September 26, 2014

Both the House and Senate were in recess this week.

National Intelligence Strategy

The Director of National intelligence James Clapper unveiled the 2014 National Intelligence Strategy (NIS) this week. The NIS is a blueprint to drive the priorities for the 17 US Intelligence Community (IC) components over the next four years. It identifies and explains the IC’s objectives – what the IC intends to accomplish (mission objectives) and how the IC will accomplish them (enterprise objectives). The seven mission objectives are: 1) strategic intelligence; 2) anticipatory intelligence; 3) current operations; 4) cyber intelligence; 5) counterterrorism; 6) counterproliferation; and 7) counterintelligence. The six enterprise objectives are: 1) integrated mission management; 2) integrated enterprise management; 3) information sharing and safeguarding; 4) innovation; 5) people; and 6) partners.

A copy of the NIS can be found at:

http://www.dni.gov/files/documents/2014_NIS_Publication.pdf

Tax Inversions

The Treasury Department released a notice on Monday stating that it will use regulatory authority to crack down on tax inversions. The notice eliminates certain techniques inverted companies currently use that make the practice profitable and makes it more difficult for US entities to invert. Specifically, Monday’s notice prevents inverted companies from accessing a foreign subsidiary’s earnings while deferring US tax through the use of “hopscotch” loans, prevents inverted companies from restructuring a foreign subsidiary in order to access the subsidiary’s earnings tax-free, closes a loophole to prevent inverted companies from transferring cash or property from a controlled foreign corporation to the new parent to completely avoid US tax, and makes it more difficult for US entities to invert by strengthening the requirement that the former owners of the US entity own less than 80% of the new combined entity. The new rules are only applicable to deals completed on or after Monday. And the department stated that they will continue to review a broad range of authorities for further anti-inversion measures as part of their continued work to close the inversion tax loopholes.

While the proposed rules did have a negative impact this week on the share prices of several publicly-traded companies involved in potential deals, some critics claimed that most companies considering inversion won’t change course even if the costs of inversion rise. Others think that the tighter rules will make US companies better acquisition targets with foreign firms initiating the transactions.

Defense Reprogramming Request

Earlier this month the Department of Defense Department submitted a reprogramming request to up to $1.54 billion in war spending to buy eight new Lockheed Martin F-35 fighter jets (including six for the Marines, to replace aircraft lost in battle) ($1.136B) and 21 additional AH-64 Apache helicopters built by Boeing ($404M). The request was included in a Sept 8 letter requesting permission to reprogram $1.9 billion in the Overseas Contingency Operations (OCO) account to pay for expanded operations against Islamic State extremists in Iraq and Syria. This week, House Defense Appropriations Subcommittee Chairman Rodney Frelinghuysen denied the Pentagon’s request to transfer money. Frelinghuysen’s subcommittee is one of the four spending and authorization panels in the House and Senate that must approve each item in reprogramming requests. In a letter to Pentagon Comptroller Michael McCord, Frelinghuysen responded that he was concerned that OCO funds are being used to “backfill budgetary shortfalls in acquisition programs that have only tenuous links to the fight in Afghanistan and other current operations.”

Cybersecurity

The National Institute for Standards and Technology (NIST) released a public notice this week stating that they had selected the MITRE Corporation to run their Federally Funded Research and Development Center (FFRDC) for cybersecurity. The IDIQ contract is worth up to $5 billion over 25 years. NIST announced plans for its first FFRDC in April 2013. The FFRDC will provide scientific and engineering support needed to carry out the research and engineering agenda set by NIST including engaging in, assisting, and contributing to the support of scientific activities and projects for developing practical cybersecurity solutions composed from commercial components; and performing and engaging in research, engineering, and technology transfer/integration services for trustworthy information systems to the U.S. Government. The new organization will also support the National Cybersecurity Center of Excellence, a public-private partnership closely associated with NIST. MITRE runs similar FFRDCs for the Defense Department and other agencies, and also manages the Common Vulnerabilities and Exposures database and developed specifications for the Structured Threat Information Expression (STIX) and Trusted Automated Exchange of Indicator Information (TAXII) under contract with DHS.

Political Updates

Eric Holder, the first African-American Attorney General, announced on Thursday that he will leave his post at the Department of Justice once a successor is nominated and confirmed. Holder has been in the job for nearly six years and is one of three of President Obama’s original cabinet members still serving in his post. Potential candidates to replace Holder include former White House counsel Kathryn Ruemmler, Massachusetts Governor Deval Patrick, Solicitor General Donald Verrilli Jr., former Michigan Governor Jennifer Granholm, Senator Sheldon Whitehouse (D-RI), Senator Amy Klobuchar (D-MN), Senator Richard Blumenthal (D-CT), California attorney general Kamela Harris, United States attorney for the Southern District of New York Preet Bharara, former Homeland Security Secretary Janet Napolitano, US Attorney for the Western District of Washington State Jenny Durkan, Labor Secretary Thomas Perez, Deputy Homeland Security Secretary Alejandro Mayorkas, former Associate Attorney General Tony West, US Attorney for Washington DC Ron Machen, former Joe Biden aide Neil MacBride, and United States attorney in Brooklyn Loretta Lynch. Gov. Patrick on Thursday said that it was not the right time for him to take such a job, and Sen. Whitehouse responded that his “heart’s desire is representing Rhode Island in the Senate” and he has no interest in other positions.

Defense Secretary Chuck Hagel nominated Navy Adm. Harry Harris this week to become the next commander of the US Pacific Command. If approved, Harris would replace Adm. Samuel Locklear, who took over the role in March 2012. The Pentagon has not yet announced the next move for Locklear. Harris is the US Pacific Fleet commander and is based in Pearl Harbor, Hawaii. He assumed command there in October 2013.

Jeffrey Johnson has been named chief of defense nuclear security and associate administrator for the National Nuclear Security Administration’s Office of Defense Nuclear Security. In his new role, Johnson will oversee the development and implementation of programs at the NNSA. He previously led the US Marine Corps Civilian Law Enforcement.

Next Week

The House and Senate are in recess until November 12.