Next week, the Senate Health, Education, Labor, and Pension (HELP) Committee and the House Education and Labor Committee will hold hearings on workplace safety. 

The HELP Committee is focusing particularly on mine safety in response to the recent accident in West Virginia.  The House will focus on the portions of the Protecting America's Workers Act that cover whistleblower and victims' rights provisions.  AGC is closely watching these issues and the impact the passage of any legislation will have on the construction industry.

This week both Speaker Pelosi and Senate Majority Leader Reid said that they would like to see comprehensive immigration reform taken up in 2010. The two main Senators working on the development of such a bill, Senator Schumer (D-N.Y.) and Senator Graham (R-S.C.), continue to meet with each other as well as those groups affected by such legislation.  

AGC remains in the discussions and continues to promote workable reform, which would include reasonable employer enforcement as well as a new visa program that would create a system to supply the U.S. economy with the workers it needs as the country begins to recover from the downturn and grow in the years ahead.

House and Senate tax writing panels are working to deal with a number of outstanding tax issues facing Congress in 2010.

First, despite each chamber having passed its own version of the annual "tax extenders" package that would extend for one year roughly $30 billion in tax provisions that expired on January 1, the House and Senate remain unable to reach an agreement on how to offset the cost of the legislation.  The tax extenders bill includes extensions of tax incentives useful to construction, including the 15-year shortened cost recovery period for restaurant improvements and new construction, leasehold and retail improvements, and a short-line rehabilitation tax credit.

Second, the Senate Finance Committee is considering how to move forward on a small business tax relief and infrastructure bill the House passed in late March that includes, among other things, an extension of the successful Build America Bonds program into 2013.  In addition, the Senate may add an extension of 50 percent bonus depreciation from the Recovery Act, along with the an extension of enhanced section 179 expensing that is included in the House-passed bill.  Depending on whether sufficient offsets can be found, leadership in both chambers have expressed interest in resolving these two measures prior to Memorial Day.

Finally, the House and Senate are working on ways to address the lapsed estate tax and the expiration of the 2001 and 2003 tax cuts at the end of 2010.  The House passed legislation in December that would have extended the 2009 estate tax rate of 45 percent with an exemption of up to $3.5 million per spouse.  However, a bipartisan group of Senators is trying to lower the rate to 35 percent and increase the exemption to $5 million per spouse and is seeking a vote this spring on their proposal.  If no action is taken in Congress, the estate tax will be reinstated at a 55 percent top rate and $1 million exemption level. 

The Senate Budget Committee this week took initial steps towards continuing the 2001 and 2003 tax cuts for the middle classes.  In its fiscal year 2011 budget resolution, the committee included a permanent extension of current policy for couples with incomes below $250,000 and singles with incomes below $200,000.  The resolution calls for allowing the current 35 percent tax bracket to increase to 39.6 percent on January 1, 2011, and the 33 percent bracket to bump up to 36 percent. 

The resolution also contains reconciliation instructions that could allow the Senate to pass tax legislation with a simple majority, rather than by overcoming a 60-vote threshold needed to end a filibuster. 

AGC is monitoring developments on these important pieces of legislation.  AGC supports lowering the federal burden on individuals, construction companies, and other business as a means of promoting investment, business development and business expansion.

House and Senate Democrats are considering whether to subject income earned by shareholders of S corporations engaged in service businesses to payroll taxes in an effort to raise revenue to pay for the annual tax extenders bill or other tax legislation this year. 

S corporation income is not directly taxed.  Instead, S corporation earnings "flow through" to shareholders who are taxed at the individual level as ordinary income.  S corporation shareholders who are active in their business, however, pay themselves a salary, on which they pay self-employment taxes that go towards Social Security and Medicare like traditional employee payroll taxes.

Applying payroll taxes to certain S corporation profits could raise anywhere from $10 to $15 billion.  Roughly $30 billion is needed to offset the cost of the annual tax extenders bill, which would extend for one year certain expired tax provisions, such as the research and development tax credit and the 15-year shorted cost recovery period for retail, restaurant, and leasehold improvements. 

