December 17, 2015

H.R. 2029 – “Consolidated Appropriations Act, 2016” and “Protecting Americans from Tax Hikes Act of 2015"

Considerations on the Bill

Divisions A thru L, the appropriations omnibus, funds the federal government through the remainder of fiscal year 2016. CBO reports that the appropriations portion of the omnibus (divisions A through L) contains $1.067 trillion in regular discretionary budget authority, which is consistent with the Bipartisan Budget Act of 2015. Total funding in the Defense appropriations bill is $572.8 billion, which contains $514.1 billion in regular discretionary budget authority and $58.6 billion in Overseas Contingency Operations (does not add due to rounding). Including all OCO, disaster, emergency, and program integrity funding, divisions A thru L contain $1.15 trillion in budget authority.

CBO also reports that divisions M thru P (the non-appropriations divisions of House amendment number 1) would result in a deficit increase of $57.6 billion over 10 years. This includes $2.2 billion in increased direct spending and $55.4 billion in decreased revenues.

Division Q (tax extenders) contains tax provisions that would decrease revenue by $622 billion over 10 years. Of this amount, $559.5 billion in decreased revenue is due to the permanently extended provisions such as the R&D tax credit, Section 179 expensing, state/local sales tax deductibility, enhanced child tax credit, American opportunity tax credit, and enhanced earned income tax credit. Also Division Q includes a five-year extension of bonus depreciation with a phase down.

Note that division P contains several tax provisions that also reduce revenue by delaying for two years the “Cadillac tax,” delaying for one year the annual fee on health insurance providers, and extending several tax credits for renewable energy production. When divisions P and Q are combined together, they result in reduced revenue of $677 billion over 10 years.

Notable Bill Provisions

The Senate Appropriations Committee has released summaries of each appropriations division, available here.  The CBO score that lists funding levels for each division is available here.

 

Division A – Agriculture, Rural Development, FDA

Provides $898 million for the Animal and Plant Health Inspection Service. That is $23 million above the 2015 enacted level.

Provides $1.51 billion for the Farm Service Agency. That is equal to the 2015 enacted level.

Provides $2.8 billion for rural development programs. That is $368 million above the 2015 enacted level.

Provides $36.7 billion in loan authorizations for rural communities to address housing, electrification, and telecommunications needs.

Provides $80.8 billion in mandatory spending for the Supplemental Nutrition Assistance Program, also known as “food stamps.” That is $988 million below the 2015 enacted level.

Section 733

Allows states to grant an exemption for the school lunch and school breakfast programs from whole grain nutrition standards if school authorities demonstrate hardship, including financial hardship, in procuring specific whole grain products which are acceptable to students and compliant with whole grain-rich requirements. Prohibits implementation of requirement to reduce the quantity of sodium contained in federally reimbursed meals, foods, and snacks sold in schools until the latest scientific research establishes the reduction is beneficial for children.

Section 734

Prohibits use of funds to release or implement the final version of the eighth edition of the Dietary Guidelines for Americans unless they are based on significant scientific agreement and are limited in scope to nutritional and dietary information. 

Section 747

Prohibits use of funds to implement, administer, or enforce the final rule entitled “Food Labeling; Nutrition Labeling of Standard Menu Items in Restaurants and Similar Retail Food Establishments” published by the Food and Drug Administration in the Federal Register on December 1, 2014, for at least one year.

Section 749

This section provides a new pro-life rider. The amendment prohibits the FDA from evaluating research or clinical applications in which a human embryo is intentionally created or modified to include a heritable genetic modification (such as creating three-parent embryos). 

Section 759

Repeals country of origin labeling requirements for beef and pork products.

Division B – Commerce, Justice, Science

Bans abortion funding for federal prisoners (Sections 202-204); and prohibits funding for Legal Services Corporation grantees that engage in abortion-related litigation (LSC Administrative Provision).

Requires each United States Attorney to establish or participate in a task force on human trafficking.

Section 539

This section prevents funds from being used to relinquish the responsibility of the National Telecommunications and Information Administration, under the Department of Commerce. NTIA has had been responsible for oversight of the Internet’s domain name system, which correlates domain names with IP addresses. For years, the government has contracted that role out to the Internet Corporation for Assigned Names and Numbers, a nonprofit group. However, the Obama administration had made plans to transition away from government oversight.

Section 540

Prohibits the use of funds to deny inspectors general complete access to documents within their jurisdiction. The provision responds to a recent OLC opinion that allows the Department of Justice to deny or limit the inspector general’s access to records protected from disclosure by other privacy laws.

Division C – Department of Defense

Total funding in the Defense appropriations bill is $572.8 billion, which contains $514.1 billion in regular discretionary budget authority and $58.6 billion in Overseas Contingency Operations (does not add due to rounding).

Section 8103

This section prohibits the transfer or release of Guantanamo detainees into the United States.

Section 8104

This section prohibits the use of funds to construct or modify facilities in the United States for the purpose of housing Guantanamo detainees. Similar prohibitions are contained in other divisions of this bill as applied to other departments and agencies.

Title IX

Within Title IX (OCO), $715 million is provided for the Iraq Train and Equip Fund to be used to provide assistance to Iraqi security forces, including Kurdish and tribal security forces, for the purposes of countering ISIL.

Division D – Energy and Water

Provides $12.5 billion for the National Nuclear Security Administration. That is $1.1 billion above the 2015 enacted level.

Provides $11 billion for energy programs within the Department of Energy. That is $794 million above the 2015 enacted level.

Provides $5.99 billion for the Army Corps of Engineers. That is $535 million above the 2015 enacted level.

Section 105

Prohibits use of funds during fiscal year 2016 to develop, adopt, implement, administer, or enforce any change to the regulations in effect on October 1, 2012, pertaining to the definitions of the terms “fill material” or “discharge of fill material” for purposes of the Clean Water Act.

Section 110

Prohibits use of funds to require a permit for discharge of dredged or fill material under the Clean Water Act for normal farming, silviculture, and ranching activities, and for construction or maintenance of farm or stock ponds or irrigation ditches, and for maintenance of drainage ditches.

Section 312

Prohibits use of funds to implement or enforce higher efficiency light bulb standards.

Section 313

Deobligates not less than $160 million from clean coal technology projects selected under prior Clean Coal Power Initiative and FutureGen solicitations that have not reached financial close and have not secured funding sufficient to construct the project. Reobligates those funds for previously selected demonstration projects under such solicitations that have reached financial close or have otherwise secured funding sufficient to construct the project.

Division E – Financial Services and General Government

The explanatory statement would require the Division of Economic and Risk Analysis to report to Congress within 18 months of enactment on the combined impacts that the Dodd-Frank Act (especially Section 619) and other financial regulations, such as Basel III, have had on access to capital for consumers, investors, and businesses, and market liquidity, to include U.S. Treasury markets and corporate debt. 

This division also includes the Smith amendment on abortion funding in the Federal Employee Health Benefits Program (Section 613-614); conscience protection in the Federal Employee Health Benefits Program (Section 726); District of Columbia conscience protection intent of Congress (Section 808); D.C Hyde (Dornan Amendment) on abortion funding in the District of Columbia (Section 810).

