Federal Issues Update
With the October 1 start of the new federal fiscal year still a
few months away, House Republican leaders have managed to reach
the halfway point in their bid to clear all 12 fiscal year 2016
appropriations bills. As of this writing, the following six
measures have been approved by the full House of Representatives:
Commerce-Justice-Science (CJS); Transportation-HUD (T-HUD);
Energy & Water (E&W); Legislative Branch; Military
Construction-Veterans Affairs (MilCon-VA); and, Defense. At the
committee level, the House Appropriations Committee recently
approved an Interior and Environment funding package, as well as
a Financial Services spending bill.
While House appropriations bills have been moving at a
historically fast pace, the Senate has yet to pass a single
fiscal year 2016 spending measure. Seven bills, however, have
been cleared by the full Appropriations Committee (Homeland
Security; Interior and Environment; CJS; E&W; Legislative
Branch; MilCon-VA; and, Defense).
Looking ahead, the road to a final budget looks to be long and
difficult as Senate Democrats are vowing to prevent all 12
appropriations bills from reaching the floor until Republicans
agree to a “Ryan-Murray type” budget agreement that would allow
for additional federal spending beginning next fiscal year. Even
if Republicans manage to overcome Democratic procedural
roadblocks and are eventually able to pass their spending
measures, President Obama has threatened to veto any funding bill
that does not provide resources beyond the levels prescribed in
the Budget Control Act of 2011.
Further complicating this year’s appropriations process is the
existence of a number of extraneous “policy riders.” For example,
the House E&W spending bill, as well as the House/Senate
versions of the Interior-Environment appropriations legislation
include language that would block the Obama administration from
implementing its recently finalized “Waters of the U.S.” (WOTUS)
rule. Several bills also include controversial language on such
matters as air quality standards, the Endangered Species Act and
gun control.
It should be noted that in addition to using the fiscal year 2016
appropriations process to block the administration’s WOTUS rule,
congressional Republicans are using other legislative options in
an attempt to derail the regulation. In the House, lawmakers
approved in mid-May legislation (HR 1732) that would block
implementation of the rule.
Across Capitol Hill, the Senate Environment and Public Works
Committee approved on June 10 a bill that is similar to HR 1732.
Under the Senate legislation (S 1140), the Environmental
Protection Agency and the Army Corps of Engineers would be
directed to issue a revised proposal that sets clear limits on
the federal regulation of water, requires consultation with key
stakeholders, and ensures that a thorough economic analysis is
undertaken.
Transportation Reauthorization
With just six weeks remaining before the current extension of
MAP-21 is slated to expire, key lawmakers have been engaged in a
series of discussions aimed at generating legislation to keep
surface transportation programs operating beyond July 31. Both
parties remain at odds over a plan to fund the Highway Trust Fund
(HTF), which the Congressional Budget Office (CBO) has projected
will face a $168 billion shortfall over the next 10 years.
Both panels with jurisdiction over the revenue component of
MAP-21 — the House Ways and Means and Senate Finance Committees
– held hearings this week to discuss potential financing options.
While Ways and Means Committee Chairman Paul Ryan (R-WI) and
Senate Finance Committee Chairman Orrin Hatch (R-UT) both agree
on the need for a multi-year bill, they disagree on how it should
be funded.
Chairman Ryan has made clear that he does not support an increase
in the federal gas tax. He also has signaled that Congress will
need to transfer money from the General Fund to avoid any
disruptions during the busy summer construction season. In
addition, House leaders have proposed using either a business tax
overhaul or a repatriation of offshore corporate profits to
finance a multi-year surface transportation bill. For his part,
Chairman Hatch has not quite ruled out a gas tax increase, but he
has shown a greater interest in finding another source of
revenue. In the coming weeks, both tax-writing panels will hold
additional hearings to further discuss funding options. However,
absent consensus on a new long-term financing plan, Congress will
need to approve another short-term extension before the latest
stopgap measure expires in July.
For its part, the Senate Environment and Public Works Committee,
which has jurisdiction over the highway title of MAP-21, is
scheduled to hold a June 24 markup of a new six-year bill. The
text of the legislation is not expected to be released until
shortly before the committee considers the bill.
Fiscal Year 2016 Appropriations
Labor-Health and Human Services
On June 17, the House Labor-Health and Human Services (Labor-HHS)
Appropriations Subcommittee approved its fiscal year 2016
spending measure, the first time it has done so in three years.
