Washington Report - December 20, 2023

Workforce 
Last week, the House Education and Workforce Committee passed two key workforce development bills on a bipartisan basis. The more sweeping measure would reauthorize the Workforce Innovation and Opportunity Act (WIOA), which is the central statute in federal law that underpins all of our country’s workforce development programs. That bill—H.R. 6655 A Stronger Workforce for America Act—seeks to upgrade employee skills by dedicating 50 percent of the adult and dislocated worker funding towards upskilling workers. It would also place emphasis on employer-led initiatives that equip workers with the skill sets necessary to fill jobs that local employers are looking to fill and help the currently employed workforce upskill to avoid displacement and advance their careers. Finally, it ensures workers displaced from their jobs through no fault of their own can access robust skill development services, including through “individual training accounts.”

The legislation passed the committee on a 44-1 vote and heads to the House floor, which will take up the measure when Congress returns in January.

The second is H.R. 6585, the Bipartisan Workforce Pell Act sponsored by House Republican Conference Chair Elise Stefanik (R-NY), Education and the Workforce Committee Ranking Member Bobby Scott (D-VA), Education and the Workforce Committee Chairwoman Virginia Foxx (R-NC), and Health, Employment, Labor, and Pensions Subcommittee Ranking Member Mark DeSaulnier (D-CA). The legislation provides opportunities for students and workers looking to gain skills in high-demand fields by allowing Pell Grants to support students enrolled in high-quality, short-term workforce programs that will lead to career advancement.

Specifically, the bill authorizes the Department of Education to award Workforce Pell Grants beginning on July 1, 2025, for the 2025-2026 award year. An eligible student for a Workforce Pell Grant must be enrolled in an eligible workforce program, may not have attained a postgraduate degree and must otherwise meet the eligibility criteria to receive a Pell Grant. 

In terms of program eligibility to qualify for these grants, workforce programs would have to be at least 150 clock hours of instruction (or an equivalent number of credit hours), but less than 600 clock hours of instruction and offered during a minimum of eight weeks, but less than 15 weeks. Also, a state workforce board must first determine if a program provides education aligned with high-skill, high-wage, or in-demand industry sectors or occupations, meets the hiring requirements of potential in-demand industry or sector employers and satisfies any applicable educational prerequisite requirement for professional licensure or certification in the state or states in which the program is offered. 
The bill authorizes $40 million for Fiscal Year 2025 to support this program, and $30 million each subsequent year through FY 2029. 

This legislation also passed on a bipartisan vote of 37-8 and heads to the House floor. 

This is a positive development for our workforce policy agenda as it finally shows some momentum and will put pressure on the Senate to move a bill in 2024. 

Mass Timber
Last week the Senate and then the House approved Fiscal Year 2024 National Defense Authorization Act (NDAA) text that carries some important provisions for wood building material manufacturers. One would require the Secretary of Defense to consider all types of building materials for any design-bid-build military construction project before proceeding beyond the 35 percent design phase and contract award. What typically occurs now is that projects default to a check list that is decades old and does not account for innovative building materials like mass timber that save money and are more efficient and sustainable. 

The second calls upon the Secretary of Defense to establish a continuing education curriculum for instructional purposes for sustainable building materials such as mass timber and project designs that feature mass timber in order to improve military installation resilience. 

The legislation is on its way to the President who will sign it. 

Tax Extenders
In early December, the House Ways & Means Committee’s Tax Subcommittee held a hearing to highlight the importance of the Tax Cuts and Jobs Act’s business tax benefits and the need to extend them. Subcommittee Chairman Rep. Mike Kelly (R-PA) noted in his opening remarks not only the importance of acting on tax extensions now, but looming tax deadlines, particularly in 2025 when the Sec. 199A deduction is set to expire. Recall, this is the 20 percent deduction for qualified business income (QBI) for S-Corporations and other pass-through tax structures. WMMA will be working to extend this key tax benefit in our advocacy next year.

