Tax Plans & Presidential Candidates

There appears to be at least a theoretical agreement among all Presidential candidates’ that the current Federal tax system is broken — measured by its complexity, inefficiency and disorder.

The field of presidential candidates in both parties is diverse and possibly evolving— as is the eventual tax agenda for 2017 after the election of a new president in November 2016. Obviously, the congressional elections in November 2016 will also have a significant bearing on the specific issues that eventually comprise the tax agenda in the new Congress. Understandably, most candidates have not provided many specifics of their tax reform plans, but a general consensus for comprehensive tax reform appears to be developing on both sides of the aisle.

A number of Republican candidates favor some version of a “flat” tax rate on personal income, with proposals ranging from 10 to 15 percent based on income levels. Sen. Marco Rubio’s (R-Fla.) proposal would implement a 15 percent rate on middle-class earners, with a rate of 35 percent for higher-income taxpayers. Similarly, Sen. Rand Paul of Kentucky has proposed a 14.5 percent “flat and fair” tax rate that would apply to all earners and businesses, with the first $50,000 of family income untaxed. Sen. Ted Cruz of Texas has said that he supports a flat tax, but he has not provided details as to a specific rate level. Neurosurgeon Ben Carson has proposed a flat tax rate of 10 percent.

Another priority for Republican candidates appears to be lowering the corporate tax rate to encourage investment in the United States and the repatriation of foreign earnings. Proposals by Rubio and New Jersey Gov. Chris Christie would reduce the maximum corporate rate to 25 percent, while former Texas Gov. Rick Perry has proposed a 20 percent rate. Other candidates support lowering the corporate rate but have not given a specific tax level. As stated above, Paul’s plan would apply a 14.5 percent rate to businesses, as well as individuals.

The candidates generally agree that taxes on capital gains and dividends should be lowered or eliminated. In addition, many proposals assert that any revenue loss from reducing tax rates should be offset by restricting or eliminating various tax deductions, with the exception of charitable donations and mortgage interest.

Clinton remains the front-runner of the Democratic field. While she has not released a specific tax plan, Clinton has expressed support for lowering the tax burden on middle-class taxpayers. In addition, Clinton has indicated that, if elected, she would close several business tax “loopholes,” including the current tax treatment of carried interest. Clinton has also stated that she opposes the current tax incentives for oil and gas companies and would seek to end them. That said, she has expressed support for implementing tax incentives to encourage profit-sharing between businesses and their employees and has proposed a $1,500 tax credit for businesses that hire apprentices. Recently, Clinton proposed a comprehensive college affordability plan, financed by a 28 percent cap on itemized deductions similar to the budget proposal advanced by President Barack Obama.

Sen. Bernie Sanders, I-Vt., appears to be narrowing the gap with Clinton in several national and state-specific polls. With respect to Sanders’ tax policy positions, he has proposed to increase and restructure the estate tax, beginning with a 45 percent rate on estates worth up to $7 million, a 50 percent rate on those worth $7 million to $10 million, and a 55 percent rate on those worth $10 million to $50 million. In addition, Sanders has expressed support for an additional 10 percent surtax on estates valued at more than $1 billion. Sanders has also sponsored legislation that would change the current tax rules for corporate inversions and earnings stripping by foreign companies, and another bill that would prohibit U.S. corporations from deferring federal income taxes on profits of offshore subsidiaries. Like Clinton, Sanders opposes current tax incentives for the oil and gas industry.

Other Democratic presidential candidates, such as former Maryland Gov. Martin O’Malley and former Sens. Jim Webb of Virginia and Lincoln Chafee of Rhode Island, have all expressed support for lowering individual tax rates generally while not advancing any specific tax plans. The one exception was an open letter written by O’Malley to the financial sector on July 9, 2015, outlining steps that he would take to prevent another major banking crisis. In that letter, he proposes a tax on financial instruments to discourage high-frequency trading and a separate financial transaction tax to discourage speculation.

Martin J. Milita, Jr. Esq., is senior director at Duane Morris Government Strategies, LLC

Visit his blog at: https://martinmilita1.wordpress.com

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http://www.dmgs.com/

Duane Morris Government Strategies (DMGS) supports the growth of organizations, companies, communities and economies through a suite of government and business consulting services. The firm offers a range of government relations and public affairs services, including lobbying, grant writing; development finance consulting, media relations management, grassroots campaigning and community outreach. Milita works at the firm’s Trenton and Newark New Jersey offices.

Cooperative purchasing as a public contracting concept.

