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- 1. Congress returns for pre-election session Washington Council Ernst & Young 6 September 2016
- 2. 1 Government funding September 6 commenced a pre-election session of Congress that is expected to focus on must-do items: a continuing resolution (CR) to fund the government beyond September 30 and funding to combat the Zika virus. The House is expected to be in session through the month of September, and the Senate is slated to be in an additional week, through the first week of October, before breaking until after the November 8 elections. The session could be shortened if the government funding issue is resolved. The short timeframe and pre-election environment make passing much other legislation unlikely, though plenty of topics will be under discussion: the House Republican tax reform Blueprint released before the seven-week summer recess; miscellaneous tax bills at the committee level, including a topical proposal exempting Olympic medals from tax; and other health items in addition to Zika, including the viability of Affordable Care Act exchanges; and water resources legislation. The discussions will come against the backdrop of a presidential election between Republican Donald Trump and Democrat Hillary Clinton that has featured debate on many of the same issues, as well as some direct interaction as Trump has adopted elements of the House Republican tax reform Blueprint. House Speaker Paul Ryan (R-WI) and Senate Majority Leader Mitch McConnell (R-KY) left for the summer recess expressing disappointment over the impasse on appropriations bills, after both began the year citing government funding as one area ripe for action under âregular orderâ after years of operating under stop-gap and omnibus spending bills. The House has thus far approved five of the dozen annual appropriations bills: Interior-Environment, Military Construction and Veterans Affairs, Legislative Branch, Defense, and Financial Services. The Senate has passed three appropriations bills â Energy and Water; Military Construction/Veterans Affairs; and Transportation and Housing, and Urban Development â with the Military Construction/Veterans Affairs conference report combined with Zika virus funding that is currently stalled. While Speaker Ryan left in July unwilling to give up on the regular order spending process and has not announced a plan for moving forward, he is reportedly preparing a three-month CR into December that will likely be considered in the House the week of September 19, and in the Senate the week following. Ryan faces opposition to the three-month approach from members of the conservative Freedom Caucus, who advocate a CR until March 2017 in order to give the new Congress and president a say in funding decisions and prevent consideration of a massive bill in an anticipated post-election lame-duck session. Democrats support a three-month CR. Senate Democratic leader Harry Reid (D- NV), who is retiring, said September 1 that his members and the President will not accept a resolution that continues funding into 2017. Congress returns for pre-election session
- 3. 2 The September CR is unlikely to include major policy riders or tax provisions, which would be expected to be considered during a lame-duck session after the elections. Items that could be considered at that time include extensions of tax credits for energy technologies said to be inadvertently left out of the 2015 year-end omnibus and tax legislation, other 2016 tax extenders, and a tax technical corrections package. The near-term CR could, however, become a vehicle for funding to fight the Zika virus if Senate efforts continue to falter. The issue has gained considerable attention over the recess, and the Centers for Disease Control and Prevention warned August 30 that its funds for addressing the virus were nearly exhausted. The spending bill could also include supplemental funds aimed at major flooding in Louisiana. The White House has submitted to congressional negotiators a list of âanomaliesâ it wants addressed in a potential CR, including language to amend the Export- Import Bankâs statutory requirement that its Board of Directors have a quorum to be able to take any official action. Senate Banking Committee Chairman Richard Shelby (R-AL) has declined to consider nominations for the Bank's board, leaving it short of the three-member quorum to approve large transactions. In terms of the broader schedule, Senator Reid said Democrats would block other legislation until there is an agreement on a CR and funding to fight the Zika virus, including dropping âpoison pillâ riders from the current proposal. Senate Majority Leader McConnell is said to want to pursue a rewrite of the Water Resources Development Act, and other bills could come up in the Senate. In the House, Majority Leader Kevin McCarthy (R-CA) has outlined a September agenda that includes elements of the Better Way campaign of policy papers released prior to the recess and bills addressing regulation, including one regarding congressional disapproval of regulations issued late in President Obamaâs term. âWhile House Republicans developed this bold agenda as a blueprint for 2017 and beyond, I believe we can and should make a down payment immediately â particularly in the areas of restoring Constitutional authority and regulatory reform,â Rep. McCarthy said in the memo. Congress returns for pre-election session According to Rep. McCarthyâs memo, bills that could be considered on the House floor in September include: âș H.R. 5063, the Stop Settlement Slush Fund Act âș H.R. 5226, the Regulatory Integrity Act, which requires agencies to publish information about proposed regulations âș A bill to allow Congress to disapprove en bloc unacceptable âMidnight Regulationsâ issued late in an Administrationâs term âș H.R. 3438, the Require Evaluation before Implementing Executive Wishlists, to prohibit major rulemakings from taking effect until pending litigation is finalized âș H.R. 5577, the Innovation in Offshore Leasing Act, to modernize the offshore leasing process âș H.R. 5424, the Investment Advisers Modernization Act of 2016, to reduce the cost of capital from small private equity firms âș H.R. 2357, the Accelerating Access to Capital Act, to eliminate certain costs for small private companies âș H.R. 4852, the Private Placement Improvement Act, addressing small business regulatory burdens
