Back to Government Affairs: Mobility and the U.S. Administration
March 13, 2017
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Dear Worldwide ERC® Member:
We are at the halfway point of the first 100 days of the new U.S. administration. Since our last Update, President Trump has signed a revised Executive Order suspending foreign nationals from six countries from entering the United States. House Republicans have also made progress on legislation to change the Affordable Care Act. In this Government Affairs Community Update, we have outlined and explained this activity in the agenda of the new administration and Congress.
Designed for easy reference and access for all Worldwide ERC® members, our twice-monthly Government Affairs Community Updates are also easily shared with others in your company, and with your clients and colleagues. Be sure to review this Update for the potential impact on your work, and look for more essential 100 Days information and review on March 27!
Peggy Smith, SCRP, SGMS-T
Worldwide ERC® President and CEO
While President Trump promised “historic tax reform” during his first address to Congress on February 28, that promise was unaccompanied by any detail as to what his administration plans to propose. Consequently, although an administration tax reform plan has been promised “within a few weeks,” so far none has emerged. However, Treasury Secretary Mnuchin said during a March 1 interview with Fox Business Network that the administration’s main objective is a middle-class tax cut, and that “we are not taking away the charitable deduction, and we are leaving the mortgage interest deduction as is.” For now the administration seems to be prioritizing health care reform, having aligned itself behind the recently introduced House Republican legislation, but has not produced a plan of its own.
The administration has also sent mixed signals concerning the controversial House Republican proposal for a border-adjustable cash flow business tax. Reports suggest that there are differences among the President’s advisors, although he clearly supports some mechanism to favor domestic production over imports.
The President and House Republicans are, however, united in their tax reform goal to repeal the so-called “Johnson Amendment” that prohibits churches and other charities from participating in political campaigns, according to a speech delivered by House Ways and Means Committee Chairman Kevin Brady at the Conservative Political Action Conference.
In Congress, little apparent progress has been made on tax reform, again in part because of the focus in the House on repeal and replacement of the Affordable Care Act. The latter activity, with bills introduced the week of March 1, includes repeal of the 3.8% tax on investment income and the extra 0.9% extra Medicare tax on certain high-income individuals.
Discussion also continues about the cost of the House Republican tax reform plan. In a March 8 analysis, the Committee for a Responsible Federal Budget, which focuses on containing the federal debt, compared different cost estimates conducted by outside groups, concluding that the House plan will likely cost somewhere around $2.3 trillion over ten years using so-called conventional scoring. That analysis can be found here: http://www.crfb.org/blogs/how-much-does-house-gop-tax-plan-cost. However, the outside groups differ if “dynamic scoring” is used (which attempts to take into account the overall effect on the economy), with the Tax Foundation estimating a ten-year loss of $200 billion and the Tax Policy Center estimating $1.8 trillion. So far, no analysis has been published from the Joint Tax Committee of Congress, which is the official scorekeeper.
Meanwhile, the House Republican Blueprint is not the only tax reform proposal pending in Congress. The Fair Tax Act of 2017 (H.R. 25 and S. 18) would repeal the individual income tax, the corporate income tax, all payroll taxes, the self-employment tax, and the estate and gift taxes. They would all be replaced with a 23% federal sales tax. The tax would be levied on top of state sales taxes (that is, the amount subject to tax would be the total of the price of an item plus any associated state sales tax), but low-income taxpayers would receive rebates on amounts spent up to the federal poverty level. This proposal has been introduced for several years, and is not likely to be adopted, but does have a number of adherents among members of Congress.
Mobile Workforce Act Reintroduced
The Mobile Workforce Act, which has numerous sponsors from both parties in the Senate and passed the full House last session, was re-introduced in both chambers March 7. The senate bill, S.540, was introduced by Senators John Thune, R-SD, and Sherrod Brown, D-Ohio. The House bill, which does not have an assigned number yet, was introduced by Representatives Mike Bishop, R-Mich, and Hank Johnson, D-Ga. The legislation, which has long been supported by Worldwide ERC®, would eliminate a patchwork of individual state rules as to when a nonresident worker earning money in the state becomes taxable there, and when state tax withholding must begin. Under the bills, a worker would not be taxable in a state until the worker had worked there at least 30 days during the year. It is hoped that this provision can be added to any tax reform legislation that emerges this year from Congress.
Affordable Care Act
Last week, the House Committee on Energy and Commerce and the Committee on Ways and Means marked up respective sections of the American Health Care Act (AHCA), which is the House Republican proposal to repeal and reform the Affordable Care Act (ACA). The Committees reported out favorably the sections along party lines. The AHCA closely follows the blueprint that House Speaker Paul Ryan (R-WI) had unveiled on February 16. On March 15, the House Committee on the Budget is scheduled to combine the respective sections of the bill with the House Committee on Rules expected to set the rules for debate on the bill this coming week.
Some of key provisions of the AHCA are as follows:
- The income-based subsidies for individuals and families to purchase health insurance through the federal or state health exchanges would be eliminated. Starting in 2020, the subsidies would be replaced by age-adjusted refundable tax credits.
- The individual and employer mandates imposing tax penalties associated with not purchasing or providing health care cover would be eliminated effective for the 2016 tax year.
- The Medicare tax on high-income individuals would be repealed.
- Children up to the age of 26 could remain on the health insurance plans of their parents.
- Protections on pre-existing conditions are included in the legislation.
