Tax Reform Plans, Campaigns & Additional AGC Legislative Priorities

AGC FINANCIAL ISSUES COMMITTEE

FEDERAL TAX UPDATEJUNE 2016

Brian J. LenihanDirector, Tax, Fiscal Affairs, and Accounting

Associated General Contractors of America

202.547.4733 | [email protected]

AGC Financial Issues Committee Summer Meeting

About Today’s PresenterBrian Lenihan is a government affairs professional with over 13 years ofexperience in representing the federal interests of companies, tradeassociations, as well as serving several members of Congress. As AGC’sDirector of Tax & Fiscal Affairs, Brian oversees the development andadvocacy of the industry’s positions on tax and accounting issues, inconsultation with AGC’s CFO and CPA membership, owners and other AGCsubject matter experts.

Previously, as a senior aide for a member of the Ways & Means Committee,Brian formulated and executed a legislative agenda focusing on tax andhealth issues. In previous positions, he represented a number of clientsbefore Congress including top publically-traded companies, municipalities,defense contractors, development authorities, private enterprises,associations and non-profit organizations.

Brian is involved with 15 business coalitions focused on tax, health, pensionand employer issues. Brian is also a frequent speaker and panelist for taxmeetings and briefings in DC and around the country. Brian graduated fromthe University of Central Florida and currently resides in Virginia with hiswife and three young children.

Brian J. LenihanDirector, Tax, Fiscal Affairs, and Accounting

Associated General Contractors of America

202.547.4733 | [email protected]


White House priorities:

Administration & Congress

Regulations: • Section 385 – related-party debt as equity • Section 199 – substantial renovation• Overtime pay (rule effective 12/1/16)• Ambush elections (in effect)• Crystalline silica (rule implemented)

Departments moving on:• Curbing Inversions• Cuba Engagement• Anti-ISIL Campaign• Trans-Pacific Partnership (TPP)

The Republican-controlled Congress approved: • Significant Medicare overhaul (Doc Fix)• Overhaul of domestic surveillance programs (FISA)• Fast-track trade authority coveted by GOP leadership and President Obama• 6-year Highway Authorization (3 years of funding)• 2-year budget deal increased spending & various tax provisions made permanent


• July 30 - Treasury announces "extraordinary measures" to avoid gov’t default

• August 6 - First GOP Presidential debate in Cleveland

• September 25 - Speaker Boehner announces that he will resign from his position

• October 13 - First Democratic Presidential debate in Las Vegas

• October 29 - W&M Chairman Paul Ryan (R-WI) is elected Speaker of the House

• November 2 - President signs budget package (includes debt limit suspension)

• November 5 - Kevin Brady (R-TX) selected to serve as chairman of W&M

• November 19 - Treasury announces additional actions to curb corporate inversions

• December 3 - Congress approves 6-year highway authorization (FAST Act)

• December 18 - Gov’t funded via Omnibus Appropriations & Tax Extenders (PATH Act)

Major Events 2015


• January 12 - President Obama gives 8th & final State of the Union Address

• January 14 - First debate of 2016 for Republicans (6th)

• January 17 - First debate of 2016 for Democrats (4th)

• February 9 - President releases FY17 budget

• March 1 - Super Tuesday Clinton & Trump both win 7 of 11 states

• March 2 - W&M Chairman Brady chairs Task Force on Tax Reform “Idea Forum”

• March 10 - 12th and final GOP debate (Fox’s debate canceled Trump and Kasich back out)

• March 16 – Obama nominated Merrick Garland to fill the Supreme Court (Scalia passed 2/13)

• April 4 - Treasury releases updated business tax reform framework & issued temporary and proposed more regulations to limit the number of corporate tax inversions

• April 14 – 10th and final Democratic primary debate

Major Events 2016


• May 3 – Indiana GOP Primary solidifies Trump as presumptive GOP presidential nominee

• May 17 & 24 – Finance hearings on chairman’s Corporate Integration proposal

• May 25 – W&M hearing on need for tax reform

• May 26 – Trump officially surpassed the 1,237 delegates required to secure nomination

• June 6 – Speaker Ryan begins roll-out of “Confident America” package for convention

• June 7 – Clinton secures the nomination during final Democratic primaries

• June 24 – W&M Brady releases blueprint (Finance Chairman Hatch releases integration)

• July 15 – Congress Recess and returns after Labor Day

• July 18 – Republican convention begins in Cleveland

• July 25 – Democratic convention begins in Philadelphia

• November 8 – Election day

Major Events 2016



Composition of the 114th Congress

Analysis• Republicans won a total of 247 seats in the House, their largest majority since 1928, when the party won 270• Lone vacancy in the House is Ohio’s 8th District – Speaker Boehner resigned effective October 31, 2015.• Republicans have a 4 seat majority in the Senate

Democratic

Republican

Independent

Republicans Control Senate

Total SeatsRepublicans: 54Democrats: 44

Independents: 2

44 54

2

Republicans Control House

AK

Total SeatsRepublicans: 246Democrats: 188

Vacancies: 1

188 247

1


2nd Session


The Chairmen

Kevin Brady (R-TX)

Elected: 1996; 10th term

Orrin Hatch (R-UT)

Elected: 1977; 6th term

Treasury & IRS to act unilaterally• Continue to issue proposed rules (i.e. inversions)

No Détente Between the Administration & GOP Led Congress in 2016• Speaker Ryan has made clear Congress needs a new partner in White House

Secretary Jack Lew

Assumed: 2013

Asst. Secretary Mark Mazur

Assumed: 2010

The Administration

House Ways and Means Committee

Current Committee Members

Ranking Member: Levin (D-MI)

Charlie Rangel (D-NY)Jim McDermott (D-WA)John Lewis (D-GA)Richard Neal (D-MA)Xavier Becerra (D-CA)Lloyd Doggett (D-TX)Mike Thompson (D-CA)John Larson (D-CT)Earl Blumenauer (D-OR)Ron Kind (D-WI)Bill Pascrell (D-NJ)Joseph Crowley (D-NY)Danny Davis (D-IL)Linda Sánchez (D-CA)

Dynamics & Issues

Dynamics: Kevin Brady (R-TX) became chairman on 11/4/15, besting Rep. Pat Tiberi; and Rep. Rice (R-SC) was added to the panel to fill the vacancy created by Speaker Ryan.

Tax Policy

• Spend 2016 pushing the "step one, step two" approach for tax reform outlined by Fmr. Chr. Ryan in the past year

• Seeking to release a “blueprint” for reform in the lead up to GOP Convention in July

• Subcommittee Chr. Boustany (LA) will focus on international system – he is running for the Senate

Health Reform

• Fraud issues, Obamacare, Medicare Access & CHIP Reauthorization

Tax Extenders

• Congress passed a comprehensive package on 12/17/15

Highway Funding

• Chairman specifically called out that a HTF funding fix will not be pursued in 2016

• T&I may rope chairman in for a summit on funding

Diane Black (R-TN)Tom Reed (R-NY)Todd Young (R-IN)*Mike Kelly (R-PA)Jim Renacci (R-OH)George Holding (R-NC)Kristi Noem (R-SD)Pat Meehan (R-PA)Jason Smith (R-MO)Bob Dold (R-IL)**Tom Rice (R-SC)

Republicans (24) Democrats (15)

Chairman: Kevin Brady (R-TX)

Sam Johnson (R-TX)Devin Nunes (R-CA)Pat Tiberi (R-OH)Dave Reichert (R-WA)Charles Boustany (R-LA)*Peter Roskam (R-IL)Tom Price (R-GA)Vern Buchanan (R-FL)Adrian Smith (R-NE)Lynn Jenkins (R-KS)Erik Paulsen (R-MN)Kenny Marchant (R-TX)


Two Retiring after 2015 * Two Running for Senate **One in Competitive Race


W&M Subcommittee Action• Rep. Charles Boustany (R-LA) chairman of Tax Policy subcommittee

• Balked on introduction of “international” tax draft (i.e. patent box & innovation rates)• Running for Senate seat being vacated by Sen. David Vitter (R)• March 22 - Member Day Hearing on Fundamental Tax Reform Proposals• March 31 - Second Member Day Hearing on Hearing on Income Tax Reform Proposals• May 12 - All Member Day Hearing on Tax Legislation• May 25 - Hearing on Perspectives on the Need for Tax Reform

Brady Wins Tax Gavel & Underscores Tax Reform Effort• November 2015 - Rep. Kevin Brady (R-TX) selected as W&M Chairman• Closest watched gavel race in recent memory, pitting two veteran panel members • Rep. Tom Rice (R-SC) filled the vacancy left by the departure of Speaker Ryan • Chairman Brady made clear in WSJ interview - spend 2016 pushing the "step one, step two“ plan• Committee Retreat at end of January charted 2016 agenda (Trade, Tax & Healthcare)• February 24 - Hearing on Global Tax Environment and Implications for International Tax Reform• Late June - Anticipated release of a “Blueprint” white paper document

http://waysandmeans.house.gov/event/39841312/

http://waysandmeans.house.gov/boustany-announces-tax-policy-subcommittee-hearing-on-fundamental-tax-reform-proposals/

http://waysandmeans.house.gov/event/member-day-hearing-on-tax-legislation/

http://waysandmeans.house.gov/event/hearing-on-perspectives-on-the-need-for-tax-reform/

http://waysandmeans.house.gov/event/chairman-brady-announces-hearing-on-the-global-tax-environment-in-2016-and-implications-for-international-tax-reform/

Politically Endangered – eked out a victory in March primary, but he is likely to have a target on his back for years to come. Opponent held Brady to 53% of the vote, one of the lowest re-election totals in his 18 year career


Seven Texan Chairman – Won out over Pat Tiberi (OH) in 2015 to become 7th Texan with a gavel

Likely to retain gavel in 2017

Cha i r m a n Br a dy

Politically Endangered –

At 82, likely to announce retirement next year


Unlikely to Regain Gavel –Chairman 2010-2011

At 84, likely to announce retirement next Congress

R a nk ing M em ber L ev in

Senate Finance Committee

Current Committee MembersDynamics & Issues

Republicans (14)• Chairman:

Orrin Hatch (R-UT)• Chuck Grassley (R-IA)*• Mike Crapo (R-ID)*• Pat Roberts (R-KS) • Mike Enzi (R-WY) • John Cornyn (R-TX) • John Thune (R-SD)*• Richard Burr (R-NC)*• Johnny Isakson (R-GA)*• Rob Portman (R-OH)*• Pat Toomey (R-PA)*• Dan Coats (R-IN)• Dean Heller (R-NV)• Tim Scott (R-SC)*

Democrats (12)• Ranking Member:

Ron Wyden (R-OR)*• Chuck Schumer (D-NY)*• Debbie Stabenow (R-MI)• Maria Cantwell (D-WA)• Bill Nelson (D-FL)• Bob Menendez (D-NJ)• Tom Carper (D-DE)• Ben Cardin (D-MD)• Sherrod Brown (D-OH)• Michael Bennet (D-CO)*• Bob Casey (D-PA)• Mark Warner (D-VA)

Dynamics: Orrin Hatch (R-UT) is chairman and Ron Wyden (D-OR) assumed ranking member role. Working Groups formed in 2015 to propose recommendations (e.g. 2013 W&M groups)

Tax Reform and Inversions

• Continue to address tax inversions, however, comprehensive reform remains unlikely in the short term due to brevity of calendar

• Dividends Received Deduction – Integration proposal

Highway Trust Fund• No plans to address funding shortfall

IRS Oversight

• advancing proposals to protect taxpayers from fraud and identity theft

Obamacare

• CMS “Part B Drug Payment Model”

Trade & Trans-Pacific Partnership

• Under TPA, the Administration must submit a description of changes in law need to implement TPP to Congress

One Retiring after 2015 * 11 Running for re-election in 2016


Senate Finance Tax Reform EffortFebruary - Bloomberg BNA Tax Policy Event, Chairman Hatch spoke about the current state of the tax reform effort and outlined some of his own ideas for reform in the near future.

April - convened a hearing on ways Congress can reform the business tax code to make it more globally competitive and to consider the findings of the Committee's bipartisan business income tax working group.

Finance created five tax working groups in January 2015• Analyze current tax law and examine policy trade-offs and available reform options • Similar to the approach of the House Ways & Means Committee took in 2013• AGC focused lobbying on members of the working groups:• Individual Income Tax - Business Income Tax - Community Development & Infrastructure

May - Committee convened a hearing to examine corporate integration, and specifically, how allowing corporations to deduct dividends could create a more efficient and fairer system of taxation

June - Hatch plans to release a discussion draft on a dividends received deduction plan, there remain various issues (e.g., the proposal’s potential impact on retirement plans and tax exempts, etc.) that still need to be resolved.


Senate Flips or WH remains Dem – At 82, likely to announce retirement next year

Next in line, Sen. Charles Grassley (IA) previously was a chair and currently chairman of the Judiciary Committee

Heir apparent is Sen. Mike Crapo (ID)


Cha i r m a n Ha tc h

Politically Endangered – more GOP seats held in 2016 that Obama won - Ayotte (NH), Portman (OH) Johnson (WI), Kirk (IL), Toomey (PA), Burr (NC)

Hatch, 82, likely to announce retirement next year


Senate Flips – regains gavel lost in 2015

Has a moderate record with AGC and businesses groups

Next in line, Sen. Charles Schumer will be Democratic Leader in next Congress (an Ex officio member and thus a vacancy will be filled on the committee)

R a nk ing M em ber Wyden

• Presidential Candidates• Clinton & Trump will set tone for down ticket

• Speaker of the House• GOP policy standard bearer working on a bold, pro-growth agenda

• “House Pests”• 25 – 41 House Republicans seeking to push policy riders in spending bills

• President Obama• 60 days between November 21 & Inauguration Day for “midnight regulations”• Mazur: IRS does not intend to put out any “significant” regulations past Labor Day

• Committee Chairs• Bottom-up process a double edge sword – more input and more expectations

• Politically Endangered • Senate GOP seats held in 2016 that Obama won

• Kirk (IL), Johnson (WI), Ayotte (NH), Toomey (PA), Portman (OH)


Who's In The Driver’s Seat?


Democrats Positioned to Gain Senate Seats

OH

WVVA

PA

NY

ME

NC

SC

GA

TN

KY

IN

MI

WI

MN

IL

LATX

OK

ID

NV

OR

WA

CA

AZ

NM

CO

WY

MT ND

SD

IA

UT

FL

AR

MO

MS AL

NE

KS

AK

HI

DE

RI

VT

NHMA

CTNJ

MD

DC

Dynamics of the 2016 Senate Race

• In 2016, Senate Democrats are defending 10 seats, compared to 24 for Republicans

• According to Charlie Cook, there are 7 Republican Senate seats and only 2 Democratic Seats in danger: Mark Kirk (R-IL), Ron Johnson (R-WI), Rob Portman (R-OH), Pat Toomey (R-PA), Kelly Ayotte (R-NH), Marco Rubio (R-FL), Richard Burr (R-NC), Michael Bennet (D-CO), and Harry Reid (D-NV)

• Democrats would need to net 4 or 5 seats in 2016 to retake the Senate. would increase to 5 if GOP president elected.

