Report Card: 106^th Congress, Second Session

Despite the fact that Congress and the Clinton administration were trapped in a seemingly intractable stalemate over much of the year, as legislative action took a back seat to election-season posturing, ACCA made strides in advancing important legislative and regulatory initiatives to aid the HVACR industry. Among these accomplishments were:

Electric Utility Restructuring: For the first time, we have a bipartisan congressional coalition willing to work on fair competition language and introduce an amendment to a comprehensive restructuring bill expected to be taken up in the 107^th Congress. Our champions are Greg Ganske, Republican of Iowa, Ed Markey, Democrat of Massachusetts, and Steve Largent, Republican of Oklahoma. Their approach is to base the amendment on the 1996 Telecom Act, which called for fair competition rules for subsidiaries of telephone utilities. They reason that since the Commerce Committee unanimously approved that language four years ago, they would be comfortable revisiting it again in the context of fair competition in the electric and gas utility industry. Additionally, it will be harder for the utilities to object since it is the same legislation their fellow utilities in the telecom industry accepted in the 1996 bill. We also scored another coup recently. After two years of discussion, we succeeded in enlisting the National Federation of Independent Business (NFIB) to our cause.

ACCA and our allies stopped congressional efforts to pass stand-alone repeal of the 1935 Public Utility Holding Company Act. Stand-alone repeal would eliminate the few controls that exist to protect the consumer and competitors from unbridled utility monopoly power in other businesses, such as HVACR. We would only support PUHCA repeal in the context of a comprehensive utility deregulation bill that included protections against market power.

As in years in past, ACCA had several opportunities to testify or submit testimony for the record in support of fair competition language in electric utility restructuring legislation.

Skilled Workforce Enhancement Act: Sponsored by Rep. James Talent (R-MO), HR 1824 would give small business owners an incentive to train much-needed workers in highly-skilled trade industries by providing a $15,000 annual tax credit per employee for up to four years. With ACCA leadership, this bill garnered 89 cosponsors in the 106^th Congress. Though passage of the bill was frustrated by inaction on a final tax package, we are in an excellent position to move the legislation in the next Congress.

Estate Tax Relief: Defying all predictions at the beginning of the 106^th Congress, ACCA and our allies succeeded in getting the House and the Senate to pass HR 8, legislation to gradually phase out federal estate and gift taxes over the next ten years. President Clinton vetoed the legislation, although he offered a significantly scaled-down version of his own. Clearly, estate tax relief has proved itself an idea whose time has come, and we fully expect the measure to be revisited next year.

GOP Small Business Tax Relief Package: In the closing days of the 106^th Congress, the House and Senate passed an omnibus small business tax bill that ended up exceeding our expectations. Linked to a $1 increase in the minimum wage over two years, the legislation included:

• Increasing the expensing deduction for small businesses from $19,000 to $35,000;
• Restoring the installment sales method of accounting to allow taxpayers who sell their businesses in installments to pay capital gains in the years they actually receive the sale proceeds;
• Clarifying of cash accounting rules to permit small businesses with annual gross receipts of $2.5 million or less to use the cash method;
• Immediate 100 percent deductibility for the health care costs of the self-employed;
• IRA expansion -- increasing IRA contribution limits (including Roth IRAs) from the current $2,000 to $5,000 by 2003;
• Simplifying tax rules to modernize and streamline pension laws to encourage more small businesses to offer pension plans.

Despite the bill passing in bipartisan fashion, President Clinton vetoed the legislation. We expect these provisions to reemerge next year.

Cash vs. Accrual: For decades, small business owners have used the straightforward cash method of accounting because it best reflects the manner in which they operate their companies. The cash method allows businesses to record cash receipts when they come in and cash outlays when they write a check for a business expense. But in the past few years, the Internal Revenue Service has increasingly and arbitrarily ignored the Congressionally-mandated $5 million safe harbor for small businesses, choosing instead to force many to adopt the complex accrual method of accounting. This spring, ACCA testified before the House Small Business Committee in support of legislation that would amend the Internal Revenue Code of 1986 to allow small businesses with average gross receipts of $5 million or less to use the cash method. We expect the bill to be reintroduced next year.

