Recently, the House released the full text of the 2016 Consolidated Appropriations Act 2016 (“omnibus”) and the Protecting Americans from Tax Hikes Act of 2015 (“tax extenders”). FMI worked with congressional offices and committee staff to ensure that Congress addressed many of the issues that are important to our industry, and we have several wins to celebrate for now. The House is expected to vote on the tax extenders package on Thursday and the omnibus on Friday. The Senate will need to follow suit and pass both bills before they become law. Additionally, Congress is expected to pass a short-term continuing resolution today to fund the government through December 22. The current funding authorization expires tonight, so this will provide Congress a few extra days to pass the omnibus and avoid a government shutdown.
The omnibus authorizes funding levels for the various federal agencies, as well as the various policy riders that FMI and other stakeholders have been working on these past few weeks. Below are many of the policy items that are of interest to FMI’s members contained in the over 2,000 pages of bill text. The House Appropriations Committee provided summaries of the 12 appropriations bills that are contained within the omnibus.
Menu Labeling Extension (page 98) – The omnibus includes menu labeling language that ties an extension of the final rule to one year after HHS/FDA publishes Level 1 guidance. The menu labeling rule is currently effective December 1, 2016, and this additional extension will provide industry with much needed time to understand the rule’s requirements one-year after FDA finalizes guidance on its menu labeling regulation, which we expect some time in spring 2016. The additional time also enables Congress to pass legislation (H.R. 2017/S. 2217) modifying the menu labeling regulations prior to the regulations going into effect. Beef and Pork Country of Origin Labeling (pages 104-105) – The omnibus contains a provision repealing country of origin labeling requirements for beef and pork products. The COOL requirements for chicken and a handful of other covered meat products will remain in place. The World Trade Organization ruled that the meat COOL requirements violated international trade standards. This repeal will try to mitigate against the WTO ruling and appease Mexico and Canada that have threatened over $1 billion in retaliatory tariffs.
Partially hydrogenated oils (page 102) – FMI-supported helpful language to protect retailers and food manufacturers from enforcement or lawsuits during the phase-out of partially hydrogenated oils (PHOs) until June 18, 2018. Dietary Guidelines (pages 92-94) – FMI-supported helpful language on the final 2015 Dietary Guidelines for Americans; provision ensures that the DGA are based on significant scientific agreement and are limited to nutritional and dietary information. The omnibus contains another provision on DGAs, which requires USDA and the National Academy of Medicine to conduct a study measuring how the Dietary Guidelines are used, impact on health, and to ensure a balanced and scientific process in forming the dietary recommendations.
Food Safety – The bill provides FDA with a $104.5 million increase for food safety activities and a $3.3 million increase to USDA for food safety inspection, all without new user or registration fees.
“Cadillac” tax (page 2000) – The omnibus contains a provision that delays the 40% excise tax on high cost employer-sponsored health coverage for two years through 2019. The tax would also be deductible against corporate income tax. The bill also requires a report within the next 180 days to recommend suitable benchmarks for how age and gender adjustment are factored into the valuation of the cost of the plan for tax purposes.
Health Insurance Tax (HIT) (page 2002) – The omnibus places a moratorium on taxes that were collected from health insurance providers January 1, 2014 until January 1, 2017. It is unclear how insurance provider customers would be allowed to recover fees that may have been passed along.
Cybersecurity information sharing (starts on page 1729) – The omnibus includes the final cyber information sharing package that House and Senate negotiators have been working on. The provisions provide liability protection for companies that share cyber threat information through a to-be created portal with the Department of Homeland Security (DHS). Many groups, including retailers, wanted to be able to share information directly with other agencies, such as the FBI and the Secret Service. The bill includes compromise language that should allow them to share with these agencies but does not explicitly include the desired liability protections. The bill also includes new language allowing the administration to open a second, non-DHS portal, if they believe it is necessary. While it is unlikely that the current administration will do so, a future administration may choose to create additional portals. Child nutrition programs (pages 56-59) – The omnibus provides funding for child nutrition programs (WIC, SNAP).
Truck weights (pages 1507-1508) – Addresses truck weight limits on federal and state highways in Idaho. Hours-of-service (page 1514) – Enforcement delay of a new hours of service rule, regarding restart provisions. NLRB – Prohibition of electronic voting (page 996) – A provision to prohibit the National Labor Relations Board (NLRB) from issuing new requirements to allow electronic voting during union elections.
Taxation of Internet Access (page 563) – Extends the Internet Tax Freedom Act for a year through October 1, 2016. This provision prohibits the taxation of internet access, and has been thought to be used as vehicle/catalyst for Marketplace Fairness Act. The one-year extension will bring the issue of internet taxation back next year (versus making ITFA permanent).
Budgetary impact of executive action (page 487) – The omnibus requires that Executive Orders and certain Presidential Memorandums issued during fiscal year 2016 include a budgetary impact statement, including costs, benefits, and revenues, of such order or memorandum.
The tax extenders package contains extensions of various tax credits and cuts that have been important provisions for the industry. Some of these were short-term extensions (ex: two years) while others were extended for longer terms or made permanent. In the case of a two-year extension, this would basically be a retroactive extension for the 2015 tax year and an extension through 2016. The House Ways and Means Committee provided a section-by-section summary of the tax extenders package.
Work opportunity tax credit (pages 38-39) – The package contains a five-year extension of the work opportunity tax credit (through 2019). Bonus depreciation (pages 39- 65) – The provision extends bonus depreciation for property acquired and placed in service during 2015 through 2019 (with an additional year for certain property with a longer production period). The bonus depreciation percentage is 50 percent for property placed in service during 2015, 2016 and 2017 and phases down, with 40 percent in 2018, and 30 percent in 2019.
Deduction for contributions of food inventory (pages 15-19) – The bill would permanently extend the enhanced deduction for charitable contributions of food inventory for non-corporate business taxpayers. The provision modifies the deduction beginning in 2016 by increasing the limitation on deductible contributions of food inventory from 10 percent to 15 percent of the taxpayer’s AGI (15 percent of taxable income (as modified by the provision) in the case of a C corporation) per year. The provision also modifies the deduction to provide special rules for valuing food inventory. Extension of 15-year straight-line cost recovery for qualified leasehold improvements, qualified restaurant buildings and improvements, and qualified retail improvements (page 29) – The provision permanently extends the 15-year recovery period for qualified leasehold improvements, qualified restaurant property, and qualified retail improvement property.