After weeks of negotiations, congressional leaders have struck an agreement on a year-end tax and spending deal that will keep the government running through 2016. In addition, the accord includes several significant legislative victories that the U.S. Chamber of Commerce and the broader American business community have been working toward for months, years and – in some cases – decades.
“Congress continues to defy expectations that nothing would get done this year,” U.S. Chamber of Commerce President and CEO Tom Donohue said in a statement. “It already passed the first meaningful reform to entitlements in a generation, the first transportation bill in a decade, the first changes to our broken permitting process since 1969, Ex-Im Bank reauthorization, and Trade Promotion Authority.”
Though far from perfect, this latest legislative compromise “builds on these achievements by implementing a number of important business priorities that will strengthen economic growth, create jobs, and enhance America’s competitiveness and security,” Donohue added.
House leaders announced the deal on Tuesday, and both chambers are expected to pass the legislation by the end of the week. In the meantime, here’s a look at the six most important provisions in the agreement and why they will help bolster U.S. businesses and buoy the American economy.
Oil export ban lifted
After four decades, the disco-era oil export ban will go the way of the pet rock. U.S. oil will be allowed to be sold on world markets just like any other commodity.
“Under the current policy, even Iran can sell its own oil—but the United States cannot. Lifting the outdated and unfair ban on oil exports was one of the Chamber’s top legislative priorities this year because it will improve global security and support hundreds of thousands of jobs at home,” Donohue said.
Studies have estimated that as many as 859,000 jobs a year could be created by lifting the ban.
Health care taxes delayed
Congress hit a triple by delaying three Obamacare taxes.
First, the Cadillac Tax, a 40% excise tax on high-value health plans, will be delayed until 2020. Although it was to take effect in 2018, employers were already making major changes to the health benefits they offer their employees.
“The 40 percent excise tax on health benefits is undermining the viability of employer-sponsored insurance, which more than 160 million Americans depend on,” Donohue said. “Although the Chamber will continue to push for full repeal of the excise tax, the delay is a step in the right direction and gives employers additional time to protect the coverage valued by their employees.”
Second, the Medical Device Tax, a 2.3% tax on the medical device sales that took effect in 2013, has been suspended for 2016 and 2017. This tax has been tough on an industry made up of many young small- and medium-sized companies that are still looking to make their first profits. The harmful tax has pushed companies to cut back on R&D and investment as well as slowed hiring.
Third, the Health Insurance Tax (HIT) will be paused for 2017. The tax, which went into effect in 2014, applies to health plans sold on the fully-insured market, a market dominated by small businesses. The tax risks as many as 286,000 jobs, according to the National Federation of Independent Business.
Cybersecurity deal reached
In a move that will better protect U.S. companies and consumers from the mounting threat of cyberattacks, House leaders included the Cybersecurity Information Sharing Act (CISA) in the year-end spending deal. The measure provides important legal protections to businesses that voluntarily share cybersecurity-related information with other companies and with the government, which will help companies and the country better detect and respond to attacks.
“Over the past several years, major cyberattacks have dominated the headlines and dramatically raised public awareness of online security,” Donohue said Tuesday. “This legislation, long championed by the Chamber, is our best chance yet to help address this economic and national security priority in a meaningful way and help prevent further attacks.”
EB-5 program extended
Congress also agreed to renew an important immigration and economic development program that enables foreign investors to obtain permanent residency if they invest at least $1 million into a project that creates at least 10 jobs for U.S. workers. Known as the EB-5 Regional Center Program, the initiative generated $5.2 billion dollars in foreign direct investment into the U.S. between 2005 and 2013.
Many EB-5 projects are currently underway, and once they’re completed, the financial support provided by these foreign backers has the potential to spur as many as 31,000 new jobs for American workers.
Still, as Donohue noted, the program isn’t perfect, and lawmakers missed a prime opportunity with this legislation to not merely renew but also strengthen the EB-5 program.
“We look forward to working with all parties in the future to reform the program in a way that includes additional protections that are appropriate for ensuring the program’s integrity, while at the same time maintaining the program’s viability for businesses to encourage more foreign direct investment and job creation in the United States,” Donohue said.
Earlier this year, the World Trade Organization ruled against U.S. Country-of-Origin-Labeling (COOL) requirements for beef and pork and authorized Canada and Mexico to slap $1 billion in tariffs on U.S. goods in retaliation. These trade barriers with the United States’ two largest export markets would’ve cost thousands of American jobs.
“With retaliation expected within a matter of days, approval of this provision repealing the COOL rule for meat is the only way to avoid the substantial damage,” Donohue said.
Tax extenders set in stone
In a separate piece of legislation negotiated alongside the spending deal, lawmakers struck an agreement to make permanent an array of important but currently temporary tax provisions. Often known as tax extenders, many of these longstanding tax rules have been rolled over for a year or two at a time for decades, leaving business owners mired in uncertainty regarding their annual tax burden.
Among the provisions that the deal makes permanent is what’s known as Section 179 expensing, under which small businesses will now be able to immediately expense up to $500,000 worth of investments in equipment and property every year, giving employers added incentive to invest into and expand their businesses. Congress also locked in an important research and development tax provision meant to encourage companies to invest in research related to, for instance, new product development.
“As the business community has long indicated, seamlessly extending, enhancing, or making permanent these important tax provisions this year provides a necessary bridge to comprehensive tax reform while preventing filing season delays and onerous tax increases,” Caroline Harris, the U.S. Chamber’s chief tax council and executive director of tax policy, wrote earlier this month.
More to come?
Coupled with recent victories on issues like transportation funding and education reform, this year-end deal illustrates what federal lawmakers and the administration can accomplish when they work together to address our nation’s most pressing challenges. Let’s hope it’s a sign of things to come next year.
“As we move into 2016, members of Congress and the administration must continue to find common ground and compromise - without comprising their principles,” Donohue said. “As 2015 is proving, this can be done. And it can and must be done again - even in an election year - for the good of the country.”