Associated Equipment Distributors
AED Washington Insights Newsletter

AED Washington Insights

December 2011

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Prepared by Christian A. Klein, AED Vice President of Government Affairs
and the AED Washington team

In this Issue:

Depreciation Bonus, Keystone Caught up in Payroll Tax Cut Bill Imbroglio

Two of AED’s top legislative priorities are caught up in end-of-session wrangling on Capitol Hill.  In addition to extending the payroll tax cut and jobless benefits, the Middle Class Tax Relief & Job Creation Act of 2011 (H.R. 3630) passed by the House on Dec. 13 would extend 100 bonus deprecation for one year and force the Obama administration’s hand on Keystone XL.

Sec. 1002 of the bill is a direct response to President Obama’s decision to put off a final determination about whether to issue a permit for the Keystone XL project until after the 2012 elections.  In an effort to get the project underway, H.R. 3630 would automatically grant a permit for the Keystone XL pipeline 60 days after the legislation’s enactment unless the president determines that the project is not in the national interest.  Given the impact on jobs, energy independence, and the construction sector in U.S. and Canada, AED made Keystone XL a top priority.  We are working with the Canadian Chamber of Commerce, Canadian American Business Council, the American Petroleum Institute, and others to get the project approved.

Sec. 1201 of the payroll tax cut bill would extend the 100 percent depreciation bonus through the end of 2012.  Under current law, the depreciation bonus is set to drop to 50 percent next year.  The bill would also hold the depreciation bonus harmless from percentage of completion (thereby letting contractors on long-term projects more easily to take advantage of the investment incentive) and allow companies to claim Alternative Minimum Tax (AMT) credits in lieu of bonus depreciation.  AED is leading an ad hoc coalition seeking to get the depreciation bonus extended for one more year.

Senate Strips Bonus Depreciation
On Dec. 17, the Senate rejected the House legislation, in favor of a two-month extension of the payroll tax cut without 100 percent bonus depreciation for 2012.  However, the Senate bill did include the Keystone XL provision.  At the close of last week, the House was poised to reject the Senate bill due to House GOP objections to the short-duration of the payroll tax cut extensions.  It was also uncertain whether 100 percent bonus depreciation might be reinserted in the House package.  Stay tuned as details unfold.

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Despite Politically Challenging Environment, AED Chalks Up Victories in 2011

2011 was a busy year for AED in Washington. While there was a lot of activity on Capitol Hill, Congress actually accomplished very little. However, here and there, we were able to eke out important victories on long-standing AED policy priorities and make progress on highway authorization. We're expecting to be busy on Capitol Hill the first couple months of the new year before we turn our attention "beyond the Beltway" to help shape the results of the 2012 elections.

Here's a look at the year in review:

At the beginning of 2011, Congress was invaded by many new faces eager to change the way things are done in Washington.

AED's first challenge was educating these new lawmakers about the importance of highway and water infrastructure investment. This was not an easy task, as most new GOP lawmakers came to Washington with a disdain for any and all federal spending. However, indications are that AED and our construction industry partners have been successful in pushing the ball forward.

Thanks to the leadership of Sens. Barbara Boxer (D-CA) and James Inhofe (R-OK), the Senate made substantial progress on highway reauthorization. In fact, the two-year Moving Ahead for Progress in the 21st Century (MAP-21) (S. 1813) was approved by the Environment & Public Works Committee by a unanimous, vote and is poised for floor consideration early next year. Nevertheless, there is still the issue of how to fund the $13 billion shortfall between Highway Trust Fund (HTF) revenues and MAP-21's investment levels.

In the House, the situation is a little trickier. After passing a budget resolution that locked in funding for road and bridges at levels equal to Highway Trust Fund (HTF) revenues, House Transportation & Infrastructure Committee Chairman John Mica (R-FL) was forced into pushing a surface transportation proposal that could have resulted in at least a 30 percent cut to the federal highway program.

Thanks to the efforts of AED members and other business leaders around the country to engage their elected officials, GOP House leaders recently backed off their proposal and are now advocating for a three- to five-year highway bill with stable funding. House Speaker John Boehner (R-OH) promised action on highway reauthorization legislation prior to the end of the year, but had to change direction when it became clear that proposals to expand domestic oil production to pay for increased infrastructure investments were not going to generate enough revenue. However, the House Republican leadership has committed to approving a highway bill early next year.

