Palmer Schoening, President of Schoening Strategies and Chairman of the Family Business Coalition is providing tED magazine with an update on decisions coming from Washington, D.C. that will impact our supply chain.
In addition to health care and tax reform, there are some key issues being debated right now that could add up to some serious impact for NAED member companies.
Health bill set for fast rewrite: With only two nay votes to give away and several Senators demanding changes, Senate Majority Leader McConnell was left with little choice but to delay the vote originally planned for today. Half of the folks I talk to in House/Senate leadership think a modified bill will pass in short order and half don’t. The half that do are banking heavily on the deal making ability of Leader McConnell. Sen. McConnell faces a numbers and political challenge in passing the bill. CBO's score gives him roughly $200 billion to play with to increase subsidies, reduce Medicaid cuts, and strengthen the response to the opioid epidemic, but the votes he gains with those may cost him others. Republicans are now in the difficult position of being damned if they do and damned if they don’t. The current legislation is incredibly unpopular – the media are seizing on stories of the sick and vulnerable losing care. Town hall events over 4th of July recess will be ugly. On the other hand, the party gained control of the Presidency and Congress promising the electorate a whole scale repeal and replace of the Affordable Care Act. Leadership is realizing given the factions in the party, they need to focus on getting their legislative machinery working after spending 8 years as an opposition party. Wednesday night's Washington Post article describes Senate Majority Leader Mitch McConnell's (R-KY) efforts to rewrite the Senate health care bill before Friday's 10-day July 4th recess in hope of passing the bill in mid-July. Thursday morning, Politico reported on the clash over Medicaid cuts between McConnell and Senator Rob Portman (R-OH), highlighting the difficulty in producing any bill that can pass the Senate. The Hill article describes the competing demands of Senate Republican moderates and conservatives. I’m told that taxes, including tax changes for the “wealthy” like the 3.8% tax on investment income, are all on the table. The last iteration of the Senate legislation 1) repealed the employer mandate 2) repealed the individual mandate 3) effectively repealed the Cadillac tax – bill calls for delay to 2026 for budget gimmick reasons. There are 60 votes to repeal this tax. 4) repealed most of the Obamacare taxes including additional 3.8% tax on investment income.
On the mystery of lower premiums and rising costs: Thursday morning's New York Times article explains the seeming contradiction in CBO's score.
Overtime Rule update: On Tuesday, the U.S. Department of Labor sent a Request for Information related to the now-enjoined overtime rule to the Office of Management and Budget for review. After OMB completes its review, the RFI will be published in the Federal Register for public comment. The RFI will likely ask employers who adjusted their wages in anticipation of the rule's passage to identify what the economic burden has been. The RFI suggests that DOL may be ready to abandon rule. The new overtime rule, would have forced employers to pay employees a minimum salary of $913 per week ($47,476 annually) to maintain their exemption from the overtime rule. The rule was to take effect on December 1, 2016, was blocked by an injunction from a Texas court last November and currently remains pending before the 5th Circuit. With the injunction of the new rule, the minimum salary for exemption for most executive, administrative, and professional employees remains $455 per week ($23,660 annually) under federal law.
Section 2704 Estate and Gift Tax valuation regulations defunded in House appropriations bill: Yesterday, the House Appropriations Financial Services and General Government Subcommittee released its draft bill, summary. Among dozens of policy riders, it would repeal the pending section 2704 stealth death tax increase, repeal the Volcker Rule, bring the FDIC, FHFA, NCUA, OCC, and non-monetary policy functions of the Federal Reserve into the appropriations process, and curtail the Consumer Financial Protection Bureau. House passage is likely, but many riders are unlikely to survive an inevitable Senate filibuster. The author of the death tax language in the House says: “I can see the Democrats allowing pretty easy, because they’ll view it as an easy “give,” since it’s probably dead anyway.” Forbes recently highlighted the “zombie regulations” which are likely to be withdrawn by the Treasury Department.
Rep. Davidson (R-OH) released a standalone bill last year, the Protect Family Farms and Businesses Act (H.R. 6100) and was the main advocate for including this language (below) in the House bill.
