Washington Report (October 2024)

Election

With Congress in recess and the regulatory agencies relatively quiet for the moment, we thought we would provide a snapshot of how the race stands for control of Congress and the White with less than a month to go before the pivotal November 5 election.

Starting with the U.S. Senate, Democrats currently control the upper chamber by a single seat—51-49. With Senator Joe Manchin’s (D-WV) retirement announcement late last year, the Senate is effectively tied headed into the election with that open seat certain to flip to Republican. That leaves four races on which to focus—Michigan, Ohio, Wisconsin and Montana.

In Michigan, Rep. Elissa Slotkin (D-MI) is looking to fill the seat being vacated by Senator Debbie Stabenow, who announced she was retiring after this session of Congress. Slotkin is polling ahead of her Republican opponent former Congressmen Mike Rogers (R-MI), but the race is tight and is in the “toss up” category in the well-respected Cook Political report’s analysis. Likewise in Ohio, incumbent Senator Sherrod Brown (D-OH) is running ahead of his Republican challenger Bernie Moreno, but the race is within the polling margin of error and Cook has had this race in the toss up category for some time. In Wisconsin, sitting Senator Tammy Baldwin (D-WI) had a 7-point lead based on polls back in August, but that race has tightened considerably and it too is within the margin of error. Her opponent, Eric Hovde, has consolidated the Republican base and many independents in a state that is evenly divided. Senator Ron Johnson (R-WI) was reelected to his seat in 2022 by a single point. Lastly, Montana is looking to be the state most likely to determine control of the Senate. Senator Jon Tester (D-MT) is trailing in the polls by about 6-8 points. However, Senator Tester has proven to be resilient over the last few election cycles and the rare Democrat who can win in a red state. Recall Senator Susan Collins (R-ME) pulled out a victory in 2022 after polls showed her trailing by the same margin a month out from election day. But most political analysts are predicting a Republican pick-up and Cook has this race in the “lean Republican” column.

Other races to watch include the Texas Senate seat held by Senator Ted Cruz (R-TX). This race is surprisingly close as Congressman Collin Alred’s (D-TX) campaign has found traction. The Democrat Senatorial Campaign Committee—the political campaign funding arm for Senate Democrats--has redirected considerable dollars to support Allred, which suggests that Democrats see a real opportunity in the Lone Star state. Cook has this race as lean Republican. Finally, Senator Deb Fischer (R-NE) is in a surprisingly close race with Independent challenger Dan Osborn. A poll conducted in September actually had Osburn leading Sen. Fischer 45%-44%. Analysts still believe that Senator Fischer will pull this out, but the race is certainly worth watching.

The bottom line is that, barring any surprises, it is looking likely that the U.S. Senate will switch control to Republican, albeit by the slimmest of margins.

In the House, Republicans hold a narrow 220-212 majority in the lower chamber. There are 3 vacancies. Twenty-six races are currently in the “toss up “category—12 held by Democrats and 14 held by Republicans—and these races are the ones to watch that will determine control of the House. Election forecast model 538 gives Democrats and Republicans an even chance at controlling the chamber. It is literally a jump ball. At a number of political events that WIA has attended over the last few months, Members of Congress from both parties have said that whoever wins the Presidential contest will likely determine control of the House.

A few races to watch include Rep. Jared Goden (D-ME), who is in a dead heat with Republican former NASCAR driver Austin Theriault. Golden has been a champion in the House for the forestry and forest products supply chain. He sits on the House Small Business Committee and is a member of the House Working Forests Caucus as well as the House Construction Procurement Caucus. Another close one is Washington’s 3^rd District, where incumbent Marie Gluesenkamp Perez is facing off with Joe Kent in this swing district. Congresswoman Gluesenkamp Perez-owner of an auto repair and machine shop-- has been a strong champion of workforce development programs that serve small businesses. She is also the author of legislation to accelerate deployment of innovative wood building product (mass timber) manufacturing. She too sits on the House Small Business Committee and House Agriculture Committee. One other to follow closely on election night is Rep. Marc Molinaro’s (R-NY) race with Democrat Josh Riley. This House race is the most expensive in the country and polling shows the two in a dead heat. Rep. Molinaro sits on three key committees of importance for WIA—Small Business, Agriculture and Transportation & Infrastructure. He and his staff have always been very accessible and receptive to our advocacy outreach.

