Through our legislative contacts and lobbyists, PPAI has access to up-to-the-minute information, insight and analysis that you won’t see published anywhere else. The information in this month’s special Washington Report focuses on the Marketplace Fairness Act and the debate over the collection of sales and use taxes from consumers by out of state sellers. It is timely information that will help you become more aware and better prepared to advocate for your business, profession and industry.
I hope you find this information beneficial to your business.
As the August recess begins, much is left to Congress for this year. The potential deadline for a debt ceiling increase nears with the hope that real tax reform will accompany. This fall could also see rejuvenation to the Marketplace Fairness Act with its recent additional support. The delay of healthcare reform is also a pressing issue as Congress retreats to their home districts. The two bills in question would delay implementation of the reform and are currently awaiting movement in the Senate.
Congress will return after Labor Day and while it will have a full agenda, only a couple of items are on the “must do” list. At some point, the federal government will run out of wiggle room below the debt ceiling and Congress will have to increase it. The hope of tax reformers (and debt reducers) everywhere is that hard deadlines for tax reform and debt reduction can be planted into the debt ceiling increase. The crisis will probably come to its day of reckoning in October, when Congress and the President will likely be forced to deal with it.
The other “must do” action is funding the government for its new fiscal year, which begins on October 1. It is doubtful, however, that Congress will have passed the appropriations bills it needs to fund the government through regular order by this date. The talk going into the summer recess is that Congress will pass a “continuing resolution” that funds the government at current levels. There is a possibility that a deal on the debt ceiling could also include a deal on fiscal year 2014 funding.
Everyone is pressing Congress and the President to deal with their particular piece of legislation this fall, even if it is not on the “must do” list. Proponents of the Marketplace Fairness Act (MFA) are just one group expected to make a push for House passage of a bill that benefits their cause.
Under the MFA, states would be allowed to secure jurisdiction (nexus) over out-of-state sellers to require them to collect and remit use taxes. The legislation exempts sellers that make less than $1 million in total remote sales in the year preceding the sale from the requirement. The Senate passed a version of the bill in May.
MFA proponents have an ally in Virginia Republican Gov. Bob McDonnell, who has placed it on his “must do” list. If a federal law is not enacted, the governor will have to accept an increase in the Virginia gas tax. He had championed a state budget that reduced the gas tax by offsetting it with a potential increase in the collection of sales and use taxes on internet-based sales transactions. The relevancy of this observation is that the key player in the House is the Chairman of the Judiciary Committee is Rep. Bob Goodlatte (R-VA) who has indicated that he does not like the Senate-passed version. If the House does act, they are expected to consider a different version of the bill, rather just pass the Senate version, resulting in either another compromise with the Senate or the Senate adoption of the House-passed version.
Tax reform also received a lower ranking in importance this fall. There is no magical deadline for tax reform—at least not yet. Since this is the first session of a Congress, the discussion could carry over into next year. Much of the speculation has to do with Senate Finance Chairman Max Baucus’s (D-MT) impending retirement after this Congress and Rep. David Camp’s (R-MI) departure from his position as Ways and Means Committee chairman. The common notion is that as lame ducks they will not have leverage to “get it done” in 2014. Both have promised a mark-up of a bill by their respective committees this year.
If there is no tax reform side deal, it will be difficult for Sen. Baucus and Rep. Camp to gain any traction for tax reform this year. If so, tax lobbyists will scramble to renew expiring tax credits and deductions. For example, the direct expensing allowance, also known as the Section 179 allowance, will drop from its current temporary levels of a $500,000 allowance with an asset purchase cap of $2 million, to $25,000 and $200,000, (both without indexing) respectively, in 2014.
DELAYING HEALTHCARE REFORM IMPLEMENTATION
The House passed two bills that would delay implementation of the healthcare reform law. Fairness for American Families Act, H.R. 2668, introduced by Rep. Todd Young (R-IN), would provide a one-year delay in the imposition of the individual health insurance mandate penalties. The Authority for Mandate Delay Act, H.R. 2667, introduced by Rep. Tim Griffin (R-AZ), would delay the application of the employer health insurance mandate for one year.
Senate Majority Leader Harry Reid (D-NV) is not likely to call these bills up for a floor vote as freestanding bills. For the moment, the proponents of these changes will pursue an amendment strategy, looking for a “must do” legislative vehicle to which they can be attached. Activity on these proposed changes will probably heat up in October.
STOPPING LAWSUIT ABUSE
The Lawsuit Abuse Reduction Act of 2013 (LARA), H.R. 2655, is on the move in the House of Representatives. The bill is moving through the committee process and could reach the House floor in the fall.
LARA is all about the Federal Rules of Civil Procedure. Rule 11 says that attorneys or unrepresented parties may not file lawsuits that are being presented for any improper purpose, such as to harass, cause unnecessary delay or needlessly increase the cost of litigation; the claims, defenses and other legal contentions are not warranted by existing law or by a frivolous argument for extending, modifying or reversing existing law or for establishing new law; and the factual contentions do not have evidentiary support. The rule allows courts to impose sanctions at their discretion, though this was not always the case. Until 1993, the courts were required to impose sanctions. “Shall” disappeared from the language of Rule 11 governing sanction imposition, and the lawsuit floodgates opened. LARA reverses those amendments , and in addition requires that judges impose monetary sanctions against lawyers who file frivolous lawsuits. These sanctions include the attorney’s fees and costs incurred by the victims of frivolous lawsuit.