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April 2018

Congress won’t do very much between now and November…

With all 435 House seats and 35 Senate seats up for grabs in November, congressional leaders will avoid opening any controversial issues that might provide fuel for their opponents in close election fights.

Despite clarion calls to pass a new farm bill, reform immigration laws, invest in infrastructure projects or change the flood insurance program, GOP leaders are reluctant to open legislative squabbles that could complicate electoral outcomes. A few measures, such as a popular bipartisan plan to reform and update IRS procedures (see separate story below), will make it through because they pose little threat to any lawmaker.

But other proposals that didn’t get crammed into the $1.3 billion funding package that passed last month has little chance of going anywhere between now and Election Day.

Will anything happen? Look for the Senate to focus on the backlog of presidential nominations, which would allow GOP leaders to appear to be doing something. That process will continue to be balky as Democrats, in no hurry to approve the president’s judicial and executive branch nominees, will continue to stall whenever they can.

The House will be a different story because House Republicans can pass controversial proposals free of any fear that they will become law given the Senate’s reluctance or inability to overcome Democratic filibusters. In addition, despite record and growing deficits, the House may even approve more tax cuts, or at least make the personal income tax cuts that expire in 2025 permanent, knowing that the Senate won’t go along. By doing that, House Republicans can charge that Democrats opposed more tax relief for voters.

A GOP plan to pass a balanced budget amendment to the Constitution fell short of the required two-thirds vote in the House, but it will allow Republicans to claim they truly care about eliminating deficits while Democrats don’t.

One of the few measures that must pass is an omnibus spending bill when the current continuing resolution runs out on Oct. 1, 2018. Look for lawmakers to kick this can down the road by extending the funding levels in the current spending bill until the new Congress convenes in January.

Other vital programs that expire this year include reauthorization of the Federal Aviation Administration (FAA) and the Federal Flood Insurance program. Rather than fight over how to get those done, Congress is more likely to simply extend the current programs until a later time.

Even a bipartisan plan to roll back the Dodd-Frank Act’s regulations on the banking industry, which passed the Senate, is likely to get bogged down in the House, where conservatives want to loosen the reins even more.

Rolling back the rollbacks at EPA...

While President Trump continues to insist that Environmental Protection Agency Administrator Scott Pruitt is doing a “great job” in undoing Obama-era environmental regulations, it appears that much of that effort is in danger of being diluted or struck down by the courts.

That’s because the EPA under Pruitt has failed to follow many of the basic requirements governing the issuance of new or revised government regulations. And, in some cases, the EPA proposals have lacked the basic scientific support that is needed to justify the proposed changes.

“In their rush to get things done, they’re failing to dot their I’s and cross their t’s,” Richard Lazarus, a professor of environmental law at Harvard University, said about the EPA rollbacks. “They’re producing a lot of short, poorly crafted rulemakings that are not likely to hold up in court.”

The result has been a series of setbacks in the courts and the promise of continuing battles over Pruitt’s deregulation efforts that could stretch out for several years.

"The longer these things are delayed," says Thomas Pyle of the American Energy Alliance, the less likely they are "to wind their way through the process before the next election."

That prospect has not been lost on some in the White House and Republicans in Congress, already concerned about the drumbeat of allegations that Pruitt violated government ethics and spending rules.

“The president’s support for Pruitt will wear thin if the claimed regulatory rollbacks don’t actually happen,” said one GOP insider.

Some rollbacks have already run into trouble. Just last month, a federal court found that EPA broke the law by delaying implementation of an ozone pollution rule. Last year, an effort to halt restrictions on methane emissions was also blocked.

In addition, six other EPA efforts to delay or roll back rules have been struck down by the courts. Faced with strong opposition, even from within the administration, Pruitt backed away from plans to delay or withdraw smog and mercury pollution regulations.

Pruitt’s proposed repeal of Obama’s Clean Power Plan may also fall short, says William Buzbee of Georgetown University Law Center. Writing in The Hill, Buzbee said Pruitt does not offer the required scientific evidence to show why the original regulation's scientific conclusions were wrong. And he noted that EPA is bound by law to regulate carbon emissions, but Pruitt’s proposal offers no replacement for the regulation it would eliminate.

Perhaps the largest rollback of environmental rule to emerge from the Trump administration came earlier this month when Pruitt proposed repealing the Obama administration’s rule that would require automakers to increase fuel economy of new cars and trucks to 54.5 miles per gallon by 2025, nearly doubling the current requirements.

Critics were quick to note, however, that Pruitt justified this plan with a 38-page document with little scientific justification and filled largely with requests from auto manufacturers to avoid the Obama fuel rules.

Experts note that Trump and Pruitt will have to get Congress to amend the Clean Air Act to have a meaningful impact on relaxing Obama-era auto emission standards. That’s because the Clean Air Act permits states and localities to enforce their own standards—and California’s tough rules are already followed in 38% of new car sales because so many states follow California’s lead.

Supreme Court to rule whether online merchants must collect state sales taxes...

The U.S. Supreme Court is considering whether to require Amazon and other online merchants to collect state sales taxes on all online sales.

The case could overturn a 26-year-old high court decision holding that online retailers need to collect sales taxes only when they have a physical presence—or “nexus”—in a state. That 1992 precedent opened the way for massive expansion of online retailing by allowing many companies to sell merchandize online at a lower net price than their bricks-and-mortar competitors, who have to collect sales tax for the state in which they are located.

When it ruled in 1992, the Supreme Court suggested that it was up to Congress to settle this issue. But, lawmakers haven’t acted despite numerous efforts to clarify the rules against cross-state online sales.

In the meantime, Amazon.com, by far the largest online retailer in the world, has opted to collect state taxes on all its own products, most of the thousands of merchants who offer an estimated one-half of the products sold on Amazon do not levy sales taxes.

