THIS WEEK IN WASHINGTON
June 24, 2022
Editor’s Note: 
This morning’s Gold Dome Report misstated two of the Georgia runoff returns. McCormick won in the 6th District and will face Democrat Bob Christian in November, while Lucy McBath in the 7th District will face Mark Gonsalves this fall. We regret this error and apologize for any undue confusion.
Welcome to the Georgia edition of This Week in Washington. Thank you for your interest in politics and policy from the Peach State to the Potomac.
 
Patrick Robertson leads off today’s edition with his Washington Whispers column, where he focuses on the workings of Congress by highlighting the research and development tax credit. Al Jackson brings us up to date on defense issues and defense appropriations.
 
Jesse Weathington gives us the latest in Georgia with his Gold Dome Report. In today’s Infographs, you’ll find one on the R&D tax credit, as discussed in Washington Whispers.   
 
We recently shared a Total Spectrum Spotlight interview between Congressman Erik Paulsen and Senator Tim Scott (R-SC). In case you missed it, we’ve included it in today’s edition. Be sure to watch this short but significant interview of one Senator who is on everybody’s list of rising stars in Washington.
 
We’ll be back in two weeks for the next issue of This Week in Washington.
 
As always… stay safe, healthy, AND sane.

Todd Smith
Chairman, Georgia Group

Jesse Weathington
Director, Georgia Group
Washington Whispers
By Patrick Robertson, Total Spectrum Strategic Consultant
 
Although the narrative in Washington is often one of paralysis and inaction, I try to show where Congress is moving legislation, like the China competitiveness bill and this week a modest compromise on legislation surrounding guns. But to truly understand Washington, it is also important to understand why pieces of legislation do not move and why compromise is so elusive.
 
This week’s edition of This Week in Washington details the recent changes to the Research and Development Tax Credit and how the 2017 move to weaken that incentive could be undone. You may wish to reference the related Infograph on Business R&D Deductions for additional detail. I recently spoke on a panel at a state Bar Association tax section and the entire conversation was about the R&D credit.
 
For many years, the R&D credit was a temporary provision in the tax code, in place for somewhere between one and five years; it would then be extended by Congress in a package called Tax Extenders along with many other temporary provisions. Businesses successfully argued that this short-term extension of this provision would not incentivize the kind of activity Congress wanted because there was not enough certainty that the credit would continue to be in place.
 
In 2015, the R&D Tax Credit was made permanent by Congress, and it seemed the long winding road of extenders had come to an end. The Protecting Americans from Tax Hikes (PATH) Act also included significant changes to tax benefits for lower income Americans including the Earned Income Tax Credit and the Child Tax Credit. At the end of the day, this bill was an excellent example of Obama-era dealmaking because some provisions in the tax code were expanded for everyone.
 
However, when Congressional Republicans and President Trump reformed the tax code in 2017, they looked to significantly lower the corporate tax rate and help keep the cost of the proposal to the Treasury within reasonable boundaries. While U.S. businesses generally agreed that lowering the corporate rate to between 25-28% would make them more competitive, the final bill brought the U.S. corporate rate down to 21%.
 
To help offset the ‘costs’ of getting to the new lower corporate rate, other tax provisions like the R&D Credit were changed once again in a sort of phase out by the end of 2022. Effective January 1, 2022, companies will have to stretch their R&D tax credits over several years rather than taking them in one year. This, going forward, reduces the value of the credit to the companies.
 
As you can imagine, the business community is nearly unanimous in its desire to change the law and take the credits all in one year. Many Congressional Democrats and Republicans support, in isolation, making the change as well. But this is far from a slam dunk because of the politics.
 
In the American Rescue Plan, passed early last year, Democrats significantly expanded the anti-poverty Child Tax Credit. However that expansion expired at the end of 2021, and Democrats have not been able to renew it. Republicans do not support an expansion as broad as the one Democrats secured.
 
