Government Affairs Katharine Mottley Director of Tax & Regulatory Affairs

Mission: Achieve ACEC’s Strategic Goal #1– To pass legislation and regulatory changes that promote and protect the business interests of ACEC members

Public Market Advocacy INFRASTRUCTURE FUNDING – transportation, water, public buildings LEVERAGE PRIVATE INVESTMENT – P3s, bonding PROCUREMENT ISSUES – QBS, FAR compliance, contracting out (e.g. FAST Act language, NYU study) TAX & REGULATORY ISSUES – tax policy, PSTs, Municipal Advisor Rule INTERNATIONAL FINANCING – USAID, Export-Import Bank, USTDA

Private Market Advocacy ENERGY legislation and permitting (FERC, NERC) ENVIRONMENTAL regulations and legis. (air quality, Clean Water Act) LABOR regulations (DOL, FLSA, health care mandates) BUILDING CODES (energy efficiency, sustainability) TAX (business/personal rates, incentives, accounting methods, professional services tax) PUBLIC-PRIVATE investment (state legislation, P-3s, EXIM) LIABILITY (regulation, court cases, insurance, cyber security) “ACEC advocacy supports our power and industrial practices.” Jack Hand, CEO, Power Engineers

State Advocacy Support Comprehensive guidance and materials QBS, contracting out (NYU Study), procurement issues Infrastructure funding Professional services tax, legal issues Model legislation on QBS, design-build, etc. Advocacy with federal and state agencies State coordination and assistance Financial Assistance Minuteman Fund

115th Congress: Major Agenda Items Health Care Reform Tax Reform Infrastructure Energy Regulatory Reform Immigration

Health Care Reform ACA “repeal and replace” bill passed the House, stalled in Senate. Possible scenarios going forward: Postpone further action Graham-Cassidy block grant legislation Smaller, bipartisan package of targeted reforms Right now we seem to be in the ‘postpone’ scenario, although there is talk of moving Alexander-Murray in December alongside tax reform – unclear how that would fare in the House Hard to say if that would change in 2018

Tax Reform – House Bill Corporate rate 20%; personal service corps 25%. Creates new rate for passthrough businesses at 25%; excludes professional service firms (lawyers, doctors, accountants, architects and engineering) but includes allowance for capital investments. Individual rates: 12% -- $24k for joint filers, $12k for individuals. 25% -- $90k for joint filers, $45k individuals. 35% -- $260k for joint filers, $200k for individuals. 39.6% -- joint filers over $1 million, $500k for individuals. We think professional services excluded from the passthrough rate for two main reasons: revenue, and compliance. With respect to compliance, we’ve shared info on FAR Part 31 rules that govern overhead and reimbursement for transportation work. Revenue is a bigger challenge. Tax rates consolidated – some ACEC members would move up from 28%/33% brackets into 35%, some move down from 39.6%

Tax Reform – House Bill Full expensing for capital investments, limits on interest deductibility. Retains R&D tax credit, preserves cash accounting. Eliminates Section 199, state/local tax deduction, estate tax. Territorial tax system; repatriation tax. Strong bias in House bill toward capital investment and economic growth from capital

Tax Reform – Senate Bill Lowers corporate rate to 20%, starting 2019. Individual tax brackets: 10%, 12%, 22.5%, 25%, 32.5%, 35% and 38.5%. 17.4% deduction for passthrough businesses; excludes engineering and other professional services (except very small firms). Repeals Section 199. Protects cash accounting. Adopts territorial tax system, repatriation tax. Also provides five years of full expensing and limits on interest deductibility.

Tax Reform – Next Steps ACEC mobilizing resources and grassroots to engage lawmakers, restore balance to the plan. House Ways & Means Committee approved H.R. 1, floor vote Nov. 16. Senate Finance Committee hopes to pass its bill Nov. 16. End of year goal for final passage.

