HIGHLIGHTS IN THIS ISSUE
This week, AGC
member Bob Lanham, Williams Brothers Construction Company, testified on clean
diesel legislation; AGC submitted testimony
on how proposed Executive Order on political contributions would negatively
impact industry, and sent a coalition letter and AGC
letter on the issue; the IRS issued final
regulations on the implementation of the 3% withholding law; AGC joined
coalition members in sending a letter to Congress in support of raising debt
limit; and AGC is asking members to provide input on the proposed new federal
stormwater permits. Next week the House is in recess.
For more information, contact Jim Young at (202) 547-0133 or email@example.com.
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IRS Delays 3% Withholding Rule Until 2013, AGC Still Demands Full Repeal
The IRS published
final regulations May 9 on the implementation of 3% withholding, or section
3402(t) of the IRS Code. The regulations considered many of the points AGC
made in its comments to the draft regulations two years ago but the final
regulations gave no ground.
In short, the good
news is confined to a delayed imposition of the rule because government
entities will have to “adopt the systems and process necessary to comply with
section 3402(t)”…and will also need to “formulate acquisition rules that are
consistent with the final regulations, as well as the infrastructure needed to
apply those rules, some commenters stated that government entities would need
at least 18 months from the final regulations … to comply.” AGC has learned
that “government entities” mentioned above include the Department of
The final regulations
provide no relief from concerns AGC has expressed about the 3% withholding.
AGC’s comments to the IRS in 2009 laid out a number of concerns and urged
reforms to reduce the burden. The IRS
rejected AGC recommendations that would have reduced the impact on the
construction industry. For instance, AGC
recommended that: the withholding amount be modified to a closer match tax
owed; the withholding law exclude construction as it does real estate
purchases; 3% be withheld from the final payment rather than every
payment; overwithholding be refundable
on a quarterly rather than an annual basis; the construction industry use
payment bonds to ensure taxes are covered; subchapter S corps, ESOPs, JVs and
other pass through entities be exempted as they owe no tax at the entity
level; and construction managers be
exempted like “agents (payment administrators)” under the regulations. In each case the IRS rejected the request for
a modification, saying that they lacked the statutory authority to create
specific exemptions or that the modifications could create opportunities for
bypassing the withholding requirement.
Included for Existing Contracts
In addition to
beginning the withholding on 1/1/2013, the regulations also modify the law’s
impact on existing contracts. The draft
regulation included an exemption from 3 percent withholding for “existing
contracts.” In the final rule, existing
contracts are exempted only for one year beyond 1/1/2013. All payments under all contracts will be subject
to withholding beginning 1/1/2014. Also,
existing contracts that are “substantially modified” after 1/1/2013 may become
subject to the withholding requirement.
Regulation Costs at
$20 Billion, Only Collects $12 Billion
AGC is a member of the
Government Withholding Relief Coalition.
Earlier this year the coalition produced a detailed estimate of the cost
of compliance and enforcement of the section 3402(t) 3% withholding
requirement. The coalition estimates
that the combined costs of software upgrades, compliance, enforcement and
administrative and interest expenses exceeds $20 billion over the first five
years. About $10 billion of those costs
will be one-time costs. Recurring annual costs include about $597 million in
interest expenses, $662 million in costs to administer withholding by
government entities, and $622 million for government contractors to comply,
report and recover the massive overwithholding contemplated by the
It is important to
note that the government estimates of new “income” generated by the provision
will be about $12 billion, so about 60 percent of the costs inflicted by the
rule. Also, on an annual basis the rule
is expected to bring in far less than 50 percent of the annual cost to comply
with the rule. Because of the negative
short and long-term impacts of the rule, the number of cosponsors for both the
House and Senate repeal bills continues to grow.
for 3 Percent Repeal Exceed 100
AGC has made repeal of
3 percent withholding a priority since it was originally enacted. The three repeal bills introduced this
Congress continue to add cosponsors.
H.R. 674 had only 42 cosponsors during the AGC convention in Las Vegas
in March. During and after the convention, AGC members made a push to get
cosponsors for the legislation, sending thousands of letters to Congress. In
addition, there have been hundreds of personal meetings with Congress,
including many during Federal Contractors Conference last week in Washington,
D.C. As a result there are now 107 cosponsors of the House bill and we are
having similar results in the Senate. There are still 129 members of the House and
six members of the Senate who have cosponsored the bill in previous years but
have yet to do so this Congress.
To see if your Member
of Congress has cosponsored, click
To send a letter to
your member of Congress and Senators, click
For more information, contact
Jeff Shoaf at firstname.lastname@example.org.
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AGC Calls for Federal Funding For Diesel Retrofit During Congressional Testimony
AGC presented testimony at a hearing
today before a Senate Environment and Public Works Subcommittee, which is
looking into initiatives to reduce diesel emissions in clean air non-attainment
AGC member Bob Lanham, Williams Brothers Construction
Company, addressed various incentives that can be used to speed up the
development of technologies to help reduce emissions from diesel powered
construction equipment. AGC’s testimony pointed out that initiatives aimed at
diesel retrofit and repowering of existing equipment must be proven to be
effective and not adversely impact the operation of the equipment or the
safety of the workers.
AGC supports legislation introduced by Senator Tom Carper
(D-Del.), Chairman of the Clean Air and Nuclear Subcommittee, that will use a
portion of congestion mitigation and air quality improvement funds that are intended
to be used for clean air initiatives to provide incentives to contractors to
upgrade their equipment. Senator Carper intends to include this language as
part of the surface transportation reauthorization bill. AGC is working with his
staff to ensure the provision does not have a negative impact on the
information, contact Brian Deery at (703) 837-5319 or email@example.com.
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AGC Says Proposed Executive Order on Federal Contractor Disclosure Undermines Federal Procurement Process
On May 12, 2011, AGC submitted testimony for a hearing held jointly between the House Committee on Oversight and Government Reform
and the House Committee on Small Business entitled, “Politicizing Procurement:
Would President Obama’s Proposal Curb Free Speech and Hurt Small
The hearing examined the proposed
Obama Executive Order that
mandates the disclosure of political donations by government contractors
as a prerequisite to receiving a government contract, and evaluated its
impact and consequences upon the federal acquisition system. Specifically, the
Committees are concerned that this proposed EO will inject politics into
the procurement process, violated political free speech rights, and usurp the
legislative power of Congress.
statement provided details on how the EO would negatively affect the
construction industry, saying that forcing government contractors to disclose
all political contributions would make it too easy for
political appointees to punish contracts for their political views or to
coerce contributions from firms. While the alleged purpose of the EO is to
ensure contracting decisions are based on merit and best value, AGC cautioned
that it would actually create the mechanism for enforcing a political
litmus test on government contractors rather than prohibiting the consideration
of political contributions. AGC also warned that the rule, once finalized, would
actually undermine the credibility of the current federal procurement process.
AGC also raised similar concerns in a letter
sent by CEO Stephen Sandherr directly to President Obama. That
letter stated that the proposed EO, titled “Disclosure of Political
Spending by Government Contractors,” is unnecessary, noting that there is no
evidence to indicate that political contributions are influencing the
award of federal contractors. AGC also pointed on in the testimony and
the letter to the White House that contractors are already required to disclose
the vast majority of political spending and that there is already a publicly
available web-based searchable database showing all political contributions.
AGC is concerned about the political motives of the EO, noting it does not
apply to many special interest groups that currently seek federal funding,
grants or favorable regulatory and administrative rulings, but exempts federal
employee unions that negotiate contracts for their members worth many
times the value of most government contracts would not be required to disclose
their political spending. AGC also questioned how the proposed EO will limited
free speech protections offered by the First Amendment.
Read AGC’s press release here.
