Washington Snapshot: Senate Votes to Pass Budget, Brings Tax Reform a Step Closer

In This Week's Edition of Snapshot

• Tax Reform Update: Senate to vote on legislation that would lay the path for tax reform
• Repealing the Johnson Amendment Remains a Target
• A reflection on executive and regulatory activity in the Trump Administration
• In the States: Elected official fundraising for nonprofits under review in the states

News from the Hill

So, What's Up with Tax Reform?

This week, the Senate continued the momentum toward the passage of tax reform, which began with the House passing a budget resolution that included reconciliation instructions for the tax code overhaul. Initially, there were concerns that Majority Leader Mitch McConnell (R-KY) would have trouble finding the 50 votes to pass the Senate’s version of the fiscal year (FY) 2018 budget resolution. This was due to several factors, including the expectation that Sen. Thad Cochran (R-MS) would miss votes this week due to medical issues, the possible opposition of Sens. John McCain (R-AZ), Lisa Murkowski (R-AK), and Susan Collins (R-ME), and the stated opposition of Sen. Rand Paul (R-KY). However, in a boost to Leader McConnell, all four of those senators voted to proceed to debate on the budget resolution, and Sens. McCain, Murkowski, and Collins have all since signaled their likely support for the measure. Additionally, Sen. Cochran was able to make it back to Washington and is expected to be a definite yes vote, meaning that it is widely assumed the Senate measure will pass late tonight or early tomorrow.

In terms of (probable) next steps for tax reform and assuming the Senate is able to pass their budget resolution:

• the House and the Senate will have to conference their differing budget resolutions or one chamber will have to pass the other’s bill as-is;
• both chambers will pass the agreed upon resolution;
• the House will likely move first in marking up a tax reform bill in the Ways and Means Committee, pass it out of Committee, and then pass it on the floor;
• the Senate will mark up their own version of tax reform in the Finance Committee, pass it out of Committee, and then pass it on the floor;
• the House and the Senate will conference their separate bills;
• each chamber will pass the compromise tax code overhaul; and
• President Trump will sign tax reform into law.

While many steps remain before Congress can complete tax reform, some Republican leaders remain optimistic the process will be completed by the end of the year. According to The Hill, “Speaker Paul Ryan (R-WI) has laid out an ambitious timeline that would see the House approve legislation in November. ‘So by early November, we’ll get it out of the House. We’ll send it to the Senate,’ Ryan said during a Wisconsin radio interview on Monday. ‘The goal: get thelaw in December so that we wake up with New Year’s and a new tax code in 2018.’” However, the same article goes on to note that Leader McConnell and President Trump both said at a press conference on the same day that they wanted tax reform done by the end of the year but acknowledged the process could leak into 2018 (at a separate event Tuesday, President Trump stated he wanted to “give our country the best Christmas present of all—massive tax relief”).

Given the few number of legislative days left in the year and the packed agenda Congress is facing, Majority Leader McConnell is leaning toward keeping the Senate in session longer. According to POLITICO, “The Senate majority leader is preparing to hold the chamber in session for more rigorous workweeks, including Fridays and possibly even weekends, according to two sources familiar with the matter. The Senate GOP discussed a more aggressive schedule at Tuesday’s party lunch and the majority of the conference agreed.” If Sen. McConnell follows through, this will allow the Senate more time to consider tax reform, some sort of fix for Obamacare, and must-pass items like the Federal Aviation Administration reauthorization, the Children’s Health Insurance Program, and funding to keep the government open for FY 2018.

Regardless of the timing of the tax reform bill, there are still differences of opinion among Republicans about how to handle certain key tax provisions. With the state and local tax (SALT) deduction, GOP members are working toward a compromise between repealing it (as was proposed by Republican leadership who hoped the repeal of this provision would help generate revenue to “pay for” their desired tax cuts) and leaving it intact at the request of members from high-tax states. The details around this don’t seem to be ironed-out just yet, but recent conversations have included alternatives like capping the SALT deduction or phasing out the deduction based on income level.

Another issue on which consensus has yet to be reached is the estate tax. Repealing this provision has been a consistent element of the tax reform documents put forward by Republicans in recent history—so it has left some puzzled that the sentiment around this may not be as strong as expected. This is primarily due to the large price tag that comes with repealing this tax, and the impression of American voters that repealing it would disproportionately benefit wealthy taxpayers. The repeal or preservation of the estate tax is particularly relevant for tax reform’s impact on charitable giving by bequest (as described recently by the Tax Policy Center).

