Construction Legislative Week in Review
www.agc.org July 1, 2010
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On the Inside
TRANSPORTATION
Supplemental Appropriations Bill Rescinds Highway Contract Authority
Transportation Appropriations Bill Clears House Subcommittee
House and Senate Vote to Extend FAA Authorization
TAX
President Signs Medicare and Pension Relief Measure
Senate Begins Debate on Small Business Jobs Act
LABOR
New Safety Bill Expected Before Congress in July
President Obama Makes a Call for Action on Immigration
FINANCIAL REFORM
Financial Regulation Legislation Passes House
BUDGET
Congressional Budget Office Issues Bleak New Budget Outlook
ELECTIONS
Longest-Serving U.S. Senator Dies at 92
TRANSPORTATION
Supplemental Appropriations Bill Rescinds Highway Contract Authority
 

Following months of AGC and other transportation construction stakeholders successfully lobbying Congress and the administration to restore $8.7 billion of rescinded highway contract authority, the House of Representatives is poised to take $2 billion of that unobligated money away to offset a $10 billion appropriation to preserve teachers’ jobs included in the House supplemental appropriations bill.  This provision will not impact overall spending but may have an impact on what types of projects states can fund in the future.

The intent of the bill is to provide funding for U.S. troops; however, the House Appropriations Committee added additional funding that required an offset of $11.7 billion.  As co-chair of the Transportation Construction Coalition, AGC sent a letter to Congress opposing the House supplemental proposal, and argued that the rescission creates further uncertainty in an already-suffering transportation construction marketplace. AGC also argued that it raises questions about future federal transportation investment commitments.  A copy of the letter can be found here.

For more information, contact Sean O’Neill at (202) 547-8892 or oneills@agc.org. Return to Top

Transportation Appropriations Bill Clears House Subcommittee
 

The House Appropriations Subcommittee on Transportation and Housing and Urban Development today marked-up their FY 2011 spending bill. The bill provides $45.2 billion for the highway program, a nearly $4 billion increase over the president’s FY 2011 budget request, and $11.3 billion for transit program funding, a $500 million increase over the president’s budget request.

The bill also provides $3.5 billion for the Airport Improvement Program, the same amount as appropriated in previous years, and $1.4 billion for high-speed passenger rail, a $400 million dollar increase from the president’s budget request but a $1.1 billion decrease from FY 2010.  In addition, the bill provides $400 million for TIGER Grant programs while failing to provide the $4 billion requested by the president for a National Infrastructure Innovation and Finance Fund.

At this time it is unclear if or when the full committee will consider the transportation spending bill.  If they fail to act prior to the end of FY 2010, the transportation programs will continue to operate at current funding levels.

For more information, contact Sean O’Neill at (202) 547-8892 or oneills@agc.org. Return to Top

House and Senate Vote to Extend FAA Authorization
 

Congress approved a bill to extend aviation programs and excise taxes through Aug. 1, 2010. The short-term extension will give lawmakers another month to attempt to finalize a multi-year FAA reauthorization bill.

While the House and Senate have passed long-term authorization bills, they are very different. An attempt was made to pass a longer-term extension to allow time for compromise legislation to be negotiated, but that effort failed. This is the 14th extension of this FAA authorization. Upon its return from July 4th recess, Congress will hopefully get to work on resolving the different bills.

For more information, contact Sean O’Neill at (202) 547-8892 or oneills@agc.org. Return to Top

TAX
President Signs Medicare and Pension Relief Measure
 

On Friday, President Obama signed into law H.R. 3962, the Preservation of Access to Care for Medicare Beneficiaries and Pension Relief Act of 2010, a stand-alone measure to prevent a scheduled cut in Medicare reimbursements to physicians.  The so-called “Doc Fix” was originally part of H.R. 4213, the American Jobs and Closing Tax Loopholes Act, or “Tax Extenders Act,” which stalled in the Senate.  The fully-offset bill also provides for single- and multiemployer pension funding relief, which would raise about $2.1 billion over 10 years.  However, the bill does not contain the preferred multiemployer pension relief approved by the House and included in H.R. 4213 pending before the Senate.  Instead, it includes the single- and multiemployer pension plan provisions the Senate passed in an earlier iteration of H.R. 4213, the American Workers, State, and Business Relief Act of 2010, on March 10. 

The multiemployer provisions in H.R. 3962 include an expanded 30-year amortization of net investment losses incurred in either or both of the first two plan years ending after August 31, 2008, as well as an expanded 10-year smoothing period and asset valuation corridor also for either or both of the first two plan years ending after August 31, 2008. 

While the relief now enacted into law is not the preferred language advocated by AGC and the multiemployer pension community, and passed by the House, there may be an opportunity to enact “technical corrections” or otherwise provide Congressional guidance to the Treasury who will now interpret the law to ensure the intent of the preferred language is followed. 

AGC and the multiemployer coalition is continuing to work on additional longer-term relief for more troubled multiemployer plans, including the “partitioning” proposal included in the pending House (H.R. 3936) and Senate (S. 3157) pension legislation. 

