Washington Report (December 2024)

The Last Gasp of the 118^th Congress—Farm Bill and Workforce Development

Congress is racing to tie up some critical loose ends this week before gaveling out the 118^th Congress and leaving town for the rest of the year. Primary among them is funding the federal government. House and Senate negotiators finally forged a deal late Tuesday on a  Continuing Resolution (CR) to extend federal government operations into mid-March of next year. Also included in the 1, 547-page measure is at least one key WIA policy deliverable and a couple of other notable policy provisions. They are:

• Reauthorization of WIOA—the CR includes provisions of the Stronger Workforce for America Act (H.R. 6655), which updates the Workforce Innovation and Opportunity Act (WIOA). This comprehensive statute underpins all our country’s workforce development programs and has not been reauthorized since 2014. Among other things, the bill would—

• Dedicate 50 percent of the adult and dislocated worker funding toward upskilling workers through “individual training accounts” (ITAs), on-the-job learning, and wrap-around supports, while redirecting an existing funding stream toward ITAs for displaced workers. 
• Prioritize employer-led initiatives that equip workers with the skill sets to fill jobs in critical industries and help the currently employed workforce upskill to avoid displacement and advance their careers.
• Streamline the “eligible training provider list” to focus on outcomes and ensure eligible programs are aligned with the skill and hiring demands of employers. 
• Strengthen and fully implement the performance accountability system in the law to hold states and local workforce boards accountable for achieving positive labor market outcomes for program participants.

Working to reauthorize WIOA has been a WIA policy priority for the last couple of years. The other two items that are notable are—

• A one-year extension of the Farm Bill. This action was essential as the House and Senate could not come together this year on a broader 5-year reauthorization measure. As part of this extension, farmers and forest landowners will receive significant funding for relief from natural disasters and wildfire. But this action buys time for new leadership in the 119^th Congress to forge consensus on a broader 5-year bill.
• A one-year delay in implementation of reporting requirements under the Corporate Transparency Act. The CTA took effect at the beginning of 2024 and Beneficial Ownership Information reports for companies formed prior to January 1, 2024 are due January 1, 2025. If the CR is enacted in its current form, this deadline would be pushed back one year. The CTA is an anti-money laundering statute that requires small businesses with less than $5 million in revenue and fewer than 20 employees to file reports on their ownership. Fines for not filing total almost $600 per day and noncompliance could result in a prison sentence.

House Speaker Mike Johnson (R-LA)’s whip team is working the phones today to find enough votes to pass this measure on Friday. Elements of this package may be altered or eliminated as this process unfolds. We will keep you apprised of developments.

House Leadership Developments

Last week the House Republican Steering Committee selected Rep. Brett Guthrie (R-KY) over Rep. Bob Latta (R-OH) to be the next Chairman of the influential House Energy and Commerce Committee. This panel leads on most environmental issues related to air, water and waste, as well as energy supply and efficiency policy. We have worked closely with Mr. Guthrie and his team since he took office in 2008. He is a solid, pragmatic legislator that is well liked by his peers and those in the government affairs realm. This committee will be active next year in considering Congressional Review Act resolutions to overturn some of the Biden Administration’s rules and regulations in the environmental policy space, among other areas. One rule in particular that may be an area of focus is the particulate matter 2.5 standard. EPA opted to tighten the National Ambient Air Quality Standard (NAAQS) from the existing 12 parts per cubic meter down to 9 (μg/m3) which is considered background level for the pollutant. PM 2.5 is essentially fine dust that is produced by engine exhaust or virtually any activity that causes fine particles to become airborne—construction, manufacturing, logging and vehicle traffic, among others. Tightening the standard to 9 brought enormous swaths of the country into nonattainment for the pollutant, which makes obtaining a permit to expand a facility and grow a business in these areas much more difficult.

Also last week, the Steering Committee gave Rep. Tim Wahlberg (R-MI) the nod to head the House Education and Workforce Committee next year. Walberg prevailed over Rep. Burgess Owens (R-UT) for the top spot on this key panel. In his social media posts after receiving the news, incoming Chairman Walberg emphasized that addressing the workforce challenges of U.S. employers will be one of his key objectives.

