ADVOCACY REPORT May 8, 2018 Boston, MA Liz Clark, NACUBO Alex Hecht, ML Strategies Chuck Samuels, Mintz Levin
The Tax War of 2017 PAB s hit in surprise attack We were relatively well-prepared compared to other PAB s Mobilization, grass roots, media and coordinated D.C. effort Dramatic reversal of House bill Advance Refundings easy target What worked, what didn t? (NAHEFFA actions)
Long list of legislative priorities remain for year Tax Reform Guidance from Treasury Infrastructure 2018 Landscape Retirement of Speaker Ryan Opens Field for GOP Democrats emboldened ahead of midterms Political silly season + Lots of retirements
Top Congressional Priorities for 2018 Potential Legislation Left for 2018 Reauthorizations Affordable Care Act stabilization Coast Guard Autonomous Vehicles Department of Homeland Security Banking Regulations Farm Bill Border wall Federal Aviation Administration CIFIUS foreign investment vetting Higher Education Act DACA/Immigration National Defense Authorization Act Drug prices National Flood Insurance Program Energy package National Transportation Safety Board Fannie Mae and Freddie Mac overhauls Securities and Exchange Commission Fiscal Year 2019 appropriations Water Resources Development Act Infrastructure IRS overhaul Opioid crisis Tax reform technical corrections Veterans health care
Outlook for Infrastructure Package President Trump and congressional Democrats have introduced competing plans, but a major infrastructure package is likely to wait until 2019. Speaker Ryan has called for infrastructure to be addressed in smaller packages. 2018 will be spent laying the groundwork for next year, but two pieces of infrastructure are likely to advance. FAA Reauthorization House passed bill on April 27 Senate expected to bring up its own bill in May Deadline of September 30 th for final bill Water Resources Development Act Last WRDA bill approved in 2016 Two year cycle with new reauthorization due this year
Midterm Elections Could Bring Big Changes Will President Trump Drag GOP Down in November? President Trump s approval rating hovering around 40 percent Historically, when the president s approval is below 50 percent his party has lost an average of 40 seats in the midterms 6
House of Representatives in Play All House members up for reelection Democrats need to pick up 23 seats in the House to win majority President s party has historically lost an average of 25 seats in midterms More than 40 Republicans are retiring, resigning, or running for another office This includes Speaker Ryan setting the stage for a battle for control of the party
What About the Senate? Safer bet for Republicans to retain 33 seats up for reelection 26 Democrats up for reelection Trump won in 10 of their states But, Democrats only need to pick up 2 Senate seats for the majority Three Republican Senate seats with retiring Senators are now considered toss-ups (Arizona, Nevada, and Tennessee) Five Senate seats held by Democrats are considered toss-ups (Florida, Indiana, Missouri, North Dakota, and West Virginia) Bottom line? Democrats have a real shot, but it is a long one. 8
Retirements or Change in Leadership Could Mean Big Changes Ahead on Capitol Hill Republican House Leadership Ryan retirement opens up leadership post for Republicans Potential successors are Reps. McCarthy (R-CA), Scalise (R-LA) and Meadows (R-NC) If Democrats take the House majority? Nancy Pelosi will likely square off with Reps. Hoyer (D-MD) and Crowley (D-NY) for the speakership Senate Majority Likely Safe But. Should Democrats take the majority, Minority Leader Schumer (D-NY) would be a friend to bonds as Majority Leader
What About the Committees? Current Chairman Brady (R-TX) hostile to tax-exempt municipal bonds Current Chairman Hatch (R-UT) is retiring replaced by Sen. Crapo (R-ID)? Ranking Member Neal (D-MA) strong supporter of bonds Sen. Crapo is a supporter of tax-exempt municipal bonds Ranking Member Wyden (D- OR) strong supporter of bonds
2018 and Beyond Brady comments on PAB s Opportunities on Bank Qualified, Advance Refunding, threat to PAB s? Infrastructure Technical corrections New tax cut Phase 2, make individual tax cuts permanent, retirement, education savings Other legislation o Water bills o FAA reauthorization o Mid-term elections
Bank Qualified H.R. 2229- Reed (N.Y.)/Neal (Mass.) and 11 co-sponsors (2015-16)-- BQ Increase maximum issuance Make permanent Apply to borrower for 501(c)(3) s
Advance Refunding Approaches Revenue 2017 Tax Bill Hultgren (H.R. 5003 10 co-sponsors) Mimic AR under current law (more expensive; less understandable) Current refundings Taxable AR Forward Delivery Bonds Legislative/Regulatory Relief to close-replicate AR
Developing AR Alternatives Overcome double-subsidy argument Overcome $17 billion price tag Toll charge approach Crippled SLG s approach
Toll Charge Tax exemption for if toll charge paid by issuers/borrowers for all or some subsidy during doubling up period Need legislation Will issuers be willing to write check to USG? Economics
Tax-exempt SLG s AR Alternate Use crippled SLG s, escrow invested in other TEB s to decrease subsidy Avoid direct payment to Treasury Implemented by Regulation
Other Legislation/Regulatory Issues HQLA MMMF H.R. 2319/S. 1117 reverse SEC prohibiting investment in SNAV MMF s House Committee reports out MSRB MA Guidance
Connect Liz Clark Director, Federal Affairs, NACUBO LClark@nacubo.org (202) 861-2553 Alex Hecht Executive Vice President & Director of Operations, ML Strategies AHecht@mlstrategies.com (202) 434-7333 Chuck Samuels Member, Mintz Levin CASamuels@mintz.com (202) 434-7311