- 4. 3 While movement on 2016 tax extenders will likely wait until at least the lame-duck session and heavy lifting on issues like tax reform wonât occur until a new president and Congress are in power in 2017, there will still be considerable work done around the edges on tax issues during the remainder of 2016. Miscellaneous tax bills. Both tax-writing committees are contemplating action on miscellaneous tax bills. House Ways and Means Committee Chairman Kevin Brady (R-TX) continued to suggest that the Committee may consider Member tax proposals that are separate from tax reform. âWe are evaluating a package of tax bills to move forward,â Brady said in June. The Ways and Means Tax Policy Subcommittee May 12 held a hearing on Member proposals for improvements to the tax system that included testimony about legislation addressing charity, research, energy, student loan, and alcohol tax issues, among others. One item that could be part of such a markup is a proposal from Rep. Bob Dold (R-IL) to exclude from gross income, for income tax purposes, the value of any medal or prize money received on account of competition in the Olympic Games. Chairman Brady has stated that he would work to move the bill through Committee in September and Speaker Ryan supports the proposal and wants a House vote. A similar bill (S. 2650) was approved by the Senate in July. Senate Finance Committee Chairman Orrin Hatch (R-UT) and Ranking Member Ron Wyden (D-OR) have set criteria for consideration of non-controversial legislation, but have not signaled when a markup could occur. âOur sincere hope is that we can continue making meaningful changes with much more frequency and efficiency,â the Senators said in a June 24 Dear Colleague letter. It said such bills should: be in the Finance Committeeâs jurisdiction; be non-controversial, and have strong bipartisan support in the Committee and in the Senate; have little or no budgetary impact; address subject matter that has been thoroughly reviewed by the Committee, have received official technical assistance from the appropriate agency; and not be opposed by leadership of either party in the Senate, or the White House. Similar criteria were set ahead of a February 11, 2015, markup during which the Committee reported out 17 miscellaneous tax bills, some of which were enacted in the year-end 2015 tax bill. Section 385 regulations. Amidst continued criticism from the business community, key House and Senate Republican tax writers, and the Wall Street Journal editorial page, the U.S. Treasury continues to pledge to move âswiftlyâ to issue final regulations under Section 385 which would recharacterize debt as equity in certain circumstances. The proposed regulations, issued on April 4, were the subject of hundreds of stakeholder comment letters, an IRS hearing early in the summer, and numerous requests to Treasury from the Senate Finance Committee and the House Ways and Means Committee to brief members and staff on the regulations and areas that Treasury might be open to changing in the final regulations. Treasury officials, including Secretary Jack Lew, met with members and staff prior to the summer recess, and it is expected that there will be additional meetings when Congress returns. A recent letter signed by all Republican members of the House Ways and Means Committee called on Treasury to be as transparent as possible in discussing with members how problematic issues will be addressed in the final regulations, while Senate Finance Committee Chairman Hatch reiterated his request that the proposed regulations be withdrawn. Meanwhile, Treasury officials, in meetings on the Hill as well as in private meetings with industry groups and individual companies, have committed to making changes in a number of areas as part of the final regulations, but it remains unclear how Treasury will draw the new boundaries in determining the scope of the final regulations. The areas where changes are likely (or at least possible) include: âș Cash pooling arrangements âș Potential exemptions or carve outs for financial services industry groups âș Payments among foreign subsidiaries of US companies âș Treatment of S corporations âș Treatment of REITs âș Revisions to the documentation requirements âș Revisions to the âper seâ recharacterization rule âș Modifications to effective dates Congress returns for pre-election session Tax
