Deal on ‘valid business purpose' avoids threat of college NIL settlement heading back to court
The College Sports Commission said it will now consider a third-party company that seeks to pay a player to have a 'valid business purpose' if the deal 'is related to the promotion or endorsement of goods or services provided to the general public for profit.'
It did away with the concept that collectives established simply to pay players did not have a valid business purpose even if they sold products for profit.
That guidance, issued earlier in July, threatened to fundamentally change the concept of third-party collectives, which were established in 2021 as the main source of NIL deals for players. With schools now allowed to pay players directly under terms of the industry-changing House settlement, the role of collectives was thrown into limbo.
The CSC, in charge of vetting third-party deals worth $600 or more, was trying to make it more difficult for schools to use collectives as a workaround to the $20.5 million cap that the schools are allowed to pay players.
Plaintiff attorneys threatened to take the case back to court, arguing the CSC guidance amounted to an incorrect reading of the lawsuit settlement that made the payments possible.
The CSC's new guidance provides a more liberal view of what third-party collectives can do.
The CSC's 'for-profit inquiry focuses on whether the sale of goods or services is for profit and not whether the entity itself is operating at a profit or a loss at any given time,' the CSC said in a news release.
Part of the CSC's requirements include athletes needing to, in certain cases, provide documentation showing the entity's efforts to profit from the deal.
In a joint statement, the defendants and plaintiffs reiterated that 'the traditional purpose of many NIL collectives — raising money to induce student-athletes to attend or play at an institution — does not satisfy the valid business purpose requirement.'
But, the statement said, 'In evaluating such payments, the Settlement's requirements focus on substance, not labels' — an indication that the focus should not be on whether the organization making the deal is considered a 'collective,' but only whether it sells something to the public for profit.
Parts of the arrangement that don't change are the CSC's task of determining fair market value for the goods and services provided and the collectives' ability to match athletes with other businesses offering NIL opportunities.
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Forbes
an hour ago
- Forbes
Moving Forward: International Tax After The OBBBA
In this episode of Tax Notes Talk, Alan Cole of the Tax Foundation discusses the international tax provisions in the One Big Beautiful Bill Act and what may be next for negotiations on a global tax framework. Tax Notes Talk is a podcast produced by Tax Notes. This transcript has been edited for clarity. David D. Stewart: Welcome to the podcast. I'm David Stewart, editor in chief of Tax Notes Today International. This week: rethinking revenge. When the House released their initial version of the One Big Beautiful Bill Act, the international business community was concerned by the proposed section 899, which came to be known as the revenge tax. We covered this provision in a previous episode, which we'll link to in the show notes. Since then, the bill has been through a number of changes at the behest of senators and one significant change requested by the administration, concluding in the final version signed into law by President Trump. So where did Congress end up on international tax? And what does the bill mean for efforts to reach a consensus on international corporate tax? This episode is part of an ongoing series on the One Big Beautiful Bill Act. As we continue to dive deep into the most important tax changes and provisions in the coming weeks or even months, we'd like to hear from you. If there's an aspect of the bill you'd like to hear more about, please email us at podcast@ But for now, here to talk more about this is Tax Notes senior reporter Jonathan Curry. Jonathan, welcome back to the podcast. Jonathan Curry: Hello again, Dave. David D. Stewart: Now, I understand you recently talked to somebody about this. Who did you talk to? Jonathan Curry: Yeah. I talked to Alan Cole of the Tax Foundation. He's a senior economist there, and he's full of great insights. David D. Stewart: And what things did you talk about? Jonathan Curry: Well, we focused on the international tax provisions of the OBBBA, or the One Big Beautiful Bill Act. We covered quite a lot of ground, to be honest. Of course, this didn't happen in a vacuum. We went through the context, the history that led us to this point. We cover some of the major provisions in the bill, things that a lot of our listeners are, I'm sure, familiar with: the [global intangible low-taxed income, foreign-derived intangible income, and base erosion and antiabuse tax] and now the sad, new nicknames we all have to memorize in order to keep track with this evolving tax landscape that we're in. You'll hear things like the foreign tax credit haircut, the [controlled foreign corporation] look-through rule, things that might not necessarily jump off a page when you're scanning a bill. But it's stuff that's important for a lot of multinational corporations, international tax practitioners in particular, and it's going to have a lot of impact for certain industries. There are going to be some winners, some losers, and