US Senate Commerce Committee Marks up and Passes Autonomous Vehicles Bill

The US Senate Committee on Commerce Science and Transportation (the Committee) today marked up and passed bipartisan legislation, S.1885, the AV START Act, proposed by Senators John Thune (R-SD) and Gary Peters (D-MI). The bill now moves forward for a vote by the full Senate and will then need to be reconciled with similar legislation that passed the House in early September.

Key provisions of the bill include:

Clarifying federal, state and local roles: Mirroring the legislative provisions in the SELF-DRIVE Act (H.R. 3388), which passed the House in early September, the bill codifies the Department of Transportation’s (DOT’s) lead national role for AV safety standards and performance while supporting state and local roles in determining traffic laws, registration and licensing. This approach avoids a patchwork of state and local safety standards that could stunt sector innovation.

Protecting Americans with disabilities: The bill expressly prohibits the denial of a license to operate a self-driving vehicle on the basis of a disability. Corresponding best practices are outlined for drivers with disabilities as this technology emerges. Ahead of the hearing the American Association for People with Disabilities, the National Federation of the Blind, the National Council on Disability and a coalition of other similar interests all endorsed the legislation.

Safety reports: The bill requires vehicle manufacturers to submit, prior to the testing or deployment, safety evaluation reports to the Secretary of Transportation (the Secretary) on safety, crashworthiness and cybersecurity based on testing, validation and assessment protocols.

Safety standards: The bill expands the Secretary’s existing discretionary authority to allow for a streamlined process for federal motor vehicle safety standards to prioritize safety for up to 80,000 vehicles per manufacturer three years after enactment after an amendment from Senator Richard Blumenthal (D-CT) that lowered the exemption from 100,000.

Maintains status quo for trucks and buses: Despite some proposals to have the legislation apply to trucks and buses, the Act applies only to vehicles weighing 10,000 pounds or less.

Cybersecurity: The Secretary is directed to convene and partner with AV manufacturers to develop and implement policies related to mitigate the risks of potential cybersecurity breaches. In addition, the bill mandates manufacturers to establish comprehensive plans for identifying and mitigating cybersecurity risks to self-driving vehicles.

The bill also establishes a DOT-led committee of experts to propose standards, including for data recording and data access and sharing. This public-private stakeholder forum will have a broad mandate to develop other recommendations for other policy issues related to self-driving vehicles over time.

Consumer protection: The bill also calls for the establishment of guidelines on “responsible consumer education and marketing.” These guidelines will educate consumers on the capabilities and limitations of this new technology and will be developed through a transparent, formal working group.

During the markup, Senator James Inhofe (R-OK) offered, and then withdrew, an amendment that would have included heavy trucks in the Act’s definition of a highly automated vehicle and would have given the National Highway Traffic Safety Administration (NHTSA) authority to regulate heavy trucks under the Act. Inhofe withdrew the amendment in response to opposition from several senators concerned about how automation would affect employment within the trucking industry. Committee Chairman John Thune (R-SD) committed to work with Inhofe on the trucking issue.

The Committee also adopted a number of non-controversial amendments by voice-vote. One of the more notable amendments, offered by Senator Tammy Duckworth (D-IL), would require the DOT to conduct a study on the transportation, mobility, environmental, energy security, and fuel economy impacts of highly automated vehicles on public roads.  Several amendments dealt with cybersecurity. For instance, the Committee approved an Inhofe amendment that would establish an advisory committee to provide recommendations to Congress on cybersecurity issues in relation to highly automated vehicles.  Another amendment, offered by Senator Roger Wicker (R-MI), would direct the DOT to develop additional cybersecurity resources to assist consumers in minimizing motor vehicle cybersecurity risks.

Promises made, questions left unanswered by GOP tax plan

The Trump administration and Congressional Republican leaderships this week released their “Unified Framework for Fixing our Broken Tax Cod,” a nine-page manifesto birthed from months of closed-door meetings on tax reform by the so-called Big Six: Treasury Secretary Steve Mnuchin, National Economic Council Director Gary Cohn, House Speaker Paul Ryan, Senate Majority Leader Mitch McConnell, House Ways and Means Committee Chairman Kevin Brady, and Senate Finance Committee Chairman Orrin Hatch.