- 5. 4 Possible changes could address multiple issues simultaneously. For example, a broad exemption for foreign-to-foreign loans and distributions, depending on how it is crafted, could provide significant relief for many cash pooling arrangements. Some companies have told the Treasury they might prefer such a carve out to an alternative proposal whereby some definition of cash pooling arrangements would be exempted from the regulations. The fear with this latter approach is that it is too difficult to craft a one-size-fits-all solution on cash pooling given the variety of pooling arrangements utilized by companies. Regarding a foreign-to-foreign carve out, it remains unclear which transactions would be excepted under such a carve out, and Treasury officials have expressed some concern that a broad carve out actually could further expose the regulations to legal challenge on the grounds that the remaining scope of the regulations is outside the authority granted by Section 385. Modifications to certain effective dates are also under active consideration for inclusion in a final regulation. In particular, Treasury officials have indicated that the documentation requirements in the proposed regulation will become more manageable in a final regulation and they may provide more time for companies to develop their systems in order to comply with whatever a final rule requires. As for timing, statements that final regulations would be issued in early September are now being tossed aside. While a Treasury spokesperson recently reiterated that the effort to produce final regulations will proceed âswiftly,â the number of complex issues to be resolved and the need to get agreement among senior IRS and Treasury officials not only on the appropriate policy outcome, but how that outcome should be worded, clearly means final regulations will not be released until later this fall. Koskinen resolution. A resolution to impeach IRS Commissioner John Koskinen could make its way to the House floor in September at the urging of conservative members. A four-article resolution put forward in July, which included an accusation of âengaging in a pattern of conduct showing he is unfit,â expired and would need to be refiled. Koskinen has long been the target of hostility over alleged IRS targeting of conservative groups. House leaders have not expressed support for an impeachment resolution. In July, Speaker Ryan said only that it would be a topic for discussion when Congress returned. Congress returns for pre-election session Following is a timeline of communications from lawmakers to Treasury regarding the Section 385 regulations. âș June 22: Ways and Means Democrats asked for consideration of âexceptions or special rules, including transition rules,â for the proposed regulations. âș June 28: Committee Republicans expressed âgrave concernsâ over the potential impact of the rules and requested that the public comment period be extended. âș July 5: Seven Finance Committee Republicans asked Treasury to ensure that ordinary business transactions are not adversely affected. âș July 6: Closed Joint Committee on Taxation briefing with Treasury to air concerns about the regulations âș August 22: Ways and Means Republicans said it is not clear that Treasury has identified appropriate solutions and that other issues have not been adequately addressed. âș August 22: Senate Finance Committee Chairman Hatch asked Treasury to re-issue the regulations in proposed form. âș August 24: Seven Finance Committee Republicans asked for an explanation, before the rules are finalized, of how certain reforms will be addressed.
- 6. 5 Tax reform Senate. Senate Finance Committee Chairman Hatch is still aiming to release a corporate integration discussion draft. In July, Chairman Hatch said the proposal is still being analyzed by the Joint Committee on Taxation and would likely be delayed at least until Congress returned in September. The draft is expected to pair a dividends paid deduction with a 35% withholding tax for dividends and interest, Finance Committee Republican staff have said that a corporate integration plan with dividends paid deduction can be viewed as a corporate tax rate cut without having to touch provisions that are strongly supported by the business community, such as accelerated depreciation, the R&D credit, and deductibility of advertising expenses. The dividends paid deduction method coupled with a withholding tax is the method seen by Chairman Hatch as having policy benefits that include greater parity between debt and equity, reducing the incentive for companies to undertake inversion transactions, and lessening the need for companies to keep earnings off-shore (i.e. the lock-out effect). Other Senators and outside observers have raised concerns about a corporate integration plan, including: âș that the 35% withholding tax expected would penalize tax-exempt entities like retirement plans and deter foreign investment in the United States; and âș that a dividends paid deduction would, by reducing corporate tax liability, diminish the effectiveness of current tax incentives like the R&D credit and accelerated depreciation, and disadvantage start-up companies more likely to retain their earnings rather than pay dividends. House. House Republicans released their tax reform Blueprint on June 24, as the sixth and final plank of Speaker Ryanâs âBetter Wayâ campaign to provide voters policy choices ahead of the upcoming political conventions and the November elections. The plan proposes a 20% statutory corporate tax rate, a 25% business tax rate for pass-through entities, a move toward a cash-flow consumption tax through immediate expensing for all businesses and elimination of deductibility of net interest expense, a territorial international tax system, a border tax adjustment mechanism, and elimination of most business preferences except the R&D tax credit and LIFO. For individuals, rates would be set at 12%, 25%, and 33%. This element gained attention over the recess when Republican presidential nominee Donald Trump adopted the rates as part of a