Senate Continues Debate on Energy, as House Set to Move Several Financial Services Bills

Senate Legislative Activity

At 3:00pm on Monday, February 1, following any leader remarks, the Senate will resume consideration of Calendar #218, S.2012, Energy Policy Modernization Act. No roll call votes are expect until Tuesday, February 2 at 2:30pm. Note that there are still several amendments pending to S. 2012, including:

  1. Murkowski amendment #2953 (substitute);
  2. Cassidy amendment #2954 (Strategic Petroleum Reserve); and
  3. Murkowski amendment #2963 (bulk power system reliability)

House Legislative Activity

After a week away due to winter weather, the House returns to Washington this week. On Monday, February 1, the House will meet at 12:00pm for morning hour and at 2:00pm, with votes postponed until 6:30pm. The following legislation will be considered under suspension of the rules:

  1. H.R. 2187 – Fair Investment Opportunities for Professional Experts Act;
  2. H.R. 2209 – To require the appropriate Federal banking agencies to treat certain municipal obligations as level 2A liquid assets, and for other purposes;
  3. H.R. 3784 – SEC Small Business Advocate Act of 2016, as amended;
  4. H.R. 4168 – Small Business Capital Formation Enhancement Act;
  5. Concur in the Senate Amendment to H.R. 515 – International Megan’s Law to Prevent Child Exploitation and Other Sexual Crimes Through Advanced Notification of Traveling Sex Offenders;
  6. H.R. 400 – Trafficking Prevention in Foreign Affairs Contracting Act, as amended;
  7. S. 152 – Electrify Africa Act of 2015; and
  8. Concur in the Senate Amendment to H.R. 4188 – Coast Guard Authorization Act of 2015

On Tuesday, February 2, the House will meet at 10:00am for morning hour and at 12:00pm for legislative business. The House will consider:

  1. H.R. 3700 – Housing Opportunity Through Modernization Act of 2015, Rules Committee Print (Subject to a Rule);
  2. Complete Consideration of H.R. 3662 – Iran Terror Finance Transparency Act; and
  3. Consideration of the Veto Message on H.R. 3762 – Restoring Americans’ Healthcare Freedom Reconciliation Act of 2015

On Wednesday, February 3, the House will meet at 10:00am for morning hour and at 12:00pm for legislative business. The House will consider H.R. 1675 – Encouraging Employee Ownership Act of 2015, Rules Committee Print (Subject to a Rule).

On Thursday, February 4, the House will meet at 9:00am for legislative business, with last votes expected by 3:00pm. The House will consider H.R. 766 – Financial Institution Customer Protection Act of 2015, Rules Committee Print (Subject to a Rule)

No votes are expected in the House on Friday, February 5.

Congress Kicks Off Budget Process

Legislative Activity

Congress Kicks Off Budget Process

This week, the Congressional fiscal year (FY) 2017 budget process begins in earnest, as the House and Senate Budget Committees hold budget hearings and various committees mark up their “Views and Estimates.” While President Barack Obama will not release his budget until February 9, Congress is not waiting as they seek to speed up the budget and appropriations process this year with the goal of passing all twelve individual appropriations bills before FY 2017 begins on September 1.

The House Budget Committee will hold a “Members’ Day” hearing to gather input from Representatives and a hearing on the Congressional Budget Office’s budget and economic outlook. House Budget Committee Chairman Tom Price (R-GA) wants to stick with an accelerated schedule and is hoping to markup the House budget resolution by the end of February, allowing the House to consider the resolution on the floor early in March. The accelerated schedule would provide more time for the House and Senate to work out differences between their respective budget resolutions and to begin work on individual appropriations bills.

Other Congressional Committees will mark up their Views and Estimates to help guide the House and Senate Budget Committees as they draft their FY 2017 budget resolutions. The House’s Views and Estimates are due before the President’s budget is released, so while they will not provide an opportunity to respond to the President’s budget they do allow Committees to lay out their legislative agendas and budget priorities for the coming year. Senate Budget Committee Chairman Michael Enzi (R-WY) has asked Senate Committees to submit their Views and Estimates by February 22.

While Senate Majority Leader Mitch McConnell (R-KY) has said he wants to pass all twelve appropriations bills individually, it has been decades since Congress has accomplished that feat. However, top line numbers for FY 2017 were established in the recent budget agreement, which may facilitate the appropriations process.

This Week’s Hearings:

  • Wednesday, February 3: The Senate Budget Committee will hold a hearing on spending on unauthorized and expired programs.
  • Wednesday, February 3: The House Appropriations Committee, State, Foreign Operations, and Related Programs Subcommittee will hold an oversight hearing on “Assistance to Combat Wildlife Trafficking.”
  • Wednesday, February 3: The House Budget Committee will hold a “Members’ Day” hearing to allow Members to testify on policy priorities for the FY 2017 Budget Resolution.
  • Thursday, February 4: The House Budget Committee will hold a hearing on “The Congressional Budget Office’s Budget and Economic Outlook.”

