Get the Daily News Digest in your inbox each morning. Sign Up

Stephen Boyd: THE MONDAY BRIEF | March 20, 2023

Stephen Boyd’s weekly Capitol Hill briefing for Alabama’s business, financial, defense and government affairs executives.

The schedule on Capitol Hill this week…

The Senate returns at 3 p.m. Tuesday to resume consideration of S. 316, legislation to repeal the 1991 and 2002 Authorizations for Use of Military Force against Iraq. The legislation cleared a procedural hurdle last week and should see a final vote before week’s end. The House of Representatives must also act on the measure before it is sent to the president’s desk for signature. 

The House returns to Washington on Wednesday following the Republicans’ three-day “issues retreat” in Orlando, Florida. According to Rep. Elise Stefanik (R-NY), more than three-quarters of House Republicans are attending the gathering. Among the guest speakers: former Rep. Trey Gowdy (R-SC) and former New Orleans Saints Quarterback Drew Brees.

Expect the agenda to be dominated by inflation and economic policy, oversight of the Biden administration, national security concerns centered around China, and policies to advance American energy independence, but… 

…all eyes on Manhattan…

…in both Orlando and Washington, the political conversation will be dominated by Donald Trump. 

In a post this weekend on his “Truth Social” media platform, former President Donald Trump announced that he will be arrested Tuesday. 

That is a shocking statement, and the only way to know if it is correct is to wait and see. But to the extent that Trump’s post conjures visions of blue lights and sirens, that is not likely going to happen. Many defendants—and, surely, a former president—accused of a nonviolent crime that allegedly occurred years ago would be given the opportunity to voluntarily report for booking and release. If Trump is indicted and then arrested in handcuffs, it’s likely because he refused to surrender to law enforcement. 

The case in question reportedly relates to Trump’s alleged $130,000 “hush money” payment to adult film actress Stormy Daniels to keep her quiet about an alleged sexual relationship between the two. Trump’s lawyer and “fixer,” Michael Cohen, allegedly made the payments prior to the 2016 presidential election. Prosecutors appear to be investigating whether Trump’s business organization—not Trump personally—provided the funds to Cohen for the payoff and then falsely declared the payment as “legal fees” to avoid tax implications. A key factual issue would be whether Trump had knowledge of this scheme as it played out. 

Reportedly, Cohen and Daniels have testified before a Grand Jury in Manhattan, and Trump was offered a chance to personally testify but declined. The case also raises complicated questions about the statute of limitations in New York. 

This appears to be the weakest of the criminal investigations surrounding Trump, which span a number of areas and jurisdictions. New York prosecutors will need to think carefully about the impact on society and our political system before indicting a former president. Any such case had better be air tight.  

Other cases seem more consequential. The four below are the ones to watch.

The Jack Smith Cases 

On November 18, 2022, U.S. Attorney Merrick Garland appointed former prosecutor Jack Smith as special counsel to oversee investigations involving Trump. 

The first, in the District of Columbia, relates to whether any person unlawfully interfered with the transfer of power following the 2020 presidential election. Although the January 6th committee in the House investigated this thoroughly and made criminal referrals, that Congressional panel lacked any enforcement powers. Smith’s office brings the full weight of federal law enforcement. 

The second, in the Southern District of Florida, relates to Trump’s possession of classified materials at Mar-a-Lago. 

Third, Smith may also consider whether Trump or others have attempted to obstruct the Department of Justice’s investigation into the classified documents matter.

Garland’s appointment of Smith as Special Counsel came soon after Trump declared himself a candidate for president, thereby setting up a potential run against Garland’s boss, President Biden, and—arguably—creating a conflict of interest that necessitated a special counsel with a degree of independence to handle the cases. (In January, Garland appointed a separate special counsel to investigate classified material at the Penn Biden Center for Diplomacy and Global Engagement and at Biden’s Wilmington residence.) 

The Georgia Election Fraud Case 

Separately, the District Attorney in Fulton County, Georgia is reportedly investigating whether Trump violated state law when he called Georgia’s Secretary of State, Brad Raffensperger, to pressure Raffensperger to “find” enough votes to flip the outcome of the 2020 election in Georgia. 

The January 2, 2021, phone call was recorded, and recent news reports suggest that there may have been a second call from Trump to the then-Speaker of the Georgia House of Representatives pushing for a special legislative session to overturn the election. 

Trump’s position that the 2020 presidential election was tainted by widespread election fraud was never supported by evidence and has been widely discredited. The Georgia investigation is not directly affected by the Jack Smith cases.

