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March 2018

March Madness: NCAA basketball and Capital fun and games...

When most folks hear the phrase “March Madness,” they think about brackets and the annual college basketball championship. But March Madness is also an apt description for what’s going on—or not going on—in our nation’s capital.

Behind the headlines about a breakthrough with North Korea, multiple investigations of Russian influence on US elections and public fascination with a porn star’s claims of an affair with President Trump, the real madness continues as Republicans, Democrats and the Trump White House battle over who does nothing best.

Like the upsets and surprises that mark the basketball tournament, each day brings changes and flip-flops in the political battles behind the scenes in Washington. Adding to the confusion are the president’s frequent policy gyrations, supporting an issue one day only to reverse his position the next.

Plus, the mid-term congressional elections in November are a constant factor, with lawmakers from both parties eager to avoid any missteps that might upset the balance in closely contested elections.

As Congress rushes toward an Easter recess at the end of the month, lawmakers face a deadline to fund the government through the end of the fiscal year in October and avert yet another government shutdown. While the topline numbers were set in an earlier budget bill, lawmakers are still negotiating over how to spend that money.

Complicating that process are major battles between Republicans and Democrats over federal funding for Planned Parenthood and women’s health programs, spending on environmental programs and money for border security and President Trump’s border wall.

Adding more challenges, the White House announced the president does not want any spending on the massive “Gateway Project” to build new rail tunnels under the Hudson River between New Jersey and New York. Some have suggested that his opposition to that plan is “pay back” to Senate Minority Leader Chuck Schumer, who is leading the effort to include about $1 billion in federal money to help the states fund that project.

Even as lawmakers fight over where to spend the money already budgeted for the current fiscal year, there is little agreement over a budget bill for next year. And despite brave talk about the urgent need to spend billions of dollars on repairing the nation’s deteriorating infrastructure, there are no proposals on the table from either the Republican majority or the Trump White House.

As the headlines over the Parkland school shootings fade, Congress is retreating to its traditional battle lines on gun control, with Republicans standing fast against Democrats pushing for tighter gun regulations. The president seems to have confused this issue further, first supporting tighter background checks and raising the minimum age to buy a gun before reversing on those issues.

A House bill including money for schools to improve security but no new gun control measures may be stalled completely in the Senate. Republicans with a majority, of only two votes, won’t be able to overcome a Democrat filibuster of any bill that doesn’t include new gun control measures.

Further divisions mark the debate over revising the Dodd-Frank banking regulations. While there is bipartisan support for relaxing some of the restrictions on smaller banks, particularly in rural areas, liberal Democrats led by Sen. Elizabeth Warren (D-MA), are warning that any effort to roll back the Dodd-Frank rules would set up the same circumstances that led to the 2008 financial collapse.

On immigration, efforts to enact broader immigration reforms were thwarted by a promised Trump veto because the proposals didn’t go far enough to limit immigration and to build his proposed border war. As a result, the focus has been on proposals to extend the Deferred Action for Childhood Arrivals (DACA), the so-called Dreamers program, in the face of Trump’s promise to end that program unless Congress acted.

Despite bipartisan support, the efforts to extend DACA have been beset by on-again, off-again support from President Trump and strong opposition from conservative Republicans. Now, the impasse over DACA has been set aside as two federal courts have blocked President Trump’s plan to end that program and have given Congress as much as year to enact legislation.

Which businesses can take the new pass-through tax deduction remains unclear...

When Republicans included the so-called pass-through deduction as part of the massive tax bill enacted in December, it was widely hailed as a major new tax break for hundreds of thousands of business owners who report their company’s income on their personal tax returns.

It’s simple in concept: Owners of pass-through entities, including partnerships, S Corporations, LLC’s and Schedule C sole proprietorships, can deduct 20% of the business income they report on their personal returns from their taxable income.

But in practice it’s far more complicated as Congress tried to exclude wealthy owners of certain service businesses, including doctors, lawyers, consultants and hedge fund managers, from taking the new deduction.

This much is clear: If you’re a pass-through business owner who earns less than $157,500 or $315,000 for a married couple (including both your pass-through income and income from other sources), you get full access to the deduction of your pass-through income no matter what your business does.

But, the deduction declines as taxable income increases for the owners of “service” industries, which the new law says include health, law, consulting, athletics, financial and brokerage services. And, the break is eliminated for service business owners whose taxable income is more than $207,500 for singles and $415,000 for married taxpayers.

That’s where the uncertainty lies. Who is a consultant? Who is a broker as opposed to a sales person? Are veterinarians “health” professionals, or does that category apply only to those providing “human” health services?

The law also specifies that any business where the “principal asset” is the “reputation or skill of one or more employees or owners” is considered a service business and barred from taking the pass-through deduction as their taxable income rises. That provision is open to broad variations for businesses named after the owner or founder or whose “reputation” is at the heart of their sales and marketing campaigns.

Right now, tax professionals and lawyers are searching for loopholes even before the IRS announces its interpretations of the new law. And it will likely take several years of IRS rulings and court challenges before it is clearer as to how the pass-through deduction will be applied across the board.

Congressional Republicans may still challenge Trump tariffs...

Republicans in Congress have not been shy in their public opposition to President Trump’s new tariffs on imported aluminum and steel. Even as Trump softened his initial plan by at least temporarily exempting Mexico and Canada from the tariffs, GOP lawmakers warned of a trade war with dire political and economic consequences.

Beyond breaking with several decades of Republican support for free trade, the lawmakers worry that any negative impact on the booming US economy would become a rallying point for Democrats in this year’s mid-term elections.

Those opposed to Trump’s tariff plan face an uphill battle in Congress, however. Because Trump would undoubtedly veto any legislation to overturn or modify his tariffs, opponents would have to muster a veto-proof majority of both the Senate and House to enact their plan. That is highly unlikely given the support for the tariffs by many Democrats and their labor-union backers and a reluctance by Republicans to buck the president on this issue even if they disagree with him.

Opponents could also take legal action, challenging Trump’s claim that the new tariffs are based on “national security” concerns. That claim is undermined, they say, by the exemptions for Canada and Mexico and the fact that Trump’s national security advisors publicly opposed the tariff plan.

Bottom line: Action to repeal or modify the tariffs is unlikely despite the broad opposition of GOP lawmakers.

Labor Department asks employers to self-report their wage and hour violations...

The U.S. Department of Labor (DOL) Wage and Hour Division (WHD) has launched a pilot program aimed at encouraging employers to voluntarily report their wage and hour violations.

The “Payroll Audit Independent Determination” (PAID) program is intended to proactively resolve potential overtime and minimum wage violations of the Fair Labor Standards Act (FLSA). (It also shows that government bureaucrats are unrelenting in their never-ending search for catchy acronyms.)

The DOL predicted that PAID will resolve violations “expeditiously and without litigation,” “improve employers' compliance with overtime and minimum wage obligations” and “ensure that more employees receive the back wages they are owed—faster.”

Employers being investigated by the WHD or who are already in litigation or have been contacted by employee representatives regarding litigation or settlement may not participate in the new program.

An employer believing there are violations or seeking to determine whether its pay practices comply with the law may contact WHD, which will then ask the company to provide its wage data and an explanation of the potential violations along with certification that other requirements are being met.

After evaluating the information, WHD will issue a summary of unpaid wages and settlement agreements for each employee. Employers are responsible for issuing prompt payment by the end of the next full pay period after receiving the summary of unpaid wages and providing proof of payment to WHD.

Although WHD will require payment of all back wages due, the government will not require additional payment of liquidated damages or civil monetary penalties—which may lead employees to refuse the back-wage payments in order to reserve their right to litigate for damages and penalties.

EPA’s Pruitt continues his crusade to slash the agency he heads...

Scott Pruitt, the former Oklahoma attorney general and now head of the Environmental Protection Agency (EPA), has been unrelenting in his efforts to shrink the EPA and refute the scientific support for global warming.

With Pruitt’s backing, the Trump White House is seeking to cut more than $2.5 billion—or 23% from EPA’s annual budget, including deep cuts in the agency’s programs related to climate change. In his first year as administrator, Pruitt shrunk the size of the agency by 1,500 people, according to the federal Office of Personnel Management (OPM). The current total of 14,162 employees is fewer than worked at EPA during the Reagan administration.

Pruitt also replaced numerous academics who sat on EPA’s science advisory panels with industry experts who may be more sympathetic to his views on climate change. Also, he announced a new policy barring any researchers from sitting on those advisory panels if they received grant money from EPA.

Delivering on President Trumps promises to reverse Obama administration policies to reduce emissions and regulate the energy industry, Pruitt has rolled back more than a dozen climate regulations put into place under the Obama administration. Most of those moves are being challenged in court by environmental groups on grounds that Pruitt and EPA failed to follow legal requirements for revising federal regulations.

In addition, Pruitt spearheaded Trump’s move to withdraw from the Paris climate agreement, removed all references to climate change in EPA’s strategic plan and deleted numerous climate change references from the EPA website.

Employer can’t lean on religious beliefs to fire transgender employees...

The U.S. Appeals Court for the Sixth Circuit has upheld the Equal Employment Opportunity Commission (EEOC) in ruling that a federal law protecting religious freedom does not give an employer the right to discriminate against a transgender employee.

The ruling came two months after President Trump shocked his own supporters by re-nominating Chai Feldblum, an LGBT activist and Obama appointee, to the EEOC. Feldblum was instrumental in the commission decision that was the subject of the appeals court ruling.

The EEOC had sued a funeral home on behalf of a transgender employee who was terminated after informing her employer that he intended to transition from male to female. The EEOC alleged that firing violated Title VII of the federal civil rights law, that prohibits discrimination based on gender. The funeral home argued that Title VII did not prohibit discrimination based on transgender status and that the Religious Freedom Restoration Act (RFRA) protected the funeral home owner’s exercise of sincerely held religious beliefs.

A trial judge’s decision in favor of the funeral home was overturned by the circuit court. The Sixth Circuit reasoned that tolerating an employee’s understanding of his or her sex and gender identity was not “tantamount to supporting it” and that compliance with the civil rights law did not amount to an endorsement by the employer of the employee’s views.

Legal experts said the appeals court decision is important because it extends a recent string of federal court rulings holding hat gender identity is closely linked with sex and therefore protected under Title VII. The decision sends a strong signal that the law protecting religious freedom has limited application in defending against employment discrimination under Title VII.

The decision also focuses new attention on Trump’s nomination of LGBT activist Feldblum to a third term on the EEOC. Feldblum has said there is no reason for religious beliefs to ever provide an exception to LGBT anti-discrimination cases.

Sen. Mike Lee (R-Utah) has called on Trump to withdraw her nomination, saying that her “radical views on marriage and the appropriate use of government power place her far outside even the liberal mainstream.”