Section 127

Prohibits the Department of the Treasury and the IRS from finalizing any regulation related to the standards used to determine the tax-exempt status of a 501(c)(4) organization.

Section 202

Requires the Office of Management and Budget to report within 18 months on the costs of implementing the Dodd-Frank Act.

Section 628

This section prevents FCC TV ownership rules from being applied to deals approved retroactively. The FCC rules regarding joint sales agreements were approved by the FCC in 2014 and were intended to prevent monopolies, including barring a company from owning more than one major broadcast station in a specific market. The provision would last until 2025.

Section 629

Prohibits the use of funds made available by this Act to be used to finalize or implement the Safety Standard for Recreational Off-Highway Vehicles published by the Consumer Product Safety Commission on November 19, 2014, until further study. 

Section 632

Requires the Office of Personnel Management to offer not less than 10 years of credit monitoring and that includes not less than $5 million in identify theft insurance to individuals affected by the data breaches.

Section 633

This section includes a nine-month extension of the Internet Tax Freedom Act to October 2016. This act, first enacted in 1998, prevents state and local governments from taxing customers pay for Internet service.

Section 634

Requires federal banking agencies to conduct a study of the appropriate capital requirements for mortgage servicing assets for banking institutions, including the risk to banks of holding mortgage servicing assets, and the impact of imposing the Basel III capital requirements and the National Credit Union Administration capital requirement on banking institutions. 

Section 735

Contains a government-wide provision that prohibits the use of funds “to recommend or require” any entity to disclose campaign contributions and expenditures in order to submit a bid for a government contract. This would prevent the president from issuing an executive order requiring such disclosure, as outside organizations have urged him to do.

Section 750

Restricts the use of funds to implement, administer, carry out, modify, revise or enforce Executive Order 13690, “Establishing a Federal Flood Risk Management Standard for a Process for Further Soliciting and Considering Stakeholder Input,” issued January 30, 2015, with certain exceptions; to implement the executive order in a manner that modifies the non-grant components of the National Flood Insurance Program; or apply it or the Federal Flood Risk Management Standards in a way that changes the floodplain consideration when determining whether to issue a permit under Section 404 of the Clean Water Act or Section 10 of the Rivers and Harbors Act. 

Division F – Homeland Security

Withholds $13 million in funding from the office of the secretary and executive management until DHS submits to Congress a comprehensive plan for implementation of the biometric entry and exit data system and a report on visa overstay data by country. Both reports are required under existing law.

Provides $11.1 billion for Customs and Border Protection, $359 million above the 2015 enacted level, of which $117 million is for border security technology, tactical infrastructure, and air capabilities between the ports of entry.

Includes funding for targeted immigration enforcement efforts above the 2015 enacted level as follows:  $10 million for visa overstay investigations, $10 million for new Mobile Criminal Alien Teams, $3 million to improve data systems to enhance reporting to the public and Congress, and $22 million for field attorneys at immigration courts.  Fully funds E-Verify and the Office of Biometric Identity Management for modernization of the Department’s biometric system.

Funds the operations of the Coast Guard ($10.76 billion, which is $933 million above the 2015 enacted level), Transportation Security Administration ($4.86 billion, which is $27 million above the 2015 enacted level) and Secret Service ($1.9 billion, which is $268 million above the 2015 enacted level), including funding targeted to address recent incidents and Inspector General recommendations.

Provides $819 million for Cybersecurity within the National Protection and Programs Directorate for protection of the “dot-gov” domain and for DHS outreach efforts to other federal agencies, states, locals, and the private sector on cybersecurity enhancements.   The bill also includes $100 million above the request to buy down the Department’s internal cybersecurity needs.

Provides $4.6 billion for the Federal Emergency Management Administration in base appropriations, $269 million above the 2015 enacted level.  Significant increases were included for hazard mitigation programs. 

A new $50 million fund is included for the Secretary’s efforts to counter violent extremism and assist state and local communities in preparing for and responding to complex, coordinated terrorist attacks.

Section 564

Prohibits the Department from implementing the Arms Trade Treaty.

Section 565

Renews the H-2B returning worker exception for one year, which increases the number of H-2B visas available in fiscal year 2016. The H-2B visa allows for the temporary admission of foreign workers to the United States to perform nonagricultural labor or services if unemployed U.S. workers are not available. This section would exempt returning workers who entered under an H-2B visa in 2013, 2014, or 2015 from the 66,000 visa cap.

Sections 572-574

Extends the authorization of four immigration programs until September 30, 2016. These are:

  • USCIS’ E-Verify program.
  • Non-ministers religious worker program. The program allows up to 5,000 foreign non-ministers engaged in religious vocations and occupations to immigrate to or adjust status in the United States for the purpose of performing religious work in a full-time compensated position.
  • Conrad 30 waiver program. The Conrad 30 waiver program permits foreign medical graduates conducting a medical residency in the U.S. on a J-1 visa to waive the requirement that they return to their country of origin for 2 years, if they agree to work in medically underserved areas of a state for a period of 3 years. Every state is allocated 30 such waivers each year.
  • EB-5 Regional Center program. The EB-5 Regional Center program began in 1993 as an outgrowth of the EB-5 visa, which provides a green card to individuals who invest in US businesses and create jobs. The Regional Center program allows multiple EB-5 investors to pool capitol in order to generate more investment. Recently the program has come under scrutiny due to national security and fraud concerns.

 

Division G – Interior and Environment

Provides $4.2 billion for wildfire fighting and prevention programs within the Department of Interior and the Forest Service, including $1 billion in firefighting reserve funds. That is $670 million above the 2015 enacted level.

Provides $545 million for hazardous fuels reduction activities and $360 million for the timber program to improve forest health and prevent fires from starting. These are $19 million and $21 million, respectively, above the 2015 enacted levels.

Provides $241 million, including $90 million in grants, to reclaim abandoned mine land sites.

Provides $2.9 billion for the National Park Service, of which $135 million is for the Centennial Initiative, including $94 million to reduce maintenance backlogs and for programs related to the NPS centennial anniversary. That is $237 million above the 2015 enacted level.

Provides $1.2 billion for the Bureau of Land Management. That is $117 million above the 2015 enacted level.

Provides $1.5 billion for the Fish and Wildlife Service. That is $68 million above the 2015 enacted level.

Provides $450 million for the Land and Water Conservation Fund.

Provides $452 million for the Payment in Lieu of Taxes program.

Provides $8.1 billion for the Environmental Protection Agency. That continues a funding level lower than the 2010 enacted level. That also continues staffing levels at the lowest level since 1989.

Provides $241 million for the Office of Surface Mining, including $90 million in grants for States to help reclaim abandoned mine lands in conjunction with the goal of accelerating economic development.

Provides $4.807 billion for the Indian Health Service, an increase of $165 million above the fiscal year 2015 enacted level. It includes funds for contract support costs, construction to address the agency’s backlog of priority construction facilities, sanitation facilities construction, maintenance and improvement and combatting alcohol and substance abuse in tribal communities.

