Construction Legislative Week in Review
www.agc.org September 23, 2010
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On the Inside
CONGRESS
Legislative Calendar Dwindles as Mid-Term Election Approaches
Republican House Members Release “A Pledge to America”
TAXES
Small Business Jobs Bill Provides Construction Incentives and Business Relief
FEDERAL
OMB Issues New Reporting Requirements for Contractors Doing State and Local Work
TRANSPORTATION
FAA Authorization Gets Three-month Extension
ELECTIONS
Hawaii Hosts Final Official Primary
CONGRESS
Legislative Calendar Dwindles as Mid-Term Election Approaches
 

With possibly only one legislative week left and 40 days before the November 2 election, both parties are positioning themselves to address major outstanding issues during a lame duck session of Congress. However, today the House did pass a Small Business Jobs Bill that provides construction incentives and business relief, and it now goes to President Obama for his signature. 

In the Senate, a campaign finance bill, the DISCLOSE Act, was rejected for the second time in three months. AGC opposed the bill and is considering it a Key Vote in its annual scorecard because the legislation will restrict free speech, increase confusion about campaign finance law and would not treat all participants in the political process equally (treats corporations and trade associations differently than labor unions).  To view the letter AGC sent to Congress click here.

This week Senate Democrats failed to deliver on two major Election Day issues: the repeal of Don't Ask, Don't Tell, and the DREAM Act, which would allow a path to citizenship for illegal immigrants brought into this country as minors by their parents if they are paying taxes, attending college or serving in the U.S. military.

The expiring 2001 and 2003 tax cuts remain a controversial issue. Efforts to extend the tax cuts for the middle class only have broken down within the Democratic Party and it appears ever more likely that the issue will have to be resolved after the election, and prior to their expiration on December 31.

Another major piece of legislation outstanding is a bill to fund the federal government after September 30. Congress has been unable to pass the annual FY11 appropriations bills and a must-pass stopgap bill will likely be necessary. The bill is expected to be a short-term extension and avoid including controversial policy goals. The short-term extension would require Congress to come back after the election to continue to fund the federal government.

AGC continues to urge Congress and the White House to finish work on long-term transportation and water infrastructure spending bills, and keep income tax rates (especially the death tax) from soaring to help construction industry employment recover from millions of lost jobs. This action is expected during the few legislative days before the election or during a lame duck session. AGC believes the stopgap funding for transportation isn’t providing the certainty companies need for hiring and growing. In addition, the prospect of a leap in taxes is deterring private investment.

For more information, contact Jim Young at (202) 547-0133 or youngj@agc.org. Return to Top

Republican House Members Release “A Pledge to America”
 

With one eye toward the elections and the other toward the potential for a GOP-run House of Representatives, Republicans today released “A Pledge to America.” The 48-page package is a response to interaction with voters and an overview on how a Republican Congress will tackle the biggest issues facing America today.

The plan takes a philosophical approach, talking thematically about creating jobs, improving international competitiveness and controlling spending. It includes a pledge to repeal health care, make Congress more transparent and more responsive, and improve national security. 

The package includes some AGC priorities, such as reducing red tape and repealing mandates like the 1099 requirement. It talks about repealing the Obama Health Care Bill and replacing it with reforms, and extending the Bush tax cuts. While it is not clear how the pledge’s federal spending freeze would impact important construction programs, it does a good job laying out the significant issues that the 112th Congress will have to face in the coming years.

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

TAXES
Small Business Jobs Bill Provides Construction Incentives and Business Relief
 

The U.S. House of Representatives today cleared H.R. 5297, the Small Business Jobs Act, a bill that would make $30 billion in funds available to community banks to make loans to small businesses and provide roughly $15 billion in tax and other incentives for businesses of all sizes. The bill now goes to President Obama for his signature. Below are a few highlights of provisions in the measure of particular benefit to the construction industry.

Increase of Section 179 Expensing and Expansion to Certain Real Property. Under current law, taxpayers may elect to write-off the costs of certain tangible personal property that is purchased for use in the active conduct of a trade or business in the year of acquisition in lieu or recovering these costs over time through depreciation. For the taxable year beginning in 2010, taxpayers may write-off up to $250,000 of these capital expenditures subject to a phase-out once these capital expenditures exceed $800,000.  After 2010, the thresholds revert to $25,000 and $200,000, respectively. This bill would increase the thresholds to $500,000 and $2,000,000 for the taxable years beginning in 2010 and 2011. Within those thresholds, this bill would 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 and Special Rule for Long-Term Contract Accounting. Businesses are allowed to recover the cost of capital expenditures over time according to a depreciation schedule. Congress temporarily allowed businesses to recover the costs of certain capital expenditures made in 2008 and 2009 more quickly than under ordinary depreciation schedules by permitting those businesses to immediately write-off 50 percent of the cost of depreciable property placed in service in those years. This bill extends the additional, first-year 50 percent depreciation for qualifying property purchased and placed in service in 2010. In addition, the bill includes a special rule for long-term contract accounting at AGC’s request via the plan, Build Now for the Future. The provision decouples bonus depreciation from allocation of contract costs under the percentage of completion method rules for assets with a depreciable life of seven years or less in order to allow contractors that do not complete contracts within the same year in which they are entered into to benefit from bonus depreciation.