Senate To Consider Amendments to Energy Bill; House To Examine Flint Water and COP 21; EPA Proposes New Oil and Gas Regulations

Legislative Activity

Comprehensive Energy Legislation

This week the Senate will continue its floor debate of S. 2012, the comprehensive energy bill that Energy and Natural Resources Committee Chairman Lisa Murkowski (R-AK) and Ranking Member Maria Cantwell (D-WA) authored. Under the open amendment process 130 amendments were filed.  While some of the non-controversial amendments were accepted last week, we anticipate the Senate to engage on the more controversial ones this week. There is also discussion of potentially authorizing funding in this bill for a fix for the lead in Flint, Michigan’s drinking water which is proving to be a controversial issue.

Water Resources

Congress is expected to assemble and pass another Water Resources Development Act (WRDA) bill this year, which would direct authorization and funding for water infrastructure and flooding prevention projects carried out by the U.S. Army Corps of Engineers. On Tuesday, February 2, the House Transportation and Infrastructure Committee will hold a hearing to discuss “Priorities for the Water Resources Development Act of 2016.”

Flint Drinking Water

On Wednesday, February 3, the House Committee on Oversight and Governmental Reform will hold a hearing to discuss potential federal intervention concerning the drinking water in Flint, Michigan.

Mining

On Wednesday, February 3, the Senate Environment and Public Works Committee will hold a hearing to examine the Department of the Interior’s Office of Surface Mining’s proposed Stream Protection Rule as it relates to the Endangered Species Act and the Clean Water Act.

COP 21

On Tuesday, February 2, the House Science, Space and Technology Committee will hold a hearing regarding the Paris Agreement on climate action – COP21.  The Committee will hear testimony from the U.S. Chamber of Commerce, The World Resources Institute and the Heritage Foundation, among others.

Regulatory Activity

Ozone

Of interest to municipal governments, the Clean Air Act requires the EPA to set National Ambient Air Quality Standards (NAAQS) for ozone and other pollutants. EPA has released its Integrated Science Assessment for Oxides of Nitrogen — Health Criteria 2016 Final Report which denotes the scientific basis the agency used to establish NAAQS. The report can be accessed here.

GHG Reporting

EPA has issued a proposed rule titled, “Greenhouse Gas Reporting Rule: Leak Detection Methodology Revisions and Confidentiality Determinations for Petroleum and Natural Gas Systems.” EPA is proposing to add new monitoring methods to detect leaks from oil and gas equipment in order to calculate GHG emissions from leaks. In addition, EPA is proposing additional reporting requirements for nine data elements. The proposed regulations are expected impact owners or operators of petroleum and natural gas systems that directly emit GHGs — specifically for pipeline transportation of natural gas; natural gas distribution; crude petroleum and natural gas extraction and natural gas liquid extraction. Comments are due February 29.

Oil and Gas Emissions

EPA is extending its public comment period on its “request information related to hazardous air pollutant emissions from sources in the oil and natural gas production, natural gas transmission and storage segments of the oil and natural gas sector.” Comments are now due March 11. 

Oil Spill Contingency Plans

EPA has issued a proposed rule to revise its “National Oil and Hazardous Substances Pollution Contingency Plan.” The main goal is to align requirements of the EPA’s Plan with the Department of Homeland Security’s National Response Framework and National Incident Management System. Comments are due March 25.

Puerto Rico, Fiduciary Rule At Front of Agenda; FSOC, OFR to Hold Fifth Annual Conference as SEC Considers Equity Market Structure Issues

Legislative Activity

Congress Turns Focus to Puerto Rico Debt Crisis

This week, House lawmakers are set to hold a hearing on Puerto Rico’s debt crisis, which is likely to kick off several weeks’ worth of debate on the matter. Importantly, in accordance with House leadership, lawmakers are expected to move legislation addressing the Commonwealth’s fiscal situation through the Natural Resources Committee – not the Judiciary Committee. As such, it is likely that the bill will focus on a financial control board (the subject of this week’s Natural Resources Committee hearing), not Chapter 9 protections, as the approach to resolving the situation in the Commonwealth. Such an approach would be similar to the one proposed by Senators Orrin Hatch (R-UT), Chuck Grassley (R-IA), and Lisa Murkowski (R-AK). Further, with House Speaker Paul Ryan (R-WI) having expressed a desire to address the issue by the end of March, we can expect increased debate and additional action on Puerto Rico in the coming weeks.

Lawmakers to Mark-Up Legislation Proposing Congressionally-Drafted Fiduciary Standard

Following the Department of Labor’s (DOL) submission last week of its Fiduciary Rule to the Office of Management and Budget (OMB), this week the House Education and the Workforce Committee will mark up twill bills seeking to “raise investment advice standards for the retirement industry to ensure financial advisers act in the best interests of their clients, while also ensuring low- and middle-income Americans have access to quality, affordable financial advice to help plan for retirement.”  Specifically, lawmakers will consider H.R. 4293, Affordable Retirement Advice Protection (ARAP) Act (amends ERISA) and H.R. 4294, Strengthening Access to Valuable Education and Retirement Support (SAVERS) Act (amends Internal Revenue Code). These bills would require an affirmative vote by Congress before DOL’s proposed rule would take effect. If Congress rejects the proposal, the bills set out a new fiduciary standard that would take effect and:

  • Require advisors to serve in their clients’ best interests;
  • Penalize advisors who take action that is not in their clients’ best interests; and
  • Require advisors to disclose key information to ensure that investors are fully-informed when making investment decisions

As for DOL’s proposal, OMB is expected to approve the rule by spring, after which DOL is expected to take additional steps to implement the final rule.

