TAX Tax Extenders Negotiations Still Ongoing and Still Fluid; Brady Files Backup Extender Bill Key Points:
Congress is exploring a larger tax extenders deal, that would make some permanent, but nothing is yet agreed to and the deal may or may not come together
The timing is that a decision is likely in the next several days, over the weekend or early next week
House Republicans filed a two-year tax extender bill this week that extends the expired measures for 2015 and 2016, and also includes a number of other provisions. The bill was reportedly filed as a backup by House Ways and Means Committee Chairman Kevin Brady (R-TX) while negotiations on the larger, permanent package continued all week.
The House bill (summary) includes a two-year extension of extenders, some with modifications. It also includes a Title II with REIT reforms; reforms to the Internal Revenue Service (IRS) related to investigations and 501(c)(4) filings; and a series of reforms to the U.S. Tax Court. There were a number of miscellaneous provisions included in the package as well, such as technical corrections to the partnership audit rules that were enacted in the “Bipartisan Budget Agreement of 2015”; refinements to the 529 college savings accounts; and changes to the hard cider excise tax, among others. Negotiations on the permanent package will continue, and action and final decisions as to
This Week in Congress
House – The House passed a five-day continuing resolution to fund the federal government through December 16, 2015. The House agreed to the Conference Report to the “Trade Facilitation and Trade Enforcement Act of 2015” (H.R. 644).
Senate – The Senate passed a five-day continuing resolution to fund the federal government through December 16, 2015. The Senate agreed to the conference report to the “Every Child Achieves Act of 2015” (S. 1177).
Next Week in Congress
House – The House may vote on an FY 2016 omnibus appropriations act.
Senate – The Senate may vote on an FY 2016 omnibus appropriations act.
Table of Contents Taxes 1 Financial Services 2 Energy & Environment 6 Defense 8 Health 12 Transportation & Infrastructure 13 Technology 16
whether a bigger or smaller package will be pursued will likely be aligned in timing with an end of the year spending bill or omnibus spending package. Clinton Details Plan to Stop Inversions Key Points:
Proposal would include legislation to decrease the merger threshold to from 80 percent to 50, apply an exit tax, and to limit earnings stripping
Presidential candidate and former Secretary of State Hillary Clinton released a detailed plan aimed at curbing corporate inversions. The proposal includes ending earnings stripping through either Congressional action or of needed executive action. Clinton said the Department of the Treasury has the authority to take such action if Congress fails to address inversions. The plan has an “exit tax” for companies moving their headquarters overseas as well as a lower ownership threshold (50 percent of combined assets) for the U.S. partner in a merger to have the new foreign domicile disregarded (from 80 percent). Clinton would ask Congress to make the 50 percent rule retroactive to May 2014. Clinton said her earnings stripping provision would raise an estimated $60 billion in new revenue plus another $20 billion from the other measures, all of which would be used to fund incentives for manufacturing, research & development, and small businesses. JCT Issues Report on Tax Expenditures Key Points:
Scores show five year “cost” of tax provisions but don’t correlate directly to a revenue score of repeal directly because do not account for
potential behavioral changes of taxpayers as a result of repealing a provision
The Joint Committee on Taxation (JCT) released its annual report on tax expenditures. The report included five-year “scores” of the amount of foregone revenue for many provisions deemed as exceptions to the “normal” rules of taxation, which includes provisions such as mortgage interest and depreciation to charitable deductions. However, the JCT tax expenditure score does not explicitly represent how much would be raised if a provision were to be repealed as the score does not assume changes in behavior that might result. For example, taxpayers could adjust their behavior to shift activity elsewhere and therefore repeal would have to take that impact into account. However, the score does indirectly show the overall scope and size of provisions relative to others, as well as changes in macroeconomic assumptions and other assumptions from year to year. For more information about tax issues you may email or call Christopher Hatcher at 202-659-8201. Laura Simmons contributed to this section. FINANCIAL SERVICES House Financial Services Committee Questions FSOC Members
Upcoming Dates December 16: The short-term FY 2016 CR expires January 12, 2016: State of the Union Address March 31, 2016: FAA extension expires March 2017: Debt limit suspension ends
Eight of the ten FSOC voting members testified before the House Financial Services Committee.
Committee Republicans raised concerns with the transparency of the FSOC’s SIFI designation process and the Council’s decision to designate insurers as SIFIs.
