April 12, 2019 Washington Update

This Week In Congress

House – The House passed H.R. 1644, “The Save the Internet Act,” and H.R. 1331, “The Local Water Protection Act.” The House cancelled a vote on legislation to raise the defense and non-defense discretionary spending caps for Fiscal Years (FY) 2020 and 2021.

Senate – The Senate confirmed to be Secretary of the Department of the Interior, and Cheryl Marie Stanton to be Administrator of the Wage and Hour Division at the Department of Labor.

Next Week In Congress

House – The House will be in recess.

Senate – The Senate will be in recess.

TAX

Treasury Secretary On April 3, House Ways and Means Responds to Request for Trump’s Tax Committee Chairman Neal (D-MA) wrote to Returns Internal Revenue Service (IRS) Commissioner Charles Rettig requesting that the agency Key Points: provide six years of President Trump’s tax . Treasury Secretary Mnuchin tells House Ways returns along with the returns of eight and Means Chairman Neal (D-MA) that he businesses connected to President Trump. The is consulting with the Department of Justice on letter set an April 10 deadline for compliance how to respond to the request for President with the request. This week, on April 10, Trump’s tax returns. Treasury Secretary Steven Mnuchin responded . On April 3, Chairman Neal wrote to IRS saying that Treasury is unable to meet the Commissioner Charles Rettig calling for the deadline and is still reviewing the request. past six years of tax returns for the President along with the returns of eight businesses Table of Contents connected to the Trump. Tax 1 . Chairman Neal argues that only the IRS Financial Services 4 should be involved in responding, and that the Energy & Environment 8 agency must provide the returns under the Health 12 language of IRC section 6103(f). Trade 14

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According to the letter; “[t]he Committee’s Income Tax Credit; (5) IRS Workforce; (6) request raises serious issues concerning the Work-Classification; (7) Non-profit constitutional scope of Congressional Organizations; (8) Wayfair Ruling; (9) FAFSA; investigative authority, the legitimacy of the (10) Medical Device Tax; and (11) asserted legislative purpose, and the Conservation Easement Tax Deduction. constitutional rights of American citizens.” Chairman Grassley (R-IA) in his opening Chairman Neal, however, argues that only the statement said the relationship between the IRS IRS should be involved in responding because and Congress has not always been positive but it has been delegated the authority on tax argued that there is now an opportunity to return matters from Treasury, and that the move forward and address the challenges agency must provide the returns under the facing the IRS today. He specifically noted that language of Internal Revenue Code (IRC) IT systems within the agency are outdated and section 6103(f). The Chairman issued a IT theft has remained a top concern. He also statement in response to the letter saying that noted the Taxpayer First Act that he and he would consult with counsel and determine Ranking Member Wyden (D-OR) introduced an appropriate response to Rettig in the coming last month, and explained that the bill would days. In all likelihood, a second letter or codify the independent appeal process to possibly a subpoena seems likely to be the next strengthen IRS independence and would also formal communication on the issue. require the agency to create long-term plans for improving customer service. Ranking Member Senate Finance Committee Holds Hearing Wyden echoed the chairman’s comments on on Internal Revenue Service the proposed legislation and added that he supports the proposal to allow Americans to Key Points: file their taxes online directly through the IRS. . Senate Finance Chairman Grassley (R-IA) said IT systems within the IRS must be IRS Commissioner Rettig explained that he modernized and IT theft remains a top looks forward to improving cyber security and concern. further training employees within the IRS to . Chairman Grassley said bipartisan legislation help better serve taxpayers. He added that he is introduced in the Senate would codify the pleased to announce that the tax filing season independent appeal process to strengthen IRS has continued to go as planned and is a tribute independence and would also require the agency to IRS employees. He said the President’s to create long-term plans for improving budget request asks for over $11 billion for the customer service. IRS in FY 2020 which is $170 million above . Ranking Member Wyden (D-OR) stressed the the 2019 enacted level. He noted that the IRS is importance of allowing Americans to file their finalizing its IT modernization plan and said taxes online directly through the IRS. the bill includes an additional $290 million for this plan. He said the IRS has continued to On April 10, the Senate Finance Committee work towards protecting taxpayer data and held a hearing entitled “The 2019 Tax Filing mentioned that the budget called for a well- Season and the 21st Century IRS.” Topics trained workforce. He said to help in this area; discussed in the hearing included: (1) IRS the IRS is asking to restore the streamline Whistleblower Program; (2) IT Modernization; critical pay authority, which expired in 2013. (3) President Trump’s Tax Returns; (4) Earned

