On April 18, the SEC voted, 4-1, to propose two rules and an interpretation related to the standard of conduct for broker-dealers and investment advisers. Under the proposal, registered broker-dealers and investment advisers would be required to provide a brief “client relationship summary” (CRS) to retail investors. Form CRS would include service details, registration status, material conflict disclosures, and a list of key questions that a retail investor should discuss with his or her financial advisor.

Commissioner Kara Stein (D), the sole dissenter, was most critical of the proposed package, calling it “Regulation Status Quo.” In her view, the proposals contain nothing new, as most of the requirements are already in place. She argued that Regulation Best Interest, despite its name, does not actually put the customer’s interests first — given that the proposed rules do not even define what “best interest” means. She noted that broker-dealers under this proposal would only be required to provide “reasonable” disclosure and offer “reasonably” designed policies and procedures to mitigate competing interests and  other conflicts. For Stein, the proposal is essentially a safe harbor for broker-dealers and does little to actually protect consumers.

Although a majority of the commissioners voted to approve the proposed rulemakings, they recognized that the proposals are incomplete and will require significant input from the public. The proposed rulemakings are subject to a 90-day comment period after publication in the Federal Register.

On April 17, Acting IRS Commissioner David Kautter said the agency would continue to enforce the Affordable Care Act’s (ACA) employer mandate. At a House Oversight Subcommittee hearing, Kautter explained that it is still the law, and the agency is therefore required to implement it. The IRS has sent nearly 10,000 enforcement letters since last fall, though a majority of these cases have been resolved without companies paying anything, after negotiations with the agency.

Several Republicans have argued that President Trump’s executive order directing federal agencies to take all actions consistent with the law to minimize the economic and regulatory burdens of the ACA includes ceasing to enforce the mandate.

Democrats and the IRS maintain that, absent repeal, there is a constitutional obligation to enforce the mandate.

The April 18 extenders roundtable at the House Ways and Means Committee has been described as a “dog and pony show” given that little came out of the closed-door gathering. Only about a dozen lawmakers showed up to defend their favored tax provisions.

The committee is expected to issue its recommendations for extenders in May — for example, which provisions should be made permanent or eliminated. Staffers on both sides of the aisle are working closely with the Joint Committee on Taxation (JCT) to get a score for the provisions.

One thing to keep an eye on is whether lawmakers will offset the extenders that they want to make permanent. The Ways and Means Subcommittee on Tax Policy may also hold another hearing before making any final decisions.

The Senate convenes today at 3 p.m. The House will meet Tuesday at noon. French President Emmanuel Macron will be on Capitol Hill this Wednesday to address a joint session of Congress.

Here’s what else is in store for the week:


FAA Bill. Lawmakers will take up the 2018 FAA reauthorization bill (H.R. 4) this week. The five-year reauthorization does not include the controversial proposal to privatize the air traffic control system – an issue that frustrated previous reauthorization measures.

Jobs Hearing. The House Ways and Means Committee will hold a subcommittee hearing on Wednesday to discuss the jobs gap from the perspective of employers. This is the third hearing of the committee’s “Jobs and Opportunity” series.

SEC Budget. The House Appropriations Committee will hold a subcommittee hearing with SEC Chairman Jay Clayton on Thursday to discuss the commission’s FY 2019 budget.


Vote. Senators will consider the nomination of Stuart Duncan to be the U.S. Circuit Judge for the Fifth Circuit. A cloture vote has been scheduled for 5:30 p.m.

Tax Law Hearing. The Senate Finance Committee will hold a hearing Tuesday with a panel of economists to get their early impressions of the new tax law.

Pompeo Faces Committee Vote. The Senate Foreign Relations Committee will vote today on the nomination of CIA Director Mike Pompeo to be the secretary of state. It is expected to be a close vote, as most Democrats and Sen. Rand Paul (R-KY) are opposed to the nomination.

Key Hearings

Tuesday, 4/24

  • Senate Finance Committee. Full committee hearing on “Early Impressions of the New Tax Law.”

