Construction Legislative Week in Review
www.agc.org December 17, 2015
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On the Inside
APPROPRIATIONS
Final FY 2016 Funding Bill Unveiled
TAX
Tax Extender Legislation Headed Toward Passage
AGC Testifies at IRS Hearing on Section 199
ENVIRONMENT
Government Watchdog Finds EPA Violated Law with Grassroots Campaign in Favor of its Own Rule
2016 ELECTIONS
Winners and Losers
APPROPRIATIONS
Final FY 2016 Funding Bill Unveiled
Passage Expected Before Christmas
 

On Wednesday, Congressional leaders released a $1.1 trillion omnibus appropriations bill that will fund federal agencies and programs for the remainder of fiscal year (FY) 2016.  Overall, the bill includes mostly good news for construction accounts, as many see increases compared to FY 2015 levels and others receive significantly smaller cuts than Congress initially wanted.  The omnibus bill provides nearly $121 billion for federal construction accounts as tracked by AGC.  This is an increase of approximately $8 billion from fiscal year 2015 and $15 billion less than the administration’s fiscal year 2016 budget request. To give time for passage of this final spending package, Congress passed another short-term funding bill—called a continuing resolution—that will fund the government through Dec. 22. The House is expected to pass the omnibus bill on Friday, with a vote in the Senate to follow shortly thereafter.

In addition to construction funding, the bill includes a number of policy riders that impact various federal programs. The bill includes a host of non-construction related policy riders that were subject of intense negotiation, including one that increases background checks for travelers who participate in the visa-waiver program and another that ends the 40-year ban on exporting U.S. oil. AGC and our coalition partners in the Energy Equipment & Infrastructure Alliance (EEIA) have been pressuring Congress to lift the decades old ban which studies have shown would stimulate as much as 2 million barrels per day of additional production.  EEIA has done an analysis on the impact of supply chain employment (including construction) based on potential increased production for every state and congressional district.   A copy of the analysis can be found here.​

Below is a summary of the construction-related provisions in the bill.

  • Affordable Care Act: The bill includes a two-year delay for the excise tax on high cost employer-sponsored health coverage—referred to as the Cadillac Tax—and the ACA’s annual health insurance tax (HIT) on insurance companies will be suspended for one year.
  • Local Hire/Hours of Service Limits: AGC fought and won the inclusion of two provisions on this topic. One provision that would restrict the use of local hiring requirements on highway and transit projects that have federal funding and another that requires states and local recipients of U.S. DOT funding assistance to certify that, if they intend to require contractors to hire a percentage of local residents, that these individuals have the requisite skills for the project, that the contractors current work force will not be impacted and that any additional costs will not delay the project or keep it from moving forward. For more information on these provisions please see below.
  • Electronic Union Election Voting: The bill contains a policy rider that prohibits the use of electronic voting in union elections. This prohibits any NLRB regulations that would allow employees to vote through electronic means in determining representation in union organizing elections. Off-site, electronic voting for union certification elections would remove the privacy workers have in secret ballot elections.
  • Training and Education: The bill contains funding for a variety of training and education programs overseen by the Departments of Labor and Education that are critical to workforce training and educating the future workforce. Some of the highlights include a boost to funding for programs under the Workforce Innovation ad Opportunity Act (but below authorized levels), increased flexibility for states and $90 million in new funding for competitive grants for apprenticeship programs. Unfortunately, the bill does not include any additional funding for the Perkins Act career and technical education state grants.
  • Renewable Energy Tax Credits: The bill includes a provision that extends the 30 percent solar investment tax credit and a credit for solar-powered energy-efficient properties for three years before phasing it down in the final two.

Transportation & Utility Construction Funding

The 2016 Omnibus appropriations legislation fully funds the authorized levels contained in the recently-enacted FAST Act, resulting in a 5.5 percent increase in highway funding and a 10 percent increase in transit funding over FY 2015 levels. The obligation limit from the Highway Trust Fund for the highway program is $42.361 billion, including $39.727 in formula funding to states, $275 million for the TIFIA program and $800 million for the new Nationally Significant Freight and Highway Project competitive grant program. In addition, the omnibus includes $500 million in funds for the TIGER grant program. While the TIGER grants were not included in the FAST Act, DOT had already solicited applications for these funds and awards are pending.  It is unclear if TIGER funding will be provided in future years.  Transit formula funding from the Highway Trust Fund transit account was at the FAST Act level of $9.348 billion. New start capital grants, however, was set at $2.177 billion in the omnibus – less than the $2.302 billion contained in the FAST Act.

The omnibus bill sets FY 2016 funding levels for the Clean Water State Revolving Fund at $1.39 billion, and the Drinking Water State Revolving Fund at $863 million, which represents a total cut to the SRFs of 4 percent. Earlier this year in both the House and Senate versions of the standalone Interior/Environment appropriations legislation (which contains funding for the EPA and its SRF programs), the SRF programs received deep cuts (25 percent and 23 percent respectively).

Federal Agency Construction Funding

The omnibus appropriations bill provides a host of good news for federal construction agencies. Compared to FY 2015 and the sequestration years prior, FY 2016 includes no losers for the major construction agencies, as the U.S. Army Corps of Engineers, Naval Facility Engineering Command, Air Force Civil Engineer Center, General Services Administration and Department of Veterans Affairs all see increases in their overall funding levels in FY 2016. However, the biggest winner and surprise in the omnibus bill is the General Services Administration, as Congress includes $1.6 billion for new construction—mostly for courthouses—where the House had previously suggested $0 and the Senate $181 million in FY 2016. With this increase in funds, contractors expect to hear more details on agency construction plans in February or March 2016. As is often the case with omnibus bills, federal agencies generally take 60 to 90 days after passage to interpret the language of the text and compile their work plans.  

Military Construction

The omnibus appropriations bill funds the total military construction program at $6.650 billion for FY 2016, which is basically in line with the president’s budget request and a considerable $1.88 billion—or 39 percent—increase compared to FY 2015 funding levels. The primary military construction accounts for the Army, Navy and Air Force see considerable increases in FY 2016 as compared to FY 2015, with funding for the Navy seeing the largest increase—$650 million—of those accounts. The Army figure for FY 2016 is $663.2 million, the Navy figure is $1.669 billion and the Air Force figure is $1.389 billion. When adding the Army National Guard and Army Reserve Accounts to the primary Army military construction account, the figure for FY 2016 is $974.1 million.

There are a number of notable bits of information in the bill’s explanatory text when it comes to military construction. First, Congress is committed to supporting the Department of Defense’s Pacific Realignment with realigning resources in Okinawa, Guam, Hawaii and Australia. Secondly, and most interesting to general contractors, the explanatory text includes the funding amounts for specific military construction projects. To see which projects receive funding, you can access the explanatory text by scrolling through it and clicking here.

Army Corps Civil Works

The U.S. Army Corps of Engineers (USACE) Civil Works program fared well, receiving $5.898 billion for FY 2016, an increase of more than $500 million from the FY 2015 enacted levels, and more than $1.25 billion over the president’s FY16 request—a 27 percent increase. Construction receives $1.862 billion, and authority for 6 new starts, 5 of which the majority of benefits derived are from navigation and flood control.  Operation and maintenance nets $3.137 billion, Mississippi River and Tributaries is funded at $345 million. Overall, the bill provides $2.6 billion for navigation, including $1.25 billion from the Harbor Maintenance Trust Fund and full use of the $405.6 million in estimated revenues from the Inland Waterways Trust Fund, and $1.7 billion in support of flood and storm damage reduction activities. To see which projects receive funding, you can access the explanatory text by scrolling through it and clicking here.

General Services Administration

Perhaps the biggest winner in the FY2016 federal construction funding arena is GSA. The House and Senate versions of the FY 2016 appropriations bills included little construction funding for GSA—$0 and $181 million, respectively—new construction. The omnibus appropriations bill provides $1.608 billion for the construction account—which more than triples the FY 2015 figure of $509.7 million—and $735.3 million for the repairs and alterations account—a slight decline from FY 2015 levels. Of note from the construction account, $341 million is for the consolidation of the Department of Homeland Security at St. Elizabeth’s; $948 million is for federal courthouses; and $75 million is for a new Federal Bureau of Investigation headquarters. For more information on GSA funding in FY 2016, you may access the explanatory text by scrolling through it and clicking here.

Department of Veterans Affairs

Despite the controversy this year, the omnibus increases funding for the overall Department of Veterans Affairs’ construction program. The major construction program—which funds projects above $10 million—is funded at $1.242 billion in FY 2016, a $682 million or 121 percent increase compared to FY 2015. The minor construction program—which funds projects at or below $10 million—is funded slightly below FY 2015 levels at $406 million in FY 2016. However, these figures do not tell the complete story. As you may recall, Congress passed an AGC-supported VA construction reform in September that requires the U.S. Army Corps of Engineers—or other federal construction owner—to execute VA construction projects over $100 million. To ensure that the VA enters into an agreement with USACE—as that negotiation process is well underway—the omnibus withholds $649 million from the FY 2016 major construction account until the VA enters into an agreement with USACE to serve as the design and/or construction agent for each major construction project with a total estimated cost of $100 million. The agreement must be made for the seven projects for which that withheld funding would go, which are located in Alameda, CA; American Lake, WA; Livermore, CA; Long Beach, CA; Louisville, KY; San Francisco, CA; and West Los Angeles, CA. To see which projects receive funding, you can access the explanatory text by scrolling through it and clicking here.

