The House is not in session the week of May 21, 2012. The Senate will convene at 2:00 p.m. on Monday and resume consideration of the motion to proceed to S. 3187, the FDA User Fee Bill. At 4:30 p.m., the Senate will proceed to executive session to consider the nomination of Paul J. Watford of California to be United States Circuit Judge for the Ninth Circuit.
- Bipartisan Group of Senators Urge Floor Consideration of Farm Bill. On Tuesday, May 15, 2012, a bipartisan group of 44 Senators sent a letter to Majority Leader Harry Reid (D-NV) and Minority Leader Mitch McConnell (R-KY) urging them to schedule floor time to consider the Farm Bill. Senators Mike Johanns (R-NE), Max Baucus (D-MT), Roy Blunt (R-MO), and Maria Cantwell (D-WA) organized the effort. On Monday, May 14, Senator Dianne Feinstein (D-CA) sent a separate letter to the leadership. Senate Agriculture Committee Chairwoman Debbie Stabenow (D-MI) and Ranking Member Pat Roberts (R-KS) did not sign the letter. Of the Senators who did not vote for the bill in Committee, Senator Kirsten Gillibrand (D-NY) signed the letter; however, Southern Senators Saxby Chambliss (R-GA), Thad Cochran (R-MS), and John Boozman (R-AR) did not sign. Senators Kay Hagan (D-NC) and Kay Bailey Hutchison (R-TX) were the only southern Senators to sign the letter.
- Postponed Dodd-Frank Markup. On Tuesday, May 15, 2012, House Agriculture Committee Chairman Frank Lucas (R-OK) postponed the Dodd-Frank markup for (1) H.R. 4235 – “Swap Data Repository & Clearinghouse Indemnification Correction Act of 2012”; (2) H.R. 1838 – “Swaps Bailout Prevention Act”; and (3) H.R. 3283 – “Swap Jurisdiction Certainty Act.” The markup was originally scheduled for Thursday, May 17, 2012. Chairman Lucas indicated that, before a mark-up is held, additional time is needed to examine the JP Morgan Chase announcement that it had lost $2 billion in risky trades.
- House Agriculture Subcommittee Hearing on Commodity and Risk Management Programs. On Wednesday, May 16 and Thursday, May 17, 2012, the House Agriculture Subcommittee on General Farm Commodities and Risk Management held a Farm Bill hearing to examine commodity programs and the crop insurance program. The first hearing included two panels, an economist panel and a farm and commodity group panel. The second hearing included two panels, an additional producers panel and a panel with representatives from the crop insurance industry. Discussion focused on developing a farm safety net that is equitable for all commodity groups. More specifically, witnesses criticized aspects of the Agriculture Risk Coverage (ARC) program (commonly referred to as the “shallow loss” program), which was included in the Senate Farm Bill. Many of the witnesses, particularly the producers, characterized ARC as a “one size fits all” program.
- House Subcommittee Hearing on Energy and Forestry Programs. On Friday, May 18, the House Agriculture Subcommittee on Conservation, Energy, and Forestry held a Farm Bill hearing to examine energy and forestry programs. Representatives of the bio-based industry discussed the importance of how energy programs, particularly the Rural Energy for America Program, Biorefinery Assistance Program, and Biobased Markets Program, help spur job growth within the agricultural sector. Representatives of forestry associations also urged the Subcommittee to preserve funding for key forestry programs, including the Environmental Quality Incentives Program.
- Department of Agriculture Report on the Cost of Healthy Foods. On Wednesday, May 16, 2012, the Department of Agriculture’s Economic Research Service released a report titled “Are Healthy Foods Really More Expensive? It Depends on How You Measure the Price.” The report finds that the metric used to measure the price of food items has a large effect on which foods are more expensive. In comparing the prices of healthy and unhealthy foods, the report uses the following three metrics: (1) the price of food energy (price/calorie); (2) the price of edible weight (price/100 edible grams); and (3) the price of an average portion (price/average portion). The report also calculates the cost of meeting the recommendations for each food group. Based on the report’s metrics, with the exception of the price of food energy metric, the authors found that healthy foods cost less than less healthy foods.
- Proposed Rule on Competitive Foods. On Friday, May 18, 2012, Department of Agriculture Under Secretary for Food, Nutrition, and Consumer Services Kevin Concannon announced at the National Food Policy Conference that the proposed rule on competitive foods should be released by the end of May.
- FY 2013 Appropriations Action. On Friday, May 18, 2012, the House Legislative Branch Appropriations Subcommittee held a markup of its FY 2013 spending bill. The full House Appropriations Committee also advanced four bills last week: Defense; Military Construction-Veterans Affairs; State-Foreign Operations; and Homeland Security (details of these bills were provided in the May 14 edition of Capital Thinking), thereby completing its work on half of its FY 2013 spending bills. As previously reported, only the Commerce-Justice-Science bill has been passed by the chamber; however, at least one of the four bills mentioned above, or the Energy and Water bill which was approved by the full Committee on April 25, 2012 will likely be brought to the floor shortly after the House returns from its District work week and brief Memorial Day recess on May 30, 2012.
Over in the Senate, the Military Construction-Veterans Affairs and Homeland Security Appropriations Subcommittees approved their FY 2013 spending bills. A full committee markup scheduled for Thursday, May 17, 2012 was postponed, but is anticipated to occur this week. Additional subcommittee markups will likely occur this week as well, including one for the State-Foreign Operations bill, which is tentatively scheduled for Tuesday, May 22, 2012. Following the anticipated advancement by the full committee markup of the Military Construction-Veterans Affairs and Homeland Security bills, the Senate Appropriations Committee will also have advanced six of its FY 2013 spending bills. It is anticipated that the Commerce-Justice-Science bill will be the first to reach the Senate floor, which will likely occur in June.
- Senate Budget Rejections. As expected, on Wednesday, May 16, 2012, five FY 2013 Republican-led budget proposals failed to secure enough votes to advance to the Senate floor – the House budget plan, a version of the President’s proposal, and three tea party offerings: (1) the House Budget Resolution (H. Con. Res. 112) was rejected by a vote of 41 to 58; (2) the Republican-introduced version of President Obama’s FY 2013 Budget Proposal (S. Con. Res. 41) was unanimously voted down; (3) a proposal by Senator Patrick Toomey (R-PA) (S. Con. Res. 37) was rejected by a vote of 42 to 57; (4) a budget resolution introduced by Senator Rand Paul (R-KY) (S. Con. Res. 42) was rejected by a vote of 16 to 83; and a resolution introduced by Senator Mike Lee (R-UT) was rejected by a vote of 17 to 82.
- Senate Cybersecurity Legislation. The Senate continues to work to address differences in the two competing cybersecurity bills in the chamber. One bill, S. 2105, introduced by Senate Homeland Security and Government Affairs Committee (HSGAC) Chairman Joe Lieberman (I-CT), Ranking Member Susan Collins (R-ME) and a number of other Senate Democratic Chairmen, would give DHS the primary role in overseeing domestic cybersecurity efforts and sets standards for owners and operators of critical infrastructure; while the other, S. 2151, the SECURE IT Act (S. 2151) introduced by Senator John McCain (R-AZ) and a number of other key Ranking Members in the Senate, is silent on critical infrastructure—focusing on information sharing, FISMA reform, research and development and other limited issues.
A bipartisan group of Senators is working on a compromise agreement as well as an opportunity for Members of the Senate to come together next week to talk through the various components of the bills. Through the bipartisan briefing, the Senators are hoping to take advantage of the broad support in the Senate for the enactment of cybersecurity legislation and work through some of the issues that have caused legislation be delayed for so many months, namely issues over proposed regulation of private sector networks.
Senator Lieberman and his committee continue to underscore concerns about critical infrastructure, releasing a statement on Thursday, May 17, 2012 citing a study by Carnegie Mellon University that suggests that the utilities and energy sector are not doing enough to protect their assets from cyber attack.
Privacy groups continue to raise concerns with both S. 2015 and S. 2151. At this point, 33 privacy and civil liberties groups, including the America Civil Liberties Union, the Center for Democracy and Technology, TechFreedom, the Constitution Project, and others have raised concerns and opposition to both Senate bills. These groups have already come out in opposition to H.R. 3523, the Cyber Intelligence Sharing and Protection Act, that passed the House on April 26, 2012.
While the Senate continues to work out some of the more controversial sections in the bills, Majority Leader Harry Reid (D-NV) remains committed to bringing cybersecurity legislation to the floor, potentially late May or early June.
EXECUTIVE BRANCH ACTIVITY
- White House Cybersecurity Official to Retire. The White House’s Cybersecurity Coordinator Howard Schmidt announced on Wednesday that he was stepping down at the end of May after over two years as the head cybersecurity official in the Obama Administration. Schmidt played a central role in creating the White House’s first legislative proposal on cybersecurity and also helped to create the first International Strategy for Cyberspace, as well as the National Strategy for Trusted Identities in Cyberspace. Michael Daniel, Director of Intelligence Programs at the Office of Management and Budget (OMB), will succeed Schmidt after working for the past 10 years handling cybersecurity issues for OMB.
