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  • Tue, June 30, 2020 2:32 PM | Anonymous member (Administrator)

    CIRT joined an effort of business organizations lead by NFIB opposed to the Crapo-Brown amendment requiring “beneficial ownership” reporting requirements to the National Defense Authorization Act (NDAA). The amendment requires small businesses with 20 or fewer employees and $5 million or less in gross receipts to report personally-identifiable information of “beneficial ownership” (individuals who own 25% or more of an entity or individuals who directly or indirectly exercise substantial control of an entity) to the Treasury Department’s Financial Crimes Enforcement Network (FinCEN). Although aimed at smaller entities the proposed new requirements, that are substantially similar to the H.R. 2513, the Corporate Transparency Act of 2019 which passed the House in October and S. 2563, the ILLICIT CASH Act, which has yet to receive consideration in the Senate; set a bad “precedent” with respect to more intrusive and burdensome mandates.  

    The amendment intends to combat money laundering, but imposes a duplicative reporting burden on businesses as they try to recover from an unprecedented economic and public health crises. Small business owners already submit this information to financial institutions, where it is protected by a subpoena. It also risks small business owner privacy as local, state, tribal, and federal law enforcement agencies would have access to this information through requests, eliminating the subpoena protection. Essentially, this amendment intends to shift the reporting burden from financial institutions to small businesses and eliminates privacy protections. [For details see Coalition Letter].


  • Mon, June 15, 2020 2:48 PM | Anonymous member (Administrator)

    CIRT joined a broad based cross-section of businesses to express strong support and appreciation for the provisions enacted in the CARES Act relating to net operating losses (NOLs).  The letter to leaders of the Senate Finance Committee observed how beneficial these changes were at a challenging time for many industries, providing them critical liquidity for operations. But it also raised alarm bells pointing out that: “We are concerned that some in Congress are seeking to reverse these changes and would urge you to leave them in place.”  As noted in CIRT’s story on (04/24/2020) regarding this topic: the ability to carryback NOLs is a critical component of a well-operating income tax system; having long been a bipartisan tool utilized by lawmakers routinely applied during times of economic distress.  [For details see Letter to Senate Finance Committee].

  • Tue, June 09, 2020 1:24 PM | Anonymous member (Administrator)

    CIRT has joined a cross-section of businesses in supporting bipartisan legislation to improve and enhance the ERTC program.  To this end, a bill has been offered by Reps. Stephanie Murphy and John Katko called: the JOBS Credit Act (H.R. 6776) to address this matter.  Building on the ERTC provision included in the Coronavirus Aid, Relief, and Economic Security (CARES) Act (P.L. 116-136 (Section 2301)), the JOBS Credit Act would include a number of policy enhancements, such as:

    • An expansion of the credit percentage from 50 percent to 80 percent of qualified wages;
    • An increase of the per-employee limitation from $10,000 for all calendar quarters to $15,000 per calendar quarter (and an aggregate of $45,000 for all calendar quarters);
    • A phased-in credit, which will allow employers with more than a 20 percent decline in gross receipts to be eligible for a portion of the credit; and
    • Improved coordination between the ERTC and the Paycheck Protection Program so employers can be eligible for both programs, but with guardrails in place to prevent “double dipping.”

    Background:
    The CARES Act created an Employee Retention Tax Credit (ERTC) to help provide liquidity to employers trying to cope with the impact of government shut-down orders and declining revenue. The ERTC was a welcome aid for employers attempting to retain their workforce or hoping to be able to rehire furloughed employees when able to so; however, the initial ERTC provision was limited in the amount of credit provided, employer eligibility for the credit, and ability to use the ETRC and the PPP.

    For details see the Coalition Letter.

  • Wed, May 20, 2020 2:50 PM | Anonymous member (Administrator)

    On behalf of its member firms and the design/construction industry, CIRT has joined a cross-section of organizations and businesses on two U.S. Chamber-led letters:

    (1) The first letter joins a COVID 19 working group urging Congress to enact temporary protections from the expected surge of coronavirus liability lawsuits against employers and others. The letter does not recommend any specific legislation but stresses the need for Congress to act. [See letter for details]. 