revision of his own tax plan, expressed support for expensing, and said that he would work with House Republicans to advance the proposal. The deductibility of mortgage interest and charitable donations would be retained under the Blueprint, but other itemized deductions (including the deduction for state and local taxes) would be repealed. Ways and Means Republican tax staff is in the process of receiving feedback and building out the tax reform Blueprint by drafting detailed statutory language. The publicly expressed goal is to have that effort completed by the end of 2016, with the intention to produce draft legislation that is ready to move early in the next Congress, regardless of who wins the White House. Staff must resolve a number of very difficult policy and technical issues as they undertake this drafting process. Congress returns for pre-election session House Republican Tax Reform Blueprint Highlights Corporate tax rate 20% Business income pass-through tax rate 25% Taxation of future foreign earnings Territorial, 100% exemption for dividends paid from foreign subsidiaries Taxation of accumulated foreign earnings 8.75% for cash/cash equivalents, 3.5% otherwise Border adjustability Exports exempt from tax/imports taxed Cost recovery 100% expensing Interest expense Not deductible on a net basis Corporate tax preferences Generally eliminated, except for R&D credit/LIFO Individual tax rates 12%, 25%, 33% Investment income 50% deduction, basic rates of 6%, 12.5%, and 16.5% Individual deductions Eliminated except for mortgage interest, charitable contributions/Std deduction increased AMT/Estate tax repealed
- 7. 6 Following are some of the more difficult issues staff will face in turning the Blueprint into legislative language: Border adjustability â A key component of the Blueprint is border adjustability; in other words, exempting export income from corporate tax while subjecting import income to full taxation. Among other benefits of this approach, along with promoting US exports, is the staffâs understanding that by making the tax system border adjustable, most of the anti-base erosion provisions that previously have been proposed as part of moving to a more territorial tax system would be unnecessary, including any kind of minimum tax on low-taxed or other foreign earnings. But developing a workable border adjustability mechanism that is not actually a component of a value-added tax presents some significant policy and technical hurdles. For example, US companies that are net exporters could end up in a perpetual tax loss position, and in the enviable position of receiving tax refunds every year because much of their expenses will be deductible while much of their income is not subject to tax. However, handing out refunds to some of the largest US companies may not work from a political standpoint, particularly as the domestic income of US companies (including the suppliers for exporting companies) is subject to tax. Technically, the Blueprint provides that the cost of imports would not be deductible â ever â but does not provide details on how those costs would be determined or whether other costs would need to be allocated to the imports (and made non- deductible). Similarly, if US companies are eligible for tax refunds reflecting the costs associated with export sales that are exempt from tax, the Blueprint does not address how to determine those costs, including whether indirect costs would be allocated to those sales (and eligible for tax refunds). Staff must also consider how to apply the border adjustability concept to cross-border flows of capital, or whether to exempt financial transactions. For example, they must consider whether a loan from a US bank to a foreign entity is an export, meaning the interest income on the loan is exempt from US tax, while the cost of funding that loan â the interest on US bank deposits â would be deductible. Along with these political and mechanical questions, there is the question of whether such a system, embedded in an income tax rather than a value added tax or other true consumption tax, is legal from an international trade perspective. While proposing a âconsumption-likeâ income tax rather than an actual consumption tax may provide political space to make concessions and other adjustments that would not be possible in a consumption tax, this approach may weaken the argument that the Blueprint is proposing an indirect (rather than direct) tax for which border adjustability adheres to international trade obligations under the World Trade Organization. Full expensing with non-deductibility of interest expense â The Blueprint would permit companies to fully and immediately deduct the cost of all tangible and intangible property, with the exception of land. However, the Blueprint also would correspondingly deny deductions for net interest expense. Companies must therefore weigh whether losing interest deductions is a cost they are willing to incur in exchange for full expensing (and a 20% corporate rate). The purpose for denying deductions for net interest expense is to prevent a presumed double benefit from fully expensing leveraged purchases of property. However, the exclusion of land from full expensing under the Blueprint would be particularly severe for debt-financed purchases of land because the land would not be eligible for full expensing (or apparently even depreciation as under current law), while deductions for interest expense on the debt would not be permitted. Moreover, the persistent issues under current law involving the allocation of purchase price between non- deductible land and immediately deductible