Legislative Update: House Passes Bipartisan Tax Bill Passes Despite a Divided Congress

The House passed a $78 billion tax bill on January 31 that boosts the child tax credit and reinstates business deductions that were rescinded during the Trump administration, sending the bipartisan, bicameral legislation to the Senate for consideration.  In a bid to secure a legislative victory for their constituents and enhance their prospects in the upcoming 2024 elections, members of Congress from both parties passed the Tax Relief for American Families and Workers Act (H.R. 7024) by a rare, overwhelmingly bipartisan 357-70 vote.

Authored by House Ways and Means Committee Chair Jason Smith (R-MO) and Senate Finance Committee Chair Ron Wyden (D-OR), the bipartisan, bicameral tax bill would incrementally raise the refundable portion of the child tax credit by increasing the maximum credit per child from $1,600 to $2,000 through 2025.

The measure also reinstates three business deductions phased out to lower the cost of the 2017 Tax Cuts and Jobs Act, including allowing businesses to deduct research and development costs every year instead of over five years.  It would also provide a more generous interest deductibility and 100% immediate expensing on machine, equipment, and vehicle investments.  Small businesses will specifically benefit from an expanded expensing cap and the reporting threshold for companies that use subcontract labor.

Additionally, it calls for raising the ceiling for the low-income housing tax credit by 12.5 percent through 2025, prevents double taxation for Taiwanese businesses that have workers in the U.S. and Taiwan, and provides disaster tax for recent weather incidents and the Norfolk Southern train derailment in East Palestine, Ohio.

Members voting against the bill came from a mix of members from both sides of the aisle. Several conservative Republicans opposed the child tax credit.  Progressive Democrats argued that the legislation was inequitable, favoring corporations over families, and the child-credit expansion didn’t go far enough.  Finally, some moderate New York Republicans were angry that the bill did not include the state and local tax (SALT) deduction.

The day before, the NY members sent a warning shot to House Speaker Mike Johnson (R-LA) and GOP leadership by shutting down floor action on the bill by opposing an unrelated procedural vote. They eventually allowed business to proceed as talks continued with the Speaker.  Reportedly, the lawmakers and leadership agreed to move on a separate SALT-related bill.

On Wednesday, Senate Majority Leader Chuck Schumer (D-NY) said he supports the tax bill and is working with Wyden “to figure out the best way forward.”  Wyden is confident that a decisive House vote would give senators momentum to pass the bill quickly.  But it will take 60 votes in the Senate, and some are signaling they may seek to make changes.

EPA will revise TSCA Rules and Streamline New-Chemical Reviews; Senators Question Freedhoff’s commitment to listening to industry

EPA chemicals chief Michal Freedhoff revealed the agency’s plans to change the Toxic Substances Control Act (TSCA) rules for existing chemicals and expedite new chemical reviews. She also indicated that targeted policy changes might be implemented, such as adjustments to existing chemical exposure limits (ECELs) based on the outcomes of risk evaluations, moving away from unattainable strict limits.

During the Jan. 24 Senate Environment and Public Works Committee oversight hearing on implementing TSCA amendments, Freedhoff expressed a willingness to collaborate with Republican senators to address concerns regarding the perceived stringency and slowness of the toxics program’s chemical reviews. Freedhoff’s comments were in response to a list of possible policy changes recommended by Ranking Member Shelley Moore Capito (R-WV) and other Senators during a meeting before the hearing.  The policy changes aim to improve the new chemicals review process, which they complain is too slow.

Freedhoff expressed support for reviving the Sustainable Futures Initiative, a program that would assist industry in developing better new chemical submissions. She also committed to explaining the reasons for using models in new-chemical risk assessments instead of applicant-submitted data, addressing a common concern from the industry.  Freedhoff acknowledged potential shifts in EPA approaches in response to industry practices and concerns but added that much would depend on the agency’s budget not being cut so they can hire people to facilitate the changes.  The debate continues over whether budget increases are needed to support these reviews.

