Report of the MCAA Legislative Committee

Words: Paul Odom

112th 1st Session of Congress Review

After a fast start to the 112th Congress (2011) after House Republicans took control of the House and moved to pass legislation that cut spending and messaged their priorities, things quickly ground to halt as our nation’s debt and deficit levels quickly took center stage. Throughout 2011, there were many attempts by the House, Senate, and White house to form bipartisan, bicameral commissions to draft and pass a comprehensive spending reduction and debt reduction package. While there was a lot of momentum during these commissions, politics quickly took control of the process and every effort, including the most recent Joint Select Committee on Deficit Reduction or “Supercommittee”, failed to come up with a plan.

While the House of Representatives Appropriations Committee passed a good number of their annual appropriations bills, only 5 of the 11 bills ultimately passed the full House and the Senate was only able to pass the Fiscal year 2012 Military Construction-VA Appropriations bill. After the “Supercommittee” failed to construct a comprehensive plan by the statutorily dictated November 23, 2011 deadline, the House and Senate quickly drafted and passed two “minibus” appropriations packages to ensure that the government was funded for FY2012 and that there was not a government shutdown.

While not much major legislation was acted upon, a number of MCAA priorities did pass Congress in the 1st Session of the 112th Congress:
  • Repeal of the 3% withholding provision
  • Life-cycle costing language related to Military Construction projects
  • Life-cycle costing as a part of OMB’s Circular A-94
The 2nd Session of Congress also provides MCAA with opportunities to gain support of other main priorities such as:
  • Cosponsorship and Passage of HR 3395, the Concrete Masonry Products Research, Education, and Promotion Act.
  • Continuing to seek opportunity to add Life-cycle costing language, specifically language directing 50 year LCC, to appropriations and authorization bills.

112th Congress Report and Outlook

The Hidden Tax on Small Business - 3% Withholding Tax

Position
MCAA supports cosponsorship and passage of H.R. 674 and S. 89, legislation to repeal the 3% withholding requirement.

Background
Legislation has been introduced since 2007 to repeal enactment of the 3% withholding requirement.

Issue Summary & Status
HR 674 was passed by the House of Representatives on October 27, 2011 by a vote of 405-16.

HR 674 then passed the Senate, with an amendment, on November 11, 2011 by a vote of 95-0.

The House of Representatives passed the amended Senate version of the bill on November 16, 2011 by a vote of 422-0.

President Barack Obama signed the bill into law on November 21, 2011 and it became Public Law 112-056, repealing the 3% withholding requirement once and for all.

Life-Cycle Costing

Life-Cycle Cost Language, favorable to MCAA, was included in both the House of Representatives Fiscal Year 2012 Military Construction-VA Appropriations bill and the Senate Fiscal Year 2012 Military Construction-VA Appropriations bill.

Language in the House Report to H.R. 2055 (Page 17 of the Report):
Facilities management, life-cycle costs, and construction method alternatives.—The Committee believes that the military construction program best serves both our military personnel and the taxpayers when projects are open to competitive bidding from contractors representing the widest possible range of construction methods. To that end, the Committee urges the Department of Defense and the execution agents for military construction, principally the Army Corps of Engineers and the Naval Facilities Engineering Command, to ensure that requests for proposals or qualifications do not arbitrarily foreclose, discourage, or privilege any type of construction method. The Committee continues to encourage a level playing field for both traditional construction methods and alternative methods such as permanent modular construction. The Committee also encourages DOD to evaluate the regular use of carbon fiber grid precast concrete technology in military construction projects.

