What’s New in Washington - November 2017

by Akin Gump Strauss Hauer & Feld LLP
Contact

Akin Gump Strauss Hauer & Feld LLP

Congress continues its heavy workload with the Thanksgiving recess roughly three weeks away. On October 26, the House passed the Senate’s Fiscal Year 2018 budget resolution by the slim margin of 216-212—opening the door for Republicans to pursue President Trump’s top priority of tax reform with a simple majority under budget reconciliation. House Republicans released their long-awaited tax reform plan this week and are scheduled to mark up the legislation next week in the House Ways and Means Committee. Senate Republicans are expected to release their package in the middle of next week (week of November 6) and mark up their bill in the Senate Finance Committee during the week of November 13. President Trump is urging the House and Senate to put tax reform on his desk by the end of the year.

Tax reform debate has continued simultaneously along with efforts to provide disaster relief and stabilize health care markets. On October 26, President Trump signed a $36.5 billion emergency aid measure to refill disaster accounts and bail out the federal flood insurance program. The funds in the bill are intended to aid not only Florida, Texas and Puerto Rico after devastating hurricanes, but western states that have suffered from massive wildfires as well. Since damage is still being assessed, it is expected that Congress will be pressed to provide further disaster aid. Additionally, the Bipartisan Health Care Stabilization Act of 2017 authored by Sens. Lamar Alexander (R-TN) and Patty Murray (D-WA) has continued to gain traction in the wake of a more favorable Congressional Budget Office (CBO) score than previously proposed health care bills.

Here are a few things that we believe are worth focusing on since our last issue: 

Tax Reform Begins in Earnest

On November 2, 2017, the House Ways and Means Committee released its much-anticipated plan for reforming the tax code for businesses and individuals, entitled the Tax Cuts and Jobs Act of 2017 (TCJA). The bill marks the beginning of what Republican leaders hope will be a speedy and successful race to enactment by the end of 2017. The plan makes significant changes to all aspects of the corporate, pass-through, international and individual sections of the tax code.

A link to Akin Gump Strauss Hauer & Feld LLP’s analysis of TCJA is available here and again at the end of this section. The analysis includes key highlights; descriptions of the plan’s treatment of corporate, pass-through, international and individual portions of the tax code; and a chart comparing the new proposal to other recent Republican tax proposals, including former Committee Chairman Dave Camp’s H.R. 1.

Key highlights of the plan include:

  • Corporate and Pass-Through:
    • corporate tax rate of 20 percent
    • pass-through rate of 25 percent on 30 percent of income designated as business income, with the remaining 70 percent taxed at individual rates as compensation income
    • five-year period of immediate and full expensing of depreciable assets
    • a limit on deductibility of net interest expense in excess of 30 percent of pretax earnings, with carveouts for small businesses (under $25 million), regulated public utilities, and real property trade and business
      • no grandfather for existing debt.
  • International:
    • shift from a worldwide system of taxation to a territorial system whereby U.S.-based companies are exempt from U.S. tax on profits earned overseas
    • provisions intended to prevent base erosion, including a global minimum tax and a new excise tax on certain related-party payments
    • one-time transition tax on deferred income of foreign affiliates (aka deemed repatriation), with a bifurcated rate of 12 percent for cash and cash equivalents and a 5 percent rate on illiquid assets.
  • Individual:
    • consolidation of the current seven tax brackets into four at 12, 25, 35 and 39.6 percent
    • doubled standard deduction ($12,000 for individual, $24,000 joint)
    • mortgage interest deductibility capped at $500,000 for new homes, up to $10,000 for property tax deduction; eliminates deductibility of other state and local taxes.

The Ways and Means Committee is scheduled to begin its markup of the legislation on Monday, November 6, at noon. The markup is expected to consume the balance of the week, with a built-in deadline of finishing by Thursday, November 9, with Veterans Day observed on Friday, November 10. While this would require a quick turnaround post-markup, Speaker Ryan has said that he plans to put the bill on the House floor for a vote the week of November 13.

The Senate Finance Committee is working to finish its version of tax reform. Finance could unveil its plan as early as November 8, with a markup planned for the week of November 13. Senate Majority Leader Mitch McConnell (R-KY) told senators that they may be in session the week of Thanksgiving for a possible Senate floor vote on the bill.

