Legislative Update

December 01, 2014

If the schedule holds, there are two weeks left in the 113th Congress-in that time, lawmakers must fund the government (current funding authority runs out on 12/11), deal with the expiring TRIA, decide what to do about almost 60 already-expired and expiring-this-year tax rules, confirm a rash of Administration nominations, and make final decisions about a handful of other time-sensitive issues (e.g., the prohibition against state taxes on the internet expires later this year, too).

All of this will happen against a backdrop of deep anger among GOP lawmakers over President Obama's November 20 executive order on immigration. Cooperation-necessary for enactment of anything more than the most basic extensions (both of funding and of expired/expiring rules)-is in short supply.

Few (no?) lawmakers want simple extensions of current tax, TRIA or funding laws-but getting agreement on policy changes is proving difficult. Already, an emerging deal on the tax extenders was scuttled last week, largely due to the anger over the immigration order. (Of course, major legislation has a way of "dying" and then "reviving" (usually multiple times!) before a final decision to enact/reject-that could happen with tax extenders this week or next, too.)

So, we expect the early weeks of the 2014 holiday season to be marked with angst and hot rhetoric. Ultimately, it is more likely than not that Congress will fund the government, at least extend if not modify and reauthorize TRIA, and make some sort of decision on tax extenders (and the other time-sensitive issues). But how far-reaching the year-end 2014 laws will be remains a question with answers that are murky, at best, at this juncture.

Tax Extenders:

Last week a triumvirate of House-Senate/GOP-Democratic negotiators came close to an agreement on tax extenders. The "big three" were Senate Majority Leader Sen. Harry Reid (D-NV), Sen. Chuck Schumer (D-NY), and Ways & Means chairman Rep. Dave Camp (R-MI). However, the emerging agreement fell apart. Negotiators will try again this week.

The near-agreement included a permanent section 179 expensing provision that would preserve the higher (but now expired) limits on the amount of business acquisitions that can be expensed (deducted in the year purchased) rather than capitalized (deductions of acquisition expense spread out over the life of the property). It also included a permanent rule allowing limited direct tax-free gifts from IRAs to charities. Also made permanent would be rules on the research & development tax credit, transportation (Metro, buses, bikes, etc.) expense deductions and on the deduction for state sales taxes. However, objections arose-principal among them were Democrats' dislike of the exclusion from the package of permanent child tax credit and earned income tax credit (EITC) rules (President Obama's people said they would recommend a veto of the bill because it did too much for business and not enough for middle and lower class individuals, largely because of the missing permanent child tax credit and EITC.)

The GOP insisted on excluding the child tax credit and EITC provisions because of the immigration issue-those who can benefit from the immigration order would, likely, qualify to claim the EITC and child tax credit and that was something many in the GOP would not support.

This is the first-but without doubt not the last-instance of legislation falling victim to the fallout from the immigration issue.

How lawmakers will respond to the current impasse this week (or next) remains unclear. As noted above, controversial legislation has a way of "dying" and then "reviving" - cooler heads and a more balanced compromise could emerge. However, at the current moment negotiators are saying the best they can do may turn out to be a simple one-year (or perhaps two) extension of the tax extender rules.

ACA:

Year two of Affordable Care Act (ACA) enrollment through the exchanges got off to a relatively smooth start on November 15. Early numbers show almost 500,000 individuals bought health insurance through an exchange in the first two weeks of this open season.

We expect "talk" but no action on legislation to rescind, repeal, gut, defund or otherwise undo the ACA this year-but watch for such action early in 2015. Incoming Sen. Majority Leader Sen. Mitch McConnell (R-KY) says the GOP will make extensive use of the appropriations (government funding) process to enact policy riders that will starve the ACA regulators/implementers of the funds they need to make the ACA work.

There will also be legislation to change the ACA-look for bills to change the definition of full-time work to 40 hours/week, to repeal the mandates (both individual and employer), to repeal the medical device tax, and other discreet issues.


           


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