Capito warned that any congressional budget support would be tied to programmatic reforms. In her opening statement, she went through a long detailed list of the many problems she sees with the TSCA program implementation, including EPA’s lack of response to stakeholders, inability to fill vacancies, and its troubling “zero-risk” approach to its TSCA program EPA has recently taken.

Several members brought up the agency’s plans to evaluate vinyl chloride. Senator Markwayne Mullin (R-OK) pointed out that all five additional chemicals for prioritization are used in plastics, specifically mentioning vinyl chloride and its extensive use in PVC throughout homes and in the water infrastructure.  Senator Mullin pressed Freedhoff firmly about her choice to quote the president of the “radical activist group,” Beyond Plastics, in her EPA press release, raising doubts among industry stakeholders about whether their input is being considered. Freedhoff defended the EPA’s accessibility to various stakeholders and explained that they had informed the industry about their shortlist of chemicals before engaging with Beyond Plastics.  She repeatedly emphasized the agency’s commitment to a multi-year scientific process the agency follows and the extensive public input before making any regulatory decisions related to chemicals used in plastics.  Several members shared their frustration with the number of years in the process.

Senator Ed Markey (D-MA) asked whether an eventual transportation ban or use restriction on vinyl chloride could help protect communities from hazards, including worker exposure and explosions.  She emphasized that an evaluation of chemicals like vinyl chloride is long overdue” and the 2016 TSCA law could potentially lead to restrictions on manufacturing or usage or changes in how it is used to enhance safety.

Senator Pete Ricketts (R-NE) emphasized the importance of chemicals in global food production, mentioning chemicals like formaldehyde, vinyl chloride, ethylene oxide, and acetyl aldehyde. He highlighted the significance of predictable and reliable permits for these chemicals. He also inquired whether the new chemicals program still utilizes the Lean Six Sigma program. Michal Freedhoff responded that they don’t use this program but aim to continuously improve through similar approaches.

House and Senate Appropriators Agree on Subcommittee Allocations Providing a Path 

The agreement between Senate Appropriations Chair Patty Murray (D-WA) and House Appropriations Chairwoman Kay Granger (R-TX) will allow the two chambers to prepare the final spending bills for passage before the current stopgap bill expires on March 1 for four bills and March 8 for the remaining eight bills. House Republicans want to avoid an omnibus bill.

Speaker Mike Johnson, on January 29, met with the 12 appropriations chairs to plot a way forward to finalize FY 24 appropriations. He thinks the goal is to break up the bills into as many small packages as possible. Given that House conservatives have become accustomed to blocking rules that set up floor debates for bills they oppose, lawmakers will likely have to construct appropriations packages that can pass under the suspension of the rules, with a higher two-thirds requirement for passage.

Another hurdle that can slow the process is the wide gap in policy issues between the House and Senate bills. House Republican appropriators are vowing to attach policy riders that Democrats say they will not accept.  If Congress doesn’t pass the bills by then, a fourth stopgap measure must be passed to avoid a government shutdown.

Senate Confirms EPA Air Office Lead Joe Goffman

After years of deadlock, the Senate narrowly confirmed Joe Goffman as the head of the EPA’s air office in a 50-49 party-line vote. This confirmation comes at a pivotal time as the agency is intensifying efforts to tighten standards for particulate matter and curtail emissions from various sources, including vehicles, power plants, and more. Goffman has been effectively leading the air office as acting head and principal deputy assistant administrator during most of the Biden administration.

Critics of the Biden EPA had previously used the lack of a confirmed air office head as a talking point against its ambitious regulatory agenda. Goffman brings a wealth of experience, having served in various roles, including at Harvard University’s Environment and Energy Law Program and the Environmental Defense Fund. However, during the Obama administration, his association with helping to develop the Clean Power Plan–essentially overturned by the Supreme Court in the West Virginia v. EPA ruling was a point of contention among Senate Republicans and Democratic Senator Joe Manchin (D-WV).

With Goffman’s confirmation, the EPA can proceed with its plans to finalize policies, including updated particulate matter standards, greenhouse gas emissions limits, vehicle emission rules, and more.