax certainty or the benefits from ending tax measures that
discriminate against U.S. companies. For these reasons, the
Committee reported the resolution adversely.
C. Legislative History
Background
H. Res. 1269 was introduced on July 26, 2022, by Rep. Kevin
Hern and was referred to the Committee on Ways and Means.
Committee hearings
The Committee on Ways and Means held no hearings on H. Res.
1269.
Committee action
The Committee on Ways and Means marked up H. Res. 1269 on
September 20, 2022, and ordered the resolution adversely
reported (with a quorum being present) by a roll call vote.
II. EXPLANATION OF THE BILL
H. Res. 1269 directs the Secretary of the Treasury to
provide to the Committee within 14 days copies of all documents
in its possession that refer to the economic impact of the
adoption of Pillar One agreement to reallocate certain tax
rights under Pillar One of the OECD Global Agreement, including
documents that relate to data or reports on modeling the
reallocation of tax rights as well as any documents that refer
to the economic effect on the United States Treasury.
III. VOTES OF THE COMMITTEE
Pursuant to clause 3(b) of rule XIII of the Rules of the
House of Representatives, the following statement is made
concerning the vote of the Committee on Ways and Means in its
consideration of H. Res. 1269 on September 20, 2022.
The resolution, H. Res. 1269, ``Of inquiry directing the
Secretary of the Treasury to provide certain documents in the
Secretary's possession to the House of Representatives relating
to the impact of the OECD Pillar One agreement on the United
States Treasury,'' was ordered adversely reported to the House
of Representatives by a recorded vote (with a quorum being
present) of 24 yeas to 16 nays.
----------------------------------------------------------------------------------------------------------------
Representative Yea Nay Present Representative Yea Nay Present
----------------------------------------------------------------------------------------------------------------
Mr. Doggett.................... X ........ ......... Mr. Brady........ ........ X .........
Mr. Thompson................... X ........ ......... Mr. Buchanan..... ........ X .........
Mr. Larson..................... X ........ ......... Mr. Smith (NE)... ........ X .........
Mr. Blumenauer................. X ........ ......... Mr. Kelly........ ........ X .........
Mr. Kind....................... X ........ ......... Mr. Smith (MO)... ........ X .........
Mr. Pascrell................... X ........ ......... Mr. Rice......... ........ X .........
Mr. Davis...................... X ........ ......... Mr. Schweikert... ........ X .........
Ms. Sanchez.................... X ........ ......... Mr. LaHood....... ........ X .........
Mr. Higgins.................... X ........ ......... Dr. Wenstrup..... ........ X .........
Ms. Sewell..................... ........ ........ ......... Mr. Arrington.... ........ X .........
Ms. DelBene.................... X ........ ......... Dr. Ferguson..... ........ ........ .........
Ms. Chu........................ X ........ ......... Mr. Estes........ ........ X .........
Ms. Moore...................... X ........ ......... Mr. Smucker...... ........ X .........
Mr. Kildee..................... X ........ ......... Mr. Hern......... ........ X .........
Mr. Boyle...................... X ........ ......... Mrs. Miller...... ........ X .........
Mr. Beyer...................... X ........ ......... Dr. Murphy....... ........ X .........
Mr. Evans...................... X ........ ......... Mr. Kustoff...... ........ X .........
Mr. Schneider.................. X ........ ......... ................. ........ ........ .........
Mr. Suozzi..................... X ........ ......... ................. ........ ........ .........
Mr. Panetta.................... X ........ ......... ................. ........ ........ .........
Mrs. Murphy.................... X ........ ......... ................. ........ ........ .........
Mr. Gomez...................... X ........ ......... ................. ........ ........ .........
Mr. Horsford................... X ........ ......... ................. ........ ........ .........
Ms. Plaskett................... X ........ ......... ................. ........ ........ .........
Chairman Neal.................. X ........ ......... ................. ........ ........ .........
Totals..................... 24 ........ ......... Totals....... ........ 16 .........
----------------------------------------------------------------------------------------------------------------
IV. BUDGET EFFECTS OF THE BILL
A. Committee Estimate of Budgetary Effects
In compliance with clause 3(d) of rule XIII of the Rules of
the House of Representatives, the Committee advises that the
Congressional Budget Office did not provide a cost estimate of
the resolution.
B. Statement Regarding New Budget Authority and Tax Expenditures Budget
Authority
Pursuant to clause 3(c)(2) of rule XIII of the Rules of the
House of Representatives, the Committee states that the
resolution involves no new or increased budget authority. The
Committee further states that the resolution involves no new
tax expenditure.
C. Cost Estimate Prepared by the Congressional Budget Office
In compliance with clause 3(c)(3) of rule XIII of the Rules
of the House of Representatives, the Committee advises that the
Congressional Budget Office did not provide a cost estimate of
the resolution.
