Back to Government Affairs: Mobility and the U.S. Administration
February 27, 2017
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Dear Worldwide ERC® Member:
Since our last Government Affairs Community Update, there has been more activity on tax reform and the ACA, new guidance (and some flexibility) in implementing the governmental hiring freeze, a court date set by the Consumer Financial Protection Bureau in its case with PHH Corporation, a meeting between Canadian Prime Minister Trudeau and President Trump, and continued work on two executive orders that impact immigration.
We are carefully monitoring the impact of this administration’s activity on the mobility industry through our twice-monthly Government Affairs Community Updates. Please share this information with your clients and colleagues and within your company. We’ll be back in two more weeks with a new Update!
Peggy Smith, SCRP, SGMS-T
Worldwide ERC® President and CEO
Plans for fundamental tax reform continued to move forward, but for the most part, actions in this initiative occurred out of sight as the House Ways and Means Committee worked on developing a consensus around the proposed cash flow border-adjustable business tax. Meanwhile, President Trump indicated that the administration was close to releasing its own tax reform plans, perhaps by early March. In several forums, Treasury Secretary Mnuchin repeated his commitment to the goal of passing a tax reform bill by the August congressional recess, but also said that timeline could slip. No legislative language has been circulated yet in either the House or Senate.
The proposed business cash flow border-adjustable tax proposed by House Republicans continued to attract support and opposition from many quarters. Manufacturers have generally praised the plan, while retailers have strongly opposed it. President Trump, who previously had not warmed to the idea, expressed his continued support last week for “a form of tax on the border,” although he has not specifically commented on the House plan, other than to express concern that it might be “too complicated.” And some Republicans in the Senate remain skeptical. For example, Senator Lindsey Graham, R-SC, said on February 19 that “the House is talking about a tax plan that won’t get 10 votes in the Senate.” Small business is also split to some degree, with the National Small Business Association noting that the proposal could hurt many such businesses, particularly those that rely to an extent on imported components.
One concern in the small business community has been the proposed elimination of business deductions for interest in favor of immediate expensing of all asset purchases. Many small businesses must borrow to fund capital investment, and do not have access to capital in any other way. Moreover, they already benefit from full expensing up to $500,000. Agriculture businesses are also heavy net borrowers. And the real estate industry has expressed opposition, noting that the plan could cause dramatic shifts in how properties are financed. Consequently, House Republicans have begun discussions of various exemptions that would continue to allow deduction of net interest expense in a variety of situations, including for small businesses.
Affordable Care Act
On February 16, Speaker of the House Paul Ryan (R-WI) unveiled the House Republican blueprint for the replacement of the Affordable Care Act (ACA). The document, “Obamacare Repeal and Replace: Policy Brief and Resources,” provides an overview of the approach House Republicans plan to use to address key components of reforming the health care system.
In lieu of subsidies for individuals and families to purchase health insurance through the federal or a state health care exchange, the blueprint calls for providing health care tax credits which could be used to purchase insurance through the health insurance market. The tax credits would be refundable; meaning the funds would be based on the amount of credit exceeding the tax liability on a tax return. The credits would also be advanceable; which means that the funds could be provided prior to the filing of a tax return, and monthly. The individual mandate requiring individuals to purchase health insurance or pay a tax penalty would be eliminated. The plan would also expand the use of and limits on Health Savings Accounts (HSAs).
A key component of the Affordable Care Act was the expansion of the Medicaid Program. Thirty-one states opted to expand their state program with the higher matching funds provided under the ACA. The House Republican blueprint would use a phase-out to repeal the Medicaid expansion, but allow states to continue to cover individuals at the lower standard matching fund levels. To help those states that opted out of the expansion, the plan would temporarily increase funding to hospitals in those states. Additionally, the plan would give states the option to receive federal Medicaid matching funds in the form of a total federal allotment or a block grant, as opposed to matching of total funding spent in a year.
Finally, the blueprint would utilize state innovation grants with the purpose of improving health insurance markets. One such innovation would be to create high-risk pools for those with preexisting conditions. The plan does not go into a deep level of detail on other key provisions of the ACA, such as allowing children until the age of 26 to remain on their parents’ health insurance. (not sure if “deep” is the right word, but it needs something there)
New guidance from the Office of Personnel Management (OPM) and the Office of Management and Budget (OMB) has provided some flexibility in implementing the administration’s hiring freeze, and allowed the IRS to continue bringing on board the several thousand seasonal employees necessary to support the tax filing season. The IRS said that it expected no filing season complications related to the hiring freeze.