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House Passes IRS Reform Legislation automated system to receive income verification requests for mortgage applications. Key Points: . The Taxpayer First Act passed the House on While the legislation has bipartisan support in April 9 and would preserve the IRS Oversight the Senate, lawmakers could threaten the Board, establish an independent Office of process by trying to use it as a way to pass tax Appeals, and permanently authorize the extenders or make technical corrections to the volunteer assistance program for low-income Tax Cuts and Jobs Act (TCJA). However, filers. Senate Finance Chairman Grassley indicated . Come lawmakers contended late in the debate that course was not likely by stating that he has that the bill would make it impossible for the given up on the idea of adding tax extenders to IRS to create its own tax return software for the legislation. “I don’t think this can be a low-income Americans. vehicle for other things,” he said this week. . Senate Finance Chairman Grassley said he has given up on the idea of adding tax Senator Elizabeth Warren Proposes extenders or TCJA technical corrections to the Corporate Profits Tax IRS reform bill. This week, Senator Warren (D-MA) proposed On April 9, the House passed legislation to an idea to tax companies earning more than restructure the IRS, add protections for $100 million per year – roughly 1200 taxpayers, and upgrade agency technology. companies in the U.S. match this criterion. H.R. 1957, the Taxpayer First Act, received last According to Senator Warren, for every dollar minute opposition from members who argued of profit above $100 million, a company would that the bill would make it more challenging for pay a 7 percent surtax. The “Real Corporate the IRS to create its own free tax return Profits Tax” as she labels it, would generate software for low-income Americans. more than $1 trillion and apply to 1,200 Representative John Lewis (D-GA) responded companies according to her office and an to the critics by saying that “[w]hatever the estimate prepared by two UC Berkeley problem may be, we will fix it.” academics. That tax would apparently apply against the income reported for financial Overall, the bill would preserve the IRS purposes by public companies. Oversight Board, establish an independent Office of Appeals, and permanently authorize In her release on the issue, Senator Warren the volunteer income tax assistance program cited as one rationale for the proposed tax the for low-income filers. The legislation would fact that for book or financial purposes, also limit the ability of private debt collectors companies may declare earnings that are not to pursue unpaid taxes for low-income treated as income for tax purposes. Of course, taxpayers and codify an exclusion to upfront tax accounting allows for carryforward of net fees and initial payments in the offer in operating losses and other tax attributes that compromise program for Americans with can change the taxable income as compared to incomes below 250 percent of the federal book income. It is not clear what basis would poverty line. In regard to technology, the bill be the income measurement in her proposal. requires the IRS to develop an internet portal for taxpayers to file Form 1099 and an

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For more information about tax issues you may email to use its national security authorities or call Christopher Hatcher at 202-659-8201. Henry responsibly but forcefully. He noted that the Homans contributed to this section. Committee on Foreign Investment in the United States (CFIUS) is becoming a model for FINANCIAL SERVICES countries looking to screen for national security Secretary Mnuchin Testifies in House risk. He said Congress made significant changes Appropriations and House Financial to CFIUS to target national security threats Services Committees while preserving investment in the U.S. He noted that last week CFIUS unwound two Key Point: deals involving Chinese investors. He stressed . Committee members raised concerns related to the need to ensure that CFIUS reform sanctions, the Bank Secrecy Act, beneficial legislation is faithfully implemented. ownership, the Export-Import Bank, and international insurance standards. FSGG Subcommittee Chairman Mike Quigley (D-IL) said the Fiscal Year (FY) 2020 budget On April 9, Treasury Secretary Steven Mnuchin request for Treasury is $12.7 billion, which is testified before the House Financial Services $62 million below the FY2019 enacted level. Committee and the House Appropriations He noted that the request includes cuts to the Committee’s Subcommittee on Financial Internal Revenue Service (IRS), which would Services and General Government (FSGG) weaken customer service. He said he is pleased Subcommittee. with the proposed increases in funding for the Office of Terrorism and Financial Intelligence House Financial Services Committee (TFI) and the Financial Crimes Enforcement Chairwoman Maxine Waters (D-CA) said the Network (FinCEN). Quigley opposed the plan Secretary must provide the Committee with to divert up to $601 million from the Treasury answers on the delisting of companies Forfeiture Fund (TFF) to pay for construction associated with Russian oligarch Oleg of physical barriers along the southern border Deripaska. She expressed concern that the of the United States. He said $242 million has delisting agreement sends the wrong message already been diverted to the Department of to Deripaska, other oligarchs, and President Homeland Security (DHS), suggesting that this Vladimir Putin. She said President Trump has money would be better used for IRS sided with Putin over his own Justice enforcement. FSGG Subcommittee Ranking Department, and she expressed concern that Member Tom Graves (R-GA) said GDP has the relationship between Putin and Trump may grown and unemployment has dropped since be affecting sanctions policy. She noted that the passage of the Tax Cuts and Jobs Act Congressionally-mandated sanctions have not (TCJA). He commended Mnuchin and IRS yet been implemented, including sanctions staff for their work to implement the TCJA in under the Chemical and Biological Weapons time for tax season. He said the budget request Act. House Financial Services Committee makes important investment in the border and Ranking Member Patrick McHenry (R-NC) national security, while making tough choices said it is a precarious time for global markets, about spending. He said the budget request pointing to the uncertainty around Brexit. includes important investment in sanctions McHenry said traditional threats to enforcement and cybersecurity. international markets still exist, such as terrorism and illicit finance. He urged Treasury

