This week, AGC held its annual National & Chapter Leadership Conference in Washington, D.C., which brought chapter leaders together to discuss best practices and meet with Members of Congress to address AGC's top legislative issues.

During the meeting Polly Trottenberg, Assistant Secretary for Transportation Policy at the U.S. Department of Transportation, thanked AGC and all of its members for their public support of the infrastructure spending in the American Recovery and Reinvestment Act.  Assistant Secretary Trottenberg provided some details on President Obama's recent request for $50 billion, explaining that the funding would be added to the early years of a six-year surface transportation reauthorization bill in order to have a more immediate positive impact on construction employment. She also provided a glimpse of the administration's priorities for surface transportation reauthorization, which will be released in more detail next year.  These priorities include integration of high-speed rail on an equal footing into the surface transportation program; streamlining, modernizing and prioritizing surface transportation investments; consolidating more than 100 different programs; focusing on using performance measurement and race-to-the-top-style competitive pressures to drive investment toward better policy outcomes; and expanding investments in areas like safety, environmental sustainability, economic competitiveness and livability.

Senator Mike Johanns (R-Neb.) talked about his efforts to roll back the health care bill, oppose Democratic leaders' cap and trade scheme for greenhouse emissions, and repeal the 1099 reporting requirement in the massive health care bill. Johanns was the lead sponsor of repeal of the reporting requirement and made several references to the cost and burden on small employers if the provision remained.

Congressman John Kline (R-Minn.), the Ranking Member of the Education and Labor Committee, which has jurisdiction over many labor laws, health care, OSHA and pension issues, also addressed the group. Kline addressed his opposition to the so-called Employee Free Choice Act (Card Check) and the need for OSHA to work with employers to create safer worksites rather than just punishing them. Congressman Kline also talked about how Congress will have to address some of the problems facing multiemployer pension plans in the next Congress.

During the meeting, AGC members from across the country visited with nearly 150 Members of Congress and urged them to repeal three percent withholding, extend the expiring tax cuts and repeal the 1099 reporting requirement while explaining the need for a multi-year highway reauthorization bill.

Senate Amendment to Cut Discretionary Spending Fails  

The House and Senate passed a Continuing Resolution (CR) to provide funds to continue the operation of the federal government until December 3.  The CR is necessary because Congress has failed to enact any of the 12 appropriations bills for FY 2011. Under the terms of the CR most government programs will continue to be funded at FY 2010 levels. 

One federal program monitored by AGC will see a decrease in funding levels; the Department of Defense Base Closure and Realignment (BRAC) will see a decrease in the amount available from over $7 billion in FY 2010 to a rate equal to $2.35 billion, the FY 2011 administration budget request.  Congress intends to wrap up the 12 unfinished appropriations bills in a large omnibus during the lame-duck session after the November 2 elections, which is tentatively scheduled to start in mid-November.

As Congress continues to look at ways to cut spending, their focus is likely to turn to limiting discretionary spending in the federal budget.  An example of this approach occurred during Senate debate of the CR through an amendment offered by Senator John Thune (R-S.D.). The Thune amendment proposed a 5 percent across-the-board cut in discretionary spending, excluding defense, homeland security and veterans' programs. The amendment - which required 60 votes to pass - failed by a vote of 51-48, with eight Democrats voting yes.  AGC is continuing to push for full spending bills.

On September 27, President Obama signed the Small Business Jobs & Credit Act of 2010, enacting numerous tax breaks for small businesses and several significant contracting reform provisions that will have a wide-reaching impact on federal contractors.

First and foremost, the legislation puts an end to the uncertainty over parity in the small business program by re-establishing equality among each of the small business subcategories that competes for government contracts. The legislation now states that a contracting officer "may" - instead of "shall" - award contracts based on limited competition to HUBZone small businesses as a first option. Numerous Government Accountability Office and the U.S. Court of Federal Claims decisions in recent years determined that using "shall" unambiguously established a preference for HUBZone firms. AGC argued that in order to preserve the concept of free and open competition, even within the small business program, there must be parity within the program.

There are other provisions in the legislation designed to improve the contracting process, including:

• Directions for SBA to establish a mentor-protégé program to assist small businesses owned by women, service-disabled veterans and those operating in HUBZones. The initiative would be modeled after the 8(a) mentor-protégé program.
• Requiring OMB's Office of Federal Procurement Policy to establish a government-wide policy for contract bundling — a process in which several small contracts are consolidated and awarded to one firm, often out of the reach of small businesses. Prior to bundling a contract, procurement officials would be required to conduct market research and to have a senior acquisition official sign off on the decision. The rationale for bundling then would be publicly disclosed.
• Requiring small businesses to recertify their size status annually. The law also establishes a government-wide policy for prosecuting companies that fraudulently proclaim themselves to be a small business.

Finally, there are two provisions that could make substantial changes to the prime-subcontractor relationship. One provision requires a prime to "make a good faith effort to acquire articles, equipment, supplies, services, or materials, or obtain the performance of construction work from the small business concerns used in preparing and submitting to the contracting agency the bid or proposal, in the same amount and quality used in preparing and submitting the bid or proposal," and "provide to the contracting officer a written explanation if the offeror or bidder fails to acquire articles, equipment, supplies, services, or materials or obtain the performance of construction work as described in clause." A second provision governing payment to subcontractors could put prime contractors at undue risk for a poor performance evaluation if there is a dispute over timing or amount of payment to a subcontractor. AGC is greatly concerned that these provisions could lead to a form of bid listing and is pushing Congress to explain in more detail their intent of this provision.

AGC also will be deeply involved in the regulatory process as the rules are promulgated to implement this legislation.

Late Wednesday, a new comprehensive immigration bill was introduced by Senator Menendez (D-N.J.) and Senator Leahy (D-Vt.).  AGC is currently reviewing this bill, but we are troubled by several items, including a proposal to make it easier to find employers in violation even if they did not "know" they had hired unauthorized workers. It also lacks a workable future visa program and includes language that would provide an incentive for unauthorized workers to file employment claims by offering a temporary work authorization.  

AGC supports a comprehensive approach to immigration reform and continues to talk with lawmakers about the needs of the construction industry in this debate.   This new bill is not expected to get much traction in the lame duck session; however the Senators who introduced the bill hope that it serves as a placeholder for the debate in 2011.

On the last working day before the elections, the House passed an AGC-supported measure that would provide health benefits for 9/11 workers.  Included in this bill (H.R. 847, the James Zadroga 9/11 Health and Compensation Act) is language that would limit the liability of contractors that worked at the site of the terrorist attack in New York City.

These contractors responded in the immediate aftermath of the collapse of the Twin Towers and continued working for over a month without contracts while at the direction of federal, state and city officials.  These contractors continue to face an enormous amount of liability from lawsuits from those who developed health problems in the aftermath of the attacks. 

A hearing on this legislation has been held in the Senate and supporters of the bill hope to see Senate action during the lame duck session.

The Office of Management and Budget (OMB) recently released new reporting requirements for recipients of federal financial assistance, including grants and loans, in compliance with the Federal Funding Accountability and Transparency Act.

Included in the rules is a requirement that recipients report the total compensation of its five most highly compensated individuals. AGC contacted the Federal Highway Administration (FHWA) to clarify that this requirement does not apply to contractors working on contracts funded through the federal-aid highway program. FHWA's General Counsel has verified that these requirements do not apply.

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).  

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.

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 112^th Congress will have to face in the coming years.

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.

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.