Mike & Co.,
Word this afternoon is that Senate Banking will take another shot at a conformations votes for five regulatory nominees, including two for SEC commissioner, perhaps as soon as this week. This follows an aborted April 7 vote, in which four Democrats (Schumer, Menendez, Warren, and Merkeley) withheld support for their own party’s nominee at the last minute. While a new vote hasn’t been scheduled yet, it is now expected in the coming days.
Should the nominees clear the Committee, it’s unclear they can get any floor time in the Senate. Observers have predicted that they will need to pass by unanimous consent — meaning that just one Senator can block their confirmation.
Meanwhile, once again, the main legislative developments of note are on the tax front. We try to bring you up to date below.
Today marks the beginning of a series of tax hearings in Congress as Democrats begin to position themselves for what could be a power swap in 2017. Per Todd Metcalf, minority chief tax counsel for Senate Finance: “We are putting together the building blocks hopefully so that we will be ready when in 2017 or whenever the opportunity arises, we are ready.”
Democrats in Congress are using 2016 as a staging area to gauge reaction to their plans for next year – drafts are being circulated and released so offices and gather feedback and make the necessary changes to improve the odds of pet projects’ passage in 2017, where circumstances are likely to improve, possibly markedly.
The GOP is up to the same thing. The corporate integration plan to end double taxes on corporate income from Senate Finance Chair Hatch and the tax blueprint by House Ways and Means Chair Brady are being developed to carry forward priorities while awaiting the right moment.
What’s Been Released, What’s Ahead
Senate Finance ranking member Wyden has been busy this year, releasing a number of proposals. On April 26, he released a proposal changing the rules on capital depreciation, simplifying the schedules currently in use; earlier in the year he proposed changing the minimum ownership stake require for a company to invert.
Wyden is expected to introduce draft legislation to revise taxes on financial products like derivatives in short order. The draft is said likely to resemble, at least partly, proposals offered in early 2013 by former Ways and Means Chair Dave Camp, while incorporating some of the changes sought to Camp’s bill.
Sen. Wyden and other Democrats have also talked regularly about legislation to tackle inversions and related cross-border income issues. Last year, Wyden published a report saying legislation to mark all derivative instruments to market and tax the resulting gains or losses as ordinary income would end the manipulation of timing and income character that derivatives allow. On wash sales, the Wyden report said rules could be updated to apply to forward contracts, swaps and derivatives involving commodities and currencies, and additional legislation could address immediately replacing a loss position.
Sen. Schumer is focused on achieving some sort of tax overhaul that would be linked to infrastructure investment. His plan for 2016 — “Let people know how great the need is on both sides to straighten out the international system, for the inversions and everything, but also how demanding our need for infrastructure is and to marry the two.”
In a moment of bipartisan success, and perhaps a view of what we stand to lose as we wait for 2017, the Senate passed a bill on May 10 allowing tariff relief for goods that domestic manufacturers cannot find inside the United States. The bill took longer than expected, but has been hailed as a way to allow American manufacturers to remain competitive.
The Landscape for 2016
Congress is on an abbreviated schedule for this election year and it’s sloped heavily toward the spring side of 2016. Legislative days are in short supply already and whatever time for compromise existed in 2016 is fast disappearing. It is likely that we will have to wait even for a hint of bipartisan agreement on tax reform issues until after the November election. Even if 2016 turns out to be a year for preparing and showcasing legislative ideas in Congress, but that doesn’t mean it will be a boring one for legislation.