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Representative Carolyn Maloney (D-NY) said compensation, overdraft fees, and mandatory Mnuchin had previously offered to work with arbitration. the Committee on beneficial ownership . Republicans stressed the importance of large legislation. She said there has been bipartisan banks to U.S. economic competitiveness and work on a bill and they are close to an recommended reforms to capital requirements agreement. She said Treasury has provided and the Bank Secrecy Act. technical assistance on the bill. She asked if they are moving in the right direction on the On April 10, the House Financial Services bill. Mnuchin responded in the affirmative. He Committee held a hearing entitled, “Holding said he hopes to see a bipartisan bill passed. Megabanks Accountable: A Review of Global Systemically Important Banks 10 years after the Representatives Steve Stivers (R-OH), Emanuel Financial Crisis.” The Committee received Cleaver (D-MO), Denny Heck (D-WA), and testimony from the CEOs of Citigroup, JP Brad Sherman (D-CA) emphasized the need to Morgan Chase, Morgan Stanley, Bank of reauthorize the Export-Import Bank and America, State Street, Bank of New York achieve a quorum on the board. Mnuchin Mellon, and Goldman Sachs. Chairwoman agreed that the Export-Import Bank should be Maxine Waters (D-CA) questioned what the reauthorized and should have a quorum. He globally systemically important banks (GSIBs) stated that this is a priority for President learned from the financial crisis and whether Trump. they are still engaging in harmful practices. She said the banks assembled have paid $163 billion Representatives Sean Duffy (R-WI) and Ted in fines since the financial crisis, including Budd (R-NC) raised concerns with the ongoing $76.1 billion from Bank of America. She International Association of Insurance suggested the banks view fines as the cost of Supervisors (IAIS) negotiations to develop doing business, noting that they continue to international capital standards (ICS). They bring in massive profits. She suggested that asked if Mnuchin would protect the U.S. some bank CEOs make more than $30 million system of insurance regulation and capital annually. She stressed the need to hold banks standards. Mnuchin responded in the accountable, stating that they should not be affirmative. rewarded for law-breaking behavior. She said Trump Administration regulators are Representatives Steve Stivers (R-OH) and deregulating banks by weakening capital Roger Williams (R-TX) stressed the need standards, stress testing, and the Volcker Rule. review the Bank Secrecy Act and reduce the She expressed concern that several of the compliance burdens on banks associated with institutions are too big to manage. the suspicious activity report regime. Ranking Member Patrick McHenry (R-NC) House Financial Services Committee said this was a “hearing in search of a Holds Hearing on Holding Megabanks headline.” He said the Committee previously Accountable held a hearing on the wrongdoing at Wells Fargo, which he supported. He suggested that Key Points: the current hearing was simply based on the . Democrats raised concerns with the conduct of size of the banks. He suggested that the size of the banks in regards to executive the banks is actually a result of Democratic legislation in the Dodd-Frank Act (DFA). He

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said the regulatory burdens imposed by the would. He suggested that the U.S. actually has DFA have encouraged bank consolidation. He the least concentrated banking sector of any suggested that the Committee’s time would be developed economy. better spent examining whether regulators are prepared for a “hard Brexit.” Representatives Frank Lucas (R-OK), Steve Stivers (R-OH), Barry Loudermilk (R-GA), and Representatives Lacy Clay (D-MO), Ayanna Denver Riggleman (R-VA) spoke on the Pressley (D-MA), Alexandria Ocasio-Cortez importance of financial industry cybersecurity. (D-NY), Gregory Meeks (D-NY), Madeleine Lucas suggested that the cybersecurity Dean (D-PA), Al Green (D-TX), Nydia regulatory regime is very complex and involves Velazquez (D-NY), Katie Porter (D-CA), many agencies. He asked about the cost of Carolyn Maloney (D-NY), Brad Sherman (D- implementing the large web of cybersecurity CA), and Sylvia Garcia (D-TX) raised concerns regulation. Dimon said the banks spend huge with the conduct of the largest banks. Ocasio- amounts of money on cybersecurity. He agreed Cortez pointed to the amount of fines levied that the regulatory system is complex, but against the largest banks since the financial noted that the banks would be meeting with crisis. Clay asserted that the big banks do not regulators on ways to streamline regulation. lend enough to small businesses. Maloney James Gorman (Chairman and CEO, Morgan suggested that JP Morgan is engaging in Stanley) said Morgan Stanley will spend more abusive overdraft practices, noting that she is than $400 million on cybersecurity this year, working on legislation in this area. Velazquez suggesting that cyber is the most existential and Porter raised concerns related to executive threat to the financial system. compensation and income inequality. Sherman spoke in opposition to the use of mandatory Representatives Blaine Luetkemeyer (R-MO), arbitration in consumer products. Bill Huizenga (R-MI), Andy Barr (R-KY), and Ted Budd (R-NC) raised concerns with the Representatives Ann Wagner (R-MO), Andy regulatory burdens imposed on banks. They Barr (R-KY), Roger Williams (R-TX), Anthony suggested that the banking system is far better Gonzalez (R-OH), French Hill (R-AR), and capitalized before the 2008 financial crisis and Lee Zeldin (R-NY) emphasized the importance contended that capital requirements should be of the GSIBs to U.S. international recalibrated. Representatives Ed Perlmutter (D- competitiveness. They suggested that if these CO) and Alexandria Ocasio-Cortez (D-NY) banks did not exist, then large U.S. expressed opposition to weakening capital corporations would have to go to foreign banks requirements. Michael Corbat (CEO, for financing. James Dimon (Chairman and Citigroup) said the Federal Reserve measures CEO, JP Morgan Chase) said JP Morgan 23 or 24 different types of capital, suggesting finances many large U.S. companies. He that there should be a holistic approach to stressed the need for the U.S. to have a strong capital. Dimon suggested that capital banking system, suggesting that this business requirements should be recalibrated and would go abroad without the large banks. Brian harmonized. Moynihan (Chairman and CEO, Bank of America) said the U.S. financial system needs Representatives Blaine Luetkemeyer (R-MO), large institutions to finance large corporations Steve Stivers (R-OH), and Anthony Gonzalez like Google. He stated that if U.S. banks could (R-OH) expressed support for reforming the not provide this financing, then foreign banks Bank Secrecy Act/Suspicious Activity Report