AGC also signed on to a broad
business coalition letter to President Obama opposing the proposed
For more information, please contact Marco
Giamberardino at (703) 837-5325 or firstname.lastname@example.org.
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House Holds Hearing on Civilian BRAC Proposals
On May 12, the Economic
Development, Public Buildings and Emergency Management Subcommittee of the
House Committee on Transportation and Infrastructure held a hearing on several proposals to employ a BRAC-like process
to civilian properties, reduce the federal footprint and ostensibly save
taxpayers billions of dollars in annual operating costs of such facilities.
The hearing, chaired by Jeff Denham (R-Calif.), included
testimony from the Office of Management and Budget, the Department of State and
the private sector. This legislative hearing marked the next step in advancing
Chairman Denham’s Civilian Property Realignment Act.
At a Subcommittee hearing held February 10, 2011,
Denham proposed exploring the use of a civilian BRAC process to address
management issues as it relates to federal real property. President
Obama’s budget then proposed a civilian BRAC process, and on May 4, 2011, both
the administration and Denham released bills entitled the Civilian Property
Realignment Act. The Denham bill is H.R. 1734.
AGC is closely monitoring and working with Congressional
leaders and administration officials to ensure that there will be ample
opportunity for AGC members have a voice in this process.
For more information, contact Marco Giamberardino at (703) 837-5325 or email@example.com.
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AGC-supported Private Activity Bond Legislation Introduced
This week legislation was introduced in the House and Senate that would
remove water and wastewater from under the private activity bond volume cap,
making it easier for up to $5 billion to be invested in water infrastructure
activity bonds (PABs) or exempt facility bonds are a form of tax-exempt
financing that encourages state and municipal governments to collaborate with
sources of private capital to meet a public need. Congress provides states an
annual allocation of the federal tax-exempt bonds, based upon population. In 2011, the state allocation or volume cap
shall be the greater of $95 per resident or $277.82 million.
most of the tax-exempt bonds have been issued to politically attractive,
short-term projects in the more than 20 other categories eligible for these
bonds, such as housing and education loans.
The annual volume cap hinders the use of PABs for water and wastewater
infrastructure, which are generally multi-year projects and out of sight. In 2007, only 1.3 percent of all exempt
facility bonds were issued to water and wastewater projects. Exceptions from
the volume cap are currently provided for other governmentally owned facilities
such as airports, ports, housing, high-speed intercity rail and solid waste
disposal sites. The legislation could make it easier for between $2 and $5
billion a year in private capital to be invested in water infrastructure, at a
cost of just $35.4 million a year.
legislation, the Sustainable Water Infrastructure Investment Act of 2011, was
introduced on a bipartisan basis in both the House and the Senate. On the House
side, Reps. Pascrell (D-N.J.) and Davis (R-Ky.) introduced the bill with their
Senate partners, Sens. Robert Menendez (D-N.J.) and Mike Crapo (R-Idaho).
For more information, contact Scott Berry at (703) 837-5321 or firstname.lastname@example.org.
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FY 2012 Appropriations Cycle Begins in the House, Committee Proposes Large Construction Funding Cuts
With fiscal year 2011 funding in place, the House of Representatives has
started the FY 2012 in earnest by announcing a schedule for marking up the
annual appropriations bills, as well as plans for how House Budget Resolution
spending totals will be divided between the twelve Appropriations
House Appropriations Chairman Hal Roger (R-Ky.) plans to
move nine of the 12 bills through the House by the August recess and take up
the remaining bills in September. Under the schedule, the Military
Construction-VA bill will be marked-up in subcommittee on May 13 and full
committee on May 24; the Defense bill marked-up in subcommittee on June 1
and full committee on June 14; the Transportation-HUD bill will be marked up in
subcommittee on July 14 and in the full committee on July 26; and the Energy
and Water bill funding the Corps of Engineers will be marked up in subcommittee
on June 2 and in full committee on June 15.