The Committee believes that the best way to ensure a level playing field is to set and communicate clear standards and expectations regarding life-cycle cost management for military construction, backed by rigorous, objective analysis. The Committee understands that situations may arise in which objectives other than lifecycle cost may take precedence; for example, speed of construction may be a predominant concern in order to meet time-limited goals such as base realignments, force structure growth, new system beddown, or urgent operational needs. At the same time, the Committee is concerned by the recent report from the Government Accountability Office (GAO–10–436) indicating that varying service attitudes toward the life-cycle costs of different construction methods were based more on pre-formed opinions, personal experiences, and anecdotal evidence rather than quantitative information or analyses. The Committee therefore urges DOD and the services to conduct further research regarding comparative life-cycle costs for differing types of construction, establish clear goals and benchmarks, and ensure these standards are communicated to contracting officials. Until such an empirical basis is established, the Committee urges DOD and the services to carefully reconsider blanket use of any new life-cycle approaches that depart from prior, standard practices.
Language in the Senate Report to H.R. 2055 (Page 21 of Report):
The Committee strongly supports the Department’s efforts to incorporate green building technologies, such as solar, photovoltaic, and green roofs, into both its new construction program and in the renovation of existing buildings. DOD currently requires new construction to meet LEED Silver standards and/or the five principles of High Performance Sustainable buildings. To ensure that all U.S. products can be utilized in DOD building construction and major renovations, the Committee urges the Department to evaluate commercial energy-efficient technologies for applicability to DOD construction and to allow and encourage the use of all green building ratings or certification systems which have been developed in accordance with rules accredited by the American National Standards Institute [ANSI] and approved as an ANSI standard. The Committee also encourages the use of green building rating or certification systems that incorporate and document the use of Life Cycle Assessment in the evaluation of building materials.
Page 35 of Senate Report:
Life-cycle Costs in VA Purchasing.—The Committee is concerned that the VA is not adequately considering life-cycle costs when making purchasing decisions. Evaluating unit cost without considering differences in the useful life of the item to be purchased may be causing the VA to spend more than necessary over time due to increased maintenance and replacement costs. The Committee directs the VA to report to the Committees on Appropriations of both Houses of Congress no later than December 30, 2011, areas in which life-cycle costs are not evaluated as part of the competitive bidding process and an explanation as to why these costs are not considered.
On December 16, 2011 the House of Representatives passed, by a vote of 296-121, the Conference Report for H.R. 2055 which was constructed as the year end omnibus appropriations bill. The Military Construction and Veterans Affairs Bill was included in this year end bill.

The Conference Report passed the Senate on December 17, 2011 by a vote of 67-32 and was signed by President Barack Obama on December 23, 2011 and became Public Law 112-074.

The report language for the Conference Report included the following language which in turn means that both the House Report Language and Senate Report Language are included in the final bill:
Page 1 of Division H under Military Construction – Joint Statement
Matters Addressed by Only One Committee.--The language and allocations set forth in House Report 112-94 and Senate Report 112-29 should be complied with unless specifically addressed to the contrary in the conference agreement and this explanatory statement. Report language included by the House, which is not changed by the report of the Senate or this explanatory statement, and Senate report language, which is not changed by this explanatory statement, is approved by the Committees on Appropriations of both Houses of Congress. This explanatory statement, while repeating some report language for emphasis, does not intend to negate the language referred to above unless expressly provided herein. In cases where the House or the Senate has directed the submission of a report, such report is to be submitted to both Houses of Congress. House or Senate reporting requirements with deadlines prior to, or within 15 days after, enactment of the conference agreement shall be submitted no later than 60 days after enactment of this Act. All other reporting deadlines not changed by this explanatory statement are to be met.
The Conference Report which was signed into law also included the following language which MCAA lobbied on:
Page 13 of Division C under Office of Management and Budget – Joint Statement
In light of increased efforts to identify government-wide efficiencies and anticipate the cost of major infrastructure projects, the Committee instructs OMB to examine Circular A-94. The Committee expects OMB's review of Circular A-94 to include an examination of the potential to incorporate life-cycle cost analysis. Moreover, this analysis should be as accurate, complete and reflective of the real costs and lifespans of materials as possible, including the use of material-specific discount rates and maintenance scheduled cost. OMB is directed to report to the Committee within 180 days of enactment of this Act on the status of reviewing Circular A-94. OMB should include appropriate experts in the field of life-cycle cost analysis, as well as appropriate industry experts and research centers.

OMB Circular A-94, "Guidelines and Discount Rates for Benefit-Cost Analysis of Federal Programs"

Check-Off

Background
HR 3395, the Concrete Masonry Products Research, Education, and Promotion Act, was introduced by Representative John Shimkus (R-IL) on November 4, 2011 and currently has 5 cosponsors.

The bill directs the Secretary of Commerce to issue orders applicable to manufacturers of concrete masonry products (concrete). Requires any such order to provide for the establishment of a Concrete Masonry Products Board, which shall carry out a program of promotion, research, and information regarding concrete products.

