Why it matters: The R&D amortization issue has been a priority for ACEC’s advocacy efforts due to its significant negative impact on America’s engineering industry.

• With passage of H.R. 7024, the House voted to pause the five-year amortization mandate until 2026.
• This restores the tax code’s traditional approach to incentivize R&D by allowing engineering firms and other innovators to fully deduct R&D investments the year they are incurred.

The bottom line: The House voted overwhelmingly to pass H.R. 7024 by a vote of 357 to 70.  This sends a strong signal to the Senate to follow the House and approve its version of the bill.

What’s next: H.R. 7024 now moves to the Senate. ACEC continues to urge its members to reach out to their Senators to support a yes vote to send the bill to the president’s desk.

And it has been a long time coming – the fulfillment of a promise made more than six decades ago. In 1963, the Bert T. Combs Mountain Parkway opened as a two and four-lane roadway, intended as a high-speed route to connect rural eastern Kentucky with the rest of the state. The project was never completed, creating a chasm – both physical and economic – that divided the state.

Over the years, traffic volume has increased, creating safety issues and congestion that have become the stuff of legend. Last summer, a survey of drivers found that the Parkway was among the most-feared roads in the nation, with hairpin turns and blink-and-you’ll-miss-them offramps. The Mountain Parkway Expansion Project is about improving safety by modernizing the roads, designing safer interchanges to give drivers more time to merge, and eliminating dangerous curves around the mountain. The Project will widen the existing two-lane highway to a four-lane divided highway, making for a safer and more efficient mechanism to move people, goods, and services throughout the state.

In his remarks at yesterday’s event, ACEC Executive Vice President Steve Hall spoke of what he called “transformational engineering,” which is the focus of our Roadshow. The use of the word “transformational” is intentional. Projects like the Parkway – and like the others we have spotlighted through our Roadshow over the last 14 months – are examples of just some of the incredible work performed by our member firms. Congratulations to Qk4, HMB Professional Engineers, Stantec, HDR, Strand Associates, American Engineers, EA Partners, Lochner, WSP, JMT, and Palmer for what I know will be a life-changing project for the commonwealth and its citizens.

And that was the impetus behind this event and behind the Roadshow as a whole: to showcase the essentiality of engineering as the catalyst for a better and more prosperous future for everyone.

Speaking of which, I was struck by something Gov. Beshear said in his remarks yesterday. He said that the Mountain Parkway Project was creating jobs and opportunities in eastern Kentucky, giving young people there the option to stay in the region rather than forcing what he called a decision between “moving or changing their dreams.”

That’s the other side of the engineering story – and it is one we are always proud to tell. It’s the human side that is not just about steel and concrete. It’s about the communities that rely on us, the aspirations we represent, and the work we do to shape a future in which we all can thrive.

Watch the entire Roadshow event below:

Finally, a quick update on R&D amortization. The House could vote this week on the business and family tax package (HR 7024) that would delay the R&D amortization requirement until 2026, retroactive to the 2022 tax year.  House leadership is holding active discussions today with House Republicans about bringing the bill to the floor. In the meantime, ACEC relaunched our action alert to help build momentum. We’re keeping our foot on the gas until we drive this home. Stay tuned.

Have a great week,

Linda Bauer Darr

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Those questions and more are on the agenda for BST Global’s upcoming AI Summit, a first of its kind gathering of leading authorities within the AI space. Scheduled for April 16-18 in Clearwater Beach, Florida, this summit’s speakers will include leaders from some of the world’s preeminent AEC firms, who will share their views on what the future holds for the industry as AI continues to both expand and improve.

