This Washington Update for CSBA is provided to AZBio Members as an update on issues that affect our industry at the nation’s capitol.
The Council of State Bioscience Associations (CSBA) is a confederation of state-based, non-profit trade organizations each governed by its own board of directors. The common mission of the members of the CSBA is to promote public understanding, and to advocate for public policies that support the responsible development of the bioscience industry. These groups are recognized by BIO as affiliate organizations in their respective states. (Learn More)
The Arizona Bioindustry Association (AZBio) is the BIO state affiliate in Arizona and a member of CSBA
Washington Update for October 2014
October 6, 2014
Legislators worked efficiently to address key legislation in September before adjourning for the mid-term elections. Congress approved a continuing resolution (CR) to extend federal funding of government agencies through December 11, 2014. Both the Administration and Congress moved forward on some tax and transportation issues, while continuing to defer action on the expired tax extenders and a possible executive order on immigration. Much of the month was defined by events transpiring outside of the U.S., including the deteriorating situation in Iraq and Syria and the Ebola outbreak in Western Africa. Many of these issues will require additional consideration when Congress returns in November for the Lame Duck session.
ISSUE – GOVERNMENT FUNDING
With the clock ticking down, Congress agreed to extend funding for the federal government at existing funding levels before leaving for election season. The government had been operating on funding from a previous CR that was set to expire at the end of Fiscal Year 2014 (FY14) on September 30, 2014. The new CR will fund the government through December 11, 2014.
With the new CR set to expire in December, legislators will need to quickly decide on a path forward for FY15 funding after they return to Washington following the mid-term elections. Senate Democrats are likely to pursue a CR or appropriations omnibus package that would extend funding through the remainder of Fiscal Year 2015 (FY15), ending in September of next year. However, if Republicans win the Senate on Election Day, GOP leaders are likely to come under pressure from some conservative members to push for a CR that runs only until the end of March, giving a new Republican-controlled Congress more latitude to adjust funding levels and advance new policy provisions as add-ons to appropriations bills.
ISSUE – TAXES
Congress addressed several tax-related issues in September while leaving others unresolved until the Lame Duck session.
Little substantive progress was made in September on renewing the expired package of personal and corporate tax provisions known collectively as tax extenders. The House passed a messaging bill (H.R. 4) containing several provisions it previously passed in other bills, including several of the expired extenders. The bill has no chance of advancing in the Senate.
The issue will most likely be resolved in the Lame Duck session, but questions remain on what a tax extenders deal would look like. House Republicans have called on Congress to make permanent a handful of the provisions, including the R&D tax credit and bonus depreciation. Earlier this year, the Senate Finance Committee produced a package that included a straight two-year extension for the tax provisions, retroactive for 2014 and then an extension into 2015. Regardless of the outcome of the elections, a two-year deal based on the Senate Finance Committee’s package is the most likely outcome, with the possibility of including R&D and maybe a few other extenders on a permanent basis.
The battle over corporate inversions, the practice of reincorporating a company in another country following a merger with a foreign entity, continued this month with action coming from Congress and the Administration. Corporate inversions occur for a variety of reasons, including a desire to lower a company’s corporate tax burden. Democrats have criticized these corporate decisions and spent most of the summer and early fall building support to restrict the use of inversions.
Senate Majority Whip Dick Durbin (D-IL) and Senator Sherrod Brown (D-OH) introduced a bill this month that would require any company inverting after September 18, 2014, to pay taxes on overseas income before relocating. This proposal follows legislation previously introduced by Senate Committee on Investigations Chairman Carl Levin (D-MI) to change the management and control requirements of inverted companies. Another plan that is being floated by Senator Chuck Schumer (D-NY) would set tighter restrictions on the use of earnings stripping, the process of foreign companies loading U.S. subsidiaries with debt in order to claim tax deductions on the interest. Senator Schumer’s proposal would retroactively apply to all inversion deals that took place after 1994, potentially affecting scores of companies.
In September, the Treasury also handed down proposed rule changes that would make inversions less attractive to corporations. Among the adjustments, the proposed rule would prevent the use of so-called “hopscotch” loans and strengthen the existing 80 percent ownership rule.
Republicans have been critical of the proposals from Democratic lawmakers and the Treasury, believing them to be retaliatory and unlikely to solve the root cause of inversions. Instead, most GOP legislators would prefer to address inversions in a comprehensive tax reform package. Senate Finance Chairman Ron Wyden (D-OR) and Ranking Member Orrin Hatch (R-UT) continue to negotiate on a bipartisan plan to curb the use of inversions, but progress has been slow. Chairman Wyden hopes to take action on a plan during the Lame Duck session and possibly include it in the tax extenders package, a move that is likely to elicit strong opposition from many Republicans, particularly if the GOP is successful in regaining the Senate majority on Election Day.
Despite the efforts of several tax leaders in Congress, lawmakers have yet to advance a comprehensive rewrite of the federal tax code. However, some legislators remain confident that tax reform will be a possibility in the coming years. Rep. Paul Ryan (R-WI), who is running against Rep. Kevin Brady (R-TX) to replace Chairman Dave Camp in January as the head of the tax-writing House Ways and Means Committee, stated this month that he sees tax reform happening in the next one to three years. Rep. Ryan called for any tax rewrite to be one part of a larger fiscal strategy that also includes entitlement reform and replacing the Affordable Care Act.
