State Attorneys General February 20 Update

Squire Patton Boggs’ State Attorneys General Practice Group is comprised of lawyers who have served at senior levels in state AG offices around the country and whose practices focus, to one degree or another, on representing clients before these increasingly assertive and powerful, yet often overlooked, government agencies, as explained in detail here.

In these updates, we will call attention to the most noteworthy state AG news or developments emerging in the previous week.

Litigation

Illinois AG Lisa Madigan has announced a settlement with BNSF Railway Company to “resolve[] environmental concerns that arose in 2015 when a BNSF train derailed, spilling a large amount of crude oil that ignited near Galena, Ill.,” according to an Illinois AG Press Release. The Press Release states that “[f]ollowing the spill, Madigan’s office obtained an agreed court order to require BNSF to clean up the crash site and monitor it for crude oil contamination,” and BNSF spent “more than $10.5 million, including reimbursements to state and local authorities for costs incurred,” to “clean up the site.” BNSF also continued to monitor the site, “spent approximately $50,000 to repair unrelated storm damage” at the request of the city of Galena, and agreed to pay “$50,000 in civil penalties,” according to the Press Release.

Texas AG Ken Paxton has announced that his office, along with the Texas Commission on Environmental Quality, has filed petitions with the US Courts of Appeals for the Fifth and D.C. Circuits “asking the courts to review the Environmental Protection Agency’s (EPA) Final Rule regarding air quality standards for sulfur dioxide,” according to a Texas AG Press Release. The Press Release states that “[i]n making the sulfur dioxide air quality designations for Texas, EPA ignored the State of Texas’ recommended designations for these areas—designations that were made based on actual monitoring results,” and the EPA instead relied on “third-party modeling information.” The EPA’s approach had the effect of “essentially ignoring [Texas’] statutory role in the air quality designation process established by the federal Clean Air Act,” according to the Press Release. AG Paxton issued a statement that: “[t]his Rule requires expensive and excessive restrictions that will damage not only our economy, but the livelihood of citizens across the state with little to no effect on the environment.”

Regulation

On February 15, Maryland’s state legislature enacted a resolution to give “Maryland’s attorney general broad authority to bypass the governor and sue the federal government on a range of issues, an unprecedented expansion of power for the office,” according to an article in the Baltimore Sun. The article states that the bill – the Maryland Defense Act of 2017 – “allows Democratic Attorney General Brian E. Frosh to challenge the administration of Republican President Donald J. Trump without first obtaining approval from Republican Gov. Larry Hogan or the Democrat-led General Assembly” on certain issues. Prior to the resolution, “the governor and [the Maryland] General Assembly reserved the right to decide when to sue the federal government,” according to the article. The resolution “allows [AG] Frosh to initiate a lawsuit against the government for a long list of action or inaction that the attorney general deems an infringement of Marylanders’ rights to health care, civil liberties, economic security, environment, immigration or international travel.” The article notes that “[AG] Frosh had sought [Governor] Hogan’s permission to challenge the constitutionality of Trump’s travel ban,” however, “[t]he governor did not respond to the request.” Maryland lawmakers are also “weighing whether to give Frosh’s office an additional $1 million a year and five more attorneys to fight the federal government,” a proposal Maryland lawmakers say is “modeled” on Oklahoma AG Scott Pruitt’s “Federalism Unit,” a “five-attorney unit” that Pruitt created in 2010 to “challenge federal regulations, [including] to sue the Environmental Protection Agency repeatedly,” according to the article.

Advocacy

New York AG Eric Schneiderman is leading a coalition of 10 states that have sent a letter to Senators Mitch McConnell and Charles Schumer “strongly urging opposition to the Commercial Vessel Incidental Discharge Act, legislation that would dramatically weaken clean water protections by preventing New York and other states from limiting the discharge of biological pollution by commercial shipping vessels into their waters,” according to a New York AG Press Release. According to the Press Release, the bill would “take the radical step of exempting these discharges from the federal Clean Water Act.” AG Schneiderman issued a statement that: “[t]his legislation would undercut the independence of states in fighting harmful biological pollution from commercial shipping, which causes serious damage to our environment and our economy in New York.”

Senate to Vote on Mnuchin, Shulkin, and McMahon

Senate Legislative Activity

The Senate stands adjourned until 12:00pm today, February 13. Following any Leader remarks, the Senate will enter Executive Session and resume consideration of the nomination of Steven Mnuchin to be Secretary of the Treasury. There are seven hours of post-cloture debate time remaining. Upon the use or yielding back of time, the Senate will vote on the confirmation of Mnuchin and David Shulkin, nominated to be Secretary of Veteran Affairs.  On Tuesday, February 14, at around 11:00am, the Senate is expected to vote on the confirmation of Linda McMahon, nominated to be the Administrator of the Small Business Administration.

House Legislative Activity

Today, the House will meet at 12:00pm for morning hour and 2:00pm for legislative business. Votes will be postponed until 6:30pm.  The following legislation will be considered under the suspension  of the rules:

  1. H.R. 609 – To designate the Department of Veterans Affairs health care center in Center Township, Butler County, Pennsylvania, as the “Abie Abraham VA Clinic” (Sponsored by Rep. Mike Kelly / Veterans Affairs Committee)
  2. H.R. 512 – WINGMAN Act, as amended (Sponsored by Rep. Ted Yoho / Veterans Affairs Committee)
  3. H.R. 244 – HIRE Vets Act, as amended (Sponsored by Rep. Paul Cook / Veterans Affairs Committee)
  4. H.R. 974 – BRAVE Act (Sponsored by Rep. Kathleen Rice / Veterans Affairs Committee)

On Tuesday, February 14, the House will meet at 10:00am for morning hour and 12:00pm for legislative business.

  1. H.R. 428 – Red River Gradient Boundary Survey Act (Subject to a Rule) (Sponsored by Rep. Mac Thornberry / Natural Resources Committee)

On Wednesday, February 15, the House will meet at 10:00am for morning hour and 12:00pm for legislative business.

On Thursday, February 16, the House will meet at 10:00am for morning hour and 12:00pm for legislative business.

On Friday, February 17, the House will meet at 9:00am for legislative business. Last votes expected no later than 3:00pm.

  1. H.J.Res. 42 – Disapproving the rule submitted by the Department of Labor relating to drug testing of unemployment compensation applicants (Subject to a Rule) (Sponsored by Rep. Kevin Brady / Ways and Means Committee)
  2. H.J.Res. 66 – Disapproving the rule submitted by the Department of Labor relating to savings arrangements established by States for non-governmental employees (Subject to a Rule) (Sponsored by Rep. Tim Walberg / Education and the Workforce Committee)
  3. H.J.Res. 67 – Disapproving the rule submitted by the Department of Labor relating to savings arrangements established by qualified State political subdivisions for non-governmental employees (Subject to a Rule) (Sponsored by Rep. Francis Rooney / Education and the Workforce Committee)
  4. H.J.Res. 69 – Providing for congressional disapproval under chapter 8 of title 5, United States Code, of the final rule of the Department of the Interior relating to Non-Subsistence Take of Wildlife, and Public Participation and Closure Procedures, on National Wildlife Refuges in Alaska (Subject to a Rule) (Sponsored by Rep. Don Young / Natural Resources Committee)
  5. H.J.Res. 43 – Providing for congressional disapproval under chapter 8 of title 5, United States Code, of the final rule submitted by Secretary of Health and Human Services relating to compliance with title X requirements by project recipients in selecting subrecipients (Subject to a Rule) (Sponsored by Rep. Diane Black / Energy and Commerce Committee)

Sources:  www.democrats.senate.gov; http://www.majorityleader.gov/

State Attorneys General February 13 Update

Squire Patton Boggs’ State Attorneys General Practice Group is comprised of lawyers who have served at senior levels in state AG offices around the country and whose practices focus, to one degree or another, on representing clients before these increasingly assertive and powerful, yet often overlooked, government agencies, as explained in detail here.

In these updates, we will call attention to the most noteworthy state AG news or developments emerging in the previous week.

