President Trump today signed the first appropriations package for fiscal year 2019. H.R. 5895 contains three annual appropriations bills: Energy-Water, Milcon-VA, and Legislative Branch. Congress is preparing to send the president a second spending package the week of Sept. 24, hoping to avoid a government shutdown.

On Sept. 18, the Senate passed, 93-7, the spending package (H.R. 6157) that covers funding for Defense and Labor-HHS-Education. It also includes a continuing resolution (or “CR) that will keep the rest of the federal government running through Dec. 7 – these are the agencies that won’t receive their full FY 2019 funding before the end of the fiscal year.

The House will vote and pass H.R. 6157 the week of Sept. 24.

The House Rules Committee will convene on Wednesday, Sept. 26 at 3 p.m. to write a rule for the floor consideration of the Tax Reform 2.0 bills. This means that floor debate and votes could take place as early as Thursday, Sept. 27. House passage of the three bills is expected.

In case you missed it, here are the Tax Reform 2.0 related bills and documents:

Protecting Family and Small Business Tax Cuts Act (H.R. 6760)

This bill would make permanent the individual and small business tax cuts enacted in 2017. The Joint Committee on Taxation (JCT) estimates that the measure would reduce federal revenue by about $631 billion.

Family Savings Act (H.R. 6757)

This bill would make it easier for individuals to save for retirement, education, and other family expenses. For example, the bill would create Universal Savings Accounts, expand 529 plans, and allow for penalty-free withdrawals from retirement plans for expenses related to the birth or adoption of a child. The JCT estimates that the measure would reduce federal revenue by about $21 billion.

American Innovation Act (H.R. 6756)

This bill contains provisions to spur entrepreneurship and lower barriers for start-ups. The JCT estimates that the measure would reduce federal revenue by about $5.4 billion.

The Senate convenes Monday at 2 p.m. The House is in recess, returning Sept. 25.

At this writing, the Senate Judiciary Committee is scheduled to vote on the nomination of Brett Kavanaugh to be an associate justice of the U.S. Supreme Court on Thursday, Sept. 20. However, this may change due to the allegations of misconduct against Kavanaugh.

Senate

Roll call votes for the following bills are scheduled for Sept. 17 at 5:30 p.m.

  • Patient Right to Know Drug Prices Act (S. 2554). A bill introduced by Sen. Collins (R-ME) that would prohibit insurers and prescription benefit managers from using gag clauses.
  • Opioids Legislation (H.R. 6). A bill to address opioid and substance use disorders. The House passed its version of the bill in June.
Key Hearings and Events

Financial Services

  • Sept. 18 – Senate Banking Committee to hold a hearing FinTech, focusing on digitization, data, and technology.
  • Sept. 20 – SEC to hold an investor roundtable to discuss the commission’s recently proposed rules on the obligations of financial professionals to investors.
  • Sept. 21 – SEC to hold a joint dialogue with NYU on the regulation of the securities market with a specific focus on the topics of high-frequency trading and liquidity resiliency.

Health Care

  • Sept. 18 – Senate HELP Committee to hold a hearing to examine ways to reduce health care costs, focusing on how transparency can lower spending and empower patients.

Energy

  • Sept. 20 – Senate Energy Committee to hold a hearing on blackstart and other system restoration plans in the electric utility industry.
  • Sept. 20 – FERC to hold a commission meeting to consider various administrative, electric, gas, and hydro issues, including a memorandum of understanding between the Transportation Department and FERC on LNG transportation facilities. View the full meeting agenda here.

Immigration

  • Sept. 18 – Senate Homeland Security Committee to hold a hearing to discuss the Flores settlement agreement and its implications for border security and illegal immigration incentives.

Congressional leaders have come up with a plan to avoid a government shutdown at the end of the fiscal year, Sept. 30. If all goes according to plan, Congress will have passed five of the 12 appropriations bills for FY 2019 before the funding deadline. This means that at the start of FY 2019, a large part of the federal government will be fully funded for the new fiscal year – a real accomplishment given that Congress has long struggled to pass spending bills on time.

This week, both the House and Senate passed the conference agreement for the first FY 2019 minibus spending package (H.R. 5895), which covers funding for Energy-Water, Milcon-VA, and the Legislative Branch. Additionally, bicameral negotiators approved the conference report for H.R. 6157, a two-bill minibus that includes funding for Defense and Labor-HHS-Education, which makes up about 70 percent of the federal government’s annual discretionary spending. The House is expected to vote on H.R. 6157 when it returns from recess on Sept. 25.

For agencies that won’t receive their full FY 2019 funding in time, a stopgap spending measure, known as a continuing resolution (CR), has been included in the H.R. 6157 package to ensure that they will be able to continue to operate at current funding levels from Oct. 1 through Dec. 7.