However, on the tax regulation front, an IRS official said on February 13 that because of the administration’s restrictions on new regulations, the IRS will not be releasing any guidance—including revenue procedures and revenue rulings—beyond the most routine items, “for a while.” The IRS has been seeking guidance from Treasury and OMB on the extent to which the administration’s regulatory freeze, and its rule requiring elimination of two regulations for every new one proposed, would apply to IRS guidance.
On the broader regulatory front, a new executive order on February 24 instructs all federal agencies to begin working immediately on a list of rules they would like to eliminate.
House Republicans also are demanding that the Federal Reserve wait for the Senate to confirm a new Federal banking regulator before proposing or adopting any new rules, although the administration has yet to nominate anyone to fill that post. In a February 24 letter to Federal Reserve Chair Janet Yellen, House Financial Services Chair Jeb Hensarling and 33 other republicans said they would use the Congressional Review Act to overturn any Federal Reserve regulations issued prematurely.
The D.C. Circuit Court agreed on February 16 to rehear the request by the Consumer Financial Protection Bureau (CFPB) in its case with PHH Corporation. The Court had previously ruled in favor of PHH on a number of points, including that the structure of the CFPB was unconstitutional, since the CFPB did not serve at the will of the President. The Court set the date of May 24 to hear oral arguments in the case, with briefs by PHH and in support of PHH due by March 10, and with briefs by CFPB and in support of the agency by March 31.
In agreeing to rehear the case, the Court directed the CFPB and PHH to answer three questions regarding the structure issue, which are as follows:
- Is the CFPB's structure as a single-Director independent agency consistent with Article II of the Constitution and, if not, is the proper remedy to sever the for-cause provision of the statute?
- May the court appropriately avoid deciding that constitutional question given the panel's ruling on the statutory issues in this case?
- If the en banc court, which has today separately ordered en banc consideration of Lucia v. SEC, 832 F.3d 277 (D.C. Cir. 2016), concludes in that case that the administrative law judge who handled that case was an inferior officer rather than an employee, what is the appropriate disposition of this case?
(Note: “en banc” refers to a session in which a case is heard before all the judges of a court.)
With the D.C. Circuit Court rehearing the case, it is unlikely that President Trump would try to remove Director Cordray until a final judgment is reached. It could be quite some time until the Court provides a final ruling.
Canadian Prime Minister Trudeau met with President Trump at the White House on February 13. During a joint press conference of the two leaders, President Trump stated the two countries would only need to “tweak” the terms of the North American Free Trade Agreement (NAFTA). He made further reference that the major reworking of the agreement would need to be with Mexico.
The White House has not yet sent the necessary notification to Congress that he plans to renegotiate the terms of NAFTA. Congress needs to be notified 90 days prior to the Administration entering into negotiations on revising a trade agreement.
The White House continues to work on two executive orders regarding immigration. The first executive order would be a revision of the executive order temporarily suspending foreign nationals from seven countries from entering the United States. This revised executive order is being developed as a result of the Appeals Court for the 9th District upholding a lower court ruling halting the suspension. The Administration is currently pursuing a revision of the executive order as opposed to requesting a review by a court of appeals with a larger number of judges, or consideration by the U.S. Supreme Court.
The second executive order would address business immigration. Drafts of the executive order on “Protecting American Jobs and Workers by Strengthening the Integrity of Foreign Worker Visa Programs” have been reported in the press. The draft order purportedly would direct the Departments of Homeland Security, Labor and State to review and revise work visa programs. The Administration would also increase enforcement and add new restrictions to employment-based visas under the draft order. No timing has been provided on the release of these two orders, but both are seen as imminent.
Restrictions on work visas would have a significant impact on workforce mobility into the United States. An article dated February 21 in the Washington Post outlines the concerns of the many technology companies if further restrictions were put in place. The article, “How today’s visa restrictions might impact tomorrow’s America” focuses on technology companies and can be accessed at https://www.washingtonpost.com/graphics/national/visas-impact/
On February 14, Worldwide ERC® hosted a webinar on the two executive orders. To access the handouts, as well as an audio recording of the webinar, please visit http://www.worldwideerc.org/Events/Pages/Webinar02142017.aspx.
Our next Government Affairs Community Update/First 100 Days will be delivered to Worldwide ERC® members March 12, 2017.
Additional First 100 Days information can be found here: