CRS Reports

Overview of U.S. International Food Assistance

Dec 31, 2018

Profiles and Effects of Retaliatory Tariffs on U.S. Agricultural Exports

Countries have imposed tariffs on U.S. agricultural products to retaliate against actions the Trump Administration took in spring 2018 to protect U.S. steel and aluminum producers and in response to Chinese intellectual property rights and technology policies. Since then, more than 800 U.S. food and agricultural products have been subject to retaliatory tariffs from China, the European Union (EU), Turkey, Canada, and Mexico. U.S. exports of those products to the retaliating countries totaled $26.9 billion in 2017, according to USDA export data. The choice of agricultural and food products for retaliatory tariffs likely reflects the large volume of agricultural trade involved and that many of these products can be sourced from non-U.S. trading partners. Such tariff hikes threaten to reduce U.S. agricultural exports. China, which is subject to both the U.S. Section 232 steel and aluminum tariffs and separate Section 301 tariffs aimed as punishment for its handling of U.S. intellectual property rights, has placed retaliatory tariffs on the largest number and highest value of U.S. agricultural and food products. More than 800 products—including soybeans, pork, dairy products, fruits and nuts, seafood, and processed products—accounting for almost all U.S. agricultural and food exports to China in value terms in 2017 (the last full year without retaliatory tariffs) are now subject to additional tariffs of 5%, 10%, 15%, 25%, or a combination of those amounts. U.S. exports to China of those products that are subject to retaliatory tariffs were worth about $20.6 billion in 2017. China has fallen from the leading export market for U.S. agricultural products in FY2017 to the third-leading export market in FY2018 due to the retaliatory tariffs, according to the U.S. Department of Agriculture (USDA). USDA forecasts that China will fall to the fifth-leading market for those products in FY2019. Canada and Mexico are each targeting about 20 U.S. food and agricultural products, which accounted for approximately $2.6 billion and $2.5 billion in exports to each respective country in 2017. The EU and Turkey have each put retaliatory tariffs on about 40 U.S. agricultural and food products that were valued at about $1 billion and $250 million, respectively, in 2017. India has threatened to impose tariffs on seven U.S. agricultural and food products, which accounted for about $857 million in exports in 2017. U.S. agricultural exports account for about 20% of U.S. farm income, according to USDA. Thus any loss in exports could have negative economic consequences for U.S. farmers. Commodities that are highly dependent on exports to the retaliating markets may be more severely affected than others by any loss of markets from the tariffs. For instance, commodities for which U.S. exports to the retaliating countries represent 30% or more of its total exports include soybeans, sorghum, pork, cheese, apples, cherries, seafood, ginseng, whiskey, and some processed foods. U.S. soybean exports to China for January through October 2018 are 63% lower than during the same time period in 2017—a change due in large part to the tariffs. USDA is attempting to ease the downside effects of the retaliatory tariffs on farmers and ranchers through a $12 billion trade aid package. Under this initiative, USDA has committed to making direct payments to farmers of selected commodities subject to the tariffs, as well as buying up surplus quantities of some commodities and providing funding for additional trade promotion efforts. In addition, legislation that was introduced in the 115th Congress sought to provide more trade assistance funding for farmers and ranchers, though none of the bills passed.

Dec 31, 2018

U.S.-South Korea (KORUS) FTA and Bilateral Trade Relations

Dec 28, 2018

Federal Correctional Reform and the First Step Act of 2018

Dec 28, 2018

Drug Shortages: Causes, FDA Authority, and Policy Options

Dec 27, 2018

Reauthorization of the Perkins Act in the 115th Congress: The Strengthening Career and Technical Education for the 21st Century Act

The Carl D. Perkins Career and Technical Education Act (Perkins Act) is the primary federal law aimed at developing and supporting career and technical education (CTE) programs at the secondary and postsecondary educational levels. Prior to the 115th Congress, the Perkins Act had most recently been reauthorized in 2006 by the Carl D. Perkins Career and Technical Education Act of 2006 (Perkins IV; P.L. 109-270). In the 115th Congress, the Perkins Act was comprehensively reauthorized again, through the Strengthening Career and Technical Education for the 21st Century Act (Perkins V; P.L. 115-224). Perkins V was signed into law by President Trump in July 2018 and is to go into effect on July 1, 2019. Under the Perkins Act, funds for the development and improvement of CTE programs are distributed to states by an allocation formula largely based on population and per capita income factors. States then distribute funds to local CTE providers at the secondary and postsecondary education levels according to within-state allocation formulas specified in statute. Recipients of Perkins funds are required to use them for a variety of purposes that help CTE students attain technical skills and earn an industry-recognized credential, a certificate, or a postsecondary degree. The accountability framework under the Perkins Act requires state and local recipients of Perkins funds to try to achieve target levels of performance on a series of core indicators of performance. The actual levels of performance on each core indicator are reported by the states and disaggregated by a number of special populations and subgroups. If a state fails to meet 90% of any of its target performance levels, it has to implement a program improvement plan for each of the core indicators of performance for which the target performance levels were not met. Perkins V makes a number of changes to the Perkins Act. Some of the key changes include the following: Fund Allocations: The state allocation formula is changed to give each state a base amount equal to its FY2018 allocation. Any additional funds are distributed among the states based on population and per capita income factors, with a greater share going to the states with the smallest initial allocation. Under Perkins V, states are allowed to reserve up to 15% of their allocation for CTE programs in rural areas or areas with high numbers of CTE students, or for innovative CTE programs, instead of 10%, which is the allowance under Perkins IV. Recipient Activities: Provisions in Perkins V require state plans to contain information about how the state’s CTE activities will be coordinated with state activities under the Workforce Innovation and Opportunity Act (WIOA) and the Elementary and Secondary Education Act (ESEA). Under Perkins V, local CTE providers are required to carry out a needs assessment to better align the offered CTE programs of study with local labor market needs and in-demand occupations. Accountability Framework: Provisions in Perkins V consolidate and modify the secondary and postsecondary core indicators of performance. Under Perkins V, states are allowed to determine their own performance targets on the core indicators of performance, as long as certain minimum requirements are met. In addition to existing data reporting and disaggregation requirements, Perkins V requires states to disaggregate CTE student achievement data by the CTE program or program of study in which the concentrator is enrolled. Program Eliminations: Provisions in Perkins V eliminate Title II of the Perkins Act, known as the Tech Prep program. New Programs: Perkins V introduces a national competitive grant program aimed at identifying, supporting, and evaluating evidence-based and innovative strategies and activities to improve and modernize CTE and align workforce skills with labor market needs.

