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Friday, February 17, 2017

Congress divided over private vs federal spending on infrastructure

posted by: Kirill Abbakumov

In his inaugural speech, President Trump said infrastructure had "fallen into disrepair and decay," and vowed to "build new roads and highways and bridges and airports and tunnels and railways” all across the nation. In a nod to creating more jobs by boosting infrastructure, Trump emphasized that people needed to “get off of welfare and back to work rebuilding” the country with American labor. Trump’s promise became approximately $180 billion in federal spending and tax credits to leverage private capital that would total $1 trillion over 10 years.

In one approach to accomplish this goal, President Trump called for levying an immediate 10% tax rate on U.S. profits held overseas in what is known as a "deemed repatriation."  As the tax committees try to write overhaul legislation, Republicans are split on how to use President Donald Trump's proposed repatriation of $2.6 trillion in corporate cash held overseas. Some argue in favor of using repatriated funds to finance Trump’s call for infrastructure improvement, while others say any new tax revenue should be put toward a sweeping tax code rewrite and are opposed to using it on other spending. There could be efforts to revive a stymied tax repatriation plan that was negotiated in 2015 as a potential add-on to the surface transportation reauthorization FAST Act (PL 114-94).

Trump hasn’t provided spending details of his plan, but its reliance on the private sector has encouraged the view that most of the money would go to projects where profits are easiest to project. A Republican infrastructure package would touch areas under Energy and Commerce jurisdiction, like the electric grid and telecommunications. Measures in those areas would be unlikely to include direct federal dollars, but would instead focus on reducing regulations that would allow the private sector to more easily upgrade its own infrastructure, he said. Republican Main Street’s legislative goals also include modernizing the air traffic control system, though the group didn’t explicitly endorse the proposal to spin off the system’s responsibilities to a private non-profit organization.

Meanwhile, Democrats propose that the $1 trillion plan to stimulate infrastructure be accomplished through direct federal funding to jump-start the economy, an alternative to Trump's plan to rely largely on the private sector for the same amount of money. Ranking Democrats of several Senate committees announced at a news conference they would distribute $1 trillion over 16 categories of infrastructure, including $200 billion for a “critical infrastructure program,” $130 billion for transit, $110 billion for water and sewer programs, and $100 billion each for roads and bridges, to “revitalize Main Street” and for energy infrastructure. The plan also calls for funding for “innovative financing tools,” expanding the Department of Transportation’s Transportation Investment Generating Economic Recovery (TIGER) grant program, and expanding rural broadband. Ambitiously, the Democrats also called for a “Buy America” provision requiring that materials used in federal infrastructure projects be made in the United States. The senators said the legislation would create 15 million jobs.

In a Gallup Poll released on January 20, 69% of respondents said it is “very important” to enact a major spending program to strengthen infrastructure, while 54% hold the same view about Trump’s promise to reduce income taxes for all Americans.

Thursday, February 16, 2017

US Energy Plan omits renewables and promising solar jobs growth

posted by: Kirill Abbakumov

On January 20, the White House has released its An America First Energy Plan which emphasizes on the potential of untapped shale, oil, and natural gas reserves of the United States as the future of American economy. Yet the Energy Plan did not take into consideration the potential of the clean energy revolution that continues to annually create many new jobs in the renewable energy.

With electricity in the country cheaper today than it was 25 years ago, solar and wind power has become cost-competitive with oil and natural gas, helping to maximize the use of American resources. Today, more than 2.5 million Americans work in clean energy, with 414,000 people in the renewable technology sector such as wind and solar.

The U.S. solar industry is leading the way, as it continues to post dramatic job growth numbers each year. The non-profit Solar Foundation’s new annual report highlights that more than 260,000 Americans now work in the solar industry, with 51,000 solar industry jobs created in 2016 alone, which is a 24.5% increase since 2015. The report also emphasizes that solar jobs have tripled since 2010, and this is the 4th consecutive year that the solar industry increased its jobs number by 20% or more.

Over half of the American solar jobs are in the installation of solar panels, especially for residential uses and larger solar arrays, as more and more American families and businesses are turning to solar. About 10-30% of jobs are also in the manufacturing of solar panels. The Solar Foundation’s report calculates that for total jobs, solar is now the second largest U.S. energy industry, second only to oil and petroleum, while considerably larger than coal.

Majority of solar jobs have been in the states along the east and the west coast of the country. The solar leader in the country is California, with 100,000 jobs, but solar jobs generally grew in states across the country. In Indiana, they nearly doubled from 1,567 to 2,700 in one year. Other states seeing big growth included Louisiana, Michigan, Texas, and Utah.

Yet with the new administration in the White House, the industry’s growth is not expected to be as fast in 2017, with an estimated 10% overall growth. This might partly be because the industry will be losing some of its Obama-era exuberance and trying to figure out how to shift into the Trump years. With dwindling federal support, there is a risk of the industry losing numerous initiatives, grants, and subsidies in the near future.

Thursday, February 9, 2017

Annual Congressional report on state of US manufacturing released

posted by: Kirill Abbakumov

The health of the U.S. manufacturing sector has long been of great concern to Congress. The decline in manufacturing employment since the start of the 21st century has stimulated particular congressional interest. The Obama Administration has undertaken a variety of related initiatives, and Members have introduced hundreds of bills intended to support domestic manufacturing activity in various ways. The proponents of such measures frequently contend that the United States is by various measures falling behind other countries in manufacturing, but are often relying on data that is over 5 years old or more, and are not accounting for improvements stimulated with federal policy and initiatives in recent years.

In order to present a more accurate picture of the contemporary U.S. manufacturing sector, the Congressional Research Service released its annual report titled U.S. Manufacturing in International Perspective on January 18. It is designed to inform the debate over the health of U.S. manufacturing through a series of charts and tables that depict the position of the United States relative to other countries according to various metrics. Understanding which trends in manufacturing reflect factors that may be unique to the United States and which are related to broader changes in technology or consumer preferences may be helpful in formulating policies intended to aid firms or workers engaged in manufacturing activity. This report does not describe or discuss specific policy options.