To be sure, President Trump could upend the whole plan if he decided to veto H.R. 6157 over funding for his border wall, but congressional leaders are betting that he won’t reject a bill that would provide more than $674 billion for the Department of Defense.

The House Ways and Means Committee today marked up and approved the GOP’s Tax Reform 2.0 package. Chairman Kevin Brady (R-TX) offered three amendments in the nature of a substitute, which would make a series of minor clerical changes to the bills. Here are the key documents and materials for the bills that were approved:

Protecting Family and Small Business Tax Cuts Act (H.R. 6760)

Family Savings Act (H.R. 6757)

American Innovation Act (H.R. 6756)

During the markup, Democrats on the panel criticized Republicans for doubling down on bad policy and pushing through yet another tax-cut package without hearings and public input. Democrats also repeatedly pointed out that the package was unpaid for and would add $3 trillion to the national debt.

The always colorful Congressman Bill Pascrell (D-NJ) compared Tax Reform 2.0 to Caddyshack II and Weekend at Bernie’s II, noting that the “sequel is never as good as the original,” which in his opinion was also a flop.

House leaders are planning to hold a floor vote for the package in the last week of September – passage is expected. Tax Reform 2.0 has near zero chance of passage in the Senate. However, provisions in the Family Savings Act (H.R. 6757) have strong bipartisan support; the bill could be taken up separately after the midterm elections.

Here are the amendments that were offered at the markup:

  • Pascrell – Eliminate the cap on the state and local tax deduction and increase the corporate tax rate to offset the cost of eliminating the cap [Failed 14-21].
  • Neal (D-MA) – Expand EOTC, make adoption tax credit refundable, and enhance the child dependent care credit. Restore the top marginal income tax to offset the cost [Failed 15-21].
  • Thompson (D-CA) – Provide for disaster tax relief [Failed 15-21].
  • Sanchez (D-CA) – Restore the deduction for certain medical expenses [Failed 15-21].
  • Doggett (D-TX) – Release Trump tax returns [Ruled non-germane].
  • Larson (D-CT) – Protect Social Security and Medicare trust funds [Failed 15-21].
  • Doggett (D-TX) – No tax breaks for corporations until the middle class receives the promised benefits of tax reform [Ruled non-germane].
  • Kind (D-WI) – Add stretch IRA provision and PBGC premium relief, among other things, to H.R. 6757 [Failed 14-21].
  • Brady – amendment in the nature of a substitute for H.R. 6760, making clerical changes to the original bill [Adopted].
  • Brady – amendment in the nature of a substitute for H.R. 6757, making clerical changes to the original bill [Adopted].
  • Brady – amendment in the nature of a substitute for H.R. 6756, making clerical changes to the original bill [Adopted].

Congress is pressing ahead with its work agenda for the week despite the threat of massive flooding in Washington from Hurricane Florence. With the end of fiscal year 2019 looming, lawmakers don’t have much time to waste. Here are the big legislative items awaiting action when Congress returns Sept. 12:

  • IRS Nominee. The Senate is expected to confirm Charles Rettig to be the IRS commissioner.
  • Tax Reform 2.0 Markup. House Ways and Means Committee will mark up and vote on a trio of bills under Tax Reform 2.0 on Sept. 13. According to an estimate by the Joint Committee on Taxation, the package of tax cuts would cost $657 billion.
  • FY 2019 Appropriations. House and Senate negotiators for the second and third “minibus” spending packages (H.R. 6147 and H.R. 6157) are scheduled to meet on Sept. 13 to iron out differences between their bills. As a refresher, the Senate version of H.R. 6147 covers funding for Financial Services, Interior-EPA, Transportation-HUD, and Agriculture; H.R. 6157 covers funding for Defense and Labor-HHS-Education. The House chamber is also expected to vote on the conference report for first minibus package (H.R. 5895), which covers Energy-Water, Milcon-VA, and Legislative spending. GOP leaders are trying to get as many of these spending bills enacted before Sept. 30. But even if successful, Congress will still have to rely on a continuing resolution or CR to avert a government shutdown. The big question is how long the CR would run. The GOP appears split on the duration of the CR – some prefer to tackle the outstanding spending issues once and for all in December, while others prefer to kick the can down the road to January 2019.
  • Water Infrastructure Bill. The House and Senate reached a deal on a water infrastructure bill, America’s Water Infrastructure Act of 2018, on Sept. 10. The legislation would authorize various projects to improve and modernize the country’s water infrastructure. The House is expected to vote on the bill before the end of the week.
  • Gag Clauses. The Senate will hold a vote on the Patients Right to Know Drug Prices Act (S. 2554) – a bill that would prohibit insurers and prescription benefit managers from using gag clauses that restrict a pharmacy’s ability to proactively inform insurance plan members the difference in drug costs when paying out-of-pocket through an insurance plan versus paying for the drug without using any insurance coverage.
  • Farm Bill. Negotiators are talking this week, but an extension is likely. Reauthorization is due Sept. 30.

