Volume 5 | Issue 18 | May 02, 2014
House passes ACA technical fix, while minimum wage
hike fails to advance in Senate
The House passed a technical modification to the Affordable Care Act addressing expatriate
plans, while a proposed hike in the federal minimum wage failed to advance in the Senate. Tax
extenders legislation will be considered in the weeks ahead by the Senate. It is possible that the
cost of this legislation may be offset by revenue provisions — such as an extension of MAP-21
pension interest rate smoothing.
In this article: Week in review | Weeks ahead
Week in review
The House of Representatives (House) passed a technical modification to the Affordable Care Act (ACA) this week
that will likely stall in the Senate. In addition to considering an increase in the minimum wage, Congress also reviewed
legislation that would limit the ability of states to tax compensation earned by employees temporarily working within
their borders.
Health care
The House passed H.R. 4414 on Tuesday (268 to 150) — a bill that would provide an exception to the ACA for plans
that cover expatriates. The bill is unlikely to be brought up in the Senate (two-thirds of the Democrats in the House
opposed the bill). Further, the Obama administration announced that it does not support the measure in its current
form — explaining that it reduces protections for consumers and creates tax loopholes.
The original version of H.R. 4414 was brought up in the House for a vote earlier this month under expedited
parliamentary rules, but failed to pass at that time (257 to 159) since two-thirds approval is required under those rules.
See our April 11, 2014 Legislate for more information on the original version of the bill.
The version of H.R. 4414 that was approved by the House on Tuesday contains more restrictive provisions, pursuant
to an amendment submitted by Representatives Devin Nunes (R-CA) and John Carney (D-DE). For example, the bill
as amended requires that individuals must be abroad for at least 180 days during a 12-consecutive-month period
(instead of 90 days or 15 trips abroad) to qualify as an expatriate. These modifications, however, were not sufficient to
win administration and significant support among House Democrats.
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Volume 5 | Issue 18 | May 2, 2014
Labor and employment
This week the Senate debated — but failed to
advance — an increase in the minimum wage,
while the House reviewed legislation on the state
income taxation of wages earned by workers who
live in one state but perform work in another.
Minimum wage. On Wednesday, S. 2223 failed to
clear a procedural hurdle in the Senate that would
allow an up or down vote. The bill would increase
the federal minimum wage to $10.10 per hour in
three steps over two and one-half years with
automatic COLA increases for later years, and
would provide more favorable expense deduction
rules for certain businesses. S. 2223 is identical to
S. 1737 (see our March 14, 2014 Legislate for
more information on S. 1737).
Confirmation of Wage and Hour Division
chief
On Monday, the Senate confirmed David Weil, PhD
as the DOL’s new Wage and Hour Division (WHD)
Administrator.
Dr. Weil is the author of a May 2010 report to WHD
that examined the structure of industries employing
large numbers of vulnerable workers — generally
lower-wage and less skilled employees — where the
use of subcontracting, third-party management,
franchising, self-employed contracting, and other
contractual forms that alter who is the employer of
record is widespread (“fissured industries”). In the
State taxes for mobile workers. On Tuesday, a
DOL’s Strategic Plan for Fiscal Years 2011-2016, the
subcommittee of the House Judiciary Committee
WHD indicated that its enforcement program would
held a hearing on H.R. 1129 — the Mobile
target fissured industries, such as agricultural,
Workforce State Income Tax Simplification Act of
construction, janitorial, and hotel/motel industries.
2013. The bill would limit state income taxation of
an employee’s wages (as well as the employer’s
Notably, the administration’s budget proposal for FY
state income tax withholding and reporting
2015 indicates an increased focus on wage and hour
requirements) to the employee’s state of residence
issues—such as minimum wage and overtime pay
and to a non-resident state(s) where the employee
violations. (See our March 7, 2014 Legislate for more
is present and works for more than 30 days during
the calendar year in which the wages are earned.
information.) The extent to which Dr. Weil’s report
Private sector witnesses testified on compliance
foreshadows his enforcement priorities at WHD
burdens both employees and employers currently
remains to be seen.
face in dealing with complex and often inconsistent
state laws. Testimony highlighted the challenges
employers can face when employees live in one state but work in another or have temporary out-of-state work
assignments. A witness representing state tax administrators opposed H.R. 1129, testifying that income should be
taxed where it is earned, and the bill would result in significant revenue loss for some states and limit enforcement of
state income tax laws.
Weeks ahead
The Senate is likely to consider tax extenders legislation (S. 2260) that was approved by the Senate Finance
Committee several weeks ago. Among other expired tax benefits, the bill would extend parity in the dollar amount
between monthly mass transit benefits (currently $130) and parking benefits (currently $250) under a qualified
transportation fringe benefit plan. The bill would also extend certain funding rules for multiemployer pension plans that
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Volume 5 | Issue 18 | May 2, 2014
expire at the end of this year. (See our April 4, 2014 Legislate for more information on this legislation.) Some of the
cost of the legislation may be offset in the bill that is actually considered on the Senate floor. If so, some revenue
raising offsets that might be used by the Senate are described below.
Even if the Senate is able to pass tax extenders legislation, the House is taking a slower approach. Chairman Dave
Camp (R-MI) of the House Ways and Means Committee (the tax-writing committee) intends to hold hearings over the
spring and summer to consider the merits of the tax extenders. During a mark-up on Tuesday, the committee
approved six out of the 50-plus tax extenders, but left more than 40 others for future consideration. Tuesday’s markup
addressed expiring tax provisions that affect income and deduction rules for businesses — for example, research and
development expenses.
Revenue from pensions and retirement
MAP-21 pension interest rate smoothing and pre-payment of PBGC premiums are two revenue offsets that the
Senate has proposed using recently and might re-propose if there is a future need for revenue offsets. See our
April 11, 2014 Legislate for more information on the use of these pension offsets in H.R. 3979, as amended by the
Senate — a bill that would extend expired unemployment benefits for five months, and that passed the Senate, but
has been ignored to date by the House.
Revenue from tax reform
It is possible that the Senate might seek to use revenue offset provisions from Chairman Camp’s tax reform draft.
That tax reform proposal would raise significant amounts of revenue by changing the tax rules for employersponsored retirement plans, fringe benefits, employment taxes, and executive compensation. (See our February 27,
2014 FYI Alert for more information on the Camp tax reform proposal.)
Authors
Drew Crouch, JD, LLM
Nancy Vary, JD
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