This Week’s Hearings:

  • Tuesday, February 2: The House Financial Services Committee will meet to discuss the Committee’s views and estimates on the budget for fiscal year 2017.
  • Tuesday, February 2: The House Financial Services Subcommittee on Oversight and Investigations will hold a hearing titled “Unsustainable Federal Spending and the Debt Limit.”
  • Tuesday, February 2: The House Education and the Workforce will mark-up:
    • H.R. 4293, Affordable Retirement Advice Protection (ARAP) Act (amends ERISA); and
    • H.R. 4294, Strengthening Access to Valuable Education and Retirement Support (SAVERS) Act
  • Tuesday, February 2: The House Natural Resources Subcommittee on Indian, Insular, and Alaska Native Affairs will hold a hearing titled “The Need for the Establishment of a Puerto Rico Financial Stability and Economic Growth Authority.”
  • Wednesday, February 3: The House Financial Services Task Force to Investigate Terrorism Financing will hold a hearing titled “Trading with the Enemy: Trade-Based Money Laundering is the Growth Industry in Terror Finance.”

Regulatory Activity

OFR, FSOC to Hold Fifth Annual Conference

On Friday, February 5, the Office of Financial Research (OFR) and the Financial Stability Oversight Council (FSOC) will hold their fifth annual conference, bringing together financial practitioners, researchers, and regulators to discuss emerging financial stability issues. There will be four panels:

  • “Orderly Resolution Around the World”;
  • “Stress Tests Beyond Banks”;
  • “Central Clearing for Repos in the United States”; and
  • “How Can Regulators Monitor and Adapt to Changing Market Structure?”

A webcast of the conference will be available here.

SEC to Hold Meeting of Equity Market Structure Advisory Committee

On Tuesday, February 2, the Securities and Exchange Commission (SEC) will hold a meeting of its Equity Market Structure Advisory Committee. The meeting, which is open to the public, will focus on the events of August 24, 2015, and certain issues affecting customers in the current equity market structure.

House to Consider Overriding President’s Veto of Reconciliation Legislation; CMS Releases Proposed Rule on ACOs and Issues Policy Changes Related to Home Health

Legislative Activity

House to Consider Overriding President’s Veto of Reconciliation Legislation

Following a postponement due to weather last week, House Majority Leader Kevin McCarthy (R-CA) has announced that on Tuesday, February 2, the House will consider the President’s veto message on H.R. 3762, the Restoring Americans’ Healthcare Freedom Reconciliation Act of 2015. The legislation seeks to repeal major portions of the Affordable Care Act; it passed the Senate on a 52-47 vote and the House on a 240-181 vote. The President issued his veto on January 8.

This Week’s Hearings:

  • Tuesday, February 2: The House Committee on Veterans’ Affairs Subcommittee on Health will hold a hearing titled “Choice Consolidation: Evaluating Eligibility Requirements for Care in the Community.”
  • Tuesday, February 2: The Senate Committee on the Judiciary Subcommittee on Antitrust, Competition Policy, and Consumer Rights will hold a hearing titled “License to Compete: Occupational Licensing and the State Action Doctrine.”
  • Wednesday, February 3: The House Committee on Oversight and Government Reform will hold a hearing titled “Examining Federal Administration of the Safe Drinking Water Act in Flint, Michigan.”
  • Wednesday, February 3: The House Committee on Agriculture Subcommittee on Nutrition will hold a hearing titled “To Review Incentive Programs Aimed at Increasing Low-Income Families’ Purchasing Power for Fruits and Vegetables.”
  • Wednesday, February 3: The House Committee on Armed Services Subcommittee on Military Personnel will hold a hearing titled “Military Treatment Facilities.”
  • Wednesday, February 3: The House Committee on Armed Services Subcommittee on Emerging Threats and Capabilities will hold a hearing titled “Outside Views on Biodefense for the Department of Defense.”
  • Wednesday, February 3: The Senate Committee on Indian Affairs will hold a hearing titled “Reexamining the Substandard Quality of Indian Health Care in the Great Plains.”
  • Thursday, February 4: The House Committee on Oversight and Government Reform will hold a hearing titled “Developments in the Prescription Drug Market: Oversight.”
  • Thursday, February 4: The House Committee on Energy and Commerce will hold a hearing titled “Examining Implementation of the Biologics Price Competition and Innovation Act.”
  • Thursday, February 4: The Senate Committee on Finance will hold a hearing on the nominations of Mary Wakefield to be Deputy Secretary of Health And Human Services, Andrew Eanes to be Deputy Commissioner of Social Security, and Elizabeth Copeland and Vik Stoll to be judges of the U.S. Tax Court.