On the agenda are discussions on topics such as:

• Achieving AI-driven business transformation
• Applying generative AI and ChatGPT in the real world
• Deploying AI at scale
• Crafting a data-strategy foundation for your firm’s future
• Fostering the data-driven consultancy of tomorrow by leveraging AI and machine learning
• Exploring how large language models (LLMs) are becoming the new AI disruptors
• Strengthening and building resiliency in cybersecurity
• Discovering how to put the right trust, governance and privacy practices in place
• Attracting, developing and retaining the right talent and skills for your AI and big data future
• Meeting the ESG imperative with big data
• Reimagining the AEC industry as a “data” business and introducing innovative business models

This is a critical moment in time, both for the AEC industry and for its firms. During ACEC’s four-part AI webinar series last year, one speaker put it best when he said that AI won’t take your job won’t take your job away, but a competitor using AI will. It’s an important distinction, and it is one of the key drivers behind this upcoming summit. The future is here, and our industry is uniquely positioned to capitalize on the wealth of new opportunity born of AI. There are important conversations that need to be had about emerging technology and its impact on our industry – and many of those conversations will be happening this April in Florida at BST Global’s AI Summit.

Spaces are limited, so register now.

Since Haley is not dropping out of the race, for today’s letter, I thought it would be helpful to dig into what both she and Trump have said about the three I’s: infrastructure, immigration, and innovation.

In Donald Trump, we have a wealth of policy pronouncements from which to draw, particularly on immigration. Securing the southern border (the Trump wall) was a cornerstone of his previous bids for the White House, and he has not backed away from the issue. A second Trump term would most likely bring increased restrictions on H1-B visas for highly skilled workers through what he calls a “merit-based immigration system that protects American labor and promotes American values.”

Haley has also taken a hardline stance on illegal immigration but has expressed support for bringing skilled workers to the U.S. In a September 2023 interview on CNN, she stated, “What about if we brought people in based on merit…where we looked and said ‘What companies need workers? What jobs do we need to fill?’ If you looked at them based on that, all of a sudden, you’re building our economy. You’re helping America.” With workforce development playing a critical role in ACEC advocacy, it will be important to monitor how each campaign’s platform develops during the campaign.

We’ve talked a lot about emerging technologies, and so have these candidates. As president, Trump established the American AI Initiative via Executive Order in February 2019, stating that “Continued American leadership in Artificial Intelligence is of paramount importance to maintaining the economic and national security of the United States.” Although Haley has not explicitly gone on record about AI, she did come briefly under fire for another controversial technology position.  Citing national security concerns she suggested – then walked back – that social media companies end anonymous posting by verifying users. “I don’t mind anonymous American people having free speech,” she said. “What I don’t like is anonymous Russians and Chinese and Iranians having free speech.” Such a position could have implications for the federal contractor TikTok ban should Haley be elected.

Last, but not least, infrastructure. In a September speech in which she unveiled her economic plan, Haley took aim at what she called “reckless federal spending” and proposed an end to the federal gas and diesel tax. “We don’t need a federal gas tax to fund our roads. We’ll keep building our roads with the trillions Washington still has.”

After the November 2021 passage of IIJA, Trump criticized the 13 Republicans who brought the legislation over the top. “Very sad that the RINOs in the House and Senate gave Biden and Democrats a victory on the ‘Non-Infrastructure’ bill,” he said in a post-vote statement. “All Republicans who voted for Democrat longevity should be ashamed of themselves.”

Despite Trump’s IIJA comments, he was bullish early on in his 2016 bid, putting infrastructure front and center. Whether he returns to that playbook to create even more contrast with Haley isn’t clear.  If he does, it will create an opportunity for ACEC to raise the issue of what comes after the IIJA.

In politics, as in life, what one says matters far less than what one does. That said, we can make inferences based on public record and public statements and get a pretty clear picture of what a candidate might do in office. Our job is to help cut through the clutter of rhetoric to find that most elusive commodity of any campaign: the truth.

Have a great week –

Linda Bauer Darr

]]> https://www.acec.org/news/last-word-blog/post/top-energy-association-ceos-agree-permitting-reform-and-regulatory-certainty-a-must/ Wed, 24 Jan 2024 21:28:49 +0000 https://www.acec.org/?p=23843 The United States Energy Association (USESA) recently held its 20th Annual State of the Energy Industry Forum at the National Press Club in Washington, gathering leading energy trade association CEOs to outline their respective policy objectives and priorities for 2024. After a half-day of four panels, 20 speakers and keynotes, all assembled leaders echoed the same theme: the critical need for permitting reform and regulatory certainty. Speakers noted public policy as the number one risk to the clean and affordable energy transition of the future, citing that there isn’t a one size fits all technology policy.  