things like that. And of course, we talked about one of my favorite topics — which I'm sad it's not going to be in law anymore — the revenge tax, section 899. You'll hear Alan's views on what impact it had on the tax debate and international negotiations. And on the topic [of] international negotiations, all these international tax changes took place in the context of the pillar 2 global minimum tax framework. And you'll hear how he thinks that this moves us in some ways closer to that and some other considerations there. David D. Stewart: All right. Let's go to that interview. Jonathan Curry: Well, Alan, it's great to have you here on the Tax Notes podcast. I know you're excited to talk about your favorite topic in the world: international tax. Welcome. Alan Cole: Thank you. Absolutely great to be here. Jonathan Curry: Yeah. So we're going to dive in and start off by talking from a 30,000-foot view, the big picture here. What was the international tax landscape prior to this new "big beautiful bill" coming into effect? I mean, why were lawmakers even wanting to make changes on the international tax end in the first place? Was this a major reform? Is this [Tax Cuts and Jobs Act] 2.0? What are we looking at here? Alan Cole: Mostly, we're looking at TCJA 2.0 on the international side. This is a very similar coalition to the one that wrote the international tax reform in 2017. Same party, same president. And that means that there's a limited desire to tinker with too much. And on top of that, the coalition had a pretty narrow majority in the House of Representatives, and that also lends itself to not making too many ultra controversial changes. That said, there were reasons to tweak TCJA even from the perspective of a party that had already passed it in recent memory. Jonathan Curry: Yeah. Now, the House version of the bill, when we got the first draft of it, I remember seeing the draft document come out and thinking, "Oh, boy, here's this whole new set of stuff to write about." And I looked at it, and there wasn't very much in there on the international tax space, except for section 899, which we'll get into later. But I mean, can you imagine the world in which international tax just got ignored altogether and the system we have currently in place was just left to continue running? Or was the Senate vision of making some changes here inevitable? Like this was going to have to happen one way or another? Alan Cole: One way you could look at it would be from the House's perspective, it's hard to get unanimous approval for something among the Republican members, and you effectively need unanimous approval in order to get a majority in the House if you're relying only on Republican votes. And that lends itself to just doing what you did before because that's the baseline that everyone can at least start from. But on the other hand, international corporate income tax is not usually an area that draws a lot of political controversy where you'll see a big dispersion in what different members believe. Especially if you're doing things carefully and relatively evenhandedly, and not trying to create big winners and losers. So there was room for a little more reform. I'm not surprised that ultimately the Senate did more to change international corporate income tax provisions than the House did, because the Senate definitely felt like they had room. They had effectively a larger majority than the House majority. But ultimately the House just agreed to the Senate's changes because international corporate income tax is not that politically controversial among members in the sense that there aren't different beliefs among members. So if you're going to present a package and say, "This is the best that our writers could do given the constraints," most of the members are probably going to go, "OK." And that's kind of what happened. The House roughly accepted the Senate's changes, and that's how we ended up with a somewhat more interesting international package than the initial House bill looked like. Jonathan Curry: Well, we've been talking about changes to the international tax portion of our laws here. Let's go over some of those changes. Let's start with the big three: GILTI, FDII, BEAT. Can you just run through us real briefly just a high-level view of what the changes that were made were? Alan Cole: GILTI and FDII both have new names now. Their acronyms are now NCTI [net CFC tested income] and FDDEI [foreign-derived deduction-eligible income]. Those names actually kind of existed before. They were intermediate steps in the calculations that got you to GILTI and FDII. But the reason for the name change is that one of the final steps is no longer there, and that is the subtraction of [qualified business asset investment] from the base of both of those tax bases. And the subtraction there is effectively a subtraction of the return on tangible investments. The idea is if you start with all income and then you subtract the return on tangible investments, what you have left is your intangible income. And that's indeed where the I's in GILTI and FDII come from. Both have an I that stands for intangible, and then the other I stands for income. Now they are each down to one I, just the one that stands for income, and they no longer target intangibles. That change is a "made in America" Trump agenda type change, I think. It's one of the places where you can see a bit of a Trump ideological stamp. And overall, I'm not a fan of this for reasons we can get