December 7, 2023

Washington Wire: Congress Inches Closer to Government Shutdown



Congress Inches Closer to Government Shutdown 
Congress is now less than two weeks from the end of the fiscal year, without a viable plan to keep the federal government open once funding runs out on October 1. 
In the Senate, for the first time in years, the Committee on Appropriations approved all 12 funding bills by the August recess, and by an overwhelmingly bipartisan margin. However, none of these bills have advanced through the full Senate. On the House side, the Appropriations Committee approved 10 of the annual funding bills but was not able to markup the Labor-HHS bill and the Commerce-Justice-Science bills, both of which provide funding for critical job training and technical education programs, in the full Committee before leaving Washington in August due to time restraints and controversial provisions included in each bill. The House was able to pass one appropriations measure on the floor, the Military Construction, Veterans Affairs, and Related Agencies bill. 
With such a short calendar, Republican House lawmakers are considering a short-term continuing resolution (CR) to fund the government at current levels until they can agree on full-year bills for government operations. U.S. House Speaker Kevin McCarthy (R-CA) continues to work with various factions within the Republican party to come to an agreement on a bill that can pass the lower chamber. 
The House is expected to continue trying to take up appropriations legislation this week, but sources indicate that negotiations among Republicans will likely continue this week. A government shutdown or lapse in federal spending would cause disruptions for some supplier defense contracts and funding for workforce development programs. On the other side of the Hill, the Senate is continuing to work towards passing a bipartisan “minibus” that combines the Agriculture-FDA, Military Construction-VA, and Transportation-HUD measures.

IRS Pauses ERC Processing
The Internal Revenue Service instituted an immediate moratorium on processing new Employee Retention Credit (ERC) claims amid an influx of claims and increased concerns over fraud. The halt in processing claims will last through at least the end of 2023. 
In the release announcing the moratorium, IRS Commissioner Danny Werfel stated, “The IRS is increasingly concerned about honorable small-business owners being duped by bad actors, and we could no longer tolerate growing evidence of questionable claims pouring in. The further we get from the pandemic, the further we see the good intentions of this important program abused.”
One Voice submitted comments to the House Ways and Means Oversight Subcommittee hearing on “The Employee Retention Tax Credit Experience: Confusion, Delays, and Fraud” in July 2023, informing the Committee that numerous small businesses, including One Voice members, were still feeling the economic impacts of the COVID-19 pandemic due to the excessive processing backlogs of ERC claims at the IRS. In a survey of One Voice members, 41 percent of association members who submitted a refund request under the ERC were still waiting for the refund to be processed, with 16 percent having waited longer than 12 months.
The IRS will continue to process previously filed claims, however, the agency will take longer to examine those filings for fraud, increasing processing times. It is unclear if the IRS will extend the deadline for submitting ERC claims. For all quarters in 2020, the deadline to apply for the ERC is April 15, 2024, and for all quarters in 2021, the deadline is April 15, 2025.


USTR Extends COVID Tariff Exclusions
The Office of the U.S. Trade Representative has once again extended the remaining 429 exclusions from the Section 301 tariffs on Chinese goods to give the agency additional time in its review. USTR has extended through the end of the year both the exclusions for 77 medical-related products needed to fight COVID-19 as well as over 350 exclusions that were reinstated in March 2022.
According to the notice released by USTR, “to provide a transition period for the expiring exclusions and to allow for further consideration under the four-year review, and pursuant to sections 301(b), 301(c), and 307(a) of the Trade Act of 1974, as amended, the U.S. Trade Representative has determined that it is appropriate to further extend the 352 reinstated exclusions and the 77 COVID-related exclusions."
USTR extended the COVID-related exclusions multiple times since first being granted in December 2020, while the agencies reinstated the exclusions for the 352 other products in March 2022 after a targeted review of exclusions that had been previously granted and extended were set to expire at the end of 2023, before being extended through September 30, 2023. 
USTR is reviewing all of the tariffs imposed on China under Section 301 of the Trade Act of 1974 during the Trump administration. USTR expects to complete the review sometime this fall, according to Ambassador Katherine Tai. The tariffs will remain in place as USTR continues its statutorily required review. 


SBA to Hold Roundtables on Overtime Rule
The Small Business Administration Office of Advocacy will hold two virtual roundtables to discuss and receive small business concerns on the Department of Labor’s proposed overtime rule. In the notice of proposed rulemaking (NPRM) for “Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales, and Computer Employees,” DOL proposes to increase the minimum salary threshold for the “white collar” exemption under the Fair Labor Standards Act (FLSA) from $35,568 to $55,068 annually. DOL also proposes to increase the total annual compensation requirement for highly compensated employees from $107,432 per year to $143,988 per year as well as automatically update earnings thresholds every three years. 
During the roundtables, the Office of Advocacy is seeking input on how the rule may impact small businesses, specifically: 
  • Whether DOL’s proposed salary level threshold should be raised, and whether the DOL’s proposed threshold levels are appropriate levels for small businesses.
  • The numbers of small businesses, small non-profits, and small governmental jurisdictions that would be affected by this rule.
  • The compliance costs of increasing the salary level to small entities, such as increased wages, overtime costs, and managerial costs.
  • Possible regulatory alternatives that would minimize the compliance costs for small entities while achieving regulatory goals.
  • The best methodology for updating the salary level and the appropriate frequency of updates.
The roundtables are being held on September 26 and 27. DOL is accepting comments on the proposed rule through November 7. The rule could take effect as soon as early 2024.


Final “Build America, Buy America” Guidance Issued
The Office of Management and Budget (OMB) published final guidance in the Federal Register on August 23, 2023, regarding the provisions of the Bipartisan Infrastructure Law related to Build America, Buy America (BABA). These provisions stipulate that for infrastructure projects supported by federal financial assistance, all iron and steel products, along with "construction materials," must have their origins within the United States. Additionally, "manufactured products" must comprise more than 55 percent of U.S. content.
The final guidance offers explicit clarifications on the definitions within the BABA provisions and outlines the processes for requesting and obtaining waivers from BABA requirements, among other critical matters. Some of the key definitions provided in the final guidance include:
  • Manufactured Products - This encompasses items, materials, or supplies that have been either "(i) processed into a specific form and shape, or (ii) combined with other items, materials, or supplies to create a product with distinct properties compared to their individual counterparts." The guidance firmly establishes that agencies should adhere to the "cost of components test" as outlined in the Federal Acquisition Regulation (FAR) to determine the domestic content of manufactured products under BABA.
  • Iron and Steel - This pertains to products that are “predominantly” iron and steel. The final guidance specifies that "primarily" denotes that the cost of iron and steel surpasses 50 percent of the total expense of all components. For iron and steel products, all manufacturing phases, commencing from the initial melting phase to the application of coatings, must transpire within the United States. The guidance also provides instances of "iron or steel products," encompassing items such as "bar, billet, slab, wire, plate, or sheet, castings, or forgings" utilized in the manufacturing process.
  • Construction Materials – This incorporates “(i) Non-ferrous metals; (ii) Plastic and polymer-based products (including polyvinylchloride, composite building materials, and polymers used in fiber optic cables); (iii) Glass (including optic glass); (iv) Fiber optic cable (including drop cable); (v) Optical fiber; (vi) Lumber; (vii) Engineered wood; and (viii) Drywall.” The final guidance also confirms that all manufacturing processes for construction materials must take place in the United States.
  • Cost of Components - For Manufactured Products subject to BABA to qualify as “produced in the United States,” the end product must be manufactured in the United States and more than 55 percent of the total cost of all components of the manufactured product must also be of U.S. origin. The final guidance outlines which costs Federal agencies and award recipients can count when determining if a Manufactured Product meets this 55 percent standard.
  • For components purchased by the manufacturer, the subsequent expenses should be included in the 55 percent calculation: the acquisition cost, including transportation costs to the place of incorporation into the manufactured product, irrespective of whether these expenses are paid to a domestic entity, and any applicable duty, regardless of whether or not a duty-free entry certificate is issued.
      • For components manufactured by the manufacturer, the following expenses should be incorporated into the 55 percent calculation: all costs associated with the manufacture of the component, including transportation expenses, and allocable overhead expenses. Importantly, all costs related to profit must be excluded along with any costs associated with the manufacture of the manufactured product.
According to the guidance, exemptions from BABA requirements can be granted under specific conditions, such as when iron, steel, manufactured products, or construction materials are not available in sufficient quantities or satisfactory quality within the United States. Additionally, exemptions may be considered if the use of domestic materials would increase the project's overall cost by more than 25 percent, or if applying the preference is deemed "inconsistent with the public interest." The guidance stipulates that waiver requests must be submitted in writing, clearly identifying the specific justification upon which the request is based. Before a waiver is approved, federal agencies are required to publish the waiver request online for public review and comment.
BABA provisions apply to federal grants or loans disbursed after May 14, 2022, intended for the establishment, alteration, maintenance, or repair of infrastructure in the United States. The final guidance is set to take effect on October 23, 2023.