    (2) The second short letter simply calls on Congress and the Administration to make key changes to the PPP rules to provide more flexibility and clarity for borrowers. Namely, to: (1) repeal the Paycheck Protection Program’s (PPP) 75%-25% rule; (2) extend the eight-week period for purposes of calculating loan forgiveness,; and (3) extending the June 30th rehiring and restoration of pay safe harbor date.  These matters are of particular importance to smaller businesses and S-Corps that will likely be more impacted by the PPP program. 

  • Tue, May 05, 2020 1:38 PM | Anonymous member (Administrator)

    CIRT has joined an AGC lead coalition of design and construction industry associations/groups to call attention to an IRS notice issued regarding taxable aspects of the Covid-19 (Wuhan virus) relief package.  The Internal Revenue Service (IRS) issued Notice 2020-32 is at odds with the legislative text of the CARES Act.  Section 1106(i) of the Act states with regard to the “taxability” of the loan forgiveness available to PPP recipients, any amounts forgiven by a PPP loan “shall be excluded from gross income” (emphasis added). The impact of the IRS’s interpretation is to undue not only the intent but the effect of the Congressionally passed provision, thus undermining the value of the loan program by increasing the taxes companies will owe in the future.  [Details see Letter to U.S. Congress re: IRS].

  • Mon, May 04, 2020 1:37 PM | Anonymous member (Administrator)

    With the vast numbers of unemployed Americans mounting (over 30 million as of May 1st), the Business Coalition for Fair Competition (BCFC), which CIRT is a founding member, has called upon Attorney General William P. Barr to curtail the federal government corporation operating under the trade name UNICOR. This program uses federal inmates to produce goods and services that generate annually more than $483 million.  But more important, it is a mandatory source of federal supply for these goods and services, meaning it is a sole source monopoly.  Under normal circumstances, private business could forego these opportunities and dollars, but the country is far from being in normal times.  Every dollar in the private sector is vital in saving a private sector job.  [Details see Letter to Attorney General Barr].

  • Fri, April 24, 2020 12:22 PM | Anonymous member (Administrator)

    Allowing businesses to use losses to offset income earned in prior years (Net Operation Loss or NOL) is a longstanding anti-recession policy with solid bipartisan support. It was adopted after the 9/11 terrorist attacks, after Hurricane Katrina, and again following the financial crisis (Great Recession of 2009-10). It is simply a way to give businesses suffering losses the ability to recognize those losses more quickly. Thus, if companies are being forced to sell assets this year to raise capital to keep the businesses running, the CARES Act helps by allowing these businesses to offset any capital gains they realize against their active business losses, reducing the tax hit at the end of the year. Using active business losses taxed at high rates to offset capital gains taxed at low rates is extremely inefficient and not something that would happen in normal times. But, as the S-Corporation Association, points out these are not normal times and businesses need the liquidity.

    This benefit is limited to "trade or business" losses that have already passed through the passive, at-risk and other tests. Losses from investments in passive assets, like those made by many hedge funds, do not benefit. Moreover, any losses claimed this year will not be available in the future. The NOL and loss limitation relief are primarily timing benefits. Lower taxes in 2020 will equal higher taxes in 2021 and beyond. Anybody claiming not to know the bipartisan NOL provision was part of the relief package simply wasn't paying attention, or is playing fast-and-loose with the truth for political reasons.


  • Tue, April 07, 2020 1:46 PM | Anonymous member (Administrator)

    With the forced shut-down of U.S. business activities as part of the fight against the COVID-19 (Wuhan virus) pandemic, Administration and Congressional leaders are seeking ways to buoy the economy.  Infrastructure, one of the long-term mainstays or stimulating the economy, has come back to the fore after being dormant during the hyper-partisan political wrangling in D.C.  The President has indicated interest in a possible $2.0 trillion dollar package aimed at infrastructure initiatives, while House Speaker Pelosi has focused more on including elements of the “Green New Deal” and other Dem-leaning policies vs. a precise figure.  Notwithstanding, the “devil” will be in the details, if and when another pandemic related package is hammered out.