On December 8, the House Financial Services Committee held a hearing to discuss the oversight of the Financial Stability Oversight Council (FSOC). Eight of the ten FSOC voting members testified at the hearing: Consumer Financial Protection Board (CFPB) Director Richard Cordray; Comptroller of the Currency Thomas Curry; Federal Deposit Insurance Corporation (FDIC) Chairman Martin Gruenberg; Commodity Futures Trading Commission (CFTC) Chairman Timothy Massad; National Credit Union Administration (NCUA) Chairwoman Debbie Matz; Federal Housing Finance Agency (FHFA) Director Mel Watt; Securities and Exchange Commission (SEC) Chair Mary Jo White; and independent member with insurance expertise, Roy Woodall. Chairman Jeb Hensarling (R-TX) in a statement noted that the FSOC’s “power is concentrated in the hands” of the political party that controls the White House. He explained that he FSOC’s budget is not subject to congressional approval, removing a check and balance to its “immense” power. He added that FSOC has earned bipartisan “condemnation” for its lack of transparency, and two-thirds of its proceedings conducted in private while minutes of those meetings are “devoid of any useful substantive information on what was discussed.” Hensarling stated of all of the Council’s activities, none generates more controversy than its designation of non-
bank financial institutions as systemically important financial institutions (SIFIs). He stated designation “anoints” institutions as Too Big to Fail (TBTF), meaning “today’s SIFI designations are tomorrow’s taxpayer-funded bailouts.” Hensarling noted the Council warns of reduced liquidity in the capital bond markets in its Annual Report, yet never acknowledges that Dodd-Frank’s Volcker rule and other regulations have drastically reduced liquidity. Ranking Member Maxine Waters (D-CA) noted Congress specifically designed the FSOC to draw upon the expertise from each agency. She suggested opponents of the DFA are too focused on dismantling the DFA rather than on fixing problems with the markets. She noted the FSOC has also taken action to improve their operation to be more transparent. Several Republicans raised concerns with the FSOC’s decision to designate three insurance companies as non-bank SIFIs, noting that Roy Woodall, FSOC’s only member with experience in the insurance industry, dissented on the Council’s votes to designate MetLife and Prudential. Representative Blaine Luetkemeyer (R-MO) noted concern over non-bank designations, and he asked NCUA Chairwoman Debbie Matz whether she is an expert on insurance. Matz stated she is not. Luetkemeyer asked how NCUA can make decisions on insurance without expertise. Matz stated it was not the insurance portion of the business which was important to designations. Some Republicans also expressed concern that the FSOC’s SIFI designation process lacks adequate transparency. However, Representative William Lacy Clay (D-MO) noted that the FSOC has implemented
recommendations made by the GAO to make their processes more transparent. Representative Dennis Ross (R-FL) argued that it is inappropriate for asset managers to be designated as SIFIs. Cordray responded that FSOC has not designated any asset managers as SIFIs. Representative Bruce Poliquin (R-ME) pointed to Chair White’s announcement regarding the regulation of asset managers, and that Section 113 of the Dodd-Frank Act sets criteria for considering SIFI designations, including whether a firm is regulated by a primary regulatory agency, such as the SEC. He asked why FSOC chose to vote to consider designations of asset managers, when they are already supervised by the SEC. Matz said the FSOC voted to consider the activities of asset managers, not to designate asset managers. Poliquin argued that the FSOC should not be involved in the asset management space. Matz said the FSOC is examining the potential threat to financial stability from the asset management industry. House Financial Services Committee Approves Eight Financial Services Bills Key Points:
The Committee approved eight bills, including legislation related to: amending the definition of accredited investor; data security; National Credit Union Administration (NCUA) budget transparency; housing opportunity; small business formation; and small banks.
On December 8 and 9, the House Financial Services Committee held a markup and approved the following eight bills. .
H.R. 2187, the “Fair Investment Opportunities for Professional Experts Act”, introduced by Representative David Schweikert (R-AZ), which would direct the Securities and Exchange
Commission (SEC) to revise its regulations regarding the qualifications of natural persons as accredited investors. H.R. 2187, as amended, was adopted by a vote of 54 to 2, with Representatives Michael Capuano (D-MA) and Stephen Lynch (D-MA) voting against the bill.
H.R. 2205, the “Data Security Act of 2015,” introduced by Representative Randy Neugebauer (R-TX), which would require individuals and companies that access or handle financial account information to implement a security program and to provide notification if data breaches are likely to cause identity theft. H.R. 2205, as amended, was adopted by a vote of 49 to 9, with Representatives Maxine Waters (D-CA), Nydia Velazquez (D-NY), Michael Capuano (D-MA), Stephen Lynch (D-MA), Al Green (D-TX), Keith Ellison (D-MN), Daniel Kildee (D-MI), and John Delaney (D-MD) voting against the bill.
H.R. 2287, the “National Credit Union Administration Budget Transparency Act,” introduced by Representative Mick Mulvaney (R-SC), which would require the National Credit Union Administration to hold public hearings and receive comments from the public on its budget. H.R. 2287 was adopted by a vote of 40 to 16.
H.R. 3700, the “Housing Opportunity Through Modernization Act of 2015,” introduced by Representative Blaine Luetkemeyer (R-MO), which would amend certain housing programs. H.R. 3700, as amended, was adopted by a vote of 44 to 10.
H.R. 3784, the “SEC Small Business Advocate Act of 2015,” introduced by Representative John Carney (D-DE),
which would require the Securities and Exchange Commission (SEC) to establish an Office of the Advocate for Small Business Capital Formation and a Small Business Capital Formation Advisory Committee. H.R. 3784, as amended, was adopted by a roll call vote of 56 to 0.
H.R. 3791, introduced by Representative Mia Love (R-UT), which would raise the consolidated assets threshold from $1 billion to $5 billion under the small bank holding company policy statement. H.R. 3791 was adopted by a vote of 33 to 21.
H.R. 4168, the “Small Business Capital Formation Enhancement Act,” introduced by Representative Bruce Poliquin (R-ME), which would require an annual review by the SEC of the annual government-business forum on capital formation and its recommendations. H.R. 4168 was adopted by a vote of 55 to 1 with Representative Carolyn Maloney (D-NY) voting against the bill.
Task Force to Investigate Terrorism Financing Resolution of 2016, to renew the Task Force to Investigate Terrorism Financing Resolution of 2016, which will expire on July 5, 2016. The resolution was adopted by voice vote.
Legislation Introduced to Address Puerto Rican Debt Crisis Key Points:
A group of Senate Republicans released a bill in response to the Puerto Rican financial crisis, ahead of their anticipated bond default January 1, 2016.
Representative Sean Duffy (R-WI) introduced legislation to provide Puerto Rico with Chapter
9 protections if it establishes a five member Financial Stability Board.
