Mar 21, 2017

Tax Policy Update

BILL OF THE WEEK: American Health Care Act

It’s all about healthcare this week. On March 23, the House is expected to take up consideration of the American Health Care Act (“AHCA”) — the GOP’s “repeal and replace” legislation for Obamacare. House Speaker Paul Ryan is facing his first big leadership test — it remains to be seen whether he can keep House Republicans in line and united to pass the AHCA. With nearly every Democrat set to vote against the bill, there is little room for error on the Republican side. At this writing, it is still uncertain whether House Republican leaders have the necessary votes. Stay tuned to our tax policy team’s alerts this’s going to be a close one!

Legislative Landscape

Godfather Style Quid Pro Quo. The House Rules Committee, with the support of President Donald Trump, released a “manager’s amendment”— a package of modifications designed to attract the support of various factions of House Republicans — namely, the House Freedom Caucus. The manager’s amendment includes:

  • Various technical changes to conform with the reconciliation instructions and address other drafting issues.
  • Repeals all of Obamacare's taxes in 2017 instead of 2018 and moving the repeal of the Cadillac tax from 2025 to 2026.
  • Eliminates states’ ability to offer Medicaid to otherwise-ineligible individuals above 133% of the federal poverty level after Dec. 31, 2017.
  • Limits the enhanced 90% FMAP to Medicaid expansion states that already cover able-bodied adults as of March 1, 2017. Any new state that expands Medicaid to cover able-bodied adults up to 133% FPL would receive that state’s regular FMAP – an average of 57%.
  • Allows states that have expanded Medicaid by Dec. 31, 2019 to keep their enhanced FMAP (90%) for individuals who were enrolled in the program as of this date and do not have a break in eligibility for more than one month after that date.
  • Increases the Medical Care Consumer Price Index by +1 for the elderly and the disabled.
  • Allows states to choose a block grant instead of the per capita cap.
  • Provides states the option of instituting a work requirement for able-bodied adults receiving coverage under Medicaid.
  • Sets up a fund to establish additional financial assistance for individuals aged 50 to 64 who would have seen their premiums spike under the original bill.

House leadership and the administration hope that these concessions will …

Next Up for the AHCA. A House Rules Committee markup of the AHCA is scheduled for March 22 at 10:00 a.m. A subsequent floor vote is expected on Thursday. Provided the House passes the bill, it will likely move to the Senate later this month.

The Senate is expected to make several changes to the bill, including boosting financial assistance for individuals 50 to 64 years of age. In the end, both chambers will have to work together to resolve any differences between their respective bills. During a March 20 rally, Trump predicted that the bill will “go back and forth” in Congress, noting that the end result would be “great.”

In addition to the AHCA, additional legislation is expected since certain items cannot be included in a reconciliation bill. This will likely address association health plans as well as the ability to purchase insurance across state lines.

Let’s Talk About Tax . With the AHCA hogging the limelight, there have been little new developments on the tax reform front. President Donald Trump’s proposed budget for fiscal year 2018 did not reveal much about where the administration stands on tax reform — namely, the controversial border adjustment tax (BAT).

As opposition to the BAT grows, the Senate has started to look for modifications and alternatives. Some senators are revisiting …

This is How Rumors Get Started. Although tax reform appears to have taken a backseat to the healthcare debate, Republicans on the House Ways and Means Committee are still meeting twice a week behind closed doors to nail down the details on other aspects of the GOP’s tax reform blueprint. One Republican on the tax-writing panel told McGuireWoods’ tax policy team that members are close to reaching consensus on …


Skinny Budget, Starving IRS. President Donald Trump has proposed a $239 million cut from fiscal year 2017 for the Internal Revenue Service, according to the “skinny budget” released on March 16. In the past seven years, the IRS budget has shrunk by $900 million — nearly 20 percent. In the past, IRS Commissioner John Koskinen has warned that further cuts to the agency will make it increasingly difficult for the IRS to serve taxpayers and to increase cybersecurity measures. In addition to cuts for the IRS, the budget proposes to …

Justice Department Argues Against CFPB in its Brief. On March 17, the Justice Department argued that the president should be allowed to fire the Consumer Financial Protection Bureau’s independent director. The Justice Department’s brief was filed with the U.S. Court of Appeals in Washington D.C. as part of the PHH Corporation case.