The benefits that need urgent attention, however, are those that have lapsed or are phasing out. To that end, a letter led by Rep. Rudy Yakym (R-IN) and signed by almost 150 House Republicans was sent to House Speaker Mike Johnson (R-LA) at the end of November to urge action by the end of this year on the expired and expiring business tax benefits that were authorized by the Tax Cuts and Jobs Act of 2017. None of the signatories sits on the House Ways & Means Committee and that was by design. Rep. Yakym wanted to show leadership that there is strong support across the Republican Caucus for action by year’s end on these key tax benefits. These benefits are:

• Full expensing (100 percent depreciation) of the cost of machinery and equipment in the year in which the costs are incurred.
  • Benefit began to ratchet down this year by 20 percent.
  • Will decrease 20 percent each year until fully phased out in 2027.
• R&D Tax Credit, which allows costs of research and development to be written off the year in which they are incurred.
  • Lapsed in 2022. R&D costs now have to be amortized over 5 years, making investments in the business more costly and restricting cash flow.
  • U.S. is now one of only two developed countries requiring amortization of these costs.
• Restoring EBITDA as the standard for deducting interest expenses.
  • Prior to 2022, business interest expense deductions were limited to 30 percent of Earnings Before Interest, Tax, Depreciation and Amortization (EBITDA). Now they are limited to 30 percent of EBIT—a stricter standard that serves as a tax on investment by making it more expensive for capital intensive industries throughout the supply chain to finance job creating growth.

A package of legislation was reported by the House Ways & Means Committee earlier this year but has not received a floor vote. Those bills are-- H.R. 2673, the American Innovation and R&D Competitiveness Act and S. 866, the American Innovation and Jobs Act, which would permanently repeal the R&D amortization provision; H.R. 2788 and S. 1232, the American Investment in Manufacturing Act, which would permanently restore the pro-growth EBITDA interest limitation standard; and H.R. 2406 and S. 1117, the Accelerate Long-Term Investment Growth Now Act, which would permanently extend full expensing.

While Speaker Johnson supports the tax package, the complicating factor is lack of a legislative vehicle. This is an unusual year in that there is no pre-Christmas “fiscal cliff” driving action on a budget deal where tax policy would usually ride. Every year for the last decade, Congress has been at work right up to Christmas week hammering out a budget deal. This year Congress funded the government into early 2024. At this point, all of the bills that could serve as a vehicle have been acted upon and the House has wrapped up its work for the year. We are optimistic though that action on these key tax benefits could occur in January. House Ways & Means Committee Chairman Jason Smith (R-MO) has been sending signals to us and the rest of the business community that this is a priority for the new year.

Rural Forest Markets Act (RFMA) 
In December, Senators Bob Casey (D-PA), Debbie Stabenow (D-MI) and Mike Braun (R-IN) introduced the Rural Forest Markets Act, legislation that would provide federal government incentives for private landowners to participate in voluntary carbon markets. Increasingly, forest landowners are looking to boost their return on investment by selling carbon sequestration credits generated from their managed forests to companies looking to offset carbon emissions or otherwise improve their carbon profile. The costs involved in ramping up to participate in these programs can be prohibitive for smaller landowners and this bill seeks to break down cost barriers to entry. 

While well intentioned, the legislation has stirred concern among those in the forest products value chain that worry about what the long-term effects of widescale participation in these markets will have on wood fiber availability. These programs typically require landowners to commit to longer harvesting rotation cycles on their timberland holdings. If enough landowners within a 50-mile radius of a sawmill postpone timber harvests by ten to fifteen years, it could put that sawmill in jeopardy of running out of raw material to make building products. Some more drastic modeling creates scenarios where forest landowners forgo harvesting altogether and rely on carbon credits for their income. 

This bill is unlikely to pass, but with Senate Agriculture Committee Chairwoman Stabenow as a cosponsor, there may be efforts to fold this bill into the upcoming Farm Bill reauthorization. House Agriculture Committee Chairman Glenn Thompson (R-PA) has serious concerns with the bill (RFMA) and would likely oppose its inclusion in any Farm Bill rewrite, but WMMA is monitoring developments closely.