Regulatory Activity

CMS Releases Proposed Rule on ACOs

On Thursday, January 28, the Centers for Medicare and Medicaid Services (CMS) released a proposed rule titled “Medicare Program; Medicare Shared Savings Program; Accountable Care Organizations – Revised Benchmark Rebasing Methodology, Facilitating Transition to Performance-Based Risk, and Administrative Finality of Financial Calculations.” Among other provisions, this proposed rule seeks to change the Medicare Shared Savings Program’s benchmark rebasing methodology to better reward Accountable Care Organizations’ (ACOs’) investment in care coordination and quality improvement. According to CMS, the Shared Savings Program includes 434 ACOs, which serve more than 7.7 million Medicare beneficiaries across the country.

The proposed rule will be published in the Federal Register on February 3, and comments are due March 28.

CMS Issues Policy Changes Related to Home Health

On Wednesday, January 27, CMS issued a final rule titled “Medicaid Program; Face-to-Face Requirements for Home Health Services; Policy Changes and Clarifications Related to Home Health.” In addition to other changes, the rule now requires physicians to document face-to-face encounters with Medicaid beneficiaries within specified timeframes prior to ordering home health care. Such documentation will also be required for physicians or certain authorized non-physician practitioners to order certain medical equipment for home health services.

The final rule is effective on July 1.

Senate Panel to Consider Changes to Investment Visa Program

Legislative Activity

Senate Panel to Consider Changes to Investment Visa Program

This week, the Senate Judiciary Committee will hold a hearing to consider changes to the EB-5 Regional Center Program.  This program is designed to bolster the U.S. economy by incentivizing investment by foreign individuals.  So-called “regional centers” pool EB-5 funds for investment in projects.  In return for investing and creating eligible jobs within the United States, these investors or their spouses and unmarried children under 21 become eligible to apply for a green card.

The FY 2016 omnibus appropriations measure passed by Congress at the end of 2015 extended the EB-5 Regional Center Program for the remainder of the Fiscal Year.  However, lawmakers are currently debating whether to overhaul the program in light of what some argue is a need to better protect against potential abuse, refocus investment in areas that need it most, and increase the minimum levels of investment required to participate in the program.  Senator Chuck Grassley (R-IA), Chairman of the Senate Judiciary Committee, delivered remarks on the Senate floor late last week objecting to S. 2415, the EB-5 Integrity Act of 2015, which he alleged would not go far enough to reform the EB-5 program.  Senator Grassley voiced his continued support for S. 1501, the American Job Creation and Investment Promotion Reform Act of 2015, legislation he cosponsored with Committee Ranking Member Patrick Leahy (D-VT) to overhaul the visa program and that he claimed was similar to, but more stringent than, S. 2415.  He lamented the time that had passed without reforming the EB-5 program, stating “I am not so sure reforms are possible anymore.  It may be time to do away with it completely.”

The Tuesday hearing will include witnesses from U.S. Citizenship and Immigration Services (USCIS) and the U.S. Securities and Exchange Commission (SEC).  The USCIS is responsible for administering the program, while the SEC announced a series of enforcement actions at the end of 2015 targeting attorneys offering EB-5 investments though not registered to act as brokers.

This Week’s Hearings:

  • Tuesday, February 2: The House Homeland Security Subcommittee on Transportation Security will hold a hearing titled “Assessing TSA’s Management and Implementation of the Screening Partnership Program.”
  • Tuesday, February 2: The Senate Homeland Security and Governmental Affairs Committee will hold a hearing titled “Frontline Response to Terrorism in America.”
  • Tuesday, February 2: The Senate Judiciary Committee will hold a hearing titled “The Failures and Future of the EB-5 Regional Center Program: Can It Be Fixed?”
  • Wednesday, February 3: The House Homeland Security Committee will hold a hearing titled “Crisis of Confidence: Preventing Terrorist Infiltration through U.S. Refugee and Visa Programs.”
  • Wednesday, February 3: The Senate Homeland Security and Governmental Affairs Committee will hold a hearing titled “Canada’s Fast-Track Refugee Plan: Unanswered Questions and Implications for U.S. National Security.”
  • Thursday, February 4: The House Judiciary Subcommittee on Immigration and Border Security will hold a hearing titled “Another Surge of Illegal Immigrants Along the Southwest Border: Is This the Obama Administration’s New Normal?”

Washington Seeks to Protect the Homeland from the Rapidly Spreading Zika Virus; Ambassador Froman Heads to the TPP Signing Ceremony; Safe Harbor Negotiators Fail to Meet EU Deadline

Historic snowfall levels kept the U.S. Federal Government from officially reopening until Wednesday of last week.  President Barack Obama, however, met the day before with his health and national security teams to discuss the rapid spread of Zika and other mosquito-borne viruses in the Americas and steps being taken to protect U.S. citizens.  The President met Friday with U.S. companies and trade associations to discuss the Trans-Pacific Partnership (TPP) deal, ahead of this week’s TPP signing ceremony in New Zealand.