The goal of the framework is to move the tax reform process forward, in particular to build support for a budget resolution that will permit the House and Senate to pass tax reform legislation by a simple majority vote.

With that goal in mind, the framework answers several important questions regarding tax reform, but it leaves far more either unanswered or with too brief or too vague of a description to evaluate.  Because it is an advocacy piece, the framework is light on details.  And, when it has details, they generally focus on the good news (i.e., taxpayer-favorable provisions that are being added or expanded) rather than the bad news (i.e., provisions being eliminated or reduced).   Further, in many cases, the framework uses guarded language or caveats when discussing politically sensitive areas.  For example, the framework “aims” to consolidate the tax rates for individuals, “envisions” changing inflation adjustments and repealing provisions to make the tax code simpler, and “contemplates” preventing wealthy individuals from avoiding the top personal tax rate.  Areas that are still unsettled or where further work is required are left to the Ways and Means Committee and Finance Committee (the “committees”) to work through and resolve.

What the Framework Says

Rates

Individuals

The framework “aims” to consolidate the current seven tax brackets into three brackets of 12%, 25% and 35%, although it warns ominously that “an additional top rate may apply to the highest-income taxpayers to ensure that the reformed tax code is at least as progressive as the existing tax code and does not shift the tax burden from high-income to lower- and middle-income taxpayers.” The framework also calls for use of a more accurate (i.e., less taxpayer-favorable) measure of inflation for purposes of indexing the tax brackets and other tax parameters.

Businesses

For corporations, the framework would reduce the top tax rate to 20%. It notes that “the committees also may consider methods to reduce the double taxation of corporate earnings,” leaving open the possibility of a corporate integration proposal.

For pass-through entities, the framework would “limit the maximum tax rate applied to the business income of small and family-owned businesses conducted as sole proprietorships, partnerships and S corporations to 25%.” Nonetheless, the framework “contemplates that the committees will adopt measures to prevent the recharacterization of personal income into business income to prevent wealthy individuals from avoiding the top personal tax rate. ”

Deductions, Exclusions and Exemptions

Individuals

The framework would:

  • combine the existing standard deduction and the personal exemptions for taxpayer and spouse and increase it to $24,000 for married taxpayers filing jointly and $12,000 for single filers;
  • convert existing personal exemptions for dependents into an enhanced child tax credit or a non-refundable $500 credit for non-child dependents;
  • eliminate “most” itemized deductions, but “retain tax incentives for home mortgage interest and charitable contributions, and
  • retain “tax benefits that encourage work, higher education and retirement security,” although the committees are encouraged to simplify them “to improve their efficiency and effectiveness.”

Punted to the committees:

  • “work on additional measures to meaningfully reduce the tax burden on the middle-class;”
  • repeal of many of the “numerous” exemptions, deductions and credits for individuals that “riddle the tax code” in order to “make the system simpler and fairer;” and
  • the appropriate treatment of interest paid by non-corporate taxpayers.

Businesses

The framework:

  • would provide immediate expensing, for at least a five-year period, for all depreciable assets– other than structures–acquired after September 27, 2017.
  • states that the deduction for net interest expense incurred by C corporations will be partially limited.
  • specifically calls for the repeal of the section 199 manufacturing deduction, and states that “numerous other special exclusions and deductions will be repealed or restricted.” There are two explicit exceptions–the R&D tax credit and the low-income housing tax credit–although “the committees may decide to retain some other business credits to the extent budgetary limitations allow.”
  • would “modernize” the tax rules affecting specific industries “to ensure that the tax code better reflects economic reality and that such rules provide little opportunity for tax avoidance.”

Repealed

The framework would repeal:

  • The individual alternative minimum tax (“AMT”);
  • the corporate AMT (or at least “aim to”); and
  • the estate tax and generation-skipping transfer tax.