improvements on the land would be intensified under the Blueprint. At least in the short term, the magnitude of these tax changes under the Blueprint likely would result in significant disruptions of some existing business finance models that have developed in the context of the current tax laws. For example, companies in the lending or leasing business may be concerned that their clients will move towards raising equity to fund their business and away from debt or leasing arrangements. Insurance companies, which invest premiums in longer term corporate debt in order to ensure they have the funds to pay off long-term promises, could find the supply of such debt to be less ubiquitous. Certain other financial institutions â such as broker dealers, investment banks, private equity funds, and hedge funds â that fund themselves with debt but have financial income not necessarily in the form of interest may find themselves in a net interest expense position, and thus denied a deduction for what they consider to be their costs of goods sold unless the definition of interest income is broadly defined in the legislation. Congress returns for pre-election session
- 8. 7 Broadening the base to pay for lowering the rate â Reducing the corporate tax rate to 20% in a fiscally responsible way will be difficult, even using dynamic scoring approaches and a current policy baseline (which treats currently temporary provisions as permanent). The Blueprint states that targeted tax breaks will be eliminated, but it remains unclear what that really means or which tax provisions are on the table, and it could require the elimination of potentially hundreds of billions of dollars in tax expenditures to reach the 20% corporate tax rate goal. Even tax incentives such as the research tax credit â which the Blueprint would preserve â could effectively be repealed for companies that have their taxable income largely eliminated through either full expensing or the exclusion of export income (or both). As such, policymakers eventually may have to examine alternatives to the research tax credit, to the extent that promoting innovation through the tax system remains a priority. Once the details are hashed out, the Blueprint could present just as many trade-offs as previous serious tax reform proposals. While the mix of winners and losers may be different than under other proposals, the ultimate fate of the Blueprint will still be determined by the same fundamental political dynamics that would face any tax reform proposal. EU State aid. The European Commissionâs August 30 conclusion that Ireland granted undue tax benefits of up to $14.6 billion to Apple that should be recovered drew criticism from members of Congress, who like the Obama administration continued to call the EUâs State aid investigations a revenue grab disproportionately targeting US companies: âș âThe European Commissionâs decision is a predatory and naked tax grab.â âWays and Means Chairman Kevin Brady âș âSlamming a company with a giant tax bill â years after the fact â sends exactly the wrong message to job creators on both sides of the Atlantic.â âSpeaker Ryan âș âIt appears the European Commission has issued an extraordinary decision that targets U.S. business by rewriting already existing tax policies.â âSenate Finance Committee Chairman Hatch âș "This is a cheap money grab by the European Commission, targeting U.S. businesses and the U.S. tax base.â - Senate Finance Committee member Charles Schumer (D-NY) Treasury is considering potential responses to the Commissionâs actions and released a white paper August 24 detailing their concerns. The issue is likely to continue to attract attention from Congress and has rekindled elements of the international tax reform debate, including criticism of the current system of deferral of foreign earnings by US-based multinationals. It remains to be seen whether the decision and the bipartisan criticism of the decision will help drive at least international tax reform legislation in 2017. Congress returns for pre-election session Remote Sales Tax On August 25, House Judiciary Committee Chairman Bob Goodlatte (R-VA) released a second discussion draft related to remote sales tax that would apply tax at the destination state of the goods, rather than on the location of the seller, which was his previous approach. The tax would be imposed at a single rate determined by the state of the purchaser, but using the tax base of the state of origin. Chairman Goodlatte wants a vote later in the year on the proposal, which has the support of Speaker Ryan. Tax Treaties President Obama has called on Congress to approve eight Foreign Relations Committee-approved tax treaties that Senator Rand Paul (R-KY) wants renegotiated over information sharing concerns. The treaties include: new protocols amending US tax treaties with Switzerland, Luxembourg, Spain and Japan; new tax treaties with Hungary, Chile and Poland; and a multilateral convention on tax administration. Foreign Relations Chairman Bob Corker (R-TN) told Senators in May the treaties are ânot new and exotic instrumentsâ and should be ratified. Technical Corrections Technical corrections bills introduced in April (H.R. 4891, S. 2775) would make changes to several provisions, including the bonus depreciation language enacted in the year-end 2015 tax legislation. Stakeholders are also interested in changes to the partnership audit rules enacted in a 2015 budget bill. No plans for consideration have been announced, but a technical corrections package could be added to other legislation, most likely during the lame-duck session after the elections.