The House of Representatives (“the House”) opted to delay legislative business until this week, though some House Committees proceeded last week with scheduled hearings.  The Senate reconvened last Wednesday for legislative and Committee work and will be in session this week.

The Iowa Caucuses for Republican and Democratic presidential contenders are scheduled for today and are expected to capture the attention of Washington next week, kicking off the presidential primaries in the United States.

U.S. Mobilizes Against the Zika Virus

Last Tuesday, President Obama was briefed on the potential economic and developmental impacts of the Zika virus spreading in the Western Hemisphere.  The President emphasized the need to accelerate research efforts to make available better diagnostic tests, to develop vaccines and therapeutics, and to ensure that all Americans have information about the Zika virus and steps they can take to better protect themselves from infection.  With the President due to release his Fiscal Year (FY) 2017 Budget request on 9 February, some accounts will likely be bolstered to account for a U.S. response to Zika.

The Centers for Disease Control (CDC) has issued travel advisories for those countries with active Zika virus transmissions and guidance for domestic health care providers caring for pregnant women.  There have been reports that pregnant women infected by Zika may have an increased chance of giving birth to babies with microcephaly, a congenital condition leading to abnormally small brains that causes life-long neurological complications.  Meanwhile, Brazil, which has had a high number of Zika infections, is due to host the 2016 Summer Olympics and may find its tourism industry – as will other countries with active Zika virus transmissions – negatively impacted by this latest global pandemic.  President Obama spoke Friday with Brazilian President Dilma Rousseff of shared concerns over the spread of the Zika virus in the Western Hemisphere.  Both agreed collaborative efforts are needed to advance research and accelerate work to develop better vaccines and other technologies to control the virus.

According to the CDC, 31 cases have been confirmed in the continental United States, all individuals who had traveled to affected areas. Another 20 cases were confirmed in U.S. territories – Puerto Rico and the U.S. Virgin Islands.  Of these confirmed cases, it is unknown how many were pregnant women.

Congress is also taking note of the Zika threat, with the leaders of the Senate Homeland Security Committee writing and asking CDC Director Thomas Frieden and Department of Homeland Security Secretary Jeh Johnson last week to examine the threat the Zika virus poses and to share the plan to protect the United States.  Senator Jeanne Shaheen (D-New Hampshire), who is a Member of the Senate Foreign Relations Committee, also wrote a letter to the Secretaries of State, Health and Human Services and Homeland Security, urging them to quickly notify Congress of what resources they need to combat the spread of Zika and protect U.S. citizens.

The World Health Organization (WHO) is expected to convene an International Health Regulations Emergency Committee in Geneva, Switzerland, today regarding the Zika virus and the observed increase in neurological disorders and neonatal malformations.  The Committee is charged with ascertaining whether the outbreak constitutes a Public Health Emergency of International Concern.

TPP Developments – Signing Ceremony on Thursday in New Zealand

Last Monday, New Zealand released the final legal text of the TPP deal, replacing the preliminary text released on 5 November.  Ahead of the scheduled TPP signing ceremony in New Zealand this Thursday, Akira Amari, Japan’s Economy Minister and lead TPP negotiator, announced his resignation last week at a press conference in Tokyo, amid corruption allegations.  Japanese Prime Minister Shinzō Abe reiterated that Amari’s resignation would not impact the deal.   On 29 January, President Obama empowered U.S. Trade Representative (USTR) Michael Froman to sign the deal on behalf of the United States.  USTR Froman is scheduled to travel this week to New Zealand.

U.S. companies and trade associations were invited to the White House for a Friday meeting on the TPP deal.  Many expected this meeting was President Obama’s latest effort to rally the U.S. business community’s support to join in advocating for early congressional passage of the agreement.  The business community has instituted a nascent coordinated effort to build support in Congress for the TPP, while also advocating for improvements to the deal.  A full-fledged lobbying effort has not commenced, which many attribute to statements by Senate Majority Leader Mitch McConnell (R-Kentucky) and other Republican leaders making clear that they do not want a vote on TPP prior to the November election.  Senate Republicans are seeking to avoid jeopardizing those Senators facing close races and prefer that a TPP vote occur in the “lame duck” congressional session, which begins after the November elections.  Earlier in the week, President Obama met with Democratic congressional leaders at the White House to discuss “shared legislative priorities for the year ahead.”  TPP was not among the priorities discussed.

House Ways and Means Committee Chairman Kevin Brady (R-Texas) announced on Friday the names of those private sector individuals who will testify before the panel’s first 2016 hearing, “Reaching America’s Potential: Delivering Growth and Opportunity for All Americans” on Tuesday, 2 February.  President Obama is scheduled to meet Tuesday with Senate Majority Leader Mitch McConnell and House Speaker Paul Ryan to discuss legislative priorities and potential areas for cooperation over the coming months.