Critics of the proposal argue that it would violate the long-standing principle that payroll taxes be applied solely to wages received for labor, not capital income.  However, the recently-enacted health care bill applied a 3.8 percent Medicare payroll tax to unearned income, including that earned by passive shareholders in S corporations.  Moreover, the proposal is inconsistent with the health law which exempted S corporation income earned by active shareholders.

AGC is a member of The S Corporation Association of America and will oppose this proposal.

Both Houses of Congress will be in session until the Memorial Day break and both chambers are expected to debate and possibly pass several major legislative initiatives in the next six weeks. Issues that could impact the construction industry may include a financial regulatory reform bill, a short-term extension of tax breaks and benefits programs, a "compromise" climate change and energy proposal, and immigration reform.  While Democratic leaders have indicated a desire to pass immigration and climate change, it will be very difficult and the votes on these measures may fall to later in the year or later.

AGC continues to push Congress to enact tax policies that would promote construction activity and business expansion.  Prior to Memorial Day, Congress is expected to finalize the annual tax extenders bill to continue roughly $30 billion in tax incentives through 2010.  The Senate may also take up a small business tax and infrastructure bill that would include an extension of the Build America Bonds program into 2013.  There is also a possibility that the Senate may consider a proposal to set a permanent rate to the estate tax.    

An outline for immigration reform from Senator Chuck Schumer (D-N.Y.) and Senator Lindsey Graham (R-S.C.) has been released despite an uphill climb to find enough votes to pass it this year. AGC is seeking to promote reasonable employer enforcement as well as a new visa program that would create a system to supply the U.S. economy with the workers it needs as the country begins to recover from the downturn. The outline as released has four pillars comprised of border security, interior enforcement, the creation of a process for admitting new provisional workers, and implementing a path to legalization for those already here.  Part of the interior enforcement aspect would include an employment verification system that would hold employers accountable for hiring practices. 

Despite the urging of the White House, and a House-passed bill last year, the Senate is still struggling to pass a comprehensive climate and energy bill.  Work continues on a Senate bill, and Senators John Kerry (D-Mass.), Lindsey Graham (R-S.C.) and Joe Lieberman (I-Conn.) are said to be close to unveiling their own proposal. AGC has been meeting with key members working on the bill and continues to share the industry's concern that the legislation will restrict construction while failing to recognize the environmental benefits of many construction projects. Additionally, AGC is concerned that the absence of federal legislation has allowed the U.S. Environmental Protection Agency (EPA) to push forward with its own regulation of greenhouse gas emissions from mobile and stationary sources under the Clean Air Act. AGC supports a bipartisan resolution sponsored by Senator Lisa Murkowski (R-Alaska) that would block the EPA from regulating greenhouse gas emissions under the Clean Air Act. 

The next six weeks will be critical to the prospects of getting a long-term multi-year transportation reauthorization bill enacted this year.  Senate Environment and Public Works Committee Chair Barbara Boxer (D-Cal) said this week that her committee's hearings are now complete and staff will finalize a draft of the Senate bill.  Congress has passed legislation to keep the highway and transit programs operating through the end of the year and provided funds to keep the Highway Trust Fund solvent through the first quarter of 2011, but AGC continues to highlight the benefits of enacting long-term, well-funded highway and transit reauthorization legislation.

Other issues that the Democratic leaders plan to address do not directly impact the construction industry, but will consume considerable debate time in Congress. These issues include food safety legislation, passing of administration nominees prior to the summer debate, confirmation of a Supreme Court Justice nominee, and campaign finance legislation.

It is widely anticipated that Senators John Kerry (D-Mass.), Lindsey Graham (R-S.C.), and Joe Lieberman (I-Conn.) will introduce climate change legislation before the end of the month.  Although a draft of the bill has not been released, the Senators have announced plans to limit carbon emissions through the inclusion of a fee on motor fuels based on the price of carbon dioxide under a cap-and-trade system.  This fee would act similar to a gas tax but it is unclear how much /if any of the revenue generated from this fee would be treated as a user fee and dedicated to the Highway Trust Fund. 