into, but it's one of the few places where this is really something more than just an update to TCJA. It goes in a new direction, and it takes away the original purpose of GILTI and FDII, which was to target intangible income. Jonathan Curry: And about those acronyms, they used to have these memorable acronyms: GILTI, FDII. We still have BEAT, of course. Have you settled on a way to refer to these new acronyms, the two new acronyms we have here? It's NCFCTI and FDDEI. Any good quick shorthand in your mind that you've settled on? Alan Cole: We're talking about NCTI versus NCFCTI? The C standing for CFC, which stands for controlled foreign corporation. That's the international income component of the new bill. Usually I'm hearing NCTI that can maybe be turned into "necktie" or "nicktee," but I'm not sure which one of those two will win out. And some people have gone with "fidday" for the new FDII, F-D-D-E-I. But it's always been awkward to come up with good names for these things, and certainly the long acronyms are doing themselves no favors. Jonathan Curry: Yeah. It will take a while for the dust to settle and for the tax community to settle on an agreed-upon way to refer to these, I think. Personally, I vote for "necktie." So GILTI and FDII had some pretty substantial changes. BEAT, as I understand, is fairly not that different, correct? Alan Cole: BEAT we can actually go through pretty simply. There was an idea for a whole bunch of changes to BEAT in the Senate draft, but they got rid of that set of changes and went with a much more simple rate hike to BEAT, not as big as the rate hike that it was scheduled for. It was scheduled to go from 10 [percent] to 12.5 [percent], and instead they made it go from 10 [percent] to 10.5 [percent]. So they kind of curved much of the rate increase in BEAT, and they preserved the current-policy treatment of credits and set it in law permanently. So mostly, they punted on BEAT. But there was an effort to do something more interesting, which was a high-tax exemption. And that would have actually done a lot to put BEAT a little bit more towards its intended purpose, or at least its stated purpose. It says it's a base erosion tax. That's what the B-E stands for. And base erosion would be when you're trying to get to a lower-tax jurisdiction, you're taking deductions in the U.S. by making payments out to some lower-tax jurisdiction so that your income shows up there instead. And the U.S. doesn't like that; the U.S. calls that base erosion because they would rather the income be in the U.S. and taxed as U.S. income. And that would make sense if all instances of stuff taxed under BEAT were base erosion. But in many cases, it's effectively just going after normal large countries with high corporate income tax rates because it doesn't actually make any determinations based on what kind of country a company is making payments to, or what kind of presence they have there. It just looks at categories of accounting that are deemed suspicious. So the Senate had an idea: "Well, let's actually look what kind of country it is. And if it's a high-tax country, defined as having at least 90 percent of the U.S. tax rate, then we can exempt you from BEAT, because there, you're not base eroding, you're just paying tax to another country that has a similar tax rate to ours. Presumably because you honestly believe that the royalty payments actually do belong to your enterprises in that other country." And that makes sense if you're a Japanese company and you say that a lot of your work comes from engineers based in Japan. That's a very believable claim, and that's not really a tax evasion-like claim. Same with France, for example. That's not a country that you would try to increase your income tax liability in because it's a high-income tax country. So that idea had a lot of promise, but I think the Joint Committee on Taxation scored it more expensively than perhaps writers thought it would be. I was surprised to see the number that high. I had been conditioned to think that the Joint Committee on Taxation thought that BEAT was a relatively smaller provision. And then we got this larger number, and then sure enough, it was gone in the next draft, and they did something simpler on BEAT. So I think it was just a matter of they didn't get the score they wanted and they pulled back from it. Jonathan Curry: I see. So you don't think it's a policy decision that lawmakers are like, "We don't think we should do this." It's more like, "Well, maybe on the margin, it's just not really worth making the change because it will add to our numbers, our bad math here, the deficit numbers." OK, well, that's interesting. Alan Cole: Yes. I think they were working within a current-policy revenue-neutral framework on the international side. So they were looking at 2025. What are we collecting in 2025? Let's try to design a system that collects about the same amount but is a little bit better. And if the BEAT score stopped them from reaching that goal, then that would be a reason to reverse it. Jonathan Curry: Yeah, yeah, interesting. Now there were a couple other changes in here too — CFC look-through rule, FTC haircut. Anything that surprised you? Or are these all pretty expected provisions to include in this package of proposals? Alan Cole: I think there are two categories here, and actually each of your examples comes from one of the categories. CFC look-through rule, and we could also go with the downward attribution glitch fix. There are