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Happy New Year 2016

We want to wish everyone a very happy and prosperous new year, and hope to see you again in 2016 at conferences or here in Washington.  The Congress has been very busy at the end of this year and proud of the fact it accomplished the passage of major highway and education bills that had lingered on the congressional agenda for months, and also approved a tax break and spending package, avoiding a government shutdown.   Appears that Congress is working again.  As Speaker Ryan recently was quoted. “We passed more major legislation in a few weeks than we have in a few years.” See my other recent blog post for details of the recent legislation that broke the congressional deadlock. new years 2016

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WASHINGTON LEGISLATIVE UPDATE: OMNIBUS SPENDING BILL, TAX EXTENDERS, INTERIOR IMPROVEMENT ACT

Vietnam memorial at ChristmasCongress Passes $1.8 Trillion Spending Measure
 
After much debate and wrangling and some say a beaten down Congress on Friday December 18th, 2015 passed a $1.8 trillion package of spending and tax cuts with little rancor.  Majority Leader, Senator Mitch McConnell (R-Ky) had promised there would be no shutdown or default this year. And was quoted as saying “By any objective standard, I think, the Senate is back to work”.  Speaker Ryan was credited with winning a majority of Republicans votes for the huge spending and tax package, although House Democratic Leader Nancy Pelosi (D-CA) insisted that Republicans came on Board only because of a recently added provision to end a 40-year ban on crude oil exports. And, at a recent news conference President Obama said, “we’ve gotten kind of used to last-minute crises and shutdown threats and so forth…this is a messy process that doesn’t satisfy everybody completely, but it’s more typical of American democracy. And I think that Speaker Ryan deserves a role in that”.
Representative Tom Cole (R-Ok) managed much of the floor debate for Republicans and said that all lawmakers could find items to support or oppose in such a huge spending and tax-break package.  As an end result, the period of belt-tightening ended in Washington the spending measure for 2016 provides a $66 billion increase in Federal outlays above previously agreed-upon limits, divided equally between military and nonmilitary programs.  The White House and congressional Democrats said they had thwarted the Republicans’ main policy goals, including efforts to cut off government financing for Planned Parenthood and put restrictions on Syrian and Iraqi refugees, while securing a number of their own priorities, including tax benefits for working Americans and to promote renewable energy.  And Speaker Ryan, who was the former Chairman of the tax-writing Ways and Means Committee pushed through the major tax-break package that many Democrats opposed.
The House approved the Tax Breaks on Thursday Dec. 17th and the spending measure on Friday with a vote of 316 to 113, with 150 Republicans and 166 Democrats supporting the bill.   The Senate then voted to end the debate on the overall legislation, dispensed with several procedural steps, and approved the package, 65 to 33.
Spending Bill provisions impacting Tribal Programs:
  • For the Indian Health Service (IHS), the omnibus provides a total appropriation of $4.8 billion, a 3.6% increase over FY 2015 levels. This includes flat funding at $914 million for Purchased/Referred Care (formerly Contract Health Services) and $523 for Facilities, a $63 million increase. It also provides an additional $10 million to alcohol and substance abuse for a focus on Tribal youth, and an increase of $12.9 million for staffing.
  • The Bureau of Indian Affairs (BIA) is funded at a total of $2.8 billion, a 7.5% increase over FY 2015 enacted. This includes $2.26 billion for the Operation of Indian Programs, a $161 million reduction compared to FY 2015, as well as $852 million for the Bureau of Indian Education. Notably, the bill also contains $138 million for school construction, an increase of $63.7 million, which should complete the 2004 replacement school construction list.
  • For Contract Support Costs (CSC) at both BIA and IHS, the omnibus creates an indefinite appropriation using the language, “such sums as may be necessary,” rather than specific amounts. Tribes and Tribal organizations advocated for the CSC line item to be made mandatory on a permanent, indefinite basis in order to stabilize funding, protect funding appropriated to other line items, and help to avoid funding shortfalls. Though the omnibus does not make CSC mandatory, providing for an indefinite appropriation will allow the agencies to pay CSC in full, as required by the Supreme Court decision in Salazar v. Ramah Navajo Chapter, as well as protect other line items in the budget and avoid shortfalls.
  • In addition to the omnibus, Congress also passed a $680 million package to extend a number of critical tax provisions that have been expired since the end of 2014. Each of these tax credits is designed to encourage increased investment in projects within Indian Country, as well as increased jobs for Native people and indicate that greater tax reform is around the corner.  These include:
    • Indian Employment Tax Credit. Extended until December 31, 2016, this provides a tax credit for private employers of tribal members and their spouses in Indian country. On-reservation unemployment rates and poverty rates are disproportionately high, and this tax credit encourages on-reservation employers to invest in the Native workforce. Without the certainty of permanency, and with effectively only one year of guaranteed credits at this point, employers have less incentive to invest in Native workers.
    • Accelerated Depreciation for Business Property on Indian Reservations. Extended until December 31, 2016 this provision allows businesses located on Indian land to claim a tax credit for certain property and infrastructure investments at sooner than they would be able to if located off-reservation. Because this credit is effectively only guaranteed through the end of 2016, there is less incentive for businesses to relocate onto Indian lands and spur on-reservation economic growth.
    • Indian Coal Production Tax Credit. Extended until December 31, 2016, this provides a tax credit to producers of coal on Indian land. This credit is vital to draw coal businesses to Indian country, where many tribes lack the capacity to produce and export their coal in-house. Again, because coal businesses are effectively only guaranteed this credit through the end of 2016, there is less incentive to build up the infrastructure and workforce necessary.
    • New Markets Tax Credit. Extended until December 31, 2019, this program provides tax credits to businesses investing in low-income workforce’s and communities, including-but not limited to-Native communities.
    1. Low Income Housing Credit.  Permanently extended, this provision allows the 9-percent minimum credit rate for the low-income housing tax credit for non-Federally subsidized new buildings. Though not limited to tribes, low income housing projects on Indian lands will now be more predictable and attractive to private investors.
Senate Committee on Indian Affairs Passes S. 1879, 

