CORRECTION: Seven Democrats voted for the GOP amendment that would expand the cap on the SALT tax deduction. A previous version of this story included incorrect information.
Maverick Sen. Kirsten Sinema (D-Ariz.) on Sunday backed a Republican amendment to shield businesses that rely on capital investment from private equity groups from the 15 percent corporate minimum tax that Senate Majority Leader Charles Schumer (DN.Y.) included in the Inflation Reduction Act.
Sen. Catherine Cortez Masto (D-Nev.), Maggie Hassan (DN.H.), Mark Kelly (D-Ariz.), Jon Ossoff (D-Ga.), Jackie Rosen (D-Nev.) and Raphael Warnock (D -Ga.) also voted for the amendment.
The amendment was sponsored by Senate Republican Whip John Thune (SD), who says the 15 percent minimum corporate tax would raise taxes on businesses with profits of less than $1 billion because it would apply to private equity groups that have partnerships interests in these enterprises.
The fix would be paid for by a one-year extension of the cap on the state and local tax deduction (SALT), which was a key feature of Trump’s 2017 tax cuts and which Schumer has promised to repeal as majority leader.
The amendment could have jeopardized the bill’s final passage because it would have hit residents of high-tax blue states like New York, New Jersey, Connecticut and California.
However, Democrats quickly offered an amendment from Sen. Mark Warner (D-Va.) after the other amendment passed to make changes to the bill to make it more palatable.
The Warner amendment replaced the expansion of the SALT cap with a different revenue-raising tax provision.
Warner’s amendment was carried, with Vice President Harris casting the casting vote.
Some Democratic senators privately expressed disappointment Sunday morning that Sinema was backing out of the deal he announced with Schumer last week to narrow the 15 percent minimum corporate tax rate while allowing companies to continue fully covering large capital investments.
They said the amendment could scuttle the deal after Democrats held together during more than 14 hours of voting to reject amendments from both sides of the aisle, including an amendment by Sen. Bernie Sanders (I-Vt.) to grant the Expanded child tax credit of $300 per month for the next five years.
“If a Democratic senator signs any of the amendments, that could be problematic,” warned one Democratic senator, who was horrified to learn that Sinema was pushing to change the main bill.
Supporters of Thune’s amendment, however, argue that the minimum tax included in the Inflation Reduction Act will net out potentially thousands of businesses that have accepted investment partnerships with private equity firms during the pandemic, when loans from regular banks were limited.
Sinema is concerned that small businesses such as nurseries and auto detailing shops in Arizona could be caught under the corporate minimum tax if they have a partnership with a private equity firm that, together with all its subsidiaries, exceeds $1 billion in profits, according to sources familiar with the discussions.
A source familiar with the tense behind-the-scenes negotiations says Schumer added text to the main bill on Saturday that expands the minimum corporate tax rate of 15 percent.
The revenue-raising provision is technically called a minimum accounting tax because it would require companies to declare revenue based on generally accepted accounting practices that are stricter than what is required under current law, which includes various tax breaks and shelters. making it easier for businesses to shield their income from the IRS.
A person familiar with the timeline of changes to the Inflation Reduction Act said that when senators first saw the new text of the bill on Saturday, it included for the first time “general control” language that would apply the minimum tax to partnerships , made up of many companies that themselves do not earn $1 billion in annual profits.
The added language would raise an additional $35 billion in revenue over 10 years.
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Thune had proposed removing that language and paying for it by extending the SALT deduction limit by a year — but that could jeopardize the bill’s passage in the Senate, making it unacceptable to Schumer or another Democrat from a high-tax state. such as Sen. Bob Menendez (DN.J.).
This story was updated at 3:05 p.m
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