Key takeaways from the 2017 report:

  • S. manufacturers use relatively fewer imported inputs and more domestically produced inputs, compared to manufacturers in other countries, with the notable exception of Japan;
  • Capital investment in manufacturing is on par with other Western countries (a little below Canada and Germany), but lower than Korea and China;
  • Manufacturing employment is down, as measured by both employees and hours worked. This it's true of all the developed countries;
  • Productivity growth has been 49% between 2002 and 2014 and is higher than most of the other Western countries, except for Japan (53%), Korea (94%), and Taiwan (97%);
  • Average 2015 compensation in manufacturing was $37.71 per hour, being higher than 26 of 34 other countries and is partly due to the strong dollar;
  • S. Manufacturers spend more on R&D than anyone except China, followed by Japan, Germany, and Korea. As a share of value add, U.S. is number 2, behind Japan. China is very low by this measure.
Monday, February 6, 2017

SBA nominee outlines key agency priorities for 2017

posted by: Kirill Abbakumov

On January 24, Linda McMahon, the nominee to lead the Small Business Administration (SBA) met with the Senate Small Business Committee at her confirmation meeting to outline the objectives and priorities she proposes for the agency. Her most significant argument was not to merge SBA into another agency, but rather have it continuing operating independently, as dialogue arose previously about the management of the agency as an independent body.

In her statement, McMahon stressed the need for the economy to encourage businesses taking risk. In particular, she claimed that small businesses need to be reassured on the risks they take when they plan to expand or hire new workers without fearing onerous new regulations, or unexpected taxes, fees and fines that will make such growth unaffordable.

McMahon also said one of her priorities at the SBA would be taking a close look at its disaster relief program, noting that the agency was slow to respond in the wake of Superstorm Sandy in 2012. The agency and its resources must be readily mobilized and effectively implemented for disaster relief.

Despite inquiry by the Senate Committee about Waters of the United States (WOTUS) Act, McMahon declined to say that she would write the EPA to ask for it to withdraw the WOTUS rule expanding federal authority under the Clean Water Act.

Thursday, February 2, 2017

President of EXIM Bank steps down

posted by: Kirill Abbakumov

On January 19, 2017 the Export-Import Bank of the United States (EXIM) bid farewell to its longest sitting Chairman and President, Fred Hochberg. He was at the helm of the agency for 8 years. Hochberg’s departure adds to an already long list of banking and financial services-related appointments awaiting President Donald Trump.

The last two years of Hochberg’s tenure were marred by political fighting over the Bank and its mission. With some members of Congress complaining that the EXIM’s loan and credit programs amounted to corporate welfare, its authorization was allowed to lapse for 6 months until the end of 2015. After reauthorization by Congress, Alabama Sen. Richard C. Shelby, who was chairman of the Senate Banking Committee in the 114th Congress, continued to hold up nominations to the EXIM Bank’s board. Since early 2015, the board does not have a quorum, which prevents the Bank from making any deals of $10 million or more.

In the Bank's annual report issued January 4, Hochberg blamed the slow reauthorization and lack of a board quorum for a decline in the Bank’s business to a 40-year low. Business at EXIM, which helps finance exports by American businesses, was down 60 percent in fiscal 2016 and down 75 percent from a high in 2014, the final full year in which the Bank was both authorized and had a quorum on its five-member board, according to the report. 

Besides the positions at the EXIM Bank, Trump will have two picks to make for the five-member Securities and Exchange Commission — where he's chosen Jay Clayton as chairman—as well as two picks to the seven-member Federal Reserve Board of Governors and three picks to the five-member Commodity Futures Trading Commission.

Tuesday, January 31, 2017

House Small Business Panels get new chairmen

posted by: Kirill Abbakumov

House Small Business Chairman Steve Chabot, R-Ohio, announced four new subcommittee chairmen Tuesday, including those replacing departed Reps. Tim Huelskamp of Kansas, Richard Hanna of New York and Cresent Hardy of Nevada.

Rep. Dave Brat of Virginia takes over as chairman of the Subcommittee on Economic Growth, Tax and Capital Access, replacing Huelskamp, who was defeated in his district’s party primary and has left Congress.

Rep. Steve Knight of California assumes the chair of the Subcommittee on Contracting and Workforce, replacing Hanna, who retired.

Rep. Trent Kelly of Mississippi was named chairman of the Subcommittee on Investigations, Oversight and Regulations, replacing Hardy, who was not re-elected.

Also, Rep. Rod Blum of Iowa becomes chairman of the Subcommittee on Agriculture, Energy and Trade, which in the 114th Congress was chaired by Rep. Carlos Curbelo of Florida, who has now moved to the House Ways and Means Committee.

Rep. Aumua Amata Coleman Radewagen of American Samoa is the only panel member to keep her subcommittee gavel in the current Congress. She's chairwoman of the Subcommittee on Health and Technology.

Friday, January 27, 2017

New president faces new fiscal challenges

posted by: Kirill Abbakumov

On January 20, 2017, Donald J. Trump became the 45th President of the United States. On January 19, the Senate adopted the budget resolution 51-48 passed by the House earlier in the week. The 2017 budget resolution (S Con Res 3) is primarily aimed at repealing the 2010 health care law. The concurrent resolution does not require a signature from the president and does not become law. For economic development, in his campaign President Trump vowed to launch a $1 trillion infrastructure program and slash taxes for all income levels.

The Government Accountability Office, the investigative arm of Congress, has released a new report on January 16 titled GAO Report to Congress: The Nation’s Fiscal Health. The report claims that even before any new spending programs or tax cuts get adopted, the country is on the verge of fiscal ruin. Soaring costs of entitlement programs, from an aging population and rising health care costs, will combine with increasing interest payments to push the federal debt to record levels. While such projections have been made previously, the new report underscores the fiscal stakes awaiting the Trump administration as it tries to translate vague campaign promises into legislative action.

The annual deficit in 2016 was $587 billion, up from $439 billion in fiscal 2015 and the first increase after six consecutive years of decline. While revenue increased by $18 billion last year, spending increased by $166.5 billion, thereby widening the deficit. The main drivers of the spending surge were Social Security, Medicare, Medicaid and interest on the debt.