A link to the Akin Gump analysis of TCJA can be found here and reflects changes from Chairman Brady’s substitute amendment released today, which primarily made technical changes.

Treasury Releases Two More Reports on the Financial Services System

On February 3, 2017, President Trump signed an Executive Order (EO) setting out a series of core principles for financial sector regulation. The EO directed the Treasury to review existing laws to determine how closely they promote the stated core principles. The Treasury delivered its first mandated report focused on the depository system on June 12.

In October, the Treasury released two additional reports on the financial system that analyzed capital markets and asset management and insurance markets. In the first report, the Treasury noted the importance of sound capital markets as a source of liquidity for American businesses and, among the recommendations included in the report, suggested:

  • streamlining disclosure requirements and tailoring those requirements to the size of the companies going public
  • harmonizing regulations between the Securities and Exchange Commission and the Commodity Futures Trading Commission
  • allowing for more public input into the rulemaking process, as well as more robust economic analysis of proposed rules
  • adopting rules allowing for pooled investments in private and less-liquid offerings
  • repealing Dodd-Frank provisions governing disclosure requirements related to conflict minerals, mine safety, resource extraction and executive compensation.

The report on asset management and insurance markets focused on four key areas: evaluation of systemic risk, effective regulation, engagement in international regulatory forums, and support of economic growth and consumer choice. Among other suggestions, the report recommended:

  • permitting an activities-based analysis of systemic risk of asset management and insurance companies
  • promoting the U.S. regulatory framework for asset management and insurance in international forums
  • fostering improved coordination among the Federal Insurance Office and state insurance regulatory authorities
  • encouraging sound liquidity risk management programs used by asset managers and insurance companies
  • delaying the implementation of the fiduciary rule pending further analysis by federal regulatory agencies and the states
  • expanding consumer choice by permitting employer-sponsored retirement plans to utilize annuities as an investment choice.

Looking forward, the Treasury is expected to release a fourth report containing reform recommendations for nonbank financial institutions. Moreover, the Treasury is due to release two additional reports targeting specific aspects of the financial system instituted by the passage of Dodd-Frank. On April 21, the White House released two presidential memoranda expanding on the February 3 EO. The documents directed the Treasury to review specific portions of Dodd-Frank. The first directed Treasury Secretary Steven Mnuchin to review the Financial Stability Oversight Council’s (the “Council”) authority to designate banks and nonbank financial firms as systemically important, with particular emphasis on the process the Council uses in its determinations. The second memorandum called for a review of the government’s orderly liquidation authority by which the Federal Deposit Insurance Corporation is able to carry out liquidation and wind down financial institutions. The memoranda ordered the Treasury to report its findings by mid-October, a deadline which the Treasury missed. It is unclear when Treasury officials will release those additional reports.

Legislative Changes Proposed to Foreign Investment Review Process

CFIUS Reform Bill

Sen. John Cornyn (R-TX) and Rep. Robert Pittenger (R-NC) are set to introduce identical bills that would dramatically expand the purview of the Committee on Foreign Investment in the United States (CFIUS). The draft legislation, which arises in the context of increased scrutiny of Chinese investments in high-tech industries, is expected to receive Trump administration approval and have bipartisan sponsorship.

The draft legislation calls for an expanded definition of “covered transactions” to capture certain noncontrolling investments and joint ventures, including transactions dealing with “critical technologies” and “critical infrastructure.” Additionally, the bill would require parties to certain transactions to file short-form notices (dubbed “declarations”) with CFIUS prior to closing. It also introduces filing fee requirements and extends the timeline for CFIUS review, among a variety of other modifications to the CFIUS regime.

Proposed Economic Review of Foreign Investment

Sens. Chuck Grassley (R-IA) and Sherrod Brown (D-OH) have floated legislation that would allow the U.S. government to screen incoming investment for its effect on domestic industry and the U.S. economy. While CFIUS currently screens foreign direct investment for national security concerns, no process exists to weigh the economic impact of investments. The senators claim that their proposed bill would better align the United States’ screening mechanism with those of Europe, Canada, Australia and China.

