THE 2024 ELECTION: WHAT IT MEANS FOR PEOS

As of December 4, 2024, the presidential and senatorial elections are all settled.

The Republicans captured the Senate majority, picking up four seats and have a 53-45-2 majority. The House will be controlled by the Republicans, but by a very slim margin. With the last House races just called, the Republicans will control the House with 220 members, a two-vote majority, while the Democrats will hold 215 seats. The Republican’s majority will be even slimmer through at least April 2025, as Rep. Matt Gaetz (R-FL) has resigned his seat and Rep. Elise Stefanik (R-NY) will leave her seat once she is confirmed as Ambassador to the United Nations. For the first few months of the Trump Administration, House Republicans will not be able to lose a single vote when passing legislation.

With the election settled, both parties on the Hill go through the process of choosing their leaders, committee chairs, and making committee assignments. The incoming Trump Administration is in the process of filing cabinet-level positions and collecting resumes for the 4,000+ political appointee jobs a President must fill.

From a big picture perspective, this election represents yet another change election. In every federal election since 2006, except for 2012, at least one of the House, Senate, or White House has changed partisan control. These change elections have resulted in tremendous turnover in both Houses of Congress. For example, as we head into tax reform in 2025, only a quarter of the Republican members of the Ways and Means Committee were members of the committee in 2017 – the last time the Congress overhauled the tax code. Half of the Republicans on the Ways and Means Committee were not in Congress in 2017. On the Senate Finance Committee, six of the current Democratic members are either retiring or lost their reelection bid. The lack of continuity and experience on the tax committees will make enacting tax reform legislation more challenging.

The NAPEO PAC had a very successful election night. The PAC donated $255,500 to 62 candidates and two Congressional fundraising committees during the 2023-24 election cycle. We donated $136,000 to Republicans (53 percent); $114,500 to Democrats (45 percent); and $5,000 to an Independent (2 percent). Of the 57 candidates who were running for election this year, 55 won and two lost, giving us a 96 percent winning percentage for the PAC. The strategy of the PAC is to support candidates on our key committees (tax, workforce, small business), as well as the leadership of both parties. Our support of candidates has positioned the PEO industry well for the upcoming tax reform legislation.

WHAT DOES THE ELECTION MEAN FOR THE PEO INDUSTRY

The recent election should have little to no impact on the PEO industry priorities before Congress. We have adopted legislative and regulatory priorities that can obtain bipartisan support. Our lobbying efforts and PAC contributions are balanced between both sides. The agenda of the industry is designed to help our small business clients grow and prosper. No matter which side wins the election, our industry agenda is well positioned.

Right now, we are asking Congress to push the IRS to clear the backlog of Employee Retention Tax Credit (ERTC) claims. We are working with members of the House Ways and Means Committee to introduce legislation that establishes clear liability for PEOs and our clients on payroll tax credits. We are also working on legislation that will allow other tax credits claimed on an amended PEO return to be paid if the IRS audits a few claims on a consolidated PEO return. And we are working to make sure that any extension of Section 199A tax deductions include language making it clear that PEO clients are eligible for this benefit.

While our agenda will not change due to the election, changes in partisan control of Congress and the White House result in different policies and priorities. A good example is the “joint employer” issue. When there is a Democratic administration, the National Labor Relation’s Board (NLRB) will push an expanded definition of “joint employer,” which has the possibility of classifying a PEO as a joint employer. When a Republican wins the White House, the NLRB overturns its former decisions and narrows the definition of joint employer. Other labor/workforce policies go through similar changes based on partisan control of the White House.

Because Republicans swept the House, Senate, and White House, they will be able to use a process called “reconciliation” to pass tax reform. Reconciliation allows the Senate to pass legislation with a 50-vote majority, instead of needing 60 votes to pass a bill. This process requires Congress to first adopt a budget resolution, which only requires a majority vote to be adopted – and the President has no role in this stage of the process. Once adopted, Congress can then address spending and tax issues, with a catch. All the provisions of reconciliation must impact spending and revenue. Any provision that fails to meet this requirement can be removed by an objection from a Senator. This is the “Byrd Rule,” named after former Senator Robert Byrd (D-VA), and it is designed to keep reconciliation from making significant legislative changes.

Overall, we can expect Congressional Republican’s to move tax reform via reconciliation, and we know that they will attempt to move this legislation quickly. We expect the Trump Administration to withdraw most of the regulations issued by the Biden Administration Department of Labor. And we expect a broader deregulation agenda to be pushed by the Trump Administration.