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FEI Legislative Accomplishments in the 113th Congress (2013-2014)

 
  • Congress Retroactively Extends Expired 2013 Tax Provisions: On Dec. 16, 2014, the Senate passed H.R. 5771, the Tax Increase Prevention Act of 2014, providing for a one-year, retroactive extension of business and individual tax provisions that expired at the end of 2013. Key business provisions that were extended though Dec. 31, 2014, included the research and development (R&D) credit, 50-percent bonus deprecation, “look-through” treatment for payments between related controlled foreign corporations (CFCs), and subpart F exemptions for active financing income. The Joint Committee on Taxation (JCT) estimated the bill to cost $41.6 billion over 10 years. The House action to pass a one-year tax extenders bill on Dec. 3 followed an unsuccessful attempt by House and Senate leaders to agree to a roughly $450 billion tax extenders package that would have made permanent the R&D credit and several other provisions, as well as extend 50-percent bonus depreciation and other provisions temporarily for two years. During 2014, the House and Senate pursued differing approaches to tax extenders. The House passed legislation that would have made permanent the R&D credit, bonus depreciation, Section 179 expensing, and certain S corporation provisions, while the Senate Finance Committee approved a two-year, $85 billion retroactive extension of more than 50 expired or expiring tax provisions. FEI urged Congress to act of tax extenders prior to the end of 2014 and supported both temporary and permanent extensions of key provisions, such as the R&D credit and bonus depreciation. Using FEI Grassroots, FEI members sent over 660 emails, tweets, and faxes to their Senators and Representatives in support of Congressional action on tax extenders.
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  • House Passes Permanent and Improved R&D Credit: On May 9, 2014, the House voted (274-131) to approve H.R. 4438, a bill to extend permanently and modify on a retroactive basis the Section 41 research credit. The House-passed bill would have repealed the traditional “regular” 20-percent research credit and made permanent the alternative simplified method for calculating the research credit and increased the rate for that method from 14 to 20 percent. It would have also made permanent the credits for amounts paid for basic research and amounts paid to an energy consortium and change the basis period for the basic research credit from a fixed period to a three-year rolling average. As a member of the R&D Credit Coalition, FEI supports a permanent and strengthened R&D credit and urged the House to pass H.R. 4438. The House vote in May was the first time since the R&D credit was created as a temporary incentive in 1981 that one chamber of Congress had voted to extend the provision on a permanent basis. Despite strong bipartisan support, Congress and the Administration could not ultimately agree on enacting a $155.5 billion permanent R&D credit that was not offset. Instead, Congress enacted a one-year, retroactive extension of the R&D credit through Dec. 31, 2014, as part of H.R. 5771, the Tax Increase Prevention Act of 2014.
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  • Congress Reforms ERISA Section 4062(e): The FY2015 Continuing Resolution/Omnibus Appropriations Act (a.k.a. “Cromnibus”) includes a provision clarifying what constitutes a “substantial cessation of operations” under Section 4062(e) the Employee Retirement Income Security Act (ERISA), and was originally included in legislation (S. 2511) passed by the Senate under Unanimous Consent (“UC”) on Sept. 17, 2014. The provision addresses a growing problem attributable to the Pension Benefit Guaranty Corporation’s (PBGC) aggressive enforcement actions under Section 4062(e). Under Section 4062(e), companies are required to post security with the PBGC in the event that a company shuts down a major facility and, as a result, lays off a substantial portion of its workforce. PBGC has in recent years started interpreting this rule in a new way that interferes in routine minor business transactions, such as the sale of small business units where no employee loses his or her job. The new rules also impose massive liabilities on employers that are disproportionate to the size of the transaction. This is causing significant problems, driving more companies out of the pension system and preventing companies from entering into beneficial transactions that can improve their business. The provision returns Section 4062(e) to its original purpose by (1) only imposing liability where there has been a major downsizing, and (2) making the liability imposed on employers reasonable. FEI, at the recommendation of the Committee on Benefits Finance (CBF), urged Congress to address this issue in the lame duck session of the 113th Congress.
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  • House Passes TRIA Bill with Derivative End-User Margin Bill Language, (which is subsequently passed by the 114th Congress and signed into law on Jan. 12, 2015.) The bill, titled the Business Risk Mitigation and Price Stabilization Act, was designed to amend the Dodd Frank Act to clarify that derivatives end users, i.e., non-financial companies that use derivatives to hedge risk and not for speculative purposes were exempt from onerous margin requirements. An early version of this bill passed the House during the 112th Congress (in 2012) but never received a floor vote in the Senate (the Democrats did not want to amend Dodd Frank so quickly after its passage). Reintroduced in the 113th Congress, a new version of the bill passed the House by a huge bi-partisan margin (411-12) but stalled once again in the Senate Banking Committee. During the lame duck session of the 113th Congress (after the November 2014 elections), House Financial Services Committee Chairman Jeb Hensarling (R-Texas) attached it to the Terrorism Risk Insurance Program Reauthorization Act of 2014 (TRIA),a must pass government insurance guarantee bill, which the House did pass (417-7). Although brought to the Senate floor, the TRIA bill failed to make it across the finish line due to a hold put on it by retiring Senator Tom Coburn (R-Okla.), unrelated to our margin language. Chairman Hensarling reintroduced TRIA (with the margin bill attached) in the 114th Congress in January 2015; it again passed the House (416-5), and was sent to the now Republican-controlled Senate. An amendment offered by Senator Elizabeth Warren (D-Mass.) to strip our margin bill language from TRIA was defeated (31-66). (Sen. Warren never actually criticized the margin bill’s substance only the process of attaching it to TRIA.) The TRIA (plus margin) bill then passed the Senate (93-4), and the President signed the legislation on Jan. 12, 2015 (although the White House had also opposed combining the bills). Throughout this four-year process, FEI worked closely with the Coalition of Derivative End-Users to lobby members of Congress in both chambers to move the bill forward. In particular, FEI’s consistent support for the margin bill offset the conflicted messaging from some industry groups who were ambivalent about Chairman Hensarling’s strategy of coupling the margin bill with TRIA. 
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  • House Passes Centralized Treasury Unit Bill. The Derivatives End-Users Clarification Act would have assured that swaps with centralized treasury units (“CTUs”) of non-financial end-users would be exempt from clearing requirements. An earlier version of the bill passed the House in 2012 but was never introduced into the Senate during the 112th Congress. Like the margins bill (see above), the CTU bill was reintroduced in the 113th Congress and after significant changes to accommodate the concerns of Rep. Maxine Waters (D-Calif.), the ranking member of the House Financial Services Committee, the bill passed the House of Representatives in December 2014 by voice vote (with no member expressing opposition). The bill was then “hot-lined” in the Senate; it cleared the Republican side, i.e., no one objected or placed a hold on the bill, but three Democratic Senators did place holds, (Sens. Warren, Jack Reed (D-R.I.) and Bernie Sanders (I-Vt.)). As the lame duck came to an end, however, the effort to pass a standalone version of the CTU bill was put off until the next Congress.
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  • Congress Strips Provision from the FY 2015 National Defense Authorization Act (NDAA) to Allow the Defense Contractor Audit Agency (DCAA) to Interview Any Contractor Employee for Audit Information. While FEI and the Committee on Government Business (CGB) provided input on several provisions with respect to the FY2015 NDAA, CGB members largely wrote the rebuttal to Senate section 825 contained in the Acquisition Reform Working Group’s analysis of the legislation. Section 825, which would have permitted DCAA to interview contractor employees at will, was subsequently dropped from the final compromise bill H.R. 3979, (signed into law on Dec. 19, 2014).
 

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