Legal and Regulatory

Merit Shop Construction Sees Wins, Some Drawbacks, in End-of-Year Legislation

While hurtling toward the 2020 elections, before the end of the year, Congress managed to enact must-pass spending bills and reauthorize the National Defense Authorization Act, while the House approved President Donald Trump’s signature trade deal with Mexico and Canada amid an impeachment vote.
By Peter Comstock
February 3, 2020
Topics
Legal and Regulatory

While hurtling toward the 2020 elections, before the end of the year, Congress managed to enact must-pass spending bills and reauthorize the National Defense Authorization Act, while the House approved President Donald Trump’s signature trade deal with Mexico and Canada amid an impeachment vote. It was a somewhat productive ending to a slow legislative year, and the actions taken by Congress and the House will certainly impact the construction industry in 2020.

The all-encompassing spending bills included tax extenders, retirement modernization and the repeal of Obama-era taxes.

The last-minute inclusion of tax extenders provides relief for the construction industry through the 179D deduction for energy-efficient buildings, which allows a deduction of up to $1.80 per square foot for the installation of energy-efficient property; the New Markets Tax Credit, which attracts private capital into underserved, low-income communities; and the Work Opportunity Tax Credit, which is available to employers for hiring individuals faced with significant barriers to employment.

Negotiations also allowed for the House-passed Setting Every Community Up for Retirement Enhancement (SECURE) Act to be rolled in to the year-end spending bills. The SECURE Act offers tax breaks aimed at expanding retirement savings and contains a provision that would expand 529 education savings plans for registered apprenticeship programs only, unfortunately ignoring the billions of dollars that merit shop construction has invested in industry-accepted programs that provide thousands of Americans with critical opportunities in construction.

The Cadillac tax on high-cost health plans, the health insurance tax on policy premiums and the medical device tax—all portions of the Affordable Care Act—have been long decried by bipartisan forces and have received numerous pauses and delays in their implementation throughout the years. Providing a full repeal of these unpopular proposals in 2020 will provide relief for U.S. employers and save families thousands of dollars in health care funds over the years.

‘Qualified Apprentices’ and the Trade Deal

Tucked away in the more than 3,000-page NDAA Conference Report for 2020, which authorizes funding for the Department of Defense and military construction projects, are several provisions that will impact U.S. contractors. Most critically, the conference report requires contractors to establish goals for apprentices to consist of 20% of the total workforce employed on a contract and defines “qualified apprentice” as an employee participating in a DOL-registered apprenticeship or certain high-quality, industry-recognized apprenticeship programs.

While not exactly a mandate, there is concern that this type of language, supported by Congress, could set the stage for apprenticeship requirements that would stifle competition and limit smaller businesses from bidding on federal construction projects in the future.

The House was also the critical hurdle for President Trump’s ability to pass a modernized trade agreement with the United States’ two largest trading partners, Mexico and Canada, and after months of negotiations was able to secure support from Democratic leadership that allowed for an overwhelmingly bipartisan support for the deal in the House before the new year.

Of the most pressing issues for Democrats in the deal was enforcement of labor protections to ensure that Mexican workers have fair labor standards and the right to organize. Ironically, 82 Democrats in Congress, in a letter to the U.S. Trade Representative Robert Lighthizer, urged support for the ability of Mexican workers to exercise “a free, secret and personal vote” for union elections and collective bargaining agreements. This is a right that big-labor, many Democrats and some Republicans seek to strip from U.S. workers through their support of the Protecting the Right to Organize Act (H.R. 2474, S. 1306).

The Senate should take up the United States-Mexico-Canada Agreement early this year, helping to ensure certainty in the supply chain and reduce volatility in pricing for building materials from Mexico and Canada to further lift the economy, support more construction projects and help address the much-needed modernization of our nation’s infrastructure.

While the year ahead will be dominated by election coverage, a health care package that is aimed at lowering prescription drug costs, creating more transparency in health care and ending surprise billing of patients could receive bipartisan support and passage in the new year. The bill has received support from Republican and Democratic lawmakers in the House and Senate and would be a step toward reducing health care costs for hardworking Americans. Passage of this measured approach could benefit those on both sides of the aisle who are eager for a win.

by Peter Comstock

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