some things that are so into the weeds that you can only really get coverage of them in a place like Tax Notes. These are really complex glitches in TCJA, or they are things that have been extended a long time, and it would be complicated if they ever went away. CFC look-through is like that. It would make the handling of U.S. multinationals much more complex without necessarily raising that much revenue. And so they made the CFC look-through rule permanent. That's a patch to the whole CFC look-through issue. And then they also included the patch to fix the problem in constructive ownership rules that was accidentally made in TCJA. It's pretty clear that there was a section of U.S. tax law that was supposed to be amended and instead it got removed, and it creates exceptions to constructive ownership rules. And that exception disappeared entirely rather than being rewritten. And as a result, people were kind of credited with having much greater CFC reach than they actually should have, and it was a whole big mess. So those are the bug fix types. And those, I think, were not big surprises. A lot of them you could see that members like Rob Portman (R-Ohio) and Thom Tillis (R-N.C.) were talking about these things for a while, and they didn't cost much. So those were definitely going to make it in there. And then the other category has to do with kind of the way that the international situation has evolved since TCJA. It's not so much that TCJA was written in a flawed way in 2017 in these cases. It's more that the way the rest of the world does things has changed, although Republicans are not always singing the same tune as the rest of the world on international corporate income tax. Here, there were a few lateral changes that can just harmonize the U.S. with foreign tax cuts a little bit more. And basically, the situation was that the U.S. had what appeared to be lower rates, but actually its rules were less generous in unique ways that were anomalous to the United States. Those are things like expense allocation, the FTC haircut, as you mentioned. Those things make it a little bit worse to be a U.S. company. But in TCJA, you had lower nominal rates than the 15 percent target that the Europeans and OECD want a lot of people to settle on. The Senate took a look at that and said, "Well, we can just remove some of these U.S. idiosyncrasies, and that gives us effectively tax cuts for corporations. And then we can raise the nominal rate, take some of that money back. That's a neutral trade, but it makes our tax code look a little bit more in line with the 15 percent target." But notably, they went only to 14 [percent], not to 15 [percent], as if almost to say, "You're not the boss of us, we will do something slightly different than your target." But effectively, the U.S. at 14 [percent] with its rules is still maybe a little bit worse, a little bit less taxpayer friendly, at least revenue-wise, than a 15 percent rate. So I don't think U.S. companies are getting away with a lot with the 14 [percent] instead of the 15 [percent]. Jonathan Curry: With this new suite of changes that we have, are there any obvious winners and losers here? I mean, you alluded to the Trump administration having a vision and putting its stamp on things. They've talked a lot about increasing domestic investment. Did these changes move the U.S. more towards that? Alan Cole: I think there are some changes that are intended to have a real impact that aren't just a little bit of lateral shuffling and creating a 14 percent rate rather than a lower 13 percent rate. There are some things that are a little bit more intended to be substantive. But even there, from an individual company's perspective, I think a lot of these things come out to be roughly a wash relative to the 2025 tax code. For example, the elimination of QBAI — the attempt to maneuver the system previously directed at intangibles towards a little bit more of a tangible and America First and export-focused tax system — that may not have that much of an impact on an overall taxpayer bottom line because, actually, the sort of company that has a lot of QBAI domestically also has a lot of it internationally. And one of those is a tax cut, and one of those is a tax hike, so they balance out for an individual taxpayer. But overall, you want to be the sort of company that has a lot of capital expenses in the U.S. or research and development in the U.S. and then maybe exports a lot. Whether using your tangibles or intangibles, that probably comes out pretty well. The big thing that I see flagged as a likely downside from large corporate practitioners is a change to [section] 163(j) interest limitations. Effectively, international income doesn't count for that, and that means that those become much tougher on some firms. Jonathan Curry: Yeah. I've certainly heard the same listening to a lot of webinars and hearing from different tax practitioners and what they're saying their eye is on and what's the big thing for their clients to look out for. [Section] 163(j), the foreign element of it definitely comes up quite a lot. So you alluded to this earlier, the current-policy baseline. Republicans did get a little mischievous with their math this time around. They used the current policy as opposed to current law, which broke with a lot of precedent. Can you tell me: How did the math add up here on the international tax provisions? Did we come out roughly revenue neutral in terms of the changes that are the higher rates, but a