Wednesday, 4/25

  • House Ways and Means Committee. Subcommittee hearing on “Jobs and Opportunity: Employer Perspectives on the Jobs Gap.”
  • House Financial Services Committee. Subcommittee hearing on the HUD’s role in rental insurance and review of legislative proposals on rent reform.
  • House Appropriations Committee. Subcommittee hearing on FY 2019 budget of the Federal Housing Administration.
  • House Appropriations Committee. Subcommittee hearing on “FY 2019 Financial Services Member Day.”

Thursday, 4/26

  • House Financial Services Committee. Subcommittee hearing on oversight of the SEC’s Division of Corporation Finance.
  • House Energy Committee. Subcommittee hearing on reform of the CFIUS review process.
  • House Appropriations Committee. Subcommittee hearing on FY 2019 budget of the SEC. Chairman Jay Clayton to testify.

Friday, 4/27

  • House Financial Services Committee. Subcommittee hearing on FinCEN’s customer due diligence rule.

On April 13, House lawmakers introduced the FAA Reauthorization Act of 2018 (H.R. 4). The bill would provide a five-year reauthorization of the Federal Aviation Administration (FAA). Of note, the measure does not contain the controversial proposal to privatize the air traffic control system — an issue that snarled up previous reauthorization bills. Current reauthorization for the FAA is set to expire on Sept. 30.

The 2018 FAA bill contains a revenue title (Title VIII) that would extend the taxes that fund the Airport and Airway Trust Fund (e.g., fuel tax, airfare tax, etc.). More importantly, the revenue title provides a placeholder for other tax provisions — Republicans are looking to use it for technical corrections and extenders.

The House is aiming to take up the bill as soon as possible. However, timing on the Senate side remains uncertain.

House Speaker Paul Ryan (R-WI) announced that he would not be seeking re-election in 2018. While it was not a complete surprise to those in the know, the decision sent a shockwave through Washington. Ryan is now part of the growing list of Republicans (about 46) who will not be returning to Congress next year.

Ryan’s retirement appears to reinforce the GOP’s fear that a “blue wave” will hit Congress come November, taking away the party’s majority status in both chambers. Yet, interestingly, the latest poll conducted by ABC News and Washington Post shows that the Democrats’ advantage in the midterm elections may be shrinking: The 12-point advantage held in January has dropped to a four-point lead.

So far, Ryan has resisted calls for him to step down as speaker and allow an early leadership election to proceed. The GOP establishment is taking bets on whether the party will be able to force Ryan to hand over the gavel — some suspect that he may cave to the pressure by summer.

Based on most accounts, Majority Leader Kevin McCarthy (R-CA) is the likely successor, despite the personal scandal that helped sink his candidacy last time around. Majority Whip Steve Scalise (R-LA) is also getting a lot of buzz, but he’s unlikely to put up a fight against McCarthy, who has already secured Ryan’s blessing. Now McCarthy must bend the knee to the House Freedom Caucus to seal the deal.

A 51-year old tax decision may finally be overturned as the Supreme Court takes a third look at a highly controversial sales tax issue: Should companies be required to remit sales taxes to states in which they sell products to residents, but do not have a physical presence? On April 17, the Supreme Court will hear legal arguments for South Dakota v. Wayfair, with a decision to follow this summer.

The Wayfair case began when South Dakota passed a law requiring Internet sellers to collect state sales tax for goods sold to residents. The lower court struck down the law as violating a prior 1992 Supreme Court decision – Quill v. North Dakota. Earlier this year, the Supreme Court accepted the Wayfair case, essentially agreeing to revisit the Quill decision.

In Quill, the Supreme Court limited a state’s ability to collect sales tax to retailers with a physical presence (e.g., a warehouse or store) in the taxing jurisdiction. Quill itself followed the 1967 Bellas Hess v. Illinois case in which the Supreme Court determined that states cannot tax mail order companies for in-state sales, unless they maintained a physical presence in the state.

Of course, this was long before the Internet and the growth of online retail. Given technological advancements, will the Supreme Court overturn its previous decision?