In other committee leadership news, Rep. Rick Crawford (R-AR) dropped out of the race to Chair the House Transportation and Infrastructure Committee next Congress. He had initiated a challenge to current Chairman Sam Graves (R-MO), who was term limited in that role but was pursuing a waiver from the rule. Once the Republican Steering Committee granted the waiver, Crawford opted to end his bid. The T&I Committee leads on policy issues associated with trucking—importantly the issue of truck weight reform to make truck transportation more efficient and cost effective.    

On the Democrat side, two moderate lawmakers on the House Agriculture Committee challenged current Chairman David Scott (D-GA) for the Ranking Member position on committee next Congress. Scott is 79 and there has been a whisper campaign for several months among his colleagues about whether he can meet the challenge of negotiating a Farm Bill reauthorization. Representatives Jim Costa (D-CA) and Angie Craig (D-MN) stepped forward and it was announced on December 16 that Rep. Craig would fill the top Democrat seat on the panel next year. 

The other important committee leadership race is for Ranking Member of the House Natural Resources Committee. Current Ranking Member Raul Grijalva (D-AZ) decided to step down from his post after Rep. Jared Huffman (D-CA) announced he was running against him. Shortly thereafter, Rep. Melanie Stansbury (D-NM) announced that she was also running for the top Democrat slot on the panel. This committee leads on all issues associated with forestry and forest management, including timber harvesting on federal lands. The Democrat Steering and Policy Committee announced earlier this week that Rep. Huffman would be the new Ranking Member next year.

Looking ahead to 2025, a new Administration and the 119^th Congress

As expected, the Congressional calendars for the 119^th Congress came out the first week of December and based on the number of days that Congress has penciled in to be in Washington, 2025 is looking to be a very busy year. The typical cadence for Members of Congress is to parachute into D.C. late Monday or early Tuesday. Starting Tuesday, they attend committee hearings and markups, fundraise, cast votes and then, when the lure of jet fumes becomes too much to bear, call it a wrap on Thursday and head back home Thursday afternoon. According to the new calendars, which will not be the case next year. There will be a  number of Fridays where both Houses are in session and incoming Senate Majority Leader Thune has been telling his colleagues to prepare for weekend work as well. We shall see, but the incoming leadership has identified a number of consequential, challenging policy issues to address—some of which are discussed below—and maximizing their time in Washington will be essential to make meaningful progress on any of them.

Tax

As we have noted many times over the course of this year, 2025 is shaping up to be historic in the tax space. Tax lobbyists that we attend meetings with are dubbing 2025 as the “Super Bowl of Tax” and “Taxmageddon.” While we anticipated that tackling expired and expiring business tax benefits would be the first item out of the gate next year as part of a budget reconciliation package, it appears that President-elect Trump and Republican leadership are going to first pursue some of the other issues on which he campaigned. Incoming Senate Majority Leader John Thune (R-SD) announced in early December that he would like to see the outlines of a budget reconciliation bill within the first 30 days after President-elect Trump takes office. According to leadership staff we have spoken to, the GOP will pursue two distinct reconciliation packages next year. The first will focus on energy, border security and military readiness/defense. Specifics on policies that will fall into these tranches are not yet clear. The second package will focus singularly on tax and extending the business tax benefits enacted by the Tax Cuts and Jobs Act (TCJA).

The appeal of using the budget reconciliation process is that it circumnavigates the 60-vote threshold in the Senate--meaning that only a simple majority is needed to clear the upper chamber. As Republicans will hold 53 Senate seats in the 119^th Congress, these measures are certain to pass barring any GOP defections. Reconciliation has fairly strict parameters but has been used often in situations where one party controls both chambers of Congress and the White House.