And finally, at the Presidential level, it is looking increasingly like Pennsylvania will determine our next President. Given its 19 Electoral College votes and history showing that Pennsylvania results align closely with Michigan and Wisconsin, analysts are predicting that whichever candidate prevails in the Keystone State will be our next President. Current polling shows the race for the Commonwealth within the margin of error. In fact, that is the case with all 6 of the other swing states—Michigan, Wisconsin, Arizona, Georgia, Nevada and North Carolina. Across the board—Senate, House and Presidential—this election promises to be historically close. And let us not forget that we may yet have an “October Surprise” that may surface in the next few weeks that may weigh on the outcome. In any event, the next month  promises to be an incredibly interesting ride.

European Union Deforestation Regulation (EUDR)

The U.S. forestry and forest products sector received some good news earlier this month when the European Commission announced a 12-month delay in implementation of EUDR, pushing the effective date for large companies to December 30, 2025. The proposal must first be adopted by both the EU Parliament and the EU Council, though most acts are adopted during the first reading.

The additional time is meant to provide impacted companies adequate time to phase in their solutions, ensuring smooth implementation from the start. The Commission noted that constant concerns expressed by global partners—including the U.S. government-- regarding their ability to comply with EUDR’s requirements played a role in the delay. The EU Commission made clear that this extension in no way puts into question the objectives or the substance of the law.

The one-year delay—assuming it is enacted—is helpful, but the fact remains that tracing trees used to make wood products back to the exact parcel where they were harvested is problematic and this requirement is a linchpin of the EU law. We will keep you apprised of developments.

Corporate Transparency Act (CTA)

The upcoming Lame Duck session of Congress following the election—the last gasp of the 118^th Congress—may include action on delaying implementation of the Corporate Transparency Act. As we have written about, this little-known law that took effect this year imposes burdensome filing and recordkeeping requirements on small to medium-sized businesses. FinCen—the arm of the U.S. Department of Treasury in charge of implementing the CTA—came out earlier in October with data showing the vast majority of businesses required to file under the CTA have not done so – despite just three months left before the year-end filing deadline. The fact of the matter is that compliance obligations have not been well communicated by FinCen and the chorus of policymakers calling for a one-year delay is growing. Penalties for non-compliance can be up to $590 per day and up to 2 years in jail.

The CTA is unique in that it explicitly targets the very companies least equipped to shoulder its regulatory burdens. Among its various exemptions, the statute includes a carve out for entities whose revenue exceeds $5 million and which employ more than 20 full-time employees. Companies not meeting those thresholds – essentially every small business currently operating in America today – must comply. FinCEN estimates that more than 32 million such entities will be affected by the new law just this year, with an additional 6 million each subsequent year as new businesses are formed.

In September, Rep. Zach Nunn (R-GA) introduced H.R. 9278 which would postpone the CTA reporting requirement for one year. The bill—the Protect Small Businesses from Excessive Paperwork Act—is pending in the House Financial Services Committee.

Tax

Senator Ron Wyden (D-OR), Chairman of the Senate Finance Committee-the tax writing panel in the upper chamber, said earlier this month that revising and updating tax law governing pass through entities like S-Corporations and partnerships should be a priority next year when Congress debates business tax benefit extension. Chairman Wyden has long been vocal in his suspicion of pass throughs and partnerships as a tax avoidance channel for upper income taxpayers. In 2021, he unveiled a legislative proposal to close what he and his team on the committee deemed “loopholes” in pass through tax law that should be closed.

Currently, pass through business structures comprise 95 percent of all U.S. businesses and 62 percent of private sector workers. The House Ways & Means Committee has established a number of tax “teams” to identify policy solutions to the upcoming 2025 tax cliff when most of the Tax Cuts and Jobs Act (TCJA) tax benefits expire.  One of these is the Main Street Tax Team led by Rep. Lloyed Smucker (R-PA) which is tasked with formulating plans for a number of expiring tax benefits including the Sec. 199A 20 percent deduction for S-Corporations and other pass-through business structures. Without Congressional action, that deduction will lapse at the end of next year. Rep. Smucker is also the sponsor of House legislation (H.R. 4721) to make the Sec. 199A deduction permanent, which makes him a great fit for this effort.

In another tax development, Senate Democrat staff familiar with Senator Wyden’s plans indicated that Senate Democrats intend to have a tax package reflecting Kamala Harris’s priorities ready on “day one” of a Harris Presidency. The goal is to have a jump start on negotiations over tax policy in the new Congress with a new President. Specifics are sparse at this point, but WIA will be meeting with key staff in the coming weeks to ascertain specific areas of tax policy that will be prioritized in the package.