FROM WISH LIST TO BILL TEXT

The NAPEO federal government affairs team – which includes NAPEO staff and our outside lobbying firm Mehlman Consulting – is working to advance our industry’s priorities in the reconciliation bill moving through Congress. But what does that actually mean?

Back in January, NAPEO’s Federal Government Affairs Committee gathered in Washington, D.C. to discuss our federal legislative and regulatory priorities for the year. One issue clearly rose above the rest: tax reform. The committee agreed our federal priorities for 2025 should focus on IRS modernization, payroll tax liability clarification and business tax credits such as 199A, WOTC, and R&D tax credits.

From the outset, we anticipated that 2025’s marquee legislative battle would center on tax reform, led by the Republican majority in Congress and advanced through the reconciliation process. We saw this as a prime opportunity for PEOs to build on the goodwill and relationships we’ve spent the past two years cultivating on the House Ways and Means Committee.

Reconciliation, in theory, is a straightforward legislative tool, but in practice it’s anything but simple. It’s like building a plane mid-flight. The process begins with the passage of an identical budget resolution in both the House and Senate. This resolution sets topline numbers for spending, revenue, and the debt limit, and can include instructions to specific committees to change spending levels in their areas of jurisdiction. The legislative output that follows these instructions is what becomes the reconciliation bill—first voted out of committee, and eventually by both chambers.

With a narrow Republican majority in Congress, the GOP controls the reconciliation process. Even though reconciliation is a partisan political exercise, NAPEO continues to take a bipartisan approach to federal advocacy. That means navigating a politically complex landscape with strategy, precision and care to ensure our priorities are not just heard, but included.

NAPEO laid the groundwork for tax reform as early as the summer of 2024, meeting with members of the House Ways and Means Committee on both sides of the aisle, attending key PAC events, and continuing to educate lawmakers and staff about the PEO industry. These efforts weren’t just about visibility they were about building the trust and familiarity needed to make progress when the time came.

In January, NAPEO President and CEO Casey Clark sent a letter to the incoming administration, outlining practical areas for improvement—highlighting, among other things, the need to retire outdated technologies like the IRS fax machine and to streamline the cumbersome Employee Retention Tax Credit (ERTC) process.

Then, in February, an opportunity emerged to spotlight these issues when the House Ways and Means Subcommittee on Oversight scheduled a hearing titled “IRS Return on Investment and the Need for Modernization.” Ahead of the hearing, NAPEO met with Representative Max Miller and his team to brief them on the broader need for IRS modernization, using the fax machine as a tangible example of legacy systems still in use.

The message landed. During the hearing, Rep. Miller devoted his entire 5 minutes and 37 seconds of allotted time to this very issue. He underscored the absurdity of relying on a fax machine in 2025 and using it as a clear call to action for broader IRS reform.

To this point, we have made steady progress—gaining traction with lawmakers and building real buy-in for our priorities. But one issue still loomed largest: payroll tax credit liability clarification.

After years of diligent work by the NAPEO Liability Working Group, we finally reached consensus on legislative language. Even more importantly, we had secured two committed champions: Rep. Mike Thompson (D-CA) and Rep. Beth Van Duyne (R-TX). Both agreed to introduce the bill on a bipartisan basis as original co-sponsors. This was a major milestone and represents the product of years of technical negotiation and stakeholder alignment.

In March, we shifted into high gear. Over the course of several weeks, we met with 17 offices across the House Ways and Means Committee and the Senate Finance Committee to lay the groundwork for our liability bill. These meetings focused on education, explaining the mechanics of the proposal, the real-world risks PEOs face, and why this fix is essential for ensuring compliance and confidence in tax credit administration. Support is growing, but continued engagement is critical.

That brings us to this May and NAPEO’s PEO Capitol Summit, where more than 60 PEO professionals will take to Capitol Hill to meet with their states’ congressional delegations. They won’t just be talking about our industry; they’ll be driving home the importance of passing our liability bill. With coordinated advocacy, strong messaging and growing momentum, we’re well-positioned to turn years of work into a legislative win.