On December 9, the Republican Chairmen of the three committees with jurisdiction over various aspects relating to proposals addressing the Puerto Rican financial crisis Senate Finance Committee Chairman Orrin Hatch (R-UT), Senate Judiciary Chairman Charles Grassley (R-IA), and Senate Energy and Natural Resources Committee Chairwoman Lisa Murkowski (R-AK) introduced a bill, the Puerto Rico Assistance Act of 2015 (S.2381), which would establish a “Puerto Rico Financial Responsibility and Management Assistance Authority” to assist in Puerto Rico in budget planning and also allow the Authority to commit up to $3 billion to assist in transition, which would not be backed by the full faith and credit of the U.S. The measure would also provide a 50 percent reduction in Social Security taxes withheld from workers’ paychecks. The bill would also require the public pension plans of all state and local governments, including Puerto Rico, to disclose more information about the funding status and actuarial assumptions used for the plans, as well as a requirement to disclose the fair market value of plan assets and using interest rates based on the U.S. Treasury yield curve. The bill does not provide Chapter 9 bankruptcy authority for Puerto Rico. The bill sponsors have stated their intent to provide relief before Congress recesses for the holiday break; however, it remains uncertain whether a Puerto Rico provision will be added to one of the end of year legislative vehicles. Separately, in remarks at the Peterson Institute for International Economics on December 9, Antonio Weis, counselor to Secretary of the Treasury Jack Lew, stated “Puerto Rico lacks the tools required to resolve this crisis
effectively and faces an uncertain and perilous future.” Weiss stated the Administration’s case for legislative proposals to address the Puerto Rican crisis, and listed several “myths” that he suggested should be dispelled: (1) the need to see audited financials before action can occur; (2) Puerto Rico’s debt is sustainable and can be paid back in full; (3) Puerto Rico can manage the situation through austerity alone; and (4) restructuring the framework for Puerto Rico would be bad for the municipal market. Also on December 9, Representative Sean Duffy (R-WI) introduced legislation, the Puerto Rico Financial Stability and Debt Restructuring Choice Act, which would provide Puerto Rico with Chapter 9 bankruptcy protection in exchange for oversight by a presidentially appointed five-member Financial Stability Council. Duffy, in a press release, stated “This bill empowers the Government of Puerto Rico with the choice to partner with the Federal Government and put the island on a path towards balanced budgets and a return to fiscal security.” He added, “If Congress does not act, it would have a devastating effect on the people of Puerto Rico and countless Americans throughout the states who stand to lose billions in the bond markets.” On July 15, 2015 Senators Charles Schumer (D-NY) and Richard Blumenthal (D-CT) introduced the Puerto Rico Chapter 9 Uniformity Act (S. 1774) to provide Puerto Rico with Chapter 9 protections. Hatch and House Judiciary Committee Chairman Bob Goodlatte (R-VA) have expressed their opposition to providing Chapter 9 authority to Puerto Rico. Upcoming Hearings and Events December 15
FDIC Open Meeting: The FDIC will hold an open meeting to discuss the proposed 2016 FDIC Operating Budget. December 16 CFPB Data Collection: The House Financial Services Committee’s Subcommittee on Oversight and Investigations will hold a hearing entitled “Examining the Consumer Financial Protection Bureau’s Mass Data Collection Program.” CFTC Open Meeting: The Commodity Futures Trading Commission (CFTC) will hold an open meeting to consider three items: (1) Proposed Rule: DCR System Safeguards; (2) Proposed Rule: DMO System Safeguards Testing Requirements; and (3) Final Rule: Margin for Uncleared Swaps December 17 FSOC Meeting: The Financial Stability Oversight Council (FSOC) will convene via telephone in closed session to discuss “the annual re-evaluation of the designation of a nonbank financial company.”
For more information about financial services issues you may email or call Joel Oswald at 202-659-8201. Rebecca Konst and Alex Barcham contributed to the articles. ENERGY AND ENVIRONMENT Committee Approves Pipeline Safety Legislation Key Points:
The Senate Commerce Committee voted to report legislation reauthorizing federal pipeline safety programs.
The Committee is the first of three in Congress with jurisdiction over the issue to act. Two House Committees are expected to move their
versions of pipeline safety legislation in the new year.
On Wednesday, the Senate Commerce, Science, and Transportation Committee approved pipeline safety legislation by voice vote. During the markup, the Committee adopted a substitute amendment modifying the original version of the “Securing America’s Future Energy: Protecting our Infrastructure of Pipelines and Enhancing Safety (SAFE PIPES) Act” (S. 2276), as well as five other amendments:
An amendment offered by Senator Kelly Ayotte (R-NH) that would require the Federal Energy Regulatory Commission (FERC) to consult with the Pipeline and Hazardous Materials Safety Administration (PHMSA) on interstate natural gas pipelines that are going through FERC’s pre-filing process.
An amendment offered by Ayotte that would mandate that PHMSA certify state participation in interstate pipeline safety oversight.
An amendment offered by Senator Ed Markey (D-MA) that would require PHMSA to report to Congress on “lost and unaccounted for natural gas from distribution pipelines and systems”, along with recommendations on any potential improvements in the “reporting and measurement of lost and unaccounted for gas or safety of systems…”
An amendment offered by Markey that would require the Government Accountability Office (GAO) to conduct a review of state policies to “encourage the repair and replacement of leaking natural gas distribution pipelines…”
An amendment offered by Markey that would require that PHMSA provide the congressional committees with jurisdiction over pipeline safety with “full and unredacted copies of oil spill response plans” of pipelines.
The legislation also includes provisions that would:
Reauthorize PHMSA through September 30, 2019.
Direct PHMSA to prioritize pending rulemakings required by earlier statutes over initiating new pipeline safety rules.
Require PHMSA to conduct an assessment of gas and liquid pipeline integrity management.
Require PHMSA to establish federal safety standards for underground natural gas storage.
Grant PHMSA direct hire authority to address staffing issues.
Reestablish pipeline safety research and development partnerships and collaboration between PHMSA and the private sector.
The Senate will most likely consider this legislation by “unanimous consent”, requiring that no Senator object to its passage. This process will require continued negotiations to preserve the bipartisan nature of the bill and to address any concerns that may be raised by Senators who are not members of the Commerce Committee. In the House of Representatives, the Transportation and Infrastructure Committee and the Energy and Commerce Committee have jurisdiction over pipeline safety. Those committees are expected to begin work on reauthorization legislation in 2016.