Dec 21, 2018

Permanent Employment-Based Immigration and the Per-country Ceiling

The Immigration and Nationality Act (INA) specifies a complex set of categories and numerical limits for admitting lawful permanent residents (LPRs) to the United States that includes economic priorities among the admission criteria. These priorities are addressed primarily through the employment-based immigration system, which consists of five preference categories. Each preference category has specific eligibility criteria; numerical limits; and, in some cases, distinct application processes. The INA allocates 140,000 visas annually for all five employment-based LPR categories, roughly 12% of the 1.1 million LPRs admitted in FY2017. The INA further limits each immigrant-sending country to an annual maximum of 7% of all employment-based LPR admissions, known as the per-country ceiling, or “cap.” Prospective employment-based immigrants follow two administrative processing trajectories depending on whether they apply from overseas as “new arrivals” seeking LPR status or from within the United States seeking to adjust to LPR status from a temporary status that they currently possess. While some prospective employment-based immigrants can self-petition, most require U.S. employers to petition on their behalf. In both cases, the Department of State (DOS) is responsible for allocating the correct number of employment-based immigrant “visa numbers” or slots, according to numerical limits and the per-country ceiling specified in the INA. This report reviews the employment-based immigration process by examining six pools of pending petitions and applications, representing prospective employment-based immigrants and any accompanying family members at different stages of the LPR process. While four of these pools represent administrative processing queues, two result from the INA’s numerical limitations on employment-based immigration and the per-country ceiling. These latter two pools of foreign nationals, who have been approved as employment-based immigrants but must wait for statutorily limited visa numbers, totaled in excess of 900,000 as of mid-2018. Most originate from India, followed by China and the Philippines. Some employers maintain that they continue to need skilled foreign workers to remain internationally competitive and to keep their firms in the United States. Proponents of increasing employment-based immigration levels argue that it is vital for economic growth. Opponents cite the lack of compelling evidence of labor shortages and argue that the presence of foreign workers can negatively impact wages and working conditions in the United States. With this statutory and economic backdrop, the policy option of revising or eliminating the per-country ceiling on employment-based LPRs has been proposed repeatedly in Congress. Some argue that eliminating the per-country ceiling would increase the flow of high-skilled immigrants from countries such as India and China, who are often employed in the U.S. technology sector, without increasing the total annual admission of employment-based LPRs. Currently, nationals from India in particular, and to a lesser extent China and the Philippines, face lengthy queues and inordinately long waits to receive LPR status. Many of those waiting for employment-based LPR status are already employed in the United States on temporary visas, a potentially exploitative situation that some argue incentivizes immigrant-sponsoring employers to continue to recruit foreign nationals primarily from these countries for temporary employment. Others counter that the statutory per-country ceiling restrains the dominance of a handful of employment-based immigrant-sending countries and preserves the diversity of immigrant flows.

Dec 21, 2018

China Primer: Illicit Fentanyl and China’s Role

Dec 21, 2018

Prescription Drug Importation

Dec 21, 2018

Defense Primer: Commanding U.S. Military Operations

Dec 20, 2018

Funding for ACA-Established Patient-Centered Outcomes Research Trust Fund (PCORTF) Expires in FY2019