For more information, contact Karen Lapsevic at 202-547-4733 or lapsevick@agc.org. Return to Top

Senate Begins Debate on Small Business Jobs Act
 

The Senate adjourned for the July 4th recess Wednesday after beginning debate on a small business jobs bill.  Building on the House-passed Small Business Lending Fund Act, H.R. 5297, Senators Max Baucus (D-Mont.) and Mary Landrieu (D-La.), offered a substitute amendment that aims to help small businesses with access to capital, stimulate investment by small businesses, and help small businesses create jobs.

Highlights of the legislation include:

100 Percent Exclusion of Small Business Capital Gains.  The bill would temporarily increase further the amount of the exclusion to 100 percent of the gain from the sale of qualifying small business stock that is acquired after the date of enactment in 2010 and held for more than five years.

General Business Credit Carried Back Five Years.  The bill extends the one year carryback for general business credits to five years for certain small businesses.

General Business Credit Not Subject to AMT.  The bill would allow certain small businesses to use all types of general business credits against their Alternative Minimum Tax (AMT).

S Corps Holding Period.  The bill would temporarily shorten the holding period of assets subject to the built-in gains tax to five years if the fifth taxable year in the holding period preceded the taxable year beginning in 2011.

Increase Small Business Administration (SBA) Loan Limits.  The bill would increase 7(a) loan limits from $2 million to $5 million, 504 loans from $1.5 million to $5.5 million, and microloans from $35,000 to $50,000.  It would also increase the government guarantee on 7(a) loan limits and eliminate borrower fees of 7(a) and 504 loans through December 31, 2010.

Small Business Lending Fund.  The bill would authorize the creation of a $30 billion Small Business Lending Fund to provide the U.S. Treasury with the ability to purchase preferred stock and other debt instruments from eligible financial institutions with less than $10 billion in total assets.

Increase of Section 179 Expensing and Expansion to Certain Real Property.  The bill would allow taxpayers for the taxable years beginning in 2010 and 2011 to write-off up to $500,000 of the costs of certain tangible personal property that is purchased for use in the active conduct of a trade of business in the year of acquisition in lieu of recovering these costs over time through depreciation subject to a phase-out once these capital expenditures exceed $2,000,000.  The bill would also allow taxpayers to expense up to $250,000 of the cost of qualified leasehold improvement property, qualified restaurant property, and qualified retail improvement property.

Extension of Bonus Depreciation.  The bill would extend the additional, first-year 50 percent depreciation for qualifying property purchased and placed in service through 2010.

Modify Section 6707A Penalty.  The bill would revise section 6707A of the Internal Revenue Code to make the penalty for failing to disclose a reportable transaction proportionate to the underlying tax savings.

AGC has advocated in support of extensions of section 179 expensing and bonus depreciation.  AGC is working with Sen. Landrieu on an amendment that would allow for the modification of the bonus depreciation extension to allow contractors engaged in long-term contracts that use the percentage-of-completion (PCM) method of accounting to purchase seven-year depreciable property.

AGC has also advocated in support of the section 6707A penalty relief for taxpayers who failed to timely and properly disclose a transaction the Internal Revenue Service (IRS) characterizes as a “listed transaction.” 

AGC is concerned about one revenue offset in the legislation. It would allow the IRS to issue levies on certain federal contractors prior to a collection due process (CDP) hearing.  Currently, before the IRS can issue a levy for an unpaid federal tax liability, it must first give the taxpayer an opportunity for a CDP hearing.  AGC opposes the collection of a tax that has not been subject to due process.

AGC is also concerned about the inclusion of a section on contracting reform. The bill includes provisions that would substantially limit how contracts can be bundled together, sunsets the Competitive Demonstration program, and adds requirements to how prime contractors handle payments to subcontractors.

The Senate is expected to resume consideration of the small business jobs bill after the July 4th recess. 

For more information, contact Karen Lapsevic at 202-547-4733 or lapsevick@agc.org. Return to Top

LABOR
New Safety Bill Expected Before Congress in July
 

This week, Congressman George Miller (D-Calif.) and Senator Tom Harkin (D-Iowa) introduced a discussion draft of a new bill that seeks to make changes to both MSHA and OSHA.   While AGC is still reviewing the 100-page document, the bill focuses mainly on changes to MSHA with elements of the OSHA-focused Protecting America’s Workers Act (PAWA) as part of the package.  

The PAWA elements in this new bill are focused on increased whistleblower protections; changes to the appeals process for the abetment of hazards; victim’s rights; and an increase in civil and criminal penalties. 

It should be noted that some of the suggestions made in the MSHA portion of the bill mirror some of the actions that OSHA has recently put in place, such as the Severe Violators Enforcement Program that became effective June 18. This program, announced in April, is designed to focus on employers who continually disregard their legal obligations to protect their workers. It should also be noted that while the bill is designed to address safety in coal mines there is nothing the legislation that clarifies how mining operations in quarries would be treated differently from coal mines.