The explanatory statement expresses concern about the work of the Department of Interior’s Office of Surface Mining Reclamation and Enforcement on the stream buffer zone rule. It notes that more than half of the states who agreed to work as participating agencies have withdrawn from the process. It recommends that OSMRE reengage state partners in a meaningful manner before finalizing the stream buffer zone rule. Directs OSMRE to provide states with all technical reports, data, analyses, comments received, and drafts relative to the environmental reviews, draft and final environmental impact statements, and meet with any state with primacy during such process at the request of the state.

Section 112

Prohibits use of funds to implement, administer, or enforce Secretarial Order No. 3310 issued by the Secretary of Interior on December 22, 2010, which requires the Bureau of Land Management to inventory lands with wilderness characteristics and to protect them through land use planning and project-level decisions.

Section 117

Prohibits use of funds to write or issue a proposed rule for greater sage-grouse or a proposed rule for the Columbia basin distinct population segment of greater-sage grouse pursuant to section 4 of the Endangered Species Act.

Section 416

Requires report to Congress in fiscal year 2017 describing in detail all federal agency funding, domestic and international, for climate change programs, projects, and activities in fiscal years 2015 and 2016, including an accounting of funding by agency with each agency identifying climate change programs, projects, and activities and associated costs by line item as presented in the president’s budget appendix, and including citations and linkages where practicable to each strategic plan that is driving funding within each climate change program, project, and activity listed in the report.

Section 417

Prohibits use of funds to promulgate or implement any regulation requiring the issuance of permits under title V of the Clean Air Act for carbon dioxide, nitrous oxide, water vapor, or methane emissions resulting from biological processes associated with livestock production.

Section 418

Prohibits use of funds to implement any provision in a rule, if that provision requires mandatory reporting of greenhouse gas emissions from manure management systems.

Section 420

Prohibits use of funds to regulate the lead content of ammunition, ammunition components, or fishing tackle under the Toxic Substances Control Act or any other law.

Division H – Labor, Health and Human Services, and Education

The bill provides $12.18 billion in discretionary funding for the Department of Labor, $234.6 million above the fiscal year 2015 enacted level; funds the Department of Health and Human Services at $75.2 billion, a $3.8 billion increase above fiscal year 2015, including cap adjustments; and funds the Department of Education at $68 billion, a $1.2 billion increase above the fiscal year 2015 level. 

Obamacare

The division provides no new funding for Obamacare. Specifically:

  • Title II, Section 225 prevents any taxpayer bailout of the risk corridor program. Obamacare included risk corridors, a risk adjustment mechanism to transfer funds to insurers that experienced losses. There has been significant concern that taxpayers and financially responsible insurers are being forced to pay for the Obama administration’s broken promises and the losses of some insurers with poor business models. The omnibus does not allow taxpayer funds to be used for this purpose.
  • Title II, Section 221 blocks the Prevention and Public Health Fund from being used as an Obamacare slush fund.
  • Title V, Section 528 eliminates funding for Obamacare’s Independent Payment Advisory Board – $15 million.

National Institutes of Health

The division funds NIH at $32 billion, an increase of $2 billion above fiscal year 2015. This is the largest increase for NIH in the Labor/HHS bill since the doubling of NIH’s budget ended in 2003.

  • $200 million for the new Precision Medicine Initiative;
  • $350 million increase for Alzheimer’s disease research;
  • $150 million, an increase of $85 million, for the BRAIN      Initiative to map the human brain;
  • $461 million, an increase of $100 million, to Combat      Antibiotic Resistance;
  • $320.8 million, an increase of $47.5 million, for the      Institutional Development Award;
  • $12.6 million for the Gabriella Miller Kids First      Research Act;
  • Increases to every institute and center to continue      investments in innovative research that will advance fundamental knowledge      and speed the development of new therapies, diagnostics, and preventive      measures to improve the health of all Americans.

Rural health

The division provides for $149.6 million, an increase of $2.1 million above fiscal year 2015, for rural health programs.

Mental Health Block Grants

The division provides for $532.6 million, an increase of $50 million above fiscal year 2015, for Mental Health Block Grants. The bill increases the set-aside for serious mental illness activities to 10 percent and fully offsets this increase with the additional funds. Further, an additional $20 million will be provided to states through the formula grant.

Fighting Prescription Drug Abuse

The division provides for $123 million, an increase of $91 million, for programs to combat opioid abuse at the Centers for Disease Control and Prevention and the Substance Abuse and Mental Health Services Administration.

Title III includes new bill language requiring that the Department of Education, no later than March 1, 2016, allocate new student loan borrower accounts to eligible student loan servicers on the basis of their performance compared to all loan servicers utilizing established common metrics, and on the basis of the capacity of each servicer to process new and existing accounts.

Includes Title X abuse reporting requirement (Section 208); Medicare Advantage conscience protection (Section 209); Hyde domestic abortion funding ban (Section 506-507(c)); Weldon conscience protection (Section 507(d)); Dickey-Wicker embryo protection (Section 508).

Section 110

Prohibits the use of funds to implement, administer, or enforce the Establishing a Minimum Wage for Contractors regulation published on October 7, 2014, related to federal contracts, permits, or other contract-like instruments entered into in connection with federal property, specifically related to offering seasonal recreational services or seasonal recreation equipment rental for the general public, with the exception of lodging and food services.

Section 111

Permits employers in the seafood industry to bring in nonimmigrants into the United States under the H-2B program at any time during the 120-day period beginning on the start date for which the employer is seeking services without needing to file another petition. Ninety days after the start date the employer must complete a new assessment of the local labor market, and offer the job to an equally or better qualified American.

Section 112

Requires that the prevailing wage paid under the H-2B program shall be the greater of the actual wage paid by the employer to other employees with similar experience and qualifications or the prevailing wage for the occupational classification of the position in the geographic area in which the H-2B nonimmigrant will be employed. In determining the prevailing wage, the Secretary is directed to accept private wage survey determinations unless the Secretary determines the survey is statistically invalid.

Section 114

Prohibits the implementation of DOL revisions to the H-2B program issued earlier this year that resulted in duplicative enforcement within the department.

Section 408

Prohibits the use of funds provided for the National Labor Relations Board to issue any new administrative directive or regulation that would provide employees any means of voting electronically in an election to determine a representative for the purposes of collective bargaining.

Division I – Legislative Branch

The legislative branch bill provides $4.4 billion, $63 million greater than the fiscal year 2015 funding level. This bill also includes full funding for the Joint Congressional Committee on Inaugural Ceremonies for the 2017 presidential inauguration.

 

Division J – Military Construction and Veterans Affairs

The military construction and veterans affairs bill provides $8.2 billion for military construction, $1.6 billion greater than the fiscal year 2015 funding level and $267 million below the president’s budget.

The division provides $163 billion in both discretionary and mandatory funding for Veterans Affairs. The discretionary portion of this is $71.4 billion, which is $6.5 billion greater than the fiscal year 2015 funding level and $1.3 billion greater than the president’s request.

Division K – State and Foreign Operations

Iran

Section 7041(b) directs that certain funds be used to support an expeditious response to any violation of the Iran nuclear agreement or U.N. Security Council Resolution 2231; and sanctions enforcement against Iran for its support for terrorism, human rights abuses, and ballistic missile proliferation.

Palestinian Authority

Section 7041(j) prohibits making Economic Support Funds available to the Palestinian Authority if they obtain the same standing as member states in the United Nations or any of its specialized agencies (outside an agreement with Israel), or if the Palestinians support an International Criminal Court judicially authorized investigation subjecting Israeli nationals to an investigation for alleged crimes against Palestinians.

The Joint Explanatory Statement notes that no funds are included for an assessed or direct contribution to the United Nations Educational, Scientific and Cultural Organization, which is prohibited by operation of law given UNESCO’s admission of Palestine as a Member State. The Obama administration recently reaffirmed its continuing interest in absolving the Palestinians from the consequences of their efforts to undermine the peace process.

Provides $339 million for the International Organizations and Programs, of which $10 million may be made available for the Intergovernmental Panel on Climate Change/ United Nations Framework Convention on Climate Change. Provides $168 million for the Global Environment Facility; $171 million for the Clean Technology Fund; and $50 million for the Strategic Climate Fund. (It does not include Senate language allowing funds for the Green Climate Fund.  It does not prohibit funds made available by the act and prior acts from being made available for the Green Climate Fund, as proposed in the House report.)

Includes Kemp-Kasten provision directing withholding of funds to organizations that participate in the management of a coercive abortion program; Tiahrt amendment on voluntary participation in family planning programs; prohibition on abortion funding in the Peace Corps; and Helms international abortion funding ban.

Section 7080

Prohibits use of funds to provide for the enforcement of any rule, regulation, policy, or guidelines implemented by the Overseas Private Investment Corporation or the Export-Import Bank that would prohibit or have the effect of prohibiting any coal-fired or other power-generation project the purpose of which is to: (1) provide affordable electricity in International Development Association-eligible countries and IDA-blend countries; and (2) increase exports of goods and services from the U.S. or prevent the loss of jobs from the U.S.

Section 7082

Provides a new funding reduction for the United Nations Population Fund by 7 percent ($2.5 million) due to UNFPA’s involvement in China’s coercive birth limitation policy. China recently announced they will continue to coerce and abuse women and families through a two-child policy.

 

Division L – Transportation and Housing and Urban Development

The bill includes $18.65 billion for the Department of Transportation, which is $2.7 billion below the President’s request (disregarding the Administration’s request to shift more than $4.2 billion in discretionary programs to mandatory spending).  Funding for highway, transit, and safety programs is consistent with the recently enacted FAST Act and prioritized to make the transportation systems safe, efficient, and reliable.

The bill includes a total of $38.3 billion for the Department of Housing and Urban Development, which is $2.3 billion below the budget request. Includes $60 million for new Veterans Affairs Supportive Housing vouchers to address veterans’ homelessness.

Title II includes language that provides $60 million for new Veterans Affairs supportive housing vouchers to address veterans’ homelessness.

Section 231

Prohibits the use of funds to implement the Homeowners Armed with Knowledge program.

Section 232

Prohibits the use of funds to be used by the Federal Housing Administration, the Government National Mortgage Administration, or the Department of Housing and Urban Development to insure, securitize, or establish a federal guarantee of any mortgage or mortgage backed security that refinances or otherwise replaces a mortgage that has been subject to eminent domain condemnation or seizure.

Section 239

Permits the secretary of housing and urban development to increase the number of public housing agencies that may participate in the Moving to Work program by 100, with limitations on the size and geographical location of participating public housing agencies.

Section 418

Requires that applicants provide proof of citizenship to receive housing assistance.

Division M – Fiscal Year 2016 Intelligence Authorization Act

This division authorizes spending and articulates policies for the intelligence community.

Section 514

Requires a report on how Iran is using the money made available to it through sanctions relief, including an assessment of whether Iran is using such money to support terrorism, the Assad regime in Syria, or to commit human rights violations.

Section 603

Prohibits the transfer of a Guantanamo detainee to Libya, Somalia, Syria, or Yemen.

Section 705

Requires a report on the effects of the OPM data breach on intelligence community operations, to include an assessment of how foreign people may be using the data to recruit intelligence assets or influence federal government decisionmaking.

 

Division N – Cybersecurity Act of 2015

The conference report would enhance the sharing of information about cybersecurity threats within the private sector and between the government and private sector. Specifically, the legislation would provide an exemption to antitrust laws and authorize liability protections for covered entities voluntarily sharing information for cybersecurity purposes. The bill would also enable private entities to take narrowly tailored “defensive measures” to prevent, detect, analyze, and mitigate cybersecurity threats. The bill includes measures to enhance privacy and civil liberties and the committee adopted a significant number of Democratic recommendations aimed at these issues.

The conference report includes provisions to enhance existing national cybersecurity programs, bolster cybersecurity workforce initiatives, and improve cybersecurity processes and plans in the federal government.

Section 103

The director of national intelligence, secretary of homeland security, secretary of defense, and attorney general will develop and promulgate procedures to promote the timely sharing of cybersecurity information.

Section 104

Enables a private entity to operate a defensive measure that is applied to information systems for cybersecurity purposes and narrowly permits the type of defensive actions a private entity may take.

Section 104(b)

This section allows a private entity to share with, or receive from, any other entity or the federal government a threat indicator or defensive measure. The managers’ amendment would limit the authorization for sharing cyber threat information provided in the bill to sharing for cybersecurity purposes.

Section 104(d)(1)

Says that any entity monitoring an information system, operating a defensive measure, or providing or receiving a cyber threat indicator or defensive measure shall protect against unauthorized access or acquisition of such information.

Section 104(d)(2)

This section requires that, before sharing cybersecurity information, an entity review information and remove personal information not directly related to a cybersecurity threat. The provision also calls for entities to implement and utilize technical capability to remove any personal information not directly related to a cybersecurity threat.

Section 106

No cause of action shall lie or be maintained in any court against any private entity, and such action shall be promptly dismissed, for the monitoring of information systems or sharing or receipt of cyber threat indicators and defensive measures.

Section 107(a)

Federal agencies shall submit information to various inspectors general in order to examine and oversee the implementation of cybersecurity information sharing, including content, effectiveness, and privacy and civil liberties.

Section 107(b)

This section calls for a biennial report from the Privacy and Civil Liberties Oversight Board.

Section 108

This section provides for a narrow construction of the bill and preempts federal and state laws.

 

Division O – Other Matters

Title I – Oil Exports, Safety Valve, and Maritime Security

Section 101

Repeals ban on crude oil exports. Prohibits federal government officials from imposing or enforcing restrictions on crude oil exports. Preserves president’s authority to prohibit crude oil exports under provisions of law that impose sanctions on foreign actors. Establishes president’s authority to impose export licensing requirements or other restrictions on crude oil exports for not more than one year if: (A) the president declares a national emergency; (B) the export licensing requirements or other restrictions apply to one or more countries, persons, or organizations in the context of sanctions or trade restrictions imposed for reasons of national security; or (C) the secretary of commerce, in consultation with the secretary of energy, finds that (i) crude oil exports have caused sustained material oil supply shortages or sustained oil prices significantly above world market levels that are directly attributable to the export of crude oil produced in the U.S.; and (ii) those supply shortages or price increases have caused or are likely to cause sustained material adverse employment effects in the U.S. Increases payments to contractors for Maritime Security Fleet operating agreements.

Title II – Terrorist Travel Prevention and Visa Waiver Program Reform

Section 202

Requires travelers under the visa waiver program to have e-passports that are fraud resistant and contain biographic and biometric information. Countries participating in the VWP must certify that they issue e-passports and have the capacity to validate such passports at ports of entry in the country.

Section 203

Bars from participating in the VWP people who have traveled to or are nationals of (1) Iraq or Syria; (2) a country the government of which has supported international terrorism; or (3) a country designated by the DHS secretary. These people must obtain a travel visa through a U.S. consulate or embassy. Those who have traveled to the designated countries for military or government service are exempt from this bar.

Section 204

Imposes increased security measures on countries participating in the VWP. Participating countries must (1) report lost or stolen passport within 24 hours of becoming aware of the theft or loss; (2) screen non-citizens that enter their countries for unlawful activity; and (3) implement agreements to share information on citizens from the country traveling to the U.S. that present a threat to U.S. security. The DHS secretary is required to suspend a country’s participation in the VWP if they fail to implement screening or information sharing programs. Conversely, the secretary may waive other VWP country requirements if the country meets the screening or information sharing requirements.

Section 205

Increases reporting requirements.

Section 206

Requires the DHS secretary to annually review VWP countries and identify those that present a high risk to U.S. national security. The secretary may suspend high risk countries from participating in the VWP.

Section 207

Mandates that the Electronic Travel Authorization System, which is used to screen VWP applicants, collect travel history from applicants.

Section 208

Requires the DHS secretary to assist non-VWP countries with submitting information on lost and stolen passports and with issuing and validating e-passports.

Section 210

Sense of Congress that the International Civil Aviation Organization, the U.N. agency responsible for international standards for border control, should establish e-passport standards and require the use of such e-passports.

Title III – James Zadroga 9/11 Health and Compensation Reauthorization Act

This section would reauthorize the World Trade Center Health Program through 2090, establishing annual caps for funding for the first 10 years, then increasing the caps to account for inflation in future years and allowing the funding to carryover if necessary. It adds a requirement that the administrator provide for an independent peer review of the scientific and technical evidence prior to adding a condition to the list of WTC-related health conditions. It also calls on GAO to provide regular reports for program integrity purposes.

Title IV – James Zadroga 9/11 Victim Compensation Fund Reauthorization

In the 111th Congress, Congress enacted a law that reopened the 9/11 VCF for five years and provided $2.775 billion to compensate victims of the September 11 terrorist attacks whose symptoms were latent during the period the original VCF was active (2001–2004). This title reauthorizes the VCF for an additional five years; provides an additional $4.6 billion to fully fund the VCF; and makes technical adjustments to VCF payment schedules to ensure the provided funding is sufficient to pay all claims. The eligibility criteria for the VCF remain the same as existing law.

Section 404 of Title IV

Section 404 places the Justice for U.S. Victims of State Sponsored Terrorism Act on the omnibus bill. This bill creates a special master to administer a newly-created U.S. Victims of State-Sponsored Terrorism Fund, namely to determine who is eligible to receive compensation from the fund and in what amounts. Those eligible include U.S. persons who hold final judgments against a state sponsor of terrorism for an act of international terrorism. Others eligible include those held hostage from the U.S. Embassy in Iran in 1979 if they are identified as a class member for a specific lawsuit on this matter and spouses or children identified as class members. Compensation will be provided on a pro rata basis as funds become available. The Algiers Accords prevent Embassy hostages from seeking compensation from Iran through the civil justice system.

Title V – Medicare and Medicaid Provisions

This title provides spending reforms designed to offset the cost of the reauthorization of the World Trade Center Health Program. Specifically, this title will limit the federal Medicaid reimbursement for durable medical equipment to the Medicare rate beginning in 2019, provide incentives for physicians to use digital radiography and other imaging changes, rescind funds from the Medicare Improvement Fund, and reimburse home health agencies when they use cost effective disposable alternatives to certain durable medical equipment.

Section 501

This section removes money from the Medicare Improvement Fund. Reduces expenditures $234 million over 10 years.

Section 502

This section provides payment incentives for physicians and hospital outpatient departments to use digital radiography x-ray technology beginning in 2017. This section also reduces a payment reduction that CMS applies when a physician interprets multiple advanced imaging tests for the same patient on the same date. It sets the rate consistent with published empirical evidence beginning in 2017.

Section 503

This section limits the federal contribution for state Medicaid program spending on durable medical equipment to the amount Medicare pays for these items beginning in 2019. It avoids unnecessary spending by linking to Medicare DME payment rates, many of which have decreased significantly since a competitive bidding model was implemented in 2011. This section clarifies that Medicaid programs can pay for DME items that Medicare does not cover. It requires CMS to evaluate the impact of limiting Medicaid rates to Medicare to guard against negative consequences.  

Section 504

This section reimburses a home health agency when it uses a disposal Negative Pressure Wound Therapy device to treat a wound in the home setting beginning in 2017; currently, only durable devices are reimbursed. A disposal NPWT device can be more convenient for beneficiaries than a durable version and less costly for the Medicare program. This section requires the GAO to report to Congress on the impact of paying for disposal NPWT and on additional disposal DME items that may be appropriate for Medicare to cover.

Title VII – Financial Services

Section 702

Restricts the sale by the Department of the Treasury until at least January 1, 2018, of preferred stock in Fannie Mae and Freddie Mac, unless legislation is enacted that includes a specific instruction to do so. 

Section 704

Applies the Federal Advisory Committee Act to each advisory committee of the Consumer Financial Protection Bureau and each subcommittee of its advisory committees.

Section 705

Modifies the Commodity Exchange Act and the Securities Exchange Act to revise the treatment of affiliate transactions that may be exempt from clearing requirements, under specific limitations.

Section 706

Makes available the same protections provided to insurance affiliates of bank holding companies to insurance affiliates of savings and loan holding companies.

Section 707

Prohibits the Securities and Exchange Commission from using any funds provided to implement a rule requiring companies to disclose their political contributions.

Title VIII – Land and Water Conservation Fund

Section 801

Reauthorizes the Land and Water Conservation Fund through September 30, 2018. Prohibits expenditure of appropriated funds for acquisition of lands or interests in lands using condemnation or eminent domain without approval of the House and Senate Appropriations Committees, with certain exceptions.

Title IX – National Oceans and Coastal Security

Sections 904 and 905

Authorize the administrator of the National Oceanic and Atmospheric Administration to establish the National Oceans and Coastal Security Fund as a tax exempt fund to award grants to support programs and activities intended to better understand and utilize ocean and coastal resources and coastal infrastructure, including baseline scientific research, ocean observing, and other programs and activities carried out in coordination with federal and state departments or agencies. Prohibit use of funds for litigation against the federal government or the creation of national marine monuments and marine protected areas, marine spatial planning, or the National Ocean Policy. Authorize such sums as are necessary for fiscal years 2017, 2018, and 2019. Require annual report to Congress on the operation of the fund during that fiscal year.

Division P – Tax-Related Provisions

The JCT score for these provisions is available here.

Section 101 – Delay of Excise Tax on High Cost Employer-Sponsored Health Coverage

Obamacare creates a punitive 40 percent tax on employer-sponsored health plans that exceed a certain dollar threshold, commonly known as the “Cadillac tax.” This provision would delay it for two years, such that the tax would be effective in 2020, rather than in 2018 as under current law.

Section 102 – Deductibility of excise tax on high cost employer-sponsored health coverage.

This provision conforms the Cadillac tax to the general rule for excise taxes, by making the tax deductible as a business expense. Under current law the tax on high-cost insurance plans is not deductible by the insurer or self-insured employer that pays it.

Section 103 – Study on suitable benchmarks for age and gender adjustment of excise tax on high cost

This provision requires the comptroller general of the United States and the National Association of Insurance Commissioners to report to Congress on the suitability of the existing benchmark plans for the age and gender adjustment to the Cadillac tax. Current law provides for an upward adjustment of the applicable dollar limit equal to the excess of the premium cost for the Blue Cross/Blue Shield standard benefit option under the Federal Employee Health Benefits Plan, if priced for the age and gender characteristics of the national workforce.

Section 201 – Moratorium on annual fee on health insurance providers

Obamacare imposes an annual fee on health insurers, which drives up the cost of coverage for consumers. This provision provides for a one-year moratorium on the annual excise tax imposed on health insurance providers. The tax would not apply for calendar year 2017.

Section 301 – Extension and phaseout of production tax credit for wind facilities.

Extends the 1.5 cent per kilowatt-hour renewable electricity production tax credit for wind facilities for five years to January 1, 2020. Includes a phaseout that reduces the credit by: 20 percent for any wind facility the construction of which begins after December 31, 2016, and before January 1, 2018; 40 percent for any wind facility the construction of which begins after December 31, 2017 and before January 1, 2019; and 60 percent for any wind facility the construction of which begins after December 31, 2018, and before January 1, 2020. Makes the effective date of the section retroactive to January 1, 2015.

Section 302 – Extension and phaseout of energy property tax credit for wind facilities.

Extends election to treat wind facilities as energy property for purposes of an energy investment tax credit for five years to January 1, 2020. Includes a phaseout that reduces the credit by: 20 percent for any wind facility the construction of which begins after December 31, 2016, and before January 1, 2018; 40 percent for any wind facility the construction of which begins after December 31, 2017, and before January 1, 2019; and by 60 percent for any wind facility the construction of which begins after December 31, 2018, and before January 1, 2020. Makes the effective date of the section retroactive to January 1, 2015.

Section 303 – Extension and phaseout of investment tax credit for solar energy.

Extends an energy investment tax credit for equipment that uses solar energy to generate electricity, to heat or cool or provide hot water for use in a structure, or to provide solar process heat for five years to January 1, 2022. Makes eligible “property the construction of which begins before January 1, 2022.” Includes a phaseout that makes the energy investment tax credit equal to: 26 percent for any property the construction of which begins after December 31, 2019, and before January 1, 2021; 22 percent for any property the construction of which begins after December 21, 2020, and before January 1, 2022; and 10 percent for any property the construction of which begins before January 1, 2022, and which is not placed in service before January 1, 2024.

Section 304 – Extension and phaseout of credits with respect to qualified solar electric property and qualified solar water heating property.

Extends a tax credit for qualified solar electric property and qualified solar water heating property for five years to December 31, 2021. Includes a phaseout that makes the applicable percentage of the tax credit: 30 percent for property placed in service after December 31, 2016, and before January 1, 2020; 26 percent for property placed in service after December 31, 2019, and before January 1, 2021; 22 percent for property placed in service after December 31, 2020, and before January 1, 2022.

Section 305 – Treatment of transportation costs of independent refiners.

Increases the amount of the allowable Section 199 manufacturing tax credit for independent refiners by allowing them to exclude 75 percent of transportation costs when calculating their income. Provision terminates after December 31, 2021.

 

Division Q - Protecting Americans from Tax Hikes Act of 2015

This division contains tax provisions that would decrease revenue by $622 billion over 10 years. Of this amount, $559.5 billion in decreased revenue is due to the permanently extended provisions contained in Subtitle A of Title I.

A technical explanation document is available from JCT here. The score of the individual provisions described below is available here.

Subtitle A of Title I of Division Q includes provisions that are permanently extended:

Section 101 – Enhanced child tax credit

If a taxpayer owes less in taxes than they are entitled to under the child tax credit, that taxpayer is entitled to an “additional child tax credit” that is refundable. The amount of the ACTC is 15 percent of the taxpayer’s earned income greater than a certain threshold amount. The 2009 stimulus bill enhanced the refundability of the ACTC by lowering this earned income threshold from $10,000 in 2001 dollars (indexed for inflation) to $3,000 (unindexed). This provision was scheduled to expire and return to the $10,000 (indexed) threshold. Section 101 makes the unindexed $3,000 threshold permanent law.

Section 102 – Enhanced American opportunity tax credit

This section makes permanent the 2009 stimulus bill’s American opportunity tax credit.

Section 103 – Enhanced earned income tax credit

This section makes permanent the 2009 stimulus bill’s enhanced earned income tax credit (increasing the EITC amount for those with three or more children and increasing the phase-out threshold for married filing jointly by an inflation-indexed $5,000).

Section 104 – Extension/modification of school teacher deduction

This section makes permanent the ability of elementary and secondary educators to take above-the-line deductions for up to $250 in out-of-pocket expenses on educational items. Above-the-line deductions enable taxpayers to receive the deduction (in addition to the standard deduction) without itemizing. Eligible educational items include books, supplies, computer equipment and software, and other educational materials used in the teacher’s classroom. Eligible educators include teachers and other staff in K-12 education. This section also indexes the $250 for inflation.

Section 105 – Extension of parity for employer-provided transit/parking benefits

Qualified transportation fringe benefits provided by an employer (parking, transit passes, and vanpool benefits) are not included in an employee’s income. Prior to passage of the president’s stimulus law in February 2009, the maximum parking benefits that could be excluded from income was $175 per month while the maximum transit or vanpool benefit that could be excluded was $100. These amounts were indexed for inflation. The president’s stimulus law increased the limit for transit/vanpool to equal the inflation-adjusted parking benefits limit. This section would make permanent the increase in the transit/vanpool exclusion to equal the parking benefits exclusion.

Section 106 – Extension of deduction of State and local sales taxes

This section makes permanent 2014 treatment allowing taxpayers an itemized deduction for state and local sales taxes. Current law allows taxpayers to deduct various state and local taxes paid, including state and local income taxes. However, the policy that expired at the end of 2014 allowed taxpayers to deduct state and local sales taxes instead of income taxes if they wished. This allowed taxpayers residing in states that do not have an income tax to receive an itemized deduction comparable to taxpayers residing in states that do have an income tax. These taxpayers could either keep track of their sales taxes paid throughout the year, or they could use the amounts included on IRS tables that estimate the average sales tax paid in each state by taxpayers with similar characteristics (income, dependents, etc).

(There are no sections 107-110 in Division Q.)

Section 111 – Extension/modification re: contributions of real property for conservation

This section makes permanent more advantageous rules for donating to charity real property used in a business if the donation is being made for conservation purposes. A special rule for farmers and ranchers donating property for conservation purposes is also made permanent. This section includes a modification allowing Alaska Native Corporations a deduction of up to 100 percent of taxable income for such donations of real property for conservation purposes.

Section 112 – Extension of tax-free distributions from IRAs for charitable purposes

This section makes permanent a provision allowing IRA owners to make distributions directly from their IRA to a charity without the funds counting towards the IRA owner’s gross income. In order to qualify for this exclusion, the distribution cannot be made before the IRA owner is age 70.5 years old and the total distribution cannot be greater than $100,000 per year.

Section 113 – Extension/modification of charitable deduction for food donations

Under permanent current law, C corporations may already claim an enhanced deduction for food and other inventory donations to charity. This section would make permanent the enhanced deduction for S corporations. Also, this section increases the limit on this deduction from 10 percent of AGI to 15 percent; this increase is applied to both C corporations and S corporations.

Section 114 – Extension/modification of tax treatment of certain payments to controlling exempt organizations

This section would make permanent the 2014 rule that allows tax-exempt organizations to exclude unrelated business taxable income, thereby avoiding a tax liability on this income. Specifically, under the rule, tax-exempt organizations do not owe tax on passive income (interest, rents, royalties, annuities, etc.) that their controlled subsidiaries earned and paid to them, provided that this income does not exceed the fair market value (i.e. that the income is the same that would have been paid in an arm’s length transaction). If the payment does exceed the fair market value, then only the amount that exceeds fair market value would be subject to tax.

Section 115 – Extension of basis adjustment to stock of S corporations making charitable contributions of property

When an S corporation makes a charitable contribution, each individual shareholder takes this into account on their own taxes by reducing their basis (cost) in the S corporation stock by the shareholder’s pro rata share of the charitable contribution. This section would make permanent the practice of making this reduction equal to the shareholder’s share of the adjusted basis of the charitable contribution, rather than the shareholder’s share of the fair market value of the contribution.

(There are no sections 116-120 in Division Q.)

Section 121 – Extension/modification of research credit

This section permanently extends the R&D tax credit. It also modifies it in two ways. First, small businesses with $50 million or less in gross receipts can claim the credit against the Alternative Minimum Tax. Second, startup companies (defined as those with less than $5 million in gross receipts that are a maximum of 5 years old) can claim the credit against payroll taxes.

Section 122 – Extension/modification of employer wage credit for employees who are active duty members of the uniformed services

This section permanently extends a credit that allows small businesses to take a tax credit for 20 percent of “differential pay” – the optional pay that an employer can pay to an employee who is an activated military reservist to make up the difference between their military pay and what they would have earned had they not been activated and had remained at their employer. Differential wage payments eligible for this credit were capped at $20,000 meaning that the maximum credit per activated employee would be $4,000. This section also modifies this by extending the credit to all employers instead of employers with 50 or fewer employees.

Section 123 – Extension of 15-year straight-line cost recovery for leasehold/restaurant/retail improvements

This section makes permanent the 15-year depreciation schedule for qualified leasehold improvements, qualified restaurant buildings and improvements, and qualified retail improvements. Generally, if nonresidential real property is already in service, improvements to this property are depreciated over 39 years.

Section 124 – Extension/modification of increased expensing limitations and treatment of certain real property as section 179 property

This section permanently extends the Section 179 expensing rules that were in place from 2010-2014. For those years, taxpayers could expense in the first tax year up to $500,000 of acquired property used in a business (equipment, machines, etc.). The phase out in 2010-2014 began at $2 million of acquired property. This Sec. 179 treatment expired at the end of 2014, and current law places the limit at $25,000 of acquired property with a phase out above $200,000. This section also indexes the $500,000 and $2 million amounts to inflation, and adds heating and air conditioning units as eligible for this expensing.

Section 125 – Extension of treatment of certain dividends of regulated investment companies

A regulated investment company (RIC) must pass on at least 90 percent of its income to its shareholders in the form of dividends. The shareholders then pay tax on this income. Prior to this policy’s expiration in 2014, dividends paid to a foreign shareholder were exempt from tax and withholding. This section would extend that treatment permanently.

Section 126 – Extension of 100 percent exclusion of gain on small business stock

This section makes permanent the exclusion from capital gains tax of 100 percent of small business stock sold by an individual. In order to qualify for this exclusion, the stock must have been acquired at original issue and held for at least five years. Small business is defined as one having assets of less than $50 million.

Section 127 – Extension of reduced S corporation recognition period

When a C corporation chooses to change structure to a closely held corporation (with 100 or fewer shareholders), that closely held corporation is taxed by having its income flow through to its shareholders. Thereafter, assets that were held by the C corporation must be held by the S corporation for a period of time or else be taxed on the built-in gains from these assets. This time period used to be 10 years, but the law that expired in 2014 had set this time period at five years. This section would make permanent that five-year time period.

Section 128 – Extension of subpart F exception for active financing income

Subpart F generally requires that U.S. corporations pay U.S. income tax immediately on foreign earnings of passive income (interest income, for example). However, for financial firms, a substantial part of the regular income they receive through their financial business could be seen as “passive” although this financial income is truly active income due to the nature of their business. Applying Subpart F to this income would put these U.S. financial firms at a disadvantage relative to their foreign financial firm competitors. This section would make permanent the exception for active financing income so that such income is not subject to immediate U.S. tax.

(There are no sections 129-130 in Division Q.)

Section 131 – Extension of minimum low-income housing tax credit rates for non-Federally subsidized buildings

This section would extend the minimum low-income housing tax credit rate of nine percent for new construction, non-federally subsidized buildings.

Section 132 – Extension of rule for determining area median gross income re: military housing allowance

This section makes permanent the exclusion of military personnel’s housing allowance payments from their income in determining whether a low-income building is eligible for a federal low-income housing credit. This provision only applies to: (1) buildings in counties that house a military installation that saw growth of at least 20 percent between December 31, 2005, and June 1, 2008; and (2) adjacent counties. In 2008, after passage of the bill that contained this original provision, the IRS published a non-exhaustive list of military installations that would meet this 20 percent increase requirement.

Section 133 – Treatment of RICs under FIRPTA

This section would extend the ability of a foreign shareholder in a RIC to be exempt from tax when they sell shares of the RIC. For comparison, this tax exempt treatment is permanent for foreign investment in a Real Estate Investment Trust. Without this provision, the foreign shareholder in a RIC would be subject to tax under the Foreign Investment in Real Property Tax Act.

Subtitle B of Title I of Division Q includes provisions that are extended through 2019

Section 141 – Extension of new markets tax credit

This section would extend $3.5 billion of new markets tax credits per year from 2015 through 2019.

Section 142 – Extension/modification of work opportunity tax credit

This credit allowed a maximum credit of $2,400 to employers who hired employees from one of nine targeted groups: (1) a member of a family receiving TANF; (2) veterans; (3) ex-felons if hired within one year of their release from prison; (4) a resident of an empowerment zone, enterprise community, renewal community, or rural renewal community; (5) people with physical or mental disabilities; (6) 16-17 year-old summer workers who are residents of an empowerment zone, enterprise community, or renewal community; (7) a member of a family receiving SNAP benefits; (8) an SSI recipient, or (9) a member of a family that has received long-term public assistance. This section would extend this credit through 2019 and would also add to the list of target groups the following: an individual who has been unemployed for at least 27 consecutive weeks.