AGC has been meeting with Senate offices working to ensure that any money from this linked fee be deposited into the Highway Trust Fund and used to finance a multi-year surface transportation bill.  Support this effort by sending a letter through AGC's Legislative Action Center.

AGC member Jon Cloud testified before the U.S. Environmental Protection Agency to explain how California's plan to require construction contractors to install emissions reduction kits on their off-road diesel equipment will endanger workers and force job cuts.

Cloud (J. Cloud, Inc., El Cajon, Calif.) and Guy Prescott, a representative of the International Union of Operating Engineers, Local Union Three, asked EPA to deny or delay a decision to allow the state to proceed with its off-road rule.

Read AGC's press release here.

The Federal Acquisition Regulation (FAR) Council has issued a final rule implementing Executive Order 13502 on the use of project labor agreements  (PLAs) on federal construction projects, giving contracting agencies broad discretion to determine whether to impose a PLA mandate on a project, when the PLA should be executed, and what terms the PLA will contain.

The rule implements the executive order's stated policy to "encourage" executive agencies to "consider" requiring the use of project labor agreements in connection with large-scale construction projects, which are defined as projects with a total cost to the federal government of $25 million or more.  Mimicking the Executive Order, the rule provides that an agency "may" require that every construction contractor and subcontractor on a particular project agree to negotiate or become a party to a PLA if the agency decides that use of a PLA will (1) advance the government's interest in achieving economy and efficiency in federal procurement, producing labor-management stability, and ensuring compliance with laws and regulations governing safety and health, equal employment opportunity, labor and employment standards, and other matters; and (2) be consistent with the law.  The rule adds several other factors that agencies may consider in their project-by-project evaluation of whether a PLA is appropriate, but it neither requires the agencies to consider those factors nor limits their consideration to those factors. 

Read more about the added factors here.

AGC issued a statement, noting that we will continue to strongly oppose any effort by government officials, who often have little or no experience in construction labor relations, to undermine existing relationships between contractors and construction workers by imposing project labor agreements.  AGC will continue to encourage agency officials to exercise the broad latitude provided by these rules to avoid imposing these agreements.

On April 6, 2009 President Obama issued a new memorandum calling for federal agencies to further intensify their efforts to improved reporting compliance by prime recipients of Recovery Act funds. The memo directs those agencies to take appropriate action by terminating awards; pursuing measures such as suspension and debarment; reclaiming funds; and considering, initiating, and implementing punitive actions.

The Recovery Act requires contractors, grantees and loan recipients to submit to FederalReporting.gov quarterly information on how they are spending the funds. During the most recent quarter — the final three months of 2009 — more than 1,000 recipients failed to file the reports. More than 300 of those recipients made the board's "repeat offender" list for also neglecting to file during the initial reporting cycle last October.

According to the memo, OMB Director Peter Orszag will, within the next 30 days, review and update the administration's Recovery Act reporting guidance to include additional agency actions and oversight strategies.

The current reporting period began on April 1 and ends April 10. Recipients will have until April 29 to make corrections to their reports. The third batch of recipient data will be published on Recovery.gov on April 30.

The Internal Revenue Service (IRS) Wednesday released a new Form W-11, the affidavit individuals must complete to confirm that they are qualified employees under a new law that provides tax incentives for businesses hiring new workers.  The IRS also released a draft Form 941, Employer's Quarterly Federal Tax Return, on which employers can claim the payroll tax exemption for eligible new hires beginning with the second calendar quarter of 2010.  The IRS announced that the final form will be released next month along with the form's instructions.

Under the Hiring Incentives to Restore Employment (HIRE) Act, employers can receive an exemption from their 6.2 percent share of Social Security payroll taxes on wages paid to qualifying employees, effective for wages paid from March 19, 2010 through December 31, 2010.  To qualify, employees must fill out the new Form W-11 under penalty of perjury to certify they have not been employed for more than 40 hours during the 60-day period they were unemployed.

The HIRE Act also provides an additional income tax credit of up to $1,000 for every new employee retained for 52 weeks. 

The FAQs regarding the HIRE Act's employer tax benefits are available at IRS' website here.