the Interior Improvement Act 

On Wednesday, December 2, 2015 the Senate Committee on Indian Affairs (SCIA) passed the Interior Improvement Act, S. 1879 that was introduced by Chairman John Barrasso (R-Wy) in July of this year. The bill improves the Department of Interior’s trust land acquisition process by codifying and streamlining portions of the process, reaffirming the Secretary’s authority to take land into trust for all federally recognized tribes and reaffirms the statutes of lands already taken into trust. The Chairman added manager’s amendments that were technical in nature and did not stray far for the original legislation.  Assistant Secretary Washburn has supported the legislation saying at most it codifies existing practices at the department, and does not disrupt the current land into trust review and will expedite the process for many trust lands applications.  This bill now sets the mark for legislation in the next Congress, and indicates that Congressional movement to fix the US Supreme Court Decision (Carcieri v. Salazar in 2009) is closer at hand.
 

WASHINGTON UPDATE: What will happen in the New Congress

The Spending Bill:

 The House of Representatives passed a spending bill, on a vote of 206 to 219.  At the time Tribal Conferences were being held in Las Vegas, the week of Dec. 9, the bill was in the Senate awaiting vote.  The Senate, since has passed the spending bill just a few hours before midnight on Saturday Dec. 13, 2014 and avoided a Government Shutdown.  The vote was 56 to 40 assuring the government would remain funded until September 15, 2015.

Senator Elizabeth Warren of Mass. objected to the roll back of Wall Street reforms that would allow for risky investments that could again lead to bail outs of the banks. Another poison pill objected to by Democrats was the increase in election campaign contributions jumping from 90 million to over 300,000 million in allowable soft money.  But the bill was considered a compromise for both parties, and the President will receive full spending on all but one agency, Homeland Security, to postpone the immigration debate until February.

 The bottom line, the liberal wing of the Democratic Party and the conservative wing of the Republican Party were disappointed.  The result however, is the President did receive extra funding for Ebola research and to fight ISIS, and full funding of agencies that are implementing the Affordable Care Act.

On the elections, the tables have turn in the Senate:  The new republican majority isn’t likely to play nice, and payback will likely be the name of the game.  The vote count, in the Senate, Republicans now control with 54, and the Dems 44, with 2 Independents.

In the House, a sharper turn to the right, House leaders will have to navigate a larger GOP caucus ripe with fresh hard-liners ready to oppose them.  The vote count, Reps control a bigger majority with 244 and the Dems 184 and 7 are not yet called.

 On the issues, Speaker Boehner has complained about the conservatives in his caucus as “knuckleheads” but has expressed confidence to keep his caucus together.  He has said that tax reform and a big Highway bill are doable.   He has put fixing the tax code as a priority to improve the economy, although most say big reform is too ambitious for a divided republican caucus.