The bill would require parties to a “covered transaction” to submit written notification to the Secretary of Commerce, who would have 15 days to approve or notify the parties that more time is needed to complete the review. After further review, the Secretary can decide to approve, prohibit or require modifications of the transaction. The bill defines a covered transaction as any merger or acquisition or greenfield investment that would result in foreign control of a business engaged in interstate commerce worth at least $1 billion or would result in foreign state-owned enterprise control of a U.S. business worth more than $50 million. The legislation would also authorize the chair and ranking member of the Senate Finance Committee or House Ways and Means Committee to request that the Secretary of Commerce review a foreign investment of any size.

International Trade Dialogues Expected to Intensify in November

Trump’s Trip to Asia

President Trump will make his first visit to Asia as U.S. leader on November 3-13, 2017. He will arrive in Japan on November 5, the Republic of Korea on November 7, China on November 8, Vietnam on November 10 and the Philippines on November 12. In Vietnam, the President will participate in the Asia-Pacific Economic Cooperation (APEC) Economic Leaders’ Meeting and deliver a speech at the APEC CEO Summit. In the Philippines, he will celebrate the 40th anniversary of U.S.-Association of Southeast Asian Nations (ASEAN) relations at the U.S.-ASEAN Summit and participate in bilateral meetings. While the trip was originally supposed to extend until November 14, it has been announced that the President will skip the gala celebration dinner for the 50th anniversary of the ASEAN and return to the United States early.

Accompanying the President will be Secretary of State Rex Tillerson, Commerce Secretary Wilbur Ross, Treasury Secretary Mnuchin, United States Trade Representative (USTR) Robert Lighthizer, National Security Advisor H.R. McMaster and senior policy advisor Stephen Miller. With respect to trade, USTR Lighthizer is expected to meet with his counterpart, Korean Trade Minister Kim Hyun-chong, to continue discussions on the U.S.-Korea Free Trade Agreement (KORUS), as well as participate in the APEC meeting in Vietnam.

Also with respect to trade, a high-profile focus of the trip will be trade relations with China, since they have been tense this year with Sections 232 investigations on steel and aluminum and Section 301 investigation on Chinese acts, policies and practices on intellectual property, technology transfer and innovation. On October 26, the U.S. Department of Commerce issued a memo on maintaining China’s nonmarket economy status and issued preliminary determinations on dumping various goods, such as aluminum foil.

NAFTA

At the end of the last round of negotiations, it was announced in a joint statement that the next round will take place in Mexico City from November 17-21, a departure from the pace of meeting every three weeks in previous rounds. It was also indicated that the negotiations would extend through the first quarter of 2018. USTR Lighthizer said in his closing statement that he was surprised to meet resistance from the trading partners and accused them of being “difficult.” Mexico and Canada have labeled the United States’ proposed provisions as obstructionist and have expressed concerns that the United States may be proposing extreme demands and provisions with one-sided benefits to give the administration reason to withdraw from the agreement.

Senate Finance Committee Releases Draft Medicare Extenders Bill

On October 26, bipartisan leaders of the Senate Finance Committee circulated a discussion draft of legislation that would extend a number of expiring Medicare payment programs. Among other provisions, the draft legislation:

  • extends the low-volume inpatient hospital adjustment through fiscal year 2022; starting in fiscal year 2018, the pay adjustment would be based on total discharges rather than just Medicare beneficiaries
  • extends the Medicare Dependent Hospital program through fiscal year 2022; the draft would require the Government Accountability Office (GAO) to conduct a study on the program
  • extends the add-on payments for all ground-ambulance services and the super-rural ambulance add-on payments through fiscal year 2022; the discussion draft also requires the Department of Health and Human Services to develop a data collection system to collect cost, revenue, utilization and other information
  • permanently repeals the therapy caps beginning January 1, 2018, and would continue to require an appropriate modifier on claims over the current exception threshold
  • extends the current 1.0 physician work Geographic Practice Expense Index (GPCI) floor through 2019 and requires the GAO to assess the appropriateness of the current method for calculating the work GPCI adjustment
  • extends the home health rural add-on, increasing it from 3 percent to 4 percent for counties with a population density of six or fewer individuals per square mile; the add-on would then be phased down to 1 percent by 2022.

The Finance Committee noted that an extension of Medicare Advantage Special Needs Plans (SNP) was not included in the draft because the CHRONIC Care Act (S. 870), which the Senate passed in late September, included a permanent extension of SNPs. Offsets for the extenders are still under discussion, but the final package is expected to be fully paid for. The extenders are likely to move as part of a year-end deal in December and may be paired with Children’s Health Insurance Program reauthorization legislation.