Internet Tax Moratorium
One tax provision that was included in the CR legislation in September was a short-term renewal of the federal moratorium on taxing Internet access. Lawmakers had been working for months to pass the moratorium extension, which enjoys broad bipartisan support. With the CR set to expire on December 11, however, Congress will need to again address the ban during the Lame Duck session.
ISSUE – HEALTHCARE
Congress took limited action on healthcare in September. The House passed a bill mid-month that would permit insurance providers to continue to sell health plans that do not meet the Department of Health and Human Services’ (HHS) minimum standards through 2019. This plan calls for a longer extension than what the Administration has thus far proposed.
The House also voted again to repeal the 2.3 percent medical device excise tax in the H.R. 4 jobs package. The tax has received criticism from across the political spectrum, and industry leaders have warned that it may stifle innovation. The repeal’s legislative vehicle is unlikely to move forward in the Senate, but the next Congress may seek to repeal the tax again given the strong bipartisan support.
ACA supporters received some good news this month as HHS announced that 7.3 million people were enrolled in federal exchange insurance plans and had paid their premium through mid-August. While this figure is above the expectations of the Congressional Budget Office (CBO), it shows a decline from the nearly 8 million enrolled following the end of open enrollment earlier this year. However, the numbers indicate that fewer people failed to pay their premiums than the industry forecast, giving a boost to ACA advocates.
Lawmakers took action on several other items before recessing for the mid-term elections, though several issues will need to be revisited in the Lame Duck session or the new Congress.
During the summer months, a terrorist organization known as the Islamic State (alternatively known as ISIS or ISIL) carried out extensive operations across Iraq and Syria, gaining control of large swaths of both countries. The international community has struggled to contain the growing threat, but, in September, President Obama began laying out his Administration’s strategy in fighting Islamic State forces.
On September 10, President Obama delivered an address to the nation in which he informed Americans that the U.S. will engage in a campaign of targeted airstrikes against Islamic State forces in Iraq and Syria. He also called on Congress to give him the authority to train and equip Syrian rebels fighting against both the Islamic State and the ruling Assad regime.
Legislators heeded the President’s call and included the authorization and funding request in the CR that passed in mid-September. However, with the CR set to expire on December 11, Congress will have to revisit the issue, and there are signs that many lawmakers have growing concerns. Members of both parties have expressed anxiety that military re-engagement in Iraq and Syria will eventually expand to encompass combat missions, a possibility the President has ruled out. Moreover, some in Congress are concerned with the difficulty of pinpointing rebels in Syria who are opposed to both the Islamic State and the Assad regime and ensuring that the equipment provided to them does not find its way into terrorists’ hands.
After receiving congressional approval, the Pentagon began its airstrike assaults, destroying or degrading Islamic State forces. President Obama has warned that the process of eliminating this threat will be long, even with the growing coalition of Western and non-Western forces joining the effort.
The President received criticism from both parties this month when the White House announced that it would delay the Administration’s long-awaited action on immigration. With immigration reform having stalled in Congress, President Obama promised to take executive action, possibly through a series of executive orders. Issues that have been rumored to be on the list for action include deferring deportations of illegal immigrants and making improvements to the green card and work authorization programs. However, in early September, President Obama announced that action would be delayed until after the mid-term elections.
The delay was widely attacked by both sides. Immigration activists and Hispanic legislators publicly criticized the decision, and Republicans claimed the move was political after several incumbent Democrats in red states have seen the issue become politically toxic in their races. Undaunted, President Obama promised swift action following the elections, promising a change in policy by the end of the year.
Concern continues to grow over the worst outbreak of the Ebola virus in world history. The explosive spread of the disease in Western Africa during the summer months has already reached 20,000 cases, with public health officials warning that the virus could infect 1.4 million by the end of January.
Mounting pressure to contain the disease prompted the Obama Administration to commit thousands of American military personnel to the region to coordinate a response to the outbreak. The President also requested $88 million in emergency funds for intervention operations, which Congress included in the September CR. Additionally, the Pentagon has requested that Congress allow it to shift $1 billion in funding to Ebola containment efforts. Some lawmakers have held up the majority of funds requested until the Obama Administration provides details on how it will ensure the safety of U.S. military personnel deployed to infected regions. Once these details are provided, the full request is expected to be approved.
The Ebola outbreak is expected to remain a top issue of interest for the Administration, particularly after the late September announcement from the Center for Disease Control that the first U.S. case of Ebola had been reported in Texas.
Congress has yet to pass the National Defense Authorization Act, the annual defense reauthorization bill that has been passed for 52 consecutive years. The House previously passed their version of the NDAA in May, but action has stalled in the Senate. During the Lame Duck session, the two chambers will likely cobble together a joint bill for 2015.
Job Approval: President Obama
|Approve 47, Disapprove 52
|Approve 43, Disapprove 52
Job Approval: Congress
|The Economist/ YouGov
Generic Congressional Ballot
|CBS News/NY Times
Public Approval of Health Care Law
|CBS News/NY Times
The Washington Update for October 2014 was prepared for CSBA by: