ACR Newsletter

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Washington Roundup | Consider This | Top Reads

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Friday, November 14, 2014

>> Federal: Washington Roundup
>> Federal: The Balance of Congress & Leadership Changes
>> Federal: Senate Finance Committee
>> Federal: House Ways & Means Committee
>> Federal: Lame Duck
>> Federal: What the Election Means for Tax Reform
>> Federal: Key Dates
>> Federal: ACR in Action
>> Consider This: Consider This: What Does it Mean?
>> Top Reads: GOP’s Senate Wins Boost Prospects of Tax Changes for Nonprofits

Washington Roundup

Congress returned to Washington on Wednesday after the midterm elections last Tuesday, November 4. Republicans reclaimed control of the U.S. Senate by gaining eight seats, with one state still outstanding, and increased their majority in the House of Representatives. This outcome means Republicans will control the tax reform process on both sides of Capitol Hill for at least the next two years.

The Balance of Congress & Leadership Changes

The big news is that Republicans took control of the Senate, picking up eight seats and giving them a majority of at least 53 to 46. While many expected the Senate to flip, few believed it was going to be by such a wide margin. Louisiana will hold a runoff on December 6 between incumbent Democratic Senator Mary Landrieu and Republican Representative Bill Cassidy. Neither of those candidates earned the required 50 percent plus-1 margin necessary to win the seat outright. Senator Landrieu faces an uphill battle in the runoff: RealClearPolitics polling averages show her trailing Cassidy by 4.8 points.

Current Senate Minority Leader Mitch McConnell (R-KY) was elected on Thursday to take over as Majority Leader next year. His deputies are also set to take over leadership positions accordingly. Current Majority Leader Harry Reid (D-NV) was also elected on Thursday as the Senate Minority Leader.

In the House, Republicans increased their margin of control to their largest majority since World War II. Current Speaker John Boehner (R-OH) will remain in charge, as will other top Republicans in leadership, following elections in the House Republican Conference on Thursday. For the Democrats, Nancy Pelosi (D-CA) is expected to remain Minority Leader and her deputies are expected to maintain their posts as well. House Democrats will hold their elections next week.

It is worth noting the Republicans also netted four additional governorships and firmly bucked what was expected to be anti-incumbent fervor across the country. Notably, Republicans picked up two key swing states – Ohio and Florida. This could have a significant impact on the 2016 Presidential election.

Senate Finance Committee

Barring any unforeseen events, Senator Orrin Hatch (R-UT) is expected to become Chairman of the Senate Finance Committee. But there will be other changes to the committee that will be worked out over the coming weeks.

The first task for Senate Republicans will be determining how large each Senate committee should be, and then the ratio of Republican members to Democrat members. These ratios are negotiated by leaders in both parties and typically reflect the Senate’s overall breakdown. Currently, there are 13 Democrats and 11 Republicans on Finance, which is approximately the same proportion as in the entire Senate.

Senate Republicans also have their own rules that determine how committee members are chosen, term limits for chairmen, and limits on how many “Super A Committees” (Finance, Appropriations, Armed Services and Foreign Relations) senators can join.

Under these rules, the party leader gets to fill odd-numbered committee openings, and even-number openings are based on seniority. So if there were only one GOP opening on a committee, Republican leader McConnell would fill the seat with the senator of his choosing. If there were two open slots, McConnell would name one, and the second would go to the most senior candidate hoping to join the committee. 

On the Finance Committee, Republicans will likely add at least one new member to reflect their new majority. Early reports suggest that Senators Dean Heller (R-NV) and Dan Coats (R-IN) are frontrunners. Democrats will likely shrink their ranks first by not replacing retiring Senator Jay Rockefeller (D-WV), but Virginia Senator Mark Warner could be dropped since he is the most junior Democrat on the panel.

House Ways & Means Committee

While the House majority will remain Republican, the GOP increased its margin and will get to fill a few more seats on the Ways and Means Committee. According to a source on the Hill, committee chairs and new member assignments for the next Congress could be finalized as early as this week, but may also carry over into next week.

In terms of process, the members of the House Republican Steering Committee are in charge of choosing new members for open committee seats. Per their rules, Speaker John Boehner has five of the 36 votes for each seat, but his influence goes beyond just those five votes. Unless there is a highly contested slot, most members follow the Speaker’s lead. The Steering Committee met this week and consulted its regional representatives to identify potential candidates for open slots on all House committees. Committee chairmanship selections, however, are far more political and often take place behind closed doors, even though the same Steering Committee oversees that process as well. 

With Chairman Dave Camp (R-MI) retiring and the election now over, Budget Committee Chairman Paul Ryan (R-WI) formally announced his intentions to seek the Ways and Means gavel. It is likely he will face a challenge from Rep. Kevin Brady (R-TX), but Ryan is widely considered the favorite. While every other Ways and Means member won re-election, Representatives Jim Gerlach (R-PA) and Tim Griffin (R-AR) are retiring at the end of this year. For the Democrats, Representative Allyson Schwartz (D-PA) unsuccessfully ran for governor and had to give up her seat. 

With Ryan taking the gavel, there are four total spots to be filled on Ways and Means, in addition to those spots reflecting the new House majority. Reports suggest that Representatives Kristi Noem (R-SD) and Pat Meehan (R-PA) are the top candidates to fill two of the three vacancies on the majority side. A clear contender for the third spot has yet to emerge, though a number of candidates have been mentioned, including Representatives George Holding (R-NC), Bill Huizenga (R-MI), Reid Ribble (R-WI), Tom Rice (R-SC), Todd Rokita (R-IN), and Jason Smith (R-MO). On the Democratic side, current Budget Committee Ranking Member Chris Van Hollen (D-MD) is expected to fill the available position left by Rep. Schwartz.

Lame Duck

Between now and Thanksgiving, the House will set party leadership and organize committee makeups. Since one Senate race will be decided in December, and control will flip to the Republicans, committee assignments and official leadership positions could be set at a later date.

The “must-do” legislative items will then have to be resolved after Congress returns from Thanksgiving. Current government funding is slated to expire on December 11 and extending this funding is a top priority for both parties. We expect Republicans to aim for a long term spending bill that funds the government through most of next year. Also on the priority list is a tax extenders bill – one that renews nearly 60 short-term tax incentives that expire on an annual basis, including the IRA charitable rollover. Senate Majority Leader Harry Reid (D-NV) said on November 7 that he hopes to reach a bipartisan deal on the extenders package during the lame duck period, though it remains unclear if a final package will include some of the additional provisions in the America Gives More Act, which passed the House earlier this year. ACR and our colleagues in the sector are currently working to help pass these provisions before the end of the year.

Other items also remain on the table. We expect outgoing Majority Leader Reid to make a strong push for confirming the remaining Presidential appointments while he still has control of the Senate. This could lead to a heated debate, given the GOP’s anger over Reid’s handling of other nominees earlier this year, and potentially derail some of the issues discussed above. As of this writing, Reid has not announced his intentions. Larger issues, such as legislation to permanently extend authorization for the Export-Import Bank (current authorization expires in June, 2015), immigration reform, and comprehensive tax reform are unlikely to be taken up before the end of the year. 

What the Election Means for Tax Reform

We believe that progress will be made on tax reform in the next Congress. Incoming leaders of both tax-writing committees have stated they view comprehensive reform as a top priority. Other Members have also chimed in: Senator Rand Paul (R-KY) said he would urge Senator Mitch McConnell (R-KY) to take up tax reform in January. Representative Brady noted there is “no question in [his] mind that a Republican-held Senate enhances the likelihood of a Senate tax draft in this next session.” Incoming Majority Leader McConnell specifically mentioned tax reform as one area of possible compromise with Democrats, and Speaker Boehner recently listed tax reform at the top of his “five key things we should do as a nation.”

At the very least, Republicans and Democrats alike have called for revamping the corporate tax code and this could be the catalyst for undertaking the individual side as well. Comprehensive reform or not, the window for such legislation is small given the 2016 Presidential election on the horizon.

Key Dates

  • Mid-November: House and Senate leadership elections
  • Mid-November or Early December: Congressional Committee leadership appointments
  • December 6: Louisiana Senate runoff
  • December 11: Continuing Resolution expires
  • January 5, 2015: 114th Congress convenes and House Speaker is sworn in
  • Late January: State of the Union
  • February 2: President’s FY 2016 budget due
  • March 15: End of suspension of debt limit
  • May 31: Expiration of the current Highway Bill, which has a tax component

ACR in Action

ACR Executive Director Sandra Swirksi recently participated in an event sponsored by the Urban Institute’s Tax Policy and Charities project that explored ways that existing charitable giving incentives, along with new platforms and better practices, can be leveraged to encourage philanthropy.

Additionally, Joanne Florino, senior vice president for public policy at The Philanthropy Roundtable, participated in a panel discussion on tax reform this morning at the Southeastern Council of Foundation’s annual meeting in New Orleans, Louisiana.

Consider This: What does it mean?

Well the election is over and most (think Alaska) but not all of the votes have been counted. Still it is clear that Republicans had a very good evening, retaining control of the House by an ever wider margin and taking control of the Senate.

What does it mean? In the Senate, every senator is a king (or queen) of sorts. Whether your party is up or down, you still can exert power, mostly by throwing a wrench in the works via a filibuster threat. However, controlling the Senate also means you have significant control over the “conversation.” You get to schedule the hearings, choose the topics and set the floor schedule. Being in charge is significant.

What we also know is that with Republicans in control of both chambers of Congress, there will be tremendous outside pressure to deliver on Republican priorities. One of those priorities is tax reform. Be prepared for a fulsome debate over the next year on that topic. Add to that the fact that in 2016, the Republicans will have to defend more than twice as many seats as Democrats, meaning that the Senate could very well flip again. The pressure is definitely ratcheted up on Senate Republicans to get something done in the next two years to show voters they deserve to keep their majority.

But first, we have to get through the lame duck. The tenor between the two parties coming out of that lame duck – be it amicable, or confrontational, or something in between – will tell us much about how the next two years play out and whether there is a real shot at getting substantive legislation to the President’s desk that he will actually sign. As we’ve said so many times before, stay tuned.

Top Reads

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