Upcoming Hearings and Events December 14 Mining Education: The House Natural Resources Committee’s Subcommittee on Energy and Mineral Resources will hold a field hearing on the “Mining Schools Enhancement Act“ (H.R. 3734). December 15 Pipeline Safety Rulemaking: The Pipeline and Hazardous Materials Safety Administration (PHMSA) will hold a webinar on the Notice of Proposed Rulemaking on “Pipeline Safety: Safety of Hazardous Liquid Pipelines”. For more information about energy and environment issues you may email or call Frank Vlossak at 202-659-8201. Updates on energy and environment issues are also available on twitter. DEFENSE Obama Speech on Terrorism Key Points:
The President made a prime-time address in which he defended and explained his approach to combatting ISIL
Obama called for a few new measures requiring Congressional support
Reaction on Capitol Hill was mixed and largely along party lines
On December 6, President Barack Obama made a rare address to the nation from the Oval Office regarding his Administration’s strategy to defeat the Islamic State of Iraq and the Levant (ISIL) in the aftermath of the shooting in San Bernardino, California. Obama reiterated his Administration’s approach, a multi-pronged effort using a number of levers of American power. Hwoever, reaction on Capitol Hill split along party lines with
Republicans generally calling for increased operations and Democrats generally signaling their support of the Administration’s approach. The President also unveiled his proposal to bar sales of guns to those on the no-fly list while also calling for a more stringent review of those people entering the U.S. under the Visa waiver program. Obama stated that “here’s what I want you to know: the threat from terrorism is real, but we will overcome it.” He stated that “[w]e will destroy ISIL and any other organization that tries to harm us…[and] [o]ur success won’t depend on tough talk, or abandoning our values, or giving into fear…[because] [t]hat’s what groups like ISIL are hoping for.” Obama claimed that “[i]nstead, we will prevail by being strong and smart, resilient and relentless, and by drawing upon every aspect of American power.” Obama said “[h]ere’s how:
First, our military will continue to hunt down terrorist plotters in any country where it is necessary.
Second, we will continue to provide training and equipment to tens of thousands of Iraqi and Syrian forces fighting ISIL on the ground so that we take away their safe havens.
Third, we’re working with friends and allies to stop ISIL’s operations -- to disrupt plots, cut off their financing, and prevent them from recruiting more fighters.
Fourth, with American leadership, the international community has begun to establish a process -- and timeline -- to pursue ceasefires and a political resolution to the Syrian war.”
Obama said that “[t]his is our strategy to destroy ISIL…designed and supported by our
military commanders and counterterrorism experts, together with 65 countries that have joined an American-led coalition.” He stated that “we constantly examine our strategy to determine when additional steps are needed to get the job done.” Obama stated that “[t]hat’s why I’ve ordered the Departments of State and Homeland Security to review the Visa Waiver program under which the female terrorist in San Bernardino originally came to this country…[a]nd that’s why I will urge high-tech and law enforcement leaders to make it harder for terrorists to use technology to escape from justice.” Obama stated that “here at home, we have to work together to address the challenge…[and] [t]here are several steps that Congress should take right away:
To begin with, Congress should act to make sure no one on a no-fly list is able to buy a gun.
We also need to make it harder for people to buy powerful assault weapons like the ones that were used in San Bernardino.
Next, we should put in place stronger screening for those who come to America without a visa so that we can take a hard look at whether they’ve traveled to warzones.
Finally, if Congress believes, as I do, that we are at war with ISIL, it should go ahead and vote to authorize the continued use of military force (AUMF) against these terrorists.”
Congressional Response Speaker of the House Paul Ryan (R-WI) asserted in a statement that “[o]ur primary responsibility is to keep the American people safe from the real and evolving threat of radical Islamic terrorism.” He claimed that “[t]hat will
require the president to produce a comprehensive strategy to confront and defeat ISIS.” Ryan said that “[t]he enemy is adapting, and we must too…[and] [t]hat’s why what we heard tonight was so disappointing: no new plan, just a half-hearted attempt to defend and distract from a failing policy.” In a release, House Minority Leader Nancy Pelosi (D-CA) stated that “[a]s Members of Congress, our first responsibility is to protect and defend the American people…[and] [a]s the President said, ‘we will prevail by being strong and smart.’” She asserted that “Congress must come together to toughen our background checks and keep guns out of the hands of terrorists, strengthen the Visa Waiver Program, and debate and vote on a long overdue AUMF tailored to the ISIS threat.” On the Senate floor, Senate Majority Leader Mitch McConnell (R-KY) said that “[u]nfortunately, the American people did not hear of a strategy or plan to defeat and destroy this terrorist army…[and] [i]nstead, they heard a restatement of a military campaign crafted to contain ISIL within Iraq and Syria.” He asserted that “[f]ollowing the attacks in Paris and California, and the downing of the Russian airliner, about 60 percent of the American people disapprove of the President’s handling of terrorism…[and] [n]early two-thirds disapprove of his handling of ISIL.” McConnell stated that “[t]hey understand intuitively that ISIL and the wider terrorist threat has not been ‘contained,’ but rather that it has evolved into something increasingly more serious and challenging.” Senate Minority Leader Harry Reid (D-NV) said that “Senate Democrats support President Obama’s plan to fight ISIS and protect America.” He stated that “[a]s President Obama has made clear, Democrats do not
believe we should put hundreds of thousands of troops on the ground in the middle of another civil war in the Middle East.” Reid said that “we do support the President’s strategy of continuing to go after ISIS in the air, along with our coalition partners, targeting their leadership, oil infrastructure and supply routes…[and] [w]e know that it must be the local forces on the ground who ultimately must fight for and hold their own land.” Carter and Selva Appear Before SASC Key Points:
After the President’s speech on terrorism, the Senate Armed Services Committee questioned the Secretary of Defense and Vice Chairman of the Joint Chiefs
Carter provided more detail on the Administration’s military approach amidst calls from some Senators for more U.S. troops on the ground against ISIL and a revamped overall strategy
On December 9, the Senate Armed Services Committee held a hearing titled “U.S. Strategy to Counter the Islamic State of Iraq and the Levant (ISIL) and U.S. Policy Toward Iraq and Syria” with testimony from Secretary of Defense Ashton Carter and the Vice Chairman of the Joint Chiefs of Staff General Paul Selva. Chairman John McCain (R-AZ) asserted that “[w]hatever illusions anyone may have had that our national security was not at stake in the conflict in Iraq and Syria or that ISIL was somehow contained, these attacks make it clear that ISIL’s threat against our homeland is real, direct and growing, that we are not winning this war and that time is not on our side.” He claimed that “[i]n short, the threat is growing and evolving faster than the Administration’s efforts to counter it…[and] [t]he broader shortcomings of the Administration’s approach
has to do with two assumptions it appears to be making.” McCain said that “[t]he first is that time is on our side, that we can afford to play out their indirect approach for years while ISIL continues to hold key terrain such as Raqqah and Mosul.” He stated that “[t]he second assumption is that we should not put U.S. forces on the ground, because that is what ISIL wants.” McCain said that “[i]t is true that ISIL seeks an apocalyptic conflict with the West, but another key pillar of ISIL’s ideology is the creation of the caliphate.” He contended that “[s]o as long as ISIL can claim to possess its caliphate, it projects an hour of success…[and] [t]hat is its most powerful tool of radicalization and recruitment.” McCain said that “[t]here are no local forces that are able and willing to destroy ISIL’s caliphate on the ground, and if we will not commit our own forces then we are accepting the existence of the caliphate.” He stated that “[o]n Sunday, President Obama once again resorted to the straw man argument that his critics want to invade Iraq and Syria with 100,000 US troops.” McCain said that “[n]o one, no one is calling for that…[but] [w]hat we do need in Iraq is several thousand additional U.S. troops to improve and accelerate the training of Iraqi forces, especially Sunni tribal fighters, embed with and advise Iraqi units closer to the fight, call in air strikes from forward positions and conduct counterterrorism operations.” McCain stated that “[o]nce ISIL is destroyed in Iraq, we must keep a residual force there is, as we should have done before…[and] [u]ltimately, to destroy ISIL in Syria, we will need a multinational ground force, primarily made up of Sunni Arab and European forces, but with a strong U.S. component, to do what no local force now can or will, retake Raqqah, destroy ISIL’s caliphate in Syria and prepare for a long-term stabilization effort.”