While bipartisan consensus is building around highway reauthorization, 2011 saw other issues become far more divisive. The Clean Water and Drinking Water State Revolving Fund programs saw drastic cuts. However, AED has been an integral part of bipartisan efforts to close the water infrastructure funding shortfall by lifting the volume cap on private activity bonds for water infrastructure projects (the Sustainable Water Infrastructure Investment Act [S. 939/H.R. 1802]). Estimates indicate that this legislation can generate $5 billion of private investment in water projects annually, and our hope is that the provision will become law next year.

The Obama administration's National Labor Relations Board, Environmental Protection Agency (EPA), and Department of Labor spent the year circumventing Congress to implement the agenda of big labor and environmentalists. AED helped lead the charge to urge lawmakers to rein in the agencies, including pairing with the National Mining Association to attract bipartisan support for House passage of the Clean Water Cooperative Federalism Act (H.R. 2018). H.R. 2018 prevents the EPA from second-guessing or delaying a state's Clean Water Act permitting and water quality certification decisions, while restoring the long-standing balance between federal and state partners in regulating the nation's waters. Unfortunately, like many of AED's top priorities, the Democratically-controlled Senate is unlikely to act on this legislation.

In spite of the challenging political environment, AED did score some important victories, particularly on tax issues that directly impact our members' costs of doing business.

Just last month, Congress permanently repealed the 3 percent government contractor withholding tax that was scheduled to take effect in 2013. Repealing the tax has been a top priority for half a decade and AED members played a significant role in raising the visibility of the issue with their election representatives. The association was also successful working with a broad coalition to repeal the onerous 1099 reporting requirement from the 2010 health care law, which would require companies to report every transaction with an outside vendor totaling more than $600 on an IRS Form 1099 beginning in 2012. AED continues to lead an ad-hoc coalition of industry groups urging Congress to extend 100 percent bonus depreciation through 2012. Additionally, as members of the LIFO Coalition's steering committee, AED helped maintain the use of LIFO for equipment distributors by ensuring repeal was not used to generate revenue during the debt ceiling debate and "super committee" deliberations.

AED's Government Affairs office also expanded its reach into nontraditional areas, such as energy production. We are now a leading voice in support of the Keystone XL pipeline project and in protecting the use of hydraulic fracturing from EPA overreach.

Finally, AED's political program laid the groundwork for a great 2012 election cycle. Equipment industry leaders dug deep and pushed the PAC to the highest nonelection year haul in its history, contributing $52,550 in 2011.

Our successes in 2011 would not have been possible without the active participation of AED members. If you hosted a lawmaker for a facility visit, participated in an ImPACt 2012 event, sent a letter to Congress, logged onto, or took the time to come to Washington and advocate on the industry's behalf, we thank you.

With control of Congress and the White House at stake, highway reauthorization pending, and comprehensive tax reform on the agenda, next year will not be any easier. We look forward to building on our achievements from the past year and working with you for a successful 2012!

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House Delays Highway Action Until 2012

House Transportation & Infrastructure Chair John Mica (R-FL) announced this month that House action on a new multiyear highway bill would be delayed until early 2012 as lawmakers struggle to find offsets to pay for the bill.

House leaders hoped to move swiftly on legislation reauthorizing the federal highway program, but a packed legislative schedule will not permit the House enough time to complete work before adjourning for the holidays. Instead, Mica announced that he plans to unveil a bill early next year and affirmed the House leadership's commitment to pass a new multiyear highway bill before the latest extension expires on March 31, 2012.

Word on the Hill is that some top GOP House leaders have been pushing Mica to retreat from his commitment to produce a five- or six-year highway bill, arguing that that a shorter, better funded bill is preferable to a longer bill with inadequate investment levels. Stay tuned for further updates.

Senate Committees of Jurisdiction Move Forward
Meanwhile, the Senate committees with jurisdiction over surface transportation legislation are following the Environment & Public Works (EPW) Committee's lead and completing their portion of the highway bill. Last month, the EPW Committee unanimously approved Moving Ahead for Progress in the 21st Century (MAP-21) (S. 1813).

