REPUBLICAN REALITY: The Republican tax reform high is slowly melting away now that they are faced with a myriad of party-splitting decisions on major measures in the short term and are scrambling to define their agenda – beyond selling tax reform – in the lead up to the 2018 mid-terms. The debate at both ends of Pennsylvania Avenue rages around taking on entitlement reform and related issues in an appeal to the party’s base or pursuing a more bipartisan agenda with infrastructure as the centerpiece. As evidenced by yesterday’s meeting with President Trump and Congressional leaders, we think Trump is likely to push for more bipartisan deals forcing the hands of his allies on Capitol Hill. To be clear, a deal on the return of congressional earmarks though is not likely to happen. Too swampy.
TAX TIME: Tax filing season begins on January 29 and given the confusion over SALT deductions at the end of 2017, the IRS is gearing up to help taxpayers navigate the law by issuing hundreds of new rules and guidances. To date, they have sent out dispatches governing withholding, SALT and property tax deductions as well as the amount of taxes corporations will have to pay when bringing money back to the U.S. And, pass-through entities and university endowments are already looking for guidance on how to interpret changes in the law directed at them. There’s just one problem, the IRS is without a leader with President Obama’s appointee exiting last November and the agency is understaffed, dealing with aging technology and lacks resources stemming from cuts in place resulting from the last budget deal. The agency has been a punching bag for Republicans for decades and they will likely pursue legislation to overhaul and restructure the agency this year, but on the heels of implementing a 1000+ page piece of legislation impacting every corner of the U.S., we think Congress would be wise to address the shortcomings before a more taxing problem is created.
UPDATING CFIUS: Lawmakers are targeting an overhaul of the Committee on Foreign Investment in the United States (CFIUS), with the aim of legislation reaching Trump’s desk by the end of the summer. While the bill’s primary focus was to keep intellectual property from the Chinese, it is evolving and may be looking at enabling CFIUS to nix deals that would transfer critical U.S technology to foreign entities. Chair Andy Barr (R-KY) of the House Subcommittee on Monetary Policy and Trade is looking to strike a balance by ensuring the bill avoids creating “an investment scrutiny regime so onerous that good money just decides to go somewhere else.” The process hasn’t been modernized for years and lawmakers want to increase oversight of foreign investment as well as encourage an accessible investment climate in the U.S. - while streamlining the CFIUS process.
FLOODING IN: After a record-setting year for natural disasters, Congress has yet to agree on a long-term reauthorization of the National Flood Insurance Program (NFIP). The House already passed legislation covering a five-year span and the Senate is stalled (yes, we know), but hope springs eternal that a deal could be reached when Congressional negotiators finally hash out their budget and spending goals as NFIP has been extended in tandem with the six prior CR’s.
UKRAINE: DEFENSE TO OFFENSE: Our Senior Geopolitical advisor General Dan Christman writes on recent strategic moves by the U.S. in the Ukraine. Read his piece here.
WILL THE JUSTICE DEPARTMENT REVISIT COMCAST-NBC UNIVERSAL? (CMCSA, T, TWX): Our Senior Telecom Analyst Paul Glenchur writes that despite political pressure to extend DOJ merger conditions, Comcast should avoid a decree modification or a breakup effort. Read his piece here.
U.S. TREASURY SANCTIONS FIVE IRANIAN ENTITIES WORKING ON BALLISTIC MISSILE PROGRAM: Our Senior Energy Analyst Joe McMonigle writes that last week’s announcement is start of tougher US action on Iran as Trump considers renewing oil sanctions on Jan 12. Read his flash note here.