This in essence creates a “check-off” program similar to the “Got Milk” Campaign run through the Department of Agriculture for the promotion of the American milk industry.

Position
The MCAA strongly supports cosponsorship and passage of HR 3395. MCAA also supports the introduction of this bill in the Senate and is currently working on finding a suitable Sponsor.

Estate Tax

Update
A reinstatement of the lapsed estate tax was included in a broad measure that extended the 2001 and 2003 tax cuts, provided a one-year reduction in Social Security taxes paid by workers, and renewed expanded benefits for the long-term unemployed.

Blanche Lincoln, D-Ark., and Jon Kyl, R-Ariz., worked out a deal in the Senate that was more generous to large estates than the House-passed bill.

Lincoln and Kyl proposed to set the top rate at 35 percent and impose it on the value of estates in excess of $5 million. They faced hurdles in their effort to win passage and were unsuccessful in trying to attach the proposal to a small-business stimulus measure when Senate leaders decided to hold off on addressing all the Bush tax cuts until after the November election.

With the end of the year — and a reinstatement of the estate tax at pre-2001 rates approaching — lawmakers agreed in December to include the Lincoln-Kyl compromise in a broad measure (HR 4853) that extended the other Bush tax cuts for two years.

These provisions will expire at the end of 2012. As a result Congress will need to act on the estate tax before the end of the year to extend the $5 million extension and 35% top rate, reform the estate tax with different exemptions and rates, or pass a law repealing the bill.

Position
The Masonry Industry supports permanent repeal of the federal estate tax. The Masonry Industry also urges examination and consideration of proposals providing reasonable exemptions.

The MCAA has been supportive of efforts to permanently repeal the estate tax, and short of that, has supported legislation (H.R. 3905) to increase the exemption level to $5 million, and reduce the rate to 35%, phased-in over ten years.

Alternative Minimum Tax (AMT)

Background
The Individual Alternative Minimum Tax (AMT) operates parallel to the regular income tax, with different rates and definition of income and deductions. Although the AMT has historically applied to few taxpayers, the tax will grow rapidly over the next decade under current law as it was not indexed for inflation when it was originally written. By 2010, the AMT was estimated to affect 33 million taxpayers – about one-third of all tax returns, up from 1 million in 1999.

Congress has historically provided “patches” to ensure that the AMT does not impact taxpayer it was not originally meant to tax and at the end of 2010 provided a 2-year patch to the AMT, punting this issue until 2012. The current patch expired on December 31, 2011.

After the Joint Select Committee on Deficit Reduction failed to craft a proposal, which many people thought would include an AMT patch or reform, the issue is back on the table for Congress to act on in 2012.

Position
The Masonry Industry supports repeal of the AMT or appropriate indexing of the AMT to its original date of enactment or the date of enactment of the new AMT bill.

Immigration Reform

Background/Update
In the past, legislation has been introduced in both the House and Senate that focuses solely on employer sanctions and would mandate that employers use Social Security numbers to verify their entire workforce, both existing and new employees. This legislation, by and large, does not take into account the unreliability of the current system or the high rate of errors produced by the system. Furthermore, there are no requirements for the system to be properly tested or revamped before implementation. Under the legislation employers would be required to re-verify their entire workforce within four years of enactment. This will be an enormous administrative burden on employers and employees, particularly small business owners.

The Masonry Industry’s main concern with proposed legislation mandating that all employers must use the electronic verification system, E-Verify, is the potential negative impact this may have on small businesses.

While Immigration reform was brought to the forefront of discussions after President Obama was elected to the White House, talk of broad immigration reform, towards the end of 2011 and the outlook for 2012, as virtually completely disappeared. While it remains important to stay on top of this issue, it does not appear that there will be any immigration reform signed into law before the Presidential elections in November 2012.

Position
The Masonry Industry supports a comprehensive approach that includes provisions to secure our nation’s borders and creates a temporary guest worker program that meets the demand for labor and a process for addressing the undocumented currently employed in the U.S.