Ranking Member Jack Reed (D-RI) stated that “[a]s the President outlined in his speech the nation on Sunday, it is critical that the U.S.-led 60 plus nation coalition for defeating ISIL pursue a multidimensional approach.” He stated that “[t]he United States and its coalition partners are intensifying their efforts to degrade ISIL militarily and denied their leaders any safe havens, to cut off ISIL financing, to interdict the flow of foreign fighters to ISIL controlled territories, and to counter the spread of ISIL’s murderous ideology that the president accurately characterized as part of a cult of death.” Reed said that “[s]uch an approach will require the careful coordination of military intelligence, diplomatic and law enforcement efforts to combat ISIL across departments of the U.S. government and within our coalition.” Reed said that “I think we all agree that intensity has to be increased significantly and rapidly.” He asserted that “[a]t the same time a sustainable defeat of ISIL in the region requires that ground combat forces be primarily local forces, though U.S. forces can and they should provide critical advice, assistance, and enablers to assist these forces and go where they must go to assist these local forces.” Reed stated that “[p]utting large numbers of U.S. troops on the ground has been suggested, I think, by all my colleagues, and in Iraq and Syria could play directly or indirectly into ISIL’s propaganda war.” He asserted that “[i]t is also clear that a sustainable outcome only be possible with more inclusive governance by the Abadi government in Baghdad, and a political transition Syria that puts an end to the brutality of the Assad regime.” Carter stated that “[t]he President had directed us to intensify the military campaign before the Paris attacks…[and] [t]he necessity of accelerating our efforts, as we’re doing, has only been made more plain by the recent
attacks.” He asserted “[t]he defense of the homeland must be strengthened to be sure…[b]ut it is absolutely necessary to defeat ISIL in its parent tumor in Syria and Iraq…[and] wherever else in the world this evil organization metastasizes.” Carter stated that “[a]chieving these objectives means leveraging all the components of our nation’s might, as the chairman noted -- diplomatic, military and law enforcement, homeland security, intelligence, economic, informational.” He claimed that “[t]hat’s the right overall approach for three principal reasons:
First, the strategy takes the fight to the enemy where they are, which we must do.
Second, it seeks to develop capable, motivated, local ground forces as the only force that can assure a lasting victory. U.S. and international coalition forces can and will do more to enable them, but we cannot substitute for them.
And third, it seeks to set the conditions for a political solution to the civil war in Syria and for inclusive governance in Iraq, both of which are essential because they’re the only durable ways to prevent a future ISIL-like organization from reemerging there.
Carter stated that “[t]he reality is we’re at war…[and] President Obama, on my and Chairman Dunford’s advice, ordered U.S. special operations forces to go into Syria to support the fight against ISIL…[who] bring a unique set of capabilities that make them force multipliers, such as intelligence gathering, targeting, and enabling local forces.” He stated that “momentum on the ground, which I’ve described, in both Syria and Iraq has been enabled by greatly increased coalition airstrikes…[and] [a]dditional strike aircraft we’ve deployed to Incirlik Air Base in Turkey,
along with improved intelligence, allowed us in November to significantly increase our airstrikes against ISIL to the highest level since the start of our operations in August, 2014.” Upcoming Hearings and Events December 15 Nominations: The Senate Armed Services Committee will hold a hearing to discuss the nominations for the Secretary of the Army, Navy and Air Force. December 16 Afghanistan Strategy: The Senate Foreign Relations Committee will hold a hearing to discuss the Obama Administration’s Strategy in Afghanistan. U.S./Pakistan Relations: The House Foreign Affairs Committee will hold a hearing to discuss the future of U.S./Pakistan relations. January 20 Afghan Reconstruction Projects Oversight: The Senate Armed Services Committee will hold a hearing to discuss oversight of the task force for business and stability operations projects in Afghanistan. For more information on defense issues you may email or call Michael Kans at 202-659-8201. HEALTH Healthcare Reforms Prominent in Government Funding; Tax Discussions Key Points:
At least three significant ACA provisions reported being considered
Legislation could be unveiled Monday
Congressional leaders anticipate legislative text of an omnibus spending bill to be released on December 14. It could also potentially be linked to a package extending expiring tax provisions. The package could also include three significant provisions related to the Affordable Care Act (ACA). Provisions being considered include a suspension of the excise tax on medical devices, and a delay of the “Cadillac” tax on certain high cost insurance plans. A third consideration is the suspension of the Health Insurance Tax (HIT), or “premium tax.” Bipartisan support has been demonstrated for repeal or delay of the Cadillac tax and for the medical device tax. Last week, a Senate amendment considered to the budget reconciliation legislation to strike reinstatement of the Cadillac tax on employee health insurance premiums and health plan benefits was agreed to by a roll call vote of 90-10. This vote reflects the fairly wide support delaying or repealing this tax. Similarly, previous votes to repeal the ACA’s medical device tax have had strong bipartisan support. It is still unclear whether negotiators will reach a broad deal that would include the ACA provisions or a narrower deal that would extend only some tax breaks. House Ways and Means Committee Chairman Kevin Brady (R-TX) has suggested including changes to the ACA taxes even if the ultimate package more narrow in scope. If the omnibus package is introduced on December 14, the House could vote on the measure by December 16. As for Senate consideration, Senate Majority Whip John Cornyn (R-TX) has said “the goal is to wrap things up by Wednesday evening.” Funding for the government expires at midnight on December 16.
