CSAC Bulletin Article

Federal Issues Update: Immigration, Internet Sales Tax

Trump Signs Executive Order Ending Family Separations: Supreme Court Issues Major Online Sales Tax Ruling

June 21, 2018

President Donald Trump signed an executive order yesterday ending his administration’s policy of separating families who cross the border illegally. The action was precipitated by widespread public backlash over the White House’s “zero tolerance” policy, which, since early May, has resulted in the separation of over 2,300 children from their parents.

Pursuant to yesterday’s directive, the U.S. Department of Justice will continue prosecuting undocumented adults who are accused of improper entry into the United States. However, the administration will “maintain family unity, including by detaining alien families together where appropriate and consistent with law and available resources.”

It should be noted that the Trump administration had previously argued that it was required to separate children from parents who are awaiting disposition of their immigration proceedings pursuant to a 1997 consent decree known as the Flores settlement. That particular agreement requires unaccompanied minors be kept in the “least restrictive” conditions possible and that they not be detained any longer than necessary. The executive order signed by President Trump directs the attorney general to promptly file a request with the U.S. District Court for the Central District of California to modify the Flores agreement to permit detained migrant families to be held together while their cases are adjudicated.

While a number of congressional Republicans hailed the president’s decision to reverse course on the issue of family separation, many Democrats and immigration rights advocates have charged that the executive order falls far short of addressing the complex issues stemming from illegal border crossings. Among other things, critics point to the fact that the order does not prescribe reunification procedures for those children who have already been separated from their parents. Likewise, according to critics, the new policy will simply shift children to detention centers that are not designed to accommodate minors.

Looking ahead, the full legal and political implications of President Trump’s executive order will remain uncertain as pending congressional action – and perhaps subsequent legal challenges – may further alter enforcement and detention practices at the border.

House Immigration Legislation

At press time, the House was slated to consider two competing immigration reform bills. The planned votes follow weeks of discussions between GOP moderates and conservatives over several contentious issues, including the fate of undocumented individuals who arrived in the United States as children.

Up first in the chamber is the Securing America’s Future Act (HR 4760). The legislation, which is supported by House conservatives, is expected to fail on the floor.

The second bill, entitled the Border Security and Immigration Reform Act (HR 6136), is a GOP leadership product that has gained the support of some moderate members of the Republican caucus. At press time, it appeared as though HR 6136 also was in danger of being defeated as a spate of 11th-hour concerns were still being vetted within the GOP caucus. Perhaps further complicating the Republican leadership’s quest to pass an immigration package was a late-breaking tweet from President Trump questioning the importance of the House passing a reform bill if the legislation is destined to fail in the Senate where 60 votes would be needed to advance the measure.

Details of HR 6136

As expected, the House GOP leadership bill adheres to the administration’s immigration framework and addresses President Trump’s “four pillars” of reform. Specifically, the legislation would: provide Deferred Action for Childhood Arrival (DACA) recipients with a pathway to citizenship; eliminate the diversity visa lottery program; provide direct funding for the border wall; and, limit family-based immigration.

HR 6136 also addresses the issue of family separation. Specifically, the bill includes a section entitled “Clarification of Standards for Family Detention,” which would essentially overrule the Flores agreement and allow the Department of Homeland Security to detain immigrant children in adult facilities with their parents/guardians.

Across Capitol Hill, Senator Dianne Feinstein (D-CA) has been leading the legislative effort to abolish the practice of family separations at the border. The senator introduced a bill that would accomplish this objective, entitled the Keep Families Together Act (S 3036). The legislation is supported by every Senate Democrat.

Under the Feinstein bill, federal officials would generally be barred from removing a child from his or her parents or legal guardian at the border. A child could only be separated from his/her family if: a state court – or state or county child welfare agency – were to determine that the action would be in the best interest of the child; an appropriate federal agency official were to determine the child is the victim of trafficking; or, it is determined that there is a strong likelihood that the adult is not the parent or legal guardian of the child.