Trade association CEOs represented natural gas (LNG), coal, renewables including solar, electric cooperatives, energy storage, nuclear, gas turbines, electric vehicles, petroleum, and hydrogen. In his keynote address, S&P Global Vice Chairman Daniel Yergin said that the energy transition is a multi-dimensional one. The trade association CEOs all agreed that there is no silver bullet for a successful energy transition and that a comprehensive mix will be needed to achieve net-zero goals while keeping the lights on. 

Two more themes that emerged were the increased demand for LNG and vulnerability of the grid. Geopolitical tensions caused by the Russian invasion of Ukraine caused Europe to look elsewhere for LNG, leading the US to rise to the #1 exporter of LNG for the first half of 2023. The “Shale Revolution,” (hydraulic fracturing technology and horizontal drilling propelled by public and private innovations) also allowed the US to become a leader in oil and natural gas and to compete with Russia. The demand and supply of LNG is strong and plentiful in the US, but leaders struggle with permitting to obtain the necessary infrastructure and pipelines to transport LNG. ACEC is working with Congress and the Council on Environmental Quality to implement NEPA amendments of the IRA to assist with permitting delays. To get involved join the ACEC Energy and Water and Environment Committees.

The grid is also under pressure due to extreme weather events, growth in the electric vehicle market and the increase in data center development. During peak demand morning hours, coal is still the leading provided resource in the US. America’s Power President & CEO Michelle Bloodworth brought up the importance of coal in the energy mix as an existing resource that is abundant, affordable, and reliable. However, the race to electrify the U.S. has put added stress on the grid, making it unstable, and the EPA is retiring coal plants too soon, panelists agreed. To hear more from Bloodworth, tune into ACEC’s next Market Briefing on the “The Growing Energy Market” on 2/21/24 at 1:30 p.m. EST here. For the top five trends impacting the energy and utilities market and for more information related to this article, subscribe to ACEC’s Market Briefs.  

Following up on our report from earlier this week, the House and Senate cleared legislation yesterday to avert a looming government shutdown and give lawmakers more time to finalize a budget for Fiscal Year 2024.

• The stopgap spending measure extends federal agency funding into early March.
• The Senate vote was 77-18. House passage quickly followed, 314-108, but Speaker Johnson is getting a lot of grief from the right flank.

What’s next: Much work remains to be done to negotiate final spending levels across government programs, including key infrastructure accounts. But there seems to be a will among both parties to get it done.

In another positive development, the House Ways and Means Committee approved the Tax Relief for American Families and Workers Act of 2024 (H.R. 7024) by a bipartisan vote of 40 to 3.

Why it matters: This is good news for ACEC members, as the bill delays the R&D amortization requirement until 2026 – and is retroactive to the 2022 tax year.

• Fixing the R&D amortization requirement has been an ACEC priority, as it significantly impacts America’s engineering firms that regularly invest in R&D in the normal course of their business. The impact of the amortization requirement has forced firms to delay hiring, stop taking on new work, and in extreme cases, question whether to remain in business.

 H.R. 7024 also delays until 2026 the limits on interest deductibility and full expensing for capital investments.

• The cost of the legislation is offset with enforcement related to the employee retention tax credit (ERTC) and a bar on new ERTC claims made after January 31, 2024.

What’s next: We are expecting that the full House could vote on H.R. 7024 the week of January 29th.

• Your Move: We must keep the pressure on Congress to pass the tax deal and fix the R&D issue. Please watch your inbox for a new action alert from ACEC so we can help send this legislation to the Senate. It has been reported the White House supports the legislation.

]]> https://www.acec.org/news/last-word-blog/post/new-optimism-on-tax-and-budget-deal/ Tue, 16 Jan 2024 22:26:11 +0000 https://www.acec.org/?p=23732 Listen to this update here:

To the ACEC Community,

We start the week with encouraging news on a couple of fronts.  First, an agreement was announced this morning by House Ways and Means Committee Chairman Jason Smith (R-MO) and Senate Finance Committee Chairman Ron Wyden (D-OR) on the framework of their business and family tax package.  Notably for ACEC members, the package includes language that would restore the full deductibility of R&D expenses until January 1, 2026.  We’ve been lobbying hard on this issue for the last two years, and even launched a media campaign last fall with TV and radio commercials and op-eds in major newspapers highlighting the impact of R&D amortization on America’s engineering industry and the urgent need for a fix.

