House Clears Updated NDAA with FDTA
On Thursday, the House of Representatives cleared a “pre-conferenced” version of the National Defense Authorization Act (NDAA) that included an amended version of the Financial Data Transparency Act (FDTA). Here’s what we know.
We do not usually track national defense bills closely, but this year, a number of provisions outside of bread-and-butter defense policy issues entered the discussions. On Tuesday evening, leadership from the House and Senate Armed Services Committees released a “pre-conferenced” version of the National Defense Authorization Act (NDAA). The House approved the amended NDAA on Thursday and the Senate will likely pass the package to the President’s desk on Monday.
- The FDTA [In… but tweaked]: The original House version of the NDAA, passed in July, included the FDTA— a proposal that instructs the Financial Stability Oversight Council (FSOC) to create data standards, including requirements for machine readable data organized in schemas. The FDTA tasks the FSOC with creating these standards within two years. Section 203 originally instructed the MSRB to create rules complying with those standards for data submitted to the board within an additional two years. This week’s updated NDAA amends Section 203 (see Section 5823 of NDAA) by placing the rulemaking authority under the SEC instead of the MSRB. It also includes a nod to the FDTA language not superseding the Tower Amendment. While groups continue to oppose Section 203, many market participants view these amendments as marginal, yet meaningful, improvements.
- ENABLERS Act [Out… for now]: The Establishing New Authorities for Businesses Laundering and Enabling Risks to Security (ENABLERS) Act would expand the definition of financial institutions under the Banking Secrecy Act (BSA) in a way that could require certain attorneys to submit Suspicious Activity Reports (SARs) on client financial transactions as well as subject attorneys to other BSA and anti-money laundering (AML) requirements. The American Bar Association (ABA) has long opposed the bill. The current NDAA does NOT include any legislation similar to the ENABLERS Act, but NABL members should expect the bill’s proponents to reintroduce the proposal in the new Congress.
- Cannabis Banking [Out… again]: Despite initial optimism last week, the Senate removed the Secure and Fair Enforcement (SAFE) Act from the current version of the NDAA. The SAFE Act, which would create a safe harbor for financial institutions to provide banking services to state-legitimate marijuana related businesses (MRBs), has garnered widespread support from both sides of the aisle as well as a number of NABL’s peer associations. Proponents of the measure will likely attempt to attach the bill to a year end spending package, but given the resistance to its inclusion in the NDAA, such an outcome is unlikely.
By advancing the NDAA, Congress is checking a major “to-do” item off its laundry list, but many other items remain.
- FY2023 Appropriations: Most pressing, Congress has one week to fund the federal government for FY2023 and avert a shutdown. Leaders have not yet agreed upon topline spending numbers, which decreases the chances of passing a comprehensive FY2023 spending package (known as an omnibus) and increases the chances of a short-term or year-long continuing resolution (CR). A short-term CR could punt the issue by a few days or early into the next Congress. A year-long CR would largely maintain FY2022 spending levels through next September. Given the rates of inflation, a year-long CR poses more significant complications than in prior years.
- PAYGO and Sequestration: Congress must also take action to address Pay As You Go (PAYGO) scorecards before the next Congress in order to avoid automatic and draconian cuts to certain mandatory spending programs, including direct pay and tax credit bond payments. Leadership remains optimistic that Congress will avert sequestration cuts, but issuers’ concerns continue to mount.
- Tax Extenders: Congress did not pass a tax extenders package last year, allowing a number of incentives to expire on December 31, 2021. Another set of provisions are set to expire at the end of this calendar year. While Congress does not have to pass an extenders package, a lame duck session presents a good time to do so. We are monitoring the status of negotiations and to see if any other unrelated tax provisions enter the discussions. View tax provisions set to expire >
It is also worth noting that the NDAA also includes the Water Resources Development Act (WRDA), which authorizes a broad array of water projects across the country. We will continue to keep members informed as updates to these priorities become available.