Weekly Legislative Update - September 23, 2019

Broad Year-End Tax Bill Including Extenders Emerging

Last Wednesday, Ways and Means Democrats from high-tax states, a power group who've been pleading for action to restore the State and Local Tax deduction (SALT), met with Chairman Neal, and at the end of the day, Democrats agreed to support a rollback of TCJA provisions which terminated SALT.

Select Revenue Measures Subcommittee Chairman Mike Thompson (R-CA) was assigned the task of preparing a bill restoring the SALT deduction for markup in October.   

Congress is so near the end of its first session that the most feasible route emerging for tax law is the Senate Finance Committee's writing an original bill with some picking and choosing from Ways and Means work:

  • Bills expanding Child Tax Credit, Earned Income Tax Credit, and Child and Dependent Care Tax Credit;
  • Retirement Savings (SECURE) Act, HR 1994;
  • Rehabilitation for Multiemployer Pensions Act, HR 397;
  • SALT restoration being written by Chairman Thompson's Subcommittee, due for markup in October; and
  • USMCA and TCJA Technical Corrections (possibly).

Senator Grassley and Chairman Neal are talking more now, seeking areas of agreement.  Compromise on the extenders is inevitable because Mr. Neal is backing one-year extension, retroactive, fully paid for, through 2020; while Senator Grassley is aiming for longer extensions, some permanent. Senator Grassley is in a position to drop Mr. Neal's extenders bill entirely, in favor of a Senate Finance Committee substitute making WOTC permanent or at least long-term, as called for in our current Lobbying Plan.

A broad tax bill written by the Senate Finance Committee can be approved by the Senate and attached to the government funding measure that's expected no later than midnight, November 21st.  If there's to be a tax bill this year, odds are it must be enacted as a tax title to whatever regular government funding bill passes by then-continuing resolutions don't count, in fact, another CR on November 21st might cause a temporary shutdown of WOTC.

A year-end tax bill has disadvantages: it can bring new antagonists as well as new supporters.  Senate floor debate can entail hundreds of amendments related to any part of the Code.  Time is short and it's easier to obstruct a bill late in the session, hence controversial items are almost always removed.  Invariably, only items agreed by House, Senate, and White House are enacted, and WOTC has always succeeded.

We've focused our lobbying on the Senate during and since the recess because the final tax bill will be written by the Senate.  This lobbying focus should continue. 

Senator Grassley's timing for markup of an extenders bill depends on how fast the staff can prepare.  Before writing his "chairman's mark" (draft bill), he'll consult Finance Committee members on their views; later, when senators see the chairman's mark and want to submit amendments, the staff will record those amendments and the order in which they'll be voted during markup.

There are more than 30 extenders, as well as 28 senators able to submit amendments, thus Senator Grassley and staff must work hard to resolve issues before markup, reducing the number of amendments voted on.  All this takes time, but markup in October means more time to lobby senators.

House And Senate Treading Water On Actions To Advance Tax Extenders

Congress has laid the groundwork, but thus far there's no movement in House or Senate to advance WOTC and other expired or expiring tax provisions. 

Here's what we'd like to see happen in the coming four weeks:

When he gets the green light from Speaker Pelosi, Ways and Means Chairman Neal can bring to the floor H.R. 3301, the Taxpayer Certainty and Disaster Tax Relief Act, which authorizes WOTC and other extenders retroactively until the end of 2020. 

Chairman Neal hasn't gotten the green light, he's constrained by two problems, first, House Democrats plan to package the extenders with expansions of the Child Credit, Earned Income Tax Credit, and Child and Dependent Care Credit, covering their full cost, but so far only a partial offset has been proposed; second, the Chairman will likely be required to floor-manage a bill to reduce the cost of prescription drugs, which Speaker Pelosi unveiled after the recess and has high priority among Democrats, bumping the extenders.

Until we see the extenders bill Chairman Neal will take to the floor, we'll lobby the House by staying current with key decision makers: Speaker Pelosi and her team, Chairman Neal and his team. 

In the Senate, action by the Finance Committee can come anytime. Chairman Grassley is committed to passing WOTC and other extenders on a bi-partisan basis with Senator Wyden, but he's yet to schedule a markup even though all task forces studying the extenders recommended taxpayer certainty through permanent or long-term extensions.

We need Chairman Grassley to mark up a bill that we in WOTC Coalition can get behind and push over the goal line.  Till this happens, we should continue to urge Senator Grassley to mark up a tax extenders bill that includes permanent WOTC with new target groups for military spouses and reservists, SSDI recipients, seniors receiving food stamps, and transitioning foster youth.   

Senator Grassley doesn't have to offset the cost of temporary extensions, i.e., extensions that have a sunset date. In the past, the Senate chose to offset the cost of permanent extensions, and since Democratic votes are needed to enact any bill in the closely-divided Senate (53-47), ultimately offsets may be required permanency.

If permanency must be paid for, it will narrow the field of those made permanent, because Republicans oppose tax increases, and Democrats oppose most spending cuts, needed to raise revenue.  It follows we must make sure our senators are aware of WOTC and its merits-we want them to speak in favor of WOTC when they caucus to consider the question of making WOTC permanent.

Beyond the next four weeks, developments aren't encouraging but we've been there before.

With the Senate far behind enacting appropriations bills for Fiscal Year 2020, the House this week will pass a continuing resolution to fund the government through November 21st.  No one can say how the CR will fare in the Senate if Democrats propose amendments. 

The Senate's appropriations process is in turmoil because Democrats refuse to accept the top-line fund allocations set by Republicans for the twelve appropriations bills. 

Additionally, Senators McConnell and Schumer have to resolve tough issues on Defense (the wall), Homeland Security (the wall), and Labor-HHS-Education (executive order covering medical advice on abortions), and these are only starters. 

Precisely how a leading appropriations measure will jell for fiscal 2020 is uncertain at this writing-most of the decisions required of leaders haven't been made, so we'd only be second-guessing to try.

Suffice it to say that tax law has often ridden along on appropriations bills, and we'd much regret losing such a vehicle so late in the session. 

Lots of tax law is coming down the pike-USMCA, TCJA technical corrections, cost of prescription drugs, retirement, multi-employer pension plans, etc. -but tax law is the hardest of legislation to pass, we'll almost always need a vehicle when reconciliation isn't invoked, and have to work with leaders of both houses to designate one