On Dec. 14, the Commerce, Science & Transportation Committee, which has responsibility for the safety components of the highway bill, approved several pieces of legislation comprising most of the panel's contribution to surface transportation reauthorization legislation. The Senate Banking, Housing & Urban Affairs Committee is expected to endorse the transit component of a highway bill before leaving for Christmas. Unfortunately, it doesn't appear that the Finance Committee has found the revenue to make up for the $13 billion shortfall between the projected Highway Trust Fund revenues and the investment levels in MAP-21. Word on the Hill is that the Finance Committee will not act until the beginning of February at the earliest.

The additional delay reinforces how important it is that Congress hears from the "folks back home" about the critical need for a new transportation bill. Be sure to visit to urge your lawmakers to support critical investments to our nation's infrastructure.

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Come See the Political Circus Firsthand - Register Now for AED's 2012 Summit and CONDEX in Washington, D.C.

If you're reading Washington Insights, you know that what's happening in the nation's capital can have a big impact on your company and industry. That's why politics will be front and center at the 2012 AED Summit in Washington, D.C., in January.

Summit speakers include Tom Donohue, president of the U.S. Chamber of Commerce, the nation's premiere business lobbying organization, and renowned political pundit Tucker Carlson, who will be sharing his prognostications about the critical 2012 elections. Both will provide new insights about the inner workings of government, the issues that matter to you, and what you can do to influence the process.

Donohue and Carlson are just two of the many good reasons to attend the 2012 Summit. To learn more and register now, click here.

We know that you come to the Summit to do business with your suppliers and network with your distributor colleagues, so aside from our top-flight political speakers, we haven't included any formal government affairs programming on the agenda. But don't let that stop you from getting personally engaged in policy making.

If you want to take advantage of your presence in Washington, D.C., to connect (or reconnect) with your congressional offices, let us know. AED's Government Affairs team is standing by to help you set up and prepare for meetings on Capitol Hill. If you're interested, shoot an e-mail to AED Senior Director of Government Affairs, Daniel Fisher. If not, we'll see you back at AED's April Fly-In.

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Super Committee Failure Could Mean Cuts to Federal Infrastructure Investment

The failure of the bipartisan congressional "super committee" to produce a plan for solving the nation's fiscal and budgetary crisis will trigger a $1.2 trillion across-the-board defense and nondefense discretionary spending cuts.

The spending rollback is set to begin in 2013 through a process known as sequestration. Though the exact impact of the process is unknown at this time, its effect will be far reaching.

Federal infrastructure programs, such as the Clean Water and Drinking Water State Revolving Fund programs will likely see reductions. Combined with recent drops in investment levels, the new cuts will be particularly damaging. The exact impact on federal programs with dedicated revenue streams, such as the highway program (Highway Trust Fund), is still unknown.

The sequestration process creates a set of discretionary spending caps and triggers mandatory spending cuts spread over a nine-year period. In 2013, cuts will be made from all congressionally approved discretionary and mandatory spending. Beginning in 2014, discretionary caps will be lowered and spending will be cut from all categories not exempted by law (i.e., Social Security, Medicaid, veterans programs, refundable income tax credits, and programs with dedicated revenue streams such as the Highway Trust Fund).

The automatic cuts are required by the Budget Control Act (BCA) of 2011, the deal reached earlier this year to raise the national debt ceiling. Under the law, House and Senate leadership appointed members to the super committee who were tasked to come up with a plan containing at least $1.2 trillion in cuts to the federal budget. The final compromise was to be voted on by both chambers. As an incentive for lawmakers to reach a deal, any failure to make the required cuts would result in the automatic reductions necessary to reach the goal.

While the super committee's failure has triggered sequestration, it is unclear what, if any, impact the process will have. Many members of Congress have indicated their desire to avoid the cuts envisioned by sequestration by creating new laws to reduce or eliminate the impact of the BCA's requirements.

AED will continue to remind Congress of the important difference between wasteful government spending and critical investments in infrastructure. The threat of the cuts highlights the need for sustainable and dedicated funding for infrastructure investments and for new and innovative approaches to financing that capitalize on public-private partnerships.

Stay tuned for further developments on the sequestration process and the impact it will have on federal infrastructure programs.

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U.S. and Canada Issue Action Plans for Improved Infrastructure and Regulatory Cooperation

On Dec. 7, President Barack Obama and Prime Minister Stephen Harper announced a U.S.-Canadian agreement to implement two action plans designed to speed up legitimate trade and travel, improve security in North America, align regulatory approaches between the two countries, and improve border infrastructure.

The Action Plan on Perimeter Security and Economic Competitiveness focuses on improving infrastructure security and facilitating trade. The plan calls for developing a joint Border Infrastructure Investment Plan that will ensure funding for important investments in physical infrastructure to facilitate surface transportation and reduce congestion at border crossings.

Examples of joint infrastructure projects include upgrades to many customs plazas for additional inspection lanes and booths, as well as new and expanded roads, highways, and bridges to connect the countries. Canada's priority projects will be in Emerson, Man.; Lacolle, Que.; Lansdowne, Ont.; North Portal, Sask.; and Peace Bridge, Ont. The U.S. priorities will be Alexandria Bay, N.Y.; Blue Water Bridge, Mich.; Lewiston Bridge, N.Y.; and Peace Bridge, N.Y.

The two leaders also unveiled the Action Plan on Regulatory Cooperation to reduce trade barriers and create economic cooperation by aligning regulatory approaches in several areas, including transportation, agriculture, and the environment. Given the integrated nature of U.S. and Canadian relations, breaking down regulatory barriers between the two countries will make it easier for firms and manufacturers to invest and do business on both sides of the border.

The agreements are a continuation of the ongoing Beyond the Border initiative announced by Obama and Harper earlier this year to enhance cross-border cooperation.

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NLRB Blocked, Withdrawn, and Still Imposing

On Nov. 30, the House approved the Workforce Democracy & Fairness Act (H.R. 3094), by a vote of 235-188.

H.R. 3094 addresses recent actions by the National Labor Relations Board (NLRB). Specifically, the bill would block the Board from moving forward with its ambush election proposal that would shorten the timeline of organizing elections, denying employees' access to critical information about unions, and stripping employers of free speech and due process rights.

The bill also would reverse the Board's recent decision in Specialty Healthcare, which changed a long-standing precedent on how to determine which group, or "unit" of employees will vote in the union election. The new standard makes it almost impossible for anyone to challenge the bargaining unit chosen by the union and will result in the formation of "micro-unions."

AED joined our partners at the Coalition for a Democratic Workplace on a letter strongly supporting H.R. 3094.

Meanwhile, on the same day, the NLRB voted in favor of considering the ambush election rule in the near future. In a 2-1 vote, the Board adopted a resolution that will serve as the basis for a final rule.

NLRB withdraws Boeing case
On Dec. 9, NLRB dropped a complaint against Boeing after the company reached an agreement with the labor union International Association of Machinists and Aerospace Workers (IAMAW).

IAMAW filed the complaint to prevent Boeing from opening a new manufacturing facility in South Carolina, a right to work state, rather than adding new manufacturing capacity in Washington. The union and NLRB alleged that Boeing was retaliating for past labor actions, while the business community decried the NLRB case as an unprecedented example of government overreach.

To many, the deal made between Boeing and IAMAW looks like political blackmail and there are worries that the NLRB will now be a willing pawn to help unions get the upper hand in labor negotiations.

NLRB Causing Confusion with Posting Requirement
In August, the National Labor Relations Board (NLRB) issued a final rule requiring employers to post a notice describing employee's collective bargaining rights.

In October, the NLRB responded to several legal challenges, (including one from AED's partners at the Coalition for a Democratic Workplace) by delaying the rule until Jan. 31, 2012.

Despite the delay, the NLRB Office of the General Counsel is now directing regional NLRB offices to "carry out this important Agency initiative." AED is reminding its members that there is no requirement to post the notice until, at the very earliest, Jan. 31. There is still a possibility that the court may reject the rule or push the effective date back further.

As the association has previously reported, the poster is available from the NLRB website and regional offices.

For a list of frequently asked questions about the rule, click here.

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House Passes Three Bills to Reduce Regulations

The House recently approved three bills that contain significant reforms to the federal regulatory process to reduce burdens on job creators, particularly small businesses.

Approved by a Dec. 1 vote of 263-169, the Regulatory Flexibility Improvements Act of 2011 (H.R. 527) is intended to strengthen the Regulatory Flexibility Act (RFA), the law that requires federal agencies to consider the impact of regulations during the rulemaking process. H.R. 527 would strengthen the RFA by mandating that federal agencies consider both direct and indirect economic impacts of regulation while also making it easier for companies to improve RFA compliance.

