to: Tim Brink / Jim gaffney / Catie Scott

fr: Michael Oscar

dt: 11/29/2017

RE: CONGRESSIONAL UPDATE

This Week in Congress… Returning after the Thanksgiving Day Recess Period, the Senate aimed to pass their version of tax reform this week. The House already passed their version of tax reform by a vote of 227-205.

Once the Senate passes their bill, the House and Senate would then iron out their differences with the goal of final passage before Christmas.Please review both bills at: https://www.bloomberg.com/graphics/2017-senate-vs-house-tax-bills/

CONTIUNING RESOLUTION: When the current continuing resolution (CR) for the budget expires on December 8th, the latest rumor is that the Congress will pass another CR with an expiration date of December 22nd. It is unclear at this time if the appropriations committees can complete their work on all 12 bills in that time frame or if another CR will be required to keep the government running into sometime next year.

SENATE TAX BILL: Estimates from a number of conservative groups regarding the Senate tax bill demonstrate that projected deficit growth could be as high as $1.3 trillion over the next ten years. Treasury Secretary Mnuchin has dismissed all such projections. He has said repeatedly that economic growth would be so powerful that the proposed tax cuts would not only pay for themselves, but reduce projected deficits by $1 trillion over the coming decade. Stay tuned!

LABOR MANAGEMENT GROUPS (Senate Tax Reform Letter): On Monday, November 27th, several labor and management groups penned a letter to Senate Finance Committee Chairman Hatch regarding their concerns with the bill. Excerpts from their letter are below:

Dear Senator Hatch:

The undersigned trade associations support tax reform that benefits all employers and results in increased investment and jobcreation here in the United States. To that end, we share the concerns raised by a number of Senators regarding the treatment of pass through businesses in the proposed Senate reform.

While the bill’s 17.4 percent deduction is a welcome effort to lower rates on all pass-through businesses, the provision is both temporary and too low. The deduction’s 50-percent payroll limitation would leave behind pass-through businesses that do not add direct payroll at a one-to-one ratio as they grow while blocking trust and estate income from the deduction would hurt multi-generation family businesses. The fraction of pass-through businesses that do get the full deduction would be subject to a 32 percent effective marginal rate, well short of the 25 percent rate forecast in the Framework and significantly higher than the 20 percent rate applied to C corporations.

The disallowance of the State and Local income tax deduction would increase this gap further, raising effective tax rates on pass-through businesses operating in States with income taxes. Meanwhile, the proposed limitation on a businesses’ ability to deduct active pass-through losses would discourage entrepreneurial activity, business formation and investment, as would the exclusion of pass-through businesses from the new, territorial regime on international income.

As a result of these provisions and others, we are concerned that the Senate bill would increase the tax burden on many pass-through businesses relative to current law, while the bill’s rate disparity with C corporations creates a significant competitive disadvantage for many more.

As the Senate continues to refine its proposal, we encourage you to address the concerns expressed by the pass through community and its representatives, and modify the legislation to ensure that it spurs investment, jobs and economic growth by all forms of business.

PBGC HEARING: OnWednesday, November 29the, the House Subcommittee on Health, Employment, Labor and Pensions held a hearing on"Financial Challenges Facing the Pension Benefit Guaranty Corporation: Implications for Pension Plans, Workers, and Retirees."The subcommittee examined how pension plans,workers, andretirees may be affected by financial challenges faced by the Pension Benefit Guaranty Corporation (PBGC).

MULTIEMPLOYER PENSION REFORM: On November 16th, Rep. Fudge (D-OH), a member of the House Education and the Workforce Committee, joined with House and Senate Democrats to introduce theRehabilitation for Multiemployer Pensions Act to help address the pension crisis affecting retirees nationwide. Led by House Ways and Means Committee Ranking Member Rep Neal (MA), the bill creates a Pension Rehabilitation Trust Fund within the Department of Treasury to make loans to multiemployer defined benefit plans. Sen. Brown (D-OH) introduced a companion bill in the Senate that same day.