    Over the years, CIRT has advocated for critical infrastructure spending levels (the driving element in any initiative), not just at the federal level and not just from public sector sources.  The CIRT Board adopted a “Strategic-Vision for Infrastructure in the United States” (hereinafter “Vision for Infrastructure”) in November 2017 that specifically called for, as one of five objectives:  

    FUNDING PRIORITY” Organize and expand capital funding and finance methods in a manner that matches the magnitude of the infrastructure investment gap.

    Strategy 1a – Authorize expanded alternative financing models including user/mileage fees, infrastructure banks, and/or infrastructure bonds in conjunction with mechanisms to incentivize private equity investment;

    Strategy 1b – Support capital budgeting and necessary funding levels (gas taxes, and other levies etc.) to enhance/expand current infrastructure funds, such as the Highway Trust Fund;

    Strategy 1c – Undertake a one-time repatriation of U.S. company profits held overseas at a lower, competitive tax rate to seed an infrastructure investment fund;

    Strategy 1d – Expand funding and eligibility for current federal government credit assistance programs by increasing the TIFIA authorization to $1B/year immediately, and $2B/year within 5 years. Raise the caps on Private Activity Bonds (PABs) and expand the range of project assets (government buildings, water systems) that are eligible for PABs. Raise the authorization of WIFIA to the full authorization amount of $50M/year and extend the program authorization timeline through 2030;

    Strategy 1e – Combine current Congressional infrastructure legislative jurisdictions into a single committee responsible for prioritizing all infrastructure spending needs (across sectors) in line with clearly stated federal policy objectives;

    Strategy 1f – Review and/or sunset funding mechanisms which are no longer working for modern infrastructure [such as: HUTF, SRF, annual budgeting, and OMB scoring for infrastructure].

    For details on all the Objectives read CIRT's “Strategic-Vision for Infrastructure in the U.S.


  • Tue, March 31, 2020 10:40 AM | Anonymous member (Administrator)

    Congress approved the “Coronavirus Aid, Relief, and Economic Security Act” (CARES Act) to provide financial assistance to individuals and businesses on March 27, 2020.  At over $2 trillion, the Act is the largest package ever passed with a mirage of provisions and complex elements that will impact individual employees and firms, some within the design and construction community.  Eligibility requirements are key to many of the provisions and may take some time to be better understood, but as of now, here are some key features:

    (1) Elements: CARES Act’s economic stimulus package includes more than $500 billion of federal funding across three basic categories: (i) grants and direct lending dedicated to specific nonfinancial industries, such as the airline and national security sectors; (ii) a significant expansion of eligibility and other aspects of lending programs administered by the Small Business Administration, and (iii) funding for several lending programs administered by the Federal Reserve. [NOTE: Financings under these programs place a number of requirements on the businesses that receive federal aid].

    (2) Direct Lending & Grants: The Treasury Secretary has broad discretion to make loans and loan guarantees to air carriers and to businesses critical to maintaining national security. The loans are only available to eligible businesses that have incurred or expect to incur covered losses that jeopardize the business, and all recipients must be organized and conduct a majority of their operations in the U.S.  [Presumably virtually no A/E/C firms will likely fall within this category].

    (3) Federal Reserve Lending Programs:  The Act provides additional support to the Fed’s lending programs if such programs: restrict stock buybacks, dividends and capital contributions, limit executive compensation, and prohibit loan forgiveness. (However, these requirements may be waived by the Treasury Secretary of the Treasury).  Moreover, the program targets U.S.-eligible businesses with between 500 and 10,000 employees, subject to: prohibitions on outsourcing and offshoring jobs for the term of the loan plus two years. The Federal Reserve may also establish a Main Street Business Lending Program or facility that supports lending to small and mid-sized businesses on such terms and conditions that are consistent with its authority under the Federal Reserve Act.  [Depending on circumstances, this program could include A/E/C firms if they meet the criteria and are willing to accept the prohibitions and other dictates mandated].