Litigation

A February 6 article in The New York Times, How Attorneys General Became Democrats’ Bulwark Against Trump (link), discusses how, with “Republicans in control of the White House and Congress, Democrats have increasingly looked to the states both to challenge Mr. Trump’s policies and to enforce federal regulations, including on business and the environment, that is administration may ignore.” Democratic state attorneys general have “gear[ed] up to play a larger role in national politics,” and several AGs have “cited as an inspiration the long-running legal war waged against the Obama administration by Republican attorneys general, who derailed key White House policies on immigration and nearly voided the Affordable Care Act,” according to the article. The article notes, for example, how the Trump Administration’s immigration executive order “spurred swift legal actions from five states in four federal courts,” including a suit from Washington AG Bob Ferguson in which “a federal judge’s ruling . . . froze, at least temporarily, the carrying out of a travel ban.” On February 9, a three-judge panel of the US Court of Appeals for the Ninth Circuit denied the government’s emergency request to reinstate the “travel ban,” according to a CNN report.

New York AG Eric Schneiderman has announced settlements with two mobile application (“app”) developers for “their failure to disclos[e] their data collection practices in a privacy policy,” according to a press release. The New York AG notes in the press release that the purpose of a privacy policy is to “inform users about what, if any, personal information is collected, used and disclosed in the use of a product or service,” and states that “failure to disclose how a company collects, uses and discloses customers’ personal information in a privacy policy is a deceptive trade practice” under New York state law. Under the settlement, the companies “agreed to clearly inform users in a privacy policy about their policies and procedures with respect to user information,” according to the press release, which notes that the New York AG “did not find that these developers misused their customers’ personal information or disclosed it to third parties.”

Florida AG Pam Bondi has announced federal court approval of proposed consent judgments that “resolve allegations that the defendant [Florida-based] debt relief companies targeted individuals deeply in debt with promises of lower credit card payments and substantial savings and collected upfront fees for the promised services, but never delivered on those services or provided refunds,” according to a news release. According to the news release, the defendant debt relief companies “allegedly worked with payment processors to create more than two dozen shell merchants to process credit card payments,” and “allegedly created these fake businesses to act as fronts and launder the illegal transactions, ultimately taking more than $12 million from consumers.” Under the settlement, the debt relief service companies are “permanently banned from conducting outbound telemarketing and selling or advertising any debt relief product or service,” and the payment processors are “permanently banned from the payment processing industry,” among other remedies, according to the news release.

House Agriculture Committee to Debate SNAP Purchase Restrictions

Legislative Activity

House Agriculture Committee to Debate SNAP Purchase Restrictions

This week, the House Agriculture Committee will hold a hearing to explore the effects of restricting certain purchases for Supplemental Nutrition Assistance Program (SNAP) recipients. The committee will hear from five witnesses representing varied backgrounds. The witnesses are said to represent the American Enterprise Institute, Brookings Institution, the Dyson School at Cornell University, the Food Marketing Institute, and the Food Trust.

As with any diverse group discussing a contentious topic, Thursday’s hearing will undoubtedly unearth a wide range of emotional pleas from committee members. Nearly all liberal-leaning members oppose SNAP restrictions of any kind. They raise a worthy point; many SNAP recipients reside in areas called “food deserts,” which are residential areas without access to a full-service grocery store. Food deserts affect urban and rural recipients alike, typically being defined as areas more than one mile away from a grocery store for urban residents, and more than ten miles away for rural residents. These areas often contain small corner markets or convenience stores, which carry significantly less fresh food items, and many more pre-packaged, boxed, or canned goods – goods typically categorized as less nutritious than certain items available at full-service grocery stores. Members argue that any restrictions on purchases further limit the food available to recipients.

On the other hand, although they may support the merits of SNAP, some fiscally conservative-minded members oppose taxpayer-funded SNAP benefits from being used to buy “unhealthy” foods and drinks, such as candy, “junk food,” soda, or other sugar-laden beverages. They argue that the ability to use benefits on these types of foods and drinks are increasing the burden on taxpayers through the rising healthcare costs associated with obesity, diabetes, and other diet-related illnesses.

It should be expected that some members will bypass the emotional sides of the argument altogether to touch on the more technical side of the issue. What defines “junk food?” What agency would be responsible for categorizing each of the thousands of food items currently available at corner markets, convenience stores, or grocery stores? How would the responsible agency properly keep pace with the tens of thousands of new food items available each year? How would small grocery stores afford to upgrade outdated systems to remain compliant, and what would that “tracking” system entail?

Although the particular issue of SNAP purchasing restrictions did not rise to the congressional hearing level during the 114th Congress, members who served on the committee during the 113th Congress will be familiar with the arguments on both sides. During farm bill debate in 2013, Rep. Tom Marino (R-PA) offered a floor amendment that would establish a pilot program in nine states to gather SNAP purchasing data and ultimately require the Comptroller General to determine how to improve SNAP recording. The amendment failed by an overwhelming 79-346 vote. Important to note is that Chairman Mike Conaway (R-TX) – although not committee chairman at the time – and Ranking Member Collin Peterson (D-MN) voted against the amendment. However, it remains to be seen if the topic will resurface during the next farm bill, and if so, in what capacity. As with other SNAP issues analyzed during the 114th Congress through congressional hearings, Chairman Conaway will likely use the insights gained during this hearing as he considers proposals for reforming SNAP in the next farm bill.

This Week’s Hearings:

  • On Wednesday, February 15, the House Agriculture Committee has scheduled a hearing titled “Rural Economic Outlook: Setting the State for the Next Farm Bill.” The witnesses will be announced.
  • On Thursday, February 16, the House Agriculture Committee has scheduled a hearing titled “Pros and Cons of Restricting SNAP Purchases.” The witnesses will be announced.

Fiscal Year 2018 Pared-down Budget Expected in “Next Few Weeks”; Reconciliation Timeline Still Unclear; Border Wall Costs Higher than Expected

Legislative Activity

President Trump’s FY 2018 Budget Proposal

The Trump Administration intends to release a FY 2018 budget proposal within the “next several weeks” according to President Trump’s Press Secretary, Sean Spicer. It is likely that this submission will be an outline (“skinny budget”) which will lay the groundwork for a more complete budget plan expected as early as May. As previously reported, it is not unusual for incoming presidents to miss the statutory deadline of February 6 and subsequently release a more narrow budget proposal during their first year in office.

However, the Director of the Office of Management and Budget typically plays a significant role in the development of an administration’s annual budget proposal. President Trump’s nominee, Rep. Mick Mulvaney (R-SC), was reported out of the Senate Committee on Homeland Security on February 2, but his Senate confirmation vote is not yet scheduled. The Senate is anticipated to debate two confirmations this week- David Shulkin as the Secretary of Veterans Affairs and Linda McMahon as the Administrator of the Small Business Administration- but Republicans are hopeful Rep. Mulvaney will be in place before Congress’ President’s Day recess, which begins February 18. We expect the Senate will utilize the full 30 hours of debate allowed, as Rep. Mulvaney has been highly criticized on both sides of the aisle for his stances on cuts to entitlement and defense spending.

FY 2017 Budget Reconciliation

The FY 2017 budget resolution established January 27 as the date for the four House and Senate committees of jurisdiction to draft their portions of reconciliation language to start the repeal process for the Affordable Care Act. Despite passage of this deadline, House Speaker Paul Ryan (R-WI) told his conference last week that the reconciliation process is “on time” and legislation to repeal the law would be complete this year. House Budget Committee Chairman Diane Black (R-TN) noted her committee will hold hearings on the matter later this month.

FY 2018 Budget Resolution and Appropriations

The appropriations season typically starts with the submission of the President’s Budget Proposal to Congress in February; however, given the delay in President Trump’s submission, it is likely Congress will begin to consider the FY 2018 budget before receiving his comprehensive request (and likely before completing the FY 2017 budget). Passage of a budget resolution by the April 15 statutory deadline is not necessary to start the appropriations process, as evidenced by the January 2017 passage of the FY 2017 Budget Resolution. Members are currently accepting programmatic funding and language requests from constituents in preparation for FY 2018 spending bills.

Border Wall

Last week, a leaked report from the U.S. Department of Homeland Security (DHS) estimated the cost of a 2,000 mile wall along the border of Mexico to be approximately $21.6 billion. This number is higher than previous estimates of $12-$15 billion provided by President Trump and some Republican members of Congress. In response, President Trump tweeted that he would be able to bring the cost “way down” when he becomes involved with the design and negotiation process.

This news immediately sparked rebuke from House and Senate Democrats. House Appropriations Committee Ranking Member Nita Lowey (D-NY) classified it as a “tragic misallocation of resources” and Senate Appropriations Committee Ranking Member Patrick Leahy (D-VT) noted that “how we use our taxpayer dollars is a reflection of our values, and wasting billions on a poorly conceived border wall does not meet that test.” The President is expected to submit a supplemental funding proposal for the wall to Congress, which would be classified as emergency spending and thus not be subject to discretionary budget caps. The timing of the request is critical, as such legislation could serve as a vehicle for a potential omnibus or minibus package before the current continuing resolution expires on April 28, 2017.

This Week’s Hearings:

  • On Wednesday, February 15, the House Appropriations Committee Subcommittee on Agriculture will hold a “USDA Office of Inspector General Oversight Hearing.” The witnesses will be:
    • Phyllis K. Fong, Inspector General, USDA Office of Inspector General
    • Gil H. Harden, Assistant Inspector General for Audit, USDA Office of Inspector General
    • Ann Coffey, Assistant Inspector General for Investigations, USDA Office of Inspector General
  • On Wednesday, February 15, the Senate Appropriations Committee Subcommittee on Labor, Health and Human Services, Education, and Related Agencies will hold a hearing titled “Mental Health Care: Examining Treatments and Services.” The witness will be:
    • Joseph Parks, Ph.D., Medical Director, National Council for Behavioral Health
    • David M. Johnson, Ed.D, LMHC, Chief Executive Officer, Navos Mental Health Solutions
    • Dennis S. Freeman, Ph.D., Chief Executive Officer, Cherokee Health Systems
    • Chief Donald W. DeLucca, President, International Association of Chiefs of Police
  • On Thursday, February 16, the House Appropriations Committee Subcommittee on Military Construction and Veterans Affairs will hold a “Member Hearing Day.”
  • On Thursday, February 16, the House Appropriations Committee Subcommittee on the Legislative Branch will hold a “Member Hearing Day.”

House Starts Work on Higher Education Reform; Senate Holds Confirmation Hearing for Andy Puzder

Legislative Activity

On Tuesday, February 7, the House Committee on Education and the Workforce held a hearing titled “Challenges and Opportunities in Higher Education” to examine the current policy issues in higher education. Chairwoman Virginia Foxx (R-NC), as well as her Senate counterpart Chairman Lamar Alexander (R-TN) of the Senate Committee on Health, Education, Labor, and Pensions (HELP), have indicated reauthorization of the Higher Education Act (HEA) will be a top priority in the 115th Congress.

Members questioned the panel on college affordability and student debt, Pell Grants, regulatory burden placed on institutions of higher education, career and technical education (CTE), the role of data in higher education, and simplifying the Free Application for Federal Student Aid (FAFSA).

Dr. William Kirwan, co-chair of the Senate Task Force on Federal Regulation on Higher Education, explained how excessive federal regulations create costs for college and universities, which are then passed down to students and their families. While recognizing the important role these rules play, his task force identified 59 regulations that can be streamlined or eliminated to help curb costs. Rep. Bobby Scott (D-VA), ranking member of the committee, recommended a follow up hearing on the regulations identified by Dr. Kirwan and solutions to reducing the burden they place on schools.

On the subject of affordability, Dr. Beth Akers emphasized the importance of simplifying the FAFSA and restructuring student loan repayment to an income based model. Republicans and Democrats both supported these proposals and Sen. Alexander has been a strong advocate of simplifying FAFSA to increase accessibility to higher education. Panelists also recommended restoring the year-round Pell Grant program to allow low-income and non-traditional students to earn credits over the summer to finish school sooner and with less debt. This provision was included with strong bipartisan support in the Senate version of the Labor-Health and Human Services- Education appropriations bill in the 114th Congress but was ultimately stripped from the House version.

This hearing served as a starting point for the discussion surrounding the HEA rewrite and is expected to continue as the Committees work toward a bipartisan reauthorization package.

This Week’s Hearings:

  • On Wednesday, February 15, the House Committee on Education and the Workforce will hold a hearing titled, “Providing Vulnerable Youth the Hope of a Brighter Future Through Juvenile Justice Reform.”
  • On Thursday, February 16, the House Committee on Education and the Workforce will hold a hearing titled,
    “Federal Wage and Hour Policies in the Twenty-First Century Economy”
  • On Thursday, February 16, the Senate Committee on Health, Education, Labor, and Pensions will hold a confirmation for Andy Puzder, President Trump’s selection to head the Department of Labor.

Regulatory Activity

Department of Labor Nominee Confirmation Hearing Scheduled for This Week

Following several delays, the Senate HELP Committee will hold a confirmation hearing Thursday, February 16 on President Trump’s nominee to serve as Secretary of Labor, Andy Puzder. Mr. Puzder has been CEO of CKE Restaurants, parent company of fast food chains Hardee’s and Carl’s Jr. for 16 years and served as an advisor during President Trump’s campaign.

Rumors have been circulated that the delays in scheduling a confirmation hearing were due to Mr. Puzder’s reluctance to serve as Secretary, but Republicans have said he has had to settle potential conflicts of interest with personal holdings in CKE Restaurants and submit a financial disclosure before the process could move forward.

Mr. Puzder is expected to face strong opposition from Democrats during his hearing and throughout his confirmation because of his strong conservative beliefs, actions during his tenure as CEO of CKE Restaurants, and alleged personal issues including his recent divorce and questions surrounding an undocumented housekeeper he employed.

Possible Senate Vote on Pruitt for EPA; Senate To Vote On Rescinding Methane Flaring Rule

Legislative Activity

Senate May Move on Nominees

In addition to taking up the methane flaring measure under the Congressional Review Act (CRA), the Senate could potentially vote on the nomination of Oklahoma Attorney General, Scott Pruitt, to serve as EPA Administrator. With the Senate calendar being quite full, the Senate might note vote this week on the nominations of Rep. Ryan Zinke (R-MT) for Secretary of Interior and Governor Rick Perry for Secretary of Energy.

Methane Flaring

This week, the Senate could take up and consider H. J. Res. 36, which would rescind the Bureau of Land Management’s Waste Prevention, Production Subject to Royalties, and Resource Conservation under the CRA. The joint resolution was passed by the House on February 3 by a vote of 221-191. The rule, which was finalized under the Obama Administration, was intended to reduce waste of natural gas from venting, flaring, and leaks during oil and natural gas production activities on onshore federal and Indian leases. The resolution is expected to be backed by most if not all Republicans.

This Week’s Hearings:

  • On Wednesday, February 15, the House Committee on Science, Space and Technology, Subcommittee on Energy and Subcommittee on Oversight, will hold a joint hearing titled “Risky Business: The DOE Loan Guarantee Program.”
  • On Wednesday, February 15, the Senate Committee on Environment and Public Works will hold a hearing titled “Oversight: Modernization of the Endangered Species Act.”
  • On Wednesday, February 15, the House Committee on Energy and Commerce, Subcommittee on Energy, will hold a hearing titled “Modernizing Energy and Electricity Delivery Systems: Challenges and Opportunities to Promote Infrastructure Improvement and Expansion.”
  • On Thursday, February 16, the House Committee on Energy and Commerce, Subcommittee on Environment, will hold a hearing titled “Modernizing Environmental Laws: Challenges and Opportunities for Expanding Infrastructure and Promoting Development and Manufacturing.”

CHOICE Act 2.0, Insurance Regulation Take Center Stage; DoL Fiduciary Rule May Be Delayed as Other Regulators Review Regs

Legislative Activity

Financial Services Committee Organizes as Hensarling Set to Move CHOICE Act 2.0

Last Tuesday, February 7, the House Financial Services Committee held a meeting to approve its Authorization and Oversight Plan (Plan) for the 115th Congress. The meeting featured partisan debate related to transparency within the Trump Administration and how the Committee should organize its priorities. Despite the clear divide between Republicans and Democrats, the Committee ultimately adopted several amendments to the Plan, including amendments related to illicit financing, housing, and flood insurance. Specifically, this Congress the Committee will: (1) pay special attention to anonymous shell companies when monitoring potential terrorist financing; (2) examine progress towards the nation’s goals to end homelessness; and (3) examine proposals to improve efficiency and transparency associated with the processing of National Flood Insurance Program (NFIP) claims.