Rather than each governmental entity endlessly repeating a time-consuming full-and-open competitive process for every buy, cooperatives conduct competitions for multiple award contracts, creating a contractual framework and facilitating faster, lower-cost competitions at the order level. In some cases, cooperatives also are able to aggregate requirements and pool money, lowering costs for both buyers and sellers.

There are three main purchasing co-ops operating nationally for U.S. nonfederal government and other nonprofit entities in addition to the federal cooperative purchasing program run by GSA. These purchasing co-ops allow for technology manufacturers, distributors, resellers and dealers to participate. And a glance at the products and services they offer shows they quickly adapt to changing IT market conditions by including cloud, cybersecurity and other software services.

NASPO provides the broadest-ranging purchasing co-op in terms of commodities offered. Its ValuePoint site brings together multiple award programs established by a single lead state, but made available to all 50 states and the District of Columbia. It also maintains a list of upcoming procurements and the states creating them. So while there is a lead state for each commodity, ValuePoint provides a single clearinghouse for a variety of commodities and multiple-award contract programs for everything from fire trucks to public cloud hosting services (lead state: Utah) and commercial off-the-shelf software products (lead state: Arizona).

Dating back to 1982 as the Michigan Collegiate Telecommunications Association, MiCTA has branched beyond its original charter — to serve as a forum to share information among universities — into a state and municipal acquisition association for a variety of network products.

These products include hardware such as switches and other data center equipment, and services such as voice over Internet protocol (VoIP), cabling and voice/video conferencing. MiCTA is based in Saginaw, Mich. Buying entities pay a small fee to belong to MiCTA, and its membership spans all 50 states. Some states themselves are members, as are many county and city governments.

A third purchasing co-op arrangement, U.S. Communities Government Purchasing Alliance, dates to 1996. It grew from a partnership between the Association of School Business Officials, the National Association of Counties, the National Institute of Governmental Purchasing, the National League of Cities and the U.S. Conference of Mayors. Customers are public schools and colleges, nonprofits, and state and municipal agencies. Like NASPO ValuePoint, U.S. Communities carries no membership fees. It works similarly to ValuePoint in that a single agency forms the lead for a particular technology or service contract, but the contract is available for all of U.S. Communities members. Technology contracts in place include several cloud providers, document and print services, telecommunications, and systems integration services. It claims 90,000 buying organizations are members.

Then there is the federal buying cooperative operated by the General Services Administration. For decades, Congress barred GSA from offering its multiple-award schedule contracts for use by nonfederal government entities. Why? For many years, coalitions of resellers, led by fire apparatus dealers, said such an arrangement would destroy the local markets they enjoyed for supplying nationally marketed capital equipment. That concern faded, or at least Congress avoided a vocal constituency by enabling GSA to offer Schedules 70 (IT goods and services) and 84 (security, law enforcement and, yes, firefighting and rescue equipment).

GSA has added several more narrowly focused schedule-based blanket purchasing agreements, including those for continuous network diagnostic and mitigation services and wireless voice/data products. From the early days, GSA structured the schedules as centrally managed contracts and catalogs that can also include participation by local dealers.

GSA markets these purchasing cooperatives to state, local and tribal governments and while the program is gradually growing, it only accounts for about $1 billion per year. Clearly it suffers a bit from state-specific cooperative programs where contracts are based on the GSA schedule and managed for the benefit of in-state cities, counties and educational institutions structured to avoid paying fees back to GSA. Thus we see that competition between the various cooperative purchasing programs is quite robust.

It would appear that cooperative purchasing as a public contracting concept is here to stay and will only grow as more buying entities become more comfortable with leveraging framework contracts managed by others.

Tips for Effective Internal Corporate Investigations

Martin Milita works as senior director of Duane Morris Government Strategies LLC in Trenton, New Jersey. Before joining the firm, he co-founded and served as managing partner of Holman Public Affairs, LLC. At Holman, Martin Milita frequently counseled companies during internal corporate investigations.

Internal corporate investigations are a common practice among businesses. These investigations help companies address issues ranging from small, contained problems with staff to large costly violations deriving from criminal activity. As part of the investigation process, companies work toward identifying facts that provide a foundation to move forward, mitigating the effects of the offending act, maintaining compliance, and creating transparency that deters future incidents.

To achieve these objectives, businesses should implement best practices for conducting witness interviews. Witnesses provide valuable information for resolving cases. Covert investigatory practices may allow businesses to recover more facts about a situation. Covert investigations involve “drop-in” interviews that provide witnesses little to no time to rehearse answers, reducing practiced or fabricated responses that can diminish an investigator’s ability to uncover the truth.