    (4) Small Business Paycheck Protection Programs: CARES Act expands the ability to obtain loans under Section 7(a) of the Small Business Act through a new $349 billion Paycheck Protection Program. Under the program, small businesses, other business concerns, etc. that have fewer than 500 employees; self-employed; sole proprietors; independent contractors; and businesses in the accommodation and food services sector with fewer than 500 employees per location, are eligible for small business loans to cover payroll; health care costs; mortgage interest payments, rent and utility payments; and interest on pre-existing debt obligations.  [Many A/E/C firms can meet this size standard, albeit, not many of CIRT’s members would fit this requirement].

    (5) Capital Markets:  Although the Act provides significant financial assistance through loans, ultimately many businesses are expected to require accesses to the capital markets. At least $450 billion is being made available by the Federal Reserve to provide liquidity to the financial system — including: facility to purchase certain new issuances by eligible issuers, potentially enabling these issuers to successfully market securities offerings that may otherwise be too costly or lack adequate investor interest in current market conditions. NOTE: the act does not limit purchases to debt obligations.  [Presumably, the A/E/C community may be able to access this liquidity for their or client needs].

    (6) Real Estate Elements: The vast majority of the provisions are designed to economically support individuals, businesses and hard-hit industries in an effort to enhance their ability to remain solvent and cover operational expenses, including rent and debt service.  This is delivered through various means such as: in the form of emergency cash infusions, financing availability, loan forgiveness/forbearance, tax benefits, and supplemental awards designed to help owners, landlords, operators, borrowers and tenants survive. (See, the Act for a more detailed set of sub-provisions that relate to this element).  NOTE: Notwithstanding the Act’s assistance, contracts likely will need to be restructured and renegotiated; thus requiring property owners and lenders collaborate.  [Presumably the A/E/C community could be on either side of this equation].

    (7) Tax Elements:  Certain deduction limitations imposed by the Tax Cuts and Jobs Act (TCJA); regarding: (i) Corporate taxpayers may carryback Net Operating Losses (NOLs) arising in 2018-2020 for up to five years (under the TCJA, no carrybacks were allowed); (ii) for 2020 and years prior, corporations and pass-throughs may fully offset their income using NOLs (the TCJA imposed an 80% cap); (iii) For 2019-2020, taxpayers may generally deduct interest up to the sum of 50% of adjusted taxable income plus business interest income (instead of the 30% limit under the TCJA); and (iv) Taxpayers may also elect to use their 2019 adjusted taxable income for determining their 2020 interest deduction.  [These tax changes will affect any eligible A/E/C firms].

    (8) Payroll Tax Credit/Deferral of Payroll Taxes: The Act provides a refundable payroll tax credit to eligible employers for 50% of “qualified wages” paid to employees; and also permits all employers and self-employed individuals to defer payment of the employer portion of payroll taxes owed on wages paid. An employer is eligible for the payroll tax credit if, during any calendar quarter of 2020, it has operations fully or partially suspended due to a governmental order related to COVID-19, or it has a decline in gross receipts of more than 50% compared to the same quarter of the prior year.  For employers with more than 100 full-time employees, “qualified wages” only covers wages paid to those employees not providing services due to a COVID-19 impact as described above; and will be limited to the first $10,000 of compensation paid to an employee. This credit is not available to employers who receive a Paycheck Protection Program loan. [Appears applicable to any A/E/C firm meeting the eligibility requirements].

    (9) Unemployment Insurance Benefits and Loans to Employers: The Act expands eligibility for unemployment insurance for workers who are displaced due to COVID-19 in a number of ways: (i) It creates the Pandemic Unemployment Assistance program, which provides up to 39 weeks of combined federal and state unemployment assistance between January 27, 2020, and December 31, 2020, to individuals, including independent contractors, who are otherwise not eligible for, or have exhausted, other state or federal benefits; (ii) One of the most controversial elements of the new Federal Pandemic Unemployment Compensation provides an additional weekly $600 federally funded payment
    for up to four months to individuals already collecting state unemployment insurance payments; (iii) Further it provides federal funding to states to cover the cost of the first week of unemployment benefits for states that choose to waive the typical one-week waiting period; and (iv) In addition, certain federal funds are made available to states to fully fund work share programs, under which employees receive partial unemployment benefits if work hours are reduced but not eliminated by their employer.  NOTE: See above for support to employers covering payroll.  [Unfortunately the disincentive of unemployment wages possibly higher than to work, will apply to the A/E/C firms and their employees].