Infrastructure White House goal: $1 trillion over 10 years. $200 billion in direct federal spending; leverage additional state / local / private investment. Heavy focus on project delivery reforms. Congress waiting on final White House plan before moving forward. ACEC seeking more direct spending – Highway Trust Fund fix, water programs. Information gleaned from fact sheet in FY18 budget submission, subsequent White House blog posts, and meetings with senior Administration officials. ACEC priorities: - Generational opportunity to address system needs and overcome funding shortfalls. - Combine incentives to promote private investment with additional funding for core infrastructure programs. - Allocate funding through existing programs to ensure effectiveness and efficiency. - Include long-term, sustainable solution for the Highway Trust Fund:

FAA Reauthorization ACEC priorities: Increased investment Airport Improvement Program (AIP) Passenger Facility Charges (PFCs) Expand QBS Facilitate use of unmanned aircraft systems (UAS). Current programs extended to March 2018

Transportation FAST Act implementation: Push implementation of project delivery reforms, performance management rules Disseminate info on grant opportunities Ongoing work with FHWA, State DOTs to ensure use of FAR cost principles for A/E audits. Alert ACEC to possible violations ACEC-FHWA education partnership

Water Infrastructure Water infrastructure agenda: New WRDA legislation expected in 2018 State Revolving Fund (SRF) funding, and improvements for drinking water projects Expansion of WIFIA Protect municipal bond financing, private activity bonds (tax reform). PVC pipe issue (mandated consideration for water projects) arising in the states, in Congress. House tax reform bill eliminates PABs going forward. PVC pipe issue: engineer should make choice, not mandates.

Energy Energy Policy Modernization Act (Senate): Promotes energy efficiency through model building codes. Modernize electrical grid, stress resiliency/security; Streamline permitting for LNG exports; creates agency coordinating committee on energy/water policy nexus. ACEC engaging FERC/NERC on energy supply chain cyber security. New ACEC Superfund study supports case for more funding; subject of recent Senate hearing. House, Senate re-starting push on comprehensive energy package, with Senate expected to move first. “Modernize” has yet to be scoped but is likely to include measures to enable more efficient and effective regulatory frameworks to a) accommodate distributed energy resource (DER) development of an “integrated grid” i.e., more responsive processes for interconnection and streamlined analytical tools for cost-benefit analysis to allocate costs and b) pipeline permitting. See also Murkowski white paper of 12/2013. “Energy diplomacy” appears limited to North American and US interstate border crossings of transmission lines and pipelines. “Efficiency” appears to apply to end-uses and government processes. Use the term "resources" as it is broader than "sources" and includes transmission, distribution and management technologies such as "energy efficiency," "demand response" (DR) and "distributed energy resources" (DER). DER seems to be replacing "distributed generation" (DG).

Federal Agency & International Federal Agencies: NYU study on Corps, NAVFAC costs launched. CM at Risk rule, new small business size standard process pending. Signed new USACE-ACEC Partnering Agreement. Defend against anti-QBS efforts at the federal and state levels. International: US firm preference report language in House and Senate USAID appropriations bills, while also advocating for funding for USAID, MCC and State Dept. Export-Import Bank—restore quorum.

Regulatory/Private Clients FLSA salary threshold for overtime: Judge overturned 2016 rule that boosted threshold to $47,476 ACEC submitted comments for new rulemaking process Supporting multi-agency regulatory streamlining effort currently underway. Ongoing efforts to partner with/support private client coalition efforts.

Government Affairs Staff Steve Hall Vice President, Government Affairs Matt Reiffer Director, Transportation Charles Kim General Counsel Jessica Salmoiraghi Director, Federal & International Programs Katharine Mottley Director, Tax/Regulatory Affairs Greg Knopp Executive Director, Political Affairs Lynn Schloesser Director, Environmental and Energy Programs Katherine Bohny ACEC-PAC Director Mark Steiner, PE, Senior Policy Advisor