It is unclear whether a year-end package will include any of the market stabilization proposals that are currently under consideration in Congress. A CBO estimate of the Alexander-Murray proposal, which would extend cost-sharing reduction (CSR) payments for two years and provide additional state waiver flexibility, indicated that the CBO would reduce the federal deficit by $3.8 billion over a decade. The White House and House Republican leadership have expressed dissatisfaction with the plan, however, prompting House Ways and Means Committee Chairman Kevin Brady (R-TX) and Senate Finance Committee Chairman Orrin Hatch (R-UT) to announce an alternative proposal that would pair a CSR extension with relief from the Affordable Care Act’s individual and employer mandates. At present, however, it appears that the Hatch-Brady plan lacks the 60 votes necessary to pass the Senate.

Department of Transportation Launches New UAS Pilot Program

On Thursday, the Department of Transportation (DOT) held a briefing at their Washington headquarters to launch the Unmanned Aerial Systems (UAS) Integration Pilot Program (the “Pilot”). The launch follows a presidential memorandum issued last week, directing the DOT to create the Pilot. During the launch briefing, Earl Lawrence, Director of the Federal Aviation Administration’s (FAA) UAS Integration Office, discussed the Pilot application process, described in more detail in this Federal Register notice. The FAA also launched a website for the Pilot, which can be found here

Applications for the Pilot will be administered through the FAA’s contracting process. There is a strict timeline beginning on November 8, when the Federal Register Notice is set to be published: 

  • “Lead Applicants”—state, local, or tribal governments (the list is more expansive), wanting to test UAS integration in their local airspace—will have 20 days (until November 28) to submit a notice of intent to participate in the Pilot by emailing the FAA. Eligible applicants will thereafter be invited to submit applications through the FAA portal. The DOT is encouraging jurisdictions to submit notices of intent even if they do not yet have firm plans for partnering or testing. Lead applicants are limited to one application.
  • “Interested Parties”—public or private entities wishing to participate in a Pilot—can request inclusion on the FAA’s “Interested Party List” within 35 days (December 13). The Interested Party List is designed to facilitate partnerships in a central repository for those seeking to join a Pilot. Earl Lawrence noted in the briefing that the Interested Party List is merely one way to engage with a Lead Applicant, and encouraged other methods of forming partnerships. Interested Parties may be included in multiple applications.
  • Lead Applicants will have 57 days to complete their applications, but just 35 days to complete the first two parts of the application, including a “concept overview” of the proposed Pilot.
  • The rest of the application must be submitted within 57 days, by January 4, including, but not limited to, information about the airspace to be accessed, the concept of operations, the team members and the needed infrastructure.
  • The DOT may select among completed applications on a rolling basis. Once selected, Lead Applicants will have until May 7, 2018 (180 days), to enter into a Memorandum of Agreement with the FAA.

The full timeline and contracting requirements are available in the screening information request on the FAA’s contracting website. 

At Thursday’s launch event, participants heard from a range of UAS stakeholders and government representatives. FAA Administrator Michael Huerta emphasized the importance of collaboration and finding the appropriate roles for federal, state, and local government and industry. He said that the Pilot provides an opportunity to test and evaluate these roles. FAA Deputy Administrator Dan Elwell remarked that, in traditional aviation, everyone knows where the airport is, but, with drones, entire cities could become an airport. “The Pilot Program will provide the opportunity to test out different models for integrating drones in local airspace,” he said. Secretary Elaine Chao championed the program as a means to “allow local communities to experiment with new technologies…on terms that work for them and support a unified and safe airspace.” She said that the current restrictions on BVLOS operations, nighttime operations and flights over people are “about to change.” “The data collected by the program will create the path forward for the safe integration of UAS,” the Secretary explained. Dr. Jaiwon Shin, the NASA Associate Administrator for the Aeronautics Research Mission Directorate, shared during an Urban Air Mobility meeting yesterday in San Carlos that one of the big benefits of the Pilot is that companies such as Amazon and Google, which are innovating in this space, will now be able to bring some of their UAS field trials back home.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Akin Gump Strauss Hauer & Feld LLP | Attorney Advertising

Written by:

Akin Gump Strauss Hauer & Feld LLP
Contact
more
less

Akin Gump Strauss Hauer & Feld LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.