The Patient Protection and Affordable Care Act of 2010 (ACA, P.L. 111-148, as amended) authorized the establishment of a private, nonprofit, tax-exempt corporation called the Patient-Centered Outcomes Research Institute (PCORI, or the Institute). This built on provisions in prior law that expanded the federal government’s role in the oversight and funding of comparative effectiveness research. The American Reinvestment and Recovery Act of 2009 (ARRA, P.L. 111-5) provided a total of $1.1 billion for comparative effectiveness research; required an Institute of Medicine (IOM, now the National Academy of Medicine) report with recommendations on national comparative effectiveness research priorities; and created the Federal Coordinating Council for Comparative Effectiveness Research (FCCCER), an interagency advisory group. FCCCER was required to report to the President and the Congress annually on federal comparative effectiveness research activities, and was terminated upon enactment of the ACA. PCORI is responsible for coordinating and supporting comparative clinical effectiveness research, which is broadly defined in law to mean “research evaluating and comparing health outcomes and the clinical effectiveness, risks, and benefits of 2 or more ... health care interventions ... being used in the treatment, management, and diagnosis of, or prevention of illness or injury.” Health care interventions include a wide range of things, for example, care management and delivery, medical devices, diagnostic tools, pharmaceuticals, and integrative health practices. PCORI was required to identify national priorities for research, and an agenda to carry out the priorities, including attention to chronic conditions, gaps in evidence, quality of care, patient health and well-being, and the effect on national expenditures associated with interventions or conditions, among other concerns. In addition, PCORI can enter into contracts with federal agencies as well as with academic, private sector research, or study-conducting entities for the management of funding and conduct of research. The ACA also required the Agency for Healthcare Research and Quality (AHRQ) to broadly disseminate research findings that are published by PCORI and other government-funded comparative effectiveness research entities, to create information tools, to and develop a publicly available database of government-funded evidence (Public Health Service Act [PHSA] Section 937). Dissemination materials must identify researchers; describe research methodology, limitations, and subpopulation-specific considerations; and must not include practice guidelines or recommendations for payment, coverage, or treatment. AHRQ has to support training of researchers and building of data capacity in coordination with other federal health programs; in addition, other federal agencies are broadly authorized to contract with PCORI for the conduct and support of relevant research. The Patient-Centered Outcomes Research Trust Fund (PCORTF) The ACA created a 10-year, multibillion dollar trust fund—the Patient-Centered Outcomes Research Trust Fund (PCORTF)—to support comparative effectiveness research, and specifically to fund PCORI and its research activities. Funding for PCORTF expires in FY2019. The law provided annual funding to the PCORTF over the period FY2010-FY2019 from the following three sources: (1) annual appropriations, (2) fees on health insurance and self-insured plans, and (3) transfers from the Medicare Part A and Part B trust funds (26 U.S.C. §9511). Three Sources of PCORTF Funds Specifically, the ACA appropriated the following amounts to the PCORTF: (1) $10 million for FY2010, (2) $50 million for FY2011, and (3) $150 million for each of FY2012 through FY2019. In addition, for each of FY2013 through FY2019, the ACA appropriated an amount equivalent to the net revenues from a new fee that the law imposes on health insurance policies and self-insured plans. For policy/plan years ending during FY2013, the fee equals $1 multiplied by the number of covered lives. For policy/plan years ending during each subsequent fiscal year through FY2019, the fee equals $2 multiplied by the number of covered lives. Finally, transfers to PCORTF from the Medicare Part A and Part B trust funds are calculated by multiplying the average number of individuals entitled to benefits under Medicare Part A, or enrolled in Medicare Part B, by $1 (for FY2013) or by $2 (for each of FY2014 through FY2019). Allocation of PCORTF Funds For each of FY2011 through FY2019, the ACA requires 80% of the PCORTF funds to be made available to PCORI and the remaining 20% of funds to be transferred to the Health and Human Services (HHS) Secretary for carrying out PHSA Section 937. Of the total amount transferred to HHS, 80% is to be distributed to AHRQ to carry out the dissemination activities authorized under PHSA Section 937. Beginning in the FY2018 budget request, the President proposed to incorporate AHRQ under the National Institutes of Health (NIH) by creating a new institute, the National Institute for Research on Safety and Quality (NIRSQ). Although this proposed change has not been adopted by Congress and AHRQ has continued to be its own stand-alone agency, for FY2018 and FY2019, the funds that are in fact going to AHRQ are shown as going to NIRSQ. Table 1 shows the allocation of PCORTF funds through FY2019. Table 1. Distribution of PCORTF Funding Millions of Dollars, by Fiscal Year Funding Recipient 2012 2013 2014 2015 2016 2017 2018 (Est.) 2019 (Est.) PCORI 120 289 376 396 469 476 499 622 HHS 30 72 94 99 117 119 125 155 AHRQ (non-add) (24) (58) (75) (80) (94) (95) — — NIH/NIRSQ (non-add) — (100) (124) Office of the Secretary (non-add) (6) (14) (19) (19) (23) (24) (25) (31) Total 150 361 470 495 586 595 624 777 Source: CRS calculations using data provided in Office of Management and Budget, Budget of the U.S. Government, Appendix (FY2013-FY2019).