Data Privacy – Senate Possibly Complicates Safe Harbor Negotiations

Last Thursday, the Senate Judiciary Committee approved the Judicial Redress Act (H.R. 1428), including a provision not contained in the House-passed version.  The new Senate provision, which could complicate the ongoing Safe Harbor negotiations between the United States and the EU, adds further requirements to the extension of privacy rights to foreign citizens, but also provides U.S. regulators with considerable flexibility to assert that certain commercial data transfers do not accord with U.S. national security interests.

Meanwhile the EU deadline of Sunday, 31 January passed with no final agreement on a new Safe Harbor deal.   EU data authorities are scheduled to publish their own judgment on data transfers between the two regions on Wednesday. 

TTIP Developments

The White House announced last Friday that President Obama will host Italian President Sergio Mattarella on 8 February.  The economic situation in Europe, the migration crisis and the Transatlantic Trade and Investment Partnership (TTIP) are expected to be on the agenda.  The Obama Administration continues to state its intentions to try and conclude negotiations before the end of this year, an admittedly ambitious timeline.

  • On Wednesday, the Senate Foreign Relations Committee is expected to hold a hearing titled, “Strains on the European Union: Implications for American Foreign Policy.”  Individuals from the private sector are scheduled to testify.

U.S. Cuba Sanctions – New Restrictions Eased

Last Tuesday, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) and the Department of Commerce’s Bureau of Industry and Security (BIS) announced new amendments to the Cuban Assets Control Regulations (CACR) and Export Administration Regulations (EAR), respectively.  Treasury Secretary Jack Lew said the latest action “sends a clear message to the world: the United States is committed to empowering and enabling economic advancements for the Cuban people.”  The announcement includes the removal on some restrictions, such as on payment and financing terms for authorized exports and re-exports, except for agricultural commodities and agricultural items.  U.S. depository institutions are also authorized to provide financing.

Iran – Tension Remains

Despite the rolling back of sanctions, in accordance with the Joint Comprehensive Plan of Action (JCPOA), tension between the United States and Iran remains intact.  The State Department issued a new travel warning on Friday, reiterating the risk of arrest and detention of U.S. citizens, particularly dual national Iranian-Americans, in Iran.  The warning notes that “various elements” in Iran remain hostile to the United States.  Iranian state-run television reported last week that an unarmed drone flew over a U.S. aircraft carrier on 12 January and took photographs during a naval drill in the Gulf.  The incident apparently occurred the same day that Iran briefly detained 10 U.S. soldiers and was just before Implementation Day.

The House is scheduled to complete consideration of H.R. 3662 on Tuesday.  The bill seeks to block the Obama Administration from lifting sanctions against certain individuals or banks without certification that they do not support terrorism, the Iranian Revolutionary Guard Corps, or Iran’s alleged proliferation of weapons of mass destruction.

Syria – Combatting ISIL

Last Thursday, House Foreign Affairs Committee Chairman Ed Royce (R-California) and Ranking Member Eliot Engel (D-New York) issued a statement ahead of the Geneva talks on Syria, saying:

“The Syrian High Negotiating Committee represents the long-silenced voice of the Syrian people, and it deserves our full and unqualified support.  This crisis has cost far too many innocent lives.  … That’s why it’s so important Russia support implementation of the U.N. resolution – for which it voted – to achieve a ceasefire.”

Secretary of State John Kerry and Russian Foreign Minister Sergei Lavrov have reportedly agreed to evaluate progress in the Geneva talks during the next meeting of the International Syria Support Group on 11 February.

  • On Wednesday, 3 February, the Senate Armed Services Subcommittee on Emerging Threats is scheduled to receive a closed briefing titled, “Counterterrorism Strategy: Understanding ISIL.”
  • Also on Wednesday, the House Homeland Security Committee is scheduled to hold a hearing titled, “Crisis of Confidence: Preventing Terrorist Infiltration through U.S. Refugee and Visa Programs.”

Russia/Ukraine

According to Russian Foreign Minister Sergei Lavrov, France and Germany may hold talks with Russia and Ukraine on 8 February, yet another attempt to find a path forward to resolving the conflict in Eastern Ukraine.  Many have speculated that Secretary of State John Kerry’s statements at Davos hinted at a softening of the U.S. position toward Russia, particularly in light of the spread of ISIL to Libya, beyond Syria.  Some also expect the EU unity needed for maintaining sanctions is weakening.

North Korea – Sanctions Legislation Advances to the Senate Floor

The Senate Foreign Relations Committee (SFRC) marked up a bill last week related to new U.S. sanctions against North Korea. The SFRC passed a bipartisan Gardner-Menendez bill that would expand and tighten enforcement of sanctions for North Korea’s nuclear and ballistic missile development and other destructive activities of the Kim regime. The legislation was offered as a substitute amendment to North Korea legislation (H.R.757) approved by the House of Representatives earlier this year.

Africa – Electrify Africa Bill Expected to Pass House

On Monday, 1 February, the House is scheduled to take up and pass the Senate-passed Electrify Africa bill (S. 2152) when it reconvenes, sending the measure forward to President Obama for signature into law.