Furthermore, an effective internal corporate investigation is achieved by anticipating witness concerns. Preparing a response in advance to questions of consequences, such as employment status following the investigation and confidentiality, ensures that no information is misrepresented by the counsel.

NJ Gov. Chris Christie has conditionally vetoed P3 Infrastructure Bill

Martin J. Milita Jr. Esq., senior director at Duane Morris Government Strategies, offers: ”NJ Gov.  Chris Christie has conditionally veto P3 Infrastructure Bill”.

Duane Morris Government Strategies (DMGS) supports the growth of organizations, companies, communities and economies through a suite of government and business consulting services. The firm offers a range of government relations and public affairs services, including lobbying, grant writing; development finance consulting, media relations management, grassroots campaigning and community outreach. Milita works at the firm’s Trenton and Newark New Jersey offices.

New Jersey Gov. Chris Christie has conditionally vetoed a Senate bill that would expand public-private partnership opportunities for government entities, calling for the removal of provisions mandating prevailing wage requirements and project labor agreements.

These modifications to S2489 would further competitive bidding for projects and reduce costs, Christie said Monday in a veto message that also recommended that the departments of Transportation, Education and Community Affairs take leading roles in building and transportation projects.

The legislation sponsored by Senate President Stephen R. Sweeney , that  cleared the Senate in July, permits Local and state government units and school districts as well to enter into the partnerships, in which the private entity assumes administrative and partial or full financial responsibility for a project, according to the bill.

“While I agree with the sponsors that we must take advantage of the opportunity to improve our infrastructure through private investment, we must take care to ensure that the state has a unified plan of development that considers the impact of projects on our residents, the economic benefits of such projects, and the long term goals of the state,” Christie said in the message, which specified municipal projects and transportation work on bridges, roads and tunnels.

The departments Christie highlighted Monday in his veto message would work alongside the Economic Development Authority, which under the bill would review and approve applications and to cancel procurement after a short list of private entities is developed for projects in the public interest.

Presently only state and county colleges can enter the partnerships, according to state law. Christie cited the successes of such partnerships in Montclair State University and said others were planned or underway at Rutgers University, Ramapo College and the College of New Jersey.

The Assembly State and Local Government Committee had amended the original version of  the bill to allow the use of availability payments as a financing method, to specify that a contractor is precluded from taking on projects under $50 million if the contractor contributed more than 10 percent of the project’s financing, and to eliminate the $10 million project threshold and instead require that roadway or highway projects must include an expenditure of at least $10 million in public funds or any expenditure in private funds.

Other amendments make certain lease provisions permissive rather than mandatory, exempt private entities from procurement and contracting requirements applicable to the public entities, and exempt nonprofit projects from property taxation and assessments.

The committee prohibited the bundling of multiple projects and eschewed the requirement that a government entity assign a management employee to enforce the prevailing wage requirement. They added requirements of EDA approval prior to commencing procurement of the project; that the private entity establish a construction account to fully capitalize and fund the project; and that the general contractor, construction manager or design-build team would post performance and payment bonds, rather than the chief financial officer of the public entity.

Tax breaks would apply to nonprofits, and private entities are exempt from certain procurement and contract requirements that apply to public entities, according to the legislation.

The bill was introduced in the Senate in October and then reviewed by the State Government, Wagering, Tourism & Historic Preservation Committee.

Martin J. Milita, Jr., Esq. Senior Director

Visit his blog at: https://martinmilita1.wordpress.com

Follow him on twitter: @MartinMilita1

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http://www.dmgs.com/

Recent Trends Suggest Medicaid Fraud Control Remains Necessary

Martin Milita served as the Medicaid inspector general for the state of New Jersey for five years. In this role, Martin Milita provided a crucial service, as all states are legally obligated to operate a Medicaid Fraud Control Unit (MFCU) or provide proof of active fraud protection alternatives.

Recent trends show that MFCUs are quite necessary, especially in the areas of pharmaceutical manufacturing and distribution. According to the U.S. Department of Health and Human Services, in 2013, 62 percent of civil settlements and judgments carried out by MFCUs involved prescription drug manufacturing. Additionally, the largest MFCU monetary criminal recovery to date occurred in 2013. This record-setting recovery resulted from a manufacturer’s admission to unlawfully and falsely promoting a prescription drug for unapproved uses.

The investigated manufacturer also faced allegations of illegal marketing; false information regarding safety, efficacy, and dosing; and illegal payment given to health care professionals and pharmacies. Although pharmaceutical companies are usually not enrolled Medicaid suppliers, illegal activities are often targeted toward marketing specific prescription medications to Medicaid suppliers and beneficiaries, thus falling under the domain of Medicaid Fraud Control Units.