Dec 20, 2018

Defense Primer: National and Defense Intelligence

Dec 20, 2018

Defense Primer: Intelligence Support to Military Operations

Dec 20, 2018

Defense Primer: The Department of Defense

Dec 20, 2018

Defense Primer: U.S. Defense Industrial Base

Dec 20, 2018

Defense Primer: Procurement

Dec 20, 2018

Introduction to Bank Regulation: Supervision

Dec 20, 2018

Argentina: An Overview

Dec 20, 2018

Defense Primer: U.S. Ballistic Missile Defense

Dec 19, 2018

Defense Primer: Under Secretary of Defense for Intelligence and Security

Dec 19, 2018

Defense Primer: Budgeting for National and Defense Intelligence

Dec 19, 2018

International Approaches to Digital Currencies

Since Bitcoin was introduced a decade ago, about 2,100 cryptocurrencies have been developed. Cryptocurrencies are digital representations of value that have no status as legal tender and are administered using distributed ledger technology, running on a network of independent, peer-to-peer computers. Cryptocurrencies are controversial. Some think they will revolutionize the international payments system for the better; others are skeptical of the business model, calling it a scam. The interest and debate surrounding cryptocurrencies has led some central banks to examine whether the technology underpinning cryptocurrencies could be used to create digital versions of fiat currencies, which would have legal status in their jurisdiction of issue. Governments around the world are taking different approaches to cryptocurrencies and digital fiat currencies, an area of increasing focus for international organizations and forums underpinning the global economy. As Congress considers issues related to digital currencies, including whether to regulate further the cryptocurrency industry, the approaches taken by other governments and international bodies may be of interest. National Approaches to Cryptocurrencies Cryptocurrencies span borders and are international in nature, but governments around the world have responded differently to the proliferation of cryptocurrencies. Three types of responses have generally taken shape. First, some governments, such as Malta, Singapore, and Switzerland, are active cryptocurrency hubs; they have been attracting and developing cryptocurrency industries in their countries. Second, some governments, such as China, India, and South Korea, have banned the use of cryptocurrencies or specific activities associated with cryptocurrencies. Third, some governments, including many European countries and the United States, are seeking balance between financial innovation and risk-management through regulation of cryptocurrencies. National Approaches to Digital Fiat Currencies To date, one country, Venezuela, which is mired in a serious economic crisis, has issued a digital fiat currency, and there are serious questions about the new currency’s success and operational viability. A few small countries are in the process of launching digital fiat currencies. Some countries, including China and Sweden, are researching the costs and benefits of these currencies, and Iran and Russia are considering them as a way to evade U.S. sanctions. Many central banks in major economies, including in the United States and the Eurozone, have argued against issuing a digital fiat currency at this time. International Bodies’ Engagement on Digital Currencies Many international organizations and forums are examining the implications of cryptocurrencies and, in some cases, are starting to make policy recommendations. They have examined a range of issues, including the utility of digital currencies for improving the international payments systems, the possible threats digital currencies may or may not pose to international financial stability, the divergence of national-level cryptocurrency regulations and whether international regulatory coordination is desirable, how cryptocurrencies should be treated in bank prudential regulation, and how to adapt international recommendations to combat money laundering and terrorist financing in light of cryptocurrencies. Possible Questions for Congress In November 2018, the Department of the Treasury announced it is developing a report on cryptocurrency regulation, including a legislative framework for Congress to consider in 2019. How do U.S. current regulations, and the proposed regulations when they are released, compare to other countries’ regulations? Some governments are actively developing cryptocurrency industries. Should the United States follow suit, or risk losing market share in the industry? Alternatively, some governments are tightly restricting, or even banning, cryptocurrency activities to protect consumers. In the United States, do consumers have adequate protections in terms of cryptocurrencies? Has the Federal Reserve adequately assessed the potential benefits and costs of developing a digital U.S. dollar relying on distributed ledger technology? How does the U.S. position on digital fiat currencies compare to other countries’ calculations? What are the potential future impacts on the role of the dollar as a reserve currency? What types of digital currency policies is the Trump Administration advocating at various international organizations? How do international recommendations and standards fit with U.S. regulations?

Dec 19, 2018

DHS’s Cybersecurity Mission—An Overview

Dec 19, 2018

Defense Primer: Department of Defense Contractors

Dec 19, 2018

Congress’s Authority to Influence and Control Executive Branch Agencies

The Constitution neither establishes administrative agencies nor explicitly prescribes the manner by which they may be created. Even so, the Supreme Court has generally recognized that Congress has broad constitutional authority to establish and shape the federal bureaucracy. Congress may use its Article I lawmaking powers to create federal agencies and individual offices within those agencies, design agencies’ basic structures and operations, and prescribe, subject to certain constitutional limitations, how those holding agency offices are appointed and removed. Congress also may enumerate the powers, duties, and functions to be exercised by agencies, as well as directly counteract, through later legislation, certain agency actions implementing delegated authority. The most potent tools of congressional control over agencies, including those addressing the structuring, empowering, regulating, and funding of agencies, typically require enactment of legislation. Such legislation must comport with constitutional requirements related to bicameralism (i.e., it must be approved by both houses of Congress) and presentment (i.e., it must be presented to the President for signature). The constitutional process to enact effective legislation requires the support of the House, Senate, and the President, unless the support in both houses is sufficient to override the President’s veto. There also are many non-statutory tools (i.e., tools not requiring legislative enactment to exercise) that may be used by the House, Senate, congressional committees, or individual Members of Congress to influence and control agency action. In some cases, non-statutory measures, such as impeachment and removal, Senate advice and consent to appointments or the ratification of treaties, and committee issuance of subpoenas, can impose legal consequences. Others, however, such as House resolutions of inquiry, may not be used to bind agencies or agency officials and rely for their effectiveness on their ability to persuade or influence.