In preparing to draft its first budget request to Congress, the Trump administration is getting advice from the Heritage Foundation and the Republican Study Committee, the largest bloc of conservative House members. Both groups have offered budget blueprints that call for deep reductions in planned spending on entitlements such as Social Security and Medicare. President Trump is expected to submit an outline of his fiscal 2018 budget request in late February, followed by a more detailed spending plan by May, according to congressional Republicans. Members of his transition team have met with both groups to review their budget plans, which would draw sharp protests from Democrats and signal a dramatic shift in fiscal policy if adopted.

Thursday, January 26, 2017

US Chamber of Commerce publishes 2017 economic outlook

posted by: Kirill Abbakumov

On January 18, 2017, the United States Chamber of Commerce released its economic outlook for the current year. The publication emphasized a positive business outlook and improved business investment based on the outcomes of the 2016 Presidential Election, in which President Trump promised more support for American manufacturers, producers, and small businesses.

The US Chamber speculates that economic growth in 2017 will settle in the range of 2-2.5%, slower than 2015’s still modest 2.6% but a bit better than the expected 1.6% growth of 2016. These predictions are in line with those released by the Congressional Accountability Budget in their The Nation’s Fiscal Health report the same week.

Other highlights of the publication include:

  • The labor market added 2.2 million net new jobs in 2016 compared with 2.7 million in 2015 and 3.0 million in 2014. The unemployment rate closed 2016 at 4.7% and is expected to remain near this level for the next few years.
  • Personal consumption expenditures, which slowed in Q3 to 3.0% from 4.3% in Q2, are expected to improve modestly in Q4 largely driven by steady job and wage growth.
  • Real business fixed investment declined in three out of the last four quarters, and through Q3 it was down 1.1% year over year. The causes of weak business investment had been operation capacity of businesses, which stood at 80% throughout 2016.

Business confidence has improved markedly as businesses anticipate a more growth-friendly Trump administration. The US Chamber hopes that the administration and Congress can make some changes quickly to improve the business environment, by reversing certain Obama administration executive orders, halting some regulations, or by overturning recently finalized regulations through the Congressional Review Act.

Tuesday, January 24, 2017

DHS seeking public feedback on improving the EB-5 program

posted by: Kirill Abbakumov

On January 11, 2017, the Department of Homeland Security (DHS) announced that it is seeking public feedback on potential regulatory changes to the EB-5 Immigrant Investor Regional Center Program. DHS has determined that program changes are needed to better reflect business realities for regional centers and EB-5 immigrant investors, to increase predictability and transparency in the adjudication process for stakeholders, to improve operational efficiency for the agency, and to enhance program integrity.

The EB-5 Program was enacted as part of the Immigration Act of 1990, and established the EB-5 immigrant visa classification to incentivize employment creation in the United States. Under the EB-5 program, lawful permanent resident status is available to foreign nationals who invest at least $1 million in a new commercial enterprise that will create at least 10 full-time jobs in the United States.

This notice provides an opportunity for DHS to hear and consider the views of the public on potential changes to improve and modify the EB-5 Program. DHS invites feedback from all interested parties, including regional centers, investors, advocacy groups, nongovernmental organizations, community-based organizations, and legal representatives who specialize in immigration law, as well as corporate and securities law. DHS welcomes comments on any and all aspects of proposed changes, and the feedback is expected to help shape the outcome of this possible rulemaking.

DHS is seeking comments from stakeholders on specific topics such as:

  • The process for initially designating entities as regional centers;
  • A potential requirement for regional centers to utilize an exemplary filing process;
  • “Continued participation” requirements for maintaining regional center designation;
  • The process for terminating regional center designation.

More information is available through the Federal Register. The deadline to submit comments and feedback is on or before April 11, 2017.

Thursday, January 19, 2017

SBA to modify the SBIC Program

posted by: Kirill Abbakumov

In December 2016, the Small Business Administration announced a number of proposed changes to its Small Business Investment Company (SBIC) Program. SBIC is an SBA financing program created to stimulate and supplement the flow of private equity capital and long-term loan funds, which small-business concerns need for the sound financing of their business operations and for their growth, expansion, and which are not available in adequate supply. Through the SBIC Program, SBA licenses and provides debenture leverage to privately-owned and professionally managed for-profit SBIC investment funds that invest in small businesses.

On December 16, 2016 SBA proposed to increase the SBIC licensing and examination fees. Presently, the SBA is allowed to collect licensing and examination fees to offset SBA’s costs associated with the administration of these two activities. SBA last increased fees for SBICs in 1996 and current fees offset less than 40% of SBA's administrative expenses related to these activities. The proposed rule would revise existing regulations to increase, over a 5-year period, SBIC licensing and examination fees in order to annually recoup an estimated 70% of SBA administrative expenses related to these activities. After the 5 year period, the rule proposes annual increases of these fees based on inflation. To encourage investment into underserved areas, the proposed rule would establish certain examination fee discounts for SBICs that make significant low and moderate income investments. SBA invites stakeholders and the public to submit comments on the proposed rule on or before February 14, 2017.

In addition, on December 28, 2016, SBA announced that it is revising regulations for the SBIC program to expand permitted investments in passive businesses and provide further clarification with regard to investments in such businesses. SBICs are generally prohibited from investing in passive businesses under the Small Business Investment Act of 1958, but the new regulations will provide for two exceptions that allow an SBIC to structure an investment utilizing a passive small business as a pass-through:

  • The first exception will provide conditions under which an SBIC may structure an investment through up to two levels of passive entities to make an investment in a non-passive business that is a subsidiary of the passive business directly financed by the SBIC.
  • The second exception will enable a partnership SBIC to provide financing to a small business through a passive, wholly-owned C corporation (blocker corporation), without the need for prior SBA approval.

The rule will become effective on January 27, 2017.

Tuesday, January 17, 2017

EDA issues final rule for Regional Innovation Strategies

posted by: Kirill Abbakumov

On January 11, 2017, the Economic Development Administration (EDA) issued a final rule applicable to the Regional Innovation Strategies (RIS) Program. Since inception, EDA has invested approximately $40 million dollars and awarded 98 grants to increase the economic competitiveness and improve the quality of life of communities across the country.

