Back to Government Affairs: Mobility and the U.S. Administration
10 April 2017
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Dear Worldwide ERC® Member:
There have been a number of eventful days in the U.S. administration since we last wrote to you in our Government Affairs Community Update.
We’ve made this information public, so feel free to share our twice-monthly Government Affairs Community Updates within your company and with your clients and colleagues. We’ll be communicating again on the U.S. administration and governmental activity on April 24.
Peggy Smith, SCRP, SGMS-T
Worldwide ERC® President and CEO
In the absence of any actual legislation, both the timing and content of tax reform remain subjects of intense speculation in Washington. After the failure to repeal and replace the Affordable Care Act (discussed below), the President and House Republicans said they would shift to aggressively pursue tax reform. However, that failure also left an approximately $1 trillion dollar hole in the revenue estimates for the House Republican Blueprint, due to the continued existence of the various ACA taxes. And Congress has now left town for more than two weeks on its Spring recess. Consequently, most observers are skeptical that tax reform legislation can possibly be completed by the target date of the August recess.
Another key provision of the House Republican plan, the border adjustment included as part of its proposed business changes, also continues to attract opposition from a wide variety of businesses that object to the special 20% tax on imported goods and services. The Administration has been lukewarm to that proposal as well, with Treasury Secretary Mnuchin quoted recently as saying “we’re not looking at it as it is.” The White House is reportedly looking at carving out certain items or products from the border tax adjustment, in order to make it more palatable to retailers. That type of alteration, however, is vigorously opposed by Ways and Means Chair Brady, and by tax policy experts who believe it would lead to distortions of trade and stymy the currency adjustments that are key to making the plan work. If the border adjustment provision is not part of the Republican’s tax reform plan, it leaves another approximately $1 trillion hole in the revenue estimates that would limit the ability to reduce tax rates on a revenue neutral basis.
Similarly, the House plan to eliminate interest deductions for business in exchange for immediate write-off of all capital expenditures has come under heavy fire from small business and farm groups, whose members depend upon debt financing and do not have the access to equity capital that larger businesses do. Again, this is a provision that raises revenue in the House plan, and its absence would further limit the ability to reduce tax rates.
For its part, the Administration has sent mixed signals as to its intentions with respect to developing its own tax reform plan, and what might be in it. Reports recently surfaced that the White House might be considering a Value Added Tax (VAT), which is similar to the House Republican border adjustable tax but with fewer problems, and would raise large amounts of money, or a carbon tax, which would also raise substantial revenue. Both might attract the support of some Democrats, who are currently on the sidelines on tax reform. The White House has also floated the idea of tying infrastructure spending to tax reform, a direction that might also attract the support of some Democrats. Ways and Means Chairman Brady recently met with Democrats on the committee, and there was reportedly some consensus on the need for infrastructure spending. And White House officials have also been meeting with moderate Democrats to gauge their interest in cooperating on tax reform.
In the meantime, plans for individual tax reform remain opaque, with no hint of an Administration position, and with House Republicans having said little beyond the Blueprint suggestion that all or most deductions should be repealed to pay for lower tax rates and replaced with a larger standard deduction.
How this will impact mobility: Business tax reform would impact all businesses, and potentially change provisions that are important to worker mobility, such as the moving expense deduction. Worldwide ERC® and the American Moving & Storage Association (AMSA) continue to prepare to defend the deduction, developing white papers, support, and strategy in the event the provision is targeted.
Affordable Care Act
On March 24, House Republican leaders indefinitely postponed a vote on legislation to repeal and reform the Affordable Care Act (ACA). House Republican leaders were unable to address concerns from both members of the conservative Freedom Caucus as well as more moderate Republicans to get the necessary votes to pass the American Health Care Act (AHCA). Following the decision, President Trump announced it was time to move on to other policy issues and Speaker of the House Paul Ryan stated the ACA would remain the “law of the land” for the foreseeable future.
Since then, House Republican leaders and Trump Administration officials have been in negotiations with members of the Freedom Caucus and other House Republicans who stated they would vote against the bill to see where there is compromise. One area they found was on high-risk pools for individuals with preexisting conditions. A high-risk pool allows individuals to still get health insurance and is also intended to bring down average premiums. On April 6, the House Rules Committee convened to adopt an amendment to the AHCA on high-risk pools.
While there is still a long path ahead for negotiations on reviving the AHCA, House Republican leaders wanted to demonstrate progress before members of Congress head back to their districts for the two-week Easter recess.
How this will impact mobility: The debate on repeal and reform of the Affordable Care Act impacts all Americans, as well as employers who provide health care coverage to their employees. As an industry that revolves around the workforce, changes to the ACA would affect our members and their clients and employees.
The Trump Administration continued its announced intention to repeal or revisit regulations it considers adverse to business and the economy. Since our last report, the President signed a bill to eliminate a rule requiring federal contractors to disclose and correct serious safety violations in order to be awarded work; issued a broad executive order instructing regulators to rewrite rules curbing U.S. carbon emissions, lifting a moratorium of federal coal leasing, and removing a requirement that federal officials consider the impact of climate change when making decisions; and signed legislation repealing a set of Federal Communications Commission (FCC) privacy protections for web users that limited the uses to which broadband companies could put their knowledge of the browsing habits of their subscribers. Although much of this activity will be subject to delay and litigation, the Administration is unmistakably moving rapidly to impose its view of the proper use of regulatory authority.
On the tax front, deliberations continued as to the impact of the President’s rule that each new regulation must be accompanied by the elimination of two existing regulations. The American College of Tax Counsel wrote to Treasury Secretary Mnuchin and Office of Management and Budget (OMB) Director Mulvaney on March 23, 2017, urging that the rule be clarified to exclude tax regulations.