Dec 19, 2018

Defense Primer: Cyberspace Operations

Dec 18, 2018

Defense Primer: Operations in the Information Environment

Dec 18, 2018

Defense Primer: The Berry and Kissell Amendments

Dec 18, 2018

U.S. Trade with Major Trading Partners

U.S. world trade has grown steadily over the past decade. In 2017, the United States exported $2.4 trillion in goods and services and imported $2.9 trillion. Since 2009, when trade flows declined sharply in the midst of the financial crisis, U.S. exports have grown—in nominal terms—48.5%, while U.S. imports have grown 47.6%. More broadly, since 1960, trade relative to gross domestic product (GDP) has risen markedly. U.S. exports as a percentage of GDP expanded from 5% in 1960 to over 12% of GDP in 2017, while U.S. imports expanded from 4% to over 15% of GDP. China was the top U.S. trading partner in 2017, with $711.7 billion in total goods and services trade, followed by Canada ($679.9 billion), Mexico ($622.1 billion), Japan ($286.1 billion), and Germany ($239.8 billion). China was the largest source of U.S. imports, while Canada was the largest destination for U.S. exports. However, considering the 28 member states of the European Union (EU) as a single trading partner, the EU is both the largest U.S. export destination ($528.2 billion) and the largest source of U.S. imports ($629.4 billion). The majority of U.S. global trade—approximately 65%—is with countries that do not have a free trade agreement (FTA) with the United States. The changing dynamics and composition of U.S. trade pose both opportunities and challenges for U.S. trade relations. These developments have intensified congressional interest in U.S. trade policy and heightened congressional demand for comparative analysis of U.S. bilateral trade flows. In the coming months, Congress may face matters such as shaping U.S. trade policy to reflect the changing composition of U.S. trade; enhancing the competitive position of U.S. industries, firms, and workers; promoting access to new foreign markets for U.S. businesses; and addressing new trade tensions, barriers, and other issues raised by the growing role of emerging economies in the global economy. In addition, questions affecting U.S. trade trends could arise as the Trump Administration renegotiates existing FTAs and pursues new ones, and Congress debates and potentially ratifies them. Congress may closely monitor negotiations on other trade agreements, as well as developments at the World Trade Organization. Key U.S Trade Developments with Major Trading Partners in 2017 Trade in Goods In 2017, the European Union (EU) was the United States’ top trading partner in terms of two-way (exports plus imports) merchandise trade. The value of U.S. merchandise trade with the EU increased 4.7% to $722.2 billion in 2017. The U.S. trade deficit with the EU rose 3.0%, from $148.1 billion in 2016 to $152.6 billion in 2017. China was the largest single-country U.S. trading partner based on two-way merchandise trade. U.S. two-way merchandise trade with China amounted to $636.7 billion in 2017, an increase of 9.9% from the level recorded in 2016. The U.S. merchandise trade deficit with China of $375.9 billion remained higher than the U.S. trade deficit registered with any other trading partner in 2017. Trade in Services The EU was the United States’ top trading partner in terms of two-way services trade in 2017, while the largest single-country trading partners were the United Kingdom, Canada, Japan, China, and Germany. The value of U.S. services trade with the EU increased 5.1%, from $414.4 billion in 2016 to $435.4 billion in 2017. The U.S. trade surplus with the EU declined 8.3%, from $56.1 billion in 2016 to $51.4 billion in 2017. In 2017, China was the United States’ fourth-largest single-country trading partner based on two-way services trade. U.S. two-way services trade with China amounted to $75.0 billion in 2017, an increase of 5.7% from the $71.0 billion recorded in 2016. The U.S. services surplus with China in 2017 amounted to $40.2 billion, increasing 3.4% over the previous year. U.S. Total Trade in Goods and Services The EU was the United States’ largest market for U.S. goods and services exports, accounting for $528.2 billion (22.5% of total U.S. exports), as well as the leading source of U.S. imports, which totaled $629.4 billion (21.7% of total U.S. imports). Canada was the second-largest U.S. export market, with $341.3 billion worth of U.S. exports (14.5% of total U.S. exports), and the fourth-largest source of U.S. imports, which totaled $338.5 billion (11.6% of total U.S. imports). China’s share of U.S. trade has increased dramatically over the past few decades. In 2000, it accounted for 2.0% of total U.S. exports and 7.1% of total U.S. imports. By 2017, China’s share had risen to 8.0% of total U.S. exports and 18.0% of U.S. imports.

