Letter to Sen. Ron Wyden, Chairman, Committee of Finance, Congressman Richard Neal, Chairman, Committee of Ways and Means - CRAPO, BRADY WARN ADMINISTRATION'S OECD POSITION UNDERMINES CONGRESS'S AUTHORITY OVER U.S. TAX LAW

Letter

Chairman Wyden and Chairman Neal,
We write to share our concerns with the Administration's strategy to compel specific
Congressional action on U.S. tax legislation, a matter over which the Senate Finance Committee
and House Ways and Means Committee have clear jurisdiction. We urge you to join us in
safeguarding against infringement of Congress's authority to set U.S. tax policy by this or any
administration.
Soon after negotiating an agreement at the Organisation for Economic Co-operation and
Development (OECD), Treasury Secretary Yellen acknowledged that Congress would be required
to enact significant domestic tax law changes in order to comply with the agreement. Whereas
prior administrations took the position that Treasury cannot bind Congress, this Administration
has taken the approach of using the global stage to attempt to force Congress's hand. This
concerning development suggests the Administration has represented to our global partners that it
can unilaterally compel changes in tax law, a significant infringement on Congressional authority.

Prior negotiations at the OECD were premised on the principle that the U.S. global minimum tax
would be treated as compliant under the global minimum tax introduced by an OECD deal. That
approach recognized our first-mover status on a global minimum tax and protected American
workers and companies without the need for additional legislative action. Yet Treasury has
reversed course and is now pursuing an agreement at the OECD that would impose severe penalties
on American companies unless significant changes are made to U.S. law.

It also appears that Treasury negotiators committed in April to "abolish" the U.S. foreign-derived
intangible income (FDII) provision. FDII was designed to meet the bipartisan goal of encouraging
American companies to develop and retain intangible property in the United States. While
Treasury has no authority to repeal legislation enacted by Congress, it appears the agency
committed to do just that, according to an OECD report published on August 5, 2021. Treasury's approach to these negotiations makes clear that the Administration has substituted its
own political priorities -- presented in its Fiscal Year 2022 Revenue Proposals -- for the bipartisan,
bicameral objectives historically pursued at the OECD. Democrats and Republicans alike have
denounced digital services taxes (DSTs) that discriminate against American workers and
companies and strip away U.S. tax revenues. Any agreement at the OECD should eliminate DSTs
and similar measures. However, Treasury has yet to secure that key condition, instead hoping that
flexibility will facilitate an agreement that advances the Administration's broader tax agenda.

Instead of moving forward unilaterally with its own priorities, Treasury should engage in
meaningful, bipartisan consultation with both sides of Congress. As Secretary Yellen has
acknowledged, certain components of the agreement must be implemented through a multilateral
treaty to be ratified by the Senate, requiring significant bipartisan consensus. By pursuing the
Administration's tax agenda at the OECD and assuming that Congress will use reconciliation to
enact certain changes, the Administration is risking the future success and durability of the
agreement. If the current Administration can unilaterally compel tax changes consistent with its
priorities, future administrations have the ability to unilaterally unwind them, leading to an
ultimate failure to generate international tax certainty.
While we do not agree on the policies being promoted by the Biden Administration, the
Administration's strategy raises far more fundamental questions about the authority of Congress
and our tax-writing committees. Please consider the precedent that would be set if Congress were
to concede to an administration's efforts to undermine the authority of Congress, and our
committees, to set U.S. tax policy.
Sincerely,

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