The RIS Program is an effort to foster innovation and better coordinate federal support for scientific and technological research and development, technology transfer, and commercialization. The Program aims to effectively support the development of regional innovation clusters in local communities, which are significant catalysts of economic development, and to increase access to the capital necessary to implement the innovative manufacturing technologies required to compete in the 21st century global economy.

Through RIS, EDA awards grants for capacity-building programs that provide proof-of-concept and commercialization assistance to innovators and entrepreneurs and for operational support to organizations that provide essential early-stage funding to start-up companies. The new regulations are the first for this Program and establish the framework and structure of the RIS Program, including its mission and objectives, applicant eligibility requirements, allowable investment rates, eligible project activities, and required application components. These regulations provide enhanced customer service to the RIS Program while mitigating the administrative burden on EDA’s constituents.

Detailed legislative and programmatic history of the RIS Program, and its parent Program (the Regional Innovation Program), can be found through the Federal Register. The rule will become effective on February 10, 2017.

Monday, January 16, 2017

EDA announces new round of funding for 2017 to help distressed communities

posted by: Kirill Abbakumov

On December 23, 2016, Economic Development Administration (EDA) has published the FY 2017 Economic Development Assistance Programs (EDAP) Federal Funding Opportunity (FFO). Through its funding opportunities, EDA provides strategic investments on a competitive merit basis to support economic development, foster job creation, and attract private investment in economically distressed areas of the United States.

Under this FFO, EDA solicits applications from applicants in order to provide investments that support construction, non-construction, technical assistance, and revolving loan fund projects under EDA’s Public Works and Economic Adjustment Assistance (EAA) programs. Grants and cooperative agreements made under these programs are designed to leverage existing regional assets and support the implementation of economic development strategies that advance new ideas and creative approaches in distressed communities.

The estimated total program funding is between the award ceiling of $3 million and award floor of $100,000. Additional information on this funding opportunity and eligibility can be accessed here.

There are no submission deadlines under this opportunity. Proposals and applications will be accepted on ongoing basis until the publication of a new EDAP FFO.

Thursday, January 12, 2017

EXIM Bank business operations hit 40-year low

posted by: Kirill Abbakumov

The Export-Import Bank (EXIM) reported on January 4, 2017 that it authorized just $5 billion in loan guarantees and credit insurance in its latest fiscal year, a 40-year low for the agency. The decline was blamed on Congressional effort to hold up nomination to the EXIM Bank board, preventing it from doing large financing deals.

According to the report, business at the Bank, which helps finance exports by American businesses, was down 60% in fiscal 2016 and down 75% from a high reached in fiscal 2014, the final full year before Congress delayed the bank’s reauthorization by 6 months and the Senate Banking Committee started blocking new members to the bank’s five-member board. The Bank’s board requires a quorum before it can approve any loans, guarantees or credit insurance surpassing $10 million. It has lacked a quorum since early 2015.

Congressional critics of the bank claim that about 99% of all U.S. exports occur without EXIM Bank financing. Congressional Republicans prevented EXIM Bank reauthorization for about six months in 2015, but Democrats and Republican supporters were able to get a four-year reauthorization attached to a highway bill at the end of 2015.

Among the highlights of the EXIM 2016 Annual Report, the Bank is credited with the following:

  • Authorizing $5 billion and supported $8 billion in exports at no cost to American taxpayers;
  • Supporting 52,000 American jobs;
  • Sent $284 million to the U.S. Treasury for debt reduction;
  • Small business authorization continued to represent nearly 90% of all EXIM authorizations.

The Annual Report stressed that Congressional inaction have cost the country jobs. The $5 billion in authorized financing that supported 52,000 jobs in fiscal 2016 is far fewer than 165,000 jobs supported in 2014 through $20 billion in EXIM Bank financing.

Wednesday, January 11, 2017

President signs SEC Small Business Advocate Act into law

posted by: Kirill Abbakumov

On December 16, 2016, President Barack Obama signed into law the SEC Small Business Advocate Act of 2016 (H.R. 3784). The legislation had broad bipartisan support in the House and Senate, and establishing within the Securities and Exchange Commission (SEC) an Office of the Advocate for Small Business Capital Formation and a Small Business Capital Formation Advisory Committee.

Both the Office of the Advocate and the Advisory Committee are tasked with the dual role of helping small businesses navigate the securities laws and advocate against the application of overly burdensome regulations to small businesses.

According to the Congressional Summary of the Act, the Advocate will:

  • Assist small businesses and small business investors in resolving significant problems they may have with the SEC or with self-regulatory organizations;
  • Identify areas in which such businesses and investors would benefit from changes in SEC regulations or the rules of such organizations;
  • Identify problems that small businesses have with securing access to capital, including any unique challenges to minority-owned and women-owned small businesses;
  • Analyze the potential impact on businesses and investors of proposed SEC regulations and rules that might have a significant economic impact on small businesses and capital formation;
  • Conduct outreach to businesses and investors to solicit views on relevant capital formation issues;
  • Propose to the SEC changes in its regulations or orders, and propose to Congress legislative, administrative, or personnel changes, to mitigate problems identified and to promote the interests of such businesses and investors;
  • Consult with the Investor Advocate on proposals and advise the Advocate on small business-related issues; submit annual reports on its activities to specified congressional committees;
  • Be responsible for planning, organizing, and executing the annual Government-Business Forum on Small Business Capital Formation.

In addition, the Advisory Committee will advise the SEC on protecting investors, maintaining markets and facilitating capital formation with respect to:

  • Capital raising by emerging, privately held small businesses and publicly traded companies with less than $250 million in public market capitalization through securities offerings;
  • Trading in the securities of such businesses and companies;
  • Public reporting and corporate governance requirements of such businesses and companies.
Thursday, January 5, 2017

DOE announces funding for regional clean energy innovation partnerships

posted by: Kirill Abbakumov

On December 28, 2016 the Department of Energy (DOE) announced a funding opportunity for up to 4 awards of up to 4 $200,000 for analytical studies that characterize and examine multi-state Regional Energy Technology Innovation Ecosystems. The grants are intended to enhance regional capacities to foster sustainable regional clusters, innovation “ecosystems” and partnerships that can generate new clean-energy technologies and jobs.