• During Presidential years, the demographic of the voting population heavily favor Democrats

• The opposite is true during mid-term elections, when Republicans tend to be favored & 2018 fares better for GOP Senate Races

■ Solid Democrat ■ Likely Democrat ■ Lean Democrat ■ Toss Up ■ Lean Republican ■ Likely Republican ■ Solid Republican ■ No Senate Race

Top Races to Watch in 2016


21

Republican running for reelection

Republican retiring from Senate

Democrat running for reelection

Democrat retiring from Senate

OH

WI

ILNV

CO

FL

NH

AKHI

PA

FL OPEN: Primaries on both sides are flaring up! Reps. DeSantis, Jolly, & Lt Gov Carlos López-Cantera

Dems have Reps. Patrick Murphy & Alan Grayson… Late Aug 30 Primary PURE TOSS UP

PA: Sen. Pat Toomey (R) is likely too conservative for PA in a presidential year, but has worked to moderate his record, Dem party got a boost when Fmr Gov. chief of staff Katie McGinty(D) beat Fmr Rep. Joe Sestak (D), in April Primary who lost to Toomey in 2010. LEAN DEM

OH: Sen. Rob Portman (R) is in a pure toss up race with Fmr. Gov. Ted Strickland (D).TILT GOP

NV Open: June 14 Primary for popular Rep. Joe Heck (R) and Fmr. Nev. AG Catherine Cortez Masto will go head-to-head. PURE TOSS UP

WI: Sen. Ron Johnson (R) is a relatively unknown quantity in his home state, and may be too conservative for a presidential-year electorate; Dems are hoping that Fmr Sen. Russ Feingold (D) has a strong showing. LEAN DEM

NH: Sen. Kelly Ayotte (R) is well-liked, but running in a blue state in a presidential year; Democrats recruited popular Gov. Maggie Hassan (D). TILT GOP

IL: Sen. Mark Kirk (R) won a close in 2010 and recently voted against defunding Planned Parenthood and in favor of gun-sale restriction. He faces formidable Rep. Tammy Duckworth. TILT DEM

FL OPEN: McConnell publicly urged Marco Rubio to run for re-election –filing deadline is June 24

CO: Sen. Michael Bennet (D) vs CO Rep. Jon Keyserinitially failed to collect enough signatures – a dist. Court judge ruled and now must clear a GOP primary on June 28 versus businessmen Jack Graham & Robert Blaha. LIKELY DEM

AZ: Sen. John McCain (R) is running for re-election, he may face headwinds with Trump at top of ticket; Democrats have Rep. Ann Kirkpatrick. LEAN GOP

AZ

SAFELIKELYLEANTILT

TOSS UP

MO

NC

Senate Democrats Face More Elections In 2018

OH

WVVA

PA

NY

ME

NC

SC

GA

TN

KY

IN

MI

WI

MN

IL

LATX

OK

ID

NV

OR

WA

CA

AZ

NM

CO

WY

MT ND

SD

IA

UT

FL

AR

MO

MS AL

NE

KS

AK

HI

DE

RI

VT

NHMA

CTNJ

MD

DC

■ Democrat Incumbent ■ Independent Incumbent ■ Republican Incumbent

Analysis• Democrats have 23 seats up with 10 competitive races (FL, IN, MO, NM, ND, OH, PA, VA, WV, WI)• Republicans expected to have 8 seats up in fairly safe territory


Republicans Have More at Stake in 2016, But Aren’t Expected to See Big Losses in the House


Republican-Held Seats (44)Democrat-Held Seats (13)

0

111

14

15

3 1

6 3

3

Cook Rating for 2016 Election

Democrats would need to hold all Democratic-leaning seats and win 30 toss up andRepublican-leaning seats to win a majority.

44 GOP House Seats Could See a Party Change


Young (AK-AL)Bost (IL-12)Davis (IL-13)Trott (MI-11)Zinke (MT-AL)

MacArthur (NJ-03)Stefanik (NY-21)Costello (PA-06)Meehan (PA-07)Reichert (WA-08)

OPEN SEAT (FL-02) Graham R+18"Panhandle Paradox"

OPEN SEAT (VA-05) Hurt R+5

CA-25 Rep. Steve Knight R+3CO-06 Rep. Mike Coffman D+1FL-26 Rep. Carlos Curbelo EVEN

IL-10 Rep. Robert Dold D+8IA-03 Rep. David Young EVEN

ME-02 Rep. Bruce Poliquin D+2NH-01 Rep. Frank Guinta* R+1

NY-24 Rep. John Katko D+5PA-08 OPEN (Fitzpatrick) R+1

TX-23 Rep. Will Hurd R+3MN-02 OPEN (Kline) R+2NV-03 OPEN (Heck) EVENNY-19 OPEN (Gibson) D+1NY-22 OPEN (Hanna) R+3WI-08 OPEN (Ribble) R+2

McSally (AZ-02)Denham (CA-10)

Valadao (CA-21) D+2Knight (CA-25) Tipton (CO-03)

Mica (FL-07)Walberg (MI-07)Paulsen (MN-03)Garrett (NJ-05)Zeldin (NY-01) Reed (NY-23)

Love (UT-04) R+16 MormonsComstock (VA-10)

OPEN SEAT (MI-01) Benishek

Bold denotes opposing party’s seat

13 Democratic House Seats Could See a Party Change


Sinema (AZ-09)Peters (CA-52)

Delaney (MD-06)Peterson (MN-07)Maloney (NY-18)

OPEN SEAT (CA-24) Capps D+4OPEN SEAT (FL-10) Websters D+9

OPEN SEAT (FL-13) Jolly vs Christ D+3OPEN SEAT (VA-04) Forbes D+8

OPEN SEAT (AZ-01) Kirkpatrick R+4OPEN SEAT (FL-18) Murphy R+3OPEN SEAT (NY-03) Israel EVEN

Bera (CA-07)Nolan (MN-08)Ashford (NE-02)Hardy (NV-04)

Bold denotes opposing party’s seat

2016 Presidential Field


2016 GOP Presidential FieldMarch 23, 2015A total of 17 major candidates entered the race starting, Senator Ted Cruz of Texas was the first to formally announce Largest presidential primary field for any political party in American history

June 16, 2015Trump announces and surged into first place in all major national polls by mid-July

February 2016Prior to the Iowa caucuses Perry, Walker, Jindal, Graham and Pataki withdrew due to low polling numbersTrump came in second to Cruz, after which Huckabee, Paul and Santorum withdrew

Sizable victory for Trump in the New Hampshire primary, Christie, Fiorina and Gilmore abandoned the raceBush withdrew after scoring fourth place to Trump, Rubio and Cruz in South Carolina

March 1,“Super Tuesday”Rubio won his first contest in Minnesota, Cruz won Alaska, Oklahoma and his home state of Texas, while Trump won seven states. Failing to gain traction, Carson suspended

March 3Romney criticized Trump in a heavily publicized speech. Later that day, there was another GOP debate, which again featured Trump, Cruz, Rubio and Kasich


2016 GOP Presidential FieldMarch 15 "Super Tuesday II“Kasich won his first contest in Ohio and Trump won five primaries including FloridaRubio suspended his campaign after losing home state

March 15 to May 3 Three candidates remained in the race: Trump, Cruz and KasichCruz won most delegates in Western contests (UT, CO, WY) and in Wisconsin, keeping a credible path to deny Trump the nomination on a first ballot with 1,237 delegates

Stop Trump movement adopted drastic strategies to derail nomination, including all-out opposition in WisconsinCruz began picking up endorsements of establishment figures Romney, Bush, Walker Republicans pressured Romney or Paul Ryan to enter the race, Ryan announced on April 13 he would not accept

April 26 “Acela primary”Trump scored landslide victories in New York and five North-Eastern states

April 27Cruz named Fiorina as his running mate (Fiorina served as a surrogate since endorsing him in March Cruz hoped that Fiorina could help his campaign in Indiana

April 29Indiana Governor Mike Pence announced that he would vote for Cruz (with a lukewarm endorsement on talk radio)


Boom Goes the Dynamite


Delegates

57

Votes

53.3%587K

036.7%404K

07.5%82K

May 3 Primary

RNC chairman Reince Priebus tweeted in the evening

Cruz withdrew that eveningKasich dropped out next day

23 days later secured 1,239 delegates for the nomination

June 2 Speaker Ryan endorsed in Janesville Gazette op-ed

2016 Democratic Presidential FieldApril 12, 2015A total of six major candidates entered the race starting with Hillary Clinton

Speculation abounded that Vice President Joe Biden would also enter the raceA draft movement was started to encourage Massachusetts Senator Elizabeth Warren

October 21, 2015Biden announced in the Rose Garden his decision not to enter the race

February 1, 2016 Clinton defeated Sanders in the Iowa Caucus by the closest margin in the history of the contest: 49.8% to 49.6%

Clinton the first woman to win the Caucus (2008 she finished in third place behind Obama and John Edwards)

O'Malley suspended his campaign after a distant third-place finish, leaving Clinton and Sanders the only two candidates.Webb citing frustration with Democratic Party leadership and Chafee both withdrew after consistently polling below 2%

February 9, 20 & 27 Sanders won the New Hampshire primary while Clinton scored victories in the Nevada caucuses and South Carolina primary

March 1: Super Tuesday or “SEC Primaries” (10 states, including six in the Southern United States)Clinton secured victories in all of the southern contests except Oklahoma. Her biggest victory of the day came in Alabama

Clinton was also able to narrowly defeat Sanders in Massachusetts


2016 Democratic Presidential FieldMarch 5Sanders won caucuses in Kansas, Maine and Nebraska by significant margins. Clinton answered with a large win in Louisiana

March 8 Clinton won Mississippi as expected by a landslide, but Sanders stunned by scoring a narrow win in Michigan

March 15: Super TuesdayClinton swept all 5 primaries in Missouri, Ohio, Illinois, North Carolina and Florida

March 22: “Western Tuesday”Clinton won Arizona, and Bernie won by nearly 80% in Idaho and Utah

March 26 Sanders was able to close the delegate deficit with wins in Alaska, Hawaii and Washington

April 19Clinton won New York by 16 points. Sanders performed Upstate with younger voters, Clinton performed well in NYC boroughs

April 26: “Acela Primary”Clinton won in of Delaware, Maryland, Pennsylvania and Connecticut while Sanders won the Rhode Island primary.