V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE HOUSE
A. Committee Oversight Findings and Recommendations
With respect to clause 3(c)(1) of rule XIII and clause
2(b)(1) of rule X of the Rules of the House of Representatives,
the Committee made findings and recommendations that are
reflected in this report.
B. Statement of General Performance Goals and Objectives
With respect to clause 3(c)(4) of rule XIII of the Rules of
the House of Representatives, the Committee advises that the
resolution does not authorize funding, so no statement of
general performance goals and objectives is required.
C. Information Relating to Unfunded Mandates
This information is provided in accordance with section 423
of the Unfunded Mandates Reform Act of 1995 (Pub. L. No. 104-
4).
The Committee has determined that the resolution does not
contain Federal mandates on the private sector. The Committee
has determined that the resolution does not impose a Federal
intergovernmental mandate on State, local, or tribal
governments.
D. Advisory Committee Statement
No advisory committees within the meaning of section 5(b)
of the Federal Advisory Committee Act were created by the
resolution.
E. Applicability to Legislative Branch
The Committee finds that the resolution does not relate to
the terms and conditions of employment or access to public
services or accommodations within the meaning of section
102(b)(2) of the Congressional Accountability Act.
F. Congressional Earmarks, Limited Tax Benefits, and Limited Tariff
Benefits
With respect to clause 9 of rule XXI of the Rules of the
House of Representatives, the Committee has carefully reviewed
the provisions of the resolution, and states that the
provisions of the resolution do not contain any congressional
earmarks, limited tax benefits, or limited tariff benefits
within the meaning of the rule.
G. Hearings
In relation to compliance with clause 3(c)(6) of rule XIII
of the Rules of the House of Representatives, the Committee
states that no hearings were held on this resolution.
H. Applicability of House Rule XXI, Clause 5(b)
Clause 5(b) of rule XXI of the Rules of the House of
Representatives provides, in part, that ``It shall not be in
order to consider a resolution, joint resolution, amendment, or
conference report carrying a retroactive Federal income tax
rate increase.'' The Committee, after careful review, states
that the resolution does not involve any retroactive Federal
income tax rate increase within the meaning of the rule.
I. Tax Complexity Analysis
Section 4022(b) of Pub. L. No. 105-266, the Internal
Revenue Service Restructuring and Reform Act of 1998 (the
``RRA''), requires the staff of the Joint Committee on Taxation
(in consultation with the Internal Revenue Service and the
Treasury Department) to provide a tax complexity analysis. The
complexity analysis is required for all legislation reported by
the Senate Committee on Finance, the House Committee on Ways
and Means, or any committee of conference if the legislation
includes a provision that directly or indirectly amends the
Internal Revenue Code of 1986 and has widespread applicability
to individuals or small businesses.
Pursuant to clause 3(h)(1) of rule XIII of the Rules of the
House of Representatives, the staff of the Joint Committee on
Taxation has determined that a complexity analysis is not
required under section 4022(b) of the RRA because the
resolution contains no provision that amends the Internal
Revenue Code of 1986 and has ``widespread applicability'' to
individuals or small businesses within the meaning of the rule.
J. Duplication of Federal Programs
In compliance with clause 3(c)(5) of rule XIII of the Rules
of the House of Representatives, the Committee states that no
provision of the resolution establishes or reauthorizes: (1) a
program of the Federal Government known to be duplicative of
another Federal program; (2) a program included in any report
to Congress pursuant to section 21 of Pub. L. No. 111-139; or
(3) a program related to a program identified in the most
recent Catalog of Federal Domestic Assistance, published
pursuant to section 6104 of title 31, United States Code.
VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED
Pursuant to clause 3(e)(1)(B) of rule XIII of the Rules of
the House of Representatives, the Committee advises that H.
Res. 1269 does not make any changes to existing law.
VII. DISSENTING VIEWS
Committee Republicans strongly oppose the Committee's
action of unfavorably reporting H. Res. 1269, Resolution of
inquiry directing the Secretary of the Treasury to provide
certain documents in the Secretary's possession to the House of
Representatives relating to the impact of the OECD Pillar One
agreement on the United States Treasury.
Congressional oversight is one of the most important
responsibilities of the U.S. Congress, and Resolutions of
Inquiry (ROIs) are one of the methods used by the U.S. House of
Representatives to obtain information from the executive
branch. ROIs simply demand that the administration turn over
basic information to Congress. This information is critical
because it allows the Congress the ensure the executive
branch's compliance with congressional intent; evaluate program
performance; prevent the executive branch's encroachment on the
legislative branch's powers; assess an agency's ability to
manage and carry out program objectives; and acquire
information from the executive branch that can inform
policymaking.