- U.S. Department of Defense Interim Final Rule. The U.S. Department of Defense (DOD) published an interim final rule to expand a pilot program that institutionalizes the sharing of cyber threat information between the Defense Industrial Base (DIB) and its contractors and industry stakeholders. Through the program, DOD will provide cyber threat information and network security best practices to participating companies to improve cybersecurity and information sharing. For their part, participating companies would report any cyber intrusion incidents to the DOD-DIB Collaborative Information Sharing Environment (DCISE). Participation in the program is voluntary but large defense contractors, such as Lockheed Martin, that participated in the smaller pilot DOD program have already announced that they will participate in the expanded program. Comments on the rule are due on July 10, 2012.
- STAR Act. On Tuesday, May 15, 2012, Senator John Cornyn (R-TX) introduced the Securing the Talent America Requires for the 21st Century or “STAR Act.” According to his office, the legislation is designed to “retain top foreign students earning graduate degrees in the fields of science, technology, engineering, and mathematics (STEM) from American universities.” Specifically, it would allow for the allocation of 55,000 immigrant visas for eligible STEM graduates of qualifying U.S. research institutions who have job offers in related fields and would streamline STEM graduate students’ ability to obtain green cards.
- Military Education. On Wednesday, May 17, 2012 the House Veterans' Affairs Subcommittee on Economic Opportunity held a hearing to review the impact of the April 27, 2012 Executive Order #13607 which aims to protect veterans from aggressive and deceptive marketing by for-profit educational institutions. Members of the veterans’ community, for-profit sector, other academic institutions, and government participated in the hearing. Generally, all participants acknowledged that there are bad actors participating in the federal military and veterans educational benefits programs. Many welcomed the Executive Order, while others criticized it for excluding feedback and information from stakeholders and rushing ahead of the work Congress is doing related to these issues. Other issues related to the Executive Order that were frequently addressed included College Navigator and a centralized complaints system.
Panelists also thanked the Subcommittee for its work on issues related to veterans’ education – not just the hearing – but also for legislation it is considering. It is understood that the Chairwoman of the Senate Veterans Affairs Committee, Patty Murray (D-WA), may bring up a package of bills related to these issues in June.
- Campus Crime Reporting. On Wednesday, May 17, 2012 the House passed legislation to reauthorize domestic violence programs, which differs from a bill the Senate passed in April to include protections for immigrants, gays, lesbians and American Indians. The Senate bill also includes an expansion of the Clery Act, a 1990 law that requires colleges and universities to report crime on or near their campuses. The Senate expansion includes new requirements to report campus incidents of domestic violence, dating violence and stalking. The White House supports the Senate bill and has indicated the Clery Act expansion should be a key part of the domestic violence renewal. (It has threatened to veto the House measure.) House Republicans take issue with the provision because they feel the House Education and Workforce Committee (not the Judiciary Committee) has jurisdiction over campus-related laws and plan to address the issue in a Higher Education Act reauthorization measure next year. Opponents also note that such reporting requirements are too burdensome for institutions of higher education. These differences – and the House’s citation of a constitutional breach, known as a “blue slip,” with the Senate’s version over the inclusion of a revenue provision – have complicated conference negotiations, which will now likely be delayed until after both chambers observe staggered recesses over the next two weeks.
- National Endowment for the Humanities Request for Proposals. The National Endowment for the Humanities is inviting proposals for a cooperative agreement to develop and administer a national or regional project to advance the role of humanities at community colleges through curriculum and faculty development projects beginning in February 2013. The application deadline is August 14, 2012.
- Negotiated Rulemaking Committee. On Wednesday, May 23, 2012 the Department of Education will hold its first public hearing in Phoenix, Arizona to receive suggestions on additional issues that should be considered for action by the negotiated rulemaking committee on federal student aid programs. The second hearing will take place in Washington, DC at the Department of Education. The deadline to submit written comments is May 31, 2012.