On Dec. 2, the House also approved the Regulatory Accountability Act of 2011 (H.R. 3010), 253-167. The bill attempts to restore the need for narrowly tailored regulations by increasing public participation and restricting the use of interim final regulations that don't go through the traditional rulemaking process.

AED joined a diverse coalition of more than 100 businesses and organizations calling for passage of H.R. 3010 so that regulators are held accountable for ensuring that regulations are narrowly tailored, supported by strong evidence, and impose the lowest possible burden.

The House approved the Regulations from the Executive in Needs of Scrutiny (REINS) Act (H.R. 10) on Dec. 7 by a vote of 241-184. The REINS act would check the power of the executive branch, requiring congressional approval before implementing any regulation with an economic impact of more than $100 million. An amendment to the bill offered by Rep. Pete Sessions (R-TX) would also require federal agencies to consider the potential employment effects of any rule submitted to Congress under the act.

Having now passed the House, the measure will await action in the Senate where Sen. Rand Paul (R-KY) has introduced a companion measure (S. 299). However, Senate Majority Leader Harry Reid (D-NV) indicated that the Senate will not consider the legislation, and the Obama administration pledged to veto the REINS Act should it be approved by the upper chamber.

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Buy America Strikes Back

Under the guise of a "major proposal to create American jobs," the Democratic leadership of the House Transportation & Infrastructure (T&I) Committee rolled out new Buy America legislation on Dec. 1. Among other things, the Invest in American Jobs Act (HR 3533) would:
  • Strengthen existing Buy America requirements for highways, bridges, public transit, rail, and aviation infrastructure and equipment to ensure that all of the steel, iron, and manufactured goods used "for" these projects are produced in the United States
  • Apply Buy America requirements to other transportation and infrastructure investment, including rail infrastructure grants, loans, and loan guarantees, Clean Water State Revolving Fund grants, and Economic Development Administration (EDA) grants
Federal agencies could waive Buy America requirements if the secretary or administrator of the appropriate department or agency finds that applying the Buy America requirements would be inconsistent with the public interest; the steel, iron, or manufactured goods is not produced in the United States in sufficient and reasonably available quantities or to a satisfactory quality; or the use of steel, iron, and manufactured goods produced in the United States for the project will increase the total cost of the project by more than 25 percent.

However, federal agencies would be required to justify any proposed waiver of the Buy America requirements and allow public comment on any proposed waiver prior to it taking effect. The bill also requires that Buy America requirements be applied in a manner that is consistent with United States obligations under international agreements.

House Highways & Transit Subcommittee Ranking Member Peter DeFazio (D-OR) said, "This is a challenge to the Republicans. Adopt our Buy America requirements as part of the surface reauthorization bill."

AED has a long-standing position against Buy America legislation, which we think will unnecessarily drive up project costs and make public construction less efficient. The association led efforts in 2008 to ensure that the Buy America provisions in the stimulus bill didn't apply to manufactured goods used "on" stimulus projects, which would have been a compliance nightmare for AED members and their contractor customers.

Given that Republicans control the House, the Buy America language is unlikely to have legs in the current Congress. However, as long as the unemployment rate remains high, lawmakers will look to score political points by advocating policy positions that, however irresponsible, appeal to certain constituencies. In the months ahead, AED will engage members of Congress in both parties to help them understand why, in the 21st century, protectionist legislation like Buy America simply doesn't make sense.

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Farewell to the AED Washington Education Fund

The Board of Directors of the AED Washington Education Fund (AED WEF) voted on Dec. 9 to shut down the organization and transfer all assets to AED to be used solely for government affairs advocacy purposes.

For several decades, the WEF and its predecessors, the AED Political Education Fund, collected contributions from distributors and manufacturers to support lobbying coalitions, AED's grassroots development, and other Washington-related activities. However, as government affairs has surged to the top of the AED value proposition, the Board of Directors determined that it made more sense to bring all advocacy expenses into the main AED budget. In addition to more transparency and efficiency gains from not having to run a separate legal entity and engage in separate fundraising activities, the end of the WEF will help eliminate confusion between that entity and the AED Political Action Committee, the association's political arm.

We thank the scores of AED members that contributed to the WEF over the years. Your contributions helped make AED one of the nation's foremost construction advocacy organizations in the nation. We're confident that our new, simplified government affairs structure will allow us to be even more successful on your behalf in the years ahead.

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