International Tax Reform

The framework:

  • Calls for adoption of a new “territorial” tax system with a 100% exemption for dividends from foreign companies in which the US parent owns 10% or more of the shares. However, this dividend exemption comes at price: “to prevent companies from shifting profits to tax havens, the framework includes rules to protect the U.S. tax base by taxing at a reduced rate and on a global basis the foreign profits of U.S. multinational corporations.”
  • Would impose a “deemed repatriation” tax on US multinationals with offshore earnings. Different rates would apply to earnings held in liquid and illiquid form, although neither the rates nor the period over which the payments must be made is specified.
  • States that the committees will incorporate rules to level the playing field between U.S.-headquartered parent companies and foreign-headquartered parent companies.

What the Framework Doesn’t Address

  • Effective dates (other than for expensing)
  • Phase-ins and transition rules
  • How the international tax rules would apply to individuals
  • How it plans to comply with the budget rules

Next Steps

The House and Senate have to agree on a budget resolution that provides for a tax reform package in line with the framework. Once that is agreed to, the Ways and Means Committee and Finance Committee can proceed to marking up tax reform legislation and filling in the blanks.

Congress and executive branch continue momentum toward bipartisan federal policies on autonomous vehicles

A week after the House of Representatives passed sweeping autonomous vehicle (AV) legislation, the Senate and the Trump administration both moved forward on AV policy initiatives this week, with Department of Transportation Secretary Elaine Chao releasing policy guidance, which is now out for public comment, and the Senate releasing a discussion draft of legislation and holding hearings on potential impacts to the trucking sector.

DOT’s Chao releases NHTSA policy guidance

On Tuesday at the University of Michigan, US Secretary of Transportation Elaine Chao announced the DOT and the National Highway Traffic Safety Administration’s (NHTSA) release of “Automated Driving Systems 2.0: A Vision for Safety.” Automated Driving Systems 2.0 provides guidance to industry and state regulators on managing this fast-evolving technology, fostering innovation and moving toward a holistic national approach to regulation and safety. The voluntary policy guidance, which replaces a previous voluntary guidance for the deployment and testing of self-driving cars issued by the Obama Administration, asserts that the second version provides “a more flexible approach to advancing the innovation of automated vehicle safety technologies.” The guidance encourages the development of best practices and making safety a priority. The document also provides technical assistance to states and examples of best practices for policymakers. It does not suggest new federal regulation at this time, explaining that the technology is new and rapidly evolving. The new guidance was published in the Federal Register on September 12 and the NHTSA has already commenced a 60-day public comment process.

The key change from the previous guidance involves the safety assessment for AVs that companies want to test and deploy. The 2016 guidance, “Federal Automated Vehicles Policy,” included a 15-point safety assessment process and allowed manufacturers to voluntarily submit their assessments of their vehicles and systems to the NHTSA, which would review and then publish them. The process was sparsely followed due to its voluntary nature. Under Automated Driving Systems 2.0, the safety assessment is scaled back to a 12-point process, manufacturers are no longer expected to submit them to the NHTSA for federal approval. In addition, Automated Driving Systems 2.0 guidelines are strictly focused on levels 3, 4 and 5 vehicles, in all of which the driver need not remain attentive during the system’s operation.

The 2016 Obama guidance provided a model state policy on regulations for AVs. the Trump guidance moves away from this approach, providing instead a set of best practices for both state legislatures and highway safety officials that begins to more clearly define state and federal regulatory roles. Mirroring bipartisan legislation emerging in Congress, the new guidance clarifies a preferred, nationally uniform approach where the federal government defines safety standards and requirements and states and localities focus on traditional licensing and registration matters, with a view to avoiding a patchwork of uncertain regulatory approaches that could stifle sector growth.

The NHTSA states that the 60-day public comment process demonstrates its intention to “continually revise and refine the guidance to reflect continued by public input, experience, research and innovation.”

Senate CST Committee releases discussion draft of legislation

The Senate Commerce, Science and Transportation Committee has made progress on its work on AV legislation. The committee recently released its staff discussion draft days after the House passed its own AV legislation with strong bipartisan support.