For starters, the makeup of the high court has changed quite a bit since the Quill decision. Only Justices Thomas and Kennedy remain from the Quill decision. However, since then, Justice Kennedy has invited the court to revisit the Quill and Bellas Hess decisions. In Direct Marketing Association v. Brohl, Justice Kennedy noted that in light of technological and social changes that have taken place in an increasingly interconnected economy, the Supreme Court should reconsider its previous decisions. Justice Kennedy also noted that as a result of the court’s decisions, states have been unable to collect sales taxes on Internet purchases, which has major financial repercussions. According to the Government Accountability Office (GAO), states could have collected $13 billion in sales taxes in 2017 alone from out-of-state companies.

Despite Justice Kennedy’s concurrence in Brohl, no other justices joined his concurrence.  However, some of the other justices seem to be reconsidering their position based on opinions in other cases, including the Supreme Court’s 2015 decision in Maryland v. Wynne.

Barring congressional action, the fate of cash-strapped states and retailers seems to be in the hands of the high court. Earlier this year, lawmakers made a final attempt to attach a sales tax legislation to the FY 2018 omnibus. However, the provision did not make it into the final deal.

The House and Senate convene today at noon and 3 p.m., respectively.


Bills Under Consideration. April 17 is Tax Day, and the House has lined up a series of votes on bills related to IRS reform. See the full list here. Most of these bills will be considered under suspension of the rules. Three measures, however, will be debated under rules specified by the House Rules Committee:

  • H.R. 5192 – the Protecting Children from Identity Theft Act would authorize the commissioner of Social Security to provide confirmation of fraud protection data to certain permitted entities.
  • H.R. 5444 – the Taxpayer First Act is a bipartisan measure that would overhaul IRS operations and tax administration procedures.
  • H.R. 5445 – the 21st Century IRS Act would improve cybersecurity and taxpayer identity protection; and modernize the information technology of the IRS.

Quarles Speaks. On Tuesday, Federal Reserve Vice Chairman for Supervision Randal Quarles will testify before the House Financial Services Committee to discuss the Fed’s agenda.

Extenders Roundtable. The House Ways and Means Committee will hold a closed meeting with members to discuss tax extenders.

FY 2019 Appropriations. The House Appropriations Committee has scheduled a slew of appropriations hearings for various federal agencies. See the complete schedule here.


Vote. Lawmakers will resume consideration of S. 140, a tribal labor bill that would amend the White Mountain Apache Tribe Water Rights Quantification Act of 2010 to clarify the use of the WMAT Settlement Fund.

Nominations Hearing. On Tuesday, the Senate Banking Committee will consider the nominations of Jeffrey Nadaner to be assistant secretary of Commerce for export enforcement; Thelma Drake to be federal transit administrator; and Seth Appleton to be assistant secretary of HUD for policy development & research.

Pensions Hearing. On Wednesday, the Joint Select Committee on Solvency of MEPs will hold a hearing on the history and structure of the multiemployer pension system.

Key Hearings

Tuesday, 4/17

  • House Financial Services Committee. Hearing on the efforts, activities, objectives, and plans of the Federal Reserve.
  • House Financial Services Committee. Subcommittee hearing on the housing choice voucher program.
  • Senate Banking Committee. Nominations of Jeffrey Nadaner to be assistant secretary of Commerce for export enforcement; Thelma Drake to be federal transit administrator; and Seth Appleton to be assistant secretary of HUD for policy development & research.
  • House Ways and Means Committee. Hearing on “Jobs and Opportunity: Federal Perspectives on the Jobs Gap.” Labor Secretary Acosta to testify.
  • House Oversight Committee. Subcommittee hearing on “Continued Oversight Over the IRS.”
  • House Small Business Committee. Subcommittee hearing on “Small Business Retirement Plans and the IRS’ Employee Plans Fee Change.”

Wednesday, 4/18

  • House Appropriations Committee. Hearing on the FY 2019 Budget of the OMB with Director Mick Mulvaney.
  • Joint Select Committee on Solvency of MEPs. Hearing on the history and structure of the multiemployer pension system.
  • Securities and Exchange Commission. Meeting to determine whether the commission should propose rules related to investment advice. Full meeting agenda here.

Thursday, 4/19

  • Senate Banking Committee. Hearing on the “Semiannual Testimony of the Federal Reserve’s Supervision and Regulation of the Financial System.”
  • Senate Finance Committee. Hearing on opioid and substance use disorders in Medicare, Medicaid, and Human Services Programs.