Washington Snapshot: A 2020 Federal Budget in Sight; Timing Challenges of Opportunity Zones Rules Release; SALT Deduction Limit Suspension Cleared for House Vote
Note: Snapshot will take a holiday break from December 20 until the new session of Congress commences the week of January 7.
In This Week's Edition of Snapshot...
- A 2020 Federal Budget in Sight
- Tax Extenders Prospect Dimming for 2019 Passage
- SALT Deduction Limit Suspension Cleared for House Vote
- Timing Challenges of Opportunity Zones Rules Release
- More on Opportunity Zones…
- Executive Branch and Regulatory Affairs
- Happening in the States
News from the Hill
A 2020 Federal Budget in Sight
Congressional leaders announced late Thursday they have reached a "deal in principle" to fund the federal government and boost defense and domestic budgets by $49 billion in fiscal 2020 -- $22 billion more for defense and $27 billion for domestic programs. Although there are technicalities to work out over the weekend, the plan is for a House vote as early as Tuesday. The House and Senate will likely look to pass all 12 appropriations bills in two big packages, or “minibuses.”
Lead Congressional appropriators, Senate Appropriations Chairman Richard Shelby ( R-AL) and House Appropriations Chairwoman Nita Lowey (D- NY), met twice this week with Treasury Secretary Steven Mnuchin who represents the Administration in the discussions, with the goal of finalizing the parameters of a government funding deal by week’s end. While the ongoing issue of southern border wall funding has been the major sticking point, reports that the agreement would provide $1.4 billion for the Administration’s border wall construction.
Leaders in Congress know they must finish the deal in time for the December 20 deadline when the government runs out of money. However, even if deliberations break down, the odds of a government shutdown at this point are slim to none.
Tax Extenders Prospect Dimming for 2019 Passage
Word has it from “those in the know,” that the possibility of passing a tax legislation package, including the awaited tax extenders package, is growing more elusive as the end of year ticks down. Basically, according to all reports, talks over the year-end package are at a standstill. Senate Majority Whip John Thune (R-SD) used the term “impasse.”
The two sides are negotiating over what might be attached to the must-pass legislation needed to fund federal agencies through Dec. 20 but it is not clear yet what might make it into a “skinny” or pared-down package.
SALT Deduction Limit Suspension Cleared for House Vote
The House Ways and Means Committee cleared the way for a House vote next week on a two-year suspension of the $10,000 deduction limit on state and local taxes, or SALT. The bill, H.R. 5377 (16) eliminate the deduction limit in 2020 and 2021. Paying for it would be done by upping the top individual tax rate back up to 39.6 percent, while also installing marriage penalty relief for 2019.
Timing Challenges of Opportunity Zones Rules Release
OMB's Office of Information and Regulatory Affairs (OIRA) has received the final rules for the Opportunity Zone (OZ) program created by the Tax Cuts and Jobs Act, H.R. 1 (115) but the publication of those final rules may be a timing problem for investors. While this generally is good news for communities waiting for investors to flow their money into Qualified Opportunity Funds, there is an interesting twist about the timing. Releasing the final regulations too close to the end of the year will not give investment managers enough time to absorb the ramifications of new rules on year-end investments. Waiting until the turn of the year may make more sense if the final regulations are not formally released prior to December 20th.
In other actions related to OZ’s, Sen. Tim Scott (R-SC), introduced new legislation this week that would impose more extensive reporting requirements than a similar measure he co-sponsored earlier this year. Sen. Scott's new legislation demands more granular information about who is investing in the zones and what they are doing there, while imposing penalties for failing to report. It also calls on the government to produce more extensive demographic and economic information to better understand what difference the program is making.
Executive & Regulatory News
On December 2nd, in a bi-partisan 70-15 vote, the U.S. Senate confirmed Dan Brouillette as the next Secretary of Energy. He was officially sworn-in December 4th at DOE headquarters. Brouillette replaces Rick Perry, also a former governor of Texas, who resigned from the position in October.
Education Secretary Betsy DeVos Tuesday unveiled a proposed rule on Tuesday that is meant to ensure colleges are not denied access to federal student aid programs based on their religious affiliation. This proposed rule is a result of her effort earlier this year to examine and ease the restrictions on how religious colleges obtain and use federal funding. The Education Department said it conducted a full review of its regulations related to Title IV Higher Education Act programs and identified provisions “that may discriminate against otherwise eligible students and faith-based entities by disqualifying them from Title IV.” The Department intends to publish final regulations by no later than November 1, 2020, so that they will be effective July 1, 2021.
Department of Commerce
The Economic Development Administration reports that since January 2017, EDA has invested $341.9 million in 236 projects across the U.S in or near Opportunity Zones (OZ). EDA regularly posts its grant awards made to organizations or municipalities in or aligned with an Opportunity Zone. In June of 2019, EDA added OZs as a funding priority. Projects range from infrastructure improvements to workforce development and apprenticeship collaborations to development of small business incubators. Philanthropic funders can use this listing to identify specific locations and grant recipients to engage for aligned collaborations with foundation ongoing or new investments in a particular OZ.
Happening in the States
Exclusive from our colleagues at the National Council of Nonprofits.
Washington State Sets Country’s Highest Overtime Threshold
This week the Washington State Department of Labor (and) Industries released its long-awaited final rules increasing minimum overtime threshold over an 8-year period to more than $80,000 per year. The new threshold for determining which white-collar employees may be exempt from overtime pay ultimately will be set at a level of 2.5 times the state minimum wage that will be $13.50/hour in 2020 and adjusted for inflation thereafter. The department predicts the minimum annual salary for exempt employees will be $83,356 by 2028. By comparison, the federal overtime threshold next month to $684 per week ($35,568 per year). In announcing the news of the overtime threshold hike to the nonprofit community, Laura Pierce, Executive Director of Washington Nonprofits explained: “We face rising labor costs and funding levels that are not keeping pace. On the positive side, this could move us toward better compensation in the sector and less burnout.”
Other states are actively adjusting their own overtime thresholds at levels higher than is set by the federal government. California and New York have adopted minimum thresholds of about $62,000 and $58,000 respectively. Maine sets the minimum salary threshold at $36,000/year based on a multiple of the state minimum wage (which is rising to $12/hour in January). A final rule in Pennsylvania would raise the threshold to $45,500 by 2022, but may be on hold as the Governor negotiates a minimum wage hike in the Commonwealth.