As reported in the May 7 edition of Capital Thinking, on May 1, the Department of Education published in the Federal Register its intent to establish a negotiated rulemaking committee to prepare proposed regulations for the Federal Student Aid Programs authorized by the Higher Education Act (HEA). More specifically, the committee will develop proposed regulations designed to prevent fraud and ensure proper use of Title IV and HEA program funds, including addressing the use of debit cards and other banking mechanisms for disbursing Federal Student Aid funds. The committee will also propose regulations to improve and streamline the campus-based federal student aid programs. The committee will begin negotiating in September 2012.
- Upcoming National Center for Education Statistics Report. On Thursday, May 24, 2012 the Department of Education’s National Center for Education Statistics will release “The Condition of Education 2012.” The report contains 49 indictors on education in the United States and will take a closer look at the progress of high schools throughout the country.
- Utility MACT. Senate Environment and Public Works Committee Ranking Member James Inhofe (R-OK) intends to use an expedited legislative process to force the Senate’s consideration of his joint resolution which would disapprove of recent utility rules promulgated by the Environmental Protection Agency. Senate Joint Resolution 37 was introduced on February 16 and would disapprove of EPA’s final emission standards (formally issued on the same day) for certain fossil fuel-fired power generation units (the “Utility Maximum Achievable Control Technology” standard or “Utility MACT”) under the Congressional Review Act (“CRA”), which has been used with limited success since 1996. Under the CRA, timely introduction of a joint disapproval resolution within 60 calendar days of an agency reporting a rule provides for an expedited procedure to discharge the resolution from a committee and allows the Senate 60 legislative days to consider and vote – by simple majority – on the resolution’s passage. S.J. Res. 37 is not expected to garner the 51 votes necessary for Senate passage. Even if the resolution were to be approved by the Senate and then by the House, the President almost assuredly would veto it. At that point, the resolution would be adopted only if it garnered a two-thirds vote in both the House and the Senate to override the veto. For that reason, we expect the final emissions standards to go into effect (unless successfully challenged in court).
- Congressional Hearings. On Tuesday, the Senate Energy and Natural Resources Committee will receive testimony on the American Energy Innovation Council’s report, “Catalyzing American Ingenuity: The Role of Government in Energy Innovation.”
- Small Nuclear. The Small Modular Reactor Subcommittee will meet on May 30, 2012 at the Department of Energy. A part of the Secretary of Energy Advisory Board, the Subcommittee will provide recommendations on safety, security, and nonproliferation standards for small modular reactors – as well as identify challenges and risks to commercialization that may otherwise hinder accelerated deployment.
- NPR-A. All nominations and comments on tracts within the Northeast and Northwest Planning Areas for the 2012 National Petroleum Reserve in Alaska oil and gas lease sale must be received by the Bureau of Land Management’s Alaska State Office before June 29, 2012.
- Central Gulf Lease Sale. The Bureau of Ocean Energy Management (BOEM) has prepared a Record of Decision following completion of the Final Supplemental Environmental Impact Statement for the 2012 Oil and Gas Lease Sale in the Central Gulf of Mexico Planning Area (Lease Sale 216/222), the final one scheduled under the current five-year OCS Oil and Gas Leasing Program. BOEM will open and publicly announce bids beginning at 9:00 a.m. on June 20, 2012 at the Superdome in New Orleans, Louisiana.
- Oil Shale. The Bureau of Land Management has submitted a proposed rule on oil shale management to the White House Office of Management and Budget (OMB) for regulatory review. There is no legal deadline to release the rule; OMB typically has up to 90 days to complete its review of the proposal.
- U.S. Extractive Industries Transparency Initiative. The Interior Department will host public listening sessions in Anchorage on May 30, 2012; Pittsburgh on June 11, 2012; New Orleans on June 12, 2012; and Washington, DC on June 22, 2012. A public webinar is scheduled from 1-3:00 p.m. ET on June 1, 2012.
- Spotted Owl. On Monday, May 21, 2012, the House Committee on Natural Resources, Subcommittee on National Parks, Forests and Public Lands will hold a field hearing concerning jobs, forests and species. The focus of the hearing will be on the administration of the Northwest Forest Plan and Endangered Species Act with regard to the Northern Spotted Owl. The hearing will take place in Longview, Washington.