May 3Sanders pulled off a surprise victory in the Indiana primary by a five-point margin despite trailing in all the state's polls


Extinguishing the Heart #Bern with 2,383 delegates


June 6 at 8:20 p.m.

AP declares Clinton winner of Democratic primary with 1,812 pledged delegates and 571 super delegates

Delegates

2,755

1,852

June 7

Clinton declares victory after decisive victories in the California, New Jersey and New Mexico

Trumps Trial Balloon with Tar Heels for Down Ticket Races


Delegates

23.6%

Votes

7,527

53.4% 16,999

NC-2: This was a closely watched race featuring two republican members of the delegation, Reps. Renee Ellmers and George Holding.

Ellmers became the first GOP incumbent to lose a congressional primary.

Trump made his first congressional endorsement urging voters to back Rep. Ellmers in a robocall – he "need[s] her help in Washington so we can work together to defeat ISIS, secure our border and bring back jobs and, frankly, so many other things.“

Ellmers was one of Palin’s original “Mama Grizzlies”

Club for Growth Action, American Conservative Union, Susan B. Anthony List, Americans for Prosperity (aka Koch brothers) once Ellmers allies spent nearly $1.2 million.

And the Candidates Are…


Modern History Predicts a Trump Presidency


If history is any indication, voters are likely to side with a Republican after eight years under a Democrat

The Democrats have failed in 4 of their last 5 attempts to win 3 consecutive terms in office after taking two elections with the same candidate

The more immediate trend is that in 7 of the last 9 elections, voters decided to switch the party controlling the White House when a candidate (or his successor) had won two prior elections

The failed Democratic candidates include James Cox (1920), Adlai Stevenson (1952), Hubert Humphrey (1968) and Al Gore (2000)

Republican candidates who lost in similar circumstances were Richard Nixon (1960), Gerald Ford (1976), and John McCain (2008)

GOP candidates who were able to win a vital third election in a row for their party were Ulysses S. Grant (1868), Rutherford B. Hayes (1876), Theodore Roosevelt (1904), and George H.W. Bush (1988)

Economic Indicators Pick Hillary


The Moody's model that has correctly predicted each presidential election since 1980 by looking at voting trends and the direction of key economic indicators at the state level (unemployment, gas prices, wages and more).

In May of 2012 the model showed President Obama would win re-election with at least 26 states and 303 electoral votes. He won 26 states and 332 electoral votes.

This year, the model points to a relatively easy win for Hillary Clinton over Donald Trump, according to CNN/Money on the model's latest findings.

Gas prices are low, unemployment is low, Obama's popularity is back above 50 percent and economic indicators favor a Democrat in nearly all the major swing states from Florida to Ohio.

2016 Like Predicting An Earthquake


American University History Prof. Allan Lichtman has predicted the outcome of every presidential election since 1984. He's still trying to figure out 2016…

Theory is not based solely on Candidates, Issues, Debates, Ads

Performance of Party Holding the White House = 13 Key Factors that 6 need be False to lose WH

No Social UnrestScandalForeign/ Military FailureForeign/Military SuccessIncumbent CharismaChallenger No Charisma

Party MandateIncumbency ContestIncumbencyNo Third PartyShort-term EconomyLong-term EconomyPolicy Change (2nd Term)

2020 Presidential Field


Roll Call's Stuart Rothenberg: Ryan understands is that his priority as the Speaker is to defend the Republican House majority, and a Trump campaign which actively undermines that majority is not something he can tolerate.

If Republicans lose big in November, Ryan becomes de facto leader of the party and its top White House contender in four years.

Republicans failing once again to win the White House and also losing their Senate majority, Ryan would almost certainly become his party's de facto leader - and that would offer him both opportunities and challenges after the election.

Ryan will be a more mature (and presidential) 50 years old at that point, a Wisconsin conservative who is currently regarded by conservatives as fair and trustworthy.

Ryan would be the perfect challenger to Clinton, then 73 years old, a veteran of the political wars for close to 30 years.

Trump’s Potential Vice Presidential Nominees

Chris ChristieGovernor from New Jersey• Christie endorsed Trump, and is a powerful attacker

on the campaign trail, and has a close relationship with Trump.

• Christie, like Trump, is highly controversial and outspoken. He may not help him make inroads in any key demographics.

Bob CorkerSenator From Tennessee• Corker recently met with Trump in NYC following a

major foreign policy speech in April.• Successful businessman known as a policy deal-

cutter in the Senate• Corker has policy expertise as Senate Foreign

Relations Chairman

John KasichGovernor of Ohio• Kasich has strong appeal as a running mate because

he would appeal to moderates and in the swing state of Ohio.

• Kasich’s spokesman has said that Kasich would never consider being Trump’s running mate, but if Kasich campaign ends, he may be tempted by a spot in the White House.

Mary FallinGovernor from Oklahoma• Fallin would help with female voters and has long

experience in government, with a focus on national security.

• When a reporter suggested Ms. Fallin as a running mate, Mr. Trump tweeted that it was “great” advice. Allies say Fallin is open to being vetted.

Rob PortmanSenator From Ohio• Portman has Capitol Hill experience that would be

useful to Trump and comes from a swing state. He is a perennial favorite on vice-presidential short lists, and would be a mild-mannered balance to Trump.

• When asked about the possibility, Portman laughed and said “I’m focused on my own race.”

Jeff SessionsSenator From Alabama• Sessions, who sometimes appears as an opening act

to Trump on the campaign trail, was the first sitting Senator to endorse Trump and is an advisor on the campaign.

• Sessions has policy expertise, sitting on several key Senate committees, and has said he would undergo the vetting process if asked.


Rick ScottGovernor of Florida• Trump praised Scott, who is from Florida,

perhaps the most important swing state, as a possible contender.

• However, Scott is one of the least popular sitting governors (48% unfavorable to 38% favorable.)

Joe ScarboroughMSNBC CommentatorFormer Representative from Florida• Scarborough is an expert in Washington

dynamics while also having an image as an outsider. Running on Trump’s ticket could help raise his media profile. Trump tends to make political choices that create a media buzz, and picking Scarborough would do just that.

• Scarborough said that he has called Trump to offer debate tips; the two are friendly.

Nikki HaleyGovernor of South Carolina• As a minority female and rising star in the GOP,

Nikki Haley would likely be on any other nominee’s short list.

• However, Haley and Trump have spoken ill of each other in the media, so they would have to reconcile.

John BoehnerFormer Speaker of the House• Boehner has the Capitol Hill expertise Trump

needs and comes from a swing state.• Boehner is vehemently anti-Cruz, and has called

Trump a texting and golf buddy.• Cruz has accused Boehner of gunning for a VP

spot, but Boehner seemed to be through with Washington when he retired as Speaker.

Trump has said he is looking for a running mate who has “a strong political background, who was well respected on the Hill, who can help me with legislation, and who could be a great president.”

Trump’s Potential Vice Presidential Nominees


Clinton’s Potential Vice Presidential Nominees

Sherrod BrownSenator From Ohio• Pros: Could help Clinton win Ohio in the general

election, a key swing state. He also has strong populist appeal which might appease Sanders supporters and drum up liberal enthusiasm

• Cons: If becomes Vice President, a GOP governor would fill his Senate seat, badly hurting the Democrats chances of capturing the Senate.

Julián CastroFederal Housing SecretaryFormer Mayor of San Anotnio• Pros: Offers a strong geographic, demographic and

generational counterbalance to Clinton, and has the benefit of being a fresh face in the party.

• Cons: Young and has relatively little experience with a low national profile.

Mark WarnerSenator from Virginia• Pros: Comes from a swing state and he is well liked

by progressives.• Cons: As the wealthiest member of the Senate, he

could be painted as out of touch.

Tim KaineSenator From VirginiaPros: Kaine is from a swing state and speaks fluent Spanish. Kaine, who sits on the Foreign Relations and Armed Services, most qualified to assume the Presidency if necessary. Choosing Kaine for VP would not lose a Senate seat for Democrats.Cons: Kaine is not a natural demographic counterbalance to Clinton. He may not inspire the enthusiasm from young and minority voters that other candidates would.

Cory BookerSenator From New Jersey• Pros: Booker is a rising star in the party who has

actively campaigned on Clinton’s behalf. He is young, an inspiring campaigner and would add diversity to the ticket.

• Cons: Booker is inexperienced, assuming office in 2013, and he doesn’t come from a swing state. Gov. Chris Christie could appoint a successor.

Amy KlobucharSenator From Minnesota• Pros: An all-female ticket could make a powerful

statement and supercharge the women’s vote. Tapping her would not mean losing a Senate seat.

• Cons: Kobluchar comes from a State Democrats are likely to win anyway and she lacks name recognition.



In American political jargon, an October surprise is a news event deliberately created or timed (or sometimes occurring spontaneously) to influence the outcome of an election, particularly one for the U.S. presidency.

The Polls Prior to Conventions


Poll Date Sample MoE Clinton Trump Spread

RCP Average 5/13 - 6/8 -- -- 44.1 40.3 Clinton +3.8

FOX News 6/5 - 6/8 1004 RV 3.0 42 39 Clinton +3

Rasmussen Reports 6/6 - 6/7 1000 LV 3.0 42 38 Clinton +4

Reuters/Ipsos 6/4 - 6/8 1440 RV 2.9 42 34 Clinton +8

IBD/TIPP 5/31 - 6/5 850 RV 3.3 45 40 Clinton +5

Quinnipiac 5/24 - 5/30 1561 RV 2.5 45 41 Clinton +4

ABC News/WaPo 5/16 - 5/19 829 RV 3.5 44 46 Drumpf +2

NBC News/WSJ 5/15 - 5/19 1000 RV 3.1 46 43 Clinton +3

CBS News/NY Times 5/13 - 5/17 1109 RV 3.0 47 41 Clinton +6

The Polls Prior to Conventions


Battlegrounds Clinton Drumpf RCP Average

Pennsylvania 46.3 42.3 Clinton +4.0

Florida 44.2 42.6 Clinton +1.6

Ohio 42.7 41.3 Clinton +1.4

Virginia 42.3 38.0 Clinton +4.3

North Carolina 42.8 43.8 Drumpf +1.0

Georgia 40.8 45.0 Drumpf +4.2

New Hampshire 43.0 36.5 Clinton +6.5

http://www.realclearpolitics.com/epolls/2016/president/pa/pennsylvania_trump_vs_clinton-5633.html




http://www.realclearpolitics.com/epolls/2016/president/fl/florida_trump_vs_clinton-5635.html




http://www.realclearpolitics.com/epolls/2016/president/oh/ohio_trump_vs_clinton-5634.html




http://www.realclearpolitics.com/epolls/2016/president/va/virginia_trump_vs_clinton-5542.html




http://www.realclearpolitics.com/epolls/2016/president/nc/north_carolina_trump_vs_clinton-5538.html




http://www.realclearpolitics.com/epolls/2016/president/ga/georgia_trump_vs_clinton-5741.html




http://www.realclearpolitics.com/epolls/2016/president/nh/new_hampshire_trump_vs_clinton-5596.html





Timeline of Key Recent Federal Actions on Tax Reform

2012

American Taxpayer Relief Act of 2012

A law which made a series of Bush administration tax cuts permanent, but increased tax rates on dividends, estate taxes, and payroll taxes; the bill also extended certain corporate tax breaks and certain tax breaks for lower-income families.

February 2014

Tax Reform Act of 2014

A comprehensive draft proposal for tax reform which was released by then-House Ways and Means Committee Chair, Rep. Dave Camp (R-MI); the bill would have lowered corporate and individual tax rates and simplified the tax code, but faced wide opposition and was only ceremonially put to the floor at the end of December of 2014.

September 2014

Treasury Actions on Inversion

Secretary Jack Lew put forward a series of measures designed to reduce benefits of tax inversions, including blocking inverted companies from transferring assets to parent companies and accessing foreign earnings.

January 2015

Senate Finance Committee Tax Working Groups

The Finance committee created a series of ‘working groups’ on different issue areas to create proposals for tax reform in the 114th

Congress.

Summer 2015

Tax Committee Action

The Finance Working Groups missed a May deadline and have until the end of June to come up with reform recommendations.

W&M working on a HTF package.

International tax provisions are epicenter of debate to keep domestic competitiveness.


Fall 2015

House Leadership Changes

Kevin Brady (R-TX) selected to serve as chairman of W&M

March 2016

Committee Action on HTF

W&M Chairman Brady chairs Task Force on Tax Reform “Idea Forum”

.

April 2016

W&M Holds Tax Hearings

Chairman Boustany holds multiple hearings for rank-and-file members to offer plans to alter tax code

May 2016

Congressional Action

House Speaker communicates tax plank for conservatives.

House & Senate chairs release white papers and messaging bills.

Summer 2016

Treasury Actions Announced

Releases updated business tax reform framework & more regulations to limit the number of corporate tax inversions (Sec. 385)Protecting Americans from Tax Hikes

Congress passes Omnibus Appropriations & Tax Extenders

2016 Congressional Calendar

■ House in session ■ Senate in session ■ Both chambers in session

June: GOP “Confident America” Plan ReleasedJuly 15: Current short term FAA extension expiresJuly 15- Sept. 6: Conventions & Congressional Recess

Oct. 1: FY17 begins (deadline for appropriations)Oct. 7: Congress enters recess prior to elections

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October November December

Nov 8: Election DayNov. 14: Congress Returns from 4 Week RecessNovember: Congress likely vote on TPP trade agreement

Dec 16: Congress ends 2016 session


House

46Days Left in Session

Senate

62Days Left in Session

14Weeks Left in Session

2016 Calendar

■ House in session ■ Senate in session ■ Both chambers in session

July 18-21: GOP Convention (Cleveland)July 25-28: Dem Convention (Philadelphia)

Sept. 26: First Presidential Debate

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October November December

Oct. 4: Vice Presidential DebateOct. 9: Second Presidential DebateOct. 19: Third Presidential Debate

Nov. 8: Election day



Areas of Focus• Comprehensive Tax Reform – promote tax rate parity for all business types, international tax

reforms most plausible actions in 2016. Meanwhile, published discussion drafts on corporate rate integration and cost recovery/depreciation are “blueprints” for starting debate in 2017

• Conventional thinking remains that comprehensive reform will follow the 2016 elections – and at a minimum, committee reports will serve as place markers as the tax reform debate continues in the next Congress with a new Administration – AGC will defend against adverse policy changes in the tax code for next 18 legislative weeks

• Vehicles for tax policy riders - there are discussions of attaching a tax title to the Puerto Rico debt relief bill. No discussion on a revenue title to the bill addressing the water crisis in Flint, MI.

• Tax Extenders – retroactively renewing expired provisions, while abhorred, is the new normal for extending expired provisions – one (1) AGC tax priority expires in 2016 & four (4) in 2019

• AGC Legislative Priorities:

– Extend the energy efficient commercial buildings deduction under Section 179D (Expires this year)

– Promote Private Activity Bonds for Social Infrastructure (new $5b allocation for public buildings)

– Reintroduction of American Job Builders Tax Reform Act (increase gross receipts threshold for determining whether a small contractor may adopt an accounting method for reporting income from a construction contract other than the percentage of completion method)


Areas of Focus• Comprehensive Tax Reform – promote tax rate parity for all business types, international

tax reforms most plausible actions in 2016. Meanwhile, published discussion drafts on corporate rate integration and cost recovery/depreciation are “blueprints” for starting debate in 2017

• Conventional thinking remains that comprehensive reform will follow the 2016 elections – and at a minimum, committee reports will serve as place markers as the tax reform debate continues in the next Congress with a new Administration – AGC will defend against adverse policy changes in the tax code for next 14 legislative weeks

• Vehicles for tax policy riders - discussions of attaching a tax title to the FAA Reauth bill

• AGC Legislative Priorities:

– Extend the energy efficient commercial buildings deduction under Section 179D (Expires this year)

– Promote Private Activity Bonds for Social Infrastructure (new $5b allocation for public buildings)

– Reintroduction of American Job Builders Tax Reform Act (increase gross receipts threshold for determining whether a small contractor may adopt an accounting method for reporting income from a construction contract other than the percentage of completion method)


2015 Tax ExtendersAt the end of 2015, the Protecting Americans from Tax Hikes (PATH) Act was signed in to law; the$622 billion tax extenders package addressed all of AGC’s expired tax priorities.

Specifically the tax extender package included the following AGC priorities:

• PERMANENT Extensions of the Following Policies:

1. Research and Development (R&D) tax credit

2. Section 179 expensing: the small business expensing limitation and phase-out amounts ($500,000 and $2 million)

3. 15-year recovery for leasehold and restaurant improvements

4. Charitable contributions of S corporations

5. 5-year recognition period for S corporation built-in-gains

• FIVE-YEAR Extensions of the Following Policies:

1. Bonus depreciation (50% for 2015-17, 40% in 2018, 30% in 2019)

2. New Markets Tax Credit

3. Work Opportunity Tax Credit

4. Production Tax Credit for Renewables (Extension & Phase-out)

Following Policy Expires at end of 2016: Energy efficient commercial buildings deduction with updated ASHRAE standards (Section 179D)


Presidential Tax Plans

one of the worst ideas in recent history. – Trump on 1986 tax reform in a WSJ op-ed






Repeal ACA taxesUnspecified for Consumption Taxes

Trump’s Tax Math


Trump's tax plan, released in September 2015, would lower the top individual tax rate from 39.6 percent to 25 percent and the corporate tax rate from 35 percent to 15 percent. It has been estimated to cost about $10 trillion over 10 years.

Trump economic adviser Sam Clovis suggested the plan could generate a government surplus of as much as $7 trillion over 10 years.

Clovis complained that the Tax Foundation did not use "dynamic scoring" which takes into account the potential growth effects of tax reductions.

When scoring on a static basis, the group said Trump's plan would cost $12 trillion. There is simply no way to get to Clovis' estimate without massive tax hikes.

In April, Trump reportedly asked Heritage Foundation’s Stephen Moore and CNBC’s Larry Kudlow to trim the cost of his plan - raise the top individual tax rate in his plan to 28 percent and cut the number of people who would pay no income taxes. Their suggestions also included full expensing.

The Trump Treasury


Only candidate regularly mentioned by Trump is activist investor Carl Icahn (80)

Icahn has repeatedly said he doesn't want the job

Blackstone Group Chief Executive Stephen Schwarzman

KKR co-founder and co-CEO Henry Kravis

Senator Bob Corker (R-TN)

Glenn Hubbard - dean of the Columbia University Graduate School of Business

Obama Treasury RegulationsSection 385

Treasury Not Yet Convinced by FeedbackMark Mazur, recently indicated that Treasury has not yet received any feedback that would dissuade it from finalizing the Section 385 debt-equity regulations as quickly as originally planned.

Several business groups have written letters to both Treasury and Congress, requesting that Treasury: 1. Extend the comment period end date from July 7, 2016, to at least October 5, 20162. Delay its timetable for finalizing the regulations3. Reconsider setting April 4, 2016, as the effective date

Treasury Deputy Assistant Secretary Bob Stack has promised that Treasury “will have an intense comment period, [and] be listening to taxpayers.”

It is now up to taxpayers to offer their input expeditiously if they are to be heard before the regulations are finalized.


Obama Treasury Regulations


Section 199Treasury updated AICPA Tax Methods and Resource Panel.

Did not comment on the Government’s direction on the proposed change to the definition of substantial renovation, although, they mentioned with regard to the aspects in the 199 regulations other than the benefits and burdens change, they didn’t expect significant changes.

Government is open to striking “by the taxpayer”, and potentially adding a rule of reasonability to the proposed definition but potentially no other changes. Meaning, the Government may proceed to finalize the definition generally with conformity to the TPR but with the prior additions.

RECOMMENDATIONS1) Strike the proposed change in definition– Add to 16-17 Priority Guidance Plan and work with industry to obtain an appropriate and administrable result

2) If you finalize the proposed definition,– Strike reference to “by the taxpayer” – Add rule of reasonability

3) Add an elective safe harbor allowing taxpayers to determine whether they substantially renovate real property based on a dollar limit of costs paid or incurred (E.g., if actual project costs (direct and indirect) or customer billings or recognized revenue equal or exceed $ 5,000 for the project)

Congressional Tax Plans


Hatch (Corp Integration thru Dividends Received Deduction)• Allowing corporations to deduct the dividends they pay to shareholders: it equalizes the treatment of debt and

equity financed investment, it lowers the cost of capital, and moves towards treating all business forms equally. • Some capital income could escape taxation completely with a dividend deduction system. (no tax when tax-

exempt organization receive the dividend)• A dividend deduction doesn’t address the high entity level tax that will remain at 35 percent.

Wyden (Depreciation Schedules)Senator Ron Wyden’s (D-OR) proposal would replace the current MACRS and ADS system with the Accelerated Mass Asset Cost Recovery and Reinvestment System (A-MACRRS). A-MACRRS would reduce the depreciation schedules to six asset “pools.” Assets would be assigned to each pool based on their current MACRS property class assignment. Taxpayers would have to calculate depreciation, E&P, and AMT adjustments only once on a unified schedule.Businesses would transition to this new system by assigning the remaining adjusted basis for their capital assets to each pool.

Each pool’s balance would be increased or decreased if any assets were bought or sold that year. Each pool would then be multiplied by its corresponding declining balance percentage to determine that year’s depreciation deductions. These percentages are shown below. For firms that manage large bundles of assets, this pooling system provides a simpler alternative to using the current “mass asset accounts” for depreciation, which impose an additional tax on the disposition of assets.


Nunes - The American Business Competitiveness ActRepresentative Devin Nunes (R-CA) seeks to reform the federal government’s tax treatment of business income.

Major elements of his plan are:• Cutting the corporate income tax to 25 percent;• Limiting the top tax rate on non-corporate business income to 25 percent;• Allowing businesses to deduct investment costs when they occur (full expensing);• Eliminating most business tax credits and many deductions;• Moving to a territorial tax system like most developed nations;• No longer letting nonfinancial businesses deduct interest costs but no longer taxing them on interest receipts;• Applying the same tax-rate limitation to individuals’ interest income as now applies to their capital gains and dividend income;• Eliminating the individual and corporate alternative minimum taxes (AMTs).



Buchanan - Main Street Fairness Act

A rate parity bill would cap the top pass through business tax rate at the top corporate rate. Under the Rep. Vern Buchanan (R-FL) bill, the same 35 percent top rate that applies to corporate income would also apply to successful pass through businesses. If Congress reduces the corporate rate next year, pass through businesses would get the new lower rate too.

Groups weighing in on the Buchanan bill include the S-Corporation Association, National Association of Manufacturers, the National Retail Federation, and the Associated Builders and Contractors.

We would like to see the Buchanan bill expanded to apply to all active pass through income, and Congress still needs to repeal the 3.8 percent Affordable Care Act tax that applies to some S corporations and other businesses.



Rep. Jim Renacci (Ryan ’09 Plan)Replace the corporate income tax with an 8.5 percent business consumption tax (BCT). The Roadmap would repeal the corporate income tax and impose an 8.5 percent BCT, a value-added tax (VAT) calculated using the subtraction method, on all businesses (C corporations, S corporations, partnerships, and sole proprietors).

Businesses could immediately expense all investment and deduct the cost of employee health insurance. They could not deduct wages and other compensation.

Ryan was hardly the first person to come up with such a tax structure. Years ago, Rudy Penner (Urban Institute via KPMG, CBO, AEI) and others (fmr Sen. Jim DeMint).

Fred Thompson in the 2007-2008 primaries. Taxpayers would be given a choice: They could switch to a simplified income tax with almost no credits, deductions, or exclusions or keep today’s system with all its subsidies and complexity. Ryan convinced that taxpayers would flock to the new tax. It would have two rates—10 percent for income up to $100,000 and 25 percent on earnings above that level.


http://crfb.org/biography/rudolph-penner

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December 2014Then-W&M Committee Chairman Dave Camp (R-MI) formally introduced the Tax Reform Act of 2014 (H.R. 1)

Congressional Documents

Early July 2015Finance Committee published reports by five bipartisan working groups, created in January 2015 to examine broad areas of the tax code.

Late July 2015Reps. Boustany (R-LA) and Neal (D-MA) released a discussion draft of a special, lower tax rate for income derived from intellectual property. An updated version is expected to be included in broader international tax legislation.

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Congressional Documents

June 2016House GOP Taskforce Jobs and Economic Growth: Tax Reform and Reducing Regulatory Burdens.

2012 GOP Platform proposed to:• Extend the 2001 and 2003 tax relief packages—commonly

known as the Bush tax cuts• pending reform of the tax code, to keep tax rates from rising

on income, interest, dividends, and capital gains;• Reform the tax code by reducing marginal tax rates by 20

percent across-the-board in a revenue-neutral manner;• Eliminate the taxes on interest, dividends, and capital gains

altogether for lower and middle-income taxpayers;• End the Death Tax• Repeal the Alternative Minimum Tax• Call for a reduction of the corporate tax• Permanent research and development tax credit• Repeal of the corporate alternative minimum tax

AGC Responses

June 2016AGC will submit a letter to House Tax Reform Task Force next week

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May 2016AGC submitted a letter to W&M Committee regarding “blueprint” for tax reform in 2017

AGCs Coalition Responses

June 2016Letter submitted to House Tax Reform Task Force regarding need to lower the high effective tax rates on the construction industry

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January 2016Letter to Congressional Leadership in support of Master Limited Partnerships Parity

High Performance BuildingCongressional Caucus Coalition

April 2016Letter to Senate Leadership in support of extending the Sec. 179D Deduction for Energy Efficient Buildings

May 2016Letter to Finance Committee to retain current law regarding like-kind exchanges under Sec. 1031

AGC Tax Policy Principles

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• Economic growth should be the goal of tax reform

• Tax policy should not pick winners and losers

• Higher taxes should be supported if the money collected is dedicated to public works projects

• Clarity, simplicity and certainty should be the goals of tax reform

• Dollar thresholds should be indexed to avoid stealth tax increases

• A three year phase in of tax policy would be preferable to deal with long term contracts

• Lower rates are preferable to more deductions, and limits on deductions should be looked at if

they accompany rate cuts. Of the deductions, it was determined that accelerated depreciation

was an extremely important policy for the industry

• A gross receipts tax or value added tax would be bad for the construction industry


Repeal corporate and individual Alternative Minimum Tax – Repeal the Alternative Minimum Tax (AMT) for

C-corporations and S-corporations (pass-throughs) in order to provide capital needed for businesses to grow

and invest in their companies and projects.

Percentage-of-Completion Accounting – The threshold at which the Percentage-of-Completion method of

accounting is required should be increased to $40m indexed for inflation since inception and should be exempt

from AMT calculations.

Estate Taxes – Preserve “stepped-up basis” for assets to allow a fair market value transfer of appreciated

property. Meanwhile, the 2012 ATRA package included some estate tax relief provisions (40% rate & $5m

exemption indexed to inflation).

Eliminate Lookback Accounting –Section 460 requires construction contractors to file amended tax returns.

At the end of a project, the contractor must go back to each year’s tax statement and recalculate, replacing

estimates with actual figures, prior taxable income figures. In the end, the same tax is paid, but thousands of

dollars are spent on calculations. Even the IRS is encountering difficulty auditing lookback.

Halt Taxation of Income While In Dispute –Businesses reporting using the percentage-of-completion

accounting method for long-term contracts should be required to include in the contract amount only items for

which the “all events test” has been met. The construction industry is the only industry that has been singled out

with taxation prior to an economic transfer of value.

Employee Misclassification – Oppose unnecessary administrative burdens and recordkeeping requirements

for employers and clarify the definition to preserve legitimate Independent Contractor relationships.

Domestic Production Activities Deduction – Preserve Section 199 deduction for the construction industry.

Bonus Depreciation and Capital Expenditures Write-Off Levels – Expand and make permanent bonus

depreciation and enhanced capital expenditures write-offs to incentivize capital investments and new and used

equipment purchases (Section 179).

Shortened Cost Recovery Period for Leasehold Improvements – Make 15-year shortened cost recovery

permanent to provide an important incentive for capital improvements to these properties.

LEGISLATION PENDING INTRO

LEGISLATION PENDING INTRO


Section 1031 – Maintain current deferral of taxable income on like-kind exchanges of real property such as

heavy construction equipment and truck fleets.

Per Diem Allowances – Allow the full deductibility of Per Diem Allowances in the construction industry.

Tax Rate Overhaul – Retain permanent marginal, capital gains, and dividends rate reductions.

5-year built-in gain recognition period – Support the reduction in S-corporation recognition period for built-

in gains (BIG) tax. The Tax Increase Prevention Act of 2014 retroactively extended through 2014 the temporary

five-year recognition period for built-in gains. The BIG recognition period reverts to 10 years in 2015.

Tax Exempt Financing –Preserve the preferable tax treatment of debt used to finance public infrastructure.

Infrastructure Financing – Extend and expand opportunities for construction companies to harness the

leverage of unique financing options. Create an additional type of exempt facility Private Activity Bonds (PAB)

for public building construction and water projects that allows private investment to be combined with tax-

exempt financing in a design-build-finance-maintain delivery model

Commercial Building Energy Efficiency Tax Deduction – Increase deduction and convert it into a tax credit to

provide a significant financial incentive for all property owners to improve the energy efficiency of commercial

buildings and ensure that 179D does not get charged to the contractor doing the work

Net Operating Loss Carryback – Create permanent policy for NOL Carryback allowing a 5-year carryback and

15-year carryforward for all businesses to allow cash-strapped firms to convert future tax benefits into cash.

Work Opportunity Tax Credit (WOTC) – Extend and expand provisions that aide employers in hiring veterans.

Research & Development Tax Credit (R&D) – Extend the credit for construction companies that have an

increasing responsibility to innovate products and processes in order to secure successful bids on projects.

PERMANENT

LEGISLATION INTRODUCED


New Markets Tax Credit – Extend the NMTC program under Section 45D which was established in 2000 to spur

new or increased investments into operating businesses and real estate projects located in low-income

communities. Many of the projects funded through the program involve major, mixed-use urban redevelopment.

Carried Interest – Reject efforts to increase tax that would undercut the economic incentive to build projects

and drive away investments from the commercial real estate sector. Most efforts identified have cast a broad net

and will likely have a significant impact on equity transfer in closely held construction companies.

Alternative Energy – Extend alternative energy tax production tax credits (e.g. Wind PTC).

Retirement Security/Pensions – Reform the Social Security system; preserve available tax preferred

retirement savings vehicles; and provide alternative savings vehicles to ensure stable retirement for all

generations of workers. Reform MPRA to include Composite Plans Designs for MEPs.

Charitable contributions of S-corps – extend rule providing that a shareholder’s basis is reduced by the

shareholder’s pro rata share of the adjusted basis of property contributed by the S-corp for charitable purposes.

EXPIRES 2019

PERMANENT


ARE YOU READY FOR TAX REFORM IN 2017?



Results of the 2016 Miller & Chevalier/National Foreign Trade Council Tax Policy Forecast Survey

AGC participated in the 10th Annual Tax Policy Forecast Survey, which measures the views of 120 tax executives on tax policy and details what changes they anticipate this election year.

• Expect a lot of talk about tax reform this year, but not much action.

• The presidential and congressional elections will likely generate substantive discussions about comprehensive tax reform, most executives don’t anticipate any drastic changes this year.

• The conventional wisdom among survey respondents is that Republican presidential candidates will engage in more favorable tax policy conversations than Democratic presidential candidates. Similarly, the vast majority of business tax executives say there’s a greater chance of tax reform if the GOP grabs control of both the House and the Senate over the next two years.

• Tax executives believe Congress will again extend several temporary tax provisions that were not made permanent by the Protecting Americans from Tax Hikes (PATH) Act of 2015. But most respondents (55 percent) believe Congress will act only when those provisions are set to expire or have already done so. This could result in another round of retroactive extensions.


Momentum on tax reform

State of the Union

Corporate coalitions reengage to advocate for tax code overhaul

Highway Trust Fund Patched 3 yrs. in FAST Act

POTUS Budget Released

POTUS Candidates Begin to Declare

FY15 Tax Extenders Addressed

GOP primary debates

Congressional Summer Recess W&M International Plans

Release of Senate Finance Working Groups Papers

Congressional White Papers

Momentum for Tax Policy

Congressional Summer Recess

AGENDA OUTLOOK

Congress could address a year-end extenders package for items that expire in 2016 (e.g. 179d)

• McConnell has signaled to the press his support for a chance to address expiring provisions

• Senate Finance staffers expressed there is no appetite for doing an extender bill this year

• Chairman Brady has rebuffed the ideas of an extender package in the lame-duck session

• Tax Policy Sub Chairman Boustany recently suggested using the technical corrections bill, which was introduced back in April to make some minor corrections to last year’s tax extenders package

The FAA reauthorization bill could become a legislative vehicle for a tax extender package

After the House tax blueprint is released on June 24 they may turn to a catch all tax bill of member priorities that are bipartisan like what Finance moved out of committee

Comprehensive vs. “business-only” tax reform has been on the top list of priorities, and the debate will be renewed with an incoming POTUS and a probable divided legislature


Questions & Comments


Other Fiscal Issues

LARGER PICTURE for 2016 – SPECTRUM OF REVENUE RELATED

• FAA Reauthorization – expires July 15

• Trade Legislation (TPP) – Lame Duck

• Miscellaneous Tax Bill (Technical Corrections) – Lame Duck

• Puerto Rico Debt Crisis & Restructuring


• Criminal Justice Reform

• Defense Appropriations/NDAA

• Comprehensive Energy Bill

• LGBT Rights/anti-discrimination amendment

• Mental Health Reform

• Opioid Epidemic

• Puerto Rico Debt Restructuring

• Trade agenda

• Highway Reauthorization

• Health Care Reform/Replace

• FAA Reauthorization/Extension

• WOTUS resolution not signed in 2015

Congressional Agenda

• Pension Reform (Composite Plan)

• Education Reforms – NCLB/Perkins

• Debt Ceiling

• Export-Import Bank

• Iranian Nuclear Negotiations

• FY17 Appropriations

• Continuing Resolution

• Min. Wage/Paid Leave/Pay Fair.

• Repeal of Medical Device Tax

• Physician Reimbursement (SGR)

• NSA – USA Freedom Act

• Keystone XL Pipeline

• Immigration Reform


Congressional Meetings

I. Before Meeting with a Legislator or Staff

Prepare effectively for your meeting:

Read advocacy packet and policy factsheets / backgrounders

1. Completed contract method thresholds – Reintroduce the American Job Builders Tax Reform Act

2. PABs for public buildings – Cosponsor H.R. 5361, the Public Buildings Renewal Act of 2016

3. NPRM by Treasury to alter DPAD language for construction – Monitor proposed IRS Rulemaking on 199 for construction

4. Independent Contractors status – Oppose H.R. 5008, the Clarify Workers Misclassification in the Construction Industry Act

5. Highway Trust Fund – Address long-term viability as Congress reforms the tax code before the expiration of the FAST Act

6. Treasury 385 regulations – Not just for inversions and base erosion & Congress needs to weigh in

Identify and practice your story with colleagues

Learn your policymakers policy positions - i.e. review their website, search Google, etc.

Review recent news or social media activity about the policymaker

Read list to understand your responsibilities before, during, and after the meeting.


Congressional Meetings

III. After Meeting with a Legislator or Staff

Stay active after your meeting.

Submit a meeting report to your organizational representative – Brian Lenihan (same day)

Share your experience on relevant social media sites – in a good light (same day)

Write personal, hand-written note thanking policymaker and staff for the meeting (1-5 days after)

Schedule a follow-up meeting in the district (4-6 weeks after)

II. During Meeting with a Lawmaker or Staff

Remember you only have 10-30 minutes to meet with each Legislator. Be polite, professional, and focused on these priorities. Read the list beforehand to be prepared.

Explain the impact of the policy issue in question through a personal story

State the specific policy ask and wait patiently for a concrete response

Write down any questions or policy positions stated by the policymaker or staff

Leave behind printed materials like booklets or one-pagers


Capitol Hill Headquarters (AGC Townhouse)


AGC’s Capitol Hill Legislative Office, located one block from the U.S.House of Representatives, is the closest trade association office to CapitolHill. The prominence of the AGC Townhouse has afforded the associationa powerful reputation and furnishes AGC lobbyists and members uniqueaccess to elected officials. The historic 1890s building was fully renovatedand remodeled in 2001 and became the home of AGC GovernmentAffairs in 2002. After only five years, the AGC Townhouse has become oneof the most popular and valuable venues on Capitol Hill, hosting chaptervisits, legislative fly–ins, coalition meetings and other events involvingWashington’s decision–makers.

Location

53 D Street (1st and D) SE

Washington, DC 20003

AGC’s Capitol Hill Headquarters (AGC Townhouse) houses our AGCLobbyists and is situated in the heart of Washington, DC. Just steps awayfrom the Capitol, is Metro Accessible – Capital South Metro Station(Blue/Orange Line). The entrance is on 1st Street. Street parking islimited, and arriving by Metro or taxi cab is recommended.


Rep. Jim Renacci

Biography

Currently:Representative, OH-16Elected: 2010

Education: Indiana U. of PA, B.A. 1980

Religion: Roman Catholic

Family: Married (Tina), 3 children

Committees

Committee on Ways and Means

Committee on Budget

Election Results

2014 General

Jim Renacci (R) Votes: 132,176 Percent: 63.7%

Pete Crossland Votes: 75,199 Percent: 36.3%

Biography

Republican Jim Renacci, first elected in 2010, is a committed conservative but works with Democrats more than most of his Class of 2010 GOP colleagues. He survived a 2012 contest against Democratic Rep. Betty Sutton after their districts were combined in redistricting. Renacci grew up in a working-class family outside Pittsburgh. He worked for an accounting firm in Pittsburgh with nursing home clients, and in 1984, he moved to Wadsworth, Ohio, and started his own chain of nursing homes. He sold his nursing home chain and formed a company specializing in financial consulting for troubled businesses. He was elected to the Wadsworth Council in 1999 and went on to serve as mayor from 2004 to 2008. As the 2010 election approached, Renacci decided to challenge Democrat John Boccieri. In the House, Renacci was firmly conservative across-the-board in his first year, but shifted toward the middle in his second year on social and foreign-policy issues. On the Financial Services Committee, he became friends with Democrat John Carney of Delaware, and the two formed a bipartisan breakfast club that grew to 14 members and developed several bills aimed at job creation. “We need to be able to work together,” Renacci told The New York Times. He later teamed up with another Financial Services member, Minnesota’s Keith Ellison—one of the chamber’s most liberal Democrats—on a bill allowing utility and telecommunications companies to report their customers’ on-time payments to credit-reporting agencies.

Stance on AGC Issues

• Opposes expanding Obamacare

• Favors vouchers for school choice

• Favors absolute right to gun ownership

• sponsored partnership audit legislation in 2015 that became law

• raised questions about consumption-based taxation in lieu of income taxation