Farm Bill Reauthorization

Later today, the House is expected to reconsider a GOP-sponsored Farm Bill reauthorization package (HR 2). Members of the conservative House Freedom Caucus voted with Democrats on May 18 to defeat the legislation in protest over a lack of action on immigration reform.

Among other things, HR 2 includes new work requirements for Supplemental Nutrition Assistance Program (SNAP/CalFRESH) recipients. Under the bill, all able-bodied adults without children under age six would be required to work at least 20 hours per week and/or be engaged in a work-related program. The first failure to do so for more than one month would result in the loss of SNAP benefits for one year. A second failure would result in denial of benefits for three years.

The bill also would restrict categorical eligibility for SNAP to only those individuals receiving Temporary Assistance for Needy Families (TANF) cash assistance or other TANF supports, such as child care. Currently, there are other ways of becoming eligible for SNAP, such as receiving aid through a state assistance program or Supplemental Security Income. Additionally, the proposal would effectively eliminate the use of the standard utility disallowance and instead would require SNAP participants to submit utility bills and would count any Low Income Home Energy Assistance Program benefits when determining SNAP benefits. Given the bill’s work-centric focus, the measure would nearly triple the amount of funding for SNAP Employment and Training programs.

Across Capitol Hill, the Senate Agriculture Committee approved on June 13 a bipartisan Farm Bill reauthorization measure (S 3042). The legislation does not include any cuts to SNAP. Senate Republican and Democratic leaders have been clear that they intend to pass a bipartisan bill on the floor and that they will reject the SNAP cuts proposed by the House. The full Senate may consider S 3042 before the July 4 recess.

Supreme Court Hands Down Ruling on Remote Sales

The Supreme Court on June 21 ruled 5-4 in favor of South Dakota in a landmark case (South Dakota v. Wayfair) involving the collection of sales taxes from online vendors. As a result, states can now require online retailers to collect and remit sales taxes, regardless of whether they have a “physical presence” in the state.

The Court last ruled on this issue in 1992 (Quill Corp. v. North Dakota) when it found that online retailers were exempt from collecting sales taxes in states where they have no physical presence. At the time, the justices determined that requiring companies to comply with various sales tax rules across the country would have placed an undue burden on interstate commerce. Consequently, local governments have lost out on billions of dollars in potential sales tax revenue. In fact, a recent report from the Government Accountability Office (GAO) found that California could have brought in an additional $1 billion to $1.7 billion in 2017, if the state had the ability to collect from all remote sellers.

As part of its decision in Quill, the Court encouraged Congress to resolve the question surrounding the physical presence standard. The justices also argued that the legislative branch was the best venue to determine whether undue burdens on interstate commerce have been eliminated. After more than 25 years, however, Congress has yet to approve a legislative solution. Meanwhile, the growth of the e-commerce marketplace has dramatically changed the retail landscape, and advancements in technology have made it easier than ever to track sales taxes online.

While a number of states have moved forward with their own legislative solutions, South Dakota has been the furthest along in its implementation. In 2016, the state approved a law that required online vendors with over $100,000 in sales or over 200 transactions within the state to collect and remit sales taxes. The state then sued the four largest internet retailers that met this criteria. While one ultimately chose to comply with the law, the other three (Wayfair, Overstock, and Newegg) refused because, in their view, the law violated the Quill decision. As anticipated, each of the lower courts ruled in favor of the retailers, as only the Supreme Court could overturn the precedent set by Quill.

Following the decision in South Dakota v. Wayfair, states are expected to move quickly to establish similar “economic presence” laws. In turn, such widespread state-level action may serve as the impetus for Congress to pass legislation addressing remote sales tax collection. Three longstanding proposals – the Marketplace Fairness Act (S 976), the Remote Transactions Parity Act (HR 2193), and the Online Sales Simplification Act (draft bill) – are likely to be pushed by their respective sponsors as the necessary solution to establishing a uniform system. Each of the proposals has its own set of detractors, however, which has stalled efforts over the years to advance remote sales tax legislation.

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