- Environmental Technologies Export Initiative. The U.S. Environmental Protection Agency (EPA), in conjunction with the U.S. Department of Commerce, has launched the Environmental Technologies Export Initiative which aims to double U.S. exports by the end of 2014 and bolster U.S. jobs. The American environmental industry generates approximately $312 billion in revenues each year, with a global market of more than $800 billion. This industry employs nearly 1.7 million Americans and includes over 60,000 small businesses across the country. The web-based tool, which is scheduled to be launched this fall and hosted on export.gov, will offer U.S. environmental companies detailed information on U.S. government support, including market research, scientific analysis, regulatory information and financial support programs. EPA and Commerce are also partnering with trade associations to highlight potential growth opportunities for U.S. companies by increasing access to EPA’s scientific, technical and regulatory information and Commerce’s foreign market analysis and export promotion infrastructure. When launched, the portal is intended to provide a systematic approach for U.S. companies looking to expand markets for their environmental products and services abroad.
- Stormwater Management. EPA will be launching a new design competition called the “Campus RainWorks Challenge” to encourage student teams on college and university campuses across the country to develop innovative approaches to stormwater management. Stormwater is a major cause of water pollution in urban areas in the U.S., impacting the health of people across the country as well as tens of thousands of miles of rivers, streams and coastal shorelines, and hundreds of thousands of acres of lakes, reservoirs, and ponds. The competition is intended to help raise awareness of green design and planning approaches at colleges and universities, and train the next generation of landscape architects, planners and engineers in green infrastructure principles and design. Student teams, working with a faculty advisor, will submit design plans for a proposed green infrastructure project for their campus. Registration for the Campus RainWorks Challenge opens September 4, and entries must be submitted by December 14, 2012, for consideration.
- JPMorgan Trading Losses Impact Capitol Hill. JPMorgan’s Thursday, May 10, 2012 announcement about multi-billion dollar trading losses associated with its chief investment office had an immediate impact on Dodd-Frank Act implementation and around Capitol Hill.
The White House released a statement reiterating the importance of financial regulatory reform, citing the Consumer Financial Protection Bureau and the Volcker Rule. House Financial Services Committee Chairman Spencer Bachus (R-AL) commented that the trading loss posed no risk to depositors or taxpayers, while Ranking Member Barney Frank (D-MA) noted that the projected $2 billion loss was “five times the amount they claim financial regulation is costing them [to implement].”
Senators Carl Levin (D-MI) and Jeff Merkley (D-OR), original proponents of the Volcker Rule, called for increased regulation of financial firms and immediate implementation of the Volcker Rule to limit banks’ trading activities.
On Thursday, May 17, the House Agriculture Committee was scheduled to markup several Dodd-Frank Title VII proposals – H.R. 4235, the “Swap Data Repository & Clearinghouse Indemnification Correction Act of 2012”; H.R. 1838, the “Swaps Bailout Prevention Act”; and H.R. 3283, the “Swap Jurisdiction Certainty Act.” The markup was postponed to a later date in order to, as Committee Chairman Frank Lucas (R-OK) said, “ensure there are no unintended consequences of the legislation."
JPMorgan Chairman and CEO, Jamie Dimon, has agreed to appear before the Senate Banking Committee, chaired by Senator Tim Johnson (D-SD), later this summer.
On Tuesday, May 22, 2012, the Senate Banking Committee will hold a hearing titled “Implementing Derivatives Reform: Reducing Systemic Risk and Improving Market Oversight” and will feature Securities and Exchange Commission Chairman Mary Schapiro and Commodity Futures Trading Commission Chairman Gary Gensler.
- FDA User Fee Reauthorization. After Senators Tom Harkin (D-IA) and Michael Enzi (R-WY) released S. 3187, the “Food and Drug Administration Safety and Innovation Act,” the Senate took the necessary procedural steps last week to call up the measure for consideration this week. The revised version includes major elements of the package approved by the Senate Health, Education, Labor and Pensions (HELP) Committee, as well as a variety of changes following the hearing, including a requirement for the HHS Secretary to draft a report on ways to accelerate the development of rare pediatric diseases. Lawmakers are working on last minute deals, including Senator Richard Burr (R-NC) who is hoping to attach language creating a national system for tracking prescription drugs. While a manager’s amendment is likely, the package is expected to receive bipartisan support. The House is expected to take up its version of the user fee bill following the Memorial Day recess.
- Senate Finance Hearing. The Senate Committee on Finance will hold a hearing on Wednesday, May 23, 2012 on “Progress in Health Care Delivery: Innovations from the Field.” Witnesses will include Dr. Richard Migliori with UnitedHealth Group, Dr. Lee Sacks with Advocate Health Care, Marc Malloy of the Renaissance Medical Management Company, and Paul Diaz of Kindred Healthcare.
- Senate VA Hearing. The Senate Committee on Veterans’ Affairs will hold a hearing on Wednesday, May 23, 2012 on “Seamless Transition: Review of the Integrated Disability Evaluation System.”
