MAY 2021 WASHINGTON REPORT
The world is opening up again as COVID-19 cases decline and vaccination rates increase. Yesterday, the CDC announced that fully vaccinated people can resume activities without wearing a mask or physically distancing, except where required by federal, state, local, tribal, or territorial laws, rules and regulations, including local business and workplace guidance. On Thursday, the governors of Massachusetts, New York, New Jersey, North Carolina, and Virginia, and the mayors of New York City and Washington, D.C., all Democrats, said they were taking the new guidance from the Centers for Disease Control and Prevention under advisement before adopting it. At least seven states led by Democrats began to lift mask mandates: Connecticut, Illinois, Kentucky, Minnesota, Nevada, Oregon, and Pennsylvania began to adjust their mask wearing guidance. Half of the country's governors, most of them Republicans, have already lifted mask mandates in some form.
This good news comes as the Republican Party is gaining strength ahead of the 2022 midterms. The Republican Party has a structural advantage in the House, Senate and Electoral College. It controls redistricting in a majority of states and is using its power in statehouses and governors’ mansions across the country to pass voting laws that solidify these advantages. The GOP is unifying and aligning members under a new House Conference Chairwoman, IBA friend and past Denk Legislative Award recipient, Representative Elise Stefanik (R-NY). Stefanik won in a 134-46 secret-ballot vote, after her sole challenger Representative Chip Roy (R-TX) dropped out. Her win is the culmination of a fast-paced effort by GOP leaders to remove Representative Liz Cheney (R-WY), the party's top female leader and frequent Donald Trump critic, from the conference chairmanship and install Stefanik in her place. The 36-year-old New Yorker, known as a moderate turned Trump ally who's used her fundraising skills to help elect a new class of GOP women, is now the highest-ranking woman in elected Republican leadership.
As the Republican Party unifies, tensions mount among Democrats over US-Israel policy. Key Democrats are pushing back against progressives who are criticizing the treatment of Palestinians by the Israeli government in the face of what some lawmakers worry could become President Biden's first foreign policy crisis. At the furtherest end of the spectrum of critics is Representative Ilhan Omar (D-MN), who on Monday called Israeli air strikes that killed civilians in Gaza "an act of terrorism." Other Progressives, including Senator Elizabeth Warren (D-MA), Senator Bernie Sanders (I-VT) and Representative Alexandria Ocasio-Cortez (D-NY), have condemned Israel's plans to evict Palestinian families from the Sheikh Jarrah neighborhood of East Jerusalem, plans that are under review by Israel's Supreme Court. Warren called the proposed evictions "abhorrent" and said the Biden Administration "should make clear to the Israeli government that these evictions are illegal and must stop immediately." Israel's strongest allies in the Senate Democratic Caucus are pushing back against the criticism, arguing that Israel has its own process for determining the legality of the proposed evictions and is absolutely justified in responding with force against rocket attacks from Hamas. Senate Majority Leader Chuck Schumer (D-NY), a longtime staunch ally of Israel, declined to take a side in the growing debate within his caucus.
This month's Washington Report will cover IBA's activities, upcoming events, and federal updates that may impact your business. Please reply to this email with any questions or comments.
REGISTER FOR IBA'S 47TH ANNUAL CONVENTION
Registration is open for IBA’s 47th Annual Meeting. On June 16 and 17, we will virtually host a series of policy webinars with guest experts and members of Congress. Keep your eye out for more information on this event, including times and agenda. .
The virtual format will allow IBA members to attend remotely and avoid travel. It will also create a more inclusive event, giving members who haven't yet attended IBA's annual convention the opportunity to join in.
Thanks to the support of our 2021 sponsors, registration for the event is FREE for all active and prospective IBA members! Please register here.
IBA SUPPORTS CONTINUATION OF THE STEPPED-UP BASIS TAX PROVISION
IBA supports the continuation of the stepped-up basis tax provision that allows people to pass assets on to heirs tax free. IBA and others in the Family Business Estate Tax Coalition are sending the following letter to the Hill to oppose the repeal of stepped-up basis:
Dear Chairman Wyden, Chairman Neal, Ranking Member Crapo, and Ranking Member Brady:
We, the undersigned members of the Family Business Estate Tax Coalition (FBETC), write to state our unequivocal support for the continuation of stepped-up basis and to highlight the attached study from EY illustrating the economic damage that step-up repeal would inflict.
Stepping up basis when an individual who is a member of a family-owned business dies is critical to that business surviving the loss of a loved one and a business partner. Repealing stepped-up basis by imposing capital gains taxes when assets transfer ownership at death would force many family-owned businesses to liquidate assets or lay off employees to cover the tax burden. This new tax would be imposed on top of any existing estate tax liability, further compounding the negative impacts and creating a second tax at death.
By raising the tax burden on investment, the repeal of stepped-up basis via tax at death increases the cost of capital, which discourages investment and results in less capital formation. With less capital available per worker, labor productivity falls and with it the wages of workers and, ultimately, GDP and Americans’ standard of living. A recent EY report forecasts that 80,000 jobs would be lost in each of the first 10 years and GDP would decrease by $100 billion over 10 years if stepped-up basis were repealed. Additionally, for every $100 of revenue raised by repeal via taxing capital gains at death, $32 would come out of the paychecks of workers.
We respectfully urge you to protect family-owned businesses from tax increases by defending stepped-up basis and opposing any changes to current law.
REPUBLICANS INTRODUCE BILL TO COUNTER PRO ACT ON JOINT EMPLOYER STANDARD
Senator Roger Marshall (R-KN) and Representative James Comer (R-KY) introduced legislation that would clarify the definition of joint employer, which they argue has been expanded and has created confusion for small businesses. The Save Local Business Act would counter the joint employer provision of the Protecting the Right to Organize Act, or PRO Act, which is a top policy focus of the Biden administration, Democrats in Congress and union leaders.
The PRO Act would codify the joint employer standard adopted by the National Labor Relations Board. The standard allows for two or more employers to be considered a joint employer of a worker if there is shared control of the worker’s essential terms and conditions of employment. The Republican bill would amend the National Labor Relations Act and the Fair Labor Standards Act to make clear that an employer may be considered a joint employer in relation to an employee only if such employer directly and immediately exercises control over the essential terms and conditions of employment.
Marshall and Comer argue that joint employer has resulted in increases in operational and legal costs, less compliance assistance and fewer opportunities to create jobs. They say their bill would provide clarification, certainty for small businesses and strengthen worker protections. “Small businesses have always been economic drivers, and as the economy continues to recover from COVID-19 we need to be empowering job growth and creation, not stifling it with harmful regulations and ambiguous standards,” Marshall said in a statement.
IBA applauds the introduction of the Save Local Business Act. IBA has strongly advocated for a clear joint employer standard at the federal level. A clear standard will allow bakers to better understand what conduct would trigger joint employer liabilities under the Fair Labor Standards Act and the National Labor Relations Act.
LABOR DEPARTMENT WITHDRAWS TRUMP INDEPENDENT CONTRACTOR RULE
The Labor Department (DOL) withdrew the Trump administration's business-friendly independent contractor rule, signaling a shift in the agency's policing of worker classification that could have major implications for the gig economy, Politico reports. The Trump rule, one of the so-called midnight regulations finalized by DOL in January, would have made it easier for businesses to classify their workers as "independent contractors" who are not covered by federal minimum wage and overtime protections under the Fair Labor Standards Act (FLSA).
The Trump administration rule set out an "economic realities" test to determine whether a worker is an independent contractor or an employee under the FLSA. The test analyzed how much control workers have over their job duties and their opportunities for profit or loss, a rule change that the Trump DOL anticipated would expand businesses' use of independent contractor relationships.
The Biden administration said the rule "was in tension" with the text and purpose of the FLSA and would result in workers losing protections they were owed under the law. “By withdrawing the Independent Contractor Rule, we will help preserve essential worker rights and stop the erosion of worker protections that would have occurred had the rule gone into effect,” said Secretary of Labor Marty Walsh in a statement on the move. “Legitimate business owners play an important role in our economy but, too often, workers lose important wage and related protections when employers misclassify them as independent contractors," he added.
The Biden administration's decision to scrap the rule isn't a surprise, but it's the latest sign that DOL is preparing to take a tougher enforcement approach to worker classification under Walsh's leadership. Last week, Walsh said that he believed “in a lot of cases, gig workers should be classified as employees," in an interview with Reuters."In some cases they are treated respectfully," Walsh added, "and in some cases they are not and I think it has to be consistent across the board.” David Weil, who is reportedly Biden's pick for Wage and Hour Division chief, took the position that “most” workers should be considered employees under federal minimum wage law when he served as Wage and Hour head in 2015 in the Obama administration.
IBA and other members of the Coalition to Promote Independent Entrepreneurs urged the Labor Department not to withdraw the Rule because it provides much needed clarity to the application of the "economic realities" test and reflects an objective restatement of the court decisions that have applied the test.
We argued that the enhanced clarity not only helps legitimate independent contractors and their clients enter into contractual relationships with a greater degree of certainty that the relationships will be respected for purposes of the FLSA, but it also more glaringly exposes instances of worker misclassification under the FLSA. The only beneficiary of a withdrawal of the Independent Contractor Rule would be the trial attorneys who profit from the uncertainty and unpredictability that exists under current law.
The withdrawal of the Independent Contractor Rule is disquieting to the regulated community. While a new administration certainly can disagree with the policy positions of a prior administration, a withdrawal of the Independent Contractor Rule is inconsistent with DOL’s own published research findings, based on its review of decades of federal court decisions applying the "economic realities" test.
The Rule's withdrawal comes as multiple worker-classification suits quietly advance in federal courts. Per a recent review by Bloomberg Law’s Ben Penn, the Labor Department is actively seeking a broader interpretation of the definition of “employee” by avoiding the big fights with gig economy behemoths and instead focusing on smaller and less noteworthy cases involving a range of other industries. The cases, many of which were brought during the Obama administration or pertain to investigations conducted during that time, appear in courts ranging from Arizona and Oklahoma to Tennessee and Pennsylvania. Although career attorneys at DOL reportedly felt pressure to soften arguments made in court during the prior administration, new political leadership will likely drive government attorneys to advance broader arguments about the scope of employment as compared to an independent contractor relationship.
OSHA PREPARES TO ISSUE COVID-19 EMERGENCY REGULATIONS
Almost two months after its deadline to issue an emergency temporary standard, the Occupational Safety and Health Administration (OSHA) sent its new emergency workplace safety rules to prevent the spread of COVID-19 to the Office of Management and Budget (OMB) for review. OMB has decided to take its time reviewing the emergency temporary standard (ETS), granting a series of new meetings with union and business groups, even as the pandemic begins to show signs of subsiding and vaccination rates continue to rise.
If issued, the standard will have immediate effect upon publication in the Federal Register and will stay in effect for six months or until a permanent standard is adopted following the usual rulemaking procedures. While the exact content of the ETS is unknown at this time, employers in states that have relaxed or eliminated COVID-19 rules should prepare to quickly comply with new regulations on masks, social distancing, cleaning and disinfection, and other safety measures. Employers in states or localities that have maintained robust safety precautions will be faced with ensuring compliance with yet another layer of government regulation. It is all but certain that outside groups will challenge the ETS in court, and far from clear that OSHA will be able to meet its very high burden of showing that such a standard is truly necessary in light of existing efforts to keep employees safe as well as the rapid pace of vaccination.
USDA ISSUES PANDEMIC FLEXIBILITIES THROUGH JUNE 2022
The U.S. Department of Agriculture (USDA) issued a broad range of flexibilities to allow school meal programs and childcare institutions across the country to return to serving healthy meals in fall 2021 as part of the Biden-Harris Administration’s commitment to reopen schools safely. Several meal service flexibilities that enable social distancing are now extended through June 30, 2022.
The waivers continue the Administration’s commitment to provide safe, healthy meals free of charge to children as the pandemic continues to threaten the food and nutrition security of our most vulnerable. Schools nationwide will be allowed to serve meals through USDA’s National School Lunch Program Seamless Summer Option (SSO), which is typically only available during the summer months. This option maintains the nutrition standards of the standard school meal programs – including a strong emphasis on providing fruits and vegetables, fluid milk, whole grains, and sensible calorie levels, while allowing schools to serve free meals to all children.
In addition, schools that choose this option will receive higher-than-normal meal reimbursements for every meal they serve, which will support them in serving the most nutritious meals possible while managing increased costs associated with pandemic-related operational and supply chain challenges. This option also affords schools the financial flexibility to further customize their meal service design to fit their local needs.
USDA will continue to offer targeted meal pattern flexibility and technical assistance as needed. In addition, schools and both child and adult care institutions can continue providing breakfasts, lunches, and after school snacks in non-group settings at flexible meal times. Parents or guardians can also pick up meals for their children when programs are not operating normally, all while maintaining social distancing consistent with federal recommendations.
These flexibilities are in addition to a variety of actions taken recently by USDA to strengthen food security, drive down hunger, and put a greater emphasis on the importance of nutrition. Just recently, USDA maximized economic relief for struggling families by taking administrative action on SNAP emergency allotments by targeting an additional $1 billion per month to roughly 25 million people. The Biden-Harris Administration’s American Rescue Plan Act provides over $12 billion in new nutrition assistance to address hardship caused by the pandemic, including:
Extending a 15 percent increase in SNAP benefits— providing over $1.1 billion per month in additional benefits for about 41 million participants—through September 2021;
Adding $1.1 billion in new funding for territories that operate nutrition assistance block grants—home to nearly 3 million Americans—to support those hard-hit by the pandemic;
Extending and expanding P-EBT—a program that served over 8.4 million families with children at its peak last year—through the duration of the public health emergency;
Funding meals for young adults experiencing homelessness through Child and Adult Care Food Program (CACFP) emergency shelters;
Providing nearly $900 million for the Special Supplemental Nutrition Program for Women, Infants and Children (WIC), including a temporary increase in fruit and vegetable vouchers to $35 per month and an historic investment in innovation and outreach to better serve more than 6.2 million people that use WIC to support a healthy start for infants and young children.
WHAT'S NEXT FOR CHILD NUTRITION
The Biden administration's proposal to expand of nutrition assistance for kids is part of a slate of big (and expensive) ideas that comes as lawmakers are looking to update these programs later in the coming months. Congress already had child nutrition on its to-do list this year. Washington usually updates child nutrition programs every five years, a process called child nutrition reauthorization, or CNR. The last time lawmakers tried, however, the process got blown up after House Republicans tried to inch toward block granting school meals programs. It’s now been a decade since the last reauthorization.
Anti-hunger groups, school nutrition leaders and lawmakers are gearing up to get it done this time around. The Senate Agriculture Committee is eager to move on this before work on the next farm bill begins in earnest next year. One big thing to watch is whether Democrats will end up looking to the reconciliation process for some pieces of Biden’s nutrition wish list outside of the CNR process. Many things progressives and anti-hunger advocates want have substantial price tags, which makes them harder to do through regular order because lawmakers will need to find pay-fors. Turning P-EBT into a new Summer EBT program, for example, would cost more than $25 billion over a decade under the White House plan unveiled this week.
IBA is working to include language in the CNR bill that would streamline nutrition standards across child nutrition programs. Currently, different nutrition standards are used in the Child and Adult Care Feeding Program (CACFP), the National School Lunch Program, and the National School Breakfast Program (SBP). This discrepancy is problematic for facilities that administer CACFP and other child nutrition programs under the same roof. For example, USDA bans reimbursement for grain-based desserts (defined to include cereal, breakfast bars, and granola bars) through CACFP, even if they meet USDA's minimum nutritional requirements. One school administrator explains that "to accommodate CACFP vs SBP guidelines, we have to plan a completely separate breakfast for PreK students for the days we serve granola bars or other breakfast items that fall in the definition of a 'grain-based dessert,' and this puts a burden on the kitchen staff as well to keep track of what days they need to be different. It would be far more simple to have CACFP follow the same guidelines for SBP." IBA believes that streamlined standards and flexible requirements will promote the USDA's goal of decreasing child hunger and providing healthy meals.
FASTER ACT BECOMES LAW
President Biden signed into law the Food Allergy Safety, Treatment, Education and Research (FASTER) Act (S. 578), which requires that sesame be labeled on packaged foods and prioritizing food allergy research. Sesame is the ninth food allergen for which the U.S. Food and Drug Administration (FDA) requires plain-language labeling. Sesame is often used when a label reads “natural flavors” or “natural spices”.
The FASTER Act also requires the Secretary of Health and Human Services (HHS) to issue a report on scientific opportunities in food allergy research that examines prevention, treatment and new cures. In addition, the legislation establishes a risk-based scientific process and framework for establishing additional allergens covered by the Federal Food, Drug, and Cosmetic Act.
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