For more information, please contact Jimmy Christianson at christiansonj@agc.org or (703) 837-5325 Return to Top

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TAX
Tax Extender Legislation Headed Toward Passage
 

On Thursday, the House passed the Protecting Americans from Tax Hikes (PATH) Act of 2015 by a 318 to 109 vote, with three republicans voting against the measure and 77 democrats in favor.  The PATH Act renews all expired provisions in some form.  The bill makes certain tax incentives permanent, while proposing a two-year extension for others, and providing a one-year retrospective for 2015 and one-year prospective for 2016 for the remaining provisions. The Senate will receive the bill and likely vote on Friday, sending the tax package to the president’s desk – which he is expected to sign. To view a copy of the legislative text click here. Specifically the tax extender package includes the following AGC priorities:

PERMANENT Extensions of the Following Policies:

  • R&D credit:  permanently extends the research and development (R&D) tax credit.  Additionally, beginning in 2016 eligible small businesses ($50 million or less in gross receipts) may claim the credit against alternative minimum tax (AMT) liability, and the credit can be utilized by certain small businesses against the employer’s payroll tax (i.e., FICA) liability.
  • Section 179 expensing:  permanently extends the small business expensing limitation and phase-out amounts in effect from 2010 to 2014 ($500,000 and $2 million, respectively). The provision further modifies the expensing limitation with respect to qualified real property by eliminating the $250,000 cap beginning in 2016.
  • 15-year recovery for leasehold and restaurant improvements
  • Charitable contributions of S corporations: permanently extends the rule providing that a shareholder’s basis in the stock of an S corporation is reduced by the shareholder’s pro rata share of the adjusted basis of property contributed by the S corporation for charitable purposes.
  • 5-year recognition period for S corporation built-in-gains

FIVE-YEAR Extensions of the Following Policies:

  • Bonus depreciation (50% for 2015-17, 40% in 2018, 30% in 2019)
  • New Markets Tax Credit
  • Work Opportunity Tax Credit
  • *Production Tax Credit for Renewables (Extension & Phase-out)

TWO-YEAR Extensions of the Following Policies:

  • Energy efficient commercial buildings deduction with updated ASHRAE beginning in 2016.
  • Medical device tax moratorium

Items also of interest to the business community, include:

  • Lifting the long-standing ban on oil exports
  • A two-year suspension of the 2.3 percent medical device excise tax through 2017
  • REIT-related provisions based on items included in Ways and Means Chairman Brady's recent proposal, but with further modifications and a transition rule
  • Technical changes to the recently adopted partnership audit rules

Additionally, it is important to note tax provisions affecting the Production Tax Credit (wind & solar 5-year phase-out), as well as a two-year delay for the excise tax on high cost employer-sponsored health coverage (Cadillac Tax) and the ACA’s annual health insurance tax (HIT) on insurance companies that will be suspended for one year were included in the omnibus spending package. The AGC Tax Webpage will be updated with the final details if an approved package signed into law.

For more information, please contact Brian Lenihan at lenihanb@agc.org or (202) 547-4733. Return to Top

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AGC Testifies at IRS Hearing on Section 199
 

On Wednesday, AGC provided commentary to Internal Revenue Service (IRS) and Treasury Department officials during a public hearing on IRS’s Notice of Proposed Rulemaking [REG–136459–09] regarding the Section 199 domestic production activities deduction (DPAD). Specifically, the testimony given by Brian Lenihan, AGC’s Director of Tax and Fiscal Affairs addressed the definition of “substantial renovation” as well as the current administrablity of DPAD and proposed reasonability tests for contractors. The government panel consisted of IRS staff from Office of the Associate Chief Counsel: Paul Handleman, Branch Chief; James Holmes, Attorney with a focus on Pass-throughs and Special Industries; John Aramburu, Senior Counsel for Income Tax and Accounting; and Ken Buck, Tax Policy Advisor at Treasury.

During his statement, Lenihan summarized that the “legislative intent and regulatory policy do not support an exhaustive and precise standard for determining whether activities constitute substantial renovation,” and added that “the intent of these rules was not to require a contractor to step into the shoes of the owner and make a capitalization determination, nor to impose on contractors the complexities of a unit of property determination, determination of underlying components, and measuring improvements under precise thresholds”. AGC will request a private meeting with IRS and the Treasury Department next year to further illustrate the need to understand AGC’s recommendations to any proposed changes to the DPAD.