Dec 18, 2018

Defense Primer: Regular Military Compensation

Dec 17, 2018

Defense Primer: Military Pay Raise

Dec 17, 2018

Defense Primer: Exceptional Family Member Program (EFMP)

Dec 17, 2018

Defense Primer: President’s Constitutional Authority with Regard to the Armed Forces

Dec 17, 2018

The International Monetary Fund

Dec 14, 2018

Cybersecurity: A Primer

Dec 14, 2018

2018 World Bank Capital Increase Proposal

Dec 14, 2018

Introduction to Bank Regulation: Credit Unions and Community Banks: A Comparison

Dec 14, 2018

Immigration

Dec 14, 2018

Defense Primer: Military Health System

Dec 13, 2018

Defense Primer: Future Years Defense Program (FYDP)

Dec 13, 2018

Defense Primer: Personnel Tempo (PERSTEMPO)

Dec 12, 2018

Defense Primer: Reserve Forces

Dec 12, 2018

Amazon HQ2 and Federal Opportunity Zone Tax Incentives

On November 13, 2018, Amazon announced that it would be splitting its second headquarters (HQ2) between Northern Virginia and Long Island City, NY. According to the company, each HQ2 site is expected to add 25,000 jobs over 12 years. Additionally, Amazon announced that it would build an “Operations Center of Excellence” that is expected to add more than 5,000 jobs in Nashville, TN. State and local governments offered Amazon a range of tax incentives, grants, and other benefits (e.g., a nearby state university “innovation campus”). Some of these incentives are performance-based and would depend on Amazon’s actual decisions to hire and invest its own money into the locations. Federal tax incentives might indirectly benefit investments near the new Amazon sites. In particular, a new set of Opportunity Zones (OZ) tax incentives could boost returns on investments made by Amazon or private investors in residential or commercial developments to support Amazon’s workforce and their families. OZs have generated much interest by state and local governments and private investors after being created by the 2017 tax revision (P.L. 115-97). Under part of the statute authorizing OZs, state governors had the discretion to nominate a limited number of census tracts within their states that were either (a) low-income, as defined in statute, or (b) having no more than 125% of the median family income of a contiguous low-income tract. Those designations were finalized in summer 2018. Investors who roll over capital gains from investments (e.g., stock sales, sales of shares in commercial or residential real estate) to purchase a financial interest in a Qualified Opportunity Fund (QOF) may benefit. QOFs are corporations or partnerships that hold at least 90% of their assets in “qualified OZ property” (tangible business property, stock, or partnership interest in another QOF). QOFs are self-certified entities and do not require advance certification for formation or to begin eligibility for OZ tax incentives. The three OZ tax incentives are all designed to reduce capital gains tax and become available at different increments over a 10-year period: Temporary deferral of capital gains that are reinvested in qualified OZ property. Taxpayers can immediately defer capital gains tax due upon sale or disposition of an asset (even if located outside of an OZ) if the capital gain portion of that asset is reinvested within 180 days in a QOF. Step-up in basis for investments held in QOFs. If the investment in the QOF is held by the taxpayer for at least five years, the basis on the original gain is increased by 10% of the original gain. If the OZ asset or investment is held by the taxpayer for at least seven years, the basis on the original gain is increased by an additional 5% of the original gain. Permanent exclusion of capital gains tax on qualified OZ investments held for at least 10 years. The basis of investments maintained (a) for at least 10 years and (b) until at least December 31, 2026, will be eligible to be marked up to the fair market value of such investment on the date the investment is sold. Effectively, this amounts to an exclusion of capital gains tax on any gains earned from the investment in the QOF (over 10 years) when the investment is sold or disposed. Under P.L. 115-97, OZ designations are in effect through 2026. To be eligible for OZ tax incentives, investments must be made before the end of 2026, and proposed Treasury regulations indicate that the permanent exclusion on gains from OZ investments would be available for qualified investors through 2047. For an illustrative calculation of OZ tax benefits, see CRS Report R45152, Tax Incentives for Opportunity Zones: In Brief, by Sean Lowry and Donald J. Marples. The Joint Committee on Taxation estimated that the OZ tax incentives will result in a revenue loss to the federal government of $1.6 billion over 10 years. This estimate within the budget window reflects the relatively small revenue losses associated with the deferral of capital gains tax and the OZ basis adjustments in years five and seven. Potentially the largest tax benefit, available in year 10, would fall outside of the 10-year budget window. Those revenue losses would not be expected until 2028. As shown in the figures, below, the planned site for the Amazon New York office is located within a designated OZ, but the Northern Virginia and Nashville sites are not. Even if the new sites are not directly located within a designated OZ, developers could look to nearby designated OZs for higher returns on investments for housing, retail, and commercial projects for use and enjoyment by Amazon’s workers and their families. Investors and QOFs face consideration of the statute providing rules for OZ tax incentives, proposed regulations, and various IRS guidance as they are released. Figure 1. Designated Opportunity Zones Near Proposed Amazon HQ2 Site in New York / Source: CRS using GIS data from Novogradac and Company, https://www.novoco.com/resource-centers/opportunity-zone-resource-center/guidance, the U.S. Census Bureau, and Esri Light Gray Base Map; letter from Howard A. Zemsky, President and CEO, New York State Urban Development Corporation, to Holly Sullivan, Head of WW Economic Development, Amazon Services, November 12, 2018, https://d39w7f4ix9f5s9.cloudfront.net/4d/db/a54a9d6c4312bb171598d0b2134c/new-york-agreement.pdf. Figure 2. Designated Opportunity Zones Near Amazon Proposed HQ2 Site in Northern Virginia Source: CRS using GIS data from Novogradac and Company, https://www.novoco.com/resource-centers/opportunity-zone-resource-center/guidance, the U.S. Census Bureau, Esri Light Gray Base Map; and Kaya Yurieff, “Amazon HQ2 Sites Have Been Decided. Now the Real Work Begins,” CNN, December 3, 2018, https://www.cnn.com/2018/12/03/tech/amazon-hq2-next-steps/index.html. Figure 3. Designated Opportunity Zones Near Proposed Amazon Site in Nashville / Sources: CRS using GIS data from Novogradac and Company, https://www.novoco.com/resource-centers/opportunity-zone-resource-center/guidance, the U.S. Census Bureau, and Esri Light Gray Base Map; and Office of Governor Bill Haslam, “Governor Haslam, Commissioner Rolfe Announce Amazon to Create 5,000 New Jobs in Nashville,” press release, November 13, 2018, https://www.tn.gov/governor/news/2018/11/13/amazon-to-create-5000-new-jobs-in-nashville.html.