- 9. 8 Health care Several health care topics are expected to demand congressional attention during the September pre- election session, some of which have been simmering over the summer recess, namely: the inability thus far for lawmakers to agree on a funding plan to address the Zika virus; the public outcry following media reports about the expense of the EpiPen for allergy emergencies, and the related debate over drug pricing; and the viability of the Affordable Care Act (ACA) exchanges in light of some high-profile insurer withdrawals and large premium increase requests from insurers in certain states. Other issues likely to be the subject of attention during this period include possible health care markups in the House Ways and Means Committee, the 21st Century Cures legislation, mental health legislation, and MACRA oversight. Following are snapshots of the issues. Zika - Prior to the August recess, Congress had been unable to reach agreement over how to fund a federal response to the growing concern over the Zika virus, an issue that has been the subject of considerable attention and political finger- pointing. The House had passed its own Zika bill but leaders acceded to addressing the issue in the Military Construction/VA appropriations conference report, which includes funding at the Senate agreed-to level of $1.1 billion, with offsets totaling roughly $750 million. They include: $543 million in unspent funding for the implementation of the ACA in US territories; $107 million in unspent funds allocated to fight Ebola; and $100 million in unused administrative costs at the Health and Human Services (HHS) Department. Senate Democrats opposed the conference report because the funding level was $800 million less than the Presidentâs request and over âpoison pillâ riders addressing the ACA and other political controversies, including language providing that contraception funding in Puerto Rico could not be directed to Planned Parenthood. Democrats also raised environmental concerns about a provision to allow the application of pesticides in targeted areas without a further permit currently required under the Clean Water Act. The House passed the conference report in June along party lines, but the Senate has failed twice to advance it. Attaching funds to the CR is also a possibility. The CDC warned on August 30 that its available funds to combat the virus were nearly exhausted. EpiPen â Public concern over the price of the EpiPen auto-injector kept at the ready in the event of anaphylactic shock has caught the attention of members of Congress. Manufacturer Mylanâs efforts to boost financial assistance to consumers for the product and to sell a generic version at about half the cost of the brand-name version have failed to quell the controversy. The House Oversight and Investigation Committee is investigating and requested information from Mylan. Similarly, a group of 20 senators led by Elizabeth Warren (D-MA) wrote to Mylan August 30 noting the increase in the price of EpiPens and asking questions about the companyâs practices. Furthermore, on September 2, Finance Committee Ranking Member Wyden and Energy and Commerce Committee Ranking Member Rep. Frank Pallone (D-NJ) sent a letter to HHS Secretary Sylvia Burwell with a series of questions regarding Mylanâs EpiPen rebate obligations under the Medicaid Drug Rebate Program. Congress returns for pre-election session
- 10. 9 ACA Exchanges â The recent decisions by Aetna and UnitedHealth to exit many ACA exchanges have, along with other insurers filing significant premium increases and projecting losses, raised questions about the viability of the marketplace in certain parts of the U.S. Merger prospects for several large insurers, the exit of large insurers from multiple marketplaces, and the failure of several co-ops have raised broad concerns about fewer consumer choices in the exchanges and higher premiums. The developments, coupled with reports that ACA enrollment for 2016 is less than half of what was projected â the Congressional Budget Office in 2013 projected 24 million enrollees by 2016, but reported just over 11.1 million as of March â stand to intensify the already pitched political fight over the future of the ACA, especially as voters face a choice between a Republican presidential candidate that wants to scrap the law and a Democratic candidate that wants to build upon it. âPlans are rapidly exiting the so-called marketplace because Washington has damaged and upended the insurance markets,â said House Energy and Commerce Committee Chairman Fred Upton (R-MI). Rep. Diana Degette (D-CO) told the Washington Post she expected Republicans to continue their case for repealing the ACA but that constructive fixes may not be determined until after the elections. âThereâs a long list of things large and small that need to be adjusted,â she said. âBut I donât think anyone can say what that is until we know what the new Congress looks like.â Mental health â A package of provisions related to mental health (the Helping Families in Mental Health Crisis Act, H.R. 2646) was approved by the House in July on a 422-2 vote, though efforts on a Senate bill (S. 2680) are in jeopardy over a related gun debate. Democrats are concerned that second-ranking Senate Republican John Cornynâs (R-TX) potential amendment regarding the interaction between mental health and the criminal justice system could make it easier for guns to fall into the hands of the mentally ill. There is also concern that opening the debate to other gun amendments could ultimately doom the bill. Senator Chris Murphy (D-CT), who sponsors the Senate bill along with Senator Bill Cassidy (R-LA), said before the recess, âI still believe this bill has to be about fixing the mental health system, not about changing gun laws,â according to Bloomberg BNA. Democratic presidential candidate Hillary Clinton recently released her own mental health proposal intended to: promote early diagnosis and intervention; integrate mental and physical health care systems; train law enforcement officers in crisis intervention, and prioritize treatment over jail; enforce mental health parity; improve access to housing and job opportunities; and invest in brain and behavioral research and developing safe and effective treatments. Congress returns for pre-election session 21st Century Cures â Senate Health, Education, Labor, and Pensions Committee Chairman Lamar Alexander (R- TN) and House Energy and Commerce Committee Chairman Upton are still aiming for passage of the 21st Century Cures legislation when Congress returns. âThis could be the most important legislation Congress passes this year, and thereâs no excuse for not finishing our work in September,â said Senator Alexander. The HELP Committee has passed a package of 19 bills that Alexander said âcreate a breakthrough path for new medical devices, help the FDA attract talented researchers and reduce administrative burdens on researchers,â but the Senate has yet to act. Bloomberg BNA reported Alexander as saying one disagreement is over how to pay for the bill. Partisan tensions include funding for National Institutes of Health (NIH) and how to offset any new funding. In July 2015, the House passed its own 21st Century Cures Act, 344- 77, to authorize funding to accelerate new treatments and reduce regulatory hurdles. It would provide nearly $9 billion in new research funding to NIH, and reform Food and Drug Administration approval of new medicines and medical devices. MACRA Oversight â Congressional oversight of the Centers for Medicare & Medicaid Servicesâ (CMS) implementation of the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) is expected to continue following a July 13 Senate Finance Committee hearing and ahead of publication of a final rule on the matter expected later this year. MACRA eliminated the Sustainable Growth Rate, or SGR, formula and included structural reforms to the Medicare program. Andy Slavitt, Acting Administrator of the Centers for Medicare and Medicaid Services, told Finance that CMS will âcontinue to gather feedback from our stakeholders, to inform an implementation approach that leads to better care, smarter spending, and improved patient outcomes,â and also is willing to consider a delayed start for the new physician Medicare quality reporting program slated to take effect in 2017.