Separately, with the Committee officially organized for the 115th Congress, Chairman Jeb Hensarling (R-TX) is set to move on a revised version of the Financial CHOICE Act (CHOICE Act 2.0), a bill he introduced last year that would make significant changes to the U.S. financial regulatory landscape. Though the text of the revised bill has not been introduced, a leaked Committee staff memorandum highlights several of the changes that have been made to the legislation since last Congress. Pursuant to the memorandum, CHOICE Act 2.0 will, among other things: (1) eliminate the CAMELS requirement from the capital election; (2) exempt banking organizations that make the capital election from stress tests; (3) make targeted “improvements” to stress tests and CCAR; (4) restructure the CFPB as a civil law enforcement agency with additional restrictions on its authority; (5) make numerous SEC-related reforms to improve capital markets; (6) impose additional requirements on financial regulators to hold them accountable, including by designating a “Lead Banking Investigator”; and (7) expand the JOBS Act to improve the atmosphere for small businesses and encourage capital formation. The bill will also likely include a technical corrections section to conform the current legislation with Dodd-Frank.

Lawmakers to Review U.S.-EU Covered Agreement

This Thursday, the House Financial Services Subcommittee on Housing and Insurance has scheduled a hearing titled “Assessing the U.S.-EU Covered Agreement.” Last month, the U.S. Department of the Treasury and the Office of the U.S. Trade Representative (USTR) announced the successful completion of negotiations for a covered agreement with the European Union, which was drafted to address the current difference between the insurance regulation in the EU and U.S. In particular, the agreement will address the application of EU rules under its “Solvency II” regulations and the oversight of reinsurers. Pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank), the covered agreement, which was negotiated on the U.S. side by the Treasury Department and U.S. Trade Representative (USTR), will come into force 90 calendar days after it has been submitted to Congress. Of course, EU governments will have to approve the agreement as well, after which it would need to be approved by the European Commission as well as the European Parliament.

Senate Republicans Ask for Briefing on CFTC Data Security

Last week, Senate Agriculture Committee Chairman Pat Roberts (R-KS) and Senate Judiciary Committee Chairman Chuck Grassley (R-IA) asked Acting Chairman of the Commodity Futures Trading Commission (CFTC) Christopher Giancarlo for a briefing about the agency’s efforts to eliminate data security deficiencies identified in an Inspector General’s report. Specifically, the Senators asked for more information related to a findings that the agency had weak internal data security policies and that a whistleblower might have been ignored. The letter requested a formal update on the CFTC’s response to the report, including information on whether the agency is taking steps to bolster agency integrity through staff training and how the agency is addressing the issue of whistleblower reprisal.

This Week’s Hearings:

  • On Tuesday, February 14, the Senate Banking, Housing, and Urban Affairs Committee has scheduled a hearing titled “The Semiannual Monetary Policy Report to the Congress.”
  • On Wednesday, February 15, the House Financial Services Committee has scheduled a hearing titled “Monetary Policy and the State of the Economy.”
  • On Thursday, February 16, the House Financial Services Subcommittee on Housing and Insurance has scheduled a hearing titled “Assessing the U.S.-EU Covered Agreement.”
  • On Thursday, February 16, the Senate Health, Education, Labor, and Pensions Committee has scheduled a hearing to consider the Nomination of Andrew Puzder to serve as Secretary of Labor.

Regulatory Activity

Department of Labor May Delay of Fiduciary Rule

Following President Trump’s February 3 Executive Memorandum (further discussed here) calling on the Department of Labor (DOL) to conduct a legal and economic review concerning the potential impact of the Fiduciary Rule – and despite a recent District Court ruling that the subject matter was within DOL’s jurisdiction – it appears that DOL may still move forward with efforts to delay the rule. Specifically, it is rumored that DOL is set to issue a notice delaying the Fiduciary Rule for 180 days. The rule, which requires financial advisers to act exclusively in their clients’ best financial interest when offering retirement advice, is presently set to take effect on April 10, 2017. Note too, this expected move comes as DOL Secretary Nominee Andrew Puzder is set to participate in his confirmation hearing this week before the Senate Health, Education, Labor, and Pensions (HELP) Committee.

SEC  to Review CEO Pay Ratio Rule

Last week, Acting Chairman of the Securities and Exchange Commission (SEC) Michael Piwowar requested a review of CEO Pay Ratio and indicated that he plans to reopen the window for public comment. As required by the Dodd-Frank Act, the rule would amend existing executive compensation disclosure rules, requiring certain additional disclosures with respect to the first fiscal year beginning on or after January 1, 2017. This announcement follows last week’s announcement that the SEC also plans to review its Conflict Minerals Rule. Notably, last month, President Trump nominated lawyer Jay Clayton to be the next chairman of the SEC; however, a confirmation hearing before the Senate Banking Committee has not yet been scheduled.

Tarullo to Step Down from Fed

In an unexpected move, Federal Reserve Board Governor Daniel Tarullo announced that he plans to resign from his position in April. Governor Tarullo, who has lead much of the Fed’s post-crisis banking oversight efforts, has been on the Board since 2009. His resignation now adds to the two already vacant positions at the Fed – vacancies that have yet to receive attention from the Trump Administration.

Verma Visits Senate Finance

Legislative Activity

Verma Visits Senate Finance

With Secretary Price now in place at the Department of Health and Human Services (HHS), it is Seema Verma’s turn to experience the Senate confirmation process as the nominee for Administrator of the Center for Medicare and Medicaid Services (CMS). On Thursday, February 16, Verma will appear before the Senate Committee on Finance for her confirmation hearing.  This will not be her first time appearing before Congress. In June 2013, Verma provided testimony for the House Committee on Energy and Commerce Subcommittee on Health at a hearing titled “The Need for Medicaid Reform: A State Perspective.” She is using this testimony as her primary policy statement for Thursday’s hearing. Verma is a health care consultant who is touted for her work with state governments, specifically for her collaboration with former Governor Mitch Daniels (R-IN) and Vice President Mike Pence on the Healthy Indiana Plan (HIP) and HIP 2.0. HIP sets-up health savings accounts (HSAs) called Personal Wellness and Responsibility (POWER) accounts and requires some members to contribute a small monthly payment. HIP is seen as a conservative model for Medicaid reform and has the potential to be the future of the Medicaid program under Verma. Given her professional background and the responsibilities of the CMS Administrator, questions regarding the repeal and replace of the Affordable Care Act (ACA); Medicaid reform; and the future of Medicare are all likely.

This Week’s Hearings:

  • On Monday, February 13, the House Committee on Oversight and Government Reform will hold a markup of H.J.Res.27, Disapproving the action of the District of Columbia Council in approving the Death with Dignity Act of 2016.
  • On Tuesday, February 14, the House Committee on Rules will formulate the rule on H.J.Res.43, the providing congressional disapproval under chapter 8 of title 5, United States Code, of the final rule submitted by the Secretary of Health and Human Services relating to compliance with title X requirements by project recipients in selecting subrecipients.
  • On Wednesday, February 15, the Senate Committee on Appropriations, Subcommittee on Labor, Health and Human Services, Education and Related Agencies will hold a hearing titled “Mental Health Care: Examining Treatments and Services.”
  • On Thursday, February 16, the Senate Committee on Finance will hold a hearing on the nomination of Seema Verma to be Administrator of the Center for Medicare and Medicaid Services.
  • On Thursday, February 16, the House Committee on the Judiciary, Subcommittee on Regulatory Reform, Commercial and Antitrust Law will hold a hearing titled “Competitive Health Insurance Reform Act of 2017.”

Lawmakers Unveil Report, Legislation to Strengthen U.S. Aviation Security; Homeland Security Committee Unveils February Terror Threat Snapshot; House Panel Discusses Border Security; Court of Appeals Upholds Stay Against Trump Travel Ban; Administration Considering Other Options

Legislative Activity

Lawmakers Unveil Report, Legislation to Strengthen U.S. Aviation Security

On Monday, February 6, the majority staff of the House Homeland Security Committee released a report titled “America’s Airports: The Threat From Within.” The report recommends nine ways to assist airports, airlines, and the Transportation Security Administration (TSA) to address insider threats facing the U.S. aviation sector. The report is the result of a two-year oversight investigation conducted by Transportation and Protective Security Subcommittee Chairman John Katko (R-NY), who introduced the Aviation Employee Screening and Security Enhancement Act of 2017 (H.R. 876) in tandem with the report’s release. Rep. Katko stated that H.R. 876 and the report’s recommendations will “serve as a roadmap for TSA, airports, and air carriers to close security vulnerabilities at our nation’s airports.”