Dec 12, 2018

Sharing the Colorado River and the Rio Grande: Cooperation and Conflict with Mexico

The United States and Mexico share the waters of the Colorado River and the Rio Grande. A bilateral water treaty from 1944 (the 1944 Water Treaty) and other binational agreements guide how the two governments share the flows of these rivers. The binational International Boundary and Water Commission (IBWC) administers these agreements. Since 1944, the IBWC has been the principal venue for addressing river-related disputes between the United States and Mexico. The 1944 Water Treaty authorizes the IBWC to develop rules and to issue proposed decisions, called minutes, regarding matters related to the treaty’s execution and interpretation. Water Delivery Requirements Established in Binational Agreements. The United States’ and Mexico’s water-delivery obligations derive from multiple treaty sources and vary depending on the body of water. Under the 1944 Water Treaty, the United States is required to provide Mexico with 1.5 million acre-feet (AF) of Colorado River water annually. The 1944 Water Treaty also addresses the nations’ respective rights to waters of the Rio Grande downstream of Fort Quitman, TX. It requires Mexico to deliver to the United States an annual minimum of 350,000 AF of water, measured in five-year cycles (i.e., 1.75 million AF over five years). For waters of the Rio Grande upstream of Fort Quitman, a 1906 bilateral convention requires the United States annually to deliver 60,000 AF of water to Mexico. Developments in the Colorado River Basin. The United States continues to meet its Colorado River annual delivery requirements to Mexico pursuant to the 1944 Water Treaty. At the forefront of recent IBWC actions on the Colorado River are efforts to cooperatively manage the Colorado River’s water and infrastructure to improve water availability during drought and to restore and protect riverine ecosystems. Minute 323 is a set of binational measures in the Colorado River basin that provides for binational cooperative basin water management, including environmental flows to restore riverine habitat. Minute 323 also provides for Mexico to share in cutbacks during shortage conditions in the U.S. portion of the basin. Additionally, Minute 323 designates a “Mexican Water Reserve” through which Mexico can delay its water deliveries from the United States and store its delayed deliveries upstream at Lake Mead, thereby increasing the lake’s elevation. Lake Mead elevation is the baseline used for determining shortage conditions and associated water delivery cutbacks for the lower Colorado River basin states of Arizona, California, and Nevada. Recent congressional attention to the Colorado River basin has related largely to oversight of Minute 323 implementation and water management during potential shortage conditions. Developments in the Rio Grande Basin. On multiple occasions since 1994, Mexico has not met its Rio Grande delivery obligations within the five-year cycle established by the 1944 Water Treaty. For example, Mexico fell 15% below its water-delivery obligations under the 1944 Water Treaty for the five-year cycle from 2010 to 2015. Mexico addressed its deficit by early 2016. The October 2015 to October 2020 cycle is under way. Mexico offset its below-target deliveries for the first year of this cycle with additional deliveries in the second year. IBWC indicates that Mexico delivered less than its 350,000 AF in the third year of the cycle; however, higher deliveries in the second year resulted in Mexico’s deliveries being almost at 98% of the three-year cumulative delivery target of 1.05 million AF. Some U.S. stakeholders promote the adoption of mechanisms to achieve a water-delivery regime by Mexico that provides more reliability and benefit for U.S. interests in Texas. The IBWC is developing a binational model for water management in the Rio Grande, as part of its broader effort to improve reliability in Mexico’s water deliveries. Congress has been involved in the recent Rio Grande water-sharing issues through oversight. Congress requires the U.S. Department of State to report annually on Mexico’s deliveries and on efforts to improve Mexico’s treaty compliance.