Upcoming Hearings and Meetings December 14 Sleep Disorders: The National Institutes of Health will hold a meeting of the Sleep Disorders Research Advisory Board of the National Heart, Lung, and Blood Institute to discuss plans for the proposed revision of the NIH Sleep Disorders Research Plan. December 15 Health Care Consolidation: The Alliance for Health Reform will hold a media briefing on “Health Care Consolidation: What You Need to Know.” Home Care: The National Association for Home Care and Hospice will hold a discussion on travel findings for home care nurses. Health Care Reform: The Urban Institute will hold a discussion on “What’s Next for Health Care Reform.” December 16 Affordable Care Act: The Cato Institute will hold a discussion on “Discontinuity of Care,” and the Affordable Care Act. December 17 Evidence Based Medicine: The National Economists Club will hold a discussion on “Economics and Evidence Based Medicine.” For more information about healthcare issues you may email or call Matthew Hoekstra or George Olsen at 202-659-8201. TRANSPORTATION AND INFRASTRUCTURE FAA Roundtable on ATO Operations
Key Points:
After the enactment of the surface transportation reauthorization, the House Transportation and Infrastructure Committee returns to the FAA reauthorization with a hearing on one of the sticking points, air traffic controllers
On December 8, the House Transportation and Infrastructure’s Aviation Subcommittee held a roundtable entitled “Policy Discussion on Review of FAA Controller Staffing.” Topics discussed included, but were not limited to: (1) staffing levels; (2) facility transfer difficulties; (3) new technology implementation; (4) hiring process; and (5) hiring burdens. Subcommittee Chairman Frank LoBiondo (R-NJ) noted U.S. airspace is one of the safest in the world thanks largely to the FAA’s air traffic controller (ATC) workforce. He said ensuring an adequate ATC workforce exists keeps the airspace safe, but he noted figuring out how to keep and maintain this workforce is not an exact science. He stated that current hiring insights are generated from a review of historical trends. He highlighted current shortfalls with the current ATC system including a requirement that fully qualified controllers must be recertified and retrained when going to a new facility. He cited a report from the Transportation Research Board (TRB) that found issues with the FAA’s staffing models for en route centers. He said FAA should collaborate on this issue with NACTA. He concluded by observing a DOT Inspector General (IG) report that said FAA has not developed necessary measures to maintain and attract staffers. Full Committee Chairman Bill Shuster (R-PA) reemphasized the safety of the current airspace and declared staffing at ATC facilities is a top
priority. He said FAA is dedicated and characterized the workforce as “tremendous.” Federal Aviation Administration (FAA) Air Traffic Organization (ATO) Chief Operating Officer said controllers operate the safest and most efficient airspace in the world. She recognized that challenges exist, but current tools and collaborative efforts can help address these challenges as well as future ones. She specifically noted a new prioritization tool that helps FAA work with NATCA. She observed a new deal with NATCA will help them take qualified controllers and move them to struggling facilities. She noted a revised ATC hiring process has been implemented, which allows a broader, more diverse set of candidates to be considered. She noted these efforts are paying off and leading to more hires. She reiterated that FAA has the tools to build on the progress. Department of Transportation (DOT) Office of Inspector General Assistant Inspector General for Aviation Audits Matthew Hampton noted while the total number of ATC personnel is sufficient, some individual ATC facilities have a personnel shortfall. He observed 13 of the high-volume facilities, including New York, Chicago and Dallas, have staff levels below minimum levels. He stated these staffing levels are compounded by the fact that there are a large amount of controllers either still in training or close to retirement age. He said problems stem from a lack of precisions from modeling, not utilizing a system to take advantage of the schedules of controllers, and poor communication between headquarters and the individual facilities. He called for improved communication between headquarters and the individual facilities; effective implementation of the new training contract, which is intended to help new
controllers; and implementation and use of scheduling tools. National Air Traffic Controllers Association (NATCA) President Paul Rinaldi declared ATC staffing has reached a “crisis” level. He said staffing has fallen 10 percent since 2011 and one-third of the workforce is eligible for retirement. He said if funding continues to fall, modernization via NextGen will be difficult. He called on hiring appropriate replacements out of the ATC training academy, and moving veteran controllers in low priority areas to high priority areas. He said in the most recent hiring process, former controllers that were qualified and previously worked for FAA were not given a job because they attached the wrong form that prohibited them from being hired. He said human resources should be a support function, not a bureaucratic gatekeeper. He noted movement of controllers within the system is starting to take place. He made three recommendations: post an open and continuous candidacy bid for veteran controllers; streamline hiring priorities; and ensure the systems has less bureaucratic and more expeditious policies to move veteran controllers into high-priority facilities. Program Consolidation Hearing Key Points:
House Oversight Subcommittee examines how the DOT has done in consolidating surface transportation programs per MAP-21
On December 8, the House Oversight & Government Reform Committee’s Transportation and Public Assets Subcommittee held a hearing entitled “Moving Ahead for Progress in the 21st Century (MAP-21) Program Consolidation.” Topics discussed during the hearing included, but were not limited to: (1) consolidation; (2) power to the
states; (3) categorical exclusions; (4) the importance of the FAST Act; (5) the state of the current infrastructure; (6) performance management; (7) funding cuts; (8) deadlines; (9) public private partnerships; and (10) environmental considerations. Chairman John Mica (R-FL) said the hearing was meant to “take an inventory” of MAP-21, looking particularly at issues like environmental permitting. He expressed eagerness to hear from the witness panel regarding whether the provisions of MAP-21 that were intended to make the Department of Transportation (DOT) more efficient are in fact achieving their intended goal. Ranking Member Tammy Duckworth (D-IL) noted that Congress has an important oversight role over MAP-21 implementation, stating that she was eager to hear from the panel about these implementation efforts. She applauded the passage of the Fixing America’s Surface Transport (FAST) Act, which authorizes $300 billion to be invested in federal highway and public transportation projects over the next five years. Duckworth noted that the bill addressed some of her top transportation priorities, including providing states and industry with certainty, strengthening public safety, and investing in innovative multi-modal transit solutions. She expressed her hope that Congress can develop a reliable long-term solution for infrastructure investment. Federal Highway Administration Chief Counsel Thomas Echikson testified that the FAST Act marks the first long-term transportation funding bill passed by Congress in ten years. He acknowledged the bill is not perfect, but argued it is an important bipartisan step that has removed a great deal of uncertainty for state departments of transportation. He noted MAP-21 consolidated the Federal Highway