Ergonomics: This past May, ACCA testified before the Occupational Safety and Health Administration on its controversial ergonomics proposal. ACCA pointed out that the proposal was ill suited to the HVACR industry, as typical activities of technicians don't take place at fixed-site workstations and don't involve repetitive motions. We also recommended that OSHA include employer safeguards to prevent fraudulent claims as well as consider other goal attainment options for small businesses. Despite Congressional efforts to block it, a final rule from OSHA is expected later this month.

Truth in Regulating Act: In conjunction with other small business allies, we succeeded in getting the Truth in Regulating Act signed into law this past October. The Act provides that when a federal agency publishes an "economically significant rule", defined as having an effect on the economy of $100 million or a rule which may adversely affect the economy, jobs, or public safety, Congress may request the General Accounting Office (GAO) to review the rule in question. The law is designed to increase the transparency of important regulatory decisions, to promote effective Congressional oversight to ensure that regulatory agencies fulfill statutory requirements in an efficient and fair manner, and to enhance the accountability of Congress and regulating agencies.

Codes: The movement toward universal acceptance of ACCA technical manuals as the HVACR reference standards of the world took another step forward this year as technical committees of the International Code Council and the International Association of Mechanical endorsed the adoption of ACCA manuals D, J and N for inclusion in several of the 2003 codes.

EPA: ACCA testified twice before the EPA on proposed regulations for Recycling of Substitute Refrigerants under Section 608, urging EPA to expand the regulations to include HFCs and PFCs for certification to ensure that only people trained to prevent venting and know about recycling will be able to work with these refrigerants. We also reinforced the belief that the training materials for the 608 certification test don’t reflect today’s technological standards or regulations and need to be updated. EPA responded positively and the test was updated this year. We also urged EPA to finalize IRG-2, first proposed in 1995. As a result, EPA held an additional stakeholder meeting and with the upshot being that ACCA and ARI co-chair a workgroup to develop a compromise which could become the final rule. EPA would like to publish it in 2002. At year-end, we are close to an agreement.

Bid-Shopping: This summer, ACCA testified on the disreputable practice known in the contracting business as "bid shopping." Bid shopping takes place when a general contractor attempts to pad his profit margin by shopping around for lower-priced subcontractors than those listed in the original bid. Testifying before the House Committee on Government Reform, ACCA stated that it was time for the federal government to restore integrity to the bidding process and to ensure that the taxpayer gets value for his hard-earned money. Our testimony helped lay the groundwork for future congressional action.

School Construction: The bipartisan initiative took several steps forward this year, but got sidetracked at the end of the session over the inclusion of Davis-Bacon requirements. A bill to underwrite the interest on $25 billion worth of school construction bonds was introduced by Rep. Nancy Johnson (R-CT) and Rep. Charles Rangel (D-NY) earlier this year. The bill received broad support, but several members of the congressional leadership objected to the legislation on grounds that it would increase construction costs by applying Davis-Bacon prevailing wage requirements. Both parties are eager to pass a school construction bill so we should expect the bill to be reintroduced next year.

PACs: This summer, ACCA submitted testimony to the Internal Revenue Service on a recently enacted disclosure law governing Section 527 political organizations. The new disclosure requirement, which targeted tax-exempt groups that secretly raise and spend money on elections, has been at the center of an increasingly contentious debate. The law is designed to highlight so-called stealth organizations, but it imposes the same disclosure requirements on many state and local PACs that are affiliated with trade and professional associations. ACCA requested that the IRS grant waivers to those organizations that already file similar disclosure information at the state and local level, in order to avoid duplication of effort and needless administrative burden. As it turns out, none of our state PACs met the minimum requirements, but they could someday. At this writing, the IRS had not yet responded.

Chapter Leadership Conference: This year's Chapter Leadership Conference was a great success -- our numbers were up again this year, and we hope to continue improving on our turnout. Visiting ACCA chapter leaders met with members of Congress and staff to promote ACCA's legislative priorities. Our efforts paid off, as several Congressmen agreed to cosponsor various pieces of legislation we have been working to enact. In particular, we got strong positive feedback from nearly all the offices we visited on our tax agenda -- members and staff were highly appreciative of our concerns regarding estate tax relief, the cash method of accounting and the installment sales repeal.

Craig Silvertooth is ACCA's Manager of Federal Relations