Preemption Monitor: December 2011

The Preemption Monitor reviews recently enacted federal legislation that preempts state authority, describes pending legislation that would preempt state authority if enacted, and examines U.S. Supreme Court cases that have implications for state authority. NCSL’s cornerstone policy on federalism states that federal legislation should be based on broad principles, not upon specific mandates that commonly lead to a one-size-fits-all approach. NCSL’s federalism policy promotes good governance at both the state and federal levels.

The volume of federal legislation that preempts state authority has not subsided in the administration. Pressure continues to mount for Congress and the White House to support federal usurpation of state authority in a variety of areas such as criminal law, insurance regulation, and the environment. Although preemption is hard to quantify because it does not always impose a cost to states, it can be harmful because it can eliminate state innovation and creativity. Often, federal preemptions seek uniformity when uniformity is not necessarily the most effective means for resolving issues. This document provides an update and analysis of pending and recently-finalized federal preemption proposals.

Preemption Victories

Preemptive Prescription Drug Preamble Revoked

The Food and Drug Administration (FDA) is announcing that it has after a review determined that three FDA regulatory preambles contain or refer to statements about preemption that are not legally justified. FDA conducted this review in response to the President’s May 20, 2009, “Memorandum for the Heads of Executive Departments and Agencies,” which outlined the Administration’s policy on preemption, in keeping with the principles in Executive Order 12132 on Federalism. FDA is also clarifying certain permeable statements related to preemption resulting from express preemption provisions in the Federal Food, Drug, and Cosmetic Act (FD&C Act) concerning nonprescription drugs and food labeling.

State Flexibility


In October, NCSL and others helped blocked passage of a Senate floor amendment that would have stripped states of the flexibility they now have to use cost-effective mechanisms to determine the eligibility criteria for low-income programs. The failed amendment, offered by Alabama Senator Jeff Sessions, would have ended “categorical eligibility” determinations for the Supplemental Nutrition Assistance Program (SNAP, formerly food stamps). Currently, 40 states exercise the categorical eligibility option in which SNAP eligibility goes hand-in-hand with determinations to qualify for such programs as TANF, SSI or Medicaid. Passage of Senator Sessions’ amendment would have automatically increased state administrative costs and eliminated state program flexibility, both of which NCSL is working vigorously to avoid in federal deficit reduction efforts. The amendment failed 41 - 58 but will likely resurface. 

Ending Federal Marijuana Prohibition Act
On June 23, 2011, Congressman Barney Frank (D-MA) and Congressman Ron Paul (R-TX) introduced, H.R.2306, “Ending Federal Marijuana Prohibition Act” which decriminalizes marijuana at the federal level. The bill grants states authority to regulate marijuana without federal interference and amends the Controlled Substance Act of 1970 by removing marijuana from the list of scheduled substances. This is the first bill ever introduced in Congress to end federal marijuana prohibition. Frank (MA)
Sponsor: Congressman Barney Frank (MA)
Status: 8/25/2011 Referred to the Subcommittee on Crime, Terrorism, and Homeland Security.


The U.S. Environmental Protection Agency (EPA) and the U.S. Army Corps of Engineers (Corps), issued draft guidance pursuant to the Clean Water Act (CWA) attempting to clarify the definition of “Waters of the US” and determinations regarding what bodies of water come under federal CWA jurisdiction. As more waters are determined to be jurisdictional, state regulatory authority and responsibilities will be impacted. The implications of the guidance could preempt state and local governments and have an adverse economic impact.  Because of its complexity, there may be unintended consequences to state and local programs. States requested and received an extension of time to comment on the proposed guidance and ultimately submitted comments asking for EPA and the Corps to initiate a rulemaking process because it was felt that a guidance document was not the right vehicle for such action.  Subsequent to the public comments on the guidance document EPA and the Corps have indicated a shift in focus from the guidance to drafting regulation and have held a series of outreach meetings to brief stakeholders.  NCSL has successfully advocated for a formal federalism consultation meeting on the regulation because of the federalism implications of the rule.  No final decision has been made as to whether or not a final guidance document would be issued by the EPA and Corps either on its own or through incorporation into the draft regulation.