Most Democrats, even those who support the R&D changes, are not willing to make corporate tax improvements without individual improvements and Republicans seem to be dug in on their opposition to the individual expansion Democrats want. Democrats also are not keen on fixing something Republicans did in a partisan 2017 tax bill that excluded Democrats.
 
As a result, we remain in a standstill on all tax provisions going into the heat of the summer. We will stay on top of this issue and many others heading into the fall and early winter when a deal is possible.
Gold Dome Report
by Jesse Weathington, Partner and Georgia Group Director

This week in Peach State politics saw the parties settle on nominees in primaries that were not decided in May. A truncated run-off period contributed to generally low turnout – summer has most voters’ minds elsewhere, and primary run-offs are typically for hard-core partisans. As noted in the previous Gold Dome Report, the GOP determined most of their nominees last month, with three U.S. House races and a smattering of state legislative runoffs this week. The Democrats on the other hand had a few statewide races to decide who will round out the ticket topped by Sen. Raphael Warnock and Stacey Abrams this fall.
 
In the 10th Congressional District, the quixotic quest of Vernon Jones to remain relevant as a born-again MAGA Republican was dealt a mortal blow by Mike Collins, who blew Jones out of the water running as a more traditional GOP candidate. Despite this setback, it is doubtful that we have seen the last of Mr. Jones, a perennial candidate who was persuaded to back out of a hopeless challenge to Governor Brian Kemp by former President Trump and into the 10th District race. In the 6th District GOP primary, Dr. Rich McCormick easily dispatched attorney Jake Evans, scion of party heavyweight Randy, and will face Bob Christian in November. To the southwest, Chris West was able to narrowly defeat Jeremy Hunt to secure the right to challenge longtime Rep. Sanford Bishop in the 2nd. Notably, Collins and McCormick were able to easily prevail in their contests despite their opponents having the support of former President Donald Trump, whose attempt to assert his hold over the Georgia GOP has not borne fruit. Down ticket, far-right candidates also generally failed to break through, and Speaker David Ralston will replace a few gadflies with allies in the House of Representatives next year.
 
On the Democratic side of the ledger, voters chose former prosecutor Charlie Bailey for their nominee for Lieutenant Governor over former Atlanta City Councilman (and briefly Congressman) Kwanza Hall. The other major contest for Democrats was in the selection of a nominee for Secretary of State, which was handily won by State Rep. Bee Nguyen. Bailey will face State Sen. Burt Jones and Nguyen will attempt to unseat incumbent Brad Raffensperger in November. (Both Bee and Brad will get some high-profile time in front of the Jan. 6th Committee this week). Stacey Abrams was able to put her stamp on the ticket, backing the eventual winners with her run-off endorsements.
Partner and
Georgia Group Chairman

Partner and
Georgia Group Director

Partner

Partner
Senator Tim Scott (R-SC)
ICYMI: Senator Tim Scott (R-SC) is a rising star in Washington, and that’s acknowledged by people on both sides of the aisle. His intellect, communication skills, and uncommon common sense have made him a quiet leader on all the committees on which he serves – Finance; Banking, Housing, and Urban Affairs; Health, Education, Labor, and Pensions; and Small Business – and on the Floor of the Senate.
 
He often talks about his goal to positively impact lives. His signature achievement was the creation of Opportunity Zones, which became part of the 2017 tax reform legislation. Opportunity Zones have brought billions of dollars in private investment into distressed areas throughout our country, which in turn has brought jobs, hope, and new opportunities for millions of Americans.
 
Senator Scott is a former small business owner, having operated an insurance agency in Charleston. He is in his second term in the Senate, and previously served on the Charleston Country Council, the South Carolina House of Representatives, and the U.S. House of Representatives before being sworn into the U.S. Senate in 2013.
 
Congressman Erik Paulsen sat down with Senator Scott to talk about the viability of the American Dream through access to education and the Senator’s commitment to Opportunity Zones as a vehicle for positive change. Senator Scott also talked about the headwinds facing small businesses, how funding reform is inextricably intertwined with criminal justice reform, and why we must address supply chain issues through infrastructure investments. 
 