broader base and so forth? Where did we land in terms of the numbers? Alan Cole: Well, the tax code that was enacted in 2017 under current-law baseline rules, there, in order to make the corporate income tax side of the TCJA permanent, they had to do a fair amount of surprise tax hikes at the very, very end of the budget window. And you can count from 2017 out to 2026. That's when those tax hikes showed up. In a few cases, they had them show up a little bit earlier so as to reduce the score of the TCJA within the budget window, but there was a suite of tax hikes. In the international sphere, a lot of those tax hikes come directly in 2026, but they kind of went for current policy 2025. So what they managed to do as a result of the switch to current policy was effectively cancel out those last minute hikes on the international side and then make permanent the slightly lower, not quite revenue neutral, TCJA international side that wouldn't have passed Byrd rule muster in 2017 without those hikes. They canceled those hikes and made that permanent. So they did get some benefit if you're looking at it from the taxpayers' perspective, or they did create some revenue loss that probably would not have been possible under the current-law baseline. Jonathan Curry: To talk about one of my favorite provisions that's actually no longer in law, section 899, the retaliatory tax, the revenge tax. I certainly had a lot of fun writing about this. It makes for a great headline, and it was such an interesting piece of policy that has kept evolving throughout the process. Section 899 had two elements, correct? There is one that was going to impose these higher, progressively higher withholding rates on corporations, individuals, countries that had what we deem the discriminatory or unfair tax, undertaxed profit rules, UTPRs, and income inclusion rules. And there was also an element that was going to target digital services taxes, which later in the Senate was only going to be happening through the so-called super BEAT that was going to supercharge the base erosion and antiabuse tax. We did get a G7 deal at the end of this where they agreed that they were going to scrap their UTPRs and IRRs. They left aside, shelved for now, the question of DSTs. But in your view, how big of an impact does section 899 have on the international discussion? Do you think that was key to the U.S. getting this agreement with the G7? Or was that just a little sideline, sideshow? Alan Cole: I think [section] 899 was a very dangerous gamble, and I think it paid off. I had concerns about it while it was still in the bill. It didn't make it into the final law, and that was actually the outcome that [section] 899's architects kind of were hoping for, I think. It would have been pretty ugly if it had happened, but it was a threat they didn't want to have to go through on. So yeah, one of the biggest aspects of the OBBB international is effectively the thing that wasn't in the bill. We talked about, I'd say three categories of things that are in the bill. There's the Trump priority type stuff with the QBAI; there's the bug fixes; and there's the moving towards the 15 percent target by doing some lateral trades. But the OBBB also had [section] 899, the retaliatory provision, kind of our doomsday device, our mutually assured destruction thing. And it was supposed to target two foreign taxes, and the G7 agreed to get rid of one. And we said, "OK, good enough." And we put it down. And I think one reason that it worked well was there's broad support for combating UTPR and DST much beyond the Trump administration. One characterization you could make of the Trump administration is it starts a lot of arguments with foreign countries. And in some cases, those arguments are idiosyncratic to the Trump administration specifically. For example, arguing that Canada is not doing enough to combat fentanyl crossing the northern border of the U.S., that was not on most people's radar. That seems like a fight idiosyncratic to the Trump administration. And maybe even fighting over bilateral trade deficits, that's pretty idiosyncratic to the Trump administration. But within the U.S. business community, within the U.S. Congress, there's actually quite a lot of opposition to UTPR and to DST. The former because it usurps Congress's authority. It's a little bit like, "Oh, the Treasury went out and talked to a bunch of people over the Atlantic. Now Congress has to rewrite the U.S. tax code in a bunch of ways. Some of them kind of arbitrary, but don't seem to have much rationale." That wasn't going to fly, if only because it was a usurpation of Congress's authority. And practitioners also didn't like it because it would be a lot more work and it would turn out to not actually have much of an impact on U.S. companies' taxes. DSTs, meanwhile, are basically just tariffs in disguise. They're a way for foreign countries to effectively tariff the large number of U.S. tech companies that have done really well globally. Foreign governments have seen those as big bags of money, like pinatas that they can whack at and the money will fall out and they get a treat. And there's no support in the U.S. for letting these things stand. And so in some cases, when the Trump administration is saying something, there's a little bit of a feeling, "Well, can we wait this out? Might they get distracted?" For example, they don't seem to be talking much about buying Greenland anymore. That was a big thing for a few months, and then they