- 11. 10 On September 14, the Senate Finance Committee is planning to hold a markup on consensus, non-controversial retirement savings proposals. The primary focus is the Miners Protection Act (S.1714), to provide the transfer of funds to pay health benefits to retired miners and prevent insolvency of the United Mine Workers of America pension fund. Another issue for possible consideration is legislation to encourage broader use of open multiple employer plans (MEPs), which allow businesses to share administrative and other responsibilities but are hindered by a common interest requirement among employers. The Committee may also consider several proposals designed to encourage savings and guard against longevity risk, including the Lifetime Income Disclosure Act (LIDA), which would require defined contribution benefit statements to include a projection of the annuity the participant would receive based on their account balance. There is also interest in a provision to make it easier for required disclosures to be provided electronically. There are also a host of âmemberâ issues that could be considered; their inclusion will hinge on their ability to satisfy the ânon-controversialâ test Chairman Hatch and Ranking Member Wyden have set, and on their revenue score. Among these are a bill introduced by Senators Mike Enzi (R-WY) and Bill Nelson (D-FL) that would make it easier for workers who separate from their companies with outstanding balances on loans from their 401(k) plan to repay the loans. Proposals dealing with S Corp ESOPs and nondiscrimination testing for frozen defined benefit plans have gotten attention, as has a bill sponsored by Senators Mark Warner (D-VA) and Dean Heller (R-NV) dealing with nonqualified deferred compensation paid by private companies. The Empowering Employees through Stock Ownership Act (S. 3152) is intended to ease the tax implications for employees of non-public firms through provisions like extending the time period in which employees are required to pay tax upon exercise of stock options. A companion bill sponsored by Rep. Erik Paulsen (R-MN) could also be considered in the House Ways and Means Committee during this work period, according to press reports. A decision on whether the overall package will be offset, and how that affects what is included, will await the membersâ return. Congress returns for pre-election session Retirement savings Over the recess, House Financial Services Committee Chairman Jeb Hensarling (R-TX) told Politico that this month he plans to formally introduce and mark up the âFinancial CHOICE Act,â his sweeping bill that would scrap key elements of the 2010 Dodd-Frank Act and replace them with alternative financial reforms. Chief among these is a provision that would exempt banks from much of Dodd-Frankâs new prudential regime if they agree to maintain a 10 percent leverage ratio -- a change that would require the largest banks to hold billions more in capital. The bill is not expected to be taken up in the Senate this year, but remains a key ideological marker for Hensarling and other House conservatives, and it could eventually get a vote on the House floor in the lame-duck session. Hensarling acknowledged that his schedule for marking up the bill could slip. He said the version of the bill that will be introduced will probably only have âminor modificationsâ from the discussion draft he released in June. Committee Republicans have also been trying to get Treasury Secretary Jack Lew to appear before the panel to testify on the Financial Stability Oversight Councilâs annual report. A letter from Hensarling to Lew last week said that if Treasury does not offer potential dates for Lewâs appearance, the committee will consider issuing a subpoena to compel Lew to testify on September 21. On September 28, Federal Reserve Chairman Janet Yellen is scheduled to testify on the Fedâs supervision of banks under Dodd-Frank. This week several measures from the Financial Services Committee are set to come to the House floor for votes, including: a bill modernizing the 1940 Investment Advisers Act (H.R. 5424); a bill blocking the Justice Department and other agencies from directing the proceeds of future bank settlements to outside groups (H.R. 5063); and a bill with several components intended to improve access to capital (H.R. 2357). That bill gathers three committee-passed measures easing SEC regulations related to Form S-3 for small-company registrations, âmicro-offerings,â and Regulation Dâs language on general solicitations. A House Financial Services subcommittee is also scheduled to hold a hearing on September 7 on governance of the regional Federal Reserve Banks. Jeffrey Lacker and Esther George â the presidents of the Richmond and Kansas City Federal Reserve Banks, respectively â are slated to testify. The Senate Banking Committee, meanwhile, has not yet announced any hearings for September, but Chairman Shelby is believed to be planning oversight hearings on the Iran nuclear agreement and a possible markup of regulatory relief bills related to SEC rules. Financial services