Research & Development Tax Provision Hurting Small Research Firms

Momentum may be gathering in Congress to fix an obscure tax provision that is causing huge tax headaches for owners and operators of small research firms. The issue is especially important in tech hubs around the country, where small firms drive innovation and provide high tech jobs. 

Since the 1950s, tax rules have allowed businesses two options for recovering Research and Experimental Expenses (REEs). According to the Congressional Research Service:

“One option was to deduct the entire amount of such expenses in the year when they were paid or incurred under Section 174(a), a treatment known as expensing. The second option was to capitalize REEs and amortize them over a period of five or more years under Section 174(b). Congress added a third option in 2004 when it established Section 59(e), which allowed companies to amortize REEs over 10 years.”

The Tax Cuts and Jobs Act of 2017, enacted in December of 2017, made sweeping changes to deductions and exemptions in the tax code. Section 13206 of the Act effectively repealed the option to expense REEs under Sec. 174 of the Internal Revenue Code. This change went into effect with the 2022 tax year. As a result, companies must now capitalize research costs and amortize them over at least five years. 

The provision is especially painful for owners of businesses that conduct research as a service to other companies rather than in support of their own potentially profitable product lines. As amended, Sec. 174 now prohibits research firms from deducting business expenses such as a company’s payroll, benefits, and materials and supplies, dramatically increasing the tax liability for some small business owners. 

A potential fix

Senators Maggie Hassan (D-NH) and Todd Young (R-IN) introduced the “American Innovation and Jobs Act” last week to reverse the 2017 change to the tax code. That legislation would also raise the cap on the refundable R&D tax credit for small businesses and startups. Prior efforts to change the 2017 provision have bogged down over talks on how to also expand an unrelated child tax credit. 

If Congress is to pass a “fix,” it likely won’t be a stand-alone measure. Expect language to be attached to “big ticket” or “must pass” legislation later this year. Possibilities include a Federal Aviation Administration reauthorization bill, the National Defense Authorization Act, government funding bills, or the Farm Bill.   

Circling Back on Crime…

In a MONDAY BRIEF earlier this month, we discussed a number of policy and political aspects to the crime issue. The basic point: though crime rates in America are not as astronomically high as some political rhetoric might suggest, they are creeping up from historic lows and Americans are indeed concerned—enough so that elected officials, including a Democratic president and a Democratic Senate, are taking note.  

On APTV’s Capitol Journal, host Todd Stacy asked Alabama Attorney General Steve Marshall about that column, and during the AG’s insightful response he made a few interesting points that I want to note:

  • Homicides are not a great indicator of violent crime because, as Marshall said, “in some respects homicide data is misleading because we’ve got great doctors out there who save lives when somebody is shot, so we have to broaden our net as to what violence looks like.” I agree. To go a step further, the number of shootings—not the number of people shot or killed—may be the better metric of violence. When shots ring out and loved ones are in the crossfire, damage is done to families and neighborhoods even though the bullets don’t necessarily strike. I speak from experience. 
  • Marshall correctly noted that crime data often lags behind reality, and interestingly pointed out that overall crime rates during the last couple of years might be misleadingly low because property crimes were down as more people stayed home during COVID lockdowns.  
  • Marshall also highlighted that at the federal level U.S. Attorney General Jeff Sessions implemented aggressive actions that curbed an upward trend in crime. As a senior Department of Justice official during that time, I can attest that the Department was laser-focused on combating violent crime and pursuing new laws to fight gun crimes and drug trafficking, which often go hand-in-hand. 

One last point—COVID may still be hampering prosecutions of federal gun crimes. Here’s why: Most criminal activity is investigated by state and local law enforcement, and prosecuted by local district attorneys. Federal prosecutions—where tougher sentences may be available and where there is no parole—only occur when specific federal statutes, like one making it illegal for a felon to be in possession of a firearm, are invoked. 

Because trials in many state courts were delayed due to COVID restrictions, federal prosecutors in some states are encountering instances when arrested “trigger pullers” have a long list of prior state charges but no actual convictions because the trial on the previous criminal act has yet to occur. According to prosecutors I’ve talked to, that’s one less tool available in the federal law enforcement toolbox. 


# # #


Stephen E. Boyd is a Partner at Horizons Global Solutions. Previously, he served as a Senate-confirmed Assistant Attorney General at the U.S. Department of Justice, Chief of Staff for Alabama members in both the U.S. Senate and U.S. House of Representatives, and as a Communications Director of the Senate Committee on the Judiciary. He resides in the Washington, D.C. area. Opinions expressed herein are his own. This news report is not intended to influence or persuade. Email Stephen at [email protected].


Get the Daily News Digest in your inbox each morning.

This field is for validation purposes and should be left unchanged.

Web Development By Infomedia