The Masonry Industry opposes immigration legislation that:
  • assigns liability for contractors who unknowingly use subcontractors that employ undocumented workers;
  • would make employers become the de facto “immigration police;”
  • fails to include a reasonable implementation period for electronic employee verification system (EEVS);
  • would include excessive debarment penalties for immigration violations;
  • implements a system that has not been thoroughly tested and revamped;
  • places a considerable financial strain on small business owners, due to the technological infrastructure;
  • does not provide liability protection for employers from discrimination lawsuits for an employer who relies on E-Verify information and subsequently denies employment to or fires a current employee who is later found eligible to work in the United States.

Regulation / Agency Rulemaking

Background
House Republicans, specifically the Oversight and Government Reform Committee, spent much of 2011 attacking the federal agencies for their overbearing and unnecessary rulemaking and regulations. Chairman Darrell Issa scheduled over 160 oversight hearings, where federal agencies were brought in to testify on their new rules and regulations and their impact on the economy and businesses.

We expect House Republicans to continue to make this an issue in 2012 as many pieces of legislation will be introduced, debated, and passed as messaging bills during the 2012 Presidential election season. The economy and unemployment rate will be the key issue in this election and House Republicans will want to keep the Obama Administration’s actions on this front in the limelight.

MCAA representatives have played a role in some of this committee hearings and this will continue to be a great opportunity for MCAA to testify on harmful DOL/OSHA regulations and rulemakings.

Conclusion

With the 2nd Session of the 112th Congress falling in the midst of the 2012 Presidential Election season and Congress still at a standstill, it appears unlikely that very many pieces of legislation will be signed into law before the elections in November 2012.

With that being said, it remains imperative that MCAA continues to educate Members of Congress and their staff on MCAA priority issues. Continuing to lay the groundwork for these priorities and gaining cosponsors on MCAA’s priority legislation will lay the groundwork for quick action when Congress begins to work on major legislation at the end of 2012 or during the 113th Congress in 2013.

2012 Election Forecast

Battle for Congress

U.S. House of Representatives
Current House: 241 Republicans | 194 Democrats
Forecasts for the 2012 House elections will remain fluid over the next several weeks and months as states finalize new district lines, new seats are created, and states losing seats merge multiple districts into one forcing incumbent vs. incumbent races. Congress is at its lowest approval rating in nearly four decades with 83% of those polled voicing disapproval, which will likely yield high turnover rates for incumbents in November. Currently political handicappers predict that Republicans will hold on to the majority.

U.S. Senate
Current Senate: 53* Democrats | 47 Republicans
Democrats are expected to have 23 seats up for election in November, including 2 independents who caucus with the Democrats, while Republicans are expected to have only 10 seats up for election. Eight seats are currently listed as “toss-ups” (six Democrat, two Republican). The future majority hinges on results of tight races in Massachusetts, Montana, Nevada, and Virginia. Two of the four seats in those battles are currently held by Republicans, Scott Brown in Massachusetts and Dean Heller in Nevada. The two Democratic seats are Jon Tester’s in Montana and the one in Virginia that Jim Webb’s retirement leaves open. If the GOP wins the White House they need to only win three seats to take the majority. If they lose, they will need to win four Senate seats. At this point it looks like two seats (NE, ND) will certainly flip, both currently held by Democrats. Currently political handicappers put the majority of the upper chamber at a toss-up.

Battle for the White House

President Obama Job Approval (RCP Average)
Approve: 46.0
Disapprove: 48.9

Direction of Country (RCP Average)
Right Direction: 28.3
Wrong Track: 65.7

President Obama vs. Republican Candidate (RCP Poll Average)
43.6 Republican (R) +1.0
42.6 Obama (D)

"In polling since 1940, just four previous presidents have started their re-election year with less than 50 percent approval. Only one of them won, Richard Nixon in 1972," according to an ABC News report.

With the first round of major presidential primaries over, it is now looking like Mitt Romney will be the Republican challenger to run against President Obama. Current polls suggest Republicans have a very slight advantage, but with over ten months until the general election there is still too much time and potential for major economic, foreign policy, natural or other disasters to affect the course of the election.

The following states will be the true battlegrounds to determine the election; all of which were won by Obama in 2008: FL, MI, NC, NH, NV, OH, VA, and WI. As you can see, this time around the Obama campaign will be on the defense, which will be a much different campaign than he ran in 2008.
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