Recently Introduced, Pending, and Passed Legislation and Regulations

Children and Families

The Child Care Protection Act
S. 581, The Child Care Protection Act of 2011 would require state agencies to conduct FBI background checks on child care providers and workers whose services are funded by the Child Care Block Grant (CCBG).  States would be allowed to charge fees to child care providers to recoup the costs of conducting the checks.  Additionally, the legislation requires states to provide an appeal process for child care staff members (or prospective members) who wish to challenge the accuracy or completeness of the results of the background check.
Sponsor: Senator Richard Burr (NC)
Status: 3/15/2011 Referred to the Committee on Health, Education, Labor, and Pensions.

The Julia Carson Responsible Fatherhood and Healthy Families
HR 2193, The Julia Carson Responsible Fatherhood and Healthy Families Act of 2011 would require a state to pass through all monies collected through the Child Support Enforcement system to the family.  Currently, states have the option to retain part or all of the monies collected through the Child Support Enforcement system to reimburse the state for costs of providing cash welfare.
Sponsor: Congressman Danny Davis (IL)
Status: 9/8/2011 Referred to the Subcommittee on Higher Education and Workforce Training.


DOE Abandons Plan to Cede Siting Authority Power To FERC
On October 11th U.S. Department of Energy Secretary Steven Chu announced that DOE will not delegate to FERC its responsibilities to conduct triennial congestion studies and to designate national interest transmission corridors across the country.  A proposal had been submitted to DOE from FERC to delegate that authority in order to expedite the process of identifying areas of transmission congestion that could possibly be designated as national interest corridors.  The FERC proposal indicated the possibility that corridors could be issued on a much narrower basis going as far as being specific to a single transmission project.  This would have not only expanded the federal backstop and further preempted state authority over transmission siting but it would have gone well beyond congressional intent when the national corridor plan was enacted in 2005.


The Coast Guard and Maritime Transportation
The U.S. House of Representatives considered legislation that would establish a single national technology-based standard to treat ballast water discharges from commercial ships, as part of a bill authorizing U.S. Coast Guard programs for fiscal years 2012-2014. H.R. 2838 would require the U.S. Environmental Protection Agency (EPA) and the Coast Guard to issue final ballast water regulations based on the International Maritime Organization's standard for ballast water management.  The regulations, which would be revised every 10 years based on technology advancements, would direct EPA on how to revise its existing National Pollutant Discharge Elimination System (NPDES) ballast water permit, which expires in December 2012.  This provision would supersede any individual state standards which have already been established by 26 states, two Native American tribes, and one U.S. territory.  One issue states have addressed through ballast water management standards is the management of invasive species into state waters.  An amendment to allow for tougher state standards was defeated on November 4th and the House will resume debate of the bill the week of November 14th.
Sponsor: Congressman Frank A. LoBiondo (NY)
Status:   11/4/2011 Committee of the Whole House on the state of the Union rises leaving H.R. 2838 as unfinished business. House Reports: 112-229 


On September 22, 2011, the U.S. House Judiciary Committee approved the Legal Workforce Act to make permanent and mandatory a federal employment eligibility verification system for all employers, including federal, state and local government.  Under current law, E-Verify is a voluntary program, except for federal contractors, and it applies to newly-hired employees.  Authorization expired September 30, 2012.  The bill is phased in by size of employer from 6 months to two years after enactment.   It exempts seasonal agricultural workers who return to work for previous agricultural employers.  The bill would require federal, state and local government to reverify all employees who have not been verified through E-Verify.  The bill would preempt state and local laws addressing E-Verify and employer sanctions. 
Sponsor:  Congressman Lamar Smith (TX)
Status:  9/22/2011 Referred to House Ways and Means and House Education and Workforce


HR 2189 would encourage states to report to the Attorney General certain information regarding the deaths of individuals in custody of law enforcement agencies. This legislation would require states that receive Byrne JAG funding to report to the Attorney General on a quarterly basis certain information regarding the death of any person who is detained, arrested, en route to incarceration, or incarcerated in state or local facilities or a boot camp prison. A 10% loss of Byrne JAG funding is to be imposed on states that fail to comply and each state will have no more than 120 days to comply with some exceptions.
Sponsor: Congressman Bobby Scott (VA)
Status: 9/21/2011 Referred to the Committee on the Judiciary.

