Congressional Update

On January 18th, the Senate passed a Continuing Resolution (CR) to fund the government through the first week in March. The measure passed the Senate by a bipartisan vote of 77 to 18, after which the House passed the legislation under suspension of the rules (314 yeas to 108 nays), relying on Democratic support to reach the required two-thirds vote, after far-right Members’ opposition to the bill and Republicans’ tiny House majority meant Speaker Johnson could not pass the bill with Republican votes alone. As a result, Congress has avoided another government shutdown and members were able to leave town for recess, leaving only the House Freedom Caucus out in the cold. When members return from recess, Speaker Johnson will have his hands full with angry members of his own party as well as an ever-growing to-do list as the White House and the Senate are pushing to complete a spending package that would include money for securing the border as well as additional funds for Ukraine, Israel, and Taiwan. This will be a heavy lift, but one that will take a lot of oxygen out of Congress’s ability to focus on much else given the election cycle this year. Especially as former (and possibly future?) President Trump is urging members of Congress not to “stupidly” give Biden a win on the border.

Despite all that, House Ways and Means Committee Chair Jason Smith (R-MO) and Senate Finance Committee Chair Ron Wyden (D-OR) announced an agreement on a “tax framework” on business tax provisions and the Child Tax Credit. The framework, titled the Tax Relief for American Families and Workers Act of 2024 includes: (1) an expanded Child Tax Credit; (2) extensions of sought-after business tax breaks including the immediate deductibility of Research and Development (R&D) expenses, 100 percent bonus depreciation, and interest deductibility; (3) disaster tax relief for recent natural and man-made disasters, including certain hurricanes, flooding, wildfires, and the Ohio rail disaster; (4) a state housing credit ceiling increase and softens tax-exempt bond financing requirements for the Low-Income Housing Tax Credit program through 2025; (5) an increase in the reporting thresholds for payments; and (6) accelerates termination of the fraud-ridden Employee Retention Tax Credit program. The $78 billion package would be a major win for House and Senate tax writers, especially in light of the current partisan environment, but before anyone schedules any bill signing ceremonies, Messrs. Smith and Wyden will have to sell it to a majority of their respective chambers.

Across the street, the Supreme Court was weighing a critical matter of Chevron deference, a practice established in a 1984 case whereby it was established courts should defer to an agency’s interpretation of a rule so long as the answer was reasonable or justifiable and so long as Congress had not spoken directly to a particular matter. In short, the Chevron ruling gave Federal agencies the ability to regulate industries even if Congress had not expressly passed any law on an issue. For example, the SEC has been able to issue decisions on cryptocurrency despite no Congressional action on the issue—this is largely because of Chevron deference. Further, for the past 40 years, many judicial decisions have been underpinned by the precedents established by Chevron deference. Well, yesterday, the court heard arguments and, many believe, may be considering overturning this practice, which may majorly limit the federal government’s ability to issue regulations—like those surrounding EVs—without an express directive from Congress. Many believe the decision will come down to Chief Justice John Roberts and Justice Amy Coney Barrett, who may be tempted to side with Justices Thomas, Gorsuch, and Kavanaugh to overturn, but who also may be hesitant to move many regulatory decisions from agencies to the courts, as the expectation is an overrule of Chevron would trigger thousands of lawsuits to undo 40 years of precedent. It’s worth noting that until recently, this was not a particularly controversial matter, but simply an understanding that sometimes, the government needs to move faster than Congress. It’s only recently that many – especially among Republicans – have started calling for it to be overturned. It’s likely that, at the very least, the court will tweak the existing rule if not toss it altogether, but we will not know that until the court releases its decisions later this year.