2019 was a banner year for Big “I” federal advocacy with tangible results for Big “I” member agencies. The year started with a huge win giving independent agencies access to significant tax relief and ended with a trifecta of longtime Big “I” priorities being signed into law by President Trump. While the accomplishments were significant on their own, they were even more impressive as they were completed during a heightened sense of partisan gridlock in Washington, D.C. with the specter of impeachment hanging over Capitol Hill for much of the year.
Throughout the year, the advocacy efforts by the government affairs team included countless meetings with members of Congress and their staff, providing testimony to key committees and sending numerous letters to congressional offices on important issues. In addition, nearly 1,000 independent agents advocated during the annual Big “I” Legislative Conference in May. These efforts by Big “I” members were vital in achieving so much this year.
In January, the IRS issued final regulations governing Section 199A of the tax code to implement a new small business tax deduction. The rule confirmed that owners and shareholders of insurance agencies and brokerages organized as pass-through entities are eligible for the new deduction of up to 20% on “qualified business income”—regardless of taxable income level. The deduction is available for taxable years through 2025 and reduces the top effective rate from 37% to 29%.
The final regulation was a significant victory for Big “I” members. When the tax reform legislation was first signed into law there was concern that insurance agencies would be considered a “specified service trade and business,” and therefore owners and shareholders with annual taxable income above certain levels would be prohibited from utilizing the new deduction. Once the law passed, the Big “I” spent the next year aggressively and successfully advocating that agencies and brokerages organized as pass-throughs should be able to fully benefit from tax reform. The Big “I” met with the administration and congressional offices on numerous occasions, submitted multiple written comment letters to the administration before and after the release of the initial draft regulations and submitted congressional testimony.
Another big win for the Big “I” included securing an exclusion for agents and brokers from proposed new federal reporting requirements. Legislation introduced in both the House and Senate would require nearly every small business with fewer than 20 employees to file new reports on their “beneficial ownership” with the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN). All businesses would have to comply annually, starting within two years of the law’s enactment for existing businesses or upon incorporation of a new business. The penalties for failure to comply are severe, with both bills imposing a civil penalty of up to $10,000. For criminal penalties, the House bill imposes up to three years in prison while the Senate bill calls for up to four. The bills have momentum going into 2020 and could be law soon.
The Big “I” was the only producer group to advocate for the exemption for agents and brokers in both bills.
Throughout the year, the Big “I” continued to defend the state-based system of insurance regulation from federal interference. The Big “I” supported eliminating or significantly restricting the Federal Insurance Office (FIO) housed within the U.S. Treasury Department. Over the years, the FIO has proven to have questionable value for insurance markets and consumers.
The Big “I” also sought to defend a state's ability to regulate their individual insurance markets, opposing legislation that would prevent the use of credit scoring in the underwriting process for auto insurance. Currently, credit scores are one of many tools used in the underwriting process and states have flexibility to determine whether insurers may use the information as a rating factor. The Big “I” was able to thwart efforts to move legislation to preempt state underwriting discretion to prohibit the use of such scores.
Similarly, the Big “I” opposed expansion of Risk Retention Groups (RRGs) into the commercial property market. Congress created RRGs through broad federal preemption of state regulation in the 1980s in response to a specific market crisis. Currently, there is no evidence of a market crisis and needlessly expanding RRGs would put consumers at risk and undermine the state-based insurance system. While government affairs staff was able to stave off efforts to push legislation to allow RRGs into property insurance, it promises to be an issue of concern in 2020.
The Big “I” also continued to advocate for a robust and strong Federal Crop Insurance Program (FCIP). With the farm bill signed into law, the Big “I” focused on strengthening its relationship with the Risk Management Agency (RMA) and educating members of Congress and their staff on the critical role the FCIP plays in our country.
While still illegal at the federal level, cannabis has become an increasingly hot button issue as more states allow varying levels of usage. Due to the legal gray area associated with cannabis businesses, the Big “I” sought to protect agents and brokers from civil or criminal liability regardless of whether they have direct or indirect contact with state-legalized cannabis businesses. In the SAFE Banking Act, which passed the House in the fall, the Big “I” helped obtain a federal “safe harbor” to financial services providers including insurers, agents and brokers. While not yet signed into law, the Big “I” will continue to stay engaged.
As 2019 drew to a close, the Big “I” government affairs team successfully lobbied to have three longtime priorities added to government funding legislation that was signed into law by President Trump. The first was the reauthorization of the Terrorism Risk Insurance Act (TRIA). That provision would reauthorize the program for seven years without significant changes. The Big “I” spent much of 2019 pushing Congress to reauthorize TRIA well in advance of its scheduled expiration at the end of 2020. The Big “I” provided testimony to both the U.S. Senate Banking Committee and the U.S. House Committee on Financial Services requesting a clean, long-term reauthorization of the program and also worked closely with other insurance industry stakeholders, meeting with numerous members of Congress and their staff and sending multiple letters to congressional offices advocating for the reauthorization.
The year-end legislation also included an extension of the National Flood Insurance Program (NFIP) through Sept. 30, 2020. The program had been scheduled to expire on Dec. 20, 2019. While not perfect, this provides more certainty to a program that has seen several short-term extensions recently, with some as short as a few weeks. The Big “I” provided testimony to the House Committee on Financial Services on the NFIP and met with members of Congress and their staff throughout the year to make sure the program didn’t lapse. The Big “I” will continue to advocate for modernization and long-term reauthorization of the NFIP in 2020.
In addition, the government funding legislation included a provision to repeal the “Cadillac” tax, a 40% excise tax on employer-sponsored health insurance plans that exceed a certain cost threshold. The tax was previously delayed twice and was set to take effect in 2022.
Over the years the Big “I” has consistently advocated for repeal of this onerous tax and has worked with the Alliance to Fight the 40, a broad-based coalition comprised of businesses, patient advocates, employer organizations, unions, local governments, health care companies, consumer groups and other stakeholders to repeal the “Cadillac” tax. Our efforts included numerous meetings with members of Congress and their staff as well as sending several letters to congressional offices showing broad support for repeal.
With 2019 “in the books” we will look toward 2020 and the continued work to be done on behalf of independent agents.
Wyatt Stewart is Big “I” senior director of federal government affairs.