For more information, please contact Brian Lenihan at lenihanb@agc.org or (202) 547-4733. Return to Top

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ENVIRONMENT
Government Watchdog Finds EPA Violated Law with Grassroots Campaign in Favor of its Own Rule
 

The nonpartisan Government Accountability Office (GAO), in response to a request from the top Republican on the Senate Environment Committee, concluded that several aspects of the social media and grassroots campaign undertaken by the Environmental Protection Agency (EPA) around the Waters of the U.S. (WOTUS) rulemaking violated provisions of the laws designed to protect against undue agency influence on the rulemaking process.

The EPA utilized many facets of social media including Twitter, Facebook, YouTube and the Thunderclap tool in an effort build support for its own rulemaking and characterize industry concerns as “myths” in favor of polluting waters. Federal agencies are allowed to promote their own policies, but are not allowed to engage in propaganda, or covert activities intended to influence the American public. They are also prohibited from grassroots lobbying, or urging the American public to contact Congress to take action on legislation.

The GAO, after evaluting the Agency’s campaign, found that elements violated both of these laws. According to the report, “EPA appealed to the public to contact Congress in opposition to pending legislation in violation of the grass-roots lobbying prohibition” and that elements of their social media campaign constituted covert propaganda. The GAO has instructed EPA to discover and report how much money was spent by staff in these violations.


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

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2016 ELECTIONS
Winners and Losers
 

The GOP presidential field took to a Las Vegas stage for their fifth and final debate of 2015 earlier this week.  Here are the winners and losers:   

Winners

Jeb Bush: With declining poll numbers, this debate was a make-or-break moment for the former Florida governor.  Of the other eight candidates, Bush was the only one to take the fight to Donald Trump saying that "Donald is great at the one-liners, but he is a chaos candidate and he would be a chaos president.”  Trump dismissed the attacks by referencing his place atop the polls, but it was clear that Bush’s strategy was getting under his skin.  Even the audience chimed in applauding when Bush said, “You’re not going to be able to insult your way to the presidency.”  We’ll have to wait to see the post-debate polling to know if voters like the new assertive Bush. 

Chris Christie: Chris Christie had a solid debate performance.  A Frank Luntz focus group of voters selected the New Jersey governor as one of it winners, and described him as “experienced,” “highly confident,” and “tells it like he sees it.”  During the evening Christie made repeated mentions of his experience as his state’s chief executive while criticizing inaction by those in the U.S. Senate.  He referred to Cruz, Paul, and Rubio as "people who've never had to make a consequential decision in an executive position."  Christie’s poll numbers have steadily risen in New Hampshire where he now places third behind Trump and Rubio.  It’s unclear if his performance will elevate him in the other early voting states.

Ted Cruz: The Texas Senator was the other candidate selected as the winner by the Luntz focus group.  While Cruz continued to avoid criticizing Trump, he did go after Marco Rubio on five occasions.  In one skirmish relating to terrorism, Cruz may have disclosed classified information when speaking on the USA Freedom Act and the percentage of phone numbers that can be searched.   

Marco Rubio: Of the nine candidates, Marco Rubio is the most natural debater.  This coupled with a thorough command of the issues has allowed him to deliver several top-notch performances.  GOP voters have certainly taken notice, as evidenced by Rubio’s continued rise in the polls.  In the RealClearPolitics national average, the senator now places third, edging out Ben Carson.  On several occasions, Rubio refused to take the bait and criticize his fellow opponents.  Though he did push back when attacked for his participation in the 2013 bipartisan Gang of Eight comprehensive immigration reform bill.  Rubio even came to the aid of Trump when the frontrunner was unknowledgeable about America’s nuclear triad.

Losers

Ben Carson: The retired neurosurgeon continues to appear out of his league when addressing foreign policy matters.  Ben Carson sought to stem the damage following the last debate going so far as traveling to Jordan to visit a Syrian refugee camp.  It did not help.  Carson perplexed many pundits following his complaint over the lack of speaking time and then immediately declining to answer a question when asked.  Since the last debate, Carson has continued to drop in the national polls falling from second to fourth place behind Trump, Cruz, and Rubio. 

Carly Fiorina: The former HP CEO continued to rely upon her résumé as a former businesswoman, but offered little new information on how she would address the nation’s problems.  Fiorina enjoyed a quick rise in the polls following her first introduction to GOP voters in the second debate, but has been unable to sustain the support. 

John Kasich: John Kasich needed a memorable night, but his performance fell flat.  While his record as a congressman and governor is impressive, he comes to the presidential race in a year where the GOP electorate is looking for an “outsider.”  Continuing to remind voters that you spent 18 years on the House Armed Services Committee isn’t going to win you many votes with this group of voters. 

For more information, please contact David Ashinoff at ashinoffd@agc.org or (202) 547-5013. Return to Top

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