Watch this relatively short interview, and you’ll see why Senator Tim Scott is a rising star.
INFOGRAPHS
Click image to download full report
What you need to know about Eased and Extended Telehealth Rules
What you need to know about Business R&D Reductions
Federal Reserve raises interest rates to fight inflation
What you need to know about SEC Ownership Disclosure Rules
Covid-19 test requirements for travelers lifted as hospitalizations slowly level out
Where extreme heat hits the hardest
Defense Update
By Al Jackson, Total Spectrum Strategic Consultant

In their version of the National Defense Authorization (NDAA) bill, Senate Armed Services Committee members added $45 billion to the Fiscal Year (FY) 2023 budget request of the administration. The $847 billion top line represents an 8% increase over what was authorized in FY2022. The Senate NDAA bill includes a 4.6% pay raise for troops; offers language requiring all women to register for potential future military drafts; and increases funding for procurement of a host of combat aircraft, naval vessels, armored fighting vehicles and munitions. The House Armed Services Committee is expected to add $37 billion to the FY2023 budget request. 
 
House Democrat Appropriators, in concert with the Biden Administration’s budget request, only provided a $32 billion increase over the FY2022 defense budget to the tune of $762 billion. By contrast, Republicans and some centrist Democrats desired a FY2023 budget raise of 3% - 5% above historic inflation rates. In the initial draft, the funding bill would provide $7.2 billion for 61 new F-35 fighters. The legislation also provides the full $1.7 billion the Air Force sought for its Next Generation Air Dominance program and cuts by one-quarter the number of F-15EX fighters the Air Force requested for FY2023. The legislation includes $1.9 billion to buy 18 F-15EX fighters next year, down from the 24 the Air Force sought at a price tag of $2.7 billion.
 
The Senate Armed Services Committee’s version of NDAA includes language to divest 21 A-10s at Fort Wayne Air National Guard Base in Indiana. The Air Force has repeatedly asked Congress for the authority to divest from the A-10 program. However, last year’s FY2022 NDAA bill did not allow the Air Force to cut 42 A-10 aircraft from service, due in large part to resistance from the Arizona delegation, as 35 of those aircraft based in Arizona would have gone away. 
 
After Hurricane Michael devastated Tyndall Air Force Base in 2018, the installation was revitalized when the service announced plans to base three F-35 Joint Strike Fighter squadrons there. The challenge has been finding qualified maintainers for the F-35. The Air Force had originally planned to use maintainers from the A-10 Warthog program, as their goal was to retire those aircraft. Instead, as previously mentioned, the Arizona delegation prohibited the Air Force from retiring those aircraft via the FY2022 NDAA legislation. When the Air Force was prohibited from reducing its A-10 inventory in FY2021 and FY2022 from 281 to 218 aircraft, the service was required to keep about 920 people tied to the Warthog instead of being able to redirect those personnel to other billets. Thirty-five of those aircraft were slated to come from Davis-Monthan Air Force Base in Arizona. It’s unclear exactly how Tyndall AFB will find maintainers for its new F-35 aircraft but it is not the only base affected - Hill AFB (Utah), Eielson AFB (Alaska), as well as training squadrons at Luke AFB (Arizona) and Eglin AFB (Florida) are impacted. 
 
Congress hoped to free up Air Force maintainers for the F-35 by adding $185 million for F-35 sustainment and $70 million for A-10 sustainment in the FY2022 appropriations bill. However the issue remains, thereby putting the A-10s future in doubt per the Air Force’s desire to divest the aircraft. This year’s Senate version of NDAA begins that process.
This e-newsletter is produced by Total Spectrum/SGA and Total Spectrum Georgia. The views expressed herein may include subjective commentary and analysis that are the views of the editors and authors alone. Information in this e-newsletter is obtained from sources believed to be reliable, but that cannot be guaranteed as independently investigated or verified. Information in this e-newsletter is not an endorsement, advertisement, recommendation, or any type of advice, political, legal, financial, or otherwise. With questions about the content of this e-newsletter, please contact Total Spectrum Georgia.