just moved on. And also, there's the reality that there will be a new president and maybe that president is not going to have the same idiosyncratic Trump priorities. But I think [section] 899 being there in legislative text made a lot of people realize that not only is Congress behind the president on DSTs and UTPR, but maybe even most of the rest of the United States is as well. And so there's no way of waiting out the president and maybe making inroads with opposition or with people within his party who don't agree with all of his stuff. No, this was unanimous among Republicans, and I think probably even some Democrats really would actively want these things to go away, and few would make a big priority of arguing for them. So I think [section] 899 showed Congress's stacking order of priorities, and showed the American business community's stacking order of priorities. It even went so far as to say, "These are the specific offenses that we want [section] 899 to apply to. We're going to call out them by name, and we're also going to come up with a list of things that aren't offenses and [section] 899 can't be used for." They narrowly cabin the retaliation to be just these two things. So I think if you're a foreign government and you're not sure what to do with the more hostile or bellicose U.S. trade posture — well, the things that have broad opposition in the U.S., you probably are more likely to make a concession on those than on things that are less workable. And especially with respect to the UTPR, that's something that isn't even in effect yet. So it's easier to not do something that you haven't even started doing yet. It's easier to flake out on a plan that you haven't yet brought to completion than to stop doing things the way you were already doing them for a long time. So all of those reasons, I think, meant that the UTPR was the easiest domino to fall. I don't think that the Trump administration is going to get all of its priorities. For example, the stuff about value added taxes being an unfair barrier to trade. Well, I don't think that Europe is going to reorder its entire tax system. Value added taxes in Europe probably raise something on the order of €4 [trillion] or 5 trillion per year, if you add all of the countries together. Jonathan Curry: Sounds significant. Alan Cole: Yeah, something like that. Jonathan Curry: That's not a small chip in a poker game here. No. Alan Cole: Yeah, yeah. They're not going to just come up with something new within the next three years in order to appease one U.S. president who has idiosyncratically said that VATs are an unfair barrier to trade. Jonathan Curry: Well, Alan, so looking ahead, is there any unfinished business on the international tax front? Or do you think that this round of changes will satisfy lawmakers, policymakers for the next, I don't know, couple of years, three, five years, 10 years before they decide to give things another look? Alan Cole: The biggest unfinished business is in the area of how the U.S. international income tax system will coexist with pillar 2. The G7 deal didn't say that pillar 2 is fully going away, although that's still an outside possibility. More likely, Europe continues to implement its version of CFC rules, its effective equivalent of GILTI or now NCTI. That's all likely to still happen. The U.S. wants to be independent of pillar 2, not have pillar 2 go over and touch things that have previously been touched by the U.S. tax code. In many cases, that's relatively simple. You can think of companies that are American and companies that are German, and obviously at the very top level, you'll have one or the other of the two systems. But it starts to get more complicated when you have nested acquisitions. That's something you see in, for example, the pharmaceutical industry a lot because there are both tax and operations reasons that pharmaceutical companies have long chains of acquisitions. Often there's one type of company that does research, and then another one says, "This is good research. We're going to buy your company and figure out how to distribute the drug everywhere." Once you get those nested things, it's much, much harder to figure out exactly how the income inclusion rule, like the European international rules, would coexist or sit side by side with NCTI without colliding with it. So that's an area of unfinished business. Digital service taxes, also unfinished business. That's effectively kind of the European hidden tariff inside of corporate income tax policy. On our side, BEAT I think is actually unfair in some of the same ways that digital services taxes are. And then the big elephant in the room is all of the other trade policy stuff often done under the economic emergency rationale, which is actually being challenged in U.S. courts, and potentially just normal section 301 retaliatory tariffs too. All of those things create a chaotic international negotiation environment. But overall, the U.S. international tax system would hold up pretty well. My one question is, in the change to make it less targeted at intangible investment, does that end up having an effect on how, say, intangible-heavy firms look at the U.S. tax system? Jonathan Curry: Yeah, that'll be something to watch. All right. Well, Alan, thank you so much for taking time to chat with us today. I appreciate it. Alan Cole: Absolutely. Thank you for having me.
Politico
2 hours ago
- Politico
Trump and Schumer couldn't clinch a deal. Now a shutdown hangs in the balance.