15 SEC. 115. None of the funds made available by this
16 Act may be used to finalize, implement, or enforce amend-
17 ments to Treasury Regulations proposed in the Notice of
18 Proposed Rulemaking in the Federal Register on August
19 4, 2016 (81 Fed. Reg. 51413) (relating to restrictions on
20 liquidation of an interest with respect to estate, gift, and
21 generation-skipping transfer taxes under section 2704 of
22 the Internal Revenue Code of 1986), or any substantially
23 similar amendments to such regulations
Big cuts to the IRS proposed: Internal Revenue Service (IRS) – The bill provides $11.1 billion for the IRS – a cut of $149 million below the fiscal year 2017 enacted level and $111 million above the President’s budget request. This holds the agency’s budget to below the 2008 level, however, it provides increased funds to Operations Support to strengthen cyber security and IRS information technology – an Administration priority. Included in the base bill are funds to support IRS’s customer service – such as phone call and correspondence response times – and funding for fraud prevention, and cyber security. In addition, to address underperformance and previous poor management and decision-making at the IRS, the bill includes several provisions, such as:
· A prohibition on a proposed regulation related to political activities and the tax-exempt status of 501(c)(4) organizations. The proposed regulation could jeopardize the tax-exempt status of many nonprofit organizations and inhibit citizens from exercising their right to freedom of speech;
· A prohibition on funds for bonuses or to rehire former employees unless employee conduct and tax compliance is given consideration;
· A prohibition on funds for the IRS to target groups for regulatory scrutiny based on their ideological beliefs;
· A prohibition on funds for the IRS to target individuals for exercising their First Amendment rights;
· A prohibition on funds for the production of inappropriate videos and conferences;
· A new prohibition on funds to implement new IRS guidance on conservation easements;
· A new prohibition on funds to determine church exemptions unless the IRS Commissioner has consented and Congress has been notified; and
· A requirement for extensive reporting on IRS spending and information technology.
The bill includes provisions to stop the IRS from implementing an individual insurance mandate on the American people. The bill also includes a provision prohibiting funds to pay for an abortion or the administrative expenses in connection with a multi-state qualified health plan, with certain exceptions.
More time needed before House budget resolution mark-up: Tuesday’s postponement was bound to happen because of differing views among Republicans over how to accommodate a defense increase, non-defense discretionary and mandatory spending cuts, and balance the budget over the next decade. Chair Diane Black (R-TN) has proposed a $200 billion spending cut through reconciliation, but House Freedom Caucus members want more.
Tax Reform; Hatch promises an open process: Tuesday, in a speech on the Senate floor, Finance Chair Orrin Hatch (R-UT) said, “I have been working to involve all the Republican members of the Senate Finance Committee in this effort. We have a number of great senators on the committee, many of whom have put in years of work on different areas of the tax system.” This was in response to the closed-door process that developed the Senate's health care bill, bypassing the Finance Committee, where there weren't enough supporters to pass it. Chairman Hatch has tapped several Senators to oversee different tax policy areas:
Sens. Enzi (R-WY) and Portman (R-OH) – international taxes
Sen. John Thune (R-SD) – business taxes and the estate tax
Sens. Dean Heller (R-NV) and Cassidy (R-LA) – energy tax issues
Sen. Grassley (R-IA) – individual taxes
Sen. Roberts (R-KS) – agricultural tax issues
The Chairman also noted: “Recently, however, we have not been hearing much from our Democratic colleagues and friends when it comes to tax reform.” Tax reform like health care will be a partisan process, with the restrictions of budget reconciliation in the Senate.
Trump Tweets on Internet Sales Tax: Wednesday, President Trump jumped into the internet sales tax debate with a tweet to his 33 million Twitter followers, stating “The #AmazonWashingtonPost, sometimes referred to as the guardian of Amazon not paying internet taxes (which they should) is FAKE NEWS!” It’s believed that the tweet was in reference to the ongoing feud between Trump Jeff Bezos, who owns Amazon and the Washington Post. In the past, Amazon avoided collecting taxes using the physical presence standard, however, with stores and fulfillment centers across the country, Amazon now collects sales taxes in every state that has a sales tax.
Energy bill reintroduced: Late Wednesday, Senate Majority Leader Mitch McConnell (R-KY) set the stage for consideration of S.1460, last year's Energy Policy Modernization Act, without going through committee again. The bill would facilitate LNG exports, streamline hydropower licensing, and enhance electric grid reliability and security. The bill includes some long-standing priorities for NAED including pilot programs for energy efficient motors and transformers, as well as updates to building codes to promote energy efficiency.
Tagged with congress, legislation, overtime, tED