Earlier this year, on Feb. 16, the CFPB won a much-needed reprieve as the D.C. Circuit vacated a three-judge panel ruling from October 2016 giving the White House the power to remove its independent director at will. The D.C. Court of Appeals will now …


Trump’s “Skinny Budget” Puts DOT on a Diet. Despite President Trump’s oft-repeated commitment to invest in America’s infrastructure, his recently-released budget for fiscal year 2018 (“FY 2018”) actually proposes to reduce federal funding for transportation infrastructure. Specifically, the president requests $16.2 billion for the Department of Transportation’s discretionary budget, a $2.4 billion or 13 percent decrease from FY 2017’s annualized amount. Cuts would include termination of Amtrak’s long distance train service, limiting funding for major transit investments, eliminating the Essential Air Service (EAS) and zeroing out the TIGER discretionary grant program, which has been extremely popular among Democrats and some Republicans since it was established in the American Recovering and Reinvestment Act of 2009.

While much of Trump’s $1 trillion infrastructure plan is still a mystery, if this budget proposal is an indicator, the president will likely expect the private sector to pick up the tab. In his budget, Trump signaled a preference for private-sector leadership by expressing support for shifting air traffic control responsibilities from the Federal Aviation Administration (FAA) to an independent, non-governmental organization (which some consider “privatization”). Trump’s support for such a move is a surprise to many people, including House Transportation and Infrastructure Committee Chairman Bill Shuster (R-PA). Is privatizing air traffic control just the first of several steps to be taken by the president in his attempt to privatize the nation’s transportation system? Time will tell.

Meanwhile, in other aviation-related news …the proposed elimination of the EAS program has prompted some head-scratching. While conservatives continually make the case of doing away with this subsidy for commercial air service to remote and rural airports, Transportation Secretary Elaine Chao acknowledged the importance of continuing the EAS program during her confirmation hearing. For a program that only receives roughly $250 million annually, the savings it would provide for the overall budget are more …

Up in the Air This Week: The Senate Commerce Committee will hold a hearing on Thursday, March 23 regarding “FAA Reauthorization: Perspectives on Improving Airport Infrastructure and Aviation Manufacturing.” The hearing will examine airport infrastructure issues, regulatory certification processes at the FAA, and reforms aimed at improving U.S. competitiveness in the global marketplace for aviation products and manufacturing.

Senate Commerce and its counterpart in the House – the Transportation and Infrastructure Committee – will be tasked with reauthorizing FAA programs (or passing another extension) before the current extension expires at the end of September. A live feed of the hearing will be available on the committee’s website starting at 10:00 am EDT.



  1. Rep. Jim Renacci (R-OH), a member of the House Ways and Means Committee, will soon announce his run for governor of Ohio.


Congressional Activity

Tuesday, 3/21

House Financial Services Committee
Financial Institutions and Consumer Credit Subcommittee hearing on "Ending the De Novo Drought: Examining the Application Process for De Novo Financial Institutions."

House Financial Services Committee
Oversight and Investigations Subcommittee hearing on "The Bureau of Consumer Financial Protection's Unconstitutional Design."

House Education Committee
Higher Education and Workforce Development Subcommittee hearing on "Improving Federal Student Aid to Better Meet the Needs of Students."

Wednesday, 3/22

House Judiciary Committee
Markup of H.R. 1393, the Mobile Workforce State Income Tax Simplification Act.

House Financial Services Committee
Monetary Policy and Trade Subcommittee hearing on “Examining Results and Accountability at the World Bank.”

House Financial Services Committee
Capital Markets, Securities and Investments Subcommittee hearing on "The JOBS Act at Five: Examining Its Impact and Ensuring the Competitiveness of the U.S. Capital Markets."

Thursday, 3/23

Senate Commerce Committee
Full committee hearing on “FAA Reauthorization: Perspectives on Improving Airport Infrastructure and Aviation Manufacturing.”

House Judiciary Committee
Regulatory Reform, Commercial and Antitrust Law Subcommittee hearing on the "Financial Institution Bankruptcy Act of 2017."

Other Activity

Monday, 3/20

American Bankers Association
2017 Government Relations Summit, March 20-22.

Tuesday, 3/21

Aspen Institute
Discussion on "Building Good Jobs into America's Infrastructure Investments."

George Washington University
Discussion on "The AHCA (American Health Care Act): Understanding the Current Health Care Proposal," focusing on "tax credits, mandate/penalties, Medicaid, and high-income ACA taxes."

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