We understand that the House Ways and Means Committee could vote on this package as early as this week, in preparation for potential floor consideration.  Final passage could happen as part of a larger budget deal or as part of another legislative vehicle.  We’re staying focused on getting this done!

We’ve also heard encouraging news related to negotiations on the larger federal budget.  House Speaker Mike Johnson (R-LA) and Senate Majority Leader Chuck Schumer (D-NY) announced a budget deal that will avert a government shutdown, and one that is largely consistent with the debt ceiling agreement between Congress and the White House from last spring.  There is still much work to be done, and the Speaker is already facing a backlash among House conservatives, but news of negotiation and compromise – in an institution lacking in these attributes in recent months – is a welcome step forward.

Staying on the good news theme — ACEC/PAC had another record-breaking year, with 46 states hitting their fundraising goals. California led the way for the second straight year, with Texas just behind and Florida and New York neck and neck for third. I am also pleased to report that four states raised over $80,000 for the first time ever. Indiana was the first state to goal in 2023, while Connecticut took top honors in percentage over goal, at 253.21 percent.

This was a tremendous fundraising year, and my sharing these numbers alongside news of other developments on the policy side is intentional. Your contributions give us the resources we need to effect change on behalf of our firms and our industry.  The stakes are always very high, and for that reason we thank you for your support, and for your interest and engagement with ACEC’s advocacy program.

Have a great week,

Linda Bauer Darr

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As the face of the American Civil Rights Movement, Dr. King faced immense scrutiny, but he still chose to risk his life daily to push for equality and freedom for all people. Among Dr. King’s many accomplishments:

• Spokesman for the Montgomery Bus Boycott
• Winner of the Nobel Peace Prize
• Force behind the march on Washington where his “I Have a Dream” speech pushed Congress to pass the 1965 Voting Rights Act.

This also a day of introspection, service, and dedication to the values Dr. King championed. Some ways to celebrate:

• Community service: Volunteer at local organizations and food banks that support marginalized communities.
• 💰 Support minority-owned business: Shop local and consider partnerships that promote economic empowerment.
• 💬 Discussions and workshops: Encourage open discussions and workshops to promote diversity, equity, and inclusion. Create a safe space for your team to share their experiences and perspectives.

ACEC Executive Vice President Steve Hall and Communications and Marketing SVP Jeff Urbanchuk recently sat down for a discussion about some of the Council’s key wins and gains in 2023, and what’s on the horizon for what is expected to be a very busy 2024.

Hall noted that the Council saw in 2023 real progress on both the legislative and regulatory fronts, racking up significant accomplishments on what have been long-standing issues for ACEC. One such accomplishment was language included in the Defense Authorization Bill that would lift the cap on design fees for work with the Corps of Engineers and Department of Defense agencies. This change bumps the ceiling from 6 percent to 10 percent.

“It’s not a perfect fix,” he said. “At a time when QBS is how firms are procured, there shouldn’t be any cap on design fees. But this is a step in the right direction. It will give firms a little more room to negotiate.”

In another key accomplishment, ACEC-backed language was included in a spending bill related to Ukraine. “We all hope and pray that the war in Ukraine comes to an end in 2024,” Hall said. “And when that happens, there is going to be a substantial reconstruction process. We expect that the American engineering industry is going to play a significant role in that reconstruction effort, and we want to make sure that effort is organized.”

Closer to home, Hall pointed to progress on another major ACEC issue: the FAR credits clause as it relates to PPP loans. The Council has gotten legislation through the House three times, only to be stymied in the Senate. As a workaround, Hall spoke of a parallel effort to try to mitigate the issue for small firms, noting that the Senate Transportation Subcommittee included ACEC-submitted language that would help blunt the impact of the mandate.

“This language isn’t going to solve the problem,” Hall said, “but we are hoping it is going to be part of the solution.”

