The $2.3 trillion Consolidated Appropriations Act, 2021 (H.R. 133) provides badly needed COVID economic relief, construction market stimulus and a forward-looking prospect for market recovery in public sector infrastructure investments as the pandemic recedes. In a memo to the MCAA Government Affairs Committee, Chair Jim Gaffney provided a summary digest of the items most likely to impact MCAA members and the MCAA policy agenda. The President is seeking greater individual stimulus checks, so there may be an amendment or veto, but this summary will stand for most of what will be the final result. Correction: The latest COVID relief measure signed into law Sunday does not extend the requirement that employers offer paid sick and family leave as required under the Families First Coronavirus Relief Act passed last March as erroneously reported in the MCAA summary published in the Weekly Update on December 28, 2020. The latest COVID bill extends only the availability of the refundable tax credit as under the FFCRA until the end of March 2021 for those employers voluntarily providing such paid leave after December 31, 2020. MCAA regrets the error.
Experts from Withum’s SBA Financial Services and Tax Services teams navigate through the myriad of provisions included in the more than 5,000 page legislative package finalized mid-December. Withum’s team covers in detail the provisions of the legislation which cover the following topics:
- PPP Loans: Another Round of Funding
- PPP Loan Forgiveness Process (Round 1 and Round 2)
- PPP Loan Forgiveness Deductibility
Withum also covers the basics of the following provisions, but expect to have more detailed communications on these as guidance becomes more clear:
- Unemployment Provisions
- Stimulus Checks
- Employer Focused Tax Credits
By: Jim Paretti, Michael J. Lotito, and William Hays Weissman
August 31, 2020
On August 28, 2020, the U.S. Department of the Treasury issued guidance for employers with respect to the deferral of the employee portion of certain payroll taxes. This guidance stems from a presidential memorandum issued earlier in the month authorizing employers to defer payment of these taxes. That memorandum allowed for the deferral of the employee portion of federal payroll taxes (6.2% for Social Security and 1.45% for Medicare) from September 1, 2020 until December 31, 2020. The memorandum allows employers to defer payment of the employee portion of these payroll taxes for workers earning less than $4,000 on a biweekly basis (roughly $104,000 annually).
Treasury’s guidance makes clear that an employer may elect to defer the payment of the employee portion of these taxes on “applicable wages” until next year, when they would be owed in installments between January 1, 2021 and April 30, 2021. “Applicable wages” are defined as those wages paid to an employee on pay dates between September 1, 2020 and December 31, 2020, “but only if the amount of such wages or compensation paid for a bi-weekly pay period is less than the threshold amount of $4,000 or the equivalent threshold amount with respect to other pay periods.” The guidance specifies that applicable wages are determined on a pay period by pay period basis. Finally, the guidance makes clear that employers are required to pay these taxes to the federal government, but goes on to state that employers “may make arrangements to otherwise collect the [due taxes] from the employee.”
The guidance leaves several clear takeaways. First, it is clear that an employer is permitted to defer payment of these taxes, but is not required to. Second, it is likewise clear that unless further action is taken (likely by Congress), these taxes are merely deferred, not forgiven, and will be due by the end of April 2021. Finally, it is not clear what, if any, role an individual employee plays with respect to determining whether they want their share of these taxes deferred, or paid in the normal course. Employers will want to keep each of these points in mind as they evaluate whether or not to participate in this elective deferral.
It is unclear whether Treasury will issue additional guidance regarding this program. Littler WPI will keep you apprised of relevant developments.
Throughout the COVID-19 pandemic, the MCAA Government Affairs Committee has been working tirelessly meeting with countless Congressional and Senate offices remotely to push our agenda forward. This vital work was made possible by PAC contributions to candidates who support our positions over the long term. Please join us in thanking those who gave and consider making a contribution to support these vital efforts.
The Government Affairs Committee’s legislative and advocacy work on issues like COVID-19 cost increases on Federal projects, change orders in the NDAA, pension issues, and the PBGC just to mention a few was made possible by:
- Robert Beck
- Robert Bolton
- Tim Brink
- Michael Cables
- Don Chase
- Jay Chase
- Matthew Cunningham
- Steve Dawson
- Jim Dougherty
- Charles Fell
- Lyle Ferguson
- John Feikema
- John Ferrucci
- Steve Fosdick
- Greg Fuller
- James Gaffney
- Michael Gallagher
- John Geiling
- Don Giarratano
- Jason Gordon
- Brian Helm
- Scott Hinton
- Brian Hughes
- Jay Lusita
- William Lynch
- Mark Magnuson
- Rick Moreno
- Edward Newville
- David Quirk
- Mark Rogers
- Bob Snyder Jr.