Last week, Ambassador Froman chaired a USTR-sponsored hearing on policy recommendations for deepening the U.S.-Africa trade and investment relationship.  Ambassador Froman observed,

“The United States has FTAs with 20 countries today, compared to 3 in 2000; though none with sub-Saharan Africa.”

He further recognized that African countries are advancing regional integration through regional economic communities and the Tripartite and African Continental Free Trade Area initiatives.  Ambassador Froman ultimately noted that beyond African Growth and Opportunity Act (AGOA) the U.S. Congress is looking for a path to more permanent, reciprocal trade arrangement.   Senators Johnny Isakson (R-Georgia) and Chris Coons (D-Delaware) also provided remarks.

  • On Wednesday, 3 February, the House Appropriations Subcommittee on State-Foreign Operations is scheduled to hold an oversight hearing on U.S. assistance in combatting wildlife trafficking.

FY 2017 National Defense Authorization Act

Unnamed sources reported last week that the House Armed Services Committee (HASC) plans to mark up its FY 2017 National Defense Authorization Act on Wednesday, 27 April.  This lengthy annual measure authorizing defense programming will likely be considered by the HASC’s six subcommittee one week prior, with consideration by the full chamber to follow in mid-May.

Heritage Foundation to Release Economic Freedom Report

Also today, the Heritage Foundation will release its annual Index of Economic Freedom   House Ways and Means Committee Chairman Brady is expected to provide the keynote remarks at the public release of the report.

Other Congressional Hearings This Week:

  • On Tuesday, 2 February, the Senate Armed Services Committee is scheduled to hold a hearing titled, “Implementation of the Decision to Open All Ground Combat Units to Women.”
  • On Tuesday, 2 February, the House Armed Services Committee is scheduled to hold a hearing titled, “Afghanistan in 2016: The Evolving Security Situation and U.S. Policy, Strategy, and Posture.”
  • On Tuesday, 2 February, the Senate Homeland Security Committee is scheduled to hold a hearing titled, “Frontline Response to Terrorism in America.”
  • On Wednesday, 3 February, the House Foreign Affairs Subcommittee on Europe, Eurasia and Emerging Threats is scheduled to hold a hearing titled, “Turkey: Political Trends in 2016.”
  • On Wednesday, 3 February, the Senate Armed Services Committee is scheduled to hold a hearing titled, “An Independent Perspective of U.S. Defense Policy in the Asia-Pacific Region.”
  • On Wednesday, 3 February, the House Armed Services Committee is scheduled to hold a hearing titled, “Acquisition Reform: Starting Programs Well.”
  • On Wednesday, 3 February, the Senate Homeland Security Committee is scheduled to hold a hearing titled, “Canada’s Fast-Track Refugee Plan: Unanswered Questions and Implications for U.S. National Security.”
  • On Wednesday, 3 February, the House Armed Services Committee is scheduled to hold a hearing titled, “Military Treatment Facilities.”
  • On Wednesday, 3 February, the House Armed Services Committee is scheduled to hold a hearing titled, “Outside Views on Biodefense for the Department of Defense.”
  • On Thursday, 4 February, the Senate Armed Services Committee is scheduled to examine the situation in Afghanistan.
  • On Thursday, 4 February, the House Armed Services Committee is scheduled to hold a hearing titled, “Naval Strike Fighters: Issues and Concerns.”

Looking Ahead

Washington is expected to focus on the following upcoming events:

  • 4 February: TPP Signing Ceremony in New Zealand
  • 4 February:  President Obama hosts Colombian President Juan Manuel Santos
  • 8 February: President Obama hosts Italian President Sergio Mattarella
  • 9 February: President Obama releases the FY 2017 Budget Request
  • 15-16 February: President Obama hosts the ASEAN leaders in California
  • 10 March: President Obama hosts Canadian Prime Minister Justin Trudeau
  • 31 March – 1 April: United States hosts the Nuclear Security Summit in Washington
  • Late April: President Obama attends the Hannover Messe in Germany
  • 8-9 July: NATO Summit in Warsaw, Poland

Tax-Writers Ponder Path Forward for 2016; U.S., EU Move Forward with BEPS Implementation

Legislative Activity

House Tax Writers to Hold Retreat as Senator Hatch Hatches His Own Plan for Reform

After being delayed due to winter weather, the House Ways and Means Committee is set to hold its retreat this week. As expected, the retreat will afford Republican tax-writers an opportunity to flesh out their agenda for the year, which is likely to include a focus on international tax reform and the Organisation for Economic Co-operation and Development’s (OECD) Base Erosion and Profit Shifting (BEPS) Project. Though Chairman Kevin Brady (R-TX) has indicated that he wants input from Committee members in determining their exact path forward, he has also made clear “[w]e’re advancing tax reform, one or more ways, in 2016… good tax policy is going to blossom, and we’re going to have a chance to give [tax reform] oxygen over 2016 and 2017.” Still, while we will know more following the retreat, Speaker Paul Ryan (R-WI) has suggested that, in general, he wants to “go big on ideas,” but may ultimately not hold votes on significant legislation in 2016.