Along with the schedule, Chairman Rogers also announced the
funding levels for each subcommittee. All of the appropriations bills,
except for the defense bill, will see a reduction from FY 2011 levels. The
three security-related subcommittees (Defense, Homeland Security, and Military
Construction-VA) collectively receive $643 billion, a 2.4 percent increase from
fiscal year 2011. The other nine subcommittees take an almost 11 percent
cut to $376 billion.
Of the bills that AGC closely monitors, the
Transportation-HUD bill takes the third-largest cut of all, $47.7 billion, a
$7.7 billion or 13.9 percent reduction from FY 2011. That number is a 36
percent cut from President Obama’s request. The Energy and Water bill takes
a nearly $2.7 billion or 3.3 percent reduction; Military Construction a $615
million or 0.8 percent reduction; and Interior-Environment bill a $2 billion or
7.1 percent reduction.
For a complete list of the appropriations schedule and
funding levels, click here.
This year’s appropriations process was delayed because of
the debate over FY 2011 spending, which was settled just last month.
Taking that delay into consideration and the fact that Senate appropriators are
waiting on the Senate Budget Committee to move their budget before they begin
their work on FY 2012 bills, the chances of Congress finishing all twelve bills
by September 30 is slim.
AGC will continue to work through the appropriations and
budget process to ensure the construction industry does not see a
disproportionate amount of the cuts that will be a part of the FY 2012 spending
For more information, contact Sean O’Neill at (202) 547-8892 or email@example.com.
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AGC Joins Coalition Urging Action on Debt Limit to Promote Economic Growth
While recognizing the need for spending reforms, AGC joined
a large group of companies and associations urging action to increase the
nation's statutory debt limit.
letter focused largely on the international economic consequences of
failure to increase the statutory debt limit.
AGC signed onto the letter knowing full well that a strong U.S. economy
is critical to construction industry growth and also knowing that a strong U.S.
economy requires international faith that the U.S. government will pay its
bills. The letter also reiterated the groups’ commitment to working with
Congress and the administration to address the nation’s fiscal challenges.
For more information, contact Jeff Shoaf at firstname.lastname@example.org.
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National Labor Relations Board Creating Controversy with Boeing Suit
The National Labor Relations Board (NLRB) General Counsel filed a complaint
April 20 against Boeing, claiming that Boeing violated federal labor law by
building a second production line for its Dreamliner at a non-union factory in
South Carolina in retaliation against past strikes by the unions.
The complaint also claims that Boeing failed to negotiate
with the union on the decision to move the work. On the other side, Boeing
is saying that this is a new facility they are opening in South Carolina that
will not take jobs from those in Washington and that the decision was made to
open the new plant for solely business reasons. Boeing also has said that
as they ramp up for this new production, jobs will be added in Washington as
well as in South Carolina.
Boeing made the decision to open a plant in South Carolina
in 2009. The construction of the new facility is almost complete and production
had been expected to start this summer. It has long been the prerogative
of business to decide where to choose to do business and there are many who
believe this is an effort by the NLRB to make the decision of where and how a
company operates. In addition, some view this as an attempt by the
NLRB to help pay back the unions for the failure of Congress to pass the
Employee Free Choice Act when both the House and the Senate were under
A hearing in front of an administrative law judge is
expected in June. That decision can be appealed to the full NLRB
Board and the Board’s decision can be appealed in federal court. The case
will hinge on what the law judge and the Board feel was Boeing’s intent by opening
a facility in South Carolina.
Republican members of Congress in both the House and the
Senate have written the president and the NLRB General Counsel of their concern
over this matter. The same is true of a group of state attorneys general.
Legislation is expected to be introduced this week in the Senate that would
guarantee that employers have the right to decide where to do business within
the United States.
AGC is closely watching developments in this case as it
could have an impact on construction if companies react to the case by limiting
the amount of construction needed to expand or refurbish buildings. AGC will
also review the legislation to evaluate how it affects current labor
For more information, contact Kelly Knott at (202) 547-4685 or email@example.com.
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