- Senate HELP Hearing. The Senate Committee on Health, Education, Labor and Pensions has scheduled a hearing on Wednesday, May 30, 2012 titled “Ensuring Patients’ Access to Care and Privacy: Are Federal Laws Protecting Patients?” This will be a field hearing taking place at the Minnesota State Capitol.
- New CCIIO Exchange Guidance and HHS Establishment Grants. The Center for Consumer Information and Insurance Oversight (CCIIO) released guidance for states regarding federally-facilitated insurance exchanges (FFE). The guidance describes how HHS will consult with stakeholders to implement an FFE, where necessary; how states can partner with HHS to implement selected functions in an FFE; and key policies organized by Exchange function. In connection with the guidance, the Department of Health and Human Services (HHS) has also announced $181 million in exchange grants for Illinois, Nevada, Oregon, South Dakota, Tennessee and Washington. Illinois, Nevada, Oregon, South Dakota and Tennessee have received Level One Exchange Establishment grants and Washington (the second state to receive this) has received a Level Two Establishment grant.
- Reg Deadlines. Friday, May 18, 2012, marked the deadline for comments on an FDA final rule that would delay compliance dates of revised labeling and effectiveness testing for over-the-counter sunscreen products.
Applications to participate in the Medicare Graduate Nurse Education (GNE) Demonstration program, which would increase the number of advanced practice registered nurses, are due Monday, May 21, 2012 by 5:00 p.m.
Comments on draft and revised guidance on product specific bioequivalence recommendations, as well as guidance regarding drug interaction studies for new drug applications, are due Monday, May 21, 2012.
Comments are due Friday May 25, 2012, on the Presidential Commission for the Study of Bioethical Issues raised by the ready availability of large-scale human genome sequence data, with regard to privacy and data access and the balancing of individual and societal interests.
INTERNATIONAL HEALTH CARE ACTIVITY
- NIH Funding and Global Competitiveness. The Information Technology and Innovation Foundation (ITIF) and United for Medical Research jointly released a report, “Leadership in Decline,” which describes the United States' position as the global leader in research as threatened with the trending cuts to NIH funding. As the United States reduces investment in biomedical research, other countries like China, Germany, Sweden and the United Kingdom are all increasing their support of medical research and implementing policies that foster innovation, enhancing global competition. For example, under current conditions, China’s financial support of biomedical research will double that of the U.S. within five years. In addition, the U.S.’s global share of biopharmaceutical patents is declining compared to China’s growth. The report advocates for a $40 billion NIH budget, up from $30.9 for FY 2012, for the US to maintain global leadership.
OTHER HEALTH NEWS
- MACPAC Meeting. The Medicaid and CHIP Payment and Access Commission (MACPAC) has scheduled a meeting for Tuesday May 22, 2012. The Commission’s agenda includes an overview of Medicaid-focused initiatives at the Center for Medicare and Medicaid Innovation, Medicaid access, quality, and value in the context of the health care system, an update on Medicare-Medicaid enrollees, data sources for measuring access to care for Medicaid and CHIP, a summary of activities and recommendations of the HRSA Negotiated Rulemaking Committee on Medically Underserved Areas and Health Professions Shortage Areas, and a review of access to care for non-elderly adults.
- IOM Meeting. The Committee on Improving the Quality of Cancer Care will hold its first open session meeting on Monday and Tuesday May 21-22, 2012, to discuss the Challenges of an Aging Population.
International, Defense, Homeland Security
Defense Bills. After considering numerous floor amendments, the House is expected to pass the FY 2013 National Defense Authorization Act (NDAA) as soon as Friday. The House Armed Services Committee (HASC)-passed version of the bill authorizes $643 billion in FY 2013 spending, an amount $8 billion above the cap established by the debt limit law. On Friday morning, the House voted 238-182 to reject an amendment offered by HASC Ranking Member Adam Smith (D-WA) and Congressman Justin Amash (R-MI) to preclude the indefinite detention without trial of U.S. and non-U.S. citizens accused of terrorism. The Obama Administration has issued a veto threat over the top-line spending amount and detainee issues, if the House version of the NDAA were to reach the President’s desk. However, the Democratic-led Senate is likely to take a significantly different approach, as the Senate Armed Services Committee is scheduled to begin consideration of the NDAA on Tuesday, May 22.