- 12. 11Congress returns for pre-election session In September, the House is expected to consider H.R. 5577, the Innovation of Offshore Leasing Act, to modernize the Department of the Interior's offshore oil and gas leasing bidding process, as part of a cadre of innovation and regulatory reform bills. Prospects for the energy policy conference, however, remain in doubt. In April, the Senate passed S. 2012, the Energy Policy Modernization Act of 2016, on a bipartisan vote. The House took a more partisan approach to its omnibus energy legislation, passing H.R. 8 in December, 2015 along party lines under threat of a presidential veto. The conference on S. 2012 is further complicated by the addition of contentious natural resources issues, including House provisions to favor agricultural interests over urban users in allocation of California water. Efforts to include tax provisions â including extensions of tax credits for energy technologies said to be inadvertently left out of the 2015 tax legislation â in the Federal Aviation Administration (FAA) reauthorization enacted in July were unsuccessful. Members such as Senate Finance Committee Ranking Member Wyden are hopeful there will be other opportunities. âOdds are certainly in favor of there being an end-of-the-year package that involves taxes,â Wyden said. âIâve heard from members of both parties that there are a handful of extenders that they hope will go in at the end of the year, so Iâm expecting that. And of course, I do feel strongly that those handful of renewable energy incentives ought to get done, because all sides acknowledge it was an omission.â Finance Committee Chairman Hatch, however, said he is ânot very enthusedâ about revisiting the provisions, echoing previous comments by Ways and Means Chairman Brady. Energy Last year Shelby pushed through the committee a broad reform bill easing a range of Dodd-Frank and Federal Reserve policies, but the bill was uniformly opposed by Democrats and never came to the floor, and Shelbyâs bid to insert the package into the end-of-year omnibus spending bill failed. A group of moderate committee Democrats has occasionally met with the chairmanâs staff to negotiate a narrower version of the bill, with few results so far. Ranking Member Sherrod Brown (D-OH) has said such a bill should be limited to provisions providing relief to community banks. Several key financial nominees continue to await confirmation votes. President Obama months ago nominated Lisa Fairfax (a Democrat) and Hester Peirce (a Republican) to fill two vacancies at the SEC, and the Banking Committee eventually advanced their nominations, but neither nominee has been given a floor vote and prospects for such a vote are uncertain. A number of Senate Democrats were unsatisfied with Fairfaxâs answers to questions about a potential SEC rule requiring corporations to disclose their political contributions. Meanwhile, the presidentâs two nominees to the Commodity Futures Trading Commission (CFTC), Democrat Chris Brummer and Republican Brian Quintenz, have waited for a confirmation hearing in the Senate Agriculture Committee. According to press reports during the August recess, the committee will hold that hearing sometime this month, though it remains uncertain if there will be time for the CFTC nominees to get a floor vote this year. A federal appeals court on October 24 is scheduled to hear arguments in the Treasury Departmentâs appeal of a lower court ruling that threw out the Financial Stability Oversight Councilâs (FSOC) designation of MetLife as a systemically important non-bank. Also in the coming weeks, the Federal Reserve and other agencies are expected to release a report (required by the Dodd-Frank Act) offering recommendations for how to reduce risks posed by large banks and investment firms. According to Bloomberg News, the report will recommend restricting banksâ investments in copper and other hard- to-value âlevel 3â assets. Trade Any hopes for congressional approval of the Trans-Pacific Partnership (TPP) are focused on the expected lame-duck session of Congress following the elections. Concern about the effects of free trade on American communities has been a main focus for both presidential candidates, making any action during the September session very unlikely. President Obama and advocates of the TPP would be expected to work to gain sufficient support to advance the pact following the elections. In August, the Administration submitted to Congress a Statement of Administrative Action on TPP.
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