- Lawrence Verne
- Frank Wall
- Scott Wallenstein
MCAA’s 2020 advocacy efforts continue to need your help. Contribute to the MCAA PAC, a critical factor to our success in moving forward legislation that positively affects your business.
(Note: In order to comply with campaign finance laws, you will need to complete a solicitation authorization form before making a contribution. Find additional details and both the solicitation authorization and contribution forms via the button below.)
In March, as a majority of the country slowed down, the MCAA Government Affairs Committee continued to work tirelessly meeting with countless Congressional and Senate office’s remotely to push our agenda forward. The committee has been working on COVID-19 cost increases on Federal projects, change orders in the NDAA, pension issues, and the PBGC just to mention a few.
What has helped the committee through this period has been PAC donations. The reality we face during today’s political time is the need for donations. MCAA’s PAC fund has been hit hard as many political fundraisers have been cancelled and political leaders have requested help.
Today, we ask for your help.
I, Jim Gaffney, am making a donation to the MCAA PAC fund, and have asked the M&SCA of Eastern PA to match my donation. If each association and member contractor could make a donation to the PAC we can continue to fight for the political needs of our association. I know times are hard for many, but please realize the organizations against our issues are not letting up and many have deep pockets. For those who have and continue to support the PAC, I want to personally thank you for your help. The PAC makes a difference for all of us and our industry.
MCAA’s 2020 advocacy efforts need your help. Donate to the MCAA PAC, a critical factor to our success in moving forward legislation that positively affects your business.
(Note: In order to comply with campaign finance laws, you will need to complete a solicitation authorization form before making a contribution. Find additional details and both the solicitation authorization and contribution forms via the button below.)
As the new Senate bill was passed by the House on April 23, 2020, the Paycheck Protection Program (PPP) gained additional emergency funds. MCAA partners and law firm, Lindabury, McCormick, Estabrook & Cooper, P.C., provide an overview of the program application and loan forgiveness requirements to assist MCAA members.
The DOL Wage and Hour Division has updated their COVID-19 webpage to include Field Assistance Bulletin 2020-1, “Temporary Non-Enforcement Period Applicable to the Families First Coronavirus Response Act (FFCRA),” states that the DOL will not bring enforcement actions against any public or private employer for violations of the leave requirements in the FFCRA for a 30-day period ending on April 17, 2020, provided that the employer has made reasonable, good faith efforts to comply with the Act.
Separately, the Wage and Hour Division have released the posters that employers are required to display outlining the rights of federal employees and non-federal employees under the FFCRA. The Wage and Hour Division has also made available a FAQ addressing issues related to the posters (e.g., where the posters must be displayed, etc.)
The Families First Coronavirus Response Act (HR 6201) was passed by the Senate and enacted into law with the President’s signature on March 18, 2020. The new law takes effect on April 2, 2020 and will remain effective until December 31, 2020.
For MCAA employers, it has three areas of immediate impact: paid family leave for employees unable to work or telecommute for reasons relating to the COVID-19 health emergency, paid sick leave for employees unable to work or telecommute for reasons relating to the coronavirus emergency – both redeemable in large measure by quarterly tax credits against payroll taxes- and then a requirement of no-cost coronavirus testing by our joint health plans.
The measure is different from the earlier version of HR 6201 and will present significant technical corrections, as well as calling for significant regulatory guidance in the implementation process. Immediately upon enactment, Senate lawmakers called for yet further paid sick and family leave measures to be included in subsequent economic and health crisis emergency measures.
So, this digest supplants any earlier briefing of HR 6201 and should be taken as preliminary, pending further technical corrections, regulatory guidance, and then perhaps even further emergency legislation on these subjects.
HR 6210 – Division C – Emergency Family and Medical Leave Expansion Act
1.1 Eligible Employees & Employers: The new law applies to employers with fewer than 500 employees (for 20 or more weeks of the current or preceding year) and employees who have been employed for at least 30 days with their respective employer.
1.2 Points of Clarification: It will need to be clarified how either criteria operate if the employers choose to exercise the discretion permitted in the law to implement compliance through a multiemployer collective bargaining agreement joint benefit fund context. Similarly, for eligibility of non-bargaining unit employees, the 30-day period of employment also will need to be clarified. It is unclear whether the 30-day employment must be closely coincident with the request for leave or otherwise.