The Senate draft mirrors the House bill, though it also differs from the lower chamber’s measure in some key respects. Like the House bill, the Senate draft would direct the Transportation secretary to establish a “Highly Automated Vehicles Technical Safety Committee,” which would provide the Transportation secretary recommendations on consensus-based performance standards and the harmonization of national AV safety standards with international standards. The House bill provides the advisory committee with a broader mandate that includes not just safety standards but also protection of mobility access for the disabled and elderly.

The Senate draft would also allow AVs to receive exemptions from NHTSA safety standards under certain circumstances, such as if an exemption would make it easier for the development or field evaluation of a new motor vehicle safety feature. Under the Senate draft, up to 50,000 AVs could qualify for this exemption in the first 12-month period after the bill is enacted. The House bill, on the other hand, would limit exemptions to 25,000 AVs in that first 12-month period.

The Senate draft also requires that each manufacturer submit to the Transportation Secretary a safety evaluation report for each new AV or AV driving system that it introduces into interstate commerce. The safety evaluation report shall include a description of how the manufacturer is addressing key issues related to AVs, including system safety, data recording, cybersecurity, human-machine interface and crashworthiness, among other issues.

The Senate draft notes that a number of key issues remain unresolved among CST Committee members, including state preemption and whether the measure should address autonomous trucks.

Senate hearing on autonomous trucking

Autonomous trucks was the subject of a September 13 CST Committee hearing featuring testimony from a diverse group of stakeholders. The hearing underscored a divide between labor and industry interests on whether autonomous passenger vehicles and autonomous trucks should both be included in this bill and regulated on the same track. Witnesses including American Trucking Associations President and CEO Chris Spear, Navistar President and CEO Troy Clarke and National Safety Council President and CEO Deborah Hersman, who argued that automated trucks should be part of the bill since regulations could then address both automated trucks and passenger cars, which would provide regulatory certainty and clarity, which is important for the sector’s development.

Ken Hall, General Secretary Treasurer of the International Brotherhood of Teamsters, disagreed, testifying that “the issues facing autonomous commercial trucks are fundamentally different, and potentially more calamitous than those facing passenger cars, and warrant their own careful consideration.” Hall urged lawmakers against “taking a cookie cutter approach” in addressing risks related to automated trucks.

Accordingly, it remains to be seen whether trucking issues will be folded into currently moving legislation or remain on a separate course and timetable.

Senator Gary Peters (D-MI), who has been engaged in discussions with Committee Chairman John Thune (R-SD) on the draft bill, stated that he does not believe automated trucks should be included in this measure due to issues related to safety and potential driver displacement. During the hearing, Peters and other Democrats on the Committee raised concerns about autonomous trucks having a negative impact on truck driver jobs. Spears contended that the technology would assist, not displace, truckers. Notably, the House bill was limited to automated passenger vehicles and did not address automated trucks.

Speaking for the Committee, Senator Thune expressed a commitment to introducing and passing bipartisan AV legislation, but he gave no timetable and the Committee will likely first have to address the divide on whether trucks should be part of the measure.

As Congress returns: Tax reform

Although the Trump administration and the Republican leaders in Congress desperately want to pivot to tax reform, the volume of actual “must do” legislation that must be considered in September will inevitably siphon time and attention from tax reform efforts.

Further, despite an August communications offensive on the tax reform issue, neither Congress nor the Administration have provided details fleshing out the principles and concepts on which they supposedly agree. Given that the countdown clock for enacting tax legislation before the 2018 election season begins in earnest is already ticking, if Congress and the administration want to enact tax legislation with only Republican votes, they will be increasingly pulled in the direction of tax cuts and temporary provisions rather than comprehensive tax reform and permanent changes.

As Congress returns: Cyber security vulnerabilities, reforms

Recently, several members of President Trump’s National Infrastructure Advisory Council resigned over the president’s “insufficient attention” to the nation’s cyber vulnerabilities. Citing Mr. Trump’s reaction to the violence in Charlottesville, VA, his failure to adequately address the threats of climate change to critical infrastructure, and his failure to secure the national election infrastructure, seven members of the council resigned one day before the council submitted its report on securing critical cyber infrastructure.