Despite decades of history between them, their relationship is now almost nonexistent. They haven't had a formal one-on-one meeting since Trump's second inauguration. And they did not speak directly as part of the nominations negotiations, according to two people granted anonymity to discuss private details. The unraveling of a typical pre-summer recess nominations deal has many on Capitol Hill concerned about what is to come. While other congressional leaders are sure to figure into the negotiations, it's Schumer — who will determine whether Senate Democrats filibuster spending legislation — and Trump — who has to sign any shutdown-averting bill — who will be the key players. 'It would be better if those two negotiated,' Sen. Kevin Cramer (R-N.D.) said of Trump and Schumer. Cramer said Senate Majority Leader John Thune served last week as the 'arbitrator' ferrying between the 'bare-knuckled' New Yorkers during the recent nominations fight. And Speaker Mike Johnson will have his hands full trying to keep his thin majority united behind a spending strategy that will keep the pressure on Democrats. Democrats believe the onus is on Thune and Johnson to wrangle Trump — the dominant leader of their party — and convince him to come to the table. They are using their hardball tactics over nominations as a warning shot for the fall funding fight. 'Sooner or later, Donald Trump — Mr. 'Art of the Deal,' or so he claims — is going to have to learn that he has to work with Democrats if he wants to get deals, good deals, that help the American people,' Schumer said late Saturday night as the Senate prepared to leave town for the summer. 'Going at it alone will be a failed strategy.' Trump's decision to temporarily abandon his confirmations push rather than give in to what he called 'political extortion' from Schumer allowed the embattled Democratic leader to do a pre-recess victory lap after taking heat from the party base for months. Schumer came under fierce criticism in March for helping to advance a shutdown-avoiding spending bill written solely by Republicans. He warned at the time that a shutdown would only empower Trump and that the dynamic would be different come September as, he predicted, Trump became more unpopular. Nine other members of his caucus joined him. Trump initially urged Republicans to stay in Washington until all of the roughly 150 pending nominees were confirmed — a demand that could have essentially erased the Senate's planned four-week recess. But Schumer and Democrats demanded that Trump unfreeze congressionally approved spending in return for consenting to the swift approval of some nominees. Trump would not pay the price. In a post where he blasted 'Senator Cryin' Chuck Schumer,' Trump instructed senators to go home. Republicans flirted with adjourning the Senate to let Trump make recess appointments, but that would have required recalling the House — and reviving the Trump-centered drama over the Jeffrey Epstein files. Instead, they are vowing to pursue a rules change later this year to quickly push Trump's nominees through the Senate. Schumer relished the Truth Social post, putting a poster-sized version on display next to him as he spoke to reporters Saturday night and comparing it to a 'fit of rage.' He kept the heat on Monday, joining with House Minority Leader Hakeem Jeffries to demand a so-called four corners meeting with Thune and Johnson to discuss a government funding strategy lest a government shutdown hit Oct. 1. (Republicans, who accuse Schumer of 'breaking' the funding process, haven't responded.) Though Schumer and Thune have had informal talks about September, they haven't delved beyond the broad strokes. The South Dakota Republican, asked about Trump and Schumer, predicted the two will have an 'evolving relationship.' 'At some point, obviously, there are certain things they are just going to have to figure out, because on some of these things where we need 60 [votes], there are going to have to be conversations,' Thune said in a brief interview. Schumer and Thune joined 85 other senators to advance the chamber's first bipartisan funding package late last week, in a show of unity that senators hope will pave the way for another package of spending bills in September. But Congress is still expected to need a short-term funding patch by Oct. 1, and there are early signs of splinters among Republicans about what that step should look like. But the nomination fight also underscores that Trump is the ultimate wild card heading into the showdown. At various points heading into and over the weekend, Republicans and Democrats appeared to believe they were close to an agreement and just needed Trump's blessing, only for it to unravel. Sen. Richard Blumenthal (D-Conn.) said that Schumer's 'satisfaction' in the wake of the nominations showdown is justified but added it was impossible to predict if Trump would come to the table in September. 'One of the most striking and salient facts about Donald Trump is his unpredictability,' he said. Schumer and Senate Democrats have been trying to game out multiple scenarios in closed-door caucus meetings. They have also been discussing what demands to make in exchange for their votes to fund the government. Those could range from an ironclad commitment from Republicans that they won't agree to claw back more funding or seek policy concessions, such as unfreezing foreign aid or National Institutes of Health funds, or pursuing a deal on soon-to-expire Affordable Care Act tax credits. Democrats have their own internal fault lines to manage. Already Pennsylvania Sen. John Fetterman is vowing to vote to keep the government open, while others like Sen. Elizabeth Warren of Massachusetts are striking a more combative tone. Republicans' unwillingness to commit to rejecting future spending clawbacks, she said, shows 'the budget negotiations weren't worth the paper they were written on.' But Schumer, for now, is savoring the moment. After he wrapped up his news conference Saturday night, the smiling Democratic leader insisted his party was 'more effective and more unified than the Republicans' as he kibitzed with reporters. 'What do you think — the art of the deal?' he asked, his arm around a poster-board display of Trump's 'Cryin' Chuck' post.
