January 13, 2017 Washington Update
This Week in Congress . House – The House passed S.Con.Res.3, the FY 2017 budget resolution; the “Regulatory Accountability Act of 2017” (H.R. 5); the “SEC Regulatory Accountability Act” (H.R. 78); the “Commodity End-User Relief Act” (H.R. 238); and the “Helping Angels Lead Our Startups Act” (H.R. 79). . Senate – The Senate passed S.Con.Res.3, the FY 2017 budget resolution.
Next Week in Congress . House –The House will be in recess. . Senate – The Senate will vote on the “GAO Access and Oversight Act” (H.R. 72).
According to a senior House Republican aide, TAX Ryan walked the Trump aides through the House Republican tax proposal that was Ryan Met with Trump Advisors as House included in the party’s “A Better Way” agenda Republicans Continue Tax Reform Efforts last year. Speaking with reporters following the meeting, Bannon told reporters the meeting Key Points: focused primarily on the border adjustability . Congressional Republicans and incoming proposal, which calls for tax imports while Trump Administration officials discuss tax exempting income from export sales. Both reform plans in some detail Trump and Ryan have expressed a desire to . Meeting focused largely on international aspects have tax policies that promote domestic of the plan including the border adjustability manufacturing, but President-elect Donald proposal and taxing foreign profits of U.S. Trump initially used tariffs in his rhetoric and companies. now has started using the term border tax; while Ryan has clearly indicated his opposition Senior members of the incoming Trump to tariffs but he very much endorses border Administration traveled to Capitol Hill on adjustability. January 9 to meet with Speaker of the House Paul Ryan (R-WI) to discuss a their respective tax plans. Those attending the meeting to meet Table of Contents Ryan and his staff included chief strategist Taxes 1 Stephen Bannon, Trump’s son-in-law Jared Financial Services 3 Kushner, Secretary of the Treasury-designate Energy & Environment 6 Steven Mnuchin, incoming chief of staff Reince Defense 7 Priebus and incoming National Economic Health 15 Council Director Gary Cohn. Transportation & Infrastructure 16 Technology 22 ______©2016 Williams & Jensen, PLLC 701 8th Street, N.W. Suite 500 Washington, D.C. 20001
Telephone: (202) 659-8201 Fax: (202) 659-5249 www.williamsandjensen.com
Williams & Jensen – Washington Update January 13, 2017
Ryan Discusses Rationale for Border Ways and Means Committee Announces Adjustment in Town Hall Meeting Subcommittee Chairs; Holds Organizational Meeting Key Points: . Ryan explains leveling the playing field as a Key Points: key policy goal of border adjustability in House . Republicans and Democrats are each expected Republican Tax Reform Blueprint to add one more new member if Price is confirmed as HHS Secretary and Becerra is On Thursday night Speaker of the House Paul confirmed as California’s Attorney General Ryan (R-WI) joined CNN’s Jake Tapper for a live town hall at George Washington The House Ways and Means Committee’s University. The wide-ranging discussion Subcommittee leadership for the 115th included an exchange on how the Speaker’s tax Congress was finalized this week: reform agenda would promote domestic manufacturing by leveling the playing field with . Human Services – Chairman Adrian our largest trading partners. During an Smith (R-NE) and Ranking Member exchange with an audience member, Ryan Danny Davis (D-IL) promoted his tax plan by explaining that, . Oversight – Chairman Vern Buchanan “…almost all our competitors do is they have a (R-FL) and Ranking Member John tax system where they border adjust their Lewis (D-GA) taxes…they take the tax off of it and then it . Social Security – Chairman Sam comes into America and it's tax-free.” Ryan Johnson (R-TX) and Ranking Member went on to provide an example of how the sale John Larson (D-CT) of an U.S.-manufactured Harley Davidson . Trade – Chairman Dave Reichert (R- abroad is taxed more heavily relative to other WA) and Ranking Member Bill Pascrell countries that have the ability to border adjust (D-NJ) certain taxes. . Tax Policy – Chairman Peter Roskam (R-IL) and Ranking Member Lloyd The border adjustment provision is a major Doggett (D-TX) component of the House Republicans’ tax reform blueprint, which would raise an estimated $1.2 trillion by imposing new taxes Upcoming Dates on imports and exempting exports from taxes. January 20, 2017: Inauguration Day The Ryan tax reform plan differs in initial February 6, 2017: President to submit description from President-elect Donald FY 2018 budget request Trump, who has called for a “big border tax” February 15, 2017: CBO releases on products imported back into the country by annual budget and economic outlook U.S. manufacturers. However, those March 15, 2017: Debt limit suspension differences may be semantic more than ends substantive and could merge as the process April 28: FY 2017 CR expires goes forward. September 30, 2017: FY 2017 ends and FAA extension expires
Williams & Jensen, PLLC 701 8th Street, N.W. Suite 500 Washington, D.C. 20001 Telephone: (202) 659-8201 Fax: (202) 659-5249 www.williamsandjensen.com
Page 2 of 24
Williams & Jensen – Washington Update January 13, 2017
At the Committee’s organizational meeting, . New Democratic Members of House Chairman Kevin Brady (R-TX) expressed Financial Services Committee are announced. support for the engaging in an “open, inclusive legislative process that thoughtfully considers This week additional House committee ideas from Members on both sides of the assignments were announced. The House aisle.” Appropriations Committee announced that Representative Tom Graves (R-GA) will serve It bears note that two seats may open up on the as Chairman of the Financial Services and Committee if Representative Tom Price (R- General Government Subcommittee. GA) is confirmed as the Secretary of Health Separately, Minority Leader Nancy Pelosi (D- and Human Services and Representative Xavier CA) announced that the new members on the Becerra (D-CA) is confirmed as California Democratic side of the House Financial Attorney General. Services Committee will be Representative Josh Gottheimer (D-NJ), Representative Vicente At a separate event, Ranking Member Richard Gonzalez (D-TX), Representative Charlie Crist Neal (D-MA) encouraged Republicans to focus (D-FL), and Representative Ruben Kihuen (D- tax reform efforts on the middle class and NV). noted that Secretary of the Treasury-designate Steven Mnuchin has expressed a similar House Passes Financial Services Bills sentiment. Key Points: Upcoming Hearings and Events . The House passed bills to facilitate angel investments, reform the regulatory process, January 24 enhance SEC cost-benefit analysis, and reauthorize the CFTC. Budget and Economic Outlook: The Congressional Budget Office will release its This week the House moved quickly to pass annual Budget and Economic Outlook. It will several financial services bills, including: be available on CBO’s website at 10:00 AM. . The “Helping Angels Lead Our Startups (HALOS) Act” (H.R. 79), For more information about tax issues you may email introduced by Representative Steve or call Christopher Hatcher at 202-659-8201. Laura Chabot (R-OH), which would define Simmons contributed to this section. the term angel investor group and clarify the definition of general FINANCIAL SERVICES solicitation. The House passed the bill on January 10, by a vote of 344 – 73. More 115th Congress Committee . The “Regulatory Accountability Act” Assignments Announced (H.R. 5), introduced by Representative Bob Goodlatte (R-VA), which would Key Points: reform the process by which Federal . Representative Tom Graves (R-GA) will serve agencies analyze and formulate new as the Chair of the House Appropriations regulations and guidance documents. Committee’s Subcommittee on Financial The House passed the bill on January Services and General Government. 11, by a vote of 238 – 183.
Williams & Jensen, PLLC 701 8th Street, N.W. Suite 500 Washington, D.C. 20001 Telephone: (202) 659-8201 Fax: (202) 659-5249 www.williamsandjensen.com
Page 3 of 24 Williams & Jensen – Washington Update January 13, 2017
. The “SEC Regulatory Accountability negotiations on a covered agreement on with Act” (H.R. 78), introduced by the EU. The agreement is intended to ensure Representative Ann Wagner (R-MO), equal treatment of insurers and reinsurers which would impose additional cost- operating in both the U.S. and the EU. In benefit requirements on the Securities November 2015, the Treasury Department and and Exchange Commission (SEC), USTR notified Congress that they would begin Municipal Securities Rulemaking Board covered agreement negotiations with the EU. (MRSB), and Financial Industry Regulatory Authority (FINRA) for their In a press release, USTR Michael Froman regulations and orders. stated: . The “Commodity End-User Relief Act” (H.R. 238), introduced by We are pleased the U.S. and EU were Representative Michael Conaway (R- able to conclude this Agreement which TX), which would reauthorize the resolves uncertainty for U.S. insurers Commodity Futures Trading and reinsurers. This agreement will Commission (CFTC) through Fiscal provide opportunities for U.S. insurers Year 2021. The bill would also establish and reinsurers doing business in the EU a CFTC Office of the Chief Economist while continuing to ensure a high and make a number of changes to the standard of protection for U.S. and EU CFTC’s swaps regulatory regime. In consumers. addition, the bill as passed by the House included an amendment by Title V of the Dodd-Frank Act (DFA) Representative Sean Duffy (R-WI) that authorized the Treasury and USTR to enter would require the CFTC to secure a into negotiations on a covered agreement. As subpoena before accessing a company’s required by the DFA, Treasury and USTR sent algorithmic trading source code and an letters to the House Financial Services amendment by Representative Mike Committee, the House Ways and Means Conaway (R-TX) relating to position Committee, the Senate Banking Committee, limits. and the Senate Finance Committee alerting them that the negotiations had been completed. U.S. and EU Regulators Announce The DFA allows a covered agreement to enter Covered Agreement on Insurance and into force 90 calendar days after it is submitted Reinsurance to the appropriate congressional committees.
Key Points: Senate Banking Holds Confirmation . The Treasury Department and the USTR Hearing on Carson’s Nomination To Head announced that they completed negotiations on HUD a covered agreement with the EU. . The agreement will enter into force after 90 Key Points: calendar days. . Chairman Mike Crapo (R-ID) expressed his desire to work in a bipartisan manner during On January 13, the Department of the Treasury the 115th Congress. and the U.S. Trade Representative (USTR) . Several Members called into question Carson’s announced that they had completed prior statements on public assistance, but he
Williams & Jensen, PLLC 701 8th Street, N.W. Suite 500 Washington, D.C. 20001 Telephone: (202) 659-8201 Fax: (202) 659-5249 www.williamsandjensen.com
Page 4 of 24 Williams & Jensen – Washington Update January 13, 2017
also received praise from many Senators on the government assistance programs are harmful panel. and that all public assistance programs should be cut by 10 percent a year until the budget is On January 12, the Senate Banking Committee balanced, without exception and without regard held a nomination hearing to discuss the to whether the population served is vulnerable. nomination of Dr. Benjamin Carson to be Carson explained that safety net programs are Secretary of the U.S. Department of Housing essential and he would not abolish those and Urban Development (HUD). During his without an alternative. However, he suggested opening statements, Chairman Mike Crapo (R- that any government program should serve as a ID) noted the “long and distinguished” history “spring board” rather than just a “hand out.” of the Committee in “tackling important and complicated issues.” He explained that during HUD Announces Reduction in FHA the 115th Congress the Committee will Annual Insurance Premiums continue this tradition and he expressed his hope that the Committee can do so in a Key Points: “strong and bipartisan manner.” He noted that . HUD Secretary Castro announced that he and Ranking Member Sherrod Brown (D- FHA would reduce its annual mortgage OH) have worked closely and collaboratively in insurance premium by 25 basis points for most the past and he expressed his desire to continue new mortgages. to do so. Crapo stated that he looks forward to . House Financial Services Committee working on streamlining requirements for local Chairman Jeb Hensarling (R-TX) expressed Public Housing Authorities such as those opposition to the change. included in the “Small Public Housing Authority Opportunities Act” (S. 2292), On January 9, Secretary of Housing and Urban introduced by Senator Jon Tester in the 114th Development (HUD) Julián Castro announced Congress. In addition he stated the Committee that the Federal Housing Administration should review Section 8, the Moving to Work (FHA) would reduce its annual mortgage program, Rental Assistance Demonstration, insurance premium (MIP) by 25 basis points public housing programs, Home Equity for most new mortgages with a Conversion Mortgage (HECM) program, and closing/disbursement date on or after January tackle the growing issue of homelessness 27, 2017. HUD released a mortgagee letter especially among veterans. describing the revised annual MIP rates.
Many Senators on the panel expressed In a press release, Castro stated: confidence in Carson, and Senator Marco Rubio (R-FL) appeared before the committee After four straight years of growth and to express his support, stating that Carson is a with sufficient reserves on hand to proven leader and has a history of meet future claims, it’s time for FHA to accomplishing things people said were pass along some modest savings to impossible. Brown, as well as several other working families. This is a fiscally Democratic Committee Members raised responsible measure to price our concerns over prior comments made by Carson mortgage insurance in a way that regarding public assistance. Brown expressed protects our insurance fund while his concern that Carson has stated that preserving the dream of
Williams & Jensen, PLLC 701 8th Street, N.W. Suite 500 Washington, D.C. 20001 Telephone: (202) 659-8201 Fax: (202) 659-5249 www.williamsandjensen.com
Page 5 of 24 Williams & Jensen – Washington Update January 13, 2017
homeownership for credit-qualified financial health of the FHA. Today, we borrowers. can say with certainty that they were wrong. The FHA has continued to House Financial Services Committee Chairman improve its financial health since that Jeb Hensarling (R-TX) issued a press release decision while also improving access to criticizing the decision to lower the MIP, credit for credit-worthy borrowers. I stating: have no doubt that this latest decision to reduce premiums similarly reflects an It seems the Obama administration’s appropriate balance that will help parting gift to hardworking taxpayers is borrowers without undermining the to put them at greater risk of footing FHA’s financial health. the bill for yet another bailout. Just three years ago the taxpayers had to For more information about financial services issues you spend $1.7 billion to bail out the may email or call Joel Oswald at 202-659-8201. FHA. Lowering premiums to below Rebecca Konst and Alex Barcham contributed to the market rates now only puts the FHA in articles. a more precarious financial condition. Playing politics with the ENERGY & ENVIRONMENT FHA through cynical, surprise 11th hour rule changes is irresponsible and Upcoming Hearings and Events endangers the integrity and success of the FHA. To be successful, the FHA January 17 must be fiscally sound, with a clearly Secretary of Interior Nomination: The defined mission, to ensure Senate Energy and Natural Resources homeownership opportunities for Committee will hold a hearing on the creditworthy first-time homebuyers and nomination of Representative Ryan Zinke (R- low-income families. Lowering FHA MT) to be Secretary of Interior. premiums now is counterproductive to achieving these goals and puts the U.S. January 19 taxpayer at greater risk. EPA Administrator Nomination: The Senate Environment and Public Works Committee House Financial Services Committee Ranking will hold a hearing on the nomination of Member Maxine Waters (D-CA) issued a press Oklahoma Attorney General Scott Pruitt to be release in support of the decision, in which she Administrator of the Environmental Protection stated: Agency.
Let’s remember that this is the second January 19 premium reduction that we have seen Secretary of Energy Nomination: The announced under Secretary Castro. Senate Energy and Natural Resources Two years ago, the FHA’s Committee will hold a hearing on the announcement to lower premiums was nomination of former Governor Rick Perry (R- met with loud criticism from my TX) to be Secretary of Energy. Republican colleagues who claimed that the decision would undermine the
Williams & Jensen, PLLC 701 8th Street, N.W. Suite 500 Washington, D.C. 20001 Telephone: (202) 659-8201 Fax: (202) 659-5249 www.williamsandjensen.com
Page 6 of 24 Williams & Jensen – Washington Update January 13, 2017
FERC Meeting: The Federal Energy Armed Forces, by a vote of 24-3. Senator Regulatory Commission (FERC) will hold its Kirsten Gillibrand (D-NY), Senator Richard monthly open meeting. The agenda includes: Blumenthal (D-CT) and Senator Elizabeth “Uplift Cost Allocation and Transparency in Warren (D-MA) voted in opposition to S. 84. Markets Operated by Regional Transmission Thereafter on January 12, the Senate approved Organizations and Independent System the waiver by a 81-17 vote with only Operators”; “Utilization of Electric Storage Democrats voting against the measure. The Resources for Multiple Services When House passed S. 83 by a 268 - 151 vote (with Receiving Cost-Based Rate Recovery”; and Representative Daniel Lipinski (D-IL) voting “Reliability Standard for Transmission System present) on January 13. Planned Performance for Geomagnetic Disturbance Events”. Topics discussed in the hearing included: (1) Conflicts of Interest; (2) Budget Control Act; For more information about energy and environment (3) Iraq and Syria; (4) Russia; (5) Iran; (6) issues you may email or call Frank Vlossak at 202- Intelligence Community; (7) Military Readiness; 659-8201. Updates on energy and environment issues (8) Women/LGBT in the Military; (9) Israel; are also available on twitter. (10) China; (11) Energy; (12) Nuclear Modernization; (13) Cybersecurity; (14) DEFENSE Veterans Healthcare; (15) Civilian Control of the Military; (16) Pacific Region; (17) Defense SASC Holds Mattis Nomination Hearing; Acquisition; (18) Emerging Technology; and Waiver Passes Senate and House (19) North Korea.
Key Points: Chairman John McCain (R-AZ), in a statement, . The Senate Armed Services questions the said he “could not be happier” with Mattis’ Trump Administration’s nominee to head the nomination. He said he supports retaining the Pentagon in a very smooth hearing for the law requiring a seven year period between former Marine Corps General serving in the military and serving as Secretary . The Committee then reported out a waiver for of Defense, but he also supports a waiver in Mattis to allow a retired general officer to serve Mattis’ case. He said too many people have as Secretary of Defense with only three no votes forgotten that “hard power matters.” He . Both houses of Congress cleared the Mattis stressed the need to address the threat of waiver “violent Islamic extremism.” He said the U.S. will be involved in international conflict for the On January 12, the Senate Armed Services foreseeable future. He stated that the greatest Committee held a hearing to discuss the threat in the Middle East is not the Islamic nomination of General James Mattis to be State of Iraq and the Levant (ISIL), but rather a Secretary of Defense. breakdown of regional order. He said Iran’s nuclear goals have been delayed but not halted. The Committee also approved S. 84, which McCain said China has become more assertive would grant Mattis an exception to a limitation in challenging the U.S. and its allies. He noted against appointment of persons as Secretary of that North Korea is testing nuclear weapons Defense within seven years of relief from active and intercontinental ballistic missiles (ICBM) at duty as a regular commissioned officer of the an alarming rate, expressing concern that they
Williams & Jensen, PLLC 701 8th Street, N.W. Suite 500 Washington, D.C. 20001 Telephone: (202) 659-8201 Fax: (202) 659-5249 www.williamsandjensen.com
Page 7 of 24 Williams & Jensen – Washington Update January 13, 2017
could develop an ICBM which could reach the unless there is a significant violation. He said U.S. He also raised concerns with the actions significant gains have been made in retaking taken by Russia in Ukraine and Syria. He said lands captured by ISIL, but ISIL continues to Russia deliberately interfered in the recent U.S. find ways to engage in terror. He stressed the election with cyberattacks and a need for the DOD, the State Department and misinformation campaign. McCain stressed that other agencies to work together to address the U.S. must recognize that President Vladimir ISIL. Reed expressed concern with North Putin is the enemy of the U.S. He emphasized Korea’s attempts to gain nuclear capabilities. that the U.S. must take up a strong position He said Russia has engaged in hybrid warfare against Putin. He said America’s military tactics to undermine neighboring democracies. technological advantage is eroding, as Russia He questioned Mattis’ views on how to deal and China are rapidly modernizing, particularly with Russia both in the cyber realm and on the in space and cyberspace. He said the Budget ground. He stressed the need to recruit and Control Act (BCA) has arbitrarily capped retain a skilled military. He expressed support defense spending and forced the services to for the development of gender-neutral delay modernization. He stated that the occupational standards, including for ground President-Elect has said he wants to eliminate combat units. Reed said service members and the sequester and fully fund the military, their families too often fall victim to suggesting that he supports this goal. He unscrupulous financial companies, urging supported repealing the Budget Control Act Mattis to focus on the Military Lending Act. He and increasing the defense top line. He stressed said defense spending has been capped by the the need to resize and reshape military. He said BCA, impeding military modernization. He the Department of Defense (DOD) should be urged the DOD to submit a budget request reformed to improve acquisition. McCain said that addresses this issue. He emphasized the the relationship between Congress and the importance of protecting the principle of DOD has deteriorated in recent years, stressing civilian control of the military. He said Trump the need to repair it. He urged Mattis to view has made troubling statements in the defense Congress as a partner, while stating that arena, particularly his praise of Putin. Reed Congress should look for ways to reduce emphasized that the waiver granted to Mattis statutory and regulatory impediments. should not be construed as a change in policy and that while he would support a waiver for Ranking Member Jack Reed (D-RI), in a Mattis, he would not support additional waivers statement, said Mattis will lead the DOD in a for future nominees. time when the U.S. faces multi-faceted challenges. He stated that Mattis will oversee Mattis noted that he did not participate in the national security under a President who lacks Presidential campaign and was did not seek a defense experience. He expressed concern with position in the Administration, but he would be how President-Elect Donald Trump will honored to serve. He said the behavior of respond when challenged by nations like Russia and China is concerning. He stressed the Russia. Reed said the Joint Comprehensive need to ensure that the U.S. military remains Plan of Action (JCPOA) is the most effective the best equipped and most lethal in the world. way to prevent Iran from pursuing nuclear He said he will be a strong advocate for military weapons. He noted that Mattis opposed the personnel and their families. He said he will JCPOA, but has said there is no going back work closely with the national security team to
Williams & Jensen, PLLC 701 8th Street, N.W. Suite 500 Washington, D.C. 20001 Telephone: (202) 659-8201 Fax: (202) 659-5249 www.williamsandjensen.com
Page 8 of 24 Williams & Jensen – Washington Update January 13, 2017
ensure U.S. diplomats negotiate from a position report. He added he has instructed the of strength. He said his priorities will be Committee’s staff to conduct a thorough, readiness, promoting strong alliances, and independent, bipartisan review of the report. bringing business reforms to the DOD. Mattis He said “our democracy is not at risk” and “we stated that he will provide strong civilian should have continued faith in the electoral leadership of the DOD if the seven year process but remain alert to challenges that face requirement is waived. He said he will us and those that seek to undermine Western collaborate closely with the Committee. democratic principles.”
Senate Intelligence Committee Hearing Ranking Member Mark Warner (D-VA) said interference in the American electoral process Key Points: by any outside power is unacceptable. He said . A second Senate Committee looks at the IC’s much of the reporting on Russian activity has conclusions that Russian hacking aimed to focused on the hacks of the Democratic interfere with the 2016 election National Committee (DNC) and John Podesta but the IC’s report acknowledges that Russia On January 10, the Senate Intelligence hackers also penetrated organizations affiliated Committee held a hearing entitled “Russian with the Republican Party. He said in contrast Intelligence Activities.” Topics discussed to the DNC and Podesta instances, Republican during the hearing included, but were not information was not leaked. Warner explained limited to: (1) Compromised Systems; (2) the target of the Russian hacks was the Russian Interference; (3) Upcoming European presidential campaign of Secretary Hillary Elections; (4) Intelligence Community Clinton but he noted any member of Congress Disclosures; (5) Intelligence Community could be the next target. He said the recently Report; and (5) Russian Cyber Escalation. released IC comprehensive review is more detailed but in line with past assessments which Chairman Richard Burr (R-NC) said while concluded Russian officials at the highest level, Russia and its predecessor, the Soviet Union, including President Vladimir Putin, directed an have used espionage tools of statecraft since influence campaign to affect the outcome of the 1920s, recent actions represent a notable the U.S. election in favor of Donald Trump. escalation. He said the public disclosure of He said he hopes the IC will continue to recent Russian activities with regard to the 2016 declassify as much information as possible election has surprised many and the notion of while maintaining the highest levels of foreign interference in the American electoral protection of its sources and methods. He process is troubling. He stated Russian cyber urged Congress and the incoming activity is not a new topic to the Committee Administration to craft a robust cyber strategy and over the last two years the Committee has and commended the IC for speaking truth to held numerous hearings on similar efforts by power. foreign actors. He noted close sessions have occurred as well. Burr said he is looking Director of National Intelligence James forward to learning more about the details in Clapper, Jr. said the IC’s comprehensive the Intelligence Community’s (IC) assessment of Russia’s interference in the 2016 comprehensive assessment. He explained he election is based on highly classified has no reason to doubt the findings of the assessments from the FBI, CIA, and NSA. He
Williams & Jensen, PLLC 701 8th Street, N.W. Suite 500 Washington, D.C. 20001 Telephone: (202) 659-8201 Fax: (202) 659-5249 www.williamsandjensen.com
Page 9 of 24 Williams & Jensen – Washington Update January 13, 2017
said a declassified version was released last panels. Most notably, Representative Kay week. He explained the report covers the scope Granger (R-TX) will succeed Representative and intent of Moscow’s interference in the Rodney Frelinghuysen (R-NJ) as the chair of election and influencing public opinion. He the House Appropriations Committee’s said the report does not draw any conclusions Defense Subcommittee. Granger has long been regarding the outcome of the election. He a subcommittee member and will surrender the stated there was no evidence of Russians gavel for the State, Foreign Operations altering vote tallies. He noted the extreme Subcommittee. Granger bested former full sensitivity of the assessment’s sources and committee Chairman Hal Rogers (R-KY) for methods. Clapper added the conclusions in the the Defense Subcommittee. classified and unclassified versions of the report are the same. He said when the IC The House Armed Services Committee will concludes something with “high confidence” it have two new subcommittee chairs as two means the IC has multiple high quality sources. chairs left the House at the end of the 114th He said the IC has briefed the President and Congress. Representatives Elise Stefanik (R- President-elect. He remarked both versions of NY) and Mike Coffman (D-CO) will lead the the report were written by seasoned, objective, Emerging Threat and Capabilities and Military non-partisan IC analysts. He said the Personnel Subcommittees respectively. assessment represents the IC’s view and not Additionally, Representative Robb Wittman (R- necessarily the Obama Administration’s. He VA) will move from the chair of the Readiness said every cyber operation leaves a trail and IC Subcommittee to the chair of the Seapower analysts use these trails and other tools and Subcommittee with Representative Joe Wilson methods to trace operations back to their (R-SC) taking over Readiness. Representatives source. Clapper said high level Russian officials Mike Turner (R-OH), Mike Rogers (R-AL), and direct cyber operations aimed at the U.S. Vicky Hartzler (R-MO) will continue to chair election and Russia’s goals were to undermine the Tactical Air and Land Forces, Strategic public faith in American electoral systems, Forces and Oversight and Investigations undermine Clinton’s electability and to Subcommittees respectively. influence the U.S. election in favor of Donald Trump. He remarked Moscow has long sought The House Armed Services Committees also undermine the U.S. – led, liberal, democratic welcomes a number of new Members, some of order and recent behavior reflects Russia’s whom served on the Committee in pervious more aggressive cyber posture. Congresses: . Scott DesJarlais (R-TN) New House Defense Subcommittee Chairs . Ralph Abraham (R-LA) . Trent Kelly (R-MS) Key Points: . Mike Gallagher (R-WI) . A new Member takes over HAC-D and four . Matt Gaetz (R-FL) of the six HASC Subcommittees will have . Don Bacon (R-NE) new chairs . Jim Banks (R-IN) . Liz Cheney (R-WY) This week, many of the House Committees revealed their subcommittee chairs and ranking . Colleen Hanabusa (D-HI) members, including a number of key defense
Williams & Jensen, PLLC 701 8th Street, N.W. Suite 500 Washington, D.C. 20001 Telephone: (202) 659-8201 Fax: (202) 659-5249 www.williamsandjensen.com
Page 10 of 24 Williams & Jensen – Washington Update January 13, 2017
. Carol Shea-Porter (D-NH) military relations is difficult to achieve…[a]nd . Jacky Rosen (D-NV) as history has taught us, achieving that balance . Donald McEachin (D-VA) requires different leaders at different times.” . Salud Carbajal (D-CA) . Anthony Brown (D-MD) Ranking Member Jack Reed (D-RI) stated that . Stephanie Murphy (D-FL) “[a]s this Committee considers legislation to . Ro Khanna (D-CA) provide an exception to General Mattis, I believe it is extremely important that we Civilian Control of Military Hearing carefully consider the consequences of setting aside the law and the implications such a Key Points: decision may have on the future of civilian and . In advance of the Mattis nomination hearing, military relations…[and] [w]e must always be SASC looks at the issues posed by a recently very cautious about any actions that may retired military officer leading the DOD inadvertently politicize our Armed Forces.” He . Members and witnesses expressed concern stated that “[d]uring this past presidential about maintaining civilian control of the election cycle, both Democrats and Pentagon while saying that a waiver would be Republicans came dangerously close to appropriate for Mattis compromising the nonpartisan nature of our military when the nominating conventions On January 10, in advance of its hearing on featured speeches from recently retired general Secretary of Defense-designate General James officers advocating for a candidate for Mattis, the Senate Armed Services Committee president.” He said that “[a]nother issue we held a hearing titled “Civilian Control of the should consider is whether the total number of Armed Forces” with testimony from Johns retired senior military officers selected for high- Hopkins School of Advanced International ranking positions in the Trump administration Studies Professor Dr. Eliot Cohen and Center will impact the dynamic of the interagency for Strategic and International Studies Senior process and the advice that the president Vice President Dr. Kathleen Hicks. receives.”
Chairman John McCain (R-AZ) said that Cohen explained that “the practice embodied “[u]ltimately, the key to healthy civil-military in the law of having a civilian Secretary of relations and civilian control of the military is Defense stems from both that history and I the oath soldiers and statesmen share in think from four sets of concerns: common, ‘to protect and defend the . The first is that it reflects the notion Constitution.’” He said that “[i]t is about the that control over the largest trust they have in one another to perform their bureaucracy in our government with respective duties in accordance with our the largest budget and with enormous republican system of government…[and] [i]t is power in many dimensions including about the candid exchange of views potentially over the lives of our own engendered by that trust and which is vital to citizens must rest with someone who effective decision-making…[a]nd it is about represents the American citizenry, not a mutual respect and understanding.” McCain military elite, which in the nature of stated that “[t]he proper balance in civil- things is appropriately self?selected
Williams & Jensen, PLLC 701 8th Street, N.W. Suite 500 Washington, D.C. 20001 Telephone: (202) 659-8201 Fax: (202) 659-5249 www.williamsandjensen.com
Page 11 of 24 Williams & Jensen – Washington Update January 13, 2017
along military lines until the very top substantially populating the upper ranks of our ranks. national security structures with recently retired . Second, it stems from the belief that senior military personnel or active duty there is a breadth of view and personnel well beyond those positions already perspective essential to running the designated in statute.” She said that “I come to military and making war that is not this conclusion based on a number of factors: likely to be found in someone who has . First, a regular reliance on former spent 30 or 40 years in uniform. commissioned officers to serve as the . Third, having a recently retired general Secretary of Defense or to widely officer as Secretary of Defense poses all populate the national security kinds of practical problems. Would establishment's senior cadre would they be inclined to favor the Joint undermine the international security Chiefs of Staff, military, over the Office advantages that accrue to the United of the Secretary of Defense, civilian? States for modeling strong civilian Would they be inclined to favor their control. own service over the others? Would . Second, were recently retired or active they bypass the Chairman of the Joint duty military officers routinely selected Chiefs of Staff as the senior military for Secretary of Defense or to widely adviser to the president? populate senior civilian positions in . Fourth, the Secretary of Defense is in government, it would risk furthering many ways the chief interlocutor or incentives for active duty officers to bridge, if you will, between our Armed politicize their speech and/or actions Forces and our society, the president and for civilians to seek to ascertain the being too busy and burdened with political viewpoints of officers as part many other responsibilities. It is the of the recruitment and hiring process Secretary of Defense who represents for political positions. the concerns, values and interests of the . This leads to a third concern. A coterie Armed Forces to politicians and to of individuals with like background society. In turn, he or she guarantees typically accompanies a senior that democratic values, attitudes and appointee into government. Academics needs will inform and shape the know lots of academics, economists American military. know many economists, and former military personnel have extensive Hicks said that “[i]t is my view that the military networks. principle of excluding recently retired . Fourth, the United States has an commissioned officers from serving as the interest in developing knowledge and Secretary of Defense is a prudent contribution expertise about the Armed Forces to maintaining the constitutionally grounded among those who have not served, principle of civilian control both symbolically especially in those who have not served and in practice.” She said that “[a] permanent at very senior levels. elimination or modification to this statute . Fifth, a recently retired senior officer at would be detrimental to the health of our civil- the helm of DOD risks prejudice with military relations and our national security.” regard to service interests. Resources Hicks stated that “[s]o, too, would be are always more constrained than one
Williams & Jensen, PLLC 701 8th Street, N.W. Suite 500 Washington, D.C. 20001 Telephone: (202) 659-8201 Fax: (202) 659-5249 www.williamsandjensen.com
Page 12 of 24 Williams & Jensen – Washington Update January 13, 2017
would like, so competition for dollars ultimately fail, to the detriment of our national- and mission-space among the military security goals in Afghanistan.” departments is a constant reality. SIGAR identified the following high-risk areas: SIGAR Warns Of Issues in Afghanistan In . AFGHAN SECURITY FORCES New Report CAPACITY AND CAPABILITIES: Afghanistan needs a stable security Key Points: environment to prevent it from again . A special IG issues a list of high-risk areas becoming a safe haven for al-Qaeda or for the reconstruction of Afghanistan for other terrorists. More than half of all consideration by the new Congress and the U.S. reconstruction dollars since 2002 next President have gone toward building, equipping, . The IG stresses the importance of addressing training, and sustaining the Afghan corruption in the Afghan government and the National Defense and Security Forces capability of Afghan security forces to secure (ANDSF). However, the ANDSF has the country not yet been capable of securing all of Afghanistan and has lost territory to the This week the Office of the Special Inspector insurgency. As of August 28, General for Afghanistan Reconstruction 2016,USFOR-A reported that only (SIGAR) released its assessment of the current 63.4% of the country’s districts were situation in Afghanistan and the biggest threats under Afghan government control or to success for the U.S. and its allies. SIGAR influence a reduction from the 72% as presented “High-Risk List report to the of November 27, 2015. Capability gaps incoming Administration and the new in key areas such as intelligence, Congress…[that] identifies what we see as the aviation, and logistics are improving, greatest threats to the ultimate success of our but still hinder effectiveness. more than 15-year-long U.S.-funded . CORRUPTION: Corruption continues reconstruction effort in Afghanistan.” SIGAR to be one of the most serious threats to noted that since 2002, over $115 billion in U.S. the U.S.-funded Afghanistan funds have been expended in Afghanistan, “the reconstruction effort. Corruption has largest expenditure to rebuild a single country eroded state legitimacy, weakening the in our nation’s history.” SIGAR stated that government’s ability to enlist popular “[w]hile all eight risk areas outlined in this support against the insurgency, report threaten reconstruction, the questionable discouraging foreign investment and capabilities of the Afghan security forces and economic growth, as well as seriously pervasive corruption are the most critical.” diminishing Afghan military capability. SIGAR stated that “[w]ithout capable security . SUSTAINABILITY: Much of the more forces, Afghanistan will never be able to stand than $115 billion the United States has on its own…[and] [w]ithout addressing committed to reconstruction projects entrenched corruption, the legitimacy and and programs risks being wasted effectiveness of the Afghan government will because the Afghans cannot sustain the remain in a perilous state.” SIGAR stated that investment—financially or “[i]f these two risk areas are not addressed, I functionally—without massive, fear that our reconstruction efforts could continued donor support. Donors were
Williams & Jensen, PLLC 701 8th Street, N.W. Suite 500 Washington, D.C. 20001 Telephone: (202) 659-8201 Fax: (202) 659-5249 www.williamsandjensen.com
Page 13 of 24 Williams & Jensen – Washington Update January 13, 2017
expected to finance approximately 69% illicit narcotics trade, raising the of Afghanistan’s $6.5 billion fiscal year question of whether the Afghan (FY) 1395 national budget (December government can ever prevail without 22, 2015–December 21, 2016), mostly tackling the narcotics problem. through grants. At 2016 conferences in . CONTRACT MANAGEMENT: The Warsaw and Brussels, the United States scope of contracting in support of U.S. and other donors pledged to maintain objectives in Afghanistan is enormous, assistance to Afghanistan at or near but contracting represents a high risk to current levels through 2020. the success of Afghanistan . ON-BUDGET SUPPORT: On-budget reconstruction. The usual difficulties of assistance includes direct assistance contract management are magnified (also referred to as bilateral, and aggravated by Afghanistan’s government-to-government assistance) remoteness, active insurgency, and assistance that travels through widespread corruption, limited multi-donor trust funds before reaching ministerial capability, difficulties in the Afghan government. On-budget collecting and verifying data, and other assistance is intended to reduce costs, issues. increase Afghan government . OVERSIGHT: The ability for trained ownership, and build the Afghan professionals to conduct site visits is a institutional capacity for managing their critical part of effective reconstruction own budget. However, on-budget oversight. Unfortunately, accessing assistance, whether delivered directly or reconstruction project sites and through multilateral trust funds, leads programs in Afghanistan has grown to reduced U.S. control and visibility increasingly difficult with the U.S. and over these funds. Given the evidence Coalition military drawdown. Oversight that the Afghan government still has also been weakened by instances of cannot manage and protect these funds poor documentation, failure to monitor and may not use them appropriately, contract compliance and work quality, the Department of Defense is planning and inattention to holding contractors to reduce some of its on-budget and grantees accountable for assistance. unsatisfactory performance. . COUNTERNARCOTICS: The . STRATEGY AND PLANNING: A cultivation and trafficking of illicit lack of emphasis on planning and drugs puts the entire U.S. investment in developing related strategies means the the reconstruction of Afghanistan at U.S. military and civilian agencies are at risk. Although the United States has risk of working at cross purposes, committed more than $8 and a half spending money on nonessential billion to counternarcotics efforts in endeavors, or failing to coordinate Afghanistan, the country still leads the efforts in Afghanistan. world in opium production, and Afghan farmers are growing more For more information on defense issues you may email opium than ever. The Afghan or call Michael Kans at 202-659-8201. Alex insurgency receives significant funding Barcham and Alex Hopkins contributed to this section. from participating in and taxing the
Williams & Jensen, PLLC 701 8th Street, N.W. Suite 500 Washington, D.C. 20001 Telephone: (202) 659-8201 Fax: (202) 659-5249 www.williamsandjensen.com
Page 14 of 24 Williams & Jensen – Washington Update January 13, 2017
HEALTH Menendez (D-NJ), Patty Murray (D-WA), Jon Tester (D-MT), and Mark Warner (D-VA). Senate Approves Budget Resolution; House Expected to Vote Friday The resolution includes reconciliation instructions directing the Senate Finance and Key Points: Health, Education, Labor and Pensions . The Senate approved the resolution 51-48. Committees and the House Ways and Means . The resolution would require Affordable Care and Energy and Commerce Committees to Act repeal proposals to be completed by each submit deficit reduction legislation to their January 27. respective budget committees by January 27, 2017. The savings found through these On January 12, the Senate approved proposals will be put in a reserve fund that will S.Con.Res.3, a budget resolution for FY 2017 go towards a replacement for the ACA. which contains language to begin rolling back the Affordable Care Act (ACA). The resolution The House scheduled a vote on resolution for passed on a nearly party line vote with only January 13 and pass it on a partisan vote. There Senator Rand Paul (R-KY) as the only are some members of the House Freedom Republican to oppose it. Caucus and the moderate Tuesday Group who have expressed concern with the budget limits Before final passage, the Senate considered 19 set in the resolution. amendments to the resolution. A point of order was made on each amendment and the motion Disagreement Remains on How to Repeal to waive the point of order was blocked each and Replace the ACA time. Most of these amendments were defeated by party lines. Key Points: . President-elect Trump has said repeal and One amendment offered by Senator Amy replace should be done simultaneously. Klobuchar (D-MN) regarding importation of . A formal replacement plan has yet to be drugs from Canada saw Members on both sides proposed. cross party lines in the vote. Republicans supporting the measure were Senators John At a press conference, President-elect Donald Boozmen (R-AR), Susan Collins (R-ME), Ted Trump stated that his Administration will offer Cruz (R-TX), Jeff Flake (R-AZ), Chuck a plan to repeal and replace the Affordable Grassley (R-IA), Dean Heller (R-NV), John Care Act (ACA) simultaneously. Trump said Kennedy (R-LA), Mike Lee (R-UT), John the replacement will be in various segments McCain (R-AZ), Lisa Murkowski (R-AK), Rand “but will most likely be on the same day or the Paul (R-KY), and John Thune (R-SD). The 13 same week, but probably the same day, it could Democrats who opposed the amendment were be the same hour” as passage of the repeal. Senators Michael Bennet (D-CO), Cory Booker (D-NJ), Maria Cantwell (D-WA), Tom Carper This timetable is slightly faster than the one (D-DE), Bob Casey (D-PA), Chris Coons (D- proposed by Congressional Republicans. DE), Joe Donnelly (D-IN), Martin Heinrich Congressional leaders have discussed a step-by- (D-NV), Heidi Heitkamp (D-ND), Bob step replacement process which would include regulatory action by the Trump Administration.
Williams & Jensen, PLLC 701 8th Street, N.W. Suite 500 Washington, D.C. 20001 Telephone: (202) 659-8201 Fax: (202) 659-5249 www.williamsandjensen.com
Page 15 of 24 Williams & Jensen – Washington Update January 13, 2017
Trump has indicated he will not release his plan For more information about healthcare issues you may until Representative Tom Price (R-GA) has email or call Nicole Ruzinski or George Olsen at 202- been confirmed as the Secretary of Health and 659-8201. Human Services. TRANSPORTATION AND Representative Chris Collins (R-NY) said if INFRASTRUCTURE Trump were to present a plan it would “shorten the cycle a lot because we have six or Chao Nomination Hearing eight plans.” It is still unclear, however, what the Trump plan could look like. Key Points: . The Secretary of Transportation-designate Speaker Paul Ryan (R-WI) has said the experiences a very smooth confirmation hearing President-elect and Congressional Republicans at which Members asked about a variety of are “in complete sync” and “it is our goal to issues bring it all together concurrently…so that we . Chao did not provide any significant detail on can save people from this mess.” Senator the Administration’s infrastructure plan Majority Leader Mitch McConnell (R-KY) has declined to comment on a specific timeline. On January 11, the Senate Commerce, Science, and Transportation Committee held a hearing Democrats continue to emphasize the potential to discuss the nomination of Elaine Chao to be negative impact on the 20 million people who the Secretary of Transportation. Topics gained coverage under the law. They also note discussed in the hearing included: (1) Working enrollment numbers on the exchanges are with Congress; (2) Rural Investments; (3) Air holding steady, countering the idea the ACA is Travel; (4) Air Traffic Control; (5) collapsing. House Minority Leader Nancy Autonomous Vehicles; (6) Merchant Marine Pelosi (D-CA) has charged that Republicans Act (aka Jones Act); (7) Railway Safety; (8) “don’t have the votes to do that in the manner Sound Transit Program; (9) Compliance versus they say they will: repeal and replace in one fell Enforcements; (10) Intermodal Transportation; swoop.” (11) Manufacturing; (12) Recreational Trails Program; (13) Highway Trust Fund; (14) Upcoming Hearings and Events Regulatory Reform; (15) Aircraft Certification; (16) Automobile Safety; (17) Alaska and January 18 Hawaii; (18) Pipelines; (19) Davis-Bacon Act; HHS Secretary: The Senate Health, (20) Drones; (21) Buy America; (22) Education, Labor and Pensions Committee will Infrastructure Funding; (23) Metropolitan hold a hearing on the nomination for Planning Organizations; (24) Disadvantaged Representative Tom Price (R-GA) to be the Business Enterprises Program; (25) Broadband; Secretary of Health and Human Services. (26) Greenhouse Gas; (27) Merchant Marine Academy. Health Policy: Bloomberg Government will hold a webinar to preview action expected in Chairman John Thune (R-SD) in a statement Congress following the inauguration. explained the Committee was able to enact over 60 measures in the 114th Congress. He stated the Department of Transportation
Williams & Jensen, PLLC 701 8th Street, N.W. Suite 500 Washington, D.C. 20001 Telephone: (202) 659-8201 Fax: (202) 659-5249 www.williamsandjensen.com
Page 16 of 24 Williams & Jensen – Washington Update January 13, 2017
(DOT) plays a vital role in facilitating and He noted the decline in the transportation promoting the safe and efficient movement of infrastructure and he stressed the need to “step goods and people throughout the country and up” to the challenge to address this problem. the world. He noted the Department contains He stated there needs to be a commitment to 10 component agencies, employs over 57,000 rebuilding the nation’s infrastructure. Nelson full time employees, and has an operating noted the need for increased investments in budget of $75 billion. He noted much of the ports, rails, highways, and transit projects, as economy is reliant on a robust transportation well as innovative technologies. He explained sector. He explained increasing the capacity and these projects will create good paying jobs and efficiency of the nation’s highways, rail lines, the benefits of expanding the nation’s pipelines, and ports is crucial, and will have to infrastructure can create “ripple effects” which be a top priority for the next Secretary of will benefit the nation as a whole. He expressed Transportation. He added that another priority the desire to hear plans for this investment in will need to be safety. He stated it will be infrastructure and how it will be paid for. important to avoid one size fits all rules on Nelson noted safety continues to be a problem safety. Thune suggested the DOT will have to as fatalities increased on the nation’s highways. offer a range of tools to combat the unique He stated the DOT must focus on improving safety challenges. He explained many strong those numbers. He noted the move towards safety improvements from the “Fixing autonomous vehicles and he stressed the need America’s Surface Transportation Act” (FAST for the DOT to play a role in ensuring its Act) (P.L. 114-94) and “Protecting our safety. Nelson stated the FAA reauthorization Infrastructure of Pipelines and Enhancing bill will be another important project. He noted Safety Act of 2016” (PIPES Act) (P.L. 114-209) the reauthorization bill was stalled in the House have yet to be implemented. He noted the next because of a proposal to privatize air traffic Secretary of Transportation will have a unique control. He suggested this “scheme” would opportunity to provide leadership on upset the partnerships existing between innovations such as autonomous vehicles and agencies. He noted the need to protect unmanned aircrafts. Thune stated if confirmed consumers and ensure the costs they pay are Chao will have the opportunity to improve fair. safety and ensure all areas, urban and rural, prosper. He noted the extensive experience of Secretary of Transportation-designate Elaine Chao. He stated she has continuously “rolled Chao in a statement explained her experience up her sleeves” and faced the challenges of the with the United Way, Secretary of Labor and as nation. Deputy Secretary of Transportation. She noted the importance of the transportation system in Ranking Member Bill Nelson (D-FL) in a the success of the economy. Chao explained statement expressed condolences for the the transportation system is in jeopardy victims of the Fort Lauderdale shooting. He because of a failure to maintain the stated this shooting serves as a reminder that infrastructure and keep up with innovations. airport security remains a challenge. He stated a She noted safety will continue to be a prime Federal Aviation Administration (FAA) objective. She stated risk based analysis will be reauthorization bill could be a good place to essential as will be cost- benefit analysis of any start to prevent similar tragedies. Nelson stated new rulemakings. Chao stated the DOT will the nation’s infrastructure is at a cross roads. work with states to ensure federal funding is
Williams & Jensen, PLLC 701 8th Street, N.W. Suite 500 Washington, D.C. 20001 Telephone: (202) 659-8201 Fax: (202) 659-5249 www.williamsandjensen.com
Page 17 of 24 Williams & Jensen – Washington Update January 13, 2017
spent to improve efficiencies. She explained far, the largest ever such settlement for an she will continue the work on the Next automaker violating the CAA. Generation (Next Gen) transitioning at the FAA. She noted the importance of private In its press release, the DOJ explained that: investments in infrastructure. She stated public- . VW has agreed to plead guilty to three private partnerships must be able to participate criminal felony counts and pay a $2.8 in the transportation sector. Chao stated the billion criminal penalty as a result of the government does not have the resources to do company’s long-running scheme to sell it all. She stated the way projects are built is just approximately 590,000 diesel vehicles in as important as how much is spent. She asked the U.S. by using a defeat device to for input on bottlenecks and manufacturing cheat on emissions tests mandated by processes. She stated there is a unique the EPA and the California Air opportunity to utilize innovative technologies Resources Board (CARB), and lying such as drones and autonomous vehicles. She and obstructing justice to further the explained the government needs to be a catalyst scheme. for safe technologies not an impediment. . In separate civil resolutions of environmental, customs and financial VW Criminal and Civil Settlements` claims, VW has agreed to pay $1.5 billion. This includes EPA’s claim for Key Points: civil penalties against VW in connection . DOJ reaches additional criminal and civil with VW’s importation and sale of settlements with VW totaling more than $4.3 these cars, as well as U.S. Customs and billion with VW for use of defeat devices on Border Protection (CBP) claims for diesel engines customs fraud. In addition, the EPA . These settlements follow the $14.7 billion with agreement requires injunctive relief to the EPA prevent future violations. The agreements also resolve alleged On January 11, the Department of Justice violations of the Financial Institutions (DOJ) announced a $4.3 billion settlement of Reform, Recovery and Enforcement criminal and civil claims against Volkswagen Act (FIRREA). (VW) for deploying defeat devices on diesel engine cars designed to game emissions tests. The DOJ made available the following Specifically, the Environmental Protection documents pertaining to the settlements: Agency (EPA) asserted that VW “violated the . VW AG Plea Agreement Clean Air Act (CAA) by the sale of . VW AG Third Partial Consent Decree approximately 590,000 model year 2009 to . VW AG Notice of Third Partial 2016 diesel motor vehicles equipped with Consent Decree ‘defeat devices.’” These settlements follow the . VW AG Third Superseding $14.7 billion worth of settlements with the Information United States, California, and the Federal Trade . FIRREA Settlement Agreement Commission (FTC) finalized in October, . VW AG CPB Settlement pushing the total monetary penalties VW has . VW AG Second Superseding agreed to pay beyond $18 billion, which is, by Indictment
Williams & Jensen, PLLC 701 8th Street, N.W. Suite 500 Washington, D.C. 20001 Telephone: (202) 659-8201 Fax: (202) 659-5249 www.williamsandjensen.com
Page 18 of 24 Williams & Jensen – Washington Update January 13, 2017
Chrysler “did not disclose the existence of EPA Alleges Fiat Chrysler Committed certain auxiliary emission control devices to Clean Air Act Violations EPA in its applications for certificates of conformity for model year 2014, 2015 and 2016 Key Points: Jeep Grand Cherokees and Dodge Ram 1500 . The EPA alleges that Fiat Chrysler used trucks, despite being aware that such a software that amounted to defeat devices for disclosure was mandatory.” The EPA claimed SUVs and trucks that could result in more that “[b]y failing to disclose this software and than $4.5 billion in liability, if proven then selling vehicles that contained it, [Fiat Chrysler] violated important provisions of the On January 12, the Environmental Protection CAA.” The EPA added that Fiat Chrysler “may Agency (EPA) “issued a notice of violation to be liable for civil penalties and injunctive relief Fiat Chrysler Automobiles…for alleged for the violations alleged in the notice of violations of the Clean Air Act (CAA) for violation” and explained that the agency “is installing and failing to disclose engine also investigating whether the auxiliary management software in light-duty model year emission control devices constitute “defeat 2014, 2015 and 2016 Jeep Grand Cherokees devices,” which are illegal.” and Dodge Ram 1500 trucks with 3.0 liter diesel engines sold in the United States.” The EPA Finalizes Carbon Pollution Standards EPA alleged that the engine management for Cars and Light Trucks Through 2025 software resulted in CAA violations in the form of increased nitrogen oxides (NOx) emissions Key Points: from approximately 104,000 vehicles. Like the . The EPA issued its final determination on CAA violations leveled against Volkswagen, the whether to maintain ambitious mileage EPA is working with the California Air standards for cars and light trucks Resources Board (CARB). If Fiat Chrysler were manufactured between 2022-2025 the agency found to be in violation of the CAA on all claims will improve air quality without charges, the company could pay up $44,500 for impacting the economic viability of automakers each vehicle or more than $4.5 billion in total. . It is not clear how the Trump Administration The EPA and CARB have sent Fiat Chrysler will address this regulatory move their notices of violation (EPA and CARB respectively.) On January 13, the Environmental Protection Agency (EPA) released its final determination In its press release, the EPA explained that to “maintain the current greenhouse gas “[t]he CAA requires vehicle manufacturers to (GHG) emissions standards for model years demonstrate to EPA through a certification 2022-2025 cars and light trucks” according to process that their products meet applicable an EPA press release. The EPA explained that federal emission standards to control air “[t]he final determination finds that a wide pollution.” The EPA stated that “[a]s part of variety of effective technologies are available to the certification process, automakers are reduce GHG emissions from cars and light required to disclose and explain any software, trucks, and that automakers are well positioned known as auxiliary emission control devices, to meet the standards through model year 2025 that can alter how a vehicle emits air at lower costs than predicted.” pollution.” The EPA alleged that that Fiat
Williams & Jensen, PLLC 701 8th Street, N.W. Suite 500 Washington, D.C. 20001 Telephone: (202) 659-8201 Fax: (202) 659-5249 www.williamsandjensen.com
Page 19 of 24 Williams & Jensen – Washington Update January 13, 2017
The EPA stated that “[t]he standards are Infrastructure Fund (AIF) to finance projected to result in average fleet-wide state and local projects. consumer fuel economy sticker values of 36 . Delaney and Yoho will file The miles per gallon (mpg) by model year 2025, 10 Infrastructure 2.0 Act, legislation that mpg higher than the current fleet average.” The includes the AIF and provides EPA stated that “[s]ince the first year of the additional long-term revenues to GHG standards, manufacturers have been stabilize and expand the Highway Trust developing and adopting fuel economy Fund. technologies at unprecedented rates…[and] [a]t the same time, the American car industry has In the last Congress, Delaney introduced both been thriving.” The EPA stated that “[s]ince the “Partnership to Build America Act of 2010, the industry has had seven consecutive 2015” (H.R. 413) and the “Infrastructure 2.0 years of sales growth, with 2016 setting a Act” (H.R. 625), neither of which were acted record high for vehicle sales.” The EPA stated upon. that “[t]he Administrator is retaining the current standards to provide regulatory Delaney, Yoho, and Davis provided the certainty for the auto industry despite a following information on the yet to be technical record that suggests the standards introduced bills: could be made more stringent.” The EPA stated that “[r]etaining the current standards The Partnership to Build America Act – To Be preserves the significant cuts in harmful carbon Introduced by Rep. Delaney & Rep. Davis pollution expected from the original standards, and provides regulatory certainty for this global The American Infrastructure Fund industry that must meet similar standards in other markets including Canada and Europe.” . The Partnership to Build America Act creates the American Infrastructure House Members Announce Plans To Fund (AIF) to provide financing to Reintroduce Bills To Use Repatriation To state and local governments for new Finance Infrastructure infrastructure. . Transportation, energy, Amid ongoing talk and speculation about the communications, water and education form and offsets of President-elect Donald projects are eligible to receive AIF Trump’s infrastructure package, this week, financing. Local governments would three House Members announced their apply directly to the AIF for support. intention to “introduce a pair of bipartisan . To encourage public-private infrastructure bills using revenues from partnerships 35% of AIF supported international tax reform to upgrade America’s projects must have at least 10% of their infrastructure,” according to the January 9 financing be private debt or equity. press release. Representatives John Delaney . The AIF will be capitalized by $50 (D-MD), Ted Yoho (R-FL) and Rodney Davis billion in infrastructure bond sales and (R-IL) explained that: leveraged at a 15:1 ratio to provide up . Delaney and Davis will bring forward to $750 billion in loans or guarantees. The Partnership to Build America Act, legislation that creates a new American Funded by an Infrastructure Bond Sale
Williams & Jensen, PLLC 701 8th Street, N.W. Suite 500 Washington, D.C. 20001 Telephone: (202) 659-8201 Fax: (202) 659-5249 www.williamsandjensen.com
Page 20 of 24 Williams & Jensen – Washington Update January 13, 2017
o $50 billion to capitalize the . Rather than using appropriated funds American Infrastructure Fund out of the federal budget to establish (AIF) the American Infrastructure Fund, the o $25 million pilot program to Partnership to Build America Act uses create regional infrastructure a bond sale. accelerators, similar to the West . AIF bonds would have a 50-year term, Coast Infrastructure Exchange pay a 1% fixed rate return and would o This frees the estimated $2 not be guaranteed by the U.S. trillion in overseas earnings to government. These bonds are not return to the United States, intended to be a good investment on spurring private sector re- their own and are transferable after investment and growth. purchase. . To incentivize companies to purchase Creating Long-term Highway Trust Fund these bonds, U.S. companies would be Solvency and Policy Certainty allowed to repatriate a certain amount of their overseas earnings tax free for . The Infrastructure 2.0 Act provides six every $1.00 they invest in the bonds. years of Highway Trust Fund solvency, This multiplier will be set by a “reverse providing immediate certainty to the Dutch auction” – which allows the private sector and policymakers. market to set the rate, ensuring that . The legislation also establishes a enough funds are raised. bipartisan and bicameral commission . Assuming a 1:4 ratio is set by the that is tasked with developing a auction; a company will be able to solution for permanent solvency of the repatriate $4.00 tax-free for every $1 in Highway Trust Fund. AIF bonds they purchase. Building a Path for Broader Tax Reform The Infrastructure 2.0 Act – To Be Introduced by Rep. Delaney & Rep. Yoho . The Infrastructure 2.0 Act creates an eighteen-month deadline for Building a World Class 21st Century international tax reform. Infrastructure with Revenue from Deemed . To encourage action, the legislation Repatriation at 8.75% Tax Rate includes a forcing function: if reform is not enacted, a fallback international tax . Under the Infrastructure 2.0 Act, package to make U.S. business climate existing overseas profits accumulated more competitive would be by U.S. multi-national corporations implemented. would be subject to a mandatory, one- o This pro-growth fallback time 8.75% tax, replacing deferral reform package would end option and current rate of 35%. deferral, reduce anti- o $120 billion to the Highway competitive over taxation, Trust Fund, enough to meet decrease taxes for companies funding gap at increased levels paying fair rates abroad but for six years. increase taxes for companies in
Williams & Jensen, PLLC 701 8th Street, N.W. Suite 500 Washington, D.C. 20001 Telephone: (202) 659-8201 Fax: (202) 659-5249 www.williamsandjensen.com
Page 21 of 24 Williams & Jensen – Washington Update January 13, 2017
tax havens. This would The Trump Transition stated that “Giuliani will eliminate the lock-out effect be sharing his expertise and insight as a trusted and allow for the free flow of friend concerning private sector cyber security profits back to the United problems and emerging solutions developing in States. the private sector” without further explanation o Under this option, for Active as to how this expertise and insight will be Market Foreign Income, a utilized. The Trump Transition explained that company would pay a 12.25% “from time to time because of the changing tax to the U.S. on overseas nature of this problem, it is contemplated that profits if they are currently the President-elect will be hosting a series of paying no tax and a 2% tax to meetings with senior corporate executives from the U.S. if they are already companies which have faced or are facing paying the OECD average of challenges similar to those facing the 25% abroad, with a sliding scale government and public entities today, such as in-between. hacking, intrusions, disruptions, manipulations, theft of data and identities, and securing For more information on transportation issues you may information technology infrastructure.” The email or call Michael Kans at 202-659-8201. Alex Trump Transition made clear, however, “[n]o Barcham and Rebecca Konst contributed to this section. consensus advice or recommendations resulting from group deliberations or interaction is TECHNOLOGY expected or will be solicited.”
Giuliani To Lead 90 Day Cybersecurity Revised NIST Cybersecurity Framework Review Key Points: Key Points: . The agency released its proposed update to the . The former mayor of New York and 2014 voluntary cybersecurity guidance presidential candidate will be charged with document leading a review of private sector cybersecurity with involvement from the President-elect On January 10, the National Institute of . However, there will not be any Standards and Technology (NIST) has released recommendations its first proposed revisions of the Framework for Improving Critical Infrastructure On January 12, former New York City Mayor Cybersecurity (Cybersecurity Framework) for Rudy Giuliani was named to chair a body to be comment, which are due by April 10. NIST formed by President-elect Donald Trump’s articulated its hope that a final version of this Administration to review cybersecurity policy draft document will be published in fall 2017. It within the first 90 days, a policy Trump bears note that the basic structure of the committed to in the last few weeks. The scope Cybersecurity Framework remains largely and breadth of this review remain ambiguous, unchanged save for the new Section 4.0 however, save for a press release issued by the (Measuring and Demonstrating Cybersecurity), Trump Transition. It appears that Trump which seeks to help businesses develop metrics himself will be involved in a capacity as well. and measurements to allow them to better assess whether its cybersecurity approach are
Williams & Jensen, PLLC 701 8th Street, N.W. Suite 500 Washington, D.C. 20001 Telephone: (202) 659-8201 Fax: (202) 659-5249 www.williamsandjensen.com
Page 22 of 24 Williams & Jensen – Washington Update January 13, 2017
helping attain business objectives and language NIST explained that “[k]ey refinements, in a number of spots stressing better Cyber clarifications, and enhancements in Framework Supply Chain Risk Management. Version 1.1 include: . A new section on cybersecurity In its press release, NIST explained that the measurement draft Cybersecurity Framework “incorporates . Greatly expanded explanation of using feedback since the release of framework Framework for Cyber Supply Chain version 1.0, and integrates comments from the Risk Management purposes December 2015 Request for Information as . Refinements to better account for well as comments from attendees at the authentication, authorization, and Cybersecurity Framework Workshop 2016 held identity proofing at the NIST campus in Gaithersburg, . Better explanation of the relationship Maryland.” between Implementation Tiers and Profiles In the draft Cybersecurity Framework, NIST identified the questions on which it would like Ratcliffe Cyber Bills public comment: . Are there any topics not addressed in Key Points: the draft Framework Version 1.1 that . The House repasses two cyber bills it passed could be addressed in the final? last Congress that died in the Senate . How do the changes made in the draft Version 1.1 impact the cybersecurity On January 10, the House took up and passed ecosystem? under a suspension of the rules two bills . For those using Version 1.0, would the sponsored by Representative John Ratcliffe (R- proposed changes impact your current TX) that are identical to two passed by the use of the Framework? If so, how? House last year: . For those not currently using Version . The Leveraging Emerging 1.0, does the draft Version 1.1 affect Technologies Act of 2017 ( H.R. 240), your decision to use the Framework? If which tasks the Secretary of Homeland so, how? Security with liaising with “innovative . Does this proposed update adequately and emerging technology developers reflect advances made in the Roadmap and firms” to better address homeland areas? security, including discretionary . Is there a better label than “version 1.1” authority to establish a Department of for this update? Homeland Security presence in parts of . Based on this update, activities in the country with high concentrations of Roadmap areas, and activities in the these types of entities cybersecurity ecosystem, are there . The Support for Rapid Innovation Act additional areas that should be added to of 2017 (H.R. 239), which provides the the Roadmap? Are there any areas that Under Secretary for Science and should be removed from the Roadmap? Technology (S&T) with authority and responsibilities to work with industry
Williams & Jensen, PLLC 701 8th Street, N.W. Suite 500 Washington, D.C. 20001 Telephone: (202) 659-8201 Fax: (202) 659-5249 www.williamsandjensen.com
Page 23 of 24 Williams & Jensen – Washington Update January 13, 2017
and other stakeholders to speed new accessed with a subpoena. According to their cybersecurity technologies to fruition press release, Yoder and Polis explained that “[t]he Email Privacy Act would update the By voice vote, the House passed these bills ECPA to state that all government agencies which were on House Majority Leader Kevin must get a warrant to search Americans’ online McCarthy’s (R-CA) Innovation Initiative that communications, regardless of when the email died in the Senate in 2016. It is not clear was crafted.” whether the Senate will act on these bills Yoder and Polis stated that “[t]he Email Email Privacy Act Reintroduced Privacy Act would: . Affirm that Americans have a Key Points: reasonable expectation of privacy in . A bill to reform law enforcement access to their email accounts and other personal email that the House unanimously passed last and professional content stored online. year is reintroduced . Require the government to get a search warrant based on a showing of On January 9, Representatives Kevin Yoder (R- probable cause in order to compel a KS) and Jared Polis (D-CO) reintroduced the service provider to disclose “Email Privacy Act” (H.R. 387), a bill that communications that are not readily would update the legal requirements for law accessible to the public with -- enforcement agencies must meet in accessing regardless of the age of the email. The House unanimously passed the communications or the means of their “Email Privacy Act” last year, but the Senate storage. Judiciary Committee did not hold a markup of . Preserve the legal tools necessary to a companion bill because of amendments a conduct criminal investigations and number of Republican Senators wanted to add protect the public (Nothing in the bill to the carefully negotiated bill. Original alters warrant requirements under the cosponsors include House Judiciary Committee Wiretap Act, FISA, or any other law). Chairman Bob Goodlatte (R-VA) and Ranking Member John Conyers (D-MI) and For more information on technology issues you may Representatives Doug Collins (R-GA), Will email or call Michael Kans at 202-659-8201. Hurd, (R-TX), Ted Poe (R-TX), Suzan DelBene (D-WA), Jerrold Nadler (D-NY), and This Week in Congress was written by Laura Judy Chu (D-CA). Simmons.
As originally set in the “Electronic Communications Privacy Act of 1986,” law enforcement must obtain a warrant to access those email communications on one’s home computer, emails in transit, or unopened emails having been stored on a remote server for less than 180 days. However, opened emails in remote storage and unopened email in remote storage for more than 180 days may be
Williams & Jensen, PLLC 701 8th Street, N.W. Suite 500 Washington, D.C. 20001 Telephone: (202) 659-8201 Fax: (202) 659-5249 www.williamsandjensen.com
Page 24 of 24