The Wood Industry Association’s priorities in the second reconciliation bill will be restoring the full expensing tax benefit that has been phasing out over the last few years and is scheduled to take another 20 percent haircut in January. The plan is to restore 100 percent bonus depreciation back to 100 percent and do so retroactively. The other piece is reviving and extending the research and development (R&D) tax credit. As part of the Tax Cuts and Jobs Act (TCJA), the ability of businesses to fully expense R&D costs in the same year those costs were incurred expired in 2022. Currently, those R&D costs have to be amortized over a 5-year period—essentially making investments in your business more expensive. Again, the plan is to restore and extend full expensing of R&D costs and make restoration of this key tax benefit retroactive. Also riding on this second train will be extending the 20 percent tax deduction for S-Corporations and other pass-through tax structures. This benefit was also put in place by the TCJA in an effort to introduce some semblance of tax parity between the rate larger C corporations negotiated and that which is assessed to smaller Main Street businesses. Unfortunately, this benefit expires at the end of 2025 and its extension is critical. To provide perspective, 62 percent of all private sector jobs are anchored by pass-through businesses. To put a finer point on it, 88 million people in this country show up for work every day at a business that is structured as a pass-through. It is a tax structure that is popular in our sector and WIA will be working with our allies in the business community and Congress next year to ensure that this deduction is carried forward.

Farm Bill

As mentioned above, the politics simply did not align between Democrats and Republicans this year on a Farm Bill rewrite. Party leadership remained so far apart on spending priorities that forging consensus was unachievable. We remain hopeful that new leadership—potentially on both the Agriculture Committees—will yield different results in the new Congress. Senator Amy Klobuchar (D-MN) will be new in the Ranking Member slot on the Senate Agriculture, Nutrition and Forestry Committee. She and incoming Chairman John Boozman (R-AR) have a good working relationship and both have proven to be champions on key issues to the forestry and forest products sectors. In the House, Chairman GT Thompson (R-PA) will continue on as Chairman, but there may be a new Ranking Member (discussed above). This issue will be settled before Congress leaves for the year.

While a new Farm Bill was not enacted in 2024, it was not an “all for naught” exercise. Many provisions that surfaced in the House and Senate Farm Bill proposals were positive, including legislative fully supporting grant programs at the Department of Agriculture that incentivize innovative wood product manufacturing like mass timber/CLT. The House Agriculture Committee passed bill also includes forestry and forest products workforce development provisions that will help enhance the supply of trained employees that can work in wood machinery manufacturing facilities and sawmills. WIA looks to build on this progress in 2025 and we remain optimistic that a new Farm Bill will be signed into law sometime next year. 

Trade

The President-elect’s campaign rhetoric over the last year or so has been pretty consistent on the international trade front. He has vowed that from Day One of his second Presidency he plans to get tough with our trading partners and rely heavily on his favorite tool to level the international playing field—tariffs. It is difficult to ascertain at this point whether the President-elect is using the threat of tariffs simply to bring our trading partners to the negotiating table or if he really is preparing to impose tariffs on China, Mexico, Canada and European Union countries in January. WIA is keeping a close eye on developments in this space as trade has been a top tier issue for us in the past.

There will of course be many other policy issues that surface next year, but these three are top of mind for WIA and the ones for which we are preparing. The new Congress-the 119^th-will gavel in January 3 when newly elected Members are sworn in and then the action starts. As always, the WIA team is here and engaged and will be communicating developments regularly as the Congressional and new Administration’s agenda takes shape.  

European Union Deforestation Regulation (EUDR)

The first week of December, the European Union tentatively agreed to delay the implementation of the EU Deforestation Regulation (EUDR) for large businesses until December 30, 2025, and for smaller businesses (up to 250 employees) until June 30, 2026. The provisional agreement required endorsement by the EU Council and the EU Parliament, which occurred on December 17. The proposed amendment to add a "no risk" category to the EUDR was not approved. This issue has been a major concern for solid wood producers—and really every link in the forest products value chain—as the EUDR’s requirement that all fiber entering the EU marketplace be traced back to the exact parcel where it was harvested.  While no entity can satisfy this requirement, the one-year delay is at least some positive news and buys time for resolution of the issue.