Washington Report (August 2024)
Tuesday, August 20, 2024
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Posted by: Kristin Evans
Congress
Members of the House of Representatives left town a week early this year, opting to begin their August recess in July. The Senate followed suit the following week after the vote on the tax bill’s procedural motion discussed below. Congress will be in recess all of August and will return September 9 for what is expected to be a shortened work period in DC before they go back to the campaign trail through the election in November.
Tax
Just before the Senate left town, a procedural motion was brought to the Senate floor and voted down by a vote of 48-44. The underlying bill attached to the Motion to Consider as it is known was H.R. 7024—the Tax Relief for American Families and Workers Act. Recall, this legislation passed the House January 31 on an overwhelmingly bipartisan vote of 357-70. The legislation restores retroactively the 100 percent bonus depreciation tax credit, which took a 20 percent haircut in 2023 and another 20 percent reduction in 2024. The bill would restore the write off to 100 percent in 2023 and extend that benefit through 2025. The legislation also retroactively extends through 2025 the research and development tax credit which expired in 2022 and includes more favorable interest deductibility provisions. Finally, it bumps up the deduction limits under Sec. 179, which allows businesses to write off business expenses for depreciable assets like equipment, vehicles and software. These business tax credits are paired with a more robust Child Tax Credit, which was successful in attracting support from Democrats and a number of Republicans who are working on rebranding the Republican party to one focused less on corporate America and more on working families.
While we were encouraged by the bipartisan vote in the House and optimistic for speedy consideration in the upper chamber, that outcome did not materialize. Senate Finance Committee Ranking Member Mike Crapo (R-ID) pushed for the bill to go through regular order in the Senate with a committee markup and consideration of amendments. The majority’s concern with that approach is that the House-passed bill represented a delicate balance of competing interests and any changes to the legislation were seen as potentially upsetting that balance and killing the effort.
The procedural motion’s failure was unfortunate but not unexpected as Senate Republicans remain opposed to the legislation. Senate Majority Leader Chuck Schumer (D-NY) put the procedural motion up for a vote to get lawmakers’ position on record in advance of the upcoming election in November. Schumer did switch his vote from “yea” to “nay” at the last minute as a parliamentary move to enable the legislation to be brought up at a later date.
Next year is a consequential one in the tax space. In addition to all of the benefits in H.R. 7024 that need to be acted upon, the Sec. 199A deduction (discussed below) expires at the end of 2025. WIA attended a breakfast fundraising event in late July for House Ways & Means Committee Chairman Jason Smith (R-MO). During the discussion, Chairman Smith noted that $4.6 trillion (with a T) in tax benefits expire at the end of next year. Along with our workforce, transportation/supply chain priorities and other policy priorities, WIA will be busy working to restore and preserve these important tax benefits that are critical to the competitiveness of Main Street businesses prevalent in our sector.
In other news in the tax space, Rep. Lloyd Smucker (R-PA)—leader of the newly formed House Ways & Means Committee’s Main Street Tax Team—hosted a forum in early August in southern York County, PA to discuss the importance of extending Sec. 199A of the Internal Revenue Code. Recall, this is the provision in the Tax Cuts and Jobs Act (TCJA) of 2017 that attempts to level the playing field in the tax code between larger corporations organized as C corporations and many small and medium sized businesses in our sector organized as pass throughs. The tax rate for C corporations in the TCJA was lowered to 21 percent and Sec. 199A is a 20 percent tax deduction for S-Corporations and other pass-through entities.
Eight individuals ranging from financial advisors to manufacturers to a dairy farm owner testified at the roundtable in support of extending 199A and the negative effects if Congress fails to act next year. The provision, like many other pieces of the TCJA, expires at the end of 2025. Rep. Smucker is the lead sponsor in the House of the Main Street Tax Credit Act (H.R. 4721) which would extend this 20 percent deduction permanently. The legislation currently has 185 cosponsors, but unfortunately only 2 Democrats are on board.
Looking forward, action on this bill is highly unlikely this year, but this issue will be a focal point in 2025. Next year will also be a new Congress—the 119th Congress—and all current pending legislation dies when the 118th is gaveled out sometime in late November or December, depending on the length of the Lame Duck session following the election. The bottom line is that this bill will have to be reintroduced next year and WIA will be working hard with our champions on and off the Hill to recruit bipartisan support for the new bill.
Truck Weight/Supply Chain
Last week, a coalition comprised of associations representing both Class 1 railroad companies and smaller short line rail operations, as well as unions and other groups sent a letter to House leadership expressing opposition to H.R. 3372—an WIA-supported bill that authorizes a pilot program for heavier 91,000-pound rigs equipped with a sixth axle to travel on our nation’s interstate highway system. The current gross vehicle truck weight limit on federal highways is 81,000 pounds on 5 axles.
The letter was prompted by a sign-on letter request from Members of Congress supporting H.R. 3372 urging House leadership to vote on the measure when Congress returns in September. One of the supporting talking points for H.R. 3372 is that it would reduce truck traffic on local roads that frequently run through small towns and intersect cross walks by encouraging shippers to move freight more efficiently on the federal interstate system. The opposition letter turns that argument on its head by asserting the following:
Increases in truck size and weight would have especially severe consequences for local roads and bridges because bigger trucks are not limited to the interstates. These heavier and longer trucks need to run on state and local roads to pick up and drop off freight, as well as for “reasonable access” for fuel, food and other necessities. Local roads and bridges face significantly more damage than interstates because they may be older, built to lower standards, or are already in poor condition.
The letter was written by the Coalition Against Bigger Trucks—a Class 1 railroad-funded organization that has lobbied against any reform of federal truck weight policy for over a decade. The rails view any increase in allowable truck weight limits as a competitive threat, despite the fact that rail cannot possibly serve all shippers’ needs and that the Class 1s would actually increase profits as a 91,000-pound limit would escalate truck traffic to rail intermodal facilities. The letter is purposefully misleading too as it references “longer” trucks. The rigs that would be authorized by the pilot in H.R. 3372 to travel on the federal interstate would have the exact same configuration as trucks currently operating on our roads today. The only difference is the addition of the sixth axle that improves weight dispersion across all the tires, thereby reducing pavement consumption, and also improving braking.
Despite opposition from the railroads, WIA will continue to advocate for House-passage of this common-sense measure to increase truck shipping efficiency.
Workforce
Before leaving for the August recess, the Senate Appropriations Committee approved its Fiscal Year (FY) 2025 Labor-Health and Human Services-Education appropriations bill on a bipartisan basis, which contains a $35 million plus up over FY 2024 for the Perkins Basic State Grant program. Overall, the measure would increase education programs by about $1 billion. The Senate legislation funnels considerably more resources for education and workforce development programs than the House version of the bill released earlier this summer.
The appropriations process will resume in September when both chambers return from the August recess. ACTE and other workforce focused advocacy groups are waging a grass roots efforts to persuade Congress to approve the Senate’s version when a final FY 2025 budget deal is finalized. We will keep you apprised of developments.
Low Interest Business Loan Program
On August 8, the U.S. Department of Agriculture announced that it will receive applications from local lenders for funding to help create jobs in rural areas through the agency’s Intermediary Relending Program. The program provides low-interest loans to local lenders who then relend the funds to local businesses to grow economies in rural communities. These loans can be used by businesses to buy equipment and machinery and “acquire, build, convert, expand or repair a business,” among other things. The announcement with more information may be found here.
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