Several key floor and Committee decisions led to the higher-than-requested $643 billion authorization in the House bill. For example, on Thursday, the House voted to reject amendments by Congressman John Conyers (D-MI) and Congressman Mike Quigley (D-IL) to curtail the F-35B and V-22 Osprey aircraft programs. In the previous week’s HASC markup, the Committee reversed the Administration’s requests to scale back several programs, including Virginia class submarines, Global Hawk Block 30 drones, and Abrams battle tanks. Meanwhile, the House NDAA bill scales back the Pentagon’s proposed military personnel reductions and blocks a round of military base closings. As a result of a floor amendment added Thursday, the bill also proposes to shift export control authority over commercial satellites from the State Department to the Commerce Department. The Senate is expected to consider making that change as well.
Also on Thursday, the House Appropriations Committee reported out its FY 2013 Appropriations bill. The $607.7 billion bill includes $519.2 billion for regular defense spending and $88.5 billion for Afghanistan and counterterrorism operations. The Administration and Democratic-led Senate will continue to make arguments about the top-line spending number that parallels the HASC and SASC discussions over the NDAA, as the Senate Appropriations Committee begins consideration of its FY 2013 bill on Wednesday.
State Department/Foreign Operations Bills. The full House Appropriations Committee reported out, by voice vote, its FY 2013 State Department and Foreign Operations spending bill on Thursday. As was the case at the Subcommittee level, the bill proposes to find State Department operations and foreign assistance at a level of $40.1 billion, which is $2 billion less than the FY 2012 figure and $6 billion below the Obama Administration’s FY 2013 request. The Committee turned back three Democratic-led amendments to provide funding for family planning programs, despite some Committee Republicans breaking ranks on the votes. One of those Republicans, Congressman Charlie Dent (R-PA), successfully added an amendment to require the State Department to examine whether the United States should designate Nigeria’s Boko Haram group as a terrorist organization. Congressman Frank Wolf (R-VA), a fierce opponent of the Sudanese government, was able to add a provision banning U.S. economic assistance to nations which grant access to Sudan’s president, Omar al-Bashir. The Senate Appropriations Committee’s State Department/Foreign Operations Subcommittee is expected to take a significantly different approach when it convenes on Tuesday, May 22, 2012, to mark up its FY 2013 bill.
Iran and Burma Sanctions Developments. On Thursday, Senate Republicans opposed a unanimous consent request by Majority Leader Harry Reid (D-NV) to move Iran sanctions legislation, despite bipartisan support for most underlying provisions in the legislation. Senator Lindsey Graham (R-SC) has requested that the bill more explicitly recognize that the use of force remains a U.S. policy option for responding to Iran’s nuclear program. Senator Roy Blunt (R-MO) expressed concerns that the bill, which targets shipping and financial services institutions doing business with Iran, may not be strong enough. Of course, the Wednesday, May 23 P5+1 discussions in Baghdad, as well as the July 1 EU crude oil embargo coupled with the entry-into-force of U.S. sanctions against companies that do business with Iran’s central bank, may well alter the equation in Congress yet again.
Last Thursday, May 17, 2012, Secretary of State Clinton announced a suspension of U.S. investment and financial services sanctions on Burma. U.S. business will be able to invest in the country, and Burmese citizens will be able to access credit and conduct dollar-based transactions. Concurrently, the Administration announced Special Envoy Derek Mitchell would be nominated as the first U.S. Ambassador to Burma since 1990.
- Bush Tax Cuts Vote Timetable. In two speeches this week, House Speaker John Boehner (R-OH) announced that the House will vote on an extension of the 2001 and 2003 Bush tax cuts before the November elections in order to prevent a massive tax increase scheduled to take effect at the beginning of 2013. The Speaker indicated that such legislation will include a fast-track process for dealing with fundamental tax reform in 2013. House Ways and Means Committee Chair Dave Camp (R-MI) has said that such a provision is in the “embryonic stage” but that the Committee is looking at a number of processes to determine which will work best. The legislation could include a template for tax reform as well, such as broad principles House Republicans believe should be followed in any reform legislation next year.
Chairman of the House Ways and Means Subcommittee on Select Revenue Measures Pat Tiberi (R-OH) has indicated that a vote on this legislation should occur before the summer recess begins in August. The legislation will likely provide a one-year extension to provide Congress with time in 2013 to work on a comprehensive tax reform measure. Chairman Camp added that the extension of the 2001 and 2003 Bush Tax Cuts do not need to be offset with savings or revenues elsewhere, as Republican budget rules do not require offsets for extending current policy.