    The precise procedures for employees to seek unemployment insurance benefits will depend greatly on individual state processes and requirements.  Given the controversial $600 federal expansion SUPPLEMENTS or is added to the state unemployment insurance levels, it won’t necessarily exceed typical prevailing wages in all areas and in all instances.

  • Thu, March 26, 2020 2:35 PM | Anonymous member (Administrator)

    Late Wednesday night (March 25th) the U.S. Senate passed 96-0 an unprecedented relief/spending package of over $2 trillion in response to the COVID-19 pandemic and its collateral damage to the U.S. economy and employees/businesses.  [See, earlier CIRT story covering the major elements of the legislation].

    Unfortunately included in the package, among other problematic elements, is one that may impact CIRT member firms with respect to potential affects on workforce and wage levels.  A provision in the bill provides that: unemployed remittances may actually come out higher on an hourly basis than the some employees’ standard hourly rates. The danger: it will create pressure or a dynamic whereby this higher rate should become the “permanent” pay level for all the individuals affected by the temporary unemployment rate.

    A group of Senate Republicans tried late last Wednesday night to amend the provision so unemployment only matched or made whole employees, not have them make more unemployed than if working.  Their amendment was doomed to failure when it was required to muster a 60-vote cloture hurdle (meaning to move it to a final vote). This essentially ensured the minority in the Senate was in control of the amendment’s fate (which they promptly killed).

    BACKGROUND

    (1) The “wrinkle” related to the Unemployment Insurance came to light during a 92-minute phone call with the Senators describing the provisions in the bill on Wednesday morning (meaning it was slipped in during the final negotiations) and appears not have been in earlier versions.

    (2) The White House/Treasury Secretary, Steve Mnuchin, were not in favor of the disincentive of the “one size fits all” approach, which means the same amount of dollars were to be applied across the country even if some areas/sectors standard pay rates are below the unemployment remittance. The Secretary didn’t have the time to put in place a more specific granular mechanism so his bargaining position was weak. [As an aide noted: "Each state has a different UI program, so the drafters opted for a temporary across-the-board UI boost of $600, which can deliver needed aid in a timely manner rather than burning time to create a different administrative regime for each state."]  Certain elements in the negotiation took full advantage of this, to ram through an ideological position that minimum wages should be much higher.  (In other word, they want the pressure to mount to create a potential outcome that forces permanent higher wages across the board – see, Senator Sanders’ comments opposing the amendment).

    (3) As noted, a last minute effort was mounted by a half-dozen Republican Senators to amend the language – but, it failed on a 48-48 vote (it needed 60-votes for the amendment to be considered).  The amendment would have capped unemployment benefits at 100 percent of an individual's salary before they were laid off.

    BOTTOM LINE:
    This is what happens when the Congress goes into crisis emergency mode . . . certain elements will take advantage of the heated circumstances and get through things they wouldn’t have a chance in normal order or legislative business. In essence none of the normal safeguards of a deliberative legislative system were in play.  Unfortunately, with the bill now headed to the HOUSE, it could be a potential minefield for more unrelated spending, policy changes, etc. tucked into must pass legislation.  [Speaker Pelosi has NOT yet committed to a straight up or down vote on the Senate version – at the time of this Update].

    The only silver lining: the provision is only in place for four months.  Hopefully, people won’t be able to exploit it into a claim their permanent wages should be at these elevated levels (calculated to be $23.15 per hour, based on a 40-hour work week).  It does beg the question, if a CIRT firm is back up and running and seeking to put people back on the job, and they refuse so as to take the Unemployment payments instead (for the four months), does the firm have any obligation or incentive to hire them back later? 


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