Modify Section 6707A Penalty. The bill revises section 6707A of the Internal Revenue Code to make the penalty for failing to disclose a reportable transaction proportionate to the underlying tax savings. The penalty for failure to disclose reportable transactions to the IRS would be set at 75 percent of the tax benefit received. Reportable transactions are defined as investments in transactions that the IRS has identified as listed tax shelters or that have characteristics of tax shelters, including large losses or confidentiality agreements. The minimum penalty under this bill is $10,000 for corporations and $5,000 for individuals and the maximum penalty is $200,000 for corporations and $100,000 for individuals. The bill also requires the IRS to provide an annual report to the Senate Finance Committee and to the House Ways and Means Committee giving an account of certain tax-shelter related penalties asserted during the year. AGC supported inclusion of this provision to provide relief to contractors who face substantial section 6707A penalties.

Remove Cellular Phones from “Listed Property.” This provision would “delist” cell phones so their cost can be deducted or depreciated like other business property, without onerous recordkeeping requirements.

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

FEDERAL
OMB Issues New Reporting Requirements for Contractors Doing State and Local Work
 

Two new rules came out of the Office of Management that affect contractors who perform work on projects that are federally-assisted (i.e. projects funded in whole or in part through grants, loans, or financial assistance from the federal government such as the EPA's State Revolving Loan Fund, or the DOT's Highway Trust Fund). This is yet another example of direct-federal contracts rules being applied to federally-assisted work performed by private contractors, a policy shift AGC strongly opposes.

Under the first new rule, recipients of these grants, loans, or financial assistance (such as State and local governments) must now report every first-tier subaward (such as a prime contract) over $25,000 to usaspending.gov. As part of this reporting, subaward recipients (i.e. contractors) who meet certain triggers will have to report the total compensation of their top five executives. These triggers are:

  • The contractor must have received 80 percent or more of its annual gross revenue in the preceding fiscal year from federal money (grants, loans, financial assistance, or direct-federal contracts)
  • The contractor must have received $25,000,000 or more in annual gross revenues in the preceding fiscal year from federal money (grants, loans, financial assistance, or direct-federal contracts)
  • The contractor does not already have to report compensation information through period reports filed under the Securities Exchange Act or the Internal Revenue Code

All three conditions must be met to trigger the total compensation reporting requirement. If your company does trigger the requirement, it will have to report to the state or local entity recipient the total compensation of its top five officers, managing partners, or any other employees in management positions.

A second rule requires contractors to obtain a Data Universal Numbering System (DUNS) number. This nine-digit number can be obtained from Dun & Bradstreet, Inc. at no cost either by telephone (866-705-5711) or online (by clicking here). While earlier versions of this guidance would have required a contractor to also maintain a current registration in the Central Contractor Registration (CCR) database, OMB has decided not to enact that requirement at this time. If a contractor fails to provide a valid DUNS number, the contractor could be determined to be not qualified to receive a contract award.

Read the rule requiring reporting of executive compensation here.

Read the rule requiring use of a DUNS Number here.

For more information, contact Scott Berry at (703) 837-5321 or berrys@agc.org. Return to Top

TRANSPORTATION
FAA Authorization Gets Three-month Extension
 

The House and Senate have each passed a three-month extension of the Federal Aviation Administration (FAA) authorization. Program and taxing authorization expired on September 30, 2007 and FAA has been operating under multiple short term extensions ever since. 

The long-awaited multi-year FAA bill is close to completion but will not be finalized before the current extension expires on September 30, 2010.  It is likely that the bill will be considered in the lame-duck session of Congress following the November mid-term elections. AGC supports a long-term FAA reauthorization.

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

ELECTIONS
Hawaii Hosts Final Official Primary
 

DAYS UNTIL ELECTION DAY
(NOV.2)

40

On September 18, Hawaii held the final official primary election of the 2010 election year. (Louisiana will hold its primary run-off on October 2).  Rep. Charles Djou (R) will once again face Democratic opponent Colleen Hanabusa for Hawaii’s 1st district in November. Djou was coined a Republican darling in May when he won Hawaii’s special election after Rep. Neil Abercrombie vacated the seat in February to run for Governor. 

UPCOMING PRIMARIES

October 2, 2010: Louisiana Run-Off

Hanabusa was Djou’s most threatening opponent in the special election, coming in a close second to the Representative.  She currently serves as a state senator.  The race is considered a “toss up” and will be an interesting one to watch come Election Day.

John Willoughby, a retired Navy officer, will challenge current Rep. Mazie Hirono (D) for Hawaii’s 2nd district.  Willoughby has a tough battle ahead as the district is considered to be safe for Hirono and rated a “Solid D” district.

Number of Competitive Races*

House
Democrats Defending Seats: 79
Republicans Defending Seats: 7

Senate
Democrats Defending Seats: 12
Republicans Defending Seats: 6

*Competitive races are those the Cook Political Report has defined as "Lean" or "Toss Up"

More election updates to come next week. For more information, contact Blair Hood at (202) 547-5013 or hoodb@agc.org. Return to Top

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