The report cites inadequate airport access controls, or safeguards to protect and restrict access to high risk areas, as an area of serious vulnerability in aviation security. The report identifies inconsistencies in airport and air carrier employee vetting and education, which the panel argues inhibits the securing of sensitive areas, and calls for a reexamination of credentialing processes to enhance access control security. The report states that credentialed airport officials across the country “may not understand the potential risk inherent in weak access controls” and that government partners are not sufficiently supportive of industry efforts to mitigate insider threats to aviation systems.

The report recommends that air carriers, airports, and the TSA:

  • Take steps to adequately educate aviation workers on their role in mitigating insider threats and securing access to sensitive areas in airports;
  • Reassess credentialing practices to ensure individuals with access to sensitive areas are held to stringent standards and are regularly subjected to risk assessments;
  • Consider expanding the physical screening of employees;
  • Identify advanced technologies for securing employee access and reduce the number of employee access points at airports;
  • Improve the relationship between TSA and industry stakeholders at certain identified airports;
  • Increase the covert testing of Playbook, an airport security program, operations at U.S. airports to measure security readiness and effectiveness; and
  • Strategically target the use of TSA employee screening operations.

The report also argues that local airports must have the flexibility to implement robust security standards, but the increasing threat environment requires a “comprehensive assessment of America’s airport security posture.” The report identifies drug and firearm smuggling as major insider threats and cites several security breaches carried out by TSA employees, including recent incidents in Dallas, Los Angeles, San Francisco, and Puerto Rico that were successfully thwarted by TSA insider threat mitigation efforts.

Homeland Security Committee Unveils February Terror Threat Snapshot

House Homeland Security Committee Chairman Michael McCaul (R-TX) released a monthly assessment of the global terror environment this week, February’s Terror Threat Snapshot.

The assessment details recent efforts by the Islamic State of Iraq and Syria (ISIS) to commit homegrown acts of terror on the United States, as well as U.S. progress in combating, identifying, and thwarting such efforts. It also discusses security threats from Al-Qaeda, the Taliban, and Iranian ballistic missile testing.

The snapshot cites at least 166 ISIS-linked plots or attacks against Western targets since 2014, including 36 in the U.S., 69 in Europe, and 61 targeting westerners outside of the U.S. or Europe. The snapshot also cites a total of 193 homegrown “jihadist” cases in the U.S. since 9/11, the majority of which have reportedly taken place in the last few years. The report notes an “alarming” forecast for the threat environment in 2017 characterized by increasing incidents of homegrown terrorism.

House Panel Discusses Border Security

On February 7, 2017, the House Homeland Security Committee held a hearing, “Ending the Crisis: America’s Borders and the Path to Security,” where lawmakers heard testimony from Department of Homeland Security (DHS) Secretary John Kelly and a panel of law enforcement officials from border communities about securing the southwest border, enforcing immigration law, and President Trump’s executive order suspending the admission of immigrant and nonimmigrant visa holders from select countries.

During the hearing, several lawmakers, including Ranking Member Bennie Thompson (D-MS) and Rep. Bonnie Watson Coleman (D-NJ), Cedric Richmond (D-LA), and Donald Payne (D-NJ), questioned the Executive Order. In response, Secretary Kelly emphasized that the order was not a “Muslim ban,” but rather a temporary pause to evaluate and strengthen the current vetting processes. He also noted that certain countries, such as Saudi Arabia, were excluded from the ban based on the reliability of their police and intelligence records. Secretary Kelly explained that in other countries, citing Syria as an example, the absence of accurate records prevents thorough vetting of individuals seeking admission to the United States. Other Committee members applauded the Executive Order as a step in the right direction. Chairman McCaul voiced his support for enhanced vetting and argued that the ban was about risk, not religion. However, Chairman McCaul did note that the roll-out of the order could have been smoother. Secretary Kelly acknowledged that there were some hiccups when the order was first carried out, but stated DHS quickly made the necessary adjustments. He also expressed his desire to coordinate more closely with Congress on immigration issues and the vetting process going forward.

This Week’s Hearings:

  • On Tuesday, February 14, the House Armed Services Committee has scheduled a hearing titled “The Evolving Threat of Terrorism and Effective Counterterrorism Strategies.” The witnesses will be:
    • Professor Bruce Hoffman, Director, Center for Security Studies, Georgetown University;
    • Brian Michael Jenkins, Senior Advisor to the President of RAND Corporation; and
    • Ambassador Michael Sheehan, Distinguished Chair, Combating Terrorism Center at West Point.
  • On Tuesday, February 14, the Senate Armed Services Committee has scheduled a hearing titled “Long-term Defense Challenges and Strategies.” The witnesses will be:
    • Honorable Robert O. Work, Deputy Secretary of Defense; and
    • James H. Baker, Director, Office of New Assessment, Office of The Secretary of Defense.
  • On Tuesday, February 14, the House Homeland Security Subcommittee on Emergency Preparedness, Response, and Communications has scheduled a hearing titled “The Future of FEMA: Stakeholder Recommendations for the Next Administrator.” The witnesses will be announced.
  • On Thursday, February 16, the House Homeland Security Subcommittee on Border and Maritime Security has scheduled a hearing titled “A Dangerous and Sophisticated Adversary: The Threat to the Homeland Posed by Cartel Operations.” The witnesses will be announced.
  • On Thursday, February 16, the House Homeland Security Subcommittee on Oversight and Management Efficiency has scheduled a hearing titled “Watchdog Recommendations: A Better Way Ahead to Manage the Department of Homeland Security.” The witnesses will be announced.

Executive Branch Activity

Court of Appeals Upholds Stay Against Trump Travel Ban; Administration Considering Other Options

On Thursday, February 9, the U.S. Court of Appeals for the Ninth Circuit ruled against the Trump Administration and upheld a Federal District Court ruling that blocked implementation of an Executive Order that would limit travel to the United States by certain visa holders and admissions under the U.S. Refugee Admissions Program (USRAP).  Travelers from the seven impacted countries and refugees may continue to enter the United States as the case proceeds.

In media appearances on Sunday, February 12, White House advisor Stephen Miller confirmed that the Trump Administration is currently considering actions to advance the President’s travel ban.  In an interview with Fox News Sunday, Miller said these options include “seeking an emergency stay at the Supreme Court, continuing the appeal with the panel, having an emergency hearing en banc, or going to the trial court at the district level and trial on the merit,” as well as potential “new executive actions designed to prevent terrorist infiltration of our country.”  He argued that the President has broad authority under the constitution to “engage in conducting border control and immigration control of this country.”

President Trump Will Welcome the Canadian and Israeli Prime Ministers This Week; The Senate Continues Working To Confirming Cabinet Members, Including the Next Treasury Secretary

President Trump hosted Japanese Prime Minister Shinzō Abe at the White House last Friday, discussing trade and security matters. Over the weekend, the two continued the dialogue while in Florida.  President Trump will welcome Canadian Prime Minister Justin Trudeau and Israeli Prime Minister Benjamin Netanyahu to the White House on Monday and Wednesday, respectively.  He is also scheduled to call two sub-Saharan African leaders on Monday: (1) Nigerian President Muhammadu Buhari; and (2) South African President Jacob Zuma.

Both chambers of the U.S. Congress are in session this week. The Senate is expected to vote on Steven Mnuchin’s nomination to serve as Secretary of the Treasury Monday evening. It remains unclear whether President Trump’s nominee to serve as Secretary of Commerce, Wilbur Ross, will be confirmed this week. Congress is scheduled to be in recess next week in observance of the Presidents Day holiday.

Japan – Prime Minister Visits U.S.

Japanese Prime Minister Abe and President Trump held a joint press conference after a bilateral meeting on Friday. President Trump said of the bilateral relationship:

“We will work together to promote our shared interests, of which we have many in the region, including freedom from navigation and of navigation, and defending against the North Korean missile and nuclear threat, both of which I consider a very, very high priority.”

Prime Minister Abe highlighted economic opportunities, including infrastructure development, suggesting Japan’s maglev technology and technical expertise could possibly “contribute to President Trump’s growth strategy.” Prime Minister Abe also noted a “cross-sectoral” dialogue would be held between Japanese Deputy Prime Minister Tarō Asō and Vice President Mike Pence to further deepen the bilateral economic relationship.