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regime. Stivers stressed the need to provide Markets Advisory Committee (GMAC). The more feedback to banks. GMAC is scheduled to examine four pillars of the 2009 G20 directive regarding the over-the- Federal Reserve Issues Proposed Rule on counter (OTC) derivatives market: (1) trading Prudential Standards for Large Foreign on exchanges or electronic trading platforms; Banks (2) clearing through central counterparties; (3) margin requirements for non-centrally cleared Key Point: derivatives; and (4) data reporting to trade . The Federal Reserve issued proposed rules repositories. intended to ensure that the regulatory framework for foreign banks matches the risks Fixed Income Market Structure Advisory they pose to the U.S. financial system. Committee: The SEC will hold a meeting of its Fixed Income Market Structure Advisory On April 8, the Federal Reserve issued a Committee (FIMSAC). The agenda for the proposed rule entitled, “Prudential Standards meeting includes draft recommendations on: for Large Foreign Banking Organizations; (1) Pennying in the Corporate Bond and Revisions to Proposed Prudential Standards for Municipal Securities Markets; and (2) Certain Large Domestic Bank Holding Companies and Principal Transactions with Advisory Clients. Savings and Loan Holding Companies.” As The Advisory Committee will receive a noted in a press release, under the proposed presentation from the Financial Industry framework “foreign banks with $100 billion or Regulatory Authority (FINRA) on the Block more in U.S. assets would be sorted into Pilot and Reference Data Service Proposal. The categories of increasingly stringent meeting will also include a panel on “LIBOR requirements based on several factors,” Transition: Implications for the Corporate including asset size, cross-jurisdictional activity, Bond and Municipal Securities Markets.” reliance on short-term wholesale funding, nonbank assets, and off-balance sheet April 16 exposure. The Federal Reserve also issued a FDIC Open Meeting: The Federal Deposit joint proposed rule with the Office of the Insurance Corporation (FDIC) will hold an Comptroller of the Currency (OCC) and the open meeting to consider three items: (1) Federal Deposit Insurance Corporation (FDIC) Notice of Proposed Rulemaking - Proposed on “Proposed changes to applicability changes to Applicability Thresholds for thresholds for regulatory capital requirements Regulatory Capital Requirements for Certain for certain U.S. subsidiaries of foreign banking U.S. Subsidiaries of Foreign Banking organizations and application of liquidity Organizations and Application of Liquidity requirements to foreign banking organizations, Requirements to Foreign Banking certain U.S. depository institution holding Organizations, Certain U.S. Depository companies, and certain depository institution Institution Holding Companies, and Certain subsidiaries.” Depository Institution Subsidiaries; (2) Notice of Proposed Rulemaking - Proposed Upcoming Hearings and Meetings Amendments to 12 C.F.R. Part 381; and (3) Advanced Notice of Proposed Rulemaking April 15 Relating to 12 C.F.R. § 360.10 and Extension Global Markets Advisory Committee: The of Insured Depository Institution Resolution CFTC will hold a meeting of its Global Plan Submission Deadlines.

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April 17 development; and the Presidential Permit Energy and Environmental Markets process for border-crossing pipelines. Advisory Committee: The CFTC will hold a meeting of its Energy and Environmental On April 10, President Trump issued two Markets Advisory Committee (EEMAC). The executive orders: “Executive Order on meeting will focus on three topics: (1) Promoting Energy Infrastructure and Growth”; derivatives markets’ responses to physical and “Order on the Issuance of Permits with markets’ developments; (2) exchange-traded Respect to Facilities and Land Transportation energy derivatives markets; and (3) the Crossings at the International Boundaries of availability of clearing and other services in the the United States.” energy derivatives markets. The “Executive Order on Promoting Energy April 18 Infrastructure and Growth” directs a series of Federal Advisory Committee on Insurance: actions by federal agencies that are intended to The Federal Advisory Committee on Insurance further the declared “policy of the United (FACI) will meet to “address the use of States to promote private investment in the subcommittees to fulfill the Committee’s Nation’s energy infrastructure”. The Order mandate, identify the Committee’s priorities for requires: 2019, and receive an update from the Federal . The Environmental Protection Agency Insurance Office.” (EPA) to update guidance and regulations on implementation of April 24 Section 401 of the Clean Water Act; Fintech and Banking: The Federal Deposit . The Department of Transportation to Insurance Corporation (FDIC) and Duke issue new regulations governing safety University’s Fuqua School of Business will hold of liquefied natural gas (LNG) facilities. a financial technology research conference in . The Department of Transportation to Arlington, Virginia. The agenda includes “propose for notice and comment a remarks and discussion by Secretary of the rule…that would treat LNG the same Treasury Steven Mnuchin, FDIC Chairman as other cryogenic liquids and permit Jelena McWilliams, and other industry, LNG to be transported by rail car.” academic and government officials. . The Department of Labor to review “retirement plans subject to the For more information about financial services issues you Employee Retirement and Income may email Joel Oswald or Alex Barcham. Security Act of 1974 (ERISA) in order to identify whether there are ENERGY & ENVIRONMENT discernable trends with respect to such plans’ investments in the energy President Issues Energy Infrastructure sector…[and] Executive Orders review…existing…guidance on the fiduciary responsibilities for proxy Key Point: voting to determine whether any such . This week, President Trump signed two guidance should be rescinded, replaced, anticipated executive orders to address: federal or modified…”; impediments to energy infrastructure . The Departments of Interior, Agriculture, and Commerce to:

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“develop a master agreement for energy The Executive Order on border-crossing infrastructure rights-of-way renewals; infrastructure is intended to reform the and…within 1 year…initiate a renewal Presidential Permit process for crude oil and or reauthorization process for all petroleum product pipelines that traverse the expired energy rights-of-way, leases, borders with Canada and Mexico. It sets time permits, and agreements, as determined limits for the Department of State to review to be appropriate…”; and provide recommendations regarding . The Department of Transportation to permit applications and clarifies that the final provide a report on the “economic and decision to issue a permit rests with the other effects caused by the inability to President. The Order directs the Department transport sufficient quantities of natural of State to issue any necessary implementation gas and other domestic energy regulations by May 29, 2020. resources to the States in New England…”; Wheeler Testifies at House Panel . The Department of Energy to produce a report on “the economic and other Key Points: effects caused by limitations on the . EPA Administrator Andrew Wheeler export of coal, oil, natural gas, and discussed the agency’s proposed Fiscal Year other domestic energy resources 2020 budget on Tuesday. through the west coast of the United . Democrats on the Environment and Climate States”; Change Subcommittee raised questions and . Federal agencies to “review existing criticisms regarding EPA policies and authorities related to the transportation regulatory initiatives. and development of domestically produced energy resources…[and] how On April 9, the House Energy and Commerce those authorities can be most efficiently Committee’s Subcommittee on Environment and effectively used to” promote U.S. and Climate Change held a hearing entitled energy development; and “The Fiscal Year 2020 EPA Budget”. The . The Department of Energy to issue a hearing allowed Members of Congress to raise report on opportunities “to promote regulatory and policy issues, including: climate economic growth of the Appalachian change and EPA regulation of greenhouse gas region, including the growth of emissions; ethanol mandates and the petrochemical and other industries.” Renewable Fuel Standard (RFS); water quality issues; the Toxic Substances Control Act In reviewing Section 401 guidance, the Order (TSCA); and per- and polyfluoroalkyl directs the EPA to consider a number of issues, substances (PFAS) contamination. including: “the need to promote timely Federal- State cooperation and collaboration;…the In his opening statement, Chairman Frank appropriate scope of water quality Pallone (D-NJ) declared that President reviews;…[and] expectations for reasonable Trump’s budget proposal would cut EPA review times for various types of certification funding by more than any other cabinet-level requests…” Some states have denied water agency. He asserted that the budget proposal quality permits for natural gas pipelines, would eliminate programs which ensure safe blocking development of proposed projects. water and fails to deliver on promises the

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Administration made on dangerous toxins such PFAS Action Plan to address emerging as on lead, and PFAS. chemicals of concern. He added that EPA’s Trash Free Water Program is stepping up to Subcommittee Chairman Paul Tonko (D-NY) help the international community capture expressed concern about the course of the marine debris and stop it from polluting the EPA under Administrator Wheeler’s oceans. He said the proposed budget includes a leadership. He noted that President Trump has 25 percent increase in the Water Infrastructure proposed a 31 percent cut to the EPA’s budget Finance and Innovation Act (WIFIA) from last from last year’s level. He also asserted that the year’s request. He said EPA issued eight proposal cuts EPA programs which the WIFIA loans totaling more than $2 billion in Administration claims are top priorities. He federal credit assistance. Wheeler also reported recalled that the House Energy and Commerce that the EPA introduced a third round of Committee reauthorized $1.3 billion in funding funding which could support more than $12 for the Drinking Water State Revolving Fund billion in water infrastructure projects. He for Fiscal Year 2020. He added that the noted that the President signed the “America’s proposed budget funding request is far less Water Infrastructure Act of 2018 (AWIA)” and than that amount. Tonko also contended that EPA has proposed funding of $83 million to the Administration has sought to undo modest begin implementation. He added that the and achievable climate protections, including budget request includes $2 billion towards the by “gutting” the Clean Power Plan, and vehicle two clean water State Revolving Funds (SRFs). emission standards. He noted the EPA is moving forward with reforms to reduce air pollution that will help Subcommittee Ranking Member John Shimkus more communities reach attainment of the (R-IL) emphasized the importance of getting a National Ambient Air Quality Standards good return for investment on environmental (NAAQS). Wheeler also reported that the EPA protection for the billions of dollars spent by is working to ensure that chemicals produced the EPA. He added that money is not the “end in commerce are safe for public use. He said all, be all” when it comes to an agency’s that the EPA continues to meet the major success. He said that fidelity to laws, statutory deadlines of the amended TSCA. He stewardship of the agency, concrete metrics, stated that the EPA finalized a ban on the retail and responsiveness to environmental and sales of Methylene Chloride for consumer paint public health concerns should also be and coating removal. Wheeler added that the considered in gauging the EPA’s success. EPA has a healthy and robust enforcement program. Administrator Wheeler stated that the budget proposal ensures that the EPA can continue Senate Subcommittee Hears Testimony on President Trump’s agenda. He noted that there Pipeline Safety are 39 deregulatory actions in development that would save billions of dollars. He said water Key Points: issues are the largest and most immediate . A week after a House hearing on the topic, the environmental priority. He told the Senate’s Transportation and Safety Subcommittee that the EPA is also moving Subcommittee reviewed pipeline safety issues. forward to update the Lead and Copper Rule . As in the House hearing, Senators questioned for the first time in over two decades. He the Administrator of the Pipeline and stated that in February the EPA released the Hazardous Materials Safety Administration