- The option for states to expand their Medicaid program would sunset on December 31, 2019 with higher matching funds to states for the Medicaid expansion phased out for new enrollees after December 31, 2019.
- The plan would provide states with a per capita total federal Medicaid allotment as opposed to matching of total funding spent in a year.
The American Health Care Act still has a long path to enactment. The more conservative members of the House Freedom Caucus want changes to the bill, including an earlier phase-out of the Medicaid expansion. However, House Republican leaders are concerned that making such changes will lose the support of more moderate members of the House Republican caucus, as well as more moderate Republican senators where Republicans have only a two-seat majority. The Congressional Budget Office (CBO) estimate on the cost of the bill - as well as how many individuals would be covered as opposed to the ACA - will have a major impact on the debate. The CBO estimate is expected to be released as early as today.
A February 24 Executive Order expands on the Trump administration’s effort to restrict federal rule-making. It requires that each agency designate an official as its Regulatory Reform Officer (RRO) within 60 days, and create a task force under the RRO’s leadership that will be made up of a representative from the agency’s central policy office and three additional senior agency officials. The task forces are charged with oversight of the administration’s rule that two regulations must be eliminated for every one proposed, and with evaluation of all existing regulations. They must develop recommendations on repeal, modification, or replacement of each regulation, and identify regulations that “(i) eliminate jobs, or inhibit job creation; (ii) are outdated, unnecessary, or ineffective; (iii) impose costs that exceed benefits; or (iv) create a serious inconsistency or otherwise interfere with regulatory reform initiatives and policies.”
The task forces are to look particularly at “those regulations that rely in whole or in part on data, information, or methods that are not publicly available or that are insufficiently transparent to meet the standard for reproducibility,” or “derive from or implement Executive Orders or other Presidential directives that have been subsequently rescinded or substantially modified.”
In the meantime, the administration has received hundreds of suggestions for regulations that should be eliminated. The Business Roundtable (BRT), a conservative group of chief executive officers of major U.S. corporations formed to promote pro-business public policy, has provided a lengthy wish-list of regulations to be killed. And agencies have begun to act. The FCC will roll back rules that require broadband companies such as Verizon, Comcast and AT& T to develop reasonable security measures to protect the social security numbers, browsing history, and other information belonging to their customers. Regulations that apply the clean water act to numerous wetlands will be withdrawn. And the first act of the new head of the Interior Department was to withdraw rules prohibiting use of lead ammunition in National Parks.
The effect on tax regulations is unclear. Although Treasury is an agency subject to the order, the IRS is not listed. Moreover, it is quite difficult to apply the criteria noted above to tax regulations, let alone the myriad other forms of guidance issued by the IRS. Treasury officials have said that the agency continues to seek guidance as to how both the administration’s regulatory freeze and its 2-for-1 order, and the February 24 order, would apply to tax guidance. In the meantime, Treasury has said that no new IRS guidance would be published other than non-substantive administrative items.
The D.C. Circuit Court, which is rehearing the appeal of the Consumer Financial Protection Bureau (CFPB) in its case brought by PHH Corporation, has granted a request by the Department of Justice to extend the deadline for filing a brief in the case. Briefs in support of PHH were due by March 10, with briefs by CFPB and in support of the agency due by March 31. In its request, the Department of Justice noted that the opinions of Administrations and independent agencies do not always align when it comes to the removal power of the President. The administration is therefore likely to support the position of PHH.
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.
At a joint press conference of U.S. Commerce Secretary Wilbur Ross and Mexican Economic Secretary Ildefonso Guajardo Villarreal, Secretary Ross stated that in the coming weeks, he would like to begin the process for renegotiations on NAFTA. To open the trade deal to new negotiations, the Trump administration needs to provide Congress with a 90-day consultation period before it enters into negotiations. President Trump has signaled he would like to enter into negotiations separately with Canada and Mexico but Secretary Guajardo noted that the North American Free Trade Agreement was a trilateral agreement.
New Suspension Executive Order
On March 6, President Trump signed a new order suspending 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. The new suspension takes effect on March 16.
The revised executive order includes exemptions and clarifications to the suspension that were not included in the initial executive order (EO 13769). The order applies to those foreign nationals who did not have a valid visa when the first executive order was issued, and do not have a valid visa and are outside of the U.S. on the effective date of the revised order. A waiver is granted to those foreign nationals who meet several conditions including but not limited to being a lawful permanent resident of the U.S., being a dual national traveling on a passport of a non-affected country, having a green card and seeking to reenter the U.S. or entering the U.S. for business purposes which would be significantly hampered by being denied entry.
Several actions to block implementation of the new executive order have already occurred. The state of Hawaii requested a federal judge to block the order with a hearing set for March 15. Washington State Attorney General Bob Ferguson, who brought the case against the initial executive order, filed a request of the judge who blocked the first order to have that ruling apply to the new order. Regarding the original order, on March 9, the Trump Administration filed a motion with the U.S. Court of Appeals for the 9th Circuit to dismiss its appeal in the case of the initial executive order suspending foreign nationals from seven countries.
H-1B Premium Processing Suspension
The United States Customs and Immigration Services (USCIS) announced starting April 3 that the agency will be suspending - for up to six months - the premium processing of H-1B visas.
Our next Government Affairs Community Update/First 100 Days will be delivered to Worldwide ERC® members March 27, 2017.
Additional First 100 Days information can be found here: