Chris Kearney | NSWA Vice President, Governmental Affairs
The House and Senate have returned for the post-election “Lame Duck Session” to address unfinished business of the outgoing 116th Congress. Adjournment by both houses is currently scheduled for December 18th. There is a very narrow timeframe for Congress to pass important pieces of legislation, most notably the final FY 2021 appropriations bills.
Currently, Congress is operating under a funding mechanism known as a “Continuing Resolution,” (CR) which, in the absence of individual agency funding bills, provides authority for the entire federal government to operate at the FY 2020 spending levels. The current CR expires on December 11th.
Just before the Thanksgiving break, the senior leadership of the House and Senate Appropriations Committees announced that they had reached broad agreement on overall spending levels for the FY 2021 appropriations budget. Currently, they are working to divvy up the funding by agency – including DOE and EPA — and work out potential policy disagreements, with a goal of reaching agreement on an “omnibus” appropriations package by the 11th.
The key differences remaining between the two chambers are over how much, if any, “emergency spending” to provide Covid-19 related funding, as well as potential funding for military veterans-related health expenditures (i.e. hospitals, etc.).
If congressional negotiators are not able to reach agreement, it’s likely another CR will be passed until agreement can be reached on the remaining bills and address the emergency spending issues.
Once matters related to the appropriations bills are completed, Congress is expected to bring the 116th Congress to a close and head home for the holidays.
Among the notable remaining bills that may be considered in the waning days of the Lame Duck include a separate COVID relief package from the emergency spending package which may or may not be included as part of the FY 2021 Appropriations Omnibus package.
While discussions continue between the House and Senate, the two chambers have for months been far apart on the size of the package (the Senate is advocating for around $500 billion and the House is promoting a package closer to 1.8 trillion). The House Leadership, in recent days, has come under increasing pressure from a bipartisan group of members to agree to a narrow package, with plans in the 117th to return to pursue a broader, more financially robust, package.
Other potential bills under consideration include the Water Resources Development Act (authorizes US Corps of Engineers projects) and the FY 2021 National Defense Authorization Act.
Action on an Energy bill and a tax “extenders” bills remain very uncertain in the waning days of Congress. On the tax front, as of this writing, there is agreement among key tax committee Democrats and Republicans over the benefit of changing the tax code to allow Paycheck Protection Program (PPP) loans to be deducted as a business expense. However, there is no consensus on a broader tax extenders bill.
On Energy, House and Senate conversations continue at the staff level, with no clear timeline for agreement.
NSWA continues outreach to key members of Congress and related organizations, including IPAA, KIOGA, NARO, and others. These connections advance our efforts to preserve percentage depletion as well as offering consideration for potential modifications, including eliminating the net income ceiling, as various legislative vehicles advance.
Background on Pending Lame Duck Legislation
FY 2021 Appropriations
To date, Congress has not enacted any of the 12 annual appropriations bills. The House passed 10 of 12 spending bills in July through two spending packages; however, the Senate has not advanced any of its bills through the appropriations committee. On October 1st, Congress passed and President Trump signed into law a Continuing Resolution (CR), P.L. 116-159, extending government funding at current FY 2020 levels through December 11th.
H.R. 7608: The House’s four-bill spending package that covers Agriculture-FDA, Interior-Environment, Military Construction-VA, and State and Foreign Operations spending. The House passed this package by a 224-189 vote on July 24th with no Republican support. Senate Republicans disagreed with the legislation’s plan to offer amendments to include in the bill additional coronavirus relief and policing and law enforcement policies. President Trump threatened to veto the spending package.
H.R. 7617: The House’s six-bill appropriations package includes Commerce-Justice-Science, Defense, Energy and Water, Financial Services, Labor-HHS-Education, and Transportation-HUD spending. H.R. 7617 passed by a 217-197 vote on July 31st without any Republican support. This bill includes a few major policy provisions, such as a requirement for local governments to institute policing policy changes, including a chokehold ban; and an additional $210 billion in emergency spending on top of regular appropriations. Senate Republicans opposed the additional coronavirus response funding and policing measures included in the bill. The White House also threatened to veto this measure, criticizing the emergency spending and policing policy riders.
COVID Relief
So far this year, Congress has passed three major coronavirus relief packages: (1) the “Coronavirus Preparedness and Response Supplemental Appropriations Act, 2020” (P.L. 116-123), which was signed into law on March 6th; (2) the “Families First Coronavirus Response Act” (P.L. 116-127), which was signed into law on March 18th; and the “Coronavirus Aid, Relief, and Economic Security (CARES) Act” (P.L. 116-136), which was signed into law on March 27th. Since March, numerous proposals have been introduced and considered in both the House and Senate, but months of negotiation between Congressional leaders and the White House has yet to result in a fourth coronavirus relief package, despite all parties agreeing that another relief package is needed.
On October 29th, House Speaker Nancy Pelosi (D-CA), who has been leading the negotiations on behalf of Congressional Democrats, sent a letter to the White House’s principal relief package negotiator, Treasury Secretary Steven Mnuchin, stating that Congress is still awaiting draft legislative language and/or responses on several issues “of critical importance,” including testing, tracing and treatment, state and local funding, schools, child care, earned income and child tax credits, unemployment insurance, OSHA, and liability. In response, Treasury Secretary Mnuchin expressed that the White House has been negotiating in good faith on these provisions, but said the Speaker has “refused to compromise” on many of these major items, including additional funding for state and local governments.
On November 4th, Senate Majority Leader Mitch McConnell (R-KY) said he wanted to pass a coronavirus relief package by the end of the year, but he maintained that the House-passed HEROES Act (H.R. 6800) (including the slimmed-down “2.0” version totaling $2.2 trillion passed on October 1) is too costly and includes too many provisions that are not directly related to the pandemic. Many Congressional Republicans have expressed concern not only with the HEROES Act and HEROES 2.0 but also with the most recent proposal from the White House, which totaled approximately $1.8 trillion. House Speaker Pelosi and Congressional Democrats remain committed to approving another package by the end of the year, as does the White House, but it is unclear if all sides will be able to come to an agreement on both cost and policy in short order, especially as many election outcomes are still unclear.
Energy Package
S. 2657: Introduced by Senators Lisa Murkowski (R-AK) and Joe Manchin (D-WV), the “Advanced Geothermal Innovation Leadership Act of 2019” includes over fifty energy efficiency, cybersecurity, and climate-oriented measures that have bipartisan Senate support. The measure would revamp U.S. energy policy for the first time in roughly a dozen years and includes a bill (S. 1602) to launch energy storage demonstration projects introduced by Sen. Susan Collins (R-ME).
The energy bill, which enjoys broad bipartisan support in the Senate was brought to the floor in March of this year, but progress stalled over an amendment to curb hydrofluorocarbons (HFCs) that have an outsized impact in warming the planet. Negotiations have continued between Sens. John Kennedy (R-LA) and Tom Carper (D-DE), the amendment’s authors, and Sen. John Barrasso (R-WY), who opposes it. Differences remain.
There is no House companion to the Senate energy package, though House Energy and Commerce Committee Chairman Frank Pallone (D-NJ) was reported to be considering a series of energy and climate measures.
Tax Extenders
During the lame duck session, Congress will need to address tax extenders and include them in any finalized appropriations package or separate extender legislation. These individual and business entity tax breaks are typically extended for one or two years instead of on a permanent basis and many of them are expiring at the end of this year. Popular individual tax extenders include the deduction for private mortgage insurance (PMI) and the above-the-line deduction for tuition and fees. Popular business tax extenders include the recovery or expensing of business income investments and incentives for empowerment zone investments. The Continuing Further Consolidated Appropriations Act of 2020, which was signed into law in December 2019, extended almost three dozen regularly expiring provisions, many retroactively to 2018.
The following is a list of expiring tax extenders for 2020 based on several sources, including the Congressional Research Service (CRS):
Individual Tax Provisions
- The exclusion from income of the discharge of indebtedness on a principal residence
- The ability to treat mortgage insurance premiums as qualified residence interest
- The 7.5% of AGI limitation on the itemized deduction for medical expenses
- The above-the-line deduction for qualified tuition and related expenses
- Credit for health insurance costs of certain low-income individuals
Special Business Investment (Cost Recovery) Provisions
- Special expensing rules for certain film, television, and live theatrical productions:
- Accelerated depreciation for property:
- Seven-year recovery period for motorsports entertainment complexes;
- Three-year depreciation for racehorses two years or younger; and
- Accelerated depreciation for business property on an Indian reservation
Economic Development Provisions
- Empowerment zone tax incentives
- New Markets Tax Credit (subject to carryover of excess allocations through 2025)
- American Samoa economic development credit
Other Business-Related Provision
- Indian employment tax credit
- Mine rescue team training credit
- Employer tax credit for paid family and medical leave
- Work opportunity tax credit
- Look-through treatment of payments between related controlled foreign corporations
- Provisions modifying excise taxes on wine, beer, and distilled spirits
Energy Tax Incentives
- Credit for nonbusiness energy property
- Energy efficient commercial building deduction
- Credit for constructing new energy efficient homes
- Credits for fuel cell motor vehicles and two-wheel plug-in electric vehicles
- Credit for alternative fuel vehicle refueling property
- Credit for second generation biofuel production
- Credit for production of Indian coal
- Beginning of construction date for renewable power facilities eligible for the electricity production credit or investment credit
Foreign Taxes
- Look-through rule for controlled foreign corporations