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regarding the status of congressionally- . Is completing work on the Valve mandated rulemakings. Installation and Rupture Detection . Congress will begin work this year on Standards NPRM. reauthorization of the Pipeline Safety Act. Pressed further by Fischer for the timing of On April 10, 2019, the Senate Commerce action on pending rules, Elliott responded that Committee’s Transportation and Safety he “hopes to have completed [most of the Subcommittee held a hearing titled “Pipeline rules] this calendar year.” Safety: Federal Oversight and Stakeholder Perspectives”. Senators on both sides of the Subcommittee Ranking Member Tammy aisle expressed an interest in developing a Duckworth (D-IL) commented that the failure bipartisan pipeline safety reauthorization bill. to complete the mandated rulemakings is Several Senators raised the Pipeline and “unacceptable.” Duckworth asked Elliott Hazardous Materials Safety Administration’s whether the President’s “Reducing Regulations (PHMSA) backlog in rulemakings mandated by and Controlling Regulatory Costs” Executive Congress in the “Pipeline Safety, Regulatory Order (E.O. 13771) is slowing the progress of Certainty, and Job Creation Act of 2011” (P.L. pending PHMSA rulemakings. Elliott 112-90) and the “Protecting our Infrastructure responded by emphasizing that the Executive of Pipelines and Enhancing Safety (PIPES) Act Order applies “Department-wide” and of 2016” (P.L. 114-183). PHMSA therefore has not had “a real impact on Administrator Skip Elliott assured the PHMSA.” He also told Duckworth that Subcommittee that the agency is making “within PHMSA, our focus has been…[on] progress to closing out mandates through the implementing these mandates.” pending Safety of Gas Transmission Pipelines final rule, Safety of Hazardous Liquid Pipelines Senator Ed Markey (D-MA) focused his final rule, and the Valve Installation and comments and questions on his legislation, the Rupture Detection Standards Notice of ‘‘Leonel Rondon Pipeline Safety Act’’ (S. 1097). Proposed Rulemaking (NPRM). He pressed the witnesses to endorse provisions of the bill that would require: the adoption of Subcommittee Chair Deb Fischer (R-NE) Safety Management Systems (SMS); and expressed interest in learning from certification of changes to pipeline systems by Administrator Elliott “about the status of the professional engineers. Markey described the outstanding rulemakings.” Fischer later Merrimack Valley gas distribution system remarked that “Congress is greatly interested in incident as a “disaster that looked like PHMSA completing its outstanding Armageddon.” mandates…” In response, Elliott explained that the agency has: Upcoming Hearings and Events . Sent the Safety of Hazardous Liquid Pipelines final rule to the Office of April 15 Management and Budget; New Mexico Oil and Gas Development: . Sent the Safety of Gas Transmission The House Natural Resources Committee’s Pipelines final rule to the Office of the Subcommittee on Energy and Mineral Secretary of Transportation; and Resources will hold a field hearing in Santa Fe, New Mexico titled “Oil and Gas Development: Impacts on Air Pollution and Sacred Sites”.

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April 18 2113). The bill was favorably reported, as FERC Meeting: The Federal Energy amended, unanimously by voice vote. Regulatory Commission will hold its monthly open meeting. This legislation combines four bipartisan bills: “Public Disclosure of Drug Discounts Act” June 25-26 (H.R. 2115); “Samples Act” (H.R. 2064); Natural Gas Pipeline Safety Regulations: “Stopping the Pharmaceutical Industry from The Pipeline and Hazardous Materials Safety Keeping drugs Expensive (SPIKE) Act of Administration (PHMSA) will convene a 2019” (H.R. 2069); and a bill “To amend title meeting of its Gas Pipeline Advisory XVIII of the Social Security Act to require Committee (GPAC). As detailed in the meeting certain manufacturers to report drug pricing notice, the “GPAC will be considering the information with respect to drugs under the gathering line component of the proposed rule Medicare program, and for other purposes” titled ‘Safety of Gas Transmission and (H.R. 2087). It would require drug Gathering Pipelines,’ which was published in manufacturers to publicly justify large price the Federal Register on April 8, 2016, (81 FR increases; require applicable manufacturers to 20722) and the associated regulatory analysis.” report to the Secretary the total aggregate monetary value and quantity of samples For more information about energy and environment provided; require the Secretary to conduct a issues you may email or call Frank Vlossak at 202- study on Medicare Part A drug costs; require 659-8201. Ashley Strobel contributed to this report. the Secretary to publicly disclose aggregate Updates on energy and environment issues are also rebates, discounts, and other price concessions available on twitter. achieved by pharmacy benefit managers on a public website; and require all manufacturers to HEALTH submit information to the Secretary on the average sales price of Part B drugs. House Ways and Means Passes Drug Pricing Bill During opening statements, Chairman Richard Neal (D-MA) and Ranking Member Kevin Key Points: Brady (R-TX) noted the bipartisan nature of . The House Ways and Means Committee the legislation and the importance of increased favorably reported the “Prescription Drug transparency from drug manufacturers. Sunshine, Transparency, Accountability and Representative Lloyd Doggett (D-TX) Reporting (STAR) Act of 2019” (H.R. questioned if the bill does enough to ensure 2113), as amended, unanimously by voice vote. that manufacturers disclose accurate . The bill would address transparency and information. He argued that nothing in the bill public reporting by manufacturers to improve requires drug manufacturers to disclose accountability and provide a better anything that would threaten their discretion. understanding of the market. Representative George Holding (R-NC) On April 10, the House Ways and Means offered an amendment that was later Committee held a markup of the “Prescription withdrawn which would have eliminated the Drug Sunshine, Transparency, Accountability provision in the bill that would require and Reporting (STAR) Act of 2019” (H.R. “unprecedented” reporting from private

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companies when their products launch at a this integration on competition. Senator Bill price above an arbitrary threshold. Cassidy (R-LA) and Senator James Lankford (R-OK) pointed to the use of pharmacy fees, Senate Finance Questions Pharmacy particularly Direct and Indirect Remuneration Benefit Mangers (DIR) fees, as a burden on independent pharmacies and a cause of industry Key Points: consolidation. . The Senate Finance Committee held a hearing titled “Drug Pricing in America: A PBM representatives contended the majority of Prescription for Change, Part III.” rebates are passed on to plans and reflected in . Questions focused on the rebate negotiations, lower premiums or beneficial cost-sharing for rebate transparency, competition in the health consumers. They expressed openness to care sector, and patient out-of-pocket costs. transparency legislation, particularly if data on rebate negotiations remains confidential. On April 9, the Senate Finance Committee held Witnesses also expressed opposition to the a hearing entitled: “Drug Pricing in America: A Trump Administration’s proposed rebate rule, Prescription for Change, Part III.” Topics advocating instead for a cap on OOP costs and discussed in the hearing included: (1) Rebates; a reduction in patent exclusivity periods to (2) Transparency; (3) Management Tools; (4) increase the number of generics and biosimilars Consolidation; (5) Pharmacy Fees; (6) in the market. Generics/Biosimilars; (7) Drug Shortages/Sole Source Drugs; (8) Medicaid/Spread Pricing; (9) Upcoming Hearings and Meetings List Prices/ Out-of-Pocket Cap; (10) Value- Based Pricing; and (11) National Drug Code. April 17 CER: The Alliance for Health Policy will hold Committee members expressed interest in a briefing on “Right Care, Right Patient, Right rebate negotiations by pharmacy benefit Time: The Role of Comparative Effectiveness managers (PBMs), especially how the Research.” negotiations impact list prices and how rebate savings are passed on for the benefit of Part B:The Council for Affordable Health consumers. Ranking Member Ron Wyden (D- Coverage will hold a briefing on “The ABCs of OR) criticized PBMs for placing barriers Medicare Part B: Affordability Challenges for between consumers and lower priced Physician-Administered Drugs & Proposals for medications in order to recover higher rebates. Reform.” He suggested negotiating rebates as a percentage of list prices creates higher drug For more information about healthcare issues you may prices and reduces out-of-pocket (OOP) email or call Nicole Ruzinski Bertsch or George Olsen savings for consumers. There was a bipartisan at 202-659-8201. Thomas McGrath contributed to call for increased transparency into these this section. negotiations.

Chairman (R-IA) expressed concern with growing consolidation of PBMs and health plans and noted the Federal Trade Commission (FTC) is evaluating the impact of

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TRADE retaliatory tariffs in response to WTO’s Airbus ruling. China Trade Deal Developments . House Republicans generally are supportive of U.S. retaliatory tariffs. Key Points: . EU warns of their own retaliatory . Reports state U.S. and China now agree tariffs on Boeing. to enforcement offices as part of a deal. . Potential for easing tariffs on China. On Monday, the Office of the U.S. Trade Representative (USTR) issued a list of On Wednesday, Treasury Secretary Steven European products that will be hit with Mnuchin stated that the U.S. and China have retaliatory tariffs as part of the U.S.’ World largely agreed on an enforcement mechanism Trade Organization (WTO) dispute against the for a bilateral trade deal. In an interview with European Union (EU) for subsidies the EU CNBC Secretary Mnuchin clarified that both provides to Airbus. Products subject to sides have agreed that they “will establish retaliatory tariffs include civil aircraft from enforcement offices that will deal with the France, Germany, Spain or the United ongoing matters.” He also indicated in that Kingdom and a variety of agricultural products, interview that the deal is very close to finished including seafood, cheeses, olives and olive oil with only a few “technical issues” left to work from all EU member states. Ranking Member out. Secretary Mnuchin has refused to of the House Ways & Means Committee comment on whether or not the deal will lead Representative Kevin Brady (R-TX) expressed the U.S. to lift tariffs on $250 billion worth of support for USTR’s decision to impose the Chinese goods. However, in the past, President retaliatory tariffs. Representative Brady argued Trump has said some tariffs would remain on that, “[i]f there’s no consequences Europe Chinese goods to ensure China is living up to won’t change their ways.” its commitments. He indicated that the 25 percent tariffs on $50 billion worth of Chinese In response to the U.S. tariffs, the European goods would remain, but did not say if any of Commission promised its own retaliatory tariffs the 10 percent tariffs on $200 billion worth of against the U.S. On Tuesday, a Commission Chinese goods would be lifted. Senator Rob spokesman said the WTO would soon give the Portman (R-OH) declared in a speech on the EU authorization to retaliate against the U.S. Senate Floor that he believes it is very likely for subsidies it provides to Boeing. In a that the U.S. will lift all of its Section 301 tariffs statement to the press Airbus called the U.S. and China will in turn lift its retaliatory tariffs. list “unjustified” and said it expected the EU Senator Portman added that if China does not retaliation to be greater than what the WTO live up to its commitments the U.S. would be authorizes for the U.S. On Tuesday, President able to quickly reimpose its unilateral tariffs. Trump cited the WTO’s ruling against EU subsidies to Airbus and the forthcoming U.S. USTR Drafts Retaliation List in Response retaliation in claiming that Europe would soon to EU, WTO Airbus Ruling stop taking advantage of the U.S. Senate Finance Committee Chairman Chuck Grassley Key Points: (R-IA) commended the Trump administration . USTR released a list of European for following international norms and awaiting products that may be hit with WTO authorization for its retaliation rather than unilaterally imposing tariffs on the EU.

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USMCA Update U.S.-Japan Trade Talks Key Points: . Mexico approves workers’ rights Key Points: legislation. . Trade discussions between the USTR . House Democrats still have issues with and Japan begin on Monday. Section 232 steel and aluminum tariffs. . Agriculture Secretary predicts a quick deal. Late Thursday, Mexico’s lower house of . USTR negotiating objectives include Congress overwhelmingly approved a workers’ financial services, food safety rights bill, legislation that U.S. House Speaker commitments, simplified customs Nancy Pelosi (D-CA) considers key to winning procedures, and rule-of-origin over Democrats wary of a revamped North provisions. American trade pact. Mexican President Andres Manuel Lopez Obrador said after Speaker Today, the Office of USTR confirmed that Pelosi’s comments he does not want to give the bilateral trade talks with Japan are set to begin U.S. any motive to reopen negotiations of the Monday in Washington, D.C. Media reports pact, which concluded last year. President have suggested Japanese Prime Minister Shinzo Obrador said in a briefing on Thursday, “[i]t is Abe will travel to the U.S. in late April and in our benefit to have this treaty, and for there President Trump will visit Japan in May for to be no excuse for opening up negotiations ceremonies related to the Japanese Emperor again.” (who is abdicating thereby setting up a transition), and again in June for the G-20 Representative Ron Kind (D-WI) told meeting. Agriculture Secretary reporters this week that U.S. Trade said on Thursday, after speaking with USTR Representative (USTR) Robert Lighthizer Lighthizer, that he believed the USTR could continues to meet with House Democrats in an secure a “quick agreement.” Secretary Perdue attempt to win support for USMCA. stated, “I hope we can come to a very quick Representative Kind noted that House agreement with Japan over maybe some Democrats continue to advocate that the U.S. temporary [agriculture] provisions and hash out Section 232 tariffs on aluminum and steel issue the many other issues that take longer in this be resolved before Congress will move forward area.” with the USMCA. Reports indicate that the Section 232 tariffs are likely to remain in place Japanese officials have reportedly finalized the until the USMCA is ready to be presented to topics they intend to discuss with the U.S. for a Congress for a vote. free trade agreement on goods and some services, but will plan to rebuff any requests for April 17 is the deadline when the ITC report auto restrictions or currency provisions. on the USMCA is now expected, which is one USTR’s negotiating objectives for its Japan requirement for USMCA to be considered talks include a section on financial services, an under the Trade Promotion Authority area it hopes to expand for U.S. financial expedited process. service suppliers in any deal, as well as the Administration’s intent to secure “enforceable and robust” sanitary and phytosanitary commitments that make “clear that each country can set for itself the level of protection

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it believes to be appropriate to protect food safety and plant and animal health in a manner consistent with its international obligations.”

The Office of USTR also said it intends to “[p]rovide for simplified customs procedures for low-value goods and a more reciprocal de minimis shipment value” following requests made by several industry groups throughout the stakeholder input process. USTR Lighthizer added that he expects to request rule-of-origin provisions that would increase content requirements for auto parts made in either of the two countries.

For more information about tax issues you may email or call Christopher Hatcher at 202-659-8201. Alex Barcham contributed to this section.

This Week in Congress was written by Alex Barcham.

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