UPDATE: Dec. 22, 2020: The U.S. Congress passed a $900 billion pandemic relief bill last night that includes $600 stimulus payments to qualifying individuals and a new round of Paycheck Protection Program funding for small businesses impacted by COVID-19.
Although it took months to reach an agreement on a second relief bill, funds in the bill for transportation and small business loans could aid construction, Stephen Sandherr, CEO of the Associated General Contractors of America, said in a statement.
“The new coronavirus recovery measure … should provide some needed relief for a construction industry that is coping with project cancellations and job losses in most parts of the country,” he said.
Sandherr pointed to $10 billion in funding addressing the shortfalls from state transportation revenue brought on by the pandemic. That funding should keep many road projects safe from cancellation and delays for a few months, he said, and includes new funding for waterways and ports.
The legislation also ensures tax deductibility for business expenses paid with forgiven PPP loans, something many contractors had been concerned about for months.
“The measure reaffirms the original congressional intent that employers that used Paycheck Protection Program loans to save jobs will not be forced to pay more taxes next year as a result,” Sandherr said.
Elected leaders returning to Capitol Hill this week face several issues impacting the U.S. construction industry.
Liability reform, a new highway funding package and Payroll Protection Program forgiveness are all on lawmakers' to-do list.
“We have this kind of mix between what we want Congress to accomplish and what we expect Congress to accomplish,” said Brian Turmail, vice president of public affairs and strategic initiatives for AGC.
Turmail said he expects partisan compromise will be more challenging than ever because it is an election year.
“Neither party wants to give the other party a victory before the election,” Turmail said. That's compounded by the fact that Democrats hope to flip the balance of power in November, which means they’d rather wait until January to pass their own legislation, rather than compromise this fall.
Peter Comstock, director of legislative affairs for ABC, echoed Turmail’s expectations.
“Things get more contentious as it approaches the election. Parties may be staking out stances, so they’re less likely to make agreements,” Comstock said.
In a survey of Construction Dive’s readers at the end of August, 93% of respondents said they believed the election would slow down the decision-making process.
In addition, AGC CEO Stephen E. Sandherr recently said during an AGC webinar that neither Democrats nor Republicans have shown any real commitment to helping the industry.
“I would say neither,” Sandherr said when asked which party is better for the industry. “We have a Republican Senate, we have a Democratic House, and they have done nothing” on issues of importance to construction.
In contrast, ABC announced its endorsement of President Trump on Aug. 28.
“Your continued support for fair and open competition, job creation, small businesses and expanded workforce development initiatives during your first term in office have helped ABC members grow their businesses, upskill their workforce and create career enhancing jobs,” ABC President and CEO Michael D. Bellaman and ABC 2020 National Chair Tim Keating wrote in a letter to Trump.
Liability reform and relief
There is a divide in party lines about the biggest issues facing the country and construction, Turmail noted.
“Democrats have made it clear they want relief for local governments, whereas Republicans have made liability reform their red line,” he said.
AGC and ABC are both pushing for that liability reform, as contractors’ concerns grow over potential legal action from workers who contract COVID-19.
Although contractors can do everything to follow guidelines and protect their workforce onsite, workers who test positive for the virus may sue their employer for compensation, even though the exact location where a person contracts it is often unknowable. Currently, there is no distinct legal language protecting contractors, or indeed any employer, from such a lawsuit.
Comstock said liability reform is certainly the biggest issue for the ABC. The organization wants contractors to focus on following CDC safety guidelines for their workers, rather than trying to avoid potential litigation.
FAST Act speeding to expiration
Democrats proposed a new surface transportation bill in the Senate in early June. The new bill would last five years and include $494 billion for building and maintaining highways, replacing the current budget.
Funds from the Fixing America’s Surface Transportation (FAST) Act — originally passed in 2015 — will run out on Sept. 30, 23 days after the congressional recess ends.
While ideally the new bill would receive approval quickly and provide security on road infrastructure construction for the next few years, Turmail wasn’t optimistic the bill would get passed. It is much more likely, he said, that the bill gets extended, though AGC hopes it is for more than just a few months.
That kind of shorter extension would amount to kicking the can down the road, and could end with the same gridlock. Making the extension longer — closer to a full year — or passing new legislation entirely would provide security and assurance for the future, Turmail said.
Comstock said representatives and senators campaigning at home — away from Washington, D.C. — could hurt the passing of a spending bill, but said he believed neither party wants it to fail, which would look bad for both. Nevertheless, a decision on infrastructure spending is vital to the survival of some businesses, especially small ones.
“Many businesses aren’t going to last six months, or can only last that long, and some will last only a year,” Comstock said.
Paycheck protection and employee retention
The Paycheck Protection Program, a part of the CARES Act, helped businesses pay employees during the first months of the coronavirus. Now, as summer comes to a close, businesses need to be wary of an IRS ruling that could mean they need to pay more in taxes next year.
A forgiven PPP loan is tax exempt, but using the loan can reduce how much a construction firm can write off on its business taxes, according to the U.S. Chamber of Commerce. If there is no decision made by Congress, contractors could see themselves with fewer deductions and more taxes than they’d normally have.
The tax increase could make things rougher for smaller businesses during an already rough time, Comstock said, and ABC is specifically looking for an extension of a federal employee tax credit, or some other alternative to PPP, due to the uncertainty most businesses face about their future.
“If anything is addressed, it’ll be [PPP taxes] hopefully,” Comstock said.
At the same time, the pandemic has exacerbated the labor shortage. In an AGC survey in August, 44% of firms who have tried to recall laid-off or furloughed workers said some staff have shown a preference for unemployment benefits, or remained at home to care for their families and remain completely safe from the virus.
Expectations vs. reality
The impact on contractors from the coronavirus has continued into the election season, and those two factors have contributed to an increasingly unknowable future.
“The pandemic is raging longer than most people had hoped. We’re still facing market uncertainty, economic uncertainty,” Turmail said.
The reality is most issues will likely be leveraged for politics, so while extensions are possible, it’s contractors who will have to deal with the impacts of continued inaction.
“Thankfully, after the election, this won’t be an election issue," Comstock said. "We’ll still need to address the COVID issue. It’s a matter of timing before that’s accomplished."