Administration’s (FHWA) programs into a smaller number of broader programs that retain and continue the eligibilities that previously existed. He explained that this allows grantees greater flexibility to deliver projects efficiently and to make data-driven decisions to meet performance targets. Echikson noted that FHWA remains focused on overseeing a $42 billion program, ensuring that federal funds are spent in accordance with the law. He stressed that 60 percent of FHWA’s employees work in field offices, directly aiding state departments of transportation. He called the adoption of a performance-based program the cornerstone of MAP-21’s federal highway program transformation. Echikson reported that DOT has been working diligently to finalize the performance management rules. He explained that new methods, standards, and data sources have had to be established in order to implement an effective national program. He said FHWA is looking forward to the benefits of a performance-based system, calling it a key tool to prepare the federal highway system for the future. American Road and Transportation Builders Association Chairman David Zachry, said the 2012 MAP-21 surface transportation reauthorization rightly sought to shorten the environmental review process for federally-funded transportation projects through an expansion in the use of categorical exclusions (CEs). He explained that CEs are generally used when projects create minimal environmental impacts, adding that most routine projects were automatically classified as CEs under MAP-21. Zachry explained that CEs can shave years off the environmental review process, and allow for the prompt undertaking of repairs. He reported that MAP-21 has also expanded states’ ability to conduct their own environmental reviews, noting that California and Texas have taken advantage of
this opportunity, while Ohio, Florida, and Utah have also demonstrated interest in doing so. He indicated that California has been able to reduce the amount of time for the most complicated environmental review documents by years. Zachry noted that these, among many MAP-21 reforms, are discretionary, not mandatory, arguing that “the more state and federal agencies choose to use the opportunities afforded by MAP-21, the greater will be its impact.” He expressed disappointment that the MAP-21 provision directing DOT to provide transparency regarding the use of federal highway funds has not gone into effect. For more information on transportation issues you may email or call Michael Kans at 202-659-8201. Kevin Prior and Marc Pitarresi contributed to this section. TECHNOLOGY Cybersecurity Information Sharing Conference Report Key Points:
Progress made on final package even though stakeholders continue to haggle over sticking points
Bill may be finished next week This week, through statements to the media and leaks, news of the progress being made on a final cybersecurity information sharing bill has indicated that negotiators are close to a final package that would ideally be voted on and sent to the White House before Congress leaves for the year. However, pushback from some stakeholders regarding various issues under discussion has delayed agreement and has possibly pushed consideration of a final bill into next week. Yet, because negotiations are also ongoing regarding an omnibus appropriations bill for the balance of FY 2016,
there has been talk that a final cybersecurity information sharing bill could be attached to that package. This year, the two chambers have passed three bills that negotiators were working on melding: the “Protecting Cyber Networks Act” (H.R. 1560) (House Intelligence Committee), the “National Cybersecurity Protection Advancement Act of 2015” (H.R. 1731) (House Homeland Security Committee), and the “Cybersecurity Information Sharing Act of 2015” (CISA) (S. 754) (Senate Intelligence Committee). Over the weekend, various sources claimed that the House Homeland Security Committee had been cut out of negotiations between the House and Senate Intelligence Committees. These claims have mobilized privacy and civil liberties advocates who see the House Homeland Security Committee’s bill as the best of the three bills as the Department of Homeland Security (DHS) would be the center of the new voluntary information sharing regime and not the intelligence community. On December 8, Senate Intelligence Committee Chairman Richard Burr (R-NC) said there are “some issues or differences,” but claimed “we’re working through them pretty methodically.” Senate Intelligence Committee Ranking Member Dianne Feinstein (D-CA) “I think it’s about done,” and House Intelligence Committee Ranking Member Adam Schiff (D-CA) stated that “I think we’re very close…[and] [w]e’re hoping to close in on a final product imminently.” However, the same day, House Homeland Security Committee Chairman Michael McCaul (R-TX) issued a statement in which he said ““I am continuing to work with other congressional leaders in this fluid process to
produce the best possible legislation on information sharing.” He added that “I am pleased that we are making progress on many aspects of the bill, particularly with regard to privacy and civil liberties protections.” On December 9, McCaul explained that “I think everything’s been going in the right direction…[and] it’s moved a long ways from the very beginning.” He said that negotiators were still discussing which federal agency would serve as the portal through which private sector entities would share cyber threat indicators. McCaul said that “[t]he goal is to have [DHS] as the lead civilian portal.” He added that “[t]he president can designate other portals if he deems necessary or appropriate…[and] [w]e just want to make sure that those are true civilian portals and not intelligence or law enforcement because, you know, you don’t want to share information with somebody that can either prosecute or spy on you.” Reportedly the White House was provided provisional draft text in the middle of the week, but it is unclear whether the Administration has signed off on the bill. There may be reservations inside the Administration because it has made clear a number of times that its position is that DHS should be the focus of information sharing and not an intelligence community agency. Additionally, many stakeholders have expressed serious misgivings about an amendment folded into CISA during floor consideration that would task DHS with assessing the cybersecurity of the sectors of U.S. industry deemed critical cyber infrastructure. As explained by primary sponsor, Senator Susan Collins (R-ME), during debate on CISA, Section 407 “requires the DHS Secretary to conduct an assessment of the fewer than 65