The House Ways and Means Committee today released three bills as part of Tax Reform 2.0:

  1. H.R. 6760Protecting Family and Small Business Tax Cuts Act, a bill addressing the individual and small business tax cuts enacted last year – most of the provisions would be made permanent.
  2. H.R. 6757Family Savings Act, a bill that contains many of the provisions in the 2018 Retirement Enhancement Savings Act, which would it easier for families to save for retirement, education, and other family expenses. For example, the bill would create Universal Savings Accounts, expand 529 plans, and allow for penalty-free withdrawals from retirement plans for expenses related to the birth or adoption of a child.
  3. H.R. 6756American Innovation Act, a bill to spur entrepreneurship and lower barriers for start-ups.

The Ways and Means Committee may hold a markup of the package on Thursday, Sept. 13.

As our tax policy team reviews these bills over the next few days, be sure to check back in on the Federal Policy Watch blog for our analysis and insights.

The House and Senate will convene on Wednesday at noon and 3 p.m., respectively.

House

  • Bills Under Suspension. The chamber will vote on a series of bills related to financial services, health care, and energy innovation – see the full list here. Some noteworthy measures include:
    • S. 97 – the Nuclear Energy Innovation Capabilities Act would enable civilian research and development of advanced nuclear energy technologies.
    • H.R. 5059 – the State Insurance Regulation Preservation Act would ensure that insurance savings and loan holding companies that meet applicable state and federal capital standards are regulated by the states.
    • H.R. 6411 – the FinCEN Improvement Act would ensure FinCEN works with tribal law enforcement agencies, prioritizes protection against all forms of terrorism, and places a focus on emerging methods of terrorism and illicit finance, including cryptocurrencies.
  • Save American Workers Act. Lawmakers will also debate H.R. 3798, a bill that would repeal the 30-hour threshold for classification as full-time employee for purposes of the Affordable Care Act’s employer mandate and increase the threshold to 40 hours. Additionally, the bill would suspend the employer mandate and delay the Cadillac tax. The House Rules Committee is scheduled to meet on Sept. 12 to draft a rule for floor debate.
  • H.R. 5895 Conference Report. The chamber may also take up the conference report to H.R. 5895 – the first FY 2019 minibus package covering funding for Energy and Water, Milcon-VA, and the Legislative Branch.

Senate

  • IRS Nominee. The chamber will resume consideration of Charles Rettig to be IRS commissioner on Sept. 12.
  • Patient Right to Know Drug Prices Act. The chamber is expected to vote on S. 2554, a bill introduced by Sen. Collins (R-ME) that would prohibit insurers and prescription benefit managers from using gag clauses.
  • Opioids Legislation. Votes on H.R. 6 (as amended) will begin this week.

Key Hearings

Financial Services
  • Sept. 12 – Senate Banking Committee to hold a hearing to examine countering Russia, focusing on assessing new tools.
  • Sept. 12 – The Financial Stability Oversight Council to hold a closed meeting on the council’s FY 2019 budget, annual report, and an update on the annual reevaluation of a SIFI designation.
  • Sept. 13 – Senate Banking Committee to hold a hearing to examine the implementation of the Economic Growth, Regulatory Relief, and Consumer Protection Act.
Tax
  • TBD – The House Ways and Means Committee may hold a markup of Tax Reform 2.0 this week.
  • Sept. 13 – Senate Finance Committee to hold a hearing to examine the nomination of Gail Ennis to be the inspector general of the Social Security Administration.
Health Care
  • Sept. 13 – House Energy and Commerce Committee to hold a subcommittee hearing on “Examining Barriers to Expanding Innovative Value-Based Care in Medicare.”
Trade
  • Sept. 13 – House Foreign Relations Committee to hold an oversight hearing on U.S. sanctions policy.
  • Sept. 13 – Senate Agriculture Committee to hold a hearing to examine perspectives on U.S. agricultural trade.
Energy
  • Sept. 13 – Senate Energy Committee to hold a hearing on the rule of U.S. LNG in meeting European energy demand.
  • Sept. 13 – Senate EPW Committee to hold a hearing to examine advanced nuclear technology, focusing on safety and associated benefits of licensing accident-tolerant fuels for commercial nuclear reactors.
Transportation
  • Sept. 13 – Senate Commerce, Science, and Transportation Committee to hold a hearing on the transportation of tomorrow, focusing on emerging technologies that will move America.
Consumer Protection
  • Sept. 13-14 – The Federal Trade Commission to hold a hearing on competition and consumer protection in the 21st century. The discussion will address the current landscape of competition and privacy laws; regulation of consumer data; and analysis of vertical mergers, among other things.

