The experiences of the construction industry in 2010 could have been called “the year of the stimulus.” It also could have been called “the year of ups and downs.” While federal stimulus money may have saved many construction jobs, it didn’t stabilize the industry in the way some predicted or hoped.
For HVAC and sheet metal contractors, 2010 has “been a mixed bag,” said Charlie McCrudden, vice president of government relations for the Air Conditioning Contractors of America.
He explained that many ACCA members had their best year ever as they took advantage of tax credits and local utility incentives in order to boost sales. However, contractors in other regions of the country may have found business to be more difficult. For example, McCrudden said that weather in the Northwestern U.S. was cooler than usual, making summer sales more challenging.
With 2010 coming to a close, many contractors are wondering what 2011 will have in store. According to McCrudden, making economic predictions for the coming year is difficult, especially with the number of legislative issues that are in limbo.
PoliticsBy the time this issue of Snips is released, we will know the makeup of the new Congress. For the past several months, many have speculated whether Democrats would keep their majorities or if Republicans would take over the House or Senate after the Nov. 2 election. But no matter who controls Congress, there are certain issues important to contractors and small business owners that the ACCA says need to be addressed. But will they be addressed during the post-election period usually called lame duck?
Next month, three important tax issues are set to expire - personal income tax cuts, the elimination of the estate tax and energy-efficiency tax credits. With the fate of these taxes undetermined, some contractors may have questions on how to best run their business next year.
The tax cuts that were passed during President George W. Bush’s presidency are set to go back to their pre-cut levels Jan. 1. President Barack Obama would like to see many of those tax credits stay, but only for individuals making less than $200,000 a year.
McCrudden said the ACCA has lobbied for all of the tax cuts to be made permanent. The reason, he explains, is because some contractors use personal income tax forms when filing their business taxes. If the tax cuts expire, “those folks will see business taxes go up,” he said.
The estate tax is also scheduled to come back by the end of the year. It deals with the worth of estates and money that is left behind when an individual dies. This can include business assets. In 2002, Congress voted to gradually eliminate the estate tax, and over the past eight years the amount that is taxed on an estate has gotten smaller and smaller. In 2010, there was no estate tax at all. By Jan. 1, the estate tax will return to pre-2002 rates, and McCrudden said this tax is damaging to business owners, especially small contractors.
A dangerous scenario, according to McCrudden, is if a contractor purchased a business property in an area where property values are increasing. If the owner dies after many years of appreciating property values, the taxes on the estate could be more than the survivors can afford.
McCrudden said that this has happened with family-owned businesses, causing the family to sell off parts of the business just to pay the taxes.
Energy efficiencyJan. 1 will also see the end of the energy tax credits. These credits benefited many contractors and homeowners by providing a tax credit of up to $1,500 for the installation of energy efficient HVAC systems.
“We (ACCA) are lobbying to get this extended,” McCrudden said.
The question of whether the tax incentive will be extended or not has caused a ripple effect of uncertainly throughout the industry. He explained that if contractors know the incentive will still be there, they can start creating business plans to promote and market more energy efficient systems. Right now, distributors and wholesalers are at an impasse.
“Distributors are making decisions now about what equipment they will sell,” McCrudden said. And manufacturers are on hold when it comes to the production of these systems and how many they will ship to suppliers.
Even if all three of the tax issues expire before January, McCrudden said there is a possibility that Congress could address the taxes at a later date and make them retroactive.
With all of the uncertainty, McCrudden said there are definite opportunities contractors can look into now before the year is over.
“Take advantage of incentives that are out there to invest in your small business,” he said.
This includes writing off equipment purchased for the business. He also said that contractors should look at bonus depreciation. This allows contractors to buy shop equipment or a new vehicle and write off part of the depreciation at tax time. For example, if a contractor buys a truck and it depreciates by half, the contractor can write off that amount on his or her taxes.
Besides taxes and financing, McCrudden is urging contractors to get involved in politics, especially at the local level. He said contractors should work with local government and utility companies to explain how HVAC can help save on energy.
“HVAC provides the greatest gains in efficiency in homes,” he said. “We want people to use less energy.”
By actively promoting this message to local government and utilities, McCrudden said the ACCA believes that energy tax incentives can be sustained.
InvolvementThe new HM100 pin moisture meter is a pPolitical involvement in 2011 is also going to be important to the Sheet Metal and Air-Conditioning Contractors’ National Association.
SMACNA says there will be some economic recovery next year, but it will be slow and uneven. With this in mind, Vince Sandusky, SMACNA’s chief executive officer, says “predatory pricing by the competition will continue beyond 2011.”
When times are economically bad, Sandusky said that there can be lax enforcement of building standards. SMACNA not only wants to make sure that these standards are enforced, but that Congress continues to work on energy and efficiency standards next year.
“SMACNA worked to get our standards included in the legislative language of the various efficiency bills passing Congress this past year,” he said. “We will continue to do the same in 2011.”
The association worked hard over the past year for the passage of “Building Star” legislation. The legislation would provide incentives to the owners of commercial, industrial and multi-family buildings. Like the already-passed Home Star legislation, incentives and rebates would be available for owners that invest in high-efficiency HVAC equipment. The legislation only made it to committee hearings and never came up to a vote. SMACNA is hoping that over 2011, the legislation can be brought to the House floor for a vote and eventually signed into law by the president.
“These ‘star’ programs are a national action plan to renovate 50 million buildings, save energy, and create jobs with the goal of investments in building efficiency retrofits,” Sandusky said.
He also said that Building Star would not only address the much-needed energy-efficiency issues in U.S. buildings, it would also help employ SMACNA contractors.
“This past year, SMACNA led the charge with a message of ‘create jobs and cut energy use’ at a variety of high-profile public conferences and meetings,” Sandusky added. “These appearances helped establish the SMACNA contractor as the leader in sustainable building technology.”ortable unit for detecting the moisture levels of materials.
Pension protectionsBesides energy issues, SMACNA is also very focused on pension reform. In 2006, the Pension Protection Act was passed, which included several provisions that employers must follow when it comes to funding pensions. The goal of the act was to stop some employers from underfunding its pensions. It also gave employees the opportunity to contribute more to their own pensions.
SMACNA said that the act is set to expire in 2014. The association says it is going to spend the years prior to 2014 educating Congress and SMACNA members on the importance of pension issues.
“Our pension task force has been meeting, discussing the issues with experts and has already begun the process of educating Congress and other potential allies on the need to act,” Sandusky said. “To their credit, the Sheet Metal Workers’ International Association, our labor partners, is also in agreement the system needs to be improved.”
The PHCC is hoping that 2011 will be a year of more involvement for its members. More specifically, the association’s president, Frank Maddalon, is urging members of the Plumbing, Heating, Cooling, Contractors-National Association to also become more involved with lobbying.
While some issues in Congress are likely to die during the lame-duck session, Maddalon is still encouraging members to get their message out to Capitol Hill. These messages not only include topics important to HVAC contractors, but to small business owners.
In a recent PHCC president’s column, titled “You Can’t Do It Alone,” Maddalon said that there are always issues that could negatively impact small business owners.
“Everyone - from our largest member to the one-man shop - is affected by what happens on Capitol Hill,” Maddalon wrote in his column.
The PHCC is also pushing the need for training and education. The association is currently recruiting new members with the slogan “Without PHCC, you stand alone.”
Maddalon wrote in his column that during his year in office, the PHCC will offer HVAC and plumbing contractors with training resources.
“Through good times and bad, it is crucial that PHC contractors continue to invest in training and education, and PHCC is the perfect place to find those programs,” he wrote.