1.3 Reasons for Paid Family Leave: Eligible employees are entitled to paid leave for “qualified need related to a public health emergency” which means the employee is unable to work (including telework) due to the need to take care of a child under the age of 18 whose elementary or secondary school is closed, or place of care or is unavailable due to COVID-19 precautions
1.4 Compensation Required: The law says the first 10 days for which an employee takes leave is to be unpaid. The employee may elect to use any accrued vacation leave, personal leave, medical leave, or sick leave for that initial 10 days. After that, the law requires employers to provide paid leave for each day in the amount of no less than two-thirds of the employee’s regular rate of pay for the regularly scheduled number of hours that period. For employees with fluctuating schedules, the law requires employers to calculate a daily average over the exact preceding 6-month time period.
1.5 Other Requirements: Eligible employees are required to give the employer advanced leave, if foreseeable and practicable. Employers with 25 or more employees are required to reinstate a worker returning from leave to the worker’s former job. If that position is no longer available, employers are required to make reasonable efforts to find a comparable position for that worker over the course of one year. Employers with fewer than 25 employees are required to find a new position for reinstatement if the worker’s position has been eliminated during the leave.
1.6 Multiemployer Collective Bargaining Implementation: The laws says an employer with a Multiemployer bargain relationship, may – consistent with the terms of the CBA – fulfill it obligation under the law based on the paid leave each of its [bargaining unit] employees is entitled to under the law – and that those employees may receive mandated pay from the Multiemployer fund or plan provided for that purpose under the CBA.
1.7 Need for Further Clarification: There are several issues with this aspect of the law – whether the labor law restrictions against direct dealing with union-represented workers are affected by this provision. Also, it’s is unclear whether the reduced pay and regular rate provisions and possible lack of benefits contributions is overcome by the superseding provisions (in other Divisions of HR6201) saying that the law does not preempt the terms of any bargaining agreement pertaining to pay and benefits, perhaps including a provision relating to pay and benefits for hours worked or for hours paid.
HR 6201 – Division E – Emergency Paid Sick Leave Act
2.1 Covered Employers and Eligible Employees: Covered employers are those employing 500 or fewer employees. Eligible employees cover all employees, without the 30-day employment eligibility included in the Division C Family Leave as above. The law specifically says that the paid sick time shall be available for immediate usability by the employee for eligible reasons regardless of how long the employee has been employed.
2.2 Permitted Reasons for Paid Sick Leave: Employees are entitled to paid sick leave to the extent they are unable to work or telecommute because:
- 2.2.1 The employee is subject to Federal, state or local quarantine or isolation order related to COVID-19;
- 2.2.2 The employee has been advised by a health care provider to self-quarantine due to concerns related to COVID-19;
- 2.2.3 The employee is experiencing symptoms of COVID-19 and is seeking a medical diagnosis;
- 2.3.4 The employee is caring for an individual who is subject to a quarantine order issued by Federal, state or local authorities, or who has been advised by a health care provider to self-quarantine due to concerns related to COVID-19;
- 2.3.5 The employee is caring for a son or daughter whose school or day care has been closed, or if other child-care is unavailable, due to COVID-19 precautions; and/or
- 2.3.6 The employee is experiencing any other substantially similar condition specified by the Secretary of Health and Human Services in consultation with the Labor and Treasury Departments.
2.3 Duration and Amount of Sick Pay: Covered full-time employees are entitled to 80 hours of paid leave. Part-time employees are entitled to the average number of hours they work over a two-week period. Employers are prohibited from requiring workers to use other paid leave in advance of using the allotted paid sick leave. Unused paid leave eligibility does not carry over from year to year and is not payable on termination of employment by terms of the law.
The amount of pay required by the law under this section is based on varying limits depending on the reason for the leave. If the leave is for the employee’s illness as set out in 2.1.1, 2.1.2, or 2.1.3 above, then the rate of pay is the regular rate of pay, subject to a maximum of $511 per day, with a maximum of $5110 in the aggregate. For paid sick leave relating to others’ illnesses as in 2.2.4, 2.3.5, or 2.3.6 above, the rate of pay required is two-thirds the regular rate, capped at $200 per day, and $2000 in the aggregate.
2.4 Collective Bargaining Implementation: Division E also sets out employer discretion to fulfill its requirements under collective bargaining and benefit fund administration, raising the same ambiguities as above. Similarly, Division E’s rules of construction recite that it does not operate to diminish rights and benefits that the employee is entitled to under a bargaining agreement or other Federal, state or local law, or employer policy.
Both Division C and E – paid family and paid sick leave can be waived by the Department of Labor for specific small business employers with fewer than 50 employees, upon showing that the imposition of the requirements would jeopardize the viability of the business.
In conclusion, the process of defining exactly what is intended and will be required at the end of the legislative and regulatory process on the issues is just beginning. MCAA will keep you up to date on developments as they become clearer.