Chairman Tiberi also has indicated that the bill will not likely include extensions of traditional tax “extenders” such as the R&D credit and active financing exception, as the Committee continues to undertake an analysis of which provisions should be extended, though he said he would like to complete action on extenders by the end of the year. Senate Majority leader Harry Reid (D-NV) has not yet indicated that the Senate will take up such legislation ahead of the elections.
- Ways and Means Committee Tax Exempt Organizations. As part of a series of hearings on fundamental tax reform, on Wednesday, May 16, 2012, the House Ways and Means Subcommittee on Oversight held a hearing on tax-exempt organizations. Republicans and Democrats alike praised the work of tax-exempt organizations, though both sides agreed that the sector could become more efficient. Democrats focused on what they believe to be a lack of IRS funding and the resulting lack of audits of such organizations, while Republicans, including Subcommittee Chairman Charles Boustany Jr. (R-LA) and Representative Tom Reed (R-NY), expressed concern that revised IRS Form 990 may be overly burdensome on some tax-exempt organizations.
Additionally, Representative Ron Kind (D-WI) suggested that many 501(c)(4) organizations have increased their political involvement, and hinted that Congress should increase their oversight of such activity, including the possibility of requiring disclosure of contributions to such organizations. Finally, Representative Xavier Becerra (D-CA) worried that tax-exempt organizations have been subject to little review, and that “fuzzy” rules on which entities qualify for tax-exempt status have created a complicated and inefficient system. He suggested that the rules governing tax-exempt organizations could be altered so that there are more “bright lines” which focus on outcomes and activities, rather than focusing on the “purpose” of such organizations.
- Senate Finance Hearing on Tax Reform Implications on Tribes and Territories. On Tuesday, May 15, 2012, the Senate Finance Committee held a hearing to address how tax reform should impact tribes and territories. Tribal issues addressed included changes to the nature of tax-exempt bonds and the general welfare exclusion. Most of the witnesses before the Committee expressed support for the repeal of the “essential government function” test that is applied to tax-exempt tribal bond proceeds. Senate Finance Committee Chairman Max Baucus (D-MT) also expressed support for this change, stating that Congress needs to level the playing field for tribal tax-exempt bonds. For U.S. territories, there was particular focus on the rum excise tax cover over, with Senator Robert Menendez (D-NJ) taking particular exception to the rum cover over provision, characterizing it as providing subsidies to some rum producers, rather than providing a benefit to its intended recipients.
- Tax Hearings Next Week. There are no tax-specific hearings scheduled next week in the House Ways and Means and Senate Finance Committees.
- IRS Holds Hearing on FATCA – Witnesses Call for Additional Time. On Tuesday, May 15, 2012, the Internal Revenue Service held a hearing on the implementation of the Foreign Account Tax Compliance Act (FATCA) as it works to finalize rules first proposed in February. Michael Plowgian of the IRS has stated that the IRS goal is to have rules finalized by the end of this summer. At the hearing, witnesses representing many countries urged the IRS to provide additional time to comply with the law, which requires foreign financial institutions (FFIs) to report information on U.S. accounts to the IRS or face a 30 percent withholding tax. Other issues addressed by witnesses included asking the IRS to conform its account identification and documentation requirements to the anti-money laundering (AML) and know-your-customer (KYC) rules that foreign banks already have experience in complying with. Intergovernmental information sharing agreements were also discussed. Under such agreements, Treasury/IRS and foreign governments would set up an information sharing scheme providing for government-to-government exchange of information required by FATCA. Some witnesses supported such approach, while a few worried that it could create problems if banks are conducting business in multiple jurisdictions, some of which may have no intergovernmental agreements.
- SAFETEA-LU Reauthorization. Since their first public meeting on May 8, 2012, conferees on the surface transportation bill have held closed-door negotiations. Senator Barbara Boxer (D-CA), Chairman of the Senate Environment and Public Works Committee, explained during a recent briefing that discussions have become substantive in nature. Chairman Boxer also affirmed her optimism that the conference committee will reach an agreement before the current transportation extension expires on June 30, 2012. However, the Keystone XL Pipeline continues to be an issue. Rep. Henry Waxman (D-CA) even took to the House floor this past week to accuse House Republicans of taking the transportation bill “hostage” over an issue that he categorized as a “legislative earmark.” With the House out next week and the Senate taking recess the following week, the legislative calendar appears to be one of the biggest obstacles challenging Chairman Boxer’s target of early June to complete conference negotiations.