Section 143 – Extension/modification of bonus depreciation

This section extend bonus depreciation through 2019. For property placed in service in 2015, 2016, or 2017 the percentage will be 50 percent. For property placed in service in 2018 the percentage will be 40 percent. For property placed in service in 2019 the percentage will be 30 percent. This section would also extend the ability to receive a corporate income tax credit for prior corporate alternative minimum taxes paid, instead of bonus depreciation. The section also contains special rules for certain plants bearing fruit and nuts.

Section 144 – Look-thru treatment of payments between related CFCs

This section would extend the “look-thru” treatment of certain foreign income through 2019. If a foreign subsidiary (“controlled foreign corporation”) of a U.S. parent corporation earns income, the U.S. tax is generally deferred on such income until the money is repatriated to the U.S. If the income of the CFC is passive or highly mobile income, however, then immediate U.S. tax is due on this income—whether or not the money is repatriated to the U.S. The CFC look-thru provision says that if one CFC receives active income and then pays this money as passive income to another, related, CFC then there will be no immediate U.S. tax. Deferral would still be allowed, even though the second CFC has passive income, because the first CFC originally earned this income as active income.

Subtitle C of Title I of Division Q includes provisions that are extended through 2016. Notable provisions include:

Section 151 – Extension/modification of mortgage debt cancellation not included in income

Extending this provision would prevent people from owing taxes on the amount of debt forgiveness they receive on a principle residence. For example, without this provision, if a taxpayer is underwater on the mortgage on their principle residence and the mortgage lender agrees to forgive a portion of the debt, the taxpayer would be forced to add the amount of this forgiveness to their income and pay taxes on it. Under the 2014 provision that this section extends, the amount of forgiven debt that can be excluded from income for tax purposes is limited to $2 million.

Section 152 – Extension of mortgage insurance deductibility

This provision would allow homeowners to deduct mortgage insurance premiums as if these payments were mortgage interest. Private mortgage insurance insures the lender against loss if the borrower defaults. The ability to deduct borrower-paid mortgage interest effectively lowers the cost of private mortgage insurance and thus encourages more home buying (and indebtedness) by individuals and families who are unable to save the typical 20 percent down payment.

Section 153 – Extension of above the line deduction for qualified tuition and expenses

This provision would extend this above-the-line deduction. When the deduction was in effect, a taxpayer did not have to itemize in order to receive this deduction. The deduction could be applied for higher education tuition and expenses for the taxpayer, their spouse, or any dependents. Taxpayers with adjusted gross income of up to $130,000 (joint) or $65,000 (single) could claim a deduction for up to $4,000 in expenses. The deduction was lowered to $2,000 for adjusted gross income of between $130,001/$65,001 and $160,000 (joint) or $80,000 (single). Taxpayers with adjusted gross incomes over the latter amounts cannot take this deduction.

Section 169 – Extension of special rules for film and television production

This section would extend special rules allowing a deduction for the cost of film and television production, instead of the typical depreciation that would be used to recover these costs. The deduction is limited to $15 million per taxpayer per year, but that limit is increased to $20 million if significant costs are in low-income or distressed areas.

Section 172 – Extension of limit on cover over of rum excise taxes to Puerto Rico and the Virgin Islands

The U.S. charges excise taxes on rum produced in Puerto Rico or the Virgin Islands and imported into the U.S. There has been a longstanding practice to return (“cover over”) these payments to Puerto Rico and the Virgin Islands for the territories to use as they see fit. The amount that can be covered over is limited in law. The limit in 2014 was $13.25 per proof gallon, and since that provision expired it has reverted to $10.50 per proof gallon. This section would extend the $13.25 per proof gallon limit.

Section 174 – Moratorium on medical device excise tax

Obamacare imposes a 2.3 percent tax on gross sales of medical devices (at section 4191 of the Internal Revenue Code), contributing to rising health care costs for patients and consumers. This section would provide for a two-year moratorium on the 2.3 percent excise tax imposed on the sale of medical devices. The tax would not apply to sales during calendar years 2016 and 2017.

Section 185 – Biodiesel and renewable diesel credits

This section would extend the biodiesel credits and renewable diesel credits. The biodiesel credits include: biodiesel mixture credit ($1 per gallon); biodiesel credit ($1 per gallon); small agri-biodiesel producer credit (10 cents per gallon); biodiesel mixture excise tax credit ($1 per gallon); payments with respect to biodiesel fuel mixtures (this makes the biodiesel mixture credit refundable in that the producer receives a payment if the mixture credit exceeds their tax liability). The renewable diesel credit is $1 per gallon.

Title II – Program integrity

This title makes several program integrity reforms that JCT estimates will increase revenue (reduce improper claims on tax breaks) by $6.9 billion over 10 years. These include provisions such as requiring stronger documentation requirements for the issuance of an individual tax identification number, preventing someone who has just received a Social Security number from retroactively claiming the earned income tax credit, preventing retroactive claims of the child tax credit, preventing retroactive claims of the American opportunity tax credit, increased penalties for paid preparers who do not perform due diligence or who make erroneous claims, preventing taxpayers from claiming certain credits if they are convicted of fraud or disregard the rules,

Sections 311 – 326 – Real Estate Investment Trusts

These sections include reforms for the tax treatment of real estate investment trusts, including section 311, which prevents tax-free spinoffs of a REIT from a parent corporation that is not a REIT.

Sections 401 – 411 – Internal Revenue Service Reforms

These sections include reforms to the IRS, including termination of employment for IRS employees who take official actions for political purposes, and a clarification that transfers to organizations that are 501(c)(4), (c)(5), or (c)(6) are exempt from the gift tax since these organizations are exempt from tax.

Section 601 – Budgetary effects

This section excludes the budgetary effects of the Protecting Americans from Tax Hikes Act from being included in the statutory pay-as-you-go scorecard or the Senate pay-as-you-go scorecards.

Administration Position

The administration supports passage of both House amendments.

Cost

CBO reports that the appropriations portion of the omnibus (divisions A through L) contains $1.067 trillion in regular discretionary budget authority, which is consistent with the Bipartisan Budget Act of 2015. Total funding in the Defense appropriations bill is $572.8 billion, which contains $514.1 billion in regular discretionary budget authority and $58.6 billion in Overseas Contingency Operations (does not add due to rounding). Including all OCO, disaster, emergency, and program integrity funding, divisions A thru L contain $1.150 trillion in budget authority.

CBO also reports that divisions M thru P (the non-appropriations divisions of House amendment number 1) would result in a deficit increase of $57.6 billion over 10 years. This includes $2.2 billion in increased direct spending and $55.4 billion in decreased revenues.

Division Q (tax extenders) contains tax provisions that would decrease revenue by $622 billion over 10 years. Of this amount, $559.5 billion in decreased revenue is due to the permanently extended provisions. Note that division P contains several tax provisions that also reduce revenue by delaying for two years the “Cadillac tax,” delaying for one year the annual fee on health insurance providers, and extending several tax credits for renewable energy production. The fiscal impact of divisions P and Q combined result in reduced revenue of $677 billion over 10 years.

Amendments

Amendments are not in order under the unanimous consent agreement.