North Korea – Another Missile Launch

President Trump condemned North Korea’s latest missile launch on Saturday from Florida. The President noted in particular “the United States of America stands behind Japan, its great ally, 100 percent.”

The House Foreign Affairs Committee held a hearing last week, exploring possible next steps in U.S. policy to ensure the North Korean regime does not complete development of intercontinental ballistic missiles capable of striking the United States.

China – “One China” Policy Affirmed

The White House released readout of a Thursday call between President Trump and Chinese President Xi Jinping.  According to the summary, “President Trump agreed, at the request of President Xi, to honor our ‘one China’ policy.”

Russia – Senate Oversight Measure Introduced

Senate Foreign Relations Committee (SFRC) Chairman Bob Corker (R-Tennessee) convened a hearing last Thursday focused on challenges facing U.S. policy toward Russia. The Chairman noted:

“As we have heard multiple times in this room, Russia violated the Budapest Memorandum when it invaded Ukraine – where it continues to occupy stolen land and enable combat operations that kill innocent civilians.”

Chairman Corker also emphasized “the importance of restoring a credible U.S. deterrent so Moscow no longer exploits what it perceives as American weakness.”

On 8 February, a bipartisan group of Senators introduced legislation, The Russia Sanctions Review Act of 2017, that would provide for congressional oversight of any Executive Branch decision to provide sanctions relief to the Government of the Russian Federation.  SFRC Ranking Member Ben Cardin (D-Maryland) said:

“If the U.S. were to provide sanctions relief to Russia without verifiable progress on the Minsk Agreements, we would lose all credibility in the eyes of our allies in Europe and around the world.”

Senate Armed Services Committee Chairman John McCain (R-Arizona) added:

“Congress must have oversight of any decision that would impact our ability to hold Russia accountable for its flagrant violation of international law and attack our institutions.”

Syria – U.S. Policy Examined

Last Wednesday, House Foreign Affairs Committee Chairman Ed Royce (R-California) issued a statement after Amnesty International alleged that as many as 13,000 people – mostly civilians – were executed through extrajudicial executions by the Syrian regime between 2011 and 2015.  Chairman Royce noted:

“The blood of thousands of Syrians is on [Syrian President Bashar al-] Assad’s hands, and the world should treat him like the pariah he is. He and his backers must be held accountable for these crimes against humanity and genocidal acts.”

The SFRC held a hearing on the situation in Syria last week. Chairman Corker opened the hearing by noting President Trump asked the Defense Department for a new plan to defeat the Islamic State (ISIS/ISIL) last month.  The Chairman added the preliminary draft should be completed by the end of this month.

  • On Tuesday, 14 February, the House Foreign Affairs Subcommittee on Terrorism is scheduled to hold a hearing titled “Defeating Terrorism in Syria: A New Way Forward.”

Yemen – Senate Briefing on Raid Requested

A bipartisan group of four Senators requested a briefing on the U.S. military’s objectives in Yemen, after new details emerged about a Navy SEAL raid that left one U.S. service member and a number of civilians dead.  Senators Rand Paul (R-Kentucky), Mike Lee (R-Utah), Chris Murphy (D-Connecticut), and Al Franken (D-Minnesota) wrote a letter to the Trump Administration asking for a classified briefing on U.S. “actions and objectives” in Yemen.  The four Senators have previously been critical of U.S. policies toward Yemen.  The week before, Representative Ruben Gallego (D-Arizona) urged the Chairman of the House Armed Services Committee to request a briefing from the Trump Administration on the raid.

Latin America – Trump Administration Outreach

Vice President Mike Pence spoke with two Latin American leaders on Friday. In speaking with President Mauricio Macri of Argentina, the Vice President pledged to “redouble efforts to enhance job creation and economic growth in both countries,” among other topics.  Vice President Pence pledged to “maintain and deepen their cooperation on security issues,” among other topics he discussed with Colombian President Juan Manuel Santos.

President Trump reportedly called President Juan Manuel Santos on Saturday. President Trump also spoke with Peruvian President Pedro Pablo Kuczynski on Sunday.  The two discussed the bilateral relationship, economic growth in both countries, and developments in Venezuela.

Other Congressional Hearings This Week

  • On Tuesday, 14 February, the Senate Armed Services Committee is scheduled to hold a closed hearing titled “Long-term Defense Challenges and Strategies.”
  • On Tuesday, 14 February, the House Armed Services Committee is scheduled to hold a hearing titled “The Evolving Threat of Terrorism and Effective Counterterrorism Strategies.”
  • On Tuesday, 14 February, the Senate Banking Committee is scheduled to hold a hearing to examine the semiannual monetary policy report to Congress. Federal Reserve Chairman Janet Yellen is scheduled to testify.
  • On Wednesday, 15 February, the Senate Foreign Relations Committee is scheduled to hold a hearing titled “Ending Modern Slavery: Building on Success.”
  • On Thursday, 16 February, the Senate Foreign Relations Committee is scheduled to hold a confirmation hearing for David Friedman to serve as U.S. Ambassador to Israel.
  • On Thursday, 16 February, the House Foreign Affairs Committee is scheduled to hold a hearing titled “Iran on Notice.”

Looking Ahead

Washington is expected to focus on the following upcoming events:

  • 13 February: President Trump to host Canadian Prime Minister Justin Trudeau
  • 15 February: President Trump to host Israeli Prime Minister Benjamin Netanyahu
  • 17-19 February: Munich Security Conference
  • 28 February: President Trump to address a joint session of Congress
  • Early March?: Release of the President’s Budget for Fiscal Year 2018
  • 28 April: U.S. Federal Government funding expires

More on Timing of Tax Reform as Trump Teases Tax Plan; Tax-Writing Committees Get Organized

Legislative Activity

Time for a Trump Tax Plan as Timing on Blueprint Shifts

Last week, various high-profile members of the House Ways and Means Committee were about town publicizing the House’s tax reform “Blueprint,” which would overhaul the U.S. corporate, individual, and international tax systems, as well as make significant reforms to the Internal Revenue Service (IRS). Though initial expectations were that the text of the Blueprint might be available as early as March, Chairman Kevin Brady (R-TX) last week indicated that it is his hope to have the legislation released “during the first half of the year,” which likely means the bill will be finalized in June.  Relatedly, senior Ways and Means Committee member Vern Buchanan (R-FL) suggested that Congress could nevertheless enact the comprehensive tax reform package by August – though, admittedly, he acknowledged that could slip until the end of the year depending on how the politics all play out.

While Chairman Brady has acknowledged that it is important to wrap the process up sooner than later, the Border Adjustability proposal in the House proposal continues to receive skepticism (if not pushback) from a large array of stakeholders – including from fellow Republican Senators. In fact, last week, following remarks from Senate Finance Committee Chairman Orrin Hatch (R-UT) and senior member Senator John Cornyn (R-TX), Senators David Perdue (R-GA) and Mike Rounds (R-SD) have expressed concern that the proposal helps pick winners and losers. With opposition mounting, the question remains: how do you pay for tax reform if you jettison its biggest payfor (which comes in at over $1.2 trillion)? While alternative options exist, they are also likely to be unpopular (i.e., a recent Republican carbon tax proposal).

Nevertheless, as Republicans continue to debate tax reform in the capital, last week the Trump Administration announced that it plans release an outline of its “phenomenal” tax reform proposal in the next several weeks as part of its budget request. According to White House Press Secretary Sean Spicer, the plan with be comprehensive and bipartisan. At the same time, however, while Republicans prefer to do permanent, bipartisan tax reform, they are still ready to use the reconciliation process if necessary.

Finance Announces Subcommittee Assignments as Ways and Means Gets New Members

Last week, Senate Finance Committee Chairman Hatch and Ranking Member Ron Wyden (D-OR) announced assignments for the Committee’s six Subcommittees, which include:

  1. Taxation and IRS Oversight;
  2. Health Care;
  3. International Trade, Customs and Global Competitiveness;
  4. Energy, Natural Resources and Infrastructure;
  5. Social Security, Pensions and Family Policy; and
  6. Fiscal Responsibility and Economic Growth

A full list of the subcommittees is available here.

Separately, Representative Judy Chu (D-CA) last week was appointed to fill the recently-vacated seat previously occupied by former Representative Xavier Becerra (D-CA); Representative Becerra resigned in December to serve as California’s Attorney General. Additionally, with Representative Tom Price (R-GA) now officially confirmed as Secretary for the Department of Health and Human Services, Republicans are soon expected to fill his vacant seat on the Committee.

