SBLC Highlights Legislation Currently Before Congress That Could Impact Small Businesses
In its latest SBLC Report, the Small Business Legislative Council (SBLC), of which PPAI is a member and PPAI president and CEO Paul Bellantone, CAE, serves as a board director, offers a quick and candid review of what’s going on in Washington. The mission of the SBLC is twofold: to make improvements in public policy for small business and to help member associations in their communications with business members. Please note that this weekly is for the sole personal, informational use of PPAI members and should not be posted to any website. Reproduced below for PPB Newslink readers, the SBLC Report looks at the state of a number of bills currently before members of Congress relevant to small businesses.
After returning from a seven-week recess on September 6, Congress is already getting ready to head out the door again—this time until after the November elections.
The big item standing between the members and the campaign trail is the not-so-small matter of funding the federal government after September 30. As was anticipated, the vast majority of the Congressional leadership’s attentions have been focused on trying to reach a deal on a stopgap funding bill. Whereas Speaker of the House Paul Ryan (R-WI), Senate Majority Leader Mitch McConnell (R-KY) and their Democratic counterparts have been moving towards a deal to maintain current funding levels for three months, some of the more conservative members of the House had initially been pushing for a longer deal. Over the past few weeks, this issue has been further complicated by debates over Zika funding (and the role that Planned Parenthood should have in the federally funded fight against the virus), defense appropriations, disaster relief funding and various other policy add-ons.
Despite the partisan jockeying, the Senate is scheduled to start procedural votes today to set the stage for votes on a substantive bill (as soon as one is agreed upon) this week. Ultimately, neither party has any interest in delaying this issue until the last minute, and we ultimately expect to see a three-month continuing resolution passed this week.
As the funding debate wraps up and the collective focus turns towards the elections, we wanted to take this opportunity to highlight some small-business friendly bills that are still pending in Congress. It is pretty clear that none of these bills will be addressed before November. However, there is a chance that some of them may be dealt with during the lame-duck period when Congress comes back into session after the elections. The appetite of either party to take actions on these, and other pieces of legislation, will be largely dependent on how the parties fare in the election and which parties will control the Senate and the White House come January.
Below we’ll summarize the:
• Small Business Healthcare Relief Act (p. 1)
• Small Business Tax Credit Accessibility Act, Restoring Access to Medication and Improving Health Savings Act of 2016 (p. 2)
• Bills on Overtime Regulations (p. 3)
• S Corporation Modernization Act (p. 4)
• Retirement Enhancement and Savings Act (p. 4)
Small Business Healthcare Relief Act
After passing the House back in late June, the bipartisan Small Business Healthcare Relief Act (S. 3060) is still awaiting consideration in the Senate. As previously reported, the purpose of the bill is to address the fact that, under current law, employers who do not sponsor a group health plan but that reimburse their employees for their premiums for individual health coverage are violating the Patient Protection and Affordable Care Act (ACA) and are running the risk of being liable for an excise tax of $100 per day per reimbursed employee (or $36,500 per employee per year). You read that right – $100 per day per employee!
If passed, the Small Business Healthcare Relief Act would allow businesses with under 50 employees to once again reimburse employees for their premiums on a pre-tax basis for individual coverage without penalty. This is a big deal for many small businesses and the SBLC has been working to promote and improve the bill since its introduction.
Given the bipartisan nature of the bill, and the fact that it passed the House by a voice vote, we are hopeful that the Senate might also pass the bill during the lame-duck period.
That said, the future of this, and any other pending healthcare-related bills, will be highly dependent on the elections.
If Donald Trump wins the presidency and the Republicans retain control of the House and Senate, we can certainly expect the attention to turn from bills like the Small Business Healthcare Relief Act that would make fixes to ACA to legislation to repeal and replace the ACA.
On the other hand, if Hillary Clinton wins the presidency, given proposals she has already made, there is a sense that she will be more willing to consider moderate fixes to the ACA than President Obama, who has been hesitant to support changes to his signature law. Additionally, particularly if the Democrats take control of the Senate, there is some thought that the Republican leadership may start moving more towards a revise than repeal approach to the ACA, though they would still have to contend with the more conservative members of their party who seem unlikely to support anything short of repeal.
Small Business Tax Credit Accessibility Act
Another pending healthcare bill specifically targeting small businesses is Sen. Chris Coons’s (D-DE) Small Business Tax Credit Accessibility Act (S. 379). This bill would expand the small employer health care insurance tax credit to allow businesses with 50 employees (up from the current 25 employees) to be eligible for credit and to extend the number of years that a business can claim the credit from two to three. The bill would also impact the method under which eligibility for the credit is phased out, eliminate the requirement that employers contribute the same percentage to each employee and get rid of the current cap on employer contributions.
The Small Business Tax Credit Accessibility Act does not have the same bipartisan support that the Small Business Healthcare Relief Act has since all ten of its co-sponsors are Democrats, with the exception of Sen. Angus King (I-ME) who caucuses with the Democrats.
The bill was introduced back in February of 2015. However, the Senate Small Business Committee only just held hearings on the bill this May. There have been no further developments since the hearing. An identical bill which was introduced in the House, also in 2015, has not seen any movement since it was assigned to the Ways and Means Committee.
Interestingly, the proposal to expand the small-business tax credit, including allowing businesses with 50 or fewer employees to be eligible for the credit, has been heard on the campaign trail as, on August 23, Hillary Clinton released a plan to expand the small business tax credit which includes many elements that are similar, or identical, to those in the Small Business Tax Credit Accessibility Act. Accordingly, if Hillary Clinton wins the presidency, the prospects of this bill, or another like it, getting attention will be high.
Restoring Access to Medication and Improving Health Savings Act of 2016
The Restoring Access to Medication and Improving Health Savings Act of 2016 (H.R. 1270) passed the House on July 6, 2016, and has been sitting on the Senate Legislative Calendar since.
The purpose of the bill, as originally introduced, was to repeal the provision of the ACA that limits the payments for medications from health savings accounts (HSAs), flexible spending arrangements (FSAs) and medical savings accounts to prescription drugs or insulin and excludes payments for over-the-counter-drugs. Though the ranking member of the House Ways and Means Committee, Sander Levin (D-MI), raised concerns about the bill’s estimated $6.6 billion price tag, the bill was voted out of the Ways and Means Committee by a voice vote in September 2015.
However, the bill got more controversial when it was amended to include two other healthcare bills that were passed out of the Ways and Means Committee in 2016, the Protecting Taxpayers by Recovering Improper Obamacare Subsidy Overpayments Act (H.R. 4723) and the Health Care Security Act of 2016 (H.R. 5445).
H.R. 4722, which, like the Restoring Access to Medication and Improving Health Savings Act of 2016, was introduced by Congresswoman Lynn Jenkins (R-KS), would eliminate the provision of the ACA limiting the government’s ability to recoup payments for health insurance premium assistance paid in advance for low-income families. In other words, where a taxpayer has elected to receive an advance of the ACA’s refundable tax credit to help individuals purchase insurance on the exchange and, during the year, the taxpayer’s income changes so that he or she would not be eligible for the full amount of the advanced tax credit he or she received, the ACA places limits, based on household income, on how much of the overpaid advanced credit the taxpayer will be required to pay back. H.R. 4722 would eliminate these limits and allow the government to recoup the full amount of any overpaid premium advances. This bill is estimated to raise $61.6 billion, which would offset the cost of the Restoring Access to Medication and Improving Health Savings Act of 2016 nine times over.
H.R. 5445, which was introduced by Congressman Erik Paulsen (R-MN) would amend the laws governing HSAs to do the following three things – (1) allow spouses to make catch-up contributions to HSAs, (2) allow HSAs established within 60 days of an individual’s enrollment in a high deductible plan to reimburse expenses incurred before the HSA was established but after the individual enrolled in the plan, and (3) increase the contribution limits for HSAs. It was estimated that this bill would cost $20.5 billion, to which Ways and Means Democrats again raised concerns.
Ultimately, the packaging of the three bills together caused the Restoring Access to Medication and Improving Health Savings Act of 2016 to lose any bipartisan support that there might have been for the original form and resulted in the bill passing the House strictly on a party-line vote. In particular, the Democrats raised concerns about using H.R. 4722, which raised money by repealing ACA protections for primarily low-income taxpayers, to fund the other two bills which expanded HSAs and other medical accounts which the Democrats asserted typically benefit higher-income taxpayers who have more income to put into such accounts.
Again, the future of these consolidated bills in the Senate will be largely dependent on the election and also whether they remain a single piece of legislation, rather than three separate bills.
Bills on Overtime Regulations
In addition to the above healthcare bills, we have been monitoring two bills which would which would impact the new regulations on overtime that were issued by the Department of Labor (DOL) in May and which will go into effect on December 1.
As extensively summarized in Volume XVIII, Issue 4 and the webinar that is available for streaming on the SBLC’s website, the new rules significantly increase the minimum salary that employees must be paid to qualify for the white collar or highly compensated exemptions to the Fair Labor Standards Act (FLSA) overtime rules and include a provision to automatically update these thresholds without the need for DOL rulemaking.
The SBLC submitted comments on the DOL’s proposed regulations and DOL specifically referred to the SBLC’s comments in making certain prosmall-business changes to the final rules. Nonetheless, the final version of the rules will still pose a significant and costly challenge for businesses of all sizes and a repeal of, or modifications to, the rule could be very beneficial for small businesses who are generally less able to bear such cost increases.
The Protecting Workplace Advancement and Opportunities Act (H.R. 4773/S. 2707) was actually introduced in March, before the DOL released the final rule. The bill would invalidate the new rule in its entirety, restrict the DOL’s ability to promulgate any similar rules in the future and prevent the DOL from implementing any future regulation that would include automatic increases to the salary thresholds. The bill has 196 co-sponsors in the House and 45 in the Senate, all of them Republicans. Neither the House nor Senate version of the bill has seen any movement since introduction.
On the other side of the aisle, on July 14, Congressman Kurt Schrader (D-OR) introduced the Overtime Reform and Enhancement Act. The bill would phase in the increase to the salary thresholds between December 1, 2016 and December 1, 2019 and eliminate the automatic updating provision. Because the bill was introduced just as Congress was heading out for recess it has yet to get much attention and currently only has nine co-sponsors (all Democrats) and no companion bill has yet to be introduced in the Senate.
Given that the new rule goes into effect on December 1, there will likely be a push for Congress to consider one, or both, of these bills when they come back from the election. In light of the fact that President Obama will still be in office for almost two months after the new rule goes into effect, the prospects are better for the Overtime Reform and Enhancement Act than the Protecting Workplace Advancement and Opportunities Act, which the President will surely veto and which does not currently have enough support to override a veto. If the Republicans fail to take the White House and/or lose the Senate, they may be more willing to support a bill like the Overtime Reform and Enhancement Act in recognition of the fact that outright repeal of the rule will be unachievable under a Clinton administration and/or Democrat-controlled Senate and that reform will be the best they can get.
S Corporation Modernization Act
In mid-July, the S Corporation Modernization Act (H.R. 5754/S.3181) was introduced in the House and Senate. This bill, earlier iterations of which have been introduced in prior congressional sessions, would make a number of changes to the rules governing S corporations, including – (1) allowing an electing small business trust (ESBT) with a non-resident alien beneficiary to hold shares in a S corporation, (2) allowing a shareholder ESBT to claim a deduction for charitable contributions attributable to the S corporation (3) modifying the “sting tax” on passive investment income of a S corporation, (4) allowing IRAs to hold stock in S corporations, and (5) allowing for a basis adjustment of S corporation stock upon the death of a shareholder which would be amortized over a 15-year period. In short, the bill would make a number of positive changes to the rules governing S corporations to help them attract investment and increase growth.
The bill has bipartisan support and was introduced in the Senate by Sen. John Thune (R-SD) with Sen. Ben Cardin (D-MD) and Sen. Pat Roberts (R-KS) signed on as original co-sponsors (no additional co-sponsors have signed on since introduction). In the House the bill was introduced by Congressman David Reichert (R-WA) with Congressman Ron Kind (D-WI) as an original co-sponsor and two other Republican members signing on as co-sponsors in August.
The bipartisan nature of the bill is a good sign, however, given that earlier versions of the bill have previously been introduced with similar support and have not gained traction, it is unclear whether there will be sufficient momentum to get the bill addressed during the lame-duck period.
Retirement Enhancement and Savings Act of 2016
Finally, just yesterday the Senate Finance Committee announced that it will mark up the Retirement Enhancement and Savings Act on September 21 before Congress goes out of session.
The Retirement Enhancement and Savings Act, which is a catch-all retirement policy bill, contains a number of policy proposals supported by the SBLC. This is not a major bill but does include a handful of provisions that will make administration of retirement plans easier for small businesses and will improve the small-employer pension plan start-up credit. Despite the mark-up, the only way that we expect this bill to move this year is if it gets included in a larger year-end legislative package that would be negotiated after the election.