HR 822 would amend the federal criminal code to authorize a person who is carrying a government issued photographic identification documentation and valid permit to carry a concealed firearm in one state, to carry concealed firearm in another state. On October 11, the “amendment in the Nature of a Substitute” offered by Congressman Franks (AZ) changed Section 2 of the bill. The bill now states that carrying a concealed hand gun will be subject to the same conditions and limitations of the particular state the person is in, “ except as to eligibility or possess or carry.” This new addition means that permits given in states with fewer restrictions on the buyer must be acknowledged as sufficient in states with higher regulations.
Sponsor: Congressman Cliff Stearns (FL)
Status: 10/25/2011 Subcommittee on Crime Terrorism and Homeland Security: Ordered to be Reported (Amended) by the Yeas and Nays: 19 - 11.


S. 1151 would establish new federal crimes relating to unauthorized access to sensitive personal information. This bill would also require most federal agencies and businesses that collect, transmit, store, or use such personal information to establish a data privacy and security program to notify any individuals whose information has been unlawfully accessed. This legislation contains intergovernmental mandates as defined in the Unfunded Mandates Reform Act (UMRA) because it would explicitly preempt laws in at least 46 states regarding the treatment of personal information and impose notification requirements and limitations on state Attorneys General.
Sponsor: Senator Patrick Leahy (VT)
Status: 9/22/2011 Placed on Senate Legislative Calendar under General Orders

S. 1408 would require federal and/or business entities in interstate commerce that have access to personal information on file to notify persons within their databases when there is a security breach. S. 1408 contains intergovernmental mandates as defined in UMRA because it would explicitly preempt laws in at least 46 states that require businesses to notify individuals in the event of a security breach and would impose notification requirements and limitations on state Attorneys General.
Sponsor: Senator Dianne Feinstein (CA)
Status: 9/22/2011 Committee on the Judiciary. Ordered to be reported with an amendment in the nature of a substitute favorably.

Tax and Revenue

Internet Gambling Prohibition, Poker Consumer Protection, and Strengthening UIGEA Act
HR 2633 would prohibit any person from operating an Internet Gambling facility without an issued license from a state of tribal agency and to establish a program for state licensing of Internet Poker. This legislation would require states to provide documentation of licenses they have issued to operators of gambling sites. Further, these agencies will be monitored by the newly established Office of Internet Poker Oversight. It is the responsibility of the states to make sure operators are following the correct legal proceedings (such as making sure persons using the site are not minors).
Sponsor: Congressman Joe Barton (TX)
Status: 8/25/2011 Referred to the Subcommittee on Crime, Terrorism, and Homeland Security.

Business Activity Tax Simplification Act
The House Judiciary Committee approved the Business Activity Tax Simplification Act (BATSA) on a bipartisan voice vote. As passed, the bill and report include no information with regard to the cost (revenue loss) to states and local governments—or to the impact on in-state businesses. The bill, HR 1439, would impose a federally-mandated “nexus threshold” for state and local “business activity taxes” (BATs), the most widely-levied state business activity taxes.  BATSA declares that a business must have a “physical presence” within a state before that jurisdiction may impose a BAT on the business.  This provision would nullify many state laws that assert that a non-physically-present business establishes nexus with the state when it makes economically-significant sales to the state’s resident individuals and/or businesses.  In so doing, the proposed legislation would reverse nearly a dozen state court decisions holding that physical presence is not required to establish nexus under a corporate income tax or other BAT. The preemption bill is intended to substantially raise the nexus threshold for corporate income taxes and other BATs — that is, to make it much more difficult for states or local governments to levy these taxes on out-of-state corporations.
Sponsor: Congressman Bob Goodlatte (VA)
Status: 10/21/2011 Placed on the Union Calendar House Reports: 112-257