In fact, Labor-HHS is generally one of the last bills to be
considered each year, due to its propensity for attracting highly
partisan policy riders. The legislation, which will be considered
by the full committee on June 24, would provide a total of $153
billion in discretionary spending next year. This would be $3.7
billion less than the currently enacted level and $14.6 billion
less than the president’s budget request.
Among other things, the bill would eliminate any funding for the
Affordable Care Act. This proposal alone would be enough to
guarantee a presidential veto. Among other things, the bill would
continue to fund a number of key health programs at current
levels. It also would provide level funding for state and local
workforce training programs. In addition, programs funded by the
Older Americans Act, including congregate meals and Meals on
Wheels, would receive a small boost. The largest discretionary
spending increases are slated for the National Institutes of
Health (NIH), as the House plan would increase NIH funding by
$1.1 billion.
It should be noted that entitlements and mandatory spending
programs are not subject to the appropriations process.
Therefore, Medicaid, the Temporary Assistance for Needy Families
(TANF) program, Child Support Enforcement, Title IV-E foster care
payments, and the Social Services Block Grant (SSBG) would
continue to receive their designated budget amounts.
The Senate has not yet announced when it will consider its
counterpart spending measure.
Interior-Environment
On June 18, the Senate Appropriations Committee approved its
fiscal year 2016 Interior and Environment spending bill. The
measure would provide just over $30 billion ($2.2 billion less
than the administration’s request) in discretionary spending for
the Department of the Interior, the Bureau of Land Management
(BLM), the U.S. Forest Service, EPA, and related agencies. Among
other things, the bill would provide a slight increase in funding
for BLM and the Forest Service. With regard to wildland
firefighting and suppression programs, the measure would provide
$3.6 billion, an increase of $52 million. It also includes a cap
adjustment that would make firefighting costs eligible for
disaster aid once federal agencies exhaust the traditional
wildfire suppression account.
As expected, the Senate bill contains a number of controversial
policy riders that are designed to hamper the White House’s
environmental agenda. For example, and as previously noted, it
would bar the Obama administration from implementing its final
WOTUS rule. Additionally, it would prohibit the EPA from lowering
the ozone standard until at least 85 percent of counties that are
in nonattainment with the current standard come into
compliance.
Internet Sales Tax
On June 15, Representative Jason Chaffetz (R-UT), who chairs the
House Oversight and Government Reform Committee, introduced
Internet sales tax legislation — the Remote Transaction Parity
Act (RTPA; HR 2775). RTPA builds upon another online sales tax
measure — the Marketplace Fairness Act (MFA; S 698), which has
been endorsed by CSAC. Like the Marketplace Fairness Act, RTPA
would give states the ability to collect sales taxes from
out-of-state Internet retailers, and the tax would be based on
the final destination of the purchase.
While the two bills are fairly similar, RTPA includes significant
audit protections for small businesses that are not included in S
698. One critique of the MFA was that it could leave small
businesses vulnerable to multiple audits in every state. Under
the Chaffetz proposal, companies that use certified software
would only be subject to an audit from their home state and/or
any state where the company has a physical presence. Furthermore,
businesses with less than $5 million in gross annual sales would
be fully exempt from remote sales tax audits, unless there is a
reasonable suspicion that the seller has engaged in intentional
misrepresentation or fraud.
Another key difference is that the RTPA would exempt more small
businesses from tax collection requirements in the first few
years. In the first year, RTPA would exempt businesses with less
than $10 million in gross annual sales. By the second year, the
exemption would drop to $5 million, and by the third year, only
businesses with less than $1 million in gross revenue would be
exempt from tax collection requirements. However, there is no
exemption for products sold over an electronic marketplace (i.e.
eBay, Amazon, etc). Finally, HR 2775 would require states to
provide remote sellers with the software needed to collect and
remit the taxes owed. It also would require states to pay for
set-up, installation, and maintenance costs of the software.
The bill has been referred to the House Judiciary Committee,
where Chairman Bob Goodlatte (R-VA) has been working on his own
draft proposal – the Online Sales Simplification Act. Unlike the
two aforementioned bills, the Goodlatte draft would allow states
to require retailers to charge sales taxes based on the location
of the seller, rather than on the location of the consumer.
Additionally, Goodlatte’s draft proposal would only subject
remote sellers to one audit by their home state taxing authority,
and it does not include an exemption for small businesses.
While Chairman Goodlatte has yet to publicly comment on the RTPA,
early indications are that he would not support it. Further
complicating matters, House and Senate GOP leaders have yet to
show any interest in moving remote sales tax legislation this
year.