Beyond this legislation, there are four other proposals being considered to fix the multiemployer pension system. More than 100 pension funds covering workers in unionized industries face insolvency in the coming years.

·  UPS Loan Proposal - UPS has aproposalthat would provide up to three successive low interest long-term federal government loans to troubled pension plans to cover their cash flow shortage for 5 years each. Plan participants would see benefit cuts of up to 20 percent across the board. Plans would be obligated to begin interest-only repayments after 5 years. Loan repayments would be ensured through the creation of a risk reserve pool funded by employers, participants, and unions. UPS could be responsible for up to $4 billion in plan contributions if the 400,000-member Central States, Southeast and Southwest Areas Pension Fund becomes insolvent. That fund is projected to be insolvent by late 2024.

·  New Design From NCCMP - The National Coordinating Committee on Multiemployer Plans, a group made up of employers and unions, has circulated aproposalthat would have the U.S. Treasury provide long-term, low-interest loans to plans that couldn’t clear the MPRA’s hurdles and are at substantial risk of insolvency. The NCCMP lobbied for passage of the MPRA. In general, the loan program would lend funds to qualifying “critical and declining” status plans at 1 percent interest for 30 years. The loans would be interest only for the first 15 years, and then require a level payment of principal and interest for the remaining 15 years. To be eligible for a loan, plans would need to show they can achieve solvency and repay their loans. The proposal would also require the loan account to be returned to the government in the event of an insolvency or a mass withdrawal of employers.

·  Funding From Credit Union Profits - Theproposalfrom the American Families for Pension Security, based in Kingston, NY, would also have the U.S. Treasury issue low interest loans to plans in critical and declining status. The group wants to create a federally chartered special-purpose credit union for the more than 10 million members of multiemployer plans and their families. The credit union would use its profits from loans and credit card operations to build a reserve pool to help plans repay and secure the loans.

·  KOPPA Bill Not Advancing - There’s one piece of legislation that’s been lingering for quite some time, and it does not include the loan proposals being tossed around by others. Sen. Sanders (I-VT) (S. 1076) and Rep Kaptur (D-OH) (H.R. 2412) have a bill known as the Keep Our Pensions Promises Act. KOPPA would repeal provisions of the MPRA that allow for the reduction of retiree benefits and create a legacy fund for troubled plans and the PBGC. The legacy fund would be offset by modifying two types of tax shelters--one for investors in art works and real estate and the other for very large estates.

DOL (OSHA Pushes Deadline for Injury/Illness Reporting): On November 22nd, OSHA announcedcovered employers have a couple more weeks to submit for the Injury and Illness tracking rule by delaying the initial electronic submission deadline from December 1 to December 15. An officialFederal Registernoticedelays the initial submission deadline for CY2016 data on Form 300A under the rule “Improve Tracking of Workplace Injuries and Illnesses.” (The original submission deadline was July 1, 2017; then pushed to December 1 and now pushed once more.) The purpose of the delay is “to allow affected entities sufficient time to familiarize themselves with the electronic reporting system, which was not made available until August 1, 2017.”


NORTH AMERICAN SHALE GAS EXPLORATION:

·  Keystone XL Lawsuit Proceeds: US District Judge Brian Morris on Wednesday did not dismiss a lawsuit filed against a presidential permit issued for the Keystone XL pipeline in March. The plaintiffs argue that the administration used outdated environmental reviews in the permitting process.

·  NEXUS Pipeline Stopped in Ohio: The 6th US Circuit Court of Appeals last week ruled in support of a petition filed by the city of Green, OH and issued a temporary injunction to prohibit the start of construction of the $2 billion NEXUS natural gas pipeline. The city accuses the Ohio Environmental Protection Agency of violating its own rules on a section of the pipeline when it issued a clean water certificate.

·  PA General Assembly Still Debating a Marcellus Shale Tax: In early December, the Pennsylvania House of Representatives is expected to reopen the debate over a proposed tax on Marcellus Shale natural gas production. Last week, the PA House failed to find common ground on a series of proposed amendments to the legislation.

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