One other significant item that has yet to be resolved is the idea of corporate integration—a tax reform approach that is favored by Senate Finance Committee Chairman Orrin Hatch (R-UT). Chairman Hatch held several hearings on this matter in the previous Congress, and recently reiterated his commitment to incorporating this into a tax reform proposal, saying “I’m pretty sure it will play a role,” according to POLITICO. For an idea that has not picked up much traction in the House, this could further complicate efforts to come to an agreement on tax reform between the House and Senate.

These issues are fundamental components of a would-be tax bill, and the decision for how to address them will play an important role in how smoothly (or not) tax reform will move through Congress. For now, leaders of this process continue to work toward building agreement to achieve tax reform. Just yesterday, the House Ways and Means Committee scheduled two meetings for next Tuesday and Wednesday morning to “continue to discuss important tax policy decisions in the lead up to the release of the bill text,” according to a Ways and Means spokesperson. Ways and Means Chairman Kevin Brady (R-TX) noted yesterday that his committee is “exploring the home mortgage deduction and charitable” that they “are working to unlock more of [it].”

Furthermore, a number a Senate Finance Democrats left a meeting yesterday morning with President Trump feeling cautiously optimistic about a bipartisan approach to tax reform in the Senate. “There was a lot of talk about bipartisanship, there always is, and I take people at their word,” said Sen. Sherrod Brown (D-OH). However, there was still skepticism that the sentiment of bipartisanship from this particular meeting might not necessarily translate to the process being led by Majority Leader McConnell and Chairman Hatch in the Senate—though, Chairman Hatch did say that he would “commend [Democrats]” for seeming “to be open to it.”

Repealing the Johnson Amendment Remains a Target

On Oct. 13 at the Values Voter Summit, hosted by the Family Research Council, Rep. Mike Johnson (R-LA) and Rep. Mark Walker (R-NC) said to the audience that the Johnson Amendment, which keeps 501(c)(3) organizations out of electoral politics, must be repealed. BGov reports “We need to unshackle the voice of the church,” Rep. Johnson said to cheers and applause at the event. “The Internal Revenue Code has really been censoring and silencing the pulpit.” President Trump campaigned on repealing the Johnson Amendment and House Ways and Means Committee Chairman Kevin Brady (R-TX) has said he may include the repeal of the Johnson Amendment in the tax reform package.

Executive & Regulatory News

A Reflection on Executive & Regulatory Activity

As of Oct. 17, 2017, President Trump has issued 67 executives orders and memorandums. Executive orders and memoranda are a legal mandate from the president to federal agencies. The main difference is that executive orders are numbered and are printed in the Federal Register, which makes them easier to track, and memorandums are not numbered and are not submitted to the Federal Register. See here for a summary of all the executive orders and memorandums by President Trump broken down by topic.

Happening in the States

Exclusive from our colleagues at the National Council of Nonprofits.

Elected Official Fundraising for Nonprofits Under Review in the States

State ethics commissions are becoming increasingly interested in the intersection between fundraising activities of government officials and the charitable nonprofits they support. At issue can be questions of public disclosure, conflicts of interest, and influence peddling.

The Hawai`i Campaign Spending Commission has launched a new ethics investigation this month into contributions from the Mayor of Maui to 41 charitable or community organizations over a two-year period. The Commission is seeking to find out whether fundraising events sponsored by a public official on behalf of nonprofits amounts to charitable donations to help the charity or advertising for the candidate’s election campaign. State law prohibits elected officials or candidates from donating more than $8,000 to “any community service, educational, youth, recreational, charitable, scientific, or literary organization.” The Commission Executive Director explains the restriction, stating “the idea [of limiting donations] is so you’re not able, as a candidate, to have an unfair advantage by feeding the community or buying their vote.” The Mayor had sponsored at least one event and made several other donations that his campaign committee labeled, or requested that receipts be labeled, as “advertising” rather than contribution, allegedly in an effort to skirt the donation cap.

Last year two state ethics commissions clarified rules governing political campaigns and charitable fundraising by government officials. The Alabama Ethics Commission ruled that a public official or employee may not solicit on a nonprofit's behalf if he or she is employed by the nonprofit, is on the Board and paid for Board service, or derives any other personal gain from service.

The Kentucky Executive Branch Ethics Commission dealt with the narrower question of the fundraising practices of government-established nonprofits. Government agencies in the Commonwealth, as in other states, had previously set up charitable organizations to raise private funds to supplement public appropriations or to perform statutory obligations. In an advisory opinion, the Commission expressed concern that these government-controlled (as opposed to independent) nonprofits could seek to raise confidential donations from lobbyists and other interested persons doing business with the government agency.