Workforce issues and immigration, as well as the fight to repeal the R&D amortization mandate topped the list of priorities in 2024. On the former, Hall said, there remains a lot of work to be done. For ACEC, workforce and immigration reform are inextricably linked, but the focus of lawmakers continues to be less about attracting talent and more about the Southern border. Lawmakers, Hall asserted, haven’t yet grasped the bigger picture. “They’re not really thinking broader about immigration as a component of our competitiveness strategy,” he said.

As for the R&D fight – better news in the offing. Hall shared that there seems to be genuine appetite on the Hill for a fix to be passed. “I’m guardedly optimistic that it could be done early this year,” he said. He went on to discuss some key successes of ACEC’s grassroots campaign, which launched late last year.   More information on the effort can be found at www.engineerinnovation.com.

And all of this, of course, will take place against the backdrop of what is certain to be a bruising presidential campaign. Still, Hall said, ACEC has both the resources and the resolve to capitalize on last year’s progress – and to build on it. He pointed to the ACEC/PAC’s record fundraising year as a critical component of the Council’s success. “And for that I have to thank our members, because [their contributions] give us the resources we need to win,” Hall said.

]]> https://www.acec.org/news/last-word-blog/post/firm-leaders-speak-out-on-rd-tax/ Thu, 11 Jan 2024 17:57:16 +0000 https://www.acec.org/?p=23667 Bob Scaer is the CEO of ACEC member firm Gannett Fleming, a civil engineering firm headquartered in Pennsylvania.  Today, Penn Live published his editorial on the R&D amortization issue, titled “Change to R&D tax leaves engineering firms scrambling.”  Read the editorial below and learn how the 5 year R&D amortization issue is impacting engineering businesses throughout the country on www.engineerinnovation.com.

—

Engineers design the infrastructure that enhances our daily lives. Whether it’s the water coming from your tap or the six-lane highway bringing you across the country, advancements in American infrastructure stems from engineers utilizing research and development (R&D). Leading Gannett Fleming, a civil engineering firm in Camp Hill, Pa., I know firsthand the challenges we face.

The forces of change shaping our world, such as climate change and the dire need for sustainable and resilient solutions, necessitate that we innovate how we deliver projects to our local community and throughout North America.

Dating back decades, our nation’s tax law incentivized investments in R&D by allowing companies to deduct qualifying costs in the same year they occur. However, a recent tax change forces firms to spread R&D deductions over five years. While this shift may seem insignificant, it produces a much higher tax obligation that in turn discourages companies from investing in R&D and drastically reduces the momentum engineering firms have built as they pursue essential innovation. The engineering industry urgently needs Congress to fix this tax now.

Particularly for smaller and mid-sized firms, the change will not only increase the cost of R&D investments but will also limit funds for internal growth, by reducing the investments firms can make in employee recruitment and personnel development.

As the tax provision continues to harm engineering companies, our communities will start to feel the impact.

If the tax change persists, engineers won’t be able to continue the R&D we shape to improve our community’s infrastructure – infrastructure that goes beyond roads and bridges. For instance, renewable energy technology is more pivotal than ever if we want to reach our climate goals, we must create buildings that can better withstand extreme weather, and we must pioneer advancements in preserving our natural resources. And nearly all these projects require R&D that we can no longer pursue.

If nothing is done to reverse this tax provision by the year’s end, our firms will face a daunting tax liability. On behalf of engineers here in Pennsylvania and throughout the nation, we are urging our leaders to pass legislation that restores R&D deductibility and incentivizes essential innovation.

Engineers are indispensable to designing the cutting-edge infrastructure that improves our neighborhoods, states, and country, and we can’t do it without Congress fixing the R&D tax. We need action now.

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This piece originally appeared in Penn Live and the The Patriot-News on January 11, 2024. Bob Scaer is the CEO of Gannett Fleming, a civil engineering firm in Camp Hill, Pennsylvania. He is also part of the American Council of Engineering Companies (ACEC), American Society of Civil Engineers (ASCE), Construction Industry Round Table, Design Professionals Coalition, and the Pennsylvania Chamber of Business and Industry.