On the Senate side, Finance Committee Chairman Orrin Hatch (R-UT) recently indicated that he intends to move forward in the next few weeks with a tax reform bill aimed at addressing double corporate taxation. While there are few details publicly available (and the legislation is still being drafted), it appears that he intends to offer companies a deduction for money paid to shareholders as dividends. Chairman Hatch has suggested that such legislation would also be helpful in slowing the rate of inversions, as it would take away some of the incentive that corporations have to leave the U.S. According to a Finance Committee spokesperson, “[i]f done right, corporate integration has the potential to significantly reduce effective tax rates, reduce incentives to move businesses offshore for tax purposes, and encourage more investment here at home.”

This Week’s Hearings:

  • Tuesday, February 2: The House Ways and Means Committee will hold a hearing titled “Reaching America’s Potential: Delivering Growth and Opportunity for All Americans.”

Regulatory Activity

U.S., EU Move Forward with CbyCR Implementation

Following the release last year by the OECD of its final BEPS reports, various countries have already begun taking steps to implement certain actions called for in the BEPS Project into their domestic law, with much of the initial focus being on country-by-country reporting (CbyCR). Notably, following-up on Treasury’s CbyCR regulations released last year, Bob Stack, U.S. Deputy Assistant Treasury Secretary for International Tax Affairs, recently emphasized that the U.S. intends to enter into such bilateral agreements “with appropriate countries that have also adopted country-by-country reporting provisions, have appropriate safeguards and infrastructure in place, and with respect to which the U.S. has an income tax treaty or tax information exchange agreement in effect.”

More broadly, the European Commission (EC) has indicated that, in addition to regulations being implemented by its member states, an EC version of CbyCR is also appropriate. As such, on Thursday, January 28, the EC released a proposal that a prior directive be expanded to require “mandatory automatic exchange of country-by-country reports between Member states.” However, any such action would first require unanimous approval by all EU member states before taking effect.

Treasury to Hold Borrowing Advisory Committee Meeting

On Tuesday, February 2, the Treasury Borrowing Advisory Committee of The Securities Industry and Financial Markets Association will meet in closed session. The agenda for the meeting provides for a charge by the Secretary of the Treasury or his designate that the Committee discuss particular issues and conduct a working session. Following the working session, the Committee will present a written report of its recommendations. Treasury staff will provide a technical briefing to the press on the day before the Committee meeting, following the release of a statement of economic conditions and financing estimates. This briefing will give the press an opportunity to ask questions about financing projections. The day after the Committee meeting, Treasury will release the minutes of the meeting, any charts that were discussed at the meeting, and the Committee’s report.

FAA Reauthorization Coming Into Focus

Legislative Activity

FAA Reauthorization Coming Into Focus

House Transportation and Infrastructure Committee Chairman Bill Shuster (R-PA) is expected to release a draft Federal Aviation Administration (FAA) Reauthorization bill soon, and it could be as early as this week. The current six-month FAA Reauthorization extension expires on March 31. Senate Commerce, Science, and Transportation Committee Chairman John Thune (R-SD) has said the Senate will wait for the House to consider its FAA Reauthorization first before taking up the Senate’s own bill.

The main sticking point now is Chairman Shuster’s plan to reform air traffic control (ATC), removing it from the federal government and creating a separate non-profit entity. Supporters of this approach to ATC reform argue it will protect ATC from the annual appropriations process, increase efficiency, and lead to better performance in safety, modernization, and NextGen implementation. A variety of groups oppose ATC reform, including the general aviation community and many Congressional Democrats. Recently, House Transportation and Infrastructure Committee members Elijah Cummings (D-MD) and Eleanor Holmes Norton (D-DC) joined consumer advocacy groups to form a coalition opposed to ATC reform, Americans Against Air Traffic Privatization. Additionally, last week the leadership of the Senate Appropriations Committee sent a bipartisan letter to the Senate Commerce Committee opposing any proposal that would exempt ATC from the annual appropriations process, including Chairman Shuster’s proposal. House Transportation and Infrastructure Committee Ranking Member Peter DeFazio (D-OR) has publicly supported moving ATC out of the FAA, but keeping it as a government-controlled entity to maintain worker protections.

While both Chairman Shuster and Chairman Thune have said they want to pass FAA Reauthorization before the current extension expires on March 31, Congress may need to pass another short-term extension to allow time to work out differences between the House and Senate reauthorization bills. The last multi-year FAA reauthorization required 23 short-term extensions before it was passed in 2012, but the recent five-year surface transportation reauthorization provides some reason for optimism that Congress will be able to reach an agreement on a long-term FAA Reauthorization bill as well.

This Week’s Hearings:

  • Tuesday, February 2: The House Judiciary Committee, Courts, Intellectual Property, and the Internet Subcommittee will hold a hearing on H.R. 1057, the “Promoting Automotive Repair, Trade, and Sales (PARTS) Act of 2015.”
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