Dear Mayor:

This is the latest bi-weekly update on action in our Nation’s Capital from the National League of Cities.

Senate Set to Resume Action on Spending Bills this Week

With the Senate in recess last week, there was no action on the FY 2008 spending bills. In the prior week, the Senate approved a Defense Authorization measure and began debate on the fiscal 2008 Commerce, Justice and science-related agencies spending bill, which contains funding for law enforcement programs, including COPS. The Senate is expected to approve the bill next week despite the President’s veto threat.

House Passes Tax Bill to Help Families Facing Foreclosure

In the preceding week, the House passed another bill, the Mortgage Debt Relief Act of 2007 (H.R. 3648), to help homeowners facing foreclosure. Under current law, if a home sale or foreclosure fails to pay off the entire existing loan debt, the remainder (or forgiven portion) of the debt is counted as taxable income. As a result, families that lose a home to foreclosure are often hit with extra taxes on “income” they never received. Under the bill, which passed by a vote of 386 to 27, a limited amount of mortgage debt forgiven after a home foreclosure or mortgage restructuring would not count as taxable income. Although the President requested a temporary 5-year repeal of the tax, the bill makes the change permanent and retroactive to January 1, 2007. A similar bill (S. 1394) has been introduced in the Senate.

House Passes Affordable Housing Trust Fund Bill

On October 10, the House passed H.R. 2895, the National Affordable Housing Trust Fund Act, by a vote of 264 to 148. The bill would provide more than $1 billion annually for the production, preservation, and rehabilitation of 1.5 million affordable homes over ten years. Sixty percent of the funds would go to cities and towns, and 40 percent would go to states. Funds could be used for construction, rehabilitation, acquisition, and preservation of affordable housing. Costs for administrative, advocacy, counseling, or tax-preparation assistance activities would not be eligible expenses. NLC supported the legislation in a letter to House Speaker Nancy Pelosi and Members of the House. It is unclear when the Senate will consider the legislation.

President Vetoes SCHIP; Congress Prepares for Override Vote

As expected, the President vetoed the State Children's Health Insurance Program (SCHIP) reauthorization bill on Oct. 3. Earlier, the Senate approved the measure with a veto proof majority, 67 to 29. The House vote was 19 shy of the two-thirds majority required to override the President’s veto. On Oct. 18, the House has scheduled a vote to try to override the President’s veto, and between now and then, intensive lobbying efforts are underway to secure the votes for an override. Among other things, the bill would increase funding for the program over the next five years by $35 billion (compared to the $5 billion called for by the President) and allow states to enroll an additional 4 million low-income children. Currently, approximately 6.5 million children are enrolled in the program. NLC supports the legislation and is encouraging Congress to override the President’s veto.

House Committee Approves Temporary Internet Tax Moratorium Bill

On Oct. 10, with strong leadership from Chairman John Conyers (D-MI), the House Judiciary Committee approved H.R. 3678, legislation that would extend temporarily the current moratorium on taxes on Internet access. The bill’s other cosponsors are: Reps. Rick Boucher (D-VA); Ranking Member of the House Judiciary Committee, Chris Cannon (R-UT); Darrell Issa (R-CA); Linda Sanchez (D-CA); James Sensenbrenner (RWI); and Melvin Watt (D-NC). Besides extending for four years the moratorium that is scheduled to expire on Nov. 1, the legislation would clarify the definition of “Internet access,” preserve the grandfather clause in the original legislation that protects state and local taxes imposed on Internet access prior to 1998, and exempt from the moratorium general business taxes imposed by four states as either a substitute to or a supplement to corporate income taxes paid by businesses. Although state and local government groups generally oppose federal interference with their authority to develop and manage their revenue systems, NLC, the National Governors Association (NGA), the U.S. Conference of Mayors, the National Association of Counties, and the National Association of Telecommunications Officers and Advisors (NATOA), support the temporary extension as an alternative to pending legislation that would make the Internet tax moratorium permanent. With the November 1st expiration of the moratorium looming, House floor debate on H.R. 3678 and Senate Commerce Committee action on S. 1453, a companion bill, is expected within the next two weeks.

House Approves One-Year Delay of Three Percent Withholding Requirement

This week, the House approved legislation (H.R. 3056) that would delay for one year implementation of a requirement that federal, state and local governments withhold a portion of contractor and vendor fees for tax collection purposes. Current law requires that, starting January 1, 2011, governments spending more than $100 million per year on purchases of goods and services must withhold three percent from all payments to contractors and vendors and remit those funds to the Internal Revenue Service to be applied toward the contractors’ and vendors’ federal income tax liabilities. Under the bill, the implementation of that requirement would be delayed until January 1, 2012. NLC supports the one-year delay but continues to urge Congress to repeal altogether the unfunded mandate imposed by this requirement.

Congress Celebrates 35th Anniversary of the Clean Water Act

On Oct. 18, the House Transportation and Infrastructure Committee will hold a hearing commemorating the 35th anniversary of the Clean Water Act and examining the Act’s successes and future challenges. NLC Second Vice President, Kathleen Novak, mayor of Northglenn, CO, will testify at the hearing on how the Clean Water Act has helped local governments ensure that residents have access to clean water for drinking and recreational purposes. Additionally, Novak will urge Congress to take steps to ensure continued success in restoring and maintaining water quality in the U.S. and to protect the original intent of the Clean Water Act.

For more information, contact Jon Moran at 609-695-3481, ext. 121 or jmoran@njslom.com.