The National Service and Maintenance Agreement continues to be an excellent tool used by HVACR and plumbing service contractors around the country to grow market share and remain competitive in this highly competitive market. The current National Agreement is effective through July 31, 2020. The MSCA Labor Committee will be discussing potential changes or modifications with the UA later this year. Although we anticipate very few changes, we would appreciate your input or recommendations on terms and conditions which you feel may be helpful in expanding your service business. Please send all comments to email@example.com by December 6, 2019.
In August 2016, Mark McManus was unanimously elected as General President at the UA’s 39th General Convention and on November 10, 2016, he assumed his new position leading the nation’s most progressive and influential trade union. Mark McManus has had a distinguished career in support of our nation’s hard-working men and women and has been unwavering in his commitment to a strong and mutually beneficial partnership between labor and management. See everything we have planned for MCAA2020 on our convention website.
The 2019 UA-MCAA Labor Relations Conference: Succeeding Together will convene October 29 – 30, 2019, at The Mirage in Las Vegas, Nevada. The conference, jointly hosted by the United Association (UA) and MCAA, will feature panel discussions focused on topics such as growing apprenticeships, expansion of service, and attracting tomorrow’s diverse workforce.
The 2019 UA-MCAA Labor Relations Conference: Succeeding Together is scheduled to take place October 29 – 30, 2019, at The Mirage in Las Vegas, Nevada and registration is now open!
The conference, jointly hosted by the United Association (UA) and MCAA, will feature panel discussions focused on topics such as growing apprenticeships, developing a joint labor-management strategic planning committee and retention of workers.
Acknowledging the importance of engaging the future of our organizations, the UA is asking all locals to bring one apprentice to the conference this year. MCAA will be hosting a breakout session with these apprentices to give them an opportunity to really dig into and ask questions about the management of the business with MCAA leaders one-on-one. Because apprentices are not only the future of the UA, they are the future of the MCAA as well.
To maximize our time together, MCAA is asking its members to plan joint dinners with their local labor partners following Tuesday’s reception. Exchanging ideas and experiences is how we will continue to thrive in this industry we all love, it is how we will be Succeeding Together.
During the negotiation process of the Tax Cuts and Jobs Act at the end of 2017, the tax credit for R&D spending was temporarily removed. Fortunately, MCAA and others worked hard to ensure that the final bill re-inserted the language for the Research Tax Credit (“RTC”) and made changes that potentially increase the credit by more than 20%. With the RTC in place, contractors are able to continue to claim tax credits for qualifying BIM and design work. Unfortunately, many mechanical and plumbing contractors are unaware that they can even claim part of their design and bid work for these tax credits.
This article is intended to offer an overview of the Research Tax Credit for mechanical contracting personnel presented in general non-tax terms, wherever possible. The credit is, however, “tax based”, and as such, the inclusion of all of the applicable rules for every situation is not possible in a brief discussion.
In order to qualify for the research tax credit, activities must pass several tests. Although these tests are fairly specific, “qualifying activities” are generally much broader than many people think. When contractors hear the term “research” they often associate the term with scientists wearing white lab coats who are mixing chemicals in beakers. However, the Internal Revenue Code definition of research, as defined under IRC §41, is much broader than this traditional definition. As a result, many contractors may typically associate a large portion of their research activities as “routine” or “ordinary”, when in fact many of these activities might qualify for the Research Tax Credit.
To successfully build a structure, there may be experimentation or an iterative process on technical design issues and the installation process to properly build it. Although it might seem complicated if you are not claiming these credits, many contractors have been doing so for years. Before you begin, it is recommended that MCAA members contact their tax professionals to ensure that they are properly claiming the appropriate costs and activities under the RTC.
To begin, the Internal Revenue Code states that the activities “must be intended to discover information to eliminate technical uncertainty concerning the capability or method for developing or improving a product or process, or the appropriateness of the product design”. The Code also requires a “process of experimentation” involving the evaluation of alternatives, confirmation of hypotheses through trial and error, testing and/or modeling (this can include iterative steps in evaluating design alternatives, alpha/beta tests, pilot trials, scale-up testing, marketing/field tests directly associated with the R&D efforts, qualification Trials, etc.). Finally, wages, supplies, and contracts associated with qualifying activities qualify. The expenditures can also be either capital or expensed items.
Broadly, this includes any activity where there is some technical uncertainty involved in the development or improvement efforts- i.e., is there a technical problem that needs to be solved before you can effectively launch/implement this equipment design, software, product, process, prototype, etc.? Personnel who are directly engaged in resolving the technical issues will qualify and those individuals who have a support role will also qualify (i.e., performing alpha/beta/unit testing, collecting data or writing programs to collect data, supervision, technical project management, etc.)