Section 385 Regulations Under Fire

On January 31, Representative Todd Rokita (R-IN) introduced H.J. Res. 54, which calls for using the Congressional Review Act (CRA) process to roll-back the Section 385 debt-equity regulations finalized by Treasury during President Obama’s last year in office. While the legislation does not currently have any co-sponsors, House Democrats have come out strongly against the proposal, with senior Ways and Means Committee Member Lloyd Doggett (D-TX) noting that “Treasury took these important steps amidst the refusal of Republicans in Congress to address the wave of corporate ‘inversions’…. [r]epealing this modest Treasury rule would be an invitation for corporations to head abroad.” While there has been some speculation that the President Trump and his Treasury may have Section 385 regulations on their radar, thus far the Administration has not moved forward with any specific attempts to undo the regulations.

This Week’s Hearings:

  • On Tuesday, February 14, the House Ways and Means Committee has scheduled an organizational meeting to adopt the Committee’s: (1) oversight plan; (2) views and estimates on the fiscal year 2018 federal budget; (3) Subcommittee assignments; and (4) appointments to the Joint Committee on Taxation (JCT).

Regulatory Activity

Mnuchin Nomination Moves Forward

Despite opposition to his nomination, Treasury Secretary Nominee Steven Mnuchin appears all but certain to be the country’s next Treasury Secretary. With a final vote on his nomination set for today, Mr. Mnuchin will be poised to move forward in his new role and will be sworn in by President Trump shortly after his confirmation is official. Once sworn in, Mr. Mnuchin is expected to begin filling in his Treasury Department leadership, which could include names like Jim Donovan, Justin Muzinich, and David Malpass. Once his team is in place, Mr. Mnuchin will be tasked with, among other things, helping the Administration work with Congress in an effort the shepherd tax reform across the finish line.

FCC Announces Close of Forward Auction Clock Phase of Incentive Auction

Legislative Activity

House Approves Email Privacy Act

On February 6, the U.S. House of Representatives (House) passed H.R.387, the Email Privacy Act, by voice vote. The bill updates part of the Electronic Communications Privacy Act of 1986 (ECPA) by enhancing the privacy protections applicable to electronic communications such as emails, social media posts, and other online content that is stored by third-party service providers, such as Internet service providers or email service providers, while preserving the ability of law enforcement to access such communications. Presently, the ECPA provides that law enforcement may search stored communications older than 180 days without a warrant. The legislation would, among other things, require law enforcement to obtain a warrant to access electronic communications regardless of the age of the communications sought. A prior version of the bill passed the House in the 114th Congress, but did not pass in the Senate. The present bill has been referred to the Senate for consideration.

This Week’s Hearings:

  • On Tuesday, February 14, the Digital Commerce and Consumer Protection Subcommittee of the House Energy and Commerce Committee will hold a hearing titled “Self-Driving Cars: Road to Deployment.” Witnesses include Mike Abelson, Vice President of Global Strategy, General Motors; Dr. Nidhi Kalra, Co-Director and Senior Scientist, RAND Center for Decision Making Under Certainty; Anders Karrberg, Vice President of Government Affairs, Volvo Car Group; Joseph Okpaku, Vice President of Public Policy, Lyft; and Gill Pratt, Executive Technical Advisor and CEO, Toyota Research Institute.

Regulatory Activity

FCC Announces Close of Forward Auction Clock Phase of Incentive Auction

The FCC announced on February 10 that “bidding in the clock phase of the incentive auction concluded,” and the auction will now “proceed to the assignment phase, in which winning forward auction bidders can bid for specific frequency blocks.” Forward auction bidders submitted gross winning bids of $19.6 billion. FCC Chairman Ajit Pai issued a statement that “[t]oday, the FCC reached a major milestone in the world’s first incentive auction: bidding in the forward auction ended. . . . The participation of [] broadcasters and wireless carriers will enable the [FCC] to release 84 megahertz of spectrum into the broadband marketplace.”

Deadline Extended for Filing Replies to Oppositions to Petitions for Reconsideration of Report and Order in Spectrum Frontiers Proceeding

The FCC has extended to February 24 the deadline for filing replies to oppositions to petitions for reconsideration of the FCC’s 2016 Use of Spectrum Bands Above 24 GHz For Mobile Radio Services Report and Order (R&O). Petitions for reconsideration of that R&O were filed by 5G Americas, Asams Telcom Inc. et al., The Boeing Company, Competitive Carriers Association, CTIA, Inmarsat, Inc. et al., NCTA – The Internet & Television Association, Nextlink Wireless, LLC, SES Americom, Inc. et al., Satellite Industry Association, Telecommunications Industry Association, T-Mobile USA, Inc., and ViaSat, Inc., according to a December 22, 2016 FCC Public Notice. The Public Notice extending the deadline states that an “extension of time is warranted to enable interested parties sufficient opportunity to review and to respond to the complex issues raised by the responses to the petitions for reconsideration.”

FCC Chairman Pai Announces a Number of Process Reform Measures

FCC Chairman Ajit Pai announced a number of process reforms that have already begun to change the way the Commission circulates, reviews, votes, and adopts its items. On February 2, the new Chairman announced a pilot program wherein the FCC would “publicly release . . . the text of all agenda items for monthly Commission meetings.” According to Chairman Pai’s statement, the program is designed to “give the public much more insight into the Commission’s activities.”

A number of other progress reform efforts have followed. On February 6 Chairman Pai’s office announced that it would depart from previous practices where FCC Chairman “briefed the press or published a blog about matters to be voted upon at the FCC’s monthly meetings before sharing those matters with Commissioners.” Instead, Chairman Pai asserts that he will “share with every Commissioner’s office every item that will be considered at an open meeting before anyone in my office discusses the content of those items publicly or the FCC releases the text of those documents.”

The very next day, on February 7, Chairman Pai adopted process reforms suggested by Commissioner Clyburn (to release a fact sheet explaining an item in clear terms at the same time the Commission releases the text of an item to the public), and by Commissioner O’Rielly (requiring that “any substantive edits made to an item between the time it is circulated and the meeting at which [the FCC] vote[s] on it [must] be proposed by a Commissioner, rather than staff.”). Both of these reforms were adopted by the Chairman in order to “allow Commissioners to better understand where edits are coming from.”

On February 8, Chairman Pai adopted a process reform that would require the FCC’s Enforcement Bureau to submit for full Commission review any Consent Decree settling an action voted upon by the full Commission. In other words, “[i]f Commissioners vote to propose and/or impose a forfeiture,” the new process requires that the Enforcement Bureau not settle the matter without FCC approval. According to the Chairman’s statement, a consent decree fitting those parameters was circulated the day the process reform was announced.

Finally, on February 9, FCC Chairman Ajit Pai announced that, beginning at the FCC’s Open Commission Meeting on February 23, “editorial privileges granted to Bureaus and Offices will extend only to technical and conforming edits to items.” Editorial privileges are, according to Chairman Pai’s statement, “the power [of FCC Bureaus and Offices] to make changes to the documents that the [FCC] Commissioners have just voted upon” in an FCC Open Commission Meeting. Chairman Pai states that Commissioner O’Rielly previously raised “concerns about the process of granting editorial privileges,” suggesting specifically that “such privileges currently are too broad, insofar as they extend to substantive edits.” According to Chairman Pai’s statement, beginning at the February meeting, “[a]ny substantive changes made to items following a meeting must be proposed by a Commissioner,” and substantive changes “should only be made in cases in which they are required . . . as a response to new arguments made in a Commissioner’s dissenting statement.”

Congressional Hearings on FAA Reauthorization and Automated Vehicles; FTA Withholds Funding from DC, MD, VA for Missing WMATA Safety Oversight Deadline

Legislative Activity

House Transportation Committee to Begin Holding FAA Hearings

The House Transportation and Infrastructure (T&I) Committee will begin examining Federal Aviation Administration (FAA) reauthorization this week, with the first of five expected hearings on the issue. The first hearing, titled “Building a 21st Century Infrastructure for America: State of American Aviation Manufacturing.” The witnesses include the associate administrator for aviation safety at FAA and representatives from the aviation manufacturing industry, including representatives from Pratt and Whitney, Boeing Commercial Airplanes, and Textron Aviation. According to the T&I Committee’s press release, the hearing will “examine the current state of civil aviation manufacturing in the United States, including the economic, regulatory, and general health of American civil aviation manufacturing, as well as challenges facing this critical industry.”

