While there were a number of victories for the promotional products industry on the legislative front last year, and significant developments such as the signing into law of new tax legislation, other issues remain unresolved as the year gets under way.
Among the industry’s legislative victories of the past year was Congress’ decision to abandon the Border Adjustment Tax (BAT). The BAT would have imposed a discriminatory tax on all imported products—including promotional products—and potentially hurt American consumers and the nation’s largest employers by increasing the cost of everyday products.
Advertising expense deductibility was another victory for PPAI and the industry. Advertising expenses are one of the most common deductions for a business. These expenses are currently 100 percent deductible in the year the expenditures are incurred. Although there were legislative proposals that threatened the full and immediate expensing of advertising expenditures, those proposals were left out of the tax legislation that was signed into law recently.
Another tax-related issue that would have adversely affected many in the promotional products industry was the proposed repeal of the step up in basis regarding capital gains taxes on inheritances, but it was also left out of the new tax legislation.
One issue of concern that began at the administrative level and was elevated to the legislative branch was the status of the National Labor Relations Board’s (NLRB) joint employer rule. In another legislative victory for the industry, the House of Representatives passed the Save Local Business Act this year. The pending legislation narrows the language of the NLRB’s joint employer standard to a significant degree by establishing the legal elements for determining joint employer status.
On the Friday before Christmas, the President signed new tax legislation into law. The sweeping overhaul, which is the largest revamp of the tax code in over 30 years, will affect virtually every aspect of the American economy.
One item left out of the tax bill is Section 274j of the tax code, which outlines provisions for employer deductions related to employee incentives. Repealing that section would have imposed an undue cost burden on companies trying to offer competitive compensation packages to their employees.
Some of the other business-related provisions of the new tax legislation are the new lowered corporate tax rate, which is now 21 percent, and the deduction for pass-through businesses, which is 20 percent. Some of the individual provisions include the new income tax brackets, the nearly doubled standard deduction, the expanded child tax credit and the elimination of personal exemptions.
The latest continuing resolution for federal spending is set to expire January 19. Congressional leaders met with the White House’s budget director and legislative affairs director at the Capitol on January 3 to attempt to reach a deal on the federal budget.
Congressional leaders and the White House have been trying for weeks to negotiate a two-year budget agreement that would finance the government through 2019. One of the major points of contention is how much to increase defense and nondefense spending. The debate over raising budget caps to avoid sequestration, or automatic across-the-board spending cuts, has complicated efforts to reach a deal on the budget.
Another major debate centers on immigration measures, specifically the Delayed Action for Childhood Arrivals program (DACA). Congressional leaders in both chambers of Congress are insisting that legislation to address the problems with DACA be drafted prior to a budget bill.
The healthcare debate also plays a role in the budget negotiations. The cost-sharing reduction payments and the subsidies for the reinsurance program are sticking points for many in Congress, and both issues were dropped from the tax reform bill that was passed late last year. One more potential complication for the budget bill will be the pending renewal of a Foreign Intelligence Surveillance Act (FISA) authorization that expires the same day as the federal budget resolution. If the FISA authorization is attached to the budget legislation, the debate related to the pending FISA renewal may pose a problem for the entire budget bill.