The objective of this funding opportunity is to fund analytical studies that examine the potential of an integrated strategy for a multi-state region to enhance and accelerate energy innovation via a regional energy innovation ecosystem. For purposes of these studies, a region must comprise a minimum of three contiguous states. The studies and supporting analysis should provide new insights as to how an integrated regional strategy could promote affordable, reliable innovative energy technology, create jobs, increase entrepreneurial activity and new venture financing, and promote economic growth and prosperity.

The studies should provide data-driven insights based on inputs from current and potential energy innovation ecosystem participants within the proposed region. Studies should analytically support components of an integrated regional strategy that could provide benefits that a “business as usual” approach would not. In addition, the results should help DOE identify the possible benefits such regional innovation strategies might have to help meet key national objectives of energy security, economic competitiveness and environmental responsibility.

The deadline for the Notice of Intent is January 18, 2017 and the deadline for applications is February 28, 2017.

Thursday, December 22, 2016

Council on Community Solutions to align federal and local government collaboration

posted by: Kirill Abbakumov

On November 16, President Obama has signed an executive order establishing the Community Solutions Council in an effort to modernize the way the federal government works with cities, counties and communities across the nation. The Council aims to provide a lasting foundation for federal agencies to strengthen partnerships with local communities and enhance coordination across the federal government to more effectively deliver assistance in improving infrastructure, revitalizing neighborhoods and increasing economic opportunities for local communities.

Local community leaders have communicated to Congress the need for a federal partner that is more effective, responsive and inclusive in addressing the needs and challenges of more than 1,800 communities. While the policies and programs established by the federal government are intended to guide local officials and coordinate efforts, local leaders are often left on their own to find federal resources and implement costly programs.

The Community Solutions Council includes leadership from agencies, departments and offices across the federal government and the White House that will work to develop and implement policy that puts local priorities first, highlights successful solutions based on best practices and streamlines federal support for communities. Further, the council will engage with representatives and leaders of local organizations, businesses and communities to expand and improve partnerships that address the most pressing challenges communities face.

The Council also builds on the last seven years of work done by federal leaders and the successful efforts of the Community Solutions Task Force launched in 2015. The Task Force works to develop a customized federal approach to working with cities and towns. The Federal programs launched since then, such as Strong Cities Strong Communities and Partnership for Sustainable Communities have revealed ways the federal government can work better with local communities to drive desired outcomes.

Tuesday, December 20, 2016

Congress will take up corporate tax reform in 2017

posted by: Kirill Abbakumov

Congressional advocates for small businesses have made it clear in November that they intend to press for parity in tax rates for corporations and small businesses in the 115th Congress.

Republican leaders are promoting a leveling of tax rates for corporations and pass-through businesses in 2017 tax negotiations, echoing statements of Republican president-elect Donald Trump. An entity that is structured as a pass-through business doesn't pay taxes at the corporate level but distributes income to owners, who pay individual tax rates. The efforts to stop placing small- and medium-sized businesses at a competitive disadvantage against large corporations would require parity in taxes paid by corporations and pass-through businesses.

Trump’s plan calls for a 15 percent rate both for business income for corporations and for pass-through businesses. However, the Republican proposal simply would prohibit qualified business income of individuals from being taxed at a higher rate than corporate income, without setting specific rates. The measure would cover income from a trade or business, including any S corporation, partnership, estate or trust. S corporations are organized under the tax code to avoid double taxation because only shareholders are taxed.

These measures will alleviate small business owners suffering under a burdensome regulatory code that makes tax time costly and time-consuming. Reforms to the tax code could ease the burden for America’s job creators, helping to energize the economy and create more jobs once small businesses are confident they are not paying a higher tax rate.

Friday, December 16, 2016

Second Continuing Resolution extends funding into 2017

posted by: Kirill Abbakumov

President Barack Obama signed Continuing Resolution into law on Saturday, December 10 as Congress finally cleared a stopgap spending measure (HR 2028) on Friday, December 9 before most government funding was set to expire. The stopgap measure took immediate effect and extends current funding levels for most federal agencies through April 28th. The bill abides by an annual cap on discretionary spending of $1.07 trillion for fiscal 2017 and includes additional funding for:

  • $4.1 billion in disaster relief funds to respond to major flood and hurricane damage in certain states;
  • $872 million for programs in the biomedical innovation package, including $500 million for states to combat the opioids addiction crisis;
  • $170 million to address water infrastructure and health needs in Flint, Michigan;
  • $45 million to address a funding shortfall and continue health care coverage for retired coal miners past the end of the year;
  • $7 million in Justice Department grants to reimburse “extraordinary law enforcement overtime costs” to protect Trump between Nov. 9 and the Jan. 20 inauguration.

In preceding months, there was a plan to push an omnibus spending bill by the end of the year, which was to be broken into a series of smaller packages called “minibuses.” However, Republican leaders scrapped the plan after the president-elect Donald Trump announced he prefers to put off spending decisions until spring so his incoming administration can help shape them. With this comes an end to the 114th Congress.

Friday, December 16, 2016

House passes package of bills to help businesses raise capital

posted by: Kirill Abbakumov

On Monday, December 5, the House passed a measure that would repackage six bipartisan bills aimed at helping small- and medium-sized businesses raise capital. The Creating Financial Prosperity for Business and Investors Act (HR 6427) would also create a small business advocate at the Securities and Exchange Commission (SEC) and relax regulatory requirements for some investors and securities issuers.

The bill is a compilation of measures bills that have individually passed the House earlier this year, but weren't taken up by the Senate. Supporters of the bills hope that packaging them into one they can draw attention from the Senate in the waning days of the 114th Congress. HR 6427 is seen by legislators as a package of bipartisan solutions to ensure that the SEC is responsive to small-business concerns. The package will focus on fostering economic growth by promoting capital formation and decreasing unnecessary friction in American securities laws while simultaneously upholding necessary customer and market protections.