How this will impact mobility: Worldwide ERC® members subject to federal regulation are facing an uncertain environment, as existing and proposed regulations that affect their businesses are revisited - and in some cases, removed. In particular, if tax regulations are limited, needed guidance may not be available. Fortunately, most federal tax laws that impact worker mobility have many layers of existing guidance and are unlikely to be affected by the Administration’s regulatory focus.
Consumer Financial Protection Bureau
Consumer Financial Protection Bureau (CFPB) Director Richard Cordray testified before the House Financial Services Committee on April 6. The hearing was on the 2016 Semi-Annual Reports of the CFPB. During the hearing, Committee Chairman Jeb Hensarling and other Republican Committee members expressed their concerns about Director Cordray having too much power, and that the President should be able to remove him. Committee Democrats defended Cordray and the structure of the CFPB.
The case of whether the President can remove the CFPB director “at will” or only “for cause” is currently being reheard by D.C. Circuit Court of Appeals, which is scheduled to hear oral arguments on May 24.
How this will impact mobility: The relocation of a transferee often involves the sale and/or purchase of a home, and thus the policies and practices involving real estate are of enormous direct impact to Worldwide ERC® members. The CFPB Director has enormous powers, with little oversight from Congress or the Administration, and thus the policy positions of a specific individual as director determines the direction of the Bureau. Having a director appointed by a Republican President would very likely take the Bureau in a different direction.
North American Free Trade Agreement
A key policy plank of the campaign of President Trump was to renegotiate North American Free Trade Agreement (NAFTA). In order for the President to begin renegotiations on a trade agreement, he must provide a letter to Congress with a 90-day consultation period. Previous press reports indicated the Trump Administration was preparing the necessary documentation on notifying Congress of its intents to renegotiate NAFTA. New press reports indicate that an eight-page letter has been drafted outlining the intentions of the Administration to renegotiate NAFTA.
On March 31, President Trump issued two executive orders on trade. The first executive order on the Omnibus Report on Significant Trade Deficits directs the Secretary of Commerce and U.S. Trade Representative to issue a report on those countries with which the U.S. had a trade deficit in 2016.
For each country with which the U.S. has a trade deficit, the report shall identify the causes of the deficit, whether the country is imposing any unfair practices contributing to the deficit, evaluate the impact on U.S. manufacturing and defense industries and identify any impairments on U.S. national security. The executive order directed the report to be submitted to the President within 90 days of the signed of the order.
The second executive order on Establishing Enhanced Collection and Enforcement of Antidumping and Countervailing Duties and Violations of Trade and Customs Laws directs the Secretary of Homeland Security to develop a strategy to combat the evasion of antidumping and countervailing duties. The strategy would also address actions against the importation of counterfeit goods. The Secretary would have 90 days in which to submit the report.
U.S. Trade Representative Nomination
On March 14, the Senate Committee on Finance held a hearing on the nomination of Robert Lighthizer to be the U.S. Trade Representative. The Committee was scheduled to vote on the nomination on April 6, but Democrats - with the exception of Ranking Member Ron Wyden - boycotted the hearing to press for the Committee to consider a bill on retired coal miner pensions and health benefits. Committee Chair Orrin Hatch stated he hoped the Committee could vote on the nomination after the Easter congressional recess.
President Trump nominated Lighthizer on January 20. He is a trade lawyer and a former deputy U.S. Trade Representative under President Reagan. He has the general support of both Republicans and Democrats in the Senate.
How this will impact mobility: Trade agreements have a significant impact on the business relationships between countries and the need to relocate individuals between U.S. and foreign operations of employers. A renegotiation of NAFTA could result in U.S. and Mexican businesses making shifts in the locations of their operations and locations of their facilities.
Trump Chooses McAleenan as CBP Commissioner
On March 31, President Trump announced he plans to nominate Kevin McAleenan to be Commissioner of U.S. Customs and Border Protection (CBP). McAleenan is currently Acting Commissioner of the CBP as well as Deputy Commissioner which is a position he has held since 2014. McAleenan became Acting Commissioner on January 20 when President Trump took office.
McAleenan first joined the CBP in 2001 and has been a member of its Senior Executive Service since 2005. McAleenan will need to be confirmed by the Senate in order to become Commissioner.
H-1B Visa Cap Reached
On April 7, U.S. Citizenship and Immigration Services (USCIS) announced the agency had received applications reaching the cap of 65,000 for H-1B visas for FY2018. The agency also reached the cap of 20,000 for the H-1B advanced degree exemption.
Six Country Immigration Suspension Executive Order
The Federal Court of Appeals for the 4th District in Richmond, Virginia is scheduled on May 8 to hear the case in which a Maryland federal judge temporarily blocked implementation of provisions of the second executive order of the President on immigration. The order suspends certain nationals of six countries from entering the U.S. The order reinstitutes a temporary 90-day ban from entering the U.S. those foreign nationals from Iran, Libya, Somalia, Sudan, Syria and Yemen and a 120-day suspension for the Refugee Admission Program on refugees from those countries. Iraq is no longer on the list of countries subject to the suspension.
How this will impact mobility: The ability to move employees around the U.S. and the globe is the foundation of our industry. Actions that suspend or prevent that movement have the ability to undermine a key tool for employers to ensure they have the appropriate employees in positions vital to their operations. Other nations could take similar actions in response to U.S. immigration policies and make it more difficult for entry of U.S. citizens from entering their countries.
Our next Government Affairs Community Update/First 100 Days will be delivered to Worldwide ERC® members April 24, 2017.
Additional First 100 Days information can be found here: