Omnibus Spending Bill Passed

The House and Senate passed, and the President signed into law, the $1.1 trillion, 2,000 page omnibus spending bill on Friday, December 18, their last day in session before leaving for a three-week recess. In the House, the vote was 316 to 113 (150 Republicans and 166 Democrats voted yea). In the Senate, the vote was 65 to 33 (27 Republicans, 37 Democrats, and one independent voted for the bill). Links to the official summaries for each of the 12 appropriations bill that make up the package can be found below:


Agriculture Appropriations;$21.75 billion for FY 2016, $925 million more than FY 2015, and $34 million below the President’s request.


Commerce, Justice, Science Appropriations;$55.7 billion for FY 2016, $5.6 billion more than FY 2015, and $3.7 billion above the President’s request.


Defense Appropriations; $514.1 billion in FY 2016 base discretionary funding, $23.9 billion more than FY 2015 – also included is $58.6 billion in GWOT/OCO funding.


Energy and Water Appropriations;  $37.2 billion for FY 2016, $3 billion more than FY 2015 and $1.1 billion above the President’s request.


Financial Services Appropriations; $23.2 billion for FY 2016, $1.7 billion more than FY 2015.


Homeland Security Appropriations; $41 billion for FY 2016, $1.3 billion more than FY 2015 and $443 million below the President’s request.


Interior and Environment Appropriations; $32.159 billion in FY 2016, $1.7 billion more than FY 2015 and $1.1 billion below the President’s request.


Labor, Health and Human Services, and Education Appropriations; $162.1 billion in FY 2016, $5.4 billion more than FY 2015 and $5.5 billion below the President’s request.


Legislative Branch Appropriations


Military Construction / Veterans Affairs Appropriations; $79.9 billion in FY 2016, $7.8 billion more than FY 2015 and $1.1 billion above the President’s request. Military construction projects receive $8.2 billion, an increase of $1.4 billion over FY 2015 levels. VA programs receive $71.4 billion in discretionary funding, $6.4 billion above 2015 levels (discretionary and mandatory funding for VA programs total $162.7 billion).


State and Foreign Operations Appropriations; $53 billion for FY 2016 ($15 billion of which is for OCO/GWOT), $3.4 billion more than FY 2015 and $1.3 billion below the President’s request.


Transportation, Housing and Urban Development Appropriations; $57.6 billion for FY 2016, $3.8 billion more than FY 2015.


The package of legislation included a number of policy riders. Most notably, the omnibus spending bill will lift the ban on oil exports and delay implementation of the ACA’s Cadillac tax for one year. The bill also prohibits individuals who traveled to Iraq, Syria, or other countries with significant levels of terrorist activity from participating in the visa waiver program. Health benefits for 9/11 first responders are be extended. Finally, a number of tax breaks and credits have been made permanent through partnering legislation (described in detail below). This includes a two year delay of the ACA’s Medical Device Tax. Solar and wind tax incentive programs were extended in the package of legislation as well (with a five year phase-out period).


Tax Extenders Update

A number of business and individual tax breaks have either been extended temporarily or permanently as part of the overall omnibus spending package. Below is a list of many of the tax incentive programs that have been extended either temporarily or permanently. A number of tax compliant reforms, IRS operational changes, administrative changes to the U.S. Tax Court, and changes to a slew of tax regulations are included in the legislation as well. The bill did not include any offsets to pay for the bill’s estimated 10 year $622 billion price tag. This legislation passed the House as a separate bill (from the omnibus) and was bundled together with the spending bill by the Senate.


Permanent extensions for businesses include:


·         The research and development tax credit

·         Section 179 expense limits and phase-out thresholds regarding depreciable business assets

·         The abilities of global finance/banking companies to deter tax on income from their foreign subsidiaries

·         A 5 year recognition period (as opposed to 10 years), applicable to entities that switch from S to C corporation status, whereby the entity has to hold its assets so to avoid taxation on built-in gains.

·         The ability of taxpayers to avoid taxation on the sale of certain small-business stocks

·         Tax exemptions for RIC dividends

·         A tax credit for businesses for differential pay to employees deployed in the military (the measure also extends this credit to companies that employ more than 50 individuals).

·         Deductions for food donations to non-profits

·         A rule that protects payments by a company to a non-profit/tax-exempt entity from being considered unrelated business income

·         A FIRPTA provision that includes RICs in the definition of a “qualified investment entity”

Permanent extensions for individuals include:


·         The American Opportunity Tax Credit

·         The Child Tax Credit

·         The Earned Income Tax Credit

·         The ability of individuals to deduct state and local sales taxes as opposed to income tax (primarily benefiting individuals who live in states without income tax)

·         The ability of teachers to deduct out-of-pocket classroom expenses

·         The employer transit and parking tax benefit (commonly referred to as the mass transit commuter tax benefit)

·         The IRA Charitable Rollover provision

Below are tax incentives that were extended temporarily for individuals:


·         The ability of individuals with mortgages to not count forgiven debt towards taxable income is extended for two years. Also, the ability to deduct mortgage insurance premiums is extended for two years and widened to apply to mortgages on personal residences.

·         Tuition deductions (and other higher education expense deductions) are extended for two years. Tax-advantaged college savings plans are expanded.

·         The 10% energy efficiency improvement credit is extended for two years.


Below are tax incentives that were extended temporarily for businesses:


·         Work Opportunity Tax Credit is extended for five years

·         The New Market Tax Credit is extended for five years

·         Empowerment zone tax incentives are extended for two years

·         The Production Tax credit (for non-wind renewable energy)  is extended for two years

·         The biodiesel, alternative fuel, and alternative fuel mixture tax credits were extended for two years

·         The energy efficient home tax credit for new constructions is extended for two years

·         Tax credits for improvements to energy efficiency is extended for two years

·         An alternative fuel pump installation tax credit (i.e. for natural gas or ethanol) is extended for two years.

·         Bonus depreciation, presently allowing companies to expense 50% of software and similar qualifying property, is extended through 2017 at which point it is phased down to 30% in 2019

·         Controlled foreign corporations (CFCs) would continue to be allowed (for five years) to defer income tax on royalties and dividends from business income of a related CFC. This is commonly referred to as the “look-through rule.”


No Child Left Behind

Last week, Congress successfully passed and the President signed into law, a bill that significantly reforms the Bush Administration’s “No Child Left Behind” policy. The law, called “the Every Student Succeeds Act” moves authority over school evaluation programs and accountability from the federal government back to states and local school districts. Local entities will also have more say in setting their own goals. Standardized testing for grades 3 to 8 would still be done annually. However, high school students would be required to undergo only one test. Finally, the legislation reauthorizes and/or creates new grant programs for disadvantaged students, teacher preparation time, parent-teacher engagement, facility maintenance and construction, homeless youth, migrants, recruitment, literacy programs and charter schools. The bill is estimated to authorize $124.2 billion over the next five years. Discretionary costs are estimated to top $92.1 billion.


Surface Transportation

For the first time since 2005, Congress was able to pass, and the President sign into law, a long-term surface transportation bill. The Fixing America’s Surface Transportation or FAST Act reauthorizes a number of highway and transit projects for five years at an overall price tag of $305 billion. $225.2 billion of that amount is earmarked for highways whereas $48.7 billion is intended for transit programs. A breakdown of new and reauthorized programs, along with a list of new safety mandates can be found here.










New Jersey Voters to Play Role in State’s Fiscal Future

Due to ballot questions that Democratic legislative leaders have been introduced in New Jersey for 2016, voters could decide the fate of 1) the future of pension payments, 2) a plan for two North Jersey casinos, 3) how to fund transportation repairs, and 4) changing the legislative redistricting process.


Pension Reform

Senate President Stephen Sweeney (D-Gloucester) proposed a constitutional amendment that seeks to increase funding for the pension system and prohibit the state from backing out on full contributions.  If approved by voters, the amendment would mandate a nearly tripling of the current, $1.3 billion contribution to the pension system two fiscal years from now, and the state pension payment would increase to over $5 billion by FY2022.  Governor Christie has expressed that the state could not afford to make the bigger contributions without substantial tax hikes and has called for new benefit cuts instead. Sweeney countered, stating that the state can no longer afford to keep digging a hole for a pension system that’s already at least $40 billion in debt by not making full payments. Sweeney also suggested that an increase of the state’s income tax on earnings over $1 million could help fund the bigger state pension-contributions that his amendment would require.  The Assembly Judiciary committee has approved the amendment for voter approval, and it has been approved in a senate committee.


Funding Transportation

On December 11, Assembly Speaker Vincent Prieto (D-Hudson) proposed a constitutional amendment that would ask voters to approve a dedication of all revenue raised by fuel taxes in New Jersey for the Transportation Trust Fund, which pays for road, bridge and rail projects throughout the state. Current funding is slated to run out as of June 30, 2016.  In the short term, approval would produce an estimated additional $40 million from fuel taxes for the fund. In the long-term, it would lay the groundwork for increased dedicated revenue for transportation projects if any of the state’s fuel taxes are increased in the future, and would ensure that any new revenues from a fuel-tax increase couldn’t be used for other purposes by the Governor or lawmakers. The Assembly Judiciary committee has approved the amendment for voter approval.


Casinos in North Jersey

Another constitutional amendment was proposed by Sweeney, along with other Democratic Senate leaders, that two new casinos would be allowed to open in New Jersey as long as they are located in different counties at least 75 miles from Atlantic City.  The goal of expanding casino gambling outside of Atlantic City would be to regain revenue that’s being lost to casinos in neighboring states including New York and Pennsylvania. Under the proposal, a portion of revenue from the North Jersey casinos would be dedicated to reviving Atlantic City and could produce many construction jobs and generate a boom of economic activity. The Assembly Judiciary committee has approved the amendment for voter approval.


Legislative Redistricting

The proposed constitutional amendment to create a more transparent and inclusive legislative redistricting process was also advanced.  Sponsored by Assembly Majority Leader Louis Greenwald and Assembly Judiciary Chairman John McKeon, this amendment would increase the number of members of the legislative Apportionment Commission from 10 to 13. The commission would need to certify a plan establishing legislative districts that ensures fair representation, i.e., each of the two major political parties is required to have an equal number of districts more favorable to that party, utilizing standards for fair representation.  The commission would be required to certify a plan with at least 25 percent competitive districts.  The amendments would require that all districts comply with federal law, in all circumstances, including but not limited to the requirements on population deviation and of the Voting Rights Act or any successor act, and be comprised of contiguous territory. 


The proposed referendums need to pass each house of the Legislature with a simple majority before the current legislative session ends on January 11, as well as during the first half of the new session that begins on January 12. 






Final Legislative Sessions Wrapped Up for 2015

The Senate and the House finished their 2015 legislative activity on December 9, passing many bills, with the General Assembly most likely to return in late January. Items to be discussed in the New Year include unemployment compensation system reform, repeal of the sales tax on employment services, employment law uniformity and extending the freeze on Ohio's energy mandates.  Additionally, the filing deadline for candidates that intend to run for office in 2016 occurred last week. All 99 House seats and 17 of the 33 Senate seats will be on the ballot in November.


Lawmakers in Ohio made final floor votes of the year and action on more than 20 bills, including the following:


·         Resolution urging Congress to lift the ban on domestic crude oil exports

·         Plans for a tougher police recruit training program expected to include drug screening as well as physical and psychological exams

·         Legislation requiring public employers to remove boxes from job applications questioning past felony convictions

·         Language blocking home health-care workers from participating in public employee collective bargaining

·         Bill to exempt gold, coins and other investment metals from sales taxes

·         Creating standards for prior authorization required by insurance companies for treatments and prescriptions, including placing a time limit for responses to such requests

·         Allow probate judges to issue search warrants

·         Allowing paramedics to treat dogs and cats at accident scenes

·         Penalizing sex offenders who fail to provide a complete account of their email addresses and other online personas

·         Improved prevention, diagnoses and treatment of Lyme disease

·         Increase federal funding of research on Type 1 Diabetes

·         Pass the Toxic Exposure Research Act of 2015






Budget Update

Conversations continue in Harrisburg, as it has been nearly six months without a budget.  On December 21, the House Rules Committee met to consider House Bill 1327 (Fiscal Code Bill).  Majority Leader Reed offered Amendment 05445 which provides spending framework of the $28.1B stop gap budget.  The bill was reported as amended with all the Republicans voting in favor and the Democrats voting against. DMGS continues to monitor the budget and provide updates on a daily basis.


Keystone Energy Enhancement Act

State House Speaker Mike Turzai’s new Keystone Energy Enhancement Act (HB 1731) aims to create jobs and infrastructure within Pennsylvania's natural gas, manufacturing and petrochemical industries. The legislation, House Bill 1731, first announced in September during the annual Marcellus Shale Coalition conference, is near reaching the House Commerce Committee and has 61 co-sponsors, including nine Democrats. The act is modeled after the state's Keystone Opportunity Zones program, which revived old industrial sites and brownfields with capital investment and jobs. The legislation would create Keystone Energy Enhancement Zones and restore deteriorated land in the Commonwealth with businesses that utilize natural gas. The businesses would get a 10-year break from state and local taxes and a tax credit up to $1,250 for every job created for their investment in the state. Philadelphia would get five zones, Allegheny would get three zones, with most counties receiving up to two zones.  Governor Wolf's team charges it as Turzai's “handout” to the oil and gas industry. The act would establish the Keystone Energy Authority, which would be governed by a seven-member board of industry experts with defined powers and responsibilities.





Airport Slot Machine Legislation

Rep. Nick Kotik (D-Allegheny), the Democratic chairman of the House Gaming Oversight Committee, has authored Airport Slot Machine Legislation (HB 1408) that would allow Pennsylvania’s six international airports, Pittsburgh, Erie, Harrisburg, Lehigh Valley, Philadelphia, and Wilkes-Barre/Scranton, to operate slot machines within their terminals.  Under the measure, a portion of the revenue generated from slots would be given to the host airports for revitalization projects, and other portions would help local municipalities, in addition to going to the General Fund for the state budget. The bill currently has 18 sponsors, but with mixed opinions from airport officials.  A special hearing to discuss the topic was held Nov. 23 at Harrisburg International Airport, where representatives from Harrisburg and Pittsburgh airports voiced their support, while those from Philadelphia opposed the plan.  If approved, six airports would be eligible to install up to 500 slot machines each, incurring a one-time $1,000 fee per machine, plus 34% tax rate on daily gross revenue. There are currently only two airports in the U.S. with licensed slot machines, the McCarran International Airport in Las Vegas, NV and Reno/Tahoe International Airport in Reno, NV.  However, Rep. Kotik pointed out, “several states across the country, including New York, Maryland, Illinois, Florida and Hawaii, have started to explore plans to legalize the operation of slot machines in airports.”










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