Moreover, Congressional Republicans have repeatedly sought
information from the Administration about the expected and
actual impact of these policies. Transparency is essential
because it promotes accountability and provides information for
the Congress and Americans about what the federal government is
doing. Despite the Biden Administration stating that President
Biden would ``bring transparency and truth back to the
government to share the truth, even when it's hard to hear,''
the Administration has ignored the need for congressional
oversight and completely failed on its promise. The American
people deserve to know how their government works and we will
hold the Biden Administration accountable for its disastrous
policies.
This ROI seeks information about how much U.S. corporate
taxing rights will be sent overseas by the Biden Administration
in ongoing international tax negotiations. On April 8, 2021,
without consulting Republicans in Congress, the Biden
Administration proposed an agenda to the steering group of the
Inclusive Framework at the Organisation for Economic
Cooperation and Development (OECD) that included a new proposal
for the scope of Pillar One to target about 100 of the largest
and most profitable companies. It was concluded that the scope
of the agreement should apply to companies with more than 20
billion Euro in global revenue and more than a 10 percent
profitability threshold. These proposals were included in
internal OECD Secretariat Documents for the Task Force on the
Digital Economy as early as April 27, 2021, and the official
OECD inclusive framework statement on July 1, 2021.
Committee Republicans first requested information on this
issue from the U.S. Department of Treasury on April 28, 2021.
Despite repeated requests for this information from
Congressional Republicans to various officials at the U.S.
Department of Treasury between April 2021 to August 2022 via
questions from Committee staff in briefings and emails,
questions from Members of Congress at hearings, questions for
the record, and letters, the Administration has not provided
Congress with the requested information.
The Majority claimed that the Treasury Department has made
progress on the Pillar One agreement that would eliminate
discriminatory digital service taxes targeting U.S. companies.
While this is the goal that both parties in Congress tasked the
Treasury Department with achieving at the OECD, all publicly
available information suggests the Department has failed in
their attempt. Academic studies suggest that the Biden
Administration's Pillar One agreement will serve to perpetuate
the discrimination against U.S. companies. Studies suggest that
around 64 percent of reallocated income is from U.S.
headquartered multinationals, while U.S. Gross Domestic Product
(GDP) only represents about 24 percent of Global GDP.\1\ This
misrepresentation by the Treasury Department is precisely why
it is important for the Congress to have access to the data and
estimations that the Treasury Department is using to evaluate
the outcome of their negotiations. We need to understand if the
Treasury Department is finding a favorable solution for U.S.
industry, or if they are reaching a conclusion that the
Congress cannot accept.
---------------------------------------------------------------------------
\1\ Michael Devereux and Martin Simmler, Who Will Pay Amount A?, 5
EconPol Policy Brief (2021).
---------------------------------------------------------------------------
The Majority went on to cite, that with so many fluid
elements the estimations would be based on premature
assumptions about the details of the agreement, as a reason the
Treasury Department need not share its analysis with the
Congress. We find this argument without merit and an
inexcusable resignation of our Constitutionally assigned
authority. As the committee responsible for tax legislation in
the chamber that must originate legislation for raising revenue
we should have the necessary information to understand what is
being considered. The Congress cannot properly signal our
support or dissatisfaction with an agreement without an
understanding of the underlying assumptions or statistical
analysis. Without understanding where the Treasury Department
is in the process, we cannot direct the Department to change
course if appropriate. It is the Congress that has the power to
lay and collect taxes, and while the Administration may have a
diplomatic role in facilitating cross-border tax cooperation,
the Administration should not deny the Congress essential
information to evaluate proposals of significant resignations
of taxing rights to other countries.
Finally, the Majority argued that this resolution does
nothing to help American families put food on the table, pay
their bills, or take care of their families. In fact, this
resolution goes to those very concerns. If the Administration
is proposing to cede taxing rights to other countries, the
result is a narrower tax base here in the U.S. As a result, it
will fall to American families to shoulder more of the effects
of the U.S. tax burden to raise the same amount of revenue to
fund the essential services of our government. Families are
already suffering under President Biden's punishing economic
policies. We fear a continuation of misguided policies will
make things worse for American families whose paychecks can no
longer cover their needs.
As the branch of government responsible for prescribing tax
policy, it is essential that Congress receive revenue and
company inclusion estimates. To be able to evaluate the
proposal Congress needs to know what companies will be
affected, what jurisdictions will be losing tax rights, and
what jurisdiction will be gaining taxing rights under the
current proposals. More broadly, Congress should understand
where U.S. companies may be sending profit taxing rights and
how it could factor into larger geopolitical considerations. It
is wholly impossible for Congress to do its job with regards to
Pillar One without an understanding of the proposed shifts in
inflows and outflows. If the Administration continues to
deprive Congress of this essential information, the ultimate
harm will fall on U.S. negotiators losing credibility abroad.
It is disappointing that Committee Democrats have blocked the
request for this information.
Kevin Brady,
Ranking Member.
Kevin Hern.
[all]