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>> Federal: Remainder of This Year
The 2018 midterm elections were held yesterday and as predicted Republicans maintained control of the Senate and Democrats gained a majority in the House. While some races are still too close to call, Republicans now hold at least 51 Senate seats, which is expected to increase by one or two, and Democrats now hold 220 of the 435 seats in the House, with 21 seats still waiting to be declared.
On the state level, there was a noticeable shift in governorships. Prior to the election, there were 33 Republican governors, 16 Democratic governors, and one independent. Now, 25 governorships are Republican and 22 are Democratic, with three races still too close to call. It’s important to note that Congressional redistricting will begin in 2020, and governors often have a heavy hand in that process, which could remake Congressional delegations in several states.
There were policy issues at play, such as tax reform, immigration, and health care, to name a few. Then there were electorate factors, such as how millennials, women, and minority voters turned out at the polls, as well as how record amounts of money spent this cycle impacted the outcomes (if at all). And then there’s the Trump factor. President Trump spent a lot of time stumping for Senate candidates in states he won in 2016, and for some (think Missouri, North Dakota, Indiana) it appears to have paid off. However, the influence of his endorsement appeared weaker in House races. All of this will inform future elections as well, so stay tuned.
With the amount of losses, retirements, and committee term limits, we expect a lot of turnover in committee leadership and membership in the 116th Congress, specifically for the two committees that are the most consequential for charitable giving.
The Ways and Means Committee is expected to look significantly different in 2019. The current mix is 24 Republicans and 16 Democrats. Given the number of seats Democrats picked up last night (coupled with two retirements), they’ll add more than a few members to their side. Republicans may just need to add one or two because of six retirements and four losses last night – Reps. Eric Paulsen (R-MN), Carlos Curbelo (R-FL), Peter Roskam (R-IL) and Mike Bishop (R-MI).
Despite the turnover however, there are not likely to be any changes at the top of those committees. Ways and Means Ranking Member Richard Neal (D-MA) is expected to take over as chairman, with Chairman Kevin Brady (R-TX) to serve as the ranking member. As you may recall, current Ranking Member Neal has been an ally to the charitable sector during his tenure. At a hearing on “Tax Reform and Charitable Contributions” back in February of 2013 (the only hearing in recent memory focused on charitable giving), Neal said “… I think protecting the charitable contribution [deduction] is a very important part of this tax reform discussion because it induces behavior, it incents behavior, and that is a theme that is neither Republican nor Democratic.” We expect to work closely with him and his staff.
On the other side of the Capitol, Senator Chuck Grassley (R-IA) will likely take over as chairman of the Senate Finance Committee with Chairman Orrin Hatch (R-UT) retiring at the end of this year, and Senator Ron Wyden (D-OR) is expected to remain ranking member. As former leader of the Senate Finance Committee in the early to mid-2000s, Senator Grassley proved tenacious in his scrutiny of the sector. This link provides an overview of his accomplishments in Congress as well as with the IRS as it relates to nonprofit oversight. It is unclear whether Senator Grassley is going to prioritize scrutiny of the sector when he takes up his gavel next year.
Once all the races are called, Congress will return to the business at hand – the lame duck session – where Republican and Democratic leaders in both chambers are expected to tackle several policy priorities. Although both parties have a variety of priorities on their wish lists for lame duck, the most pressing issue is the need to pass a spending bill before a significant portion of government funding expires on December 7. Other priorities for lawmakers include a tax package addressing technical corrections; retirement legislation and tax extenders; a farm bill; criminal justice reform; and judicial confirmations, to name a few. However, now that Democrats have gained control of the House, we could see a less ambitious session – they’d rather compromise when they’re in control of the House than now. Stay tuned over the next several weeks for what’s to come.
As for planning for next year, the respective caucuses will also hold leadership elections for the next Congress, finalize incoming chairman and ranking members, and decide the mix of Republicans and Democrats on each committee. House and Senate leadership elections are expected to be held between mid-November and early December, and everything else will follow those. As for new members of committees, we don’t expect any final roster until January at the earliest. There’s always a lot of jockeying for the Ways and Means and Finance Committees, and they are awarded very judiciously.
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