critical infrastructure entities at greatest risk and develop a strategy to mitigate the risks of a catastrophic cyber-attack.” Many industry stakeholders have articulated the view that such a process would be a precursor to greater regulation of these entities and perhaps even binding cybersecurity standards. Additionally, 74 Members of the House wrote a letter this week to the negotiators stating that Section 407 ‘would put the DHS in a position of developing a cybersecurity “strategy” for several private sector firms…[and] [a]s is too often the case, what begins as a strategy” could easily run into burdensome regulation when federal agencies get involved.” They called on negotiators to strike Section 407. Data Security Act Markup Key Points:
A second data security and breach notification bill is reported out of House Committee this year
However, another Committee has jurisdiction over the bill that has voted on its own package
On December 8 and 9, the House Financial Services Committee held a markup of eight bills, including the “Data Security Act of 2015,” (H.R. 2205) introduced by Representative Randy Neugebauer (R-TX), which would require individuals and companies that access or handle financial account information to implement a security program and to provide notification if data breaches are likely to cause harm to consumers. H.R. 2205, as amended, was adopted by a roll call vote of 49 to 9. Despite the overwhelming vote, the path for this bill to the House floor may prove complicated because H.R. 2205 was also referred to the House Energy and Commerce Committee. In April, the House Energy and Commerce Committee marked up its data
security bill, the “Data Security and Breach Notification Act of 2015” (H.R. 1770) and passed the bill largely along party lines. However, H.R. 1770 has not been reported out of Committee and has been referred to the Committee’s Commerce, Manufacturing, and Trade Subcommittee. Representative Randy Neugebauer (R-TX) offered an amendment in the nature of a substitute that was adopted by voice vote. He said the manager’s amendment reflects changes agreed to with the Ranking Member Maxine Waters (D-CA). He stressed the need to ensure the security of every link in the payment chain. He said Congress has struggled to pass a data breach notification regime. He said the bill creates a national data standard and a national breach notification standard with a strong enforcement mechanism. He said the data security standard must be technology neutral and scalable. He emphasized that H.R. 2205 is flexible depending on the size and nature of the business. He said creating a single national breach standard will reduce the burdens on businesses. He emphasized that the bill does not create a technology mandate or bank-centric regulation. He said the bill does not weaken consumer protection. Neugebauer said the manager’s amendment would create a backup enforcement mechanism for state attorneys general. He offered to work with members to improve the bill as it goes to the floor. Waters said she is always concerned about preemption. She stated that her staff has worked to resolve some of her concerns with the bill. She noted that California’s Attorney General and Insurance Commissioner have raised concerns with the bill. She said the California Attorney General has said the preemption in the bill is too broad. She noted that only 12 states have extensive laws covering
data breaches. She suggested that those 12 states should be exempted. She said the California Attorney General has expressed concern that the bill would impede state-based innovation. She said California consumers would lose out on their private right of action under the bill. Chairman Jeb Hensarling (R-TX) noted that the House Energy and Commerce Committee has already passed legislation on this issue. He noted that the two committees have concurrent jurisdiction on this issue. He emphasized that this markup is just the beginning of the process on this issue. Waters offered an amendment that was defeated by a roll call vote of 20 to 36 that would strike the preemption standard in the bill and replace it with a standard that sets a federal floor. She said states should be allowed to go beyond this floor if they deem it necessary. Neugebauer expressed opposition to the amendment. He stressed the need to create consistency in standards. He noted that the bill includes a role for state attorneys general. Representative John Carney (D-DE) expressed concern that the amendment would undermine the intent of the bill to create a national standard. FTC Announces Settlement in Wyndham Hotels Case Key Points:
FTC achieves significant victory against hotel chain that failed in challenging the FTC’s authority to regulate data security
On December 9, the Federal Trade Commission (FTC) announced a settlement with Wyndham Hotels that, if the U.S. District Court of New Jersey agrees, will bring to a close the FTC’s efforts to sanction Wyndham
for breaches of credit card information that occurred as far back as 2008. The settlement would establish FTC oversight of Wyndham’s information security practices for the next 20 years and represents a major victory for the agency since Wyndham has challenged the FTC’s jurisdiction to use its existing powers to police the data security standards of those entities it can regulate. The settlement will require the establishment of a “comprehensive information security program” for 20 years with respect to debit and credit cards. Additionally, Wyndham must seek and receive annual written assessments that their information security program is in compliance with defined certification standards (the settlement specifically references PCI DSS Risk Assessment Guidelines Version 2.0), and if not in compliance, Wyndham must take steps to come into compliance. In its press release, the FTC stated that “the order requires Wyndham’s audit to:
certify the “untrusted” status of franchisee networks, to prevent future hackers from using the same method used in the company’s prior breaches;
certify the extent of compliance with a formal risk assessment process that will analyze the possible data security risks faced by the company; and
certify that the auditor is qualified, independent and free from conflicts of interest.
The FTC further stated that “[t]he order also requires that in the event Wyndham suffers another data breach affecting more than 10,000 payment card numbers, they must obtain an assessment of the breach and provide that assessment to the FTC within 10 days.” The FTC stated that “[t]he order provides that if Wyndham successfully obtains the necessary
compliance certifications, it will be deemed in compliance with the comprehensive information security program provision of the order…[and] [t]hat provision is not effective, however, in the event that Wyndham in any way misleads or provides false information during the annual audit and assessment process.” In August, the U.S. Court of Appeals for the Third Circuit ruled against Wyndham and for the FTC regarding whether the FTC could regulate data security standards under its powers to prohibit unfair practices. The case arose when the FTC accused Wyndham of failing to maintain proper cybersecurity standards, which resulted in three breaches in 2008 and 2009 and fraudulent credit card charges of $10.6 million to more than 619,000 customers. For more information on technology issues you may email or call Michael Kans at 202-659-8201. Rebecca Konst and Alex Barcham contributed to this section. This Week in Congress was written by Laura Simmons.
