Lame duck challenges and opportunities laid out

Key Insight: Learn why municipal advocates are racing to attach key provisions to upcoming tax legislation.

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What’s at Stake: Counties risk losing the federal funding needed to deliver key local services.

Expert Quote: “We’re going to have legislation being proposed that probably has no likelihood of being enacted,” — Rochelle Hodes, Partner, Crowe Advisory LLC.

Supporting Data: December 11, the expiration date of a crucial legislative funding resolution.

Forward Look: Expect a heavy focus on tax policy during the next congressional session.

The current Congress has til the end of the year to pass key legislation including the possibility of a tax title before the Democrats take over with a strong majority in both houses. 

“We’re going to have legislation being proposed that probably has no likelihood of being enacted,” said Rochelle Hodes, a partner in Tax, at Crowe Advisory LLC. 

“I think they’ll be a number of tax provisions that are well-known priorities for Democrats.  

“I also think they’re going to be potentially some bipartisan work to try to get something done in tax. The concern is that other issues will overtake tax.” 

The comments came during a panel discussion hosted by Tax Analysts on Tuesday in Washington, D.C. 

Muni advocates are always on the lookout for bipartisan tax titles as a possible vehicle for adding provisions that would restore the advance refunding of tax-exempt municipal bonds and raise the cap on bank-qualified debt.  

The ever-widening budget deficit could also give budget hawks room to hunt. 

“We have a huge budget gap,” said Keith Martin a partner with Norton Rose Fulbright U.S. LLP.

“Somebody at some point is going to have to raise some revenue. The Democrats want to delay the work requirement for Medicaid cuts, they also want to roll back the SNAP cuts, so I would look for some sort of pay fors as part of that process.” 

Martin mentioned the possibilities of pay-fors being legislated in the next Congress by changing stock buyback rules or taxing data centers and millionaires.

Looking for revenue raisers to pay for expensive social welfare programs has in the past caused lawmakers to consider ending the tax exemption for municipal bonds – an issue that’s currently not on the table. 

In addition to the possibility of tax legislation, the lame duck session to-do list includes a continuing resolution that expires on Dec. 11.  

A long-delayed farm bill could provide a ride for the Modernizing Agricultural and Manufacturing Bonds Act, which would ease restrictions on private activity bonds.  

Dealing with the National Defense Authorization Act is now complicated by the possible impeachment of Defense Secretary Pete Hegseth. 

The National Association of Counties has a priority list that includes expiring Infrastructure Investment and Jobs Act spending. 

“NACo is pushing for Congress to either pass a multi-year surface transportation reauthorization bill or extend IIJA’s authorities and its programs funded through advance appropriations.” 

Anxiety is also running high over the proposed OMB Uniform Guidance rule that would have significant impacts on counties’ ability to deliver key services using federal funding.  

The midterm elections will usher in a sea change of political power in January which could provide opportunities for tax titles to flow out of committee. 

“Affordability, housing, healthcare, data centers, do have a tax component so, whether we get enacted legislation or directional messaging legislation, we’re going to see a lot of tax in the next session,” said Hodes.