Capitol Hill

On Sept. 30, 2003, Sen. Jim Bunning (R-Ky.), a member of the U.S. Senate Committee on Finance, introduced S 1679, the Realistic Roofing Tax Treatment Act of 2003, which would shorten the tax depreciation schedule for commercial roof systems from the current 39-year schedule to 20 years. Bill co-sponsors are Sens. Saxby Chambliss (R-Ga.), Jeff Sessions (R-Ala.) and Jim Talent (R-Mo.), and more are expected to sign on to the bill this year.

In the U.S. House of Representatives, the companion bill, HR 3310, was introduced Oct. 16, 2003, by Rep. Mark Foley (R-Fla.), a member of the House Committee on Ways and Means. He was joined by Reps. Spencer Bachus (R-Ala.), Artur Davis (D-Ala.), Phil English (R-Pa.), J.D. Hayworth (R-Ariz.), Rubén Hinojosa (D-Texas), Stephanie Tubbs Jones (D-Ohio), Ron Lewis (R-Ky.), Howard "Buck" McKeon (R-Calif.), Jim Nussle (R-Iowa), Adam Putnam (R-Fla.), Clay Shaw Jr. (R-Fla.) and Jerry Weller (R-Ill.). Original co-sponsors also include Reps. Don Manzullo (R-Ill.) and Nydia Velázquez (D-N.Y.), the chairman and ranking member of the House Committee on Small Business, respectively. More co-sponsors are expected to add their names to the bill this year.

The bill's passage would create an economic incentive for building owners to replace their roof systems more frequently. This not only would boost business for roofing contractors, but research performed by Ducker Worldwide, Bloomfield Hills, Mich., and commissioned by the National Roofing Foundation's The Roofing Industry Alliance for Progress shows the bill also would create 40,000 new jobs while making buildings more energy-efficient. (Read "Evidence of depreciation," November 2003 issue, page 28, to learn about the Ducker Worldwide study.) It is impossible to say when these bills will pass, but it would be terrific to get them passed in this Congress.

Energy legislation

On Nov. 18, 2003, HR 6, the Energy Policy Act of 2003, passed the House by a bipartisan vote of 246-180. HR 6 was filibustered in the Senate, meaning 60 votes are needed for passage, and will be taken up again early this year. NRCA is a member of the pro-business Alliance for Energy and Economic Growth, which is lobbying for passage of the bill in its entirety.

NRCA and the Polyisocyanurate Insulation Manufacturers Association worked to include a section in the bill to provide a tax deduction for energy-efficient commercial buildings (see "Capitol Hill," September 2003 issue, page 16). The commercial building tax incentive will provide a tax deduction equal to the "energy-efficient commercial building property" expenditures, such as roof systems, up to a limit of $1.50 per square foot related to the construction or reconstruction of qualifying commercial buildings.

FASB

This past summer, the Financial Accounting Standards Board (FASB) issued a new accounting standard, Statement of Financial Accounting Standards (FAS) 150, which would have required nonpublic, non-U.S. Securities and Exchange Commission-registered companies to classify as a liability any financial instrument issued in the form of shares that is "mandatorily redeemable," or buy/sell agreements. A financial instrument is "manditorily redeemable" if it requires the issuer to redeem it by transferring its assets at a specified or determinable date upon an event that is certain to occur. Such events include the death or termination of employment of an individual shareholder.

The requirement of FAS 150 to recognize this kind of liability essentially would wipe out on paper the net worth of many construction firms, especially those using an Employee Stock Option Plan. This would have a devastating effect on the ability of such companies to bid for work because they typically are required to obtain surety bonds and credit to bid on projects. Sureties require nonpublic companies to have binding buy/sell agreements to provide for orderly continuation of business. The federal government and many state and local governments demand surety bonds for contractors, and some states demand a positive net worth for companies bidding on public work.

FAS 150 also would put nonpublic construction companies at a disadvantage with public companies because public companies are not as dependent on mandatory repurchase agreements. They sell shares to the public that are not required to be repurchased by the companies at any time.

NRCA and other construction associations communicated with Congress about the negative consequences of FAS 150, which was scheduled to go into effect Dec. 15, 2003.

On Nov. 7, 2003, FASB announced, "The classification, measurement and disclosure provisions of Statement 150 are deferred indefinitely pending further board action."

Craig S. Brightup is NRCA's vice president of government relations.