While several of the resignations came from Obama-era appointees, the newsworthy takeaway is how (or if) the government will adopt the council’s recommendations and the impact that this will have on the security of the nation’s critical infrastructure, including the electoral system.

As Congress returns: FAA reauth

Neither the House nor the Senate have been able to pass a comprehensive Federal Aviation Administration (FAA) authorization bill, which will necessitate the passage of a short-term extension to avoid a shutdown on September 30th.

In the Senate, efforts have stalled over a proposal by Senate Commerce Committee Chairman John Thune (R-SD) to allow pilots to substitute classroom training for flying experience in qualifying to fly for commercial airlines. House Transportation and Infrastructure Chairman Bill Shuster’s FAA bill has been held up while the Chairman tries to garner support for his proposal to turn over the Air Traffic Control system to a non-profit corporation.

As Congress returns: foreign policy looms large

On July 14, 2017, the House passed, with strong bipartisan support, its version of the National Defense Authorization Act (NDAA) for FY18 by a vote of 344–81. The Senate did not consider its version of the annual, must-pass defense policy bill before departing for August recess, and is set to dispense with the legislation this week. Thereafter, a conference committee will be formed to resolve the differences between the House-and Senate-passed versions. With top-line defense spending levels in each bill that exceed the $549 billion cap on base DOD spending for FY18 imposed by the Budget Control Act of 2011, lawmakers must raise the defense spending cap for FY18, which will inevitably require Congressional Republicans to make concessions to their Democratic colleagues on a domestic spending cap increase. A deal to increase the FY18 defense and domestic spending caps will likely be struck within the broader framework of the required short-term CR. Congress has sent the NDAA to the president every year for the past 55 consecutive years, and that streak will continue this year.

North Korea

Amidst escalating rhetoric and shows of force between North Korea and the US and its East Asian allies over North Korea’s unwavering pursuit of advancements in its nuclear capabilities and corresponding missile tests, the UN Security Council unanimously imposed new sanctions on North Korea on August 5, 2017, including a prohibition on key mineral and other exports from the totalitarian state. Undaunted, the Kim Jong Un regime fired a ballistic missile over the northern tip of Japan on August 29—one of the Hermit Kingdom’s most provocative acts in the past 20 years.

State-run media described the launch as “a meaningful prelude to containing Guam,” a US territory in the Western Pacific that serves as a strategic hub for US military power projection throughout the Asia-Pacific region.

US Secretary of Defense Jim Mattis and Chairman of the Joint Chiefs of Staff General Joe Dunford, while continuing to emphasize that the US has a range of military options that are immediately deployable, insist that diplomatic engagement with the mercurial Kim regime remains the preferred option for mitigating tensions arising from North Korea’s nuclear ambitions.

Afghanistan

President Trump campaigned on a promise to withdraw from military conflicts abroad, including Afghanistan. However, on August 20, 2017, he announced a new US plan for Afghanistan based on his administration’s policy review. Trump’s plan is to deploy more troops there, with primarily a training purpose for the Afghan National Army and the Afghan police. He also suggested the US will place even more pressure on Pakistan, which supports militants inside Afghanistan, to stop providing sanctuary, support and a platform to the Taliban. Under the Trump plan, the US will also continue its counter­terrorism mission with US Special Forces in Afghanistan.

Trump declined to indicate the amount of the troop increase, the benchmarks for success or how long US troops will stay. His plan is not altogether different from the last administration and can be viewed as a victory for Secretary of Defense Jim Mattis and National Security Advisor H.R. McMaster, both of whom advocated for continued US commitment in Afghanistan to prevent the ascendancy of the Taliban and ISIS that would surely occur in the wake of a withdrawal.

The plan also calls for greater emphasis on diplomacy and economic development in Afghanistan, but these goals will be difficult to achieve with the proposed cuts to State Department and AID funding.