T&I Committee Chairman Bill Shuster (R-PA) is expected to once again push for his air traffic control (ATC) reform proposal that he introduced in the last Congress. The controversial proposal failed to garner enough support last year, facing opposition from Democrats, appropriators, and several members of the House Ways and Means Committee. However, Chairman Shuster may find he has additional support this year in President Trump. Last week, Trump met with representatives from the aviation industry and said the ATC system is “totally out of whack,” characterizing the current NextGen modernization effort as billions of federal dollars spent without achieving significant results. And while noting that the US has obsolete airports, Trump appeared to dismiss any proposal to increase passenger facility charges to fund airport improvements.

House Energy and Commerce Committee to Hold Hearing on Automated Vehicles

The House Energy and Commerce Committee Digital Commerce and Consumer Protection Subcommittee will hold a hearing on Tuesday, February 14 titled “Self-Driving Cars: Road to Deployment.” Subcommittee Chairman Bob Latta (R-OH) said the hearing will “explore the potential of this game-changing technology and ensure the proper framework is in place for a safe and secure deployment of self-driving cars.” Witnesses will include representatives from General Motors, the RAND Center for Decision Making Under Uncertainty, Volvo Car Group, Lyft, and Toyota Research Institute.

Regulatory Activity

FTA Withholds Funding from DC, MD, VA for Missing WMATA Safety Oversight Deadline

In a letter to the Governors of Maryland and Virginia and the Mayor of Washington DC last week, FTA informed the jurisdictions it is withholding five percent of their FY 2017 Urbanized Area (§5307) formula funds because the jurisdictions failed to establish a State Safety Oversight Program (SSOP) for Washington Metropolitan Area Transit Authority (WMATA) by the February 9, 2017 deadline. Under the current Continuing Resolution (CR) funding federal programs through April 28, 2017, these withheld amounts total $8.9 million. The funding will be restored after each of the jurisdictions passes identical legislation to establish a new federally-compliant SSOP for WMATA. By law, states are primarily responsible for the safe operation of their transit systems, but FTA assumed responsibility for safety oversight of WMATA in October 2015, following several safety incidents and accidents.

This Week’s Hearings:

  • On Tuesday, February 14, the House Energy and Commerce Subcommittee on Digital Commerce and Consumer Protection has scheduled a hearing titled “Self-Driving Cars: Road to Deployment.” The witnesses will be:
    • Mike Abelson, vice president of global strategy for General Motors;
    • Nidhi Kalra, co-director and senior information scientist at the RAND Center for Decision Making Under Uncertainty;
    • Anders Karrberg, vice president of government affairs for the Volvo Car Group;
    • Joseph Okpaku, vice president of public policy for Lyft; and
    • Gill Pratt, executive technical advisor and CEO of Toyota Research Institute.
  • On Wednesday, February 15, the House Energy and Commerce Subcommittee on Energy has scheduled a hearing titled “Modernizing Energy and Electricity Delivery Systems: Challenges and Opportunities to Promote Infrastructure Improvement and Expansion.” The witnesses will be announced.
  • On Wednesday, February 15, the House Transportation and Infrastructure Subcommittee on Aviation has scheduled a hearing titled “Building a 21st Century Infrastructure for America: State of American Aviation Manufacturing.” The witnesses will be:
    • Peggy Gilligan, associate administrator for aviation safety at the Federal Aviation Administration;
    • Alan Epstein, vice president for technology and environment at Pratt and Whitney;
    • John Hamilton, vice president for engineering for Boeing Commercial Airplanes; and
    • Michael Thacker, senior vice president for certification for Textron Aviation.
  • On Wednesday, February 15, the Senate Commerce, Science and Transportation Subcommittee on Surface Transportation and Merchant Marine Infrastructure, Safety, and Security has scheduled a hearing titled “Moving America: Stakeholder Perspectives on our Multimodal Transportation System.” The witnesses will be:
    • Matthew K. Rose, Executive Chairman, BNSF Railway;
    • Christopher B. Lofgren, Chief Executive Officer, Schneider National;
    • Tom Gurd, Vice President of Integrated Supply Chain, Dow Chemical Company; and
    • Wick Moorman, President and Chief Executive Officer, Amtrak.
  • On Wednesday, February 15, the Senate Environment and Public Works Committee has scheduled a hearing titled “Oversight: Modernization of the Endangered Species Act.” The witnesses will be announced.
  • On Thursday, February 16, the House Energy and Commerce Subcommittee on Environment has scheduled a hearing titled “Modernizing Environmental Laws: Challenges and Opportunities for Expanding Infrastructure and Promoting Development and Manufacturing.” The witnesses will be announced.
  • On Thursday, February 16, the Senate Commerce, Science and Transportation Subcommittee on Aviation Operations, Safety, and Security has scheduled a hearing titled “Stakeholder Perspectives on Improving TSA for the Security of the Traveling Public.” The witnesses will be:
    • Stephen Alterman, president of the Cargo Airline Association and chairman of the Aviation Security Advisory Committee;
    • Sharon Pinkerton, senior vice president of legislative and regulatory policy for Airlines for America;
    • Kim Day, CEO of Denver International Airport; and
    • Mark Laustra, vice president of global business development and government relations for Analogic.

Senate Set to Vote on DeVos, Short Week for House

Senate Legislative Activity

The Senate stands adjourned until 12:00pm today, February 6. Following any Leader remarks, the Senate will resume consideration of the nomination of Betsy DeVos to be Secretary of Education. The confirmation vote on the DeVos nomination is expected on Tuesday, February 7. Procedural votes are possible tonight around 6:00pm.

As a reminder, cloture has also been filed on the Sessions (Attorney General), Price (HHS), and Mnuchin (Treasury) nominations. Those cloture motions will ripen upon disposition of the previous nomination in the order filed. Each nomination is subject to 30 hours of post-cloture debate, prior to a vote on confirmation.

House Legislative Activity

Today, the House will meet at 12:00pm for morning hour and 2:00pm for legislative business. Votes will be postponed until 6:30pm. The following legislation will be considered under suspension of the rules:

  1. H.R. 618 – Crags, Colorado Land Exchange Act of 2017 (Sponsored by Rep. Doug Lamborn / Natural Resources Committee)
  2. H.R. 698 – Elkhorn Ranch and White River National Forest Conveyance Act of 2017 (Sponsored by Rep. Scott Tipton / Natural Resources Committee)
  3. H.R. 688 – Arapaho National Forest Boundary Adjustment Act of 2017 (Sponsored by Rep. Jared Polis / Natural Resources Committee)
  4. H.R. 689 – Bolts Ditch Access and Use Act (Sponsored by Rep. Jared Polis / Natural Resources Committee)
  5. H.R. 337 – Black Hills National Cemetery Boundary Expansion Act (Sponsored by Rep. Kristi Noem / Natural Resources Committee)
  6. H.R. 494 – Fort Frederica National Monument Boundary Expansion Act (Sponsored by Rep. Buddy Carter / Natural Resources Committee)
  7. H.R. 387 – Email Privacy Act (Sponsored by Rep. Kevin Yoder / Judiciary Committee)

On Tuesday, February 7, the House will meet at 10:00am for morning hour and 12:00pm for legislative business.

  1. H.J.Res. 44 – Disapproving the rule submitted by the Department of the Interior relating to Bureau of Land Management regulations that establish the procedures used to prepare, revise, or amend land use plans pursuant to the Federal Land Policy and Management Act of 1976 (Subject to a Rule) (Sponsored by Rep. Liz Cheney / Natural Resources Committee)
  2. H.J.Res. 58– Providing for congressional disapproval under chapter 8 of title 5, United States Code, of the rule submitted by the Department of Education relating to teacher preparation issues (Subject to a Rule) (Sponsored by Rep. Brett Guthrie / Education and the Workforce Committee)
  3. H.J.Res. 57 – Providing for congressional disapproval under chapter 8 of title 5, United States Code, of the rule submitted by the Department of Education relating to accountability and State plans under the Elementary and Secondary Education Act of 1965 (Subject to a Rule) (Sponsored by Rep. Todd Rokita / Education and the Workforce Committee)

There are no votes expected in the House on Wednesday, Thursday, and Friday due to the Democratic caucus retreat.

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