The package includes six previously passed bills:

  • HR 4168, which would require the SEC to respond to the recommendations of its government-business forum on capital formation. It passed the House in February.
  • HR 3784, which would create the small-business advocate position and passed the House in February.
  • HR 4854, which would define qualifying venture capital funds as those with not more than $10 million and/or 250 investors. It passed the House in July.
  • HR 2187, which would add securities professionals, attorneys and accountants to the definition of accredited investors who can take part in investments now restricted to those meeting wealth and income standards. It passed the House in February.
  • HR 4855, which would relax registration requirements for crowd-funded shares. It passed the House in July.
  • HR 5322, which would eliminate the exemption for investment companies from the Investment Company Act for companies in Puerto Rico, the Virgin Islands, or any other U.S. possession. It passed the House in July.
Thursday, December 8, 2016

EXIM Bank announces adoption of SBA rule to streamline applications

posted by: Kirill Abbakumov

On November 22, the Export-Import Bank of the United States (EXIM Bank) announced a proposal to adopt the Interim Rule of the Small Business Jobs Act of 2010 (PL 111-240) as an alternative standard for defining small business for all its programs. This measure is expected to streamline the application process for small- and medium-sized businesses.

The Jobs Act mandated that the Small Business Administration (SBA) use maximum tangible net worth and average net income as an alternative to the use of industry based size standards as follows: Not more than $15 million in tangible net worth and $5 million in average net income after Federal income taxes to define a small business concern.

The SBA currently uses the Interim Rule for its business loans under the 7(a) Loan Program and 504 Loan Program, which represent the bulk of SBA’s small business guaranteed loans. If approved by the SBA's Administrator, EXIM Bank will apply the Interim Rule as an alternative size standard in addition to using size standards established by SBA for individual industries to determine whether or not participants of EXIM programs can be categorized as small business concerns.

This proposal to align the Bank’s size standards for determining small businesses with SBA’s current standards will bring consistency to the marketplace, would possibly increase the number of applicants qualifying as a small business for EXIM Bank’s programs and increase the accuracy of the Bank’s reporting to Congress on its small business activities.

Thursday, December 8, 2016

Congress plans budget process overhaul for 2017

posted by: Kirill Abbakumov

There is a strong push in Congress to overhaul the federal budget process which has been in place since the 1974 act (PL 93-344) that created the congressional budget resolution, the House and Senate committees and the Congressional Budget Office (CBO). Legislative action on proposed changes are expected to come in 2017.

Prospects for a Republican-led overhaul were strengthened by the November elections, which gave the GOP control of the White House and both chambers of Congress for at least the next two years. Many Republicans, along with some Democrats, have concluded that the budget process is broken, illustrated by the fact that Congress hasn't passed all of its 12 annual spending bills on time in more than 20 years.

Work on a rewrite of the process has proceeded slowly. Some of the proposals include:

  • Strengthening budget enforcement.
  • Adoption of a two-year budget cycle.
  • Controlling automatic spending programs.
  • Reasserting congressional authority over the budget.
  • Increasing “transparency” in the budget process, including with the CBO.
  • Reversing a bias in the budget process toward “higher and higher spending.”

It attempts to give Congress greater control over all federal spending and more time to complete bills in an orderly way. It would for the first time create a two-year federal budget cycle, designed to give lawmakers additional time to better scrutinize programs they fund. The fiscal year, which currently begins on Oct. 1, would be shifted to Jan. 1 to coincide with the calendar year and allow more time for bills to be completed without the need for a stopgap measure.

The overhaul plan has been presented as a draft, and is yet to turn into legislation.

Thursday, December 8, 2016

SelectUSA seeking exhibitors for investment meeting in Dubai

posted by: Matthew Mullin

SelectUSA is looking for communities interested in exhibiting at the 2017 Annual Investment Meeting (AIM) of the Gulf Cooperation Council (GCC). The meeting is similar to the SelectUSA Investment Summit, though not in size. Only a handful of communities will take part in the U.S. Investment Pavilion and enjoy direct access with investors from key trading partners like the United Arab Emirates (UAE) and Saudi Arabia.

From SelectUSA:

As a trading bloc, GCC markets constitute the United States’ fifth-largest export market and our fourteenth-largest source of foreign direct investment (FDI), with over $43 billion in FDI as of 2015. In 2014, combined GCC FDI in the United States supported approximately 24,000 U.S. jobs.

  • Secure one-on-one meetings with regional government and private sector officials with decision-making authority;
  • Meet regional investor delegates recruited by the U.S. Commercial Service;
  • Leverage AIM's exclusive networking system to initiate meetings with investors;
  • Connect with priority AIM participants at events organized by the U.S. Embassy in Abu Dhabi, the U.S. Consulate in Dubai, and AIM; and
  • Receive full assistance from SelectUSA and Commercial Service investment specialists.

For more information, including registration, please contact Steve Miller in Washington, D.C. or Maya Najm in Abu Dhabi, UAE. If you are interested in reserving booth space, please contact Julianna Kreko in Washington, D.C.

Friday, November 18, 2016

FHWA announces new pilot program for local road projects

posted by: Kirill Abbakumov

On October 25, 2016, the Department of Transportation’s Federal Highway Administration (FHWA) announced that they are accepting submissions for the Local Empowerment for Accelerating Projects (LEAP) Pilot Program. The LEAP program is an effort to reduce the cost of delivering highway projects by allowing for direct funding from the federal government to local public agencies (LPAs).

Created as part of the FAST Act, the program allows local governments to identify projects under a formula criteria and apply directly to FHWA for funding. This includes projects like the design, construction and preventative maintenance of major collector roadways. As a pilot program, only five submissions will be awarded these funds. The main stipulation is that the LPA must agree to a voluntary contribution from non-Federal funds (LPA, State, or other) in an amount equal to 1% for the first year of the funds transferred to FHWA.

With counties owning 45 percent of the nation’s roads, this direct funding pilot program will help LPAs to save precious financial resources and complete projects faster for their communities. This program will be carried out over 5 years and requires an agreement between the LPA and their respective state DOT, however it will also be subject to federal oversight.

Applications will need to be submitted by November 25, 2016 by following the instructions outlined on the Federal Register.

Friday, November 18, 2016

SBA announces $18.8 million to support small business exporters

posted by: Kirill Abbakumov

On October 3, 2016 the Small Business Administration (SBA) announced $18.85 million to support export growth among American small businesses. The funding was awarded through SBA’s competitive State Trade Expansion Program (STEP).