San Francisco Chronicle
4 hours ago
- San Francisco Chronicle
The Latest: Texas Democrats prevent state redistricting by leaving the state
Texas Democrats on Monday prevented their state's House of Representatives from moving forward, at least for now, with a redrawn congressional map sought by President Donald Trump to shore up Republicans' 2026 midterm prospects as his political standing falters. After dozens of Democrats left the state, the Republican-dominated House was unable to establish the quorum of lawmakers required to do business. Texas Gov. Greg Abbott has made threats about removing members who are absent from their seats. Democrats counter that Abbott is using 'smoke and mirrors' to assert legal authority he doesn't have. In California, Democrats encouraged by Gov. Gavin Newsom are considering new political maps that could slash five Republican-held House seats in the liberal-leaning state while bolstering Democratic incumbents in other battleground districts. The move is intended to undercut any GOP gains in Texas, potentially swinging House control and giving Democrats a counterweight to Trump on Capitol Hill. In rejecting jobs report, Trump follows his own playbook of discrediting unfavorable data When the coronavirus surged during Trump's first term, he called for a simple fix: Limit the amount of testing so the deadly outbreak looked less severe. When he lost the 2020 election, he had a ready-made reason: The vote count was fraudulent. And on Friday, when the July jobs report revisions showed a distressed economy, Trump had an answer: He fired the official in charge of the data and called the report of a sharp slowdown in hiring 'phony.' Trump has a go-to playbook if the numbers reveal uncomfortable realities, and that's to discredit or conceal the figures and to attack the messenger — all of which can hurt the president's efforts to convince the world that America is getting stronger. 'Our democratic system and the strength of our private economy depend on the honest flow of information about our economy, our government and our society,' said Douglas Elmendorf, a Harvard University professor who was formerly director of the Congressional Budget Office. 'The Trump administration is trying to suppress honest analysis.' Defending Texas GOP's mid-decade redistricting, Trump says 'We are entitled to five more seats' President Trump defended Texas Republicans' decision to redraw the state's congressional map mid-decade, pointing to Democratic-led states where he says Republicans are underrepresented. 'They did it to us,' Trump said in a TV interview Tuesday. But in many of the states Trump referenced — including California — partisan lawmakers are not in charge of drawing district lines. During the same interview, Trump also lashed out at Illinois Gov. JB Pritzker, who welcomed Texas Democrats to his state after they left to block a vote on the new map. Trump called Pritzker 'probably the dumbest of all governors.' Trump says 'I'd like to run' for president again Touting his 2024 win and 'the best poll numbers,' Trump told CNBC that 'I'd like to run again.' But asked by the hosts if he will, Trump replied, 'Probably not.' The back-and-forth came as Trump heralded his 2024 win in Texas, a record he said 'they say won't be beaten unless I run again.' And Trump threatens to raise tariffs on India within 24 hours Trump said on CNBC that higher tariffs could be coming for India. Last week, Trump said the U.S. said it would impose a 25% tariff on goods from India, plus an additional import tax because of India's purchasing of Russian oil. 'I think I'm going to raise that very substantially over the next 24 hours because they're buying Russian oil, they're fueling the war machine,' Trump said Tuesday. 'And if they're going to do that, then I'm not going to be happy.' The 25% tariffs were part of a flurry of trade activity that included a series of executive actions regarding Brazil, copper and shipments of goods worth less than $800, as well as a reduced 15% tax on imports from South Korea, including its autos. Trump threatens eventual 200% tariffs on pharma The U.S. president said imported pharmaceutical drugs could eventually face tariffs as high as 200%. 'We want pharmaceuticals made in our country,' Trump said in the CNBC interview. Trump said tariffs on pharmaceuticals will be 'initially small,' but that he would hike it to 150% or 200% over the subsequent year and a half. The president also said he would announce tariffs on semiconductors and computer chips. Trump says EU will pay 35% tariffs if $600B investments don't come through Trump told CNBC hosts that 35% tariffs will kick in with the European Union if they don't make good on promised investments in U.S. goods. The president was asked what 'teeth' were in deals to force European officials to make good on their pledges. Trump initially said the EU was paying $650 billion but then rounded the figure down to $600 billion. 'We're a rich country again,' Trump said, adding that the $600 billion investment can go in 'anything I want.' Trump floats 'Kevin and Kevin' for Fed chair The president said he was considering four people for Federal Reserve Chairman Jerome Powell's replacement. Among the top on his list are his current economics director, Kevin Hassett, and former Fed governor Kevin Warsh. 'I think Kevin and Kevin, both Kevins are very good,' Trump said during an interview on CNBC Tuesday morning. He said two other people were in consideration. Not one of them: current Treasury Secretary Scott Bessent, who has indicated to Trump that he wants to stay where he is. 'It'll be one of four people,' he said. 'We're going to make a decision soon.'