 The House will push for their jobs bills that died in the Senate and for the keystone pipeline.  And they will fight for repeal of the medial device tax in Obama Care.  And it is predicted that more stalemate will occur on the budget and debt ceiling issues that will come up in the new congress.   A budget resolution is due in March or April, but it is likely to see continuing resolutions and there will be intense debates on the debt ceiling to increase government borrowing.   It is predicted that Republican leadership will continue to struggle to get consensus as some try to force cuts to shut down immigration reform or Obama Care Programs.

 In the Senate with a new majority and Mitch McConnell in charge the President and the Democratic Caucus will feel payback.  Republicans have said they are going after health care, financial services, and EPA.  So the chances of a grand bargain on the Tax Code are slim and soon there will be political maneuvering of the 2016 Presidential Contest.  They predict a narrow window next year to get things done.

 On Committee’s:  In the House, retirements, term limits and election results yield new dynamics.  On Transportation, Shuster remains as Chair, and looks like for Dems because Rahall from West Va lost, that Peter Defazio will be ranking from Oregon.  Natural Resources with departure of Doc Hasting , Bob Bishp of Utah will be Chair.  Hanabusa lost her fight for Senate so not sure as of yet the ranking member of Resources.

 On Ways and Means, Paul Ryan is taking over for Camp.  Ryan did support this fall Camp’s proposal for funneling in the one-time windfall from over hauling corporate taxes into infrastructure.   The administration has called this transitional funding for Transportation falling out of Tax reform.  On Agriculture, Conway of Texas replaces Lucas as Chairman.  Appropriations Rogers of Kentucky remains as Chair, and Lowry of NY as ranking member.  Budget is Price as Chairman. On Energy, Upton is Chair and Pallone won the fight over Democrat Eshoo for ranking member who was favored by Pelosi.

 In the Senate the new majority means a real changing of the guard is occurring.  On Commerce Science and Transportation John Thune of SD replacing Jay Rockefeller as Chair.  Senator Boxer is senior and is likely to hold ranking member.  On Environmental and Public Works that decides the tribal transportation formula, Senator Inhofe of Oklahoma will Chair.   And Senator Bill Nelson the Ranking member on Commerce.

On Energy Murkowski of Alaska will chair with Maria Cantwell as Ranking.  On Finance, Senator Orin Hatch will Chair, Appropriations Thad Cochran will Chair, and Milkulski of MD is ranking.  On Armed Service McCain will Chair and Reed of RI will be ranking.  On Budget Senator Enzi of Wyoming, and on Banking Senator Shelby of Alabama will Chair.  Senator Barrasso will Chair the Senate Indian Affairs Committee.  It is still very dynamic and not all Chairmanships have been announced.

 What will happen with Transportation and the re-authorization bill and trust fund, and the now May 15th deadline?

 Chairman Shuster has vowed not to do short term funding and has proposed a six year measure.  Paul Ryan has proposed funding through the Tax Code.  And the administration has also said that through Tax reforms what they refer to as Transitional funding would allow for increases in the Highway Trust fund.  But the reforms to the Tax code are not likely to look the same from opposing parties.

 Recently at a Department of Transportation listening session the Deputy Secretary commented that he believes a compromise would be possible and that funding could be increased by a onetime infusion of 150 billion as part of the Grow American Act introduced by the President. Right now the Highway Trust Fund is short by 167 Billion.  So there is a scramble to find new funding.

The Grow America Act introduced by the Administration, is a 4 year authorization of Transportation, both sides want an authorization bill that is longer term.   And Speaker Boehner has said that he believes a big Highway Bill is doable in the new congress.  But can they meet the May deadline and whether it is possible to get a tax code revision in time to add money into the Highway Trust fund is the question.

The president’s proposal is funded by supplementing current revenue with $150 billion in one time infusion of  ‘Transition’ revenue.  So from addressing the 1 to 2 trillion of un-taxed foreign earnings that US companies have accumulated overseas and from reforming accumulated depreciation–this one time savings from a transition to new business tax system could help pay for the proposed transportation budget.

 Paul Ryan has also expressed support for the former Ways and Means Chairman Camp’s proposed windfall from tax reform for infrastructure funding.  Thus it appears that there is the political will from both the Republicans and the White House to use tax reform to pour money into infrastructure.

 The bottom-line: Both parties will have to work together to get major measures through congress, but there does appear to be political will on both sides to pass a longer term authorization bill and to find new funding for the Highway Trust Fund through tax reform.

 Read The Year According to Rep. Tom Cole

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