Pardon Our Dust
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NUMBER OF THE WEEK: $203 billion
The amount of mandatory savings and reforms called for in the House FY2018budget resolution. The House budget sets overall discretionary spending at$1.1 trillion for fiscal year 2018 and seeks to balance the budget within10 years through a combination of spending cuts and projected economicgrowth.
The House Budget Committee approved the blueprint in a party-line vote of22 to 14. However, the budget resolution is unlikely to receive floorconsideration before lawmakers depart for August recess, as HouseRepublicans have yet to unite behind the proposal. House Republicanmoderates are unhappy with the steep spending cuts proposed in the budget,while members of the House Freedom Caucus want to see an outline for taxreform before they vote on the measure. Fully aware of the division, HouseWays and Means Chairman Kevin Brady (R-TX) reminded his colleagues ofwhat’s at stake saying, “No budget is perfect, but for us to deliver on ourpromise on bold tax reform, this budget needs to move forward.”
The House budget blueprint may have stalled at the moment, but the chamberis moving to consider a “minibus” spending package this week. The bill,H.R. 3219, containsfour House appropriations measures for FY2018: (1) Defense, (2) LegislativeBranch, (3) Energy-Water, and (4) Milcon-VA. The fate of the other eightannual appropriations bills approved by the House Appropriation Committeeis still up in the air. The current fiscal year ends on Sept. 30, butRepublicans have yet to articulate a clear strategy to avoid a governmentshutdown in the fall.
LEGISLATIVE LANDSCAPE
Third Time’s the Charm? After two postponed votes, Senate Majority Leader Mitch McConnell (R-KY)will hold a vote on the motion to proceed to the House-passed healthcarebill this afternoon after the GOP caucus meeting. The vote is nail-bitinglyclose. While Sen. Susan Collins (R-ME) has indicated that she will likelyvote “no,” others like Sens. Lisa Murkowski (R-AK), Dean Heller (R-NV), andShelley Moore Capito (R-WV) remain undecided. Leadership hopes to swayholdouts during the caucus meeting.
All Eyez on Mitch. If the motion to proceed is successful, the Senate will begin 20 hours ofdebate on a healthcare bill. Which healthcare bill? Good question, no oneknows at this writing except for McConnell. Reports indicate that McConnellwill likely offer a substitute amendment to replace the text of theHouse-passed bill with the Senate’s updated version ofH.R. 3762, the 2015 straight-repeal bill. During the debate, senators may offervarious amendments to the bill. Once all other amendments have beenconsidered, McConnell may offer a Manager’s Amendment (wraparoundamendment) for a vote. This will likely be some version of arepeal-and-replace bill.
During this process, senators will also raise points of order to strip outvarious provisions that don’t conform to the reconciliation rules. Afterthe conclusion of the marathon voting session, McConnell may then move tovote on the underlying bill, as amended. Republican leaders will whip votesto win over holdouts on the healthcare bill.
The Monty Hall Problem. The vote today could lead to several results. The chart below illustratesthe different ways the healthcare debate may play out …
You Get a Goat! If the motion to proceed fails, the GOP may attempt …
You Get a Car (Maybe)! If the motion to proceed succeeds, then the GOP will try to …
Killing Me Softly. If McConnell’s life is not already complicated enough, earlier thisweek, the Senate parliamentarian, Elizabeth MacDonough, ruled that keyprovisions of the repeal-and-replace bill are subject to a 60-vote ByrdRule point of order. Key “Byrd-able” provisions include:
- the six-month lock out to stabilize the individual market;
- abortion restrictions for the tax credits and defunding Planned Parenthood; and
- funding for the cost-sharing subsidies.
Several additional provisions are still under review, including:
- waivers for state innovations that allows states to waive age rating, essential health benefits, and pre-existing condition requirements so long as their proposal does not increase the federal deficit;
- changing the age-rating band from 3:1 to 5:1; and
- the flexible block grant option for states.
A full list of these provisions that Senate Democrats have compiled can befoundhere.
Reconciliation Party. The House FY2018 budget resolution unveiled last week containsreconciliation instructions for 11 committees to produce $203 billion insavings and reforms. The House Ways and Means Committee has been instructedto produce at least $52 billion in savings, which it plans to do viadeficit-neutral tax reform. Aside from affirming that tax reform will bedeficit-neutral, the budget blueprint contains no new details on taxreform. Interestingly though, the budget resolution bucks the House GOP taxreform blueprint’s use of …
Welcome Back, Kautter. The Senate Finance Committee unanimously approved the nomination of DavidKautter to be the assistant secretary of tax policy at Treasury despiteRanking Member Ron Wyden’s (D-OR) concerns with Kautter’s work at Ernst andYoung. The Senate is hoping to confirm Kautter before the start of Augustrecess.
At his July 18 confirmation hearing, Kautter said he would work with thetax-writing in a “bipartisan, collaborative, and collegial manner.” On thesubject of interest deductibility, Kautter said that all options are on thetable, adding that he does not think there should be an “across the table”change for the deductibility of interest expense because differentindustries rely on debt financing and interest expensing in different ways.