Uncertainty exists if the information available to the contractor does not establish the capability or method for developing or improving the product/process or the appropriate design of the product/process. The required level of uncertainty may be established in instances where your work requires the resolution of technical issues when either designing the mechanical and plumbing system or working from a set of drawings that are incomplete or need modification to function.
The definition of activities that qualify for the credit is fairly broad and the driver for the effort can be to produce a new, better or more competitive product/process, to increase reliability/quality, to increase general product/process safety, to respond to new federal/state requirements, to reduce costs or increase speed/efficiency, etc. Furthermore, the success or the degree of technological advancement is not a factor.
Below is a representative sample of activities a taxpayer would typically perform, which often times are misclassified as “routine” or “non R&D” related:
- Evolutionary advancements to the functionality, performance, reliability or quality of an existing product (Change orders for process improvement);
- Development of prototypes or models to prove out conceptual ideas (Including BIM);
- Experimentation to verify if an existing construction technique or process can support a new product with differing characteristics (Testing point loads);
- Experimentation to verify if a new or existing construction technique or process can be implemented in a new or different geographic region, new environment, or different industry/application;
- The design and development of custom equipment, tooling, molds and/or dies;
- The development of microcode used within machinery or robotics;
- The redesign of an existing construction or building process to improve efficiencies, increase safety or reduce operating expense;
- Testing to prove out the use of new materials in existing products;
- Plant and/or Process scale-up activities;
- Qualifying “Bid and Proposal” efforts; and
- The development of custom software that is either intended to be used internally or sold, leased or licensed to third parties as a commercial product offering.
However, simply because some items may be new, unique, customized or involve special problems does not mean that they will automatically qualify for a credit. For instance, there may be options or choices in regard the application of standard engineering techniques, but no uncertainty in regard to the resolution of a technical issue facing the project team. Qualifying activities that are intended to resolve technical uncertainties should also involve some iterative type of testing, experimentation, the consideration of alternatives, trial and error evaluations, prototyping, validation, etc.
Thus, although no qualifying activity might occur for most HVAC systems (even where custom designs are involved), technical uncertainty might arise on mechanical engineering and/or design efforts in instances where there are unusual requirements involving, for example: complex temperature, humidity, pressure, ambient air ratio range controls with differing protocols for numerous chambers/rooms; the need to design for particulate and/or chemical fume control/mitigation where the chemistry might require special construction materials; unusual space limitations, local regulations, cost mandates, etc.; instances where numerous alternative methodologies for technical solutions are necessary; development of technical alternatives to address repeated system failures; etc.
The PATH Act of 2015 made the Research Tax Credit permanent but also broadened the impact of the credit for many small to mid-sized businesses. Starting January 1, 2016, small businesses that meet certain criteria can also use the Research Tax Credit to offset the FICA employer portion of payroll tax, with a credit cap of $250,000 for each eligible year.
– – –
Mike Foley is the Managing Partner at Foley & Smith, LLC, a firm specializes in Research Tax Credits.
Mike D’Allesandro is the Managing Director at Research Tax Credits, LLC
Emily Murphy, a former procurement policy consultant for the MCAA Government Affairs Committee and daughter of former MCAA President Jim Murphy and Mimi Murphy, was confirmed by the Senate as the new leader of the U.S. General Services Administration. The GSA is the lead civilian agency focusing on procurement policy and government operations.
Ms. Murphy’s confirmation hearing was held on October 18, 2017. She was introduced by Missouri Senator Claire McCaskill, the Ranking Democrat on the Senate Homeland Security and Governmental Affairs Committee.
Lawmakers on both sides of the aisle were supportive of Ms. Murphy’s appointment and exceptionally strong credentials for the position.
The UA/MCAA Labor Relations Conference will be held at The Mirage in Las Vegas, November 14-15, 2017. The conference theme is “Highlighting Best Practices.” This will be a very positive and forward-looking event. There will be substantial UA attendance as the UA is holding a Business Managers Meeting in conjunction with the Labor Relations Conference. It will be great, therefore, to have robust attendance from MCA affiliated associations. To encourage maximum attendance there will be NO registration fee.
To reserve your room at The Mirage:
To reserve by telephone:
Reference code: SUAM1117
Room rates begin at $180.00/night and must be booked no later than Friday, October 20, 2017.
Registration for the conference will open in August. The conference will begin with a reception the evening of Tuesday, November 14. The conference program will be all day on Wednesday, November 15. That evening MCA local associations and UA local union attendees are encouraged to hold joint dinners. MCAA participants should, therefore, not plan on departing before the morning of November 16.
For more information, contact John McNerney.