Tax Reform 2.0

The House Ways and Means Committee today released three one-pagers on Tax Reform 2.0 – nothing groundbreaking here. The documents simply reiterate the three main goals of Tax Reform 2.0:

  1. Make permanent the individual and small business tax cuts enacted in 2017. See the document here.
  2. Promote savings by making it easier for individuals to save for retirement, education, and other expenses. See the document here.
  3. Spur new business innovation by reducing start-up costs and removing barriers to growth. See the document here.

Once again, the committee did not provide many policy details. This is just a rehash of the framework that came out in July. The Ways and Means Committee is planning to mark up a bill the week of Sept. 10. House leadership is aiming to hold a floor vote on Tax Reform 2.0 in late September.

Rettig Nomination

Charles Rettig, nominee to be the next IRS commissioner, may finally get his confirmation vote in the Senate next week.

Unmanned aircraft systems (UAS) technology is poised to revolutionize businesses across industries and fulfill consumer demands for new and innovative ways to receive goods and services. Like any new and developing technology, it also presents unique challenges.

While safety and security mechanisms are core to industry’s ongoing UAS technology development, federal law enforcement must be equipped to address threats posed by malicious operators, just as it is equipped to respond to threats posed by those who misuse other technologies — from the internet to connected devices.

The policy debate around UAS countermeasures includes important questions about the safety of air navigation, interagency coordination, and privacy and civil liberties, including Fourth and Fifth Amendment protections. Therefore, it also involves a myriad of stakeholders, from law enforcement to the military and lawmakers, regulators, industry, and privacy and consumer advocates.

Congress Weighs In

Congress first took steps in 2016 to authorize federal entities to engage in UAS countermeasures operations that otherwise would be prohibited by Title 18 of the United States Code, including damaging, destroying or disabling an aircraft. FY17 and FY18 defense authorization bills granted the Departments of Defense (DOD) and Energy (DOE) authority to take enumerated counter-UAS actions to protect against threats to safety or security of DOD and DOE facilities and assets, notwithstanding Title 18. These provisions have served as the framework for subsequent proposals to expand the federal government’s authorities.

In 2017, the administration sought to expand these authorities to all federal Departments and agencies, but its legislative proposal was never introduced on Capitol Hill. Earlier this year, the administration revised its proposal to seek authorities for the Departments of Homeland Security (DHS) and Justice (DOJ). Since then, the bipartisan leadership of the Senate Homeland Security and Governmental Affairs Committee introduced and advanced out of committee legislation largely adapted from the administration’s revised proposal. House Homeland Security Committee Chairman Mike McCaul (R-Texas) introduced a similar but more tailored bill. Additionally, McCaul’s committee advanced a bill by Rep. Scott Perry (R-Penn.) that directs DHS to establish a countering UAS coordinator, an effort to improve the decision-making process that has been a source of frustration for lawmakers and industry alike. With just a few months remaining in the 115th Congress, each of these bills remains pending.

Jurisdictional Roadblocks Loom

If these or similar bills are to move forward this year, however, they likely would do so before the Federal Aviation Administration (FAA) implements remote identification and tracking requirements that most federal government officials and industry leaders believe should be a prerequisite for any additional countermeasures authorities. In order to safely and responsibly exercise any countermeasures authorities, law enforcement must be able to identify and assess what, if any, threats a UAS poses. FAA projects it will not issue a proposed rule until spring 2019, but it also is grappling with a loophole, which only Congress can close, that precludes it from imposing regulations on all UAS operators. These issues are outside the jurisdiction of the Homeland Security Committees.

Decoupling of Johnson-McCaskill Bill?

As detailed in our recent FAA reauthorization outlook, a modified version of the Johnson-McCaskill bill likely will be adopted as an amendment to the Senate’s FAA reauthorization bill if it comes to the floor. The Johnson-McCaskill bill aims to provide the Departments of Homeland Security and Justice authorities similar to those granted to the Departments of Defense and Energy, to utilize limited UAS countermeasures operations typically prohibited by federal law.

However, it is very possible that Congress will need to enact another short-term extension of FAA authorities before Sept. 30. Depending on the duration of an extension — and given the bipartisan, bicameral support for bestowing these authorities on the Departments of Homeland Security and Justice — there may be an effort to decouple it from FAA reauthorization and move it as separate legislation.