Dec 12, 2018

The Internal Revenue Service’s Private Tax Debt Collection Program

Dec 12, 2018

Defense Primer: Strategic Nuclear Forces

Dec 11, 2018

Authority to Launch Nuclear Forces

Dec 11, 2018

USDA Domestic Food Assistance Programs: FY2018 Appropriations

The Consolidated Appropriations Act, 2018 (P.L. 115-141) was enacted on March 23, 2018. This omnibus bill included appropriations for the U.S. Department of Agriculture (USDA), of which USDA’s domestic food assistance programs are a part. Prior to its enactment, the federal government had continued to operate for the first six months of the fiscal year under continuing resolutions (CRs). This report focuses on the enacted appropriations for USDA’s domestic food assistance programs and, in some instances, policy changes provided by the omnibus law. CRS Report R45128, Agriculture and Related Agencies: FY2018 Appropriations provides an overview of the entire FY2018 Agriculture and Related Agencies portion of the law as well as a review of the reported bills and CRs preceding it. Domestic food assistance funding is primarily mandatory but also includes discretionary funding. Most of the programs’ funding is for open-ended, appropriated mandatory spending—that is, terms of the authorizing law require full funding and funding may vary with program participation (and in some cases inflation). The largest mandatory programs include the Supplemental Nutrition Assistance Program (SNAP, formerly the Food Stamp Program) and the child nutrition programs (including the National School Lunch Program and School Breakfast Program). Though their funding levels are dictated by the authorizing law, in most cases, appropriations are needed to make funds available for obligation and expenditure. The three largest discretionary budget items are the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC); the Commodity Supplemental Food Program (CSFP); and federal nutrition program administration. The domestic food assistance funding is, for the most part, administered by USDA’s Food and Nutrition Service (FNS). The enacted FY2018 appropriation provides nearly $105 billion for domestic food assistance (Table 1). This is a decrease of approximately $3.2 billion from FY2017. Declining participation in SNAP is responsible for most of the difference. Over 95% of the FY2018 appropriations for domestic food assistance are for mandatory spending. Highlights of the associated appropriations accounts are summarized below. For SNAP and other programs authorized by the Food and Nutrition Act, such as The Emergency Food Assistance Program (TEFAP) commodities, the FY2018 appropriations law provides approximately $74.0 billion. Certain provisions of the law affect SNAP policies. For example, it continues a policy in the FY2017 appropriations law that limited USDA’s implementation of December 2016 regulations regarding SNAP retailers’ inventory requirements. USDA must amend its final rule to define “variety” more expansively and must “apply the requirements regarding acceptable varieties and breadth of stock.” For the child nutrition programs (National School Lunch Program and others), the enacted law provides approximately $24.3 billion. This includes discretionary funding for school meals equipment grants ($30 million) and Summer Electronic Benefit Transfer (EBT) demonstration projects ($28 million). General provisions provide an additional $5 million for farm-to-school grants and $2 million for training school nutrition personnel. The law includes policy provisions related to processed poultry from China, discrimination in the school meals programs, and requirements for schools’ paid lunch pricing. For the WIC program, the law provides nearly $6.2 billion while also rescinding $800 million in prior-year carryover funding. For the Commodity Assistance Program account, which includes funding for the Commodity Supplemental Food Program, TEFAP administrative and distribution costs, and other programs, the law provides over $322 million. It provides level funding for the WIC Farmers’ Market Nutrition Program ($18.5 million), though the President’s budget requested no funding for this program. For Nutrition Programs Administration, the law provides nearly $154 million.

Dec 11, 2018

District Court Temporarily Blocks Implementation of Asylum Restrictions on Unlawful Entrants at the Southern Border

Dec 11, 2018

Lifting the Earmark Moratorium: Frequently Asked Questions

While the term earmark has been used historically to describe various types of congressional spending actions, since the 110th Congress (2007-2008) House and Senate rules have defined an earmark as any congressionally directed spending, tax benefit, or tariff benefit that would benefit an entity or a specific state, locality, or congressional district. In the 112th Congress (2011-2012), the House and Senate began observing what has been referred to as an earmark moratorium or earmark ban. The moratorium does not exist in House or Senate chamber rules, however, and therefore is not enforced by points of order. Instead, the moratorium has been established by party rules and committee protocols and is enforced by chamber and committee leadership through their agenda-setting power. In recent years, some Members have expressed interest in lifting the earmark moratorium. Whether or not the earmark moratorium is lifted, the House and Senate continue to have formal earmark disclosure rules that were implemented in the 110th Congress with the stated intention of bringing more transparency to earmarking. These rules generally prohibit consideration of certain legislation unless information is provided about any earmarks included in the legislation. House and Senate rules require that any Member submitting an earmark request provide a written statement that includes the name of the Member, the name and address of the earmark recipient, and a certification that the Member has no financial interest in the earmark. House and Senate rules require that committees determine whether a provision constitutes an earmark, and committees must compile and make accessible certain earmark-related information. If Congress were to lift the current earmark ban, it might also choose to institute any number of policies or restrictions to govern the use of congressional earmarks. These policies or restrictions might be instituted through formal amendments to the House and Senate standing rules, by standing order, or by enacting new law. Such policies might also be instituted through party rules or leadership and committee practices and protocols. Some policies might seek to add more transparency to the earmarking process or prohibit certain types of entities from receiving earmarks. Restrictions might be implemented related to the purposes for which an earmark could be used or limiting the amount of federal dollars that might be spent on earmarks. Other policy approaches might potentially involve the executive branch or the congressional support agencies.

Dec 10, 2018