The case currently before the court was brought by South Dakota, which has asked the justices to impose a standard based on the level of sales in a given state. This co-called “economic presence” rule would require any online merchant whose sales total $100,000 or who conducts more than 200 transactions in any one state to collect sales taxes.

A high court decision is expected by June.

Congress moves to make the IRS friendlier to taxpayers...

A bipartisan plan to redesign the Internal Revenue Service, including an independent office of taxpayer appeals and measures to prevent identity theft, is expected to win quick congressional approval.

However, while Congress has increased the tax agency’s budget, current funding levels will still leave the IRS short of the resources it needs to implement December’s massive tax-cut bill or to audit more than a tiny share of personal tax returns.

“It’s been 20 years since Congress and the Ways and Means Committee last considered major legislation to overhaul the IRS,” said Ways and Means Chairman Kevin Brady, R-Texas “During that time much has changed, and the IRS must change with it.”

The tax reform package moving through the House includes several major sections. One would set up an IRS Independent Office of Appeals to make it easier for taxpayers to have IRS decisions reviewed. Another provision would give taxpayers greater access to “the case against them.” Under current law, taxpayers can access their case file only by requesting it under the Freedom of Information Act.

Another section would amend the tax code to improve cybersecurity and taxpayer identity protection, including new personal taxpayer identification numbers. The bill would also modernize the information technology of the IRS, which is still using main frame computer systems designed during the Kennedy administration.

On the business side, the bill would limit the IRS's ability to seize the assets of businesses who have not committed a crime but are under suspicion of evading reporting requirements, a practice that critics say has been unfairly used against innocent small businesses.

In a move to make the finances of tax-exempt organizations more visible, the bill would require them to file electronically each year, which would provide faster public inspection of those returns.

Unlike the massive tax bill passed last December supported primarily by Republicans, this new IRS package includes several measures co-sponsored by Democrats, including provisions that provide more tax preparation assistance to low and moderate-income taxpayers.

However, the IRS reform measure does little to bolster the resources of the IRS, which has faced steady budget cuts for nearly a decade. The agency lost 18,000 employees from 2010 to 2017 and recent reports shows it can answer only about 60 percent of calls from tax

filers. Another report found that the IRS audited one out of every 160 individual tax returns in 2017, the lowest rate since 2010.

Also, the agency's workload was dramatically increased by the new tax law, which tasked it with implementing hundreds of complicated changes in the tax law and the creation of an estimated 450 new tax forms. Even with that new burden, President Trump asked Congress to cut $100 million in IRS funding in the massive $1.3 trillion spending bill passed last month. Instead, Republicans increased IRS spending by $320 million—which is still short of what the agency says it needs to implement the new tax law.

Past salaries don’t justify pay disparities between men and women..

In a decision with far-reaching national implications, a federal appeals court has ruled that employers cannot rely on a worker’s past salaries to justify pay differences between men and women performing the same work.

That decision by the Federal Appeals Court for the Ninth Circuit overturned a 1982 precedent from the same court and conflicts with rulings from other federal circuits, setting up an almost-certain Supreme Court showdown on this important issue.

While forbidding employers from paying men and women differently for the same work, the federal Equal Pay Act provides four exceptions: seniority, merit, the quantity or quality of the employee’s work, or “any other factor other than sex.” Employers have insisted that past salary history can be used to set starting pay because it is a “factor other than sex.”

The employer in this latest case admitted that it paid the female worker less than her male colleagues for the same work but said that relying on her salary history was permissible because it was attributable to men having higher salaries than women before they came to work there. That made it “factor other than sex.”

The full Ninth Circuit disagreed and concluded “unhesitatingly” that the Equal Pay Act’s reference to “any other factor other than sex” encompasses only “legitimate, job-related factors such as a prospective employee’s experience, educational background, ability, or prior job performance.”

Legal experts predicted a spate of lawsuits on this issue, which they said would not be resolved until the Supreme Court untangled the conflicts between federal circuit courts.

GOP finally regains control at the NLRB...

With the confirmation of John Ring as a member of the National Labor Relations Board (NLRB), Republicans now have the 3-2 majority on the five-member Board, opening the way to revisiting and reversing a number of pro-labor Obama-era NLRB decisions.

Shortly after Ring’s Senate confirmation, President Trump named him as chairman. He will replace Marvin Kaplan, whom Trump tapped as chairman less than four months ago after the departure of Philip Miscimarra. Kaplan will remain on the board.

Ring is a management-side employment and labor lawyer and is expected to provide strong leadership along with NLRB General Counsel Peter Robb, who was named by Trump in November. Robb replaced Democrat and pro-labor attorney Richard Griffin Jr., who had used the powerful general counsel’s position to drive pro-labor rulings through the NLRB.

The general counsel oversees bringing cases before the board, and Robb is expected to quickly ask the Board to reverse previous decisions holding companies responsible for the labor practices of their franchisees or subcontractors and the so-called quickie election rules compressing the timeframe for union representation elections.

Federal agencies streamline environmental review of infrastructure projects...

Eleven federal agencies have agreed to streamline environmental review of major infrastructure projects under the National Environmental Policy Act (NEPA).

The interagency Memorandum of Understanding (MOU) implements President Trump’s executive order to speed up the time it takes to complete major construction. He complained that it has taken more than five years just to gain environmental sign-off on some large projects.

Among its provisions, the multi-agency MOU would require there be a lead agency for any major project, that environmental reviews be completed within two years and that agencies conduct reviews concurrently.

Despite this new agreement to streamline the process, Trump’s proposed $1.5 trillion infrastructure plan, introduced in January, is not expected to win congressional approval before the mid-term elections in November.