It is expected that the House Education and Labor Committee will hold a hearing on this bill the week of July 12, with a vote in the Committee likely the following week.  Senate action is uncertain at this time.

For more information, contact Kelly Knott at (202) 547-4685 or knottk@agc.org. Return to Top

President Obama Makes a Call for Action on Immigration
 

President Obama today made a push for immigration reform during a speech at American University in Washington, D.C.  This speech was made to indicate the president’s commitment to the concept of immigration reform and to attempt to push Congress to take action.

The president covered aspects of immigration reform that AGC supports, including making our borders more secure and establishing a workable employment verification system.  However, one of the main tenets of immigration reform that AGC and other business groups support – a workable new visa program – was not a part of the speech.  AGC supports a new visa program to allow for a legal way for workers to come into the country when the economy improves.

Despite the speech today, the likelihood of movement on this issue before the November elections is slim.  AGC continues to meet with the administration as well as members of Congress on the need for comprehensive immigration reform. 

For more information, contact Kelly Knott at (202) 547-4685 or knottk@agc.org. Return to Top

FINANCIAL REFORM
Financial Regulation Legislation Passes House
 

The House passed the conference report to H.R. 4173, Dodd-Frank Wall Street Reform and Consumer Protection Act, and the Senate will consider the legislation sometime after July 12. The legislation was opposed by the banking industry because it would significantly impact fees banks charge while adding new regulations and oversight over lenders, and create the Consumer Financial Protection Bureau. 

While this legislation does not directly address the construction industry, small lenders that work with the construction industry were concerned about the treatment of trust preferred securities. The final version allowed banks under $15 billion in assets to keep current trust preferred securities in place while requiring bigger banks to divest these assets over the next five years.

According to an ENR report this week, Robert A. Murray, McGraw-Hill Construction’s vice president for economic affairs, says its short-term impact on construction lending would be “neutral to somewhat negative.” He says, “The [bill’s] greater emphasis on regulation and the adaptation of the banking industry to this new environment may push back the timing when lending conditions can improve.”

For more information, contact Jeff Shoaf at shoafj@agc.org. Return to Top

BUDGET
Congressional Budget Office Issues Bleak New Budget Outlook
 

With the total federal debt now totaling $13 trillion, Congress is looking for ways to close the budget deficit gap.  The latest update from the Congressional Budget Office (CBO) was released on June 30. The update focused on federal government debt held by the public, which is a subset of the total debt that does not include debt the federal government owes to itself (such as the debt owed by the government to the Social Security Trust fund). The report creates two scenarios.  The first scenario adheres to current law, while the second incorporates changes to current law, such as extension of some tax cuts or continuing the annual patch on the Alternative Minimum Tax (AMT).

Over the last 40 years, public debt has averaged 36 percent of Gross Domestic Product (GDP). At the end of 2008, public debt was about 40 percent of GDP, at the end of 2010 CBO anticipates that public debt will reach 62 percent of GDP.  Using the current law estimate, the public debt is expected to grow to 80 percent of GDP by 2035.  Using the alternative estimate, which anticipates exempting middle class tax payers from a tax increase on January 1, 2011 and no patch of the Alternative Minimum Tax, public debt would grow to 87 percent of GDP by 2020, 109 percent of GDP in 2025, and 185 percent of GDP by 2035.  The historical high for public debt as a percentage of GDP is 109 percent.

While the debt grows more slowly under the current law estimate, it incorporates a significant increase in government revenues.  It anticipates that total tax revenues as a percentage of GDP will increase by more than 50 percent, from 15 percent now to 23 percent in 2035. Over the last 40 years, the tax burden has averaged about 18 percent.  Marginal tax rates would increase 9 percent and more than 50 percent of all tax payers would pay the Alternative Minimum Tax (AMT).

CBO believes that continued large deficits will reduce national savings, increase interest rates, reduce domestic investment and reduce income growth. The large deficits will reduce Congress’s ability to respond to economic challenges and national emergencies.  In addition, CBO predicted that the higher debt levels could lead to a national fiscal crisis. 

For more information, contact Jeff Shoaf at shoafj@agc.org. Return to Top

ELECTIONS
Longest-Serving U.S. Senator Dies at 92
 

 

Sen. Robert Byrd (D-W.V.) passed away in a Washington area hospital at the age of 92.  Byrd, who was elected Senate Majority Leader twice and Senate President pro tempore twice. AGC worked closely with Senator Byrd on infrastructure funding, including Byrd’s leadership in significantly increasing funding in TEA-21. In 2006, Byrd was elected to his ninth consecutive term in the Senate.

West Virginia Gov. Joe Manchin, a Democrat, will appoint a successor to Byrd. Under West Virginia election law, Manchin would have been able to appoint someone to serve the entire balance of Byrd’s term had Byrd died after July 3 — or with less than 30 months left to go on a term that expires Jan. 3, 2013. But with more than 30 months left of an “unexpired term,” the law stipulates that he tap an interim successor until a special election can be held.

For more information, contact Blair Hood at (202) 547-5013 or hoodb@agc.org. Return to Top

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