These awards are granted to U.S. states and territories to support programs that help small businesses expand their export-related activities. This includes participation in foreign trade missions, foreign market sales trips, subscription services for access to international markets, as well as the design of international marketing campaigns, export trade show exhibits, export training workshops and more.

The top 5 awardee states are:

  • Illinois - $850,000
  • North Carolina - $850,000
  • Washington - $850,000
  • California - $844,214
  • Michigan - $820,000

Full list of awardees can be found here.

STEP awards were created to advance key priorities identified in the President’s National Export Initiative, namely to expand the base of small businesses that become exporters and to make the exporting process as easy as possible for small enterprises. Recipients of STEP awards in the first three rounds (FY 2011, 2012, 2014) reported a strong return on federal taxpayer investment, generating $22 in U.S. small business export sales for every $1 awarded.

STEP funds allow small businesses the opportunity to meet foreign buyers face-to-face at trade shows or on trade missions, and complement SBA’s export loan guaranty programs, which can finance the working capital needed to complete export orders and in turn help finance the expansion of production facilities due to export success. Loans are available up to $5 million. More information can be obtained from SBA’s Export Finance Mangers located at 21 U.S. Export Assistance Centers across the country.

Friday, November 18, 2016

DOL announces $50.5 million in Apprenticeship State Expansion Grants

posted by: Kirill Abbakumov

On October 21, 2016 the Department of Labor (DOL) announced $50.5 million in State Expansion Grants under the ApprenticeshipUSA Initiative. The 18-month grants, ranging from $700,000 to $2.7 million, were awarded to 37 grantees across the country.

The State Expansion Grants represent the final set of investments supported by a $90 million appropriation for apprenticeship in the FY 2016 omnibus spending bill. DOL had previously released $10.4 million in state Accelerator grants in June 2016, and $20.4 million in intermediary and equity technical assistance contracts to national organizations in late September 2016.

Grantees are state projects that bring together stakeholders across the apprenticeship system to develop innovative system reforms to increase the use of apprenticeship as a training strategy. Stakeholders include intermediaries, industry, education providers, and community-based organizations. States are tasked with integrating workforce and education systems, building capacity to conduct outreach to new sectors not traditionally using apprenticeship and to populations underrepresented in the current system. They are also tasked with building on and developing practices to increase demand for apprenticeship and availability of apprenticeship opportunities.

It is unclear whether there will be further funding to support the ApprenticeshipUSA initiative next year. The Senate Appropriations Committee proposed an additional $100 million in FY2017 to build on this year’s investments, while the House did not include additional funding in their version of the FY2017 Labor, Health and Human Services, Education, and Related Agencies bill. Congress approved a short-term continuing resolution in early October that lasts through December 9th, so final decisions on FY 2017 funding will be made once lawmakers return on November 14.

Friday, November 18, 2016

EPAís WOTUS faces continued opposition from states and industry groups

posted by: Kirill Abbakumov

A group of 31 states, industry groups and companies assert that the Obama administration lacks authority to expand federal jurisdiction over streams and wetlands, as they file briefs challenging the Environmental Protection Agency’s (EPA) Waters of the United State (WOTUS) rule in the U.S. Court of Appeals for the Sixth Circuit.

The EPA and the Army Corps of Engineers in May 2015 finalized the rule to clarify the scope of federal authority under the Clean Water Act. Opponents of this Act have been critical of the rule, calling it an unconstitutional power grab by the federal government that is burdensome for industry and farmers because they would be required to apply for permits for activities that affect streams and wetlands added to federal jurisdiction. States also filed separate cases, arguing in their briefs that WOTUS undermines state authority because it intrudes upon the states’ sovereign interests in regulating their land and water resources.

The EPA and Corps were prohibited by the court in October 2015 from enforcing the rule, and it continues to face opposition from Republican lawmakers who have tried unsuccessfully to deny federal agencies funds to carry out its provisions. Republicans will likely have in President-elect Donald Trump an ally in their fight against the so-called encroachment into state authority that hurts industry and farmers. Trump rode to victory partly on his promise to scuttle President Barack Obama's environmental regulations like the Waters of the U.S. rule, which he said have killed jobs and made the U.S. less competitive.

But while Trump has decried Obama administration environmental regulations, he has also said he believes in clean air and clean water. But while Trump has a history of contradicting his advisers, he has promised to turn over more power to the states, which bodes well for the states that have sued on the grounds that WOTUS infringes on their power to self-regulate.

The EPA and the Army Corps of Engineers have until Jan. 18 to file their response to the challengers in court. A hearing is unlikely to occur before April 2017.

On October 13, 2016, the Department of Housing and Urban Development (HUD) announced that Louisiana would receive the bulk of the $500 million in flood relief cleared by Congress in September, while the rest of the funding would be shared with Texas and West Virginia. The three states experienced destructive flooding that caused extensive damage to residents’ homes and drained state resources.

Louisiana will receive approximately $438 million, or 88% of the total allocation made in a stopgap spending bill, through the Community Development Block Grant (CDBG) program to rebuild and recover from severe flooding that ravaged the state in August. Texas will receive $45 million and West Virginia will receive the remaining $17 million. The CDBG grants will support housing redevelopment, business assistance and infrastructure repair. Administered by HUD, the department estimates that nearly 102,000 households and 41,000 families in the three states have been affected by destruction of the natural disaster. Maryland was affected by flash flooding in late July that destroyed downtown businesses and homes, but was absent from the CDBG disbursement.

Congress provided $500 million in flood aid through CDBG as part of a stopgap spending package (PL 114-223) enacted last month. The funding was targeted to the most impacted and distressed areas that experienced disasters declared by the president prior to September 29, when the spending bill was signed. This measure excludes East Coast states affected by Hurricane Matthew in October from receiving a slice of the $500. The Federal Emergency Management Agency (FEMA) currently estimates that $5 billion in disaster relief funds will be used to address immediate damage from Matthew.