REGULATORY WORLD
2017 Unified Agenda. On July 20, the Trump Administration released its2017 Unified Agenda for Regulatory and Deregulatory Actions(“Unified Agenda”) — a semiannual report on actions that the regulatoryagencies plan to issue in the near and long term. The purpose of thisreport is to give the public a better sense of each agency’s regulatoryfocus for the next 12 months. The Internal Revenue Service has outlined atotal of 238 pending regulatory items but did not provide much detail onwhat the agency plans to do with them. Below is a list of the items thatmay be …
LINE ITEMS
- Vic Fleischer, co-chief tax counsel, for Senate Finance Committee Democrats will be stepping down from his post at the end of July. No explanation has been given for Fleischer’s departure, which leaves Tiffany Smith as the sole chief tax counsel on the Democratic side.
- The House will take up a disapproving resolution under the Congressional Review Act this week to nullify the arbitration rule recently finalized by the Consumer Financial Protection Bureau.
- Rep. Mark Meadows (R-NC), chair of the ultra-conservative House Freedom Caucus, would like to eliminate the Congressional Budget Office’s Budget Analysis Division — the unit that is responsible for scoring legislation. Meadows offered an amendment to the House’s “minibus” spending package (H.R. 3219) that would cut $15 million from the CBO to eliminate its scoring function and require the nonpartisan budget office to rely on scoring data from various think tanks instead.
IN THE QUEUE
Congressional Activity
Tuesday, 7/25
House Judiciary Committee
Subcommittee hearing on H.R. 2887, a bill to regulate certain stateimpositions on interstate commerce (i.e. internet sales tax)House Ways and Means Committee
Oversight subcommittee hearing on the Treasury Inspector General for TaxAdministration’s audit of the IRS’s electronic record retention policies.Senate Banking Committee
Executive session to vote on the following nominations:
- Mr. J. Paul Compton, Jr. to be General Counsel, HUD
- Ms. Anna M. Farias to be Assistant Secretary for Fair Housing and Equal Opportunity, HUD
- Mr. Neal J. Rackleff to be Assistant Secretary for Community Planning and Development, HUD
- Mr. Richard Ashooh to be Assistant Secretary for Export Administration, Department of Commerce
- Ms. Elizabeth Erin Walsh to be Assistant Secretary for Global Markets and Director General of the United States and Foreign Commercial Service, Department of Commerce
- Mr. Christopher Campbell to be Assistant Secretary for Financial Institutions, Department of the Treasury.
Wednesday, 7/26
Senate Appropriations Committee
Subcommittee hearing on the Treasury’s budget with Treasury SecretarySteven Mnuchin testifying.
Thursday, 7/27
House Agriculture Committee
Nominations hearing on Rostin Behman, Brian Quintenz, and Dawn DeBerryStump – nominees to the CFTC.House Financial Services Committee
Annual testimony of the secretary of the Treasury on the state of theinternational financial system.Senate Banking Committee
Nomination hearing for the following:
- Joseph Otting to be Comptroller of the Currency
- Randal Quarles to be Vice Chairman for Supervision of the Board of Governors of the Federal Reserve System.
Agency Activity
Tuesday, 7/25
Federal Reserve
The Federal Open Market Committee holds a closed meeting, beginning at 9a.m. The FOMC is the policymaking arm of the Federal Reserve, July 25-26.
Wednesday, 7/26
Internal Revenue Service
Open meeting of the Taxpayer Advocacy Panel Joint Committee – the TaxpayerAdvocacy Panel is soliciting public comments, ideas, and suggestions onimproving customer service at the Internal Revenue Service.
Thursday, 7/27
Internal Revenue Service
IRS hosts an industry day event designed to increase transparency about IRSstrategic priorities and goals and build collaborative partnerships withindustry
Friday, 7/28
Financial Stability Oversight Council
FSOC will hold a closed executive session. The preliminary agenda includesa discussion about the recommendations regarding the Volcker Rule in theTreasury Department’s June 2017 report issued pursuant to Executive Order13772, “Core Principles for Regulating the United States Financial System”;an update on the annual reevaluation of the designation of a nonbankfinancial company; and a discussion regarding the pending litigationbrought by MetLife against the Council.
Other Activity
Wednesday, 7/26
U.S. Chamber of Commerce
The chamber will host a special discussion with SEC Chair Jay Clayton.
For listings of all the week’s tax and financial services happenings, read below to find out how you can become a subscriber.
The McGuireWoods’ Tax & Financial Services Policy Group assists clients in understanding how the latest legislative and regulatory proposals anddecisions may impact their business and industry. To learn more about how our team can help you monitor, analyze, and navigate all relevant legislativeand regulatory developments, please contact any of our attorneys and consultants below at (202) 857-1700. For more information on how to subscribe toour weeklyTax Policy Update and tax news alerts, please contact Radha Mohan, rmohan@mwcllc.com, (202) 857-2944.
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