Wireless Tax Fairness Act of 2011.
The House Judiciary Committee passed and reported to the full House legislation to prohibit states or local governments from imposing any new discriminatory tax on mobile services, mobile service providers, or mobile service property (i.e., cell phones) for five years. The legislation, H.R. 1002 and S. 543, would define “new discriminatory tax” as a tax imposed on mobile services, providers, or property that is not generally imposed on other types of services or property, or that is generally imposed at a lower rate, unless such tax was imposed and actually enforced prior to the date of enactment of this Act. This legislation does not preempt any existing tax on state and local communications services.

H.R. 1002
Sponsor: Congresswoman Zoe Lofgren (CA)
Status: 11/2/2011 Referred to the Committee on Finance.

S. 543
Sponsor: Senator Ron Wyden (OR)
3/10/2011 Read twice and referred to the Committee on Finance.

Digital Goods and Services Tax Fairness Act of 2011
Digital Goods and Services Tax Fairness Act of 2011, H.R. 1860 and S. 971 - Prohibits a state or local jurisdiction from imposing multiple or discriminatory taxes on or with respect to the sale or use of digital goods or services delivered or transferred electronically to a customer. These bills exclude from the definition of "digital service" telecommunications service, Internet access service, or audio or video programming service which is consistent with the streamlined sales and use tax agreement definitions. H.R. 1860 and S. 971 restrict taxation of digital goods and services by the jurisdiction encompassing a customer's tax address which is consistent with the federal Mobile Sourcing Act which is operational in all 50 states. These bills prohibits the use of existing regulations or administrative rulings relating to the taxation of tangible personal property or other services to impose any tax on the sale or use of digital goods or services. Aggrieved parties may take their case to federal district courts to prevent a violation of this act, without regard to the amount in controversy or the citizenship of the parties. Congress expresses the desire for each state to take reasonable steps to prevent multiple taxation of digital goods and services where a foreign country has imposed a tax on such goods and services.
H.R. 1860
Congressman Lamar Smith (TX)
Status: 5/23/2011 Referred to the Subcommittee on Courts, Commercial and Administrative Law.
S. 971
Senator Ron Wyden (OR)
Status: 5/12/2011 Read twice and referred to the Committee on Finance.

Office of the Comptroller of the Currency
 Preemption of state financial services laws as they might apply to national banks continues. Despite language in last year’s Dodd-Frank financial services reform law, the Office of the Comptroller of the Currency released a final rule on July 20 that confirms that the independent agency did not get or will not heed the message in Dodd-Frank. After stating it would delete a 2004 regulation that created a firewall around national banks from state laws conflicting with OCC’s perceived authority, the agency has returned to its “obstructs, impairs, or conditions” threshold for judging (the agency uses the term “re-examine”) state laws against national bank activities. The new regulation has greater punch since OCC is now vested with regulating thrifts.

The Digital Accountability and Transparency Act
State governments will report directly to the federal government on all received grants, contracts and loans if H.R. 2146, the Digital Accountability and Transparency Act of 2011 (DATA Act), passes. This legislation would expand and make permanent the reporting requirements established under the American Recovery and Reinvestment Act. Introduced by California Representative Daniel Issa, the legislation received bipartisan applause at a June 14, 2011, hearing of the House Oversight and Government Reform Committee. Rep. Issa indicated a willingness to consider making federal funding available to states to carry out the legislation. Virginia Senator Mark Warner has introduced companion legislation.
Sponsor: Congressman Darell Issa (CA)
Status: 10/25/2011 Placed on the Union Calendar House Reports: 112-260