Friday, November 4, 2016

Federal government considers FEMA flood insurance reform

posted by: Kirill Abbakumov

Congressional lawmakers are considering how to limit the government’s liability to increasingly severe natural disasters. The effects of climate change, exemplified by frequent floods from torrential rains, hurricanes and other phenomena, are straining the federal flood insurance program and exposing American taxpayers to a potentially growing price tag of flood relief payouts. Proposed solutions could include designating more places as flood-prone and encouraging residents to move out of harm’s way.

In the past 5 years, the National Flood Insurance Program, operated by the Federal Emergency Management Agency (FEMA) has taken in between $3.2 billion and $3.5 billion in premiums from its policymakers, while paying out only $372 million for claims in 2014 and $839 million in 2015. But funding is problematic in years characterized by powerful storms, exemplified by fiscal 2013 when FEMA paid out $8.2 billion for damage resulting from Superstorm Sandy.

In a 2015 report, the Government Accountability Office (GAO) came to a conclusion that losses generated by the program, as well as the potential for future losses, have created substantial financial exposure for the federal government. The flood program has been on GAO’s High Risk List since 2006, and the program owes $23 billion to the Treasury. This prompted Congress to propose the idea of moving away from flood insurance programs and towards grants for resiliency efforts. FEMA is recommended to ensure that flood insurance premiums begin aligning with changes in flood risk, especially as those risks grow in areas where they historically occurred less frequently.

Congress is also looking at a variety of proposals to limit the federal government’s liability exposure. In an effort to expand coverage in flood-prone areas. In April 2016, the House unanimously passed a bill (HR 2901) meant to spur the development of a private insurance market offering comparable coverage at a lower cost than the federal flood program offers. The bill would ensure that private insurance would satisfy the requirements for federally-backed mortgages on properties that are prone to flooding.

Lawmakers have also targeted areas and homes that have been subjected to repeated flood impacts. Congress introduced legislation in September 2016 that would direct FEMA to map the areas of flooded properties and public infrastructure that have experienced repeated flood impacts, and then develop and implement a plan to mitigate the risk in these areas.

On October 12, 2016, the U.S. Department of Transportation’s Federal Transit Administration (FTA) announced that 16 organizations around the country will receive a share of $14.7 million in grants that the communities can use to expand the economic and social impact of new transit services.

The funds are made available through FTA’s Transit-Oriented Development (TOD) Planning Pilot Program and would provide grants for comprehensive planning work in 16 metropolitan areas around the country, helping communities plan improved access to transit, jobs, education and services, and helps revitalize communities by attracting new business opportunities, jobs, and housing. In addition, the program encourages inclusive communities and seeks planning solutions to reduce residential and commercial displacement that can result from gentrification, seeking to connect people and opportunities through multimodal access to transit stations and to enhance connectivity of disadvantaged populations to essential services.

Nationwide planning projects highlighted by FTA include:

  • The Santa Clara VTA will receive $1.5 million to identify and plan for multimodal access needs and TOD opportunities for station areas along the Bay Area Rapid Transit (BART) Silicon Valley Phase II project. The project is a 6.5-mile heavy rail extension that connects BART to San Jose and Santa Clara.
  • The Regional Transportation District and City and County of Denver will receive $1.35 million to fund planning efforts of urban design guidelines for the corridor, an affordable housing strategy, small business retention and development strategy, and a financing plan for implementation of TOD.
  • The City of Phoenix will receive $2 million to plan for additional development and improved pedestrian and bicycle infrastructure in the South Central Light Rail Transit Extension corridor, while also preserving nearby housing affordability and established small businesses. 
  • The City of Milwaukee will receive $750,000 to conduct comprehensive TOD planning of the Milwaukee Streetcar from downtown into surrounding neighborhoods. The city will work with stakeholders along the proposed extensions to evaluate how to use transit-supportive development, to revitalize the two corridors, and to better connect residents to downtown jobs.

To be eligible for the Pilot Program, planning work must be associated with a transit project for which the local community intends to seek funding through FTA’s Capital Investment Grant (CIG) Program or that recently received funding through the CIG Program. The CIG Program is FTA’s primary competitive grant program for funding major transit capital investments, including heavy rail, commuter rail, light rail, bus rapid transit and core capacity projects.

Thursday, October 20, 2016

EDA seeks public comments to improve programs

posted by: Kirill Abbakumov

On September 21, 2016 the Economic Development Administration (EDA) announced two notices of proposed rulemaking (NRPM) and requests for public comment through the Federal Register for its Innovative Technologies in Manufacturing (ITM) Loan Guarantee Program and the Regional Innovation Program (RIS).

The ITM program is utilized by EDA to provide loan guarantees for obligations to small and medium-sized manufacturers for the use or production of innovative technologies, and ITM has supported approximately $280 million in loans over the past 5 years. These guarantees enable innovative technology manufacturers to obtain capital otherwise unavailable to them.

Specifically for the ITM program, EDA seeks public input through the Federal Register before the comment period closes on December 20, 2016, particularly on:

  • The biggest impediments to small or medium-sized manufacturers receiving a loan from a lending institution.
  • Whether the EDA's ITM loan program would make it more likely for lenders to lend to manufacturers, especially small or medium-sized manufacturers.
  • What lending institutions should require for a borrower to demonstrate that a market exists for an innovative technology product.
  • Whether there is an existing market for small to medium-sized business loans in the innovative manufacturing sector that are not currently being met.
  • What other requirements in a loan guarantee program would be necessary for a lender to offer such loans.
  • The manufacturing size threshold and definition to be considered a medium-sized manufacturer.
  • The typical loan size that a small-medium business in innovative manufacturing would apply for.
  • Whether securing a loan through the EDA ITM program to support the use or production of innovative technologies would assist manufacturers with access to outside capital.
  • Other activities and outcomes from the EDA ITM loan program that would best support innovation in the manufacturing sector.

EDA is also seeking input on its RIS program, which began in 2014 to competitively award grants to eligible applicants for activities related to the formation and development of regional innovation clusters. The RIS program is designed to increase economic growth and resilience, enhance prosperity, and improve quality of life by increasing employment and private investment in economically distressed regions.

EDA is seeking public input on how to use the RIS program to best provide funding to encourage scientific and technological innovation and collaboration. Comments can be submitted through the Federal Register, with the comment period closing on November 21, 2016.