2006 Post-Election Wrap-up
Developed by SmithBucklin Corporation's Government Relations team, this document provides an overview of the congressional results, as well as election results in state legislative and gubernatorial races. Exit polling and project congressional leadership and committee chairs are referenced, as well as profile the new members in the U.S. Senate and list new members in the U.S. House of Representatives.
Click here to download the 2006 Post-Election Wrap-up
Tax Policy Outlook in the 110th Congress
While the dust is still setting on last week's election, it is already clear that American business will need to be vigilant -- and politically engaged -- to guard against tax increases that would stymie economic growth and job creation. The Tax Relief Coalition needs to be active now in preparation for anticipated legislative efforts in the next Congress to erode the Bush tax cuts and to continue the battle to make them permanent.
WHAT THE NEW CONGRESSIONAL LEADERS HAVE SAID:
Since the election, incoming Speaker of the House Nancy Pelosi (D-CA) and House Ways and Means Committee Chairman Charlie Rangel (D-NY) have made restrained comments about bipartisan cooperation and indicated that they do not intend to pursue repeal of the 2001 and 2003 tax cuts. However, they both opposed enactment of those tax cuts and consistently supported efforts to repeal them or roll them back.
Congressman Rangel's recent statements are particularly worrisome:
***9/26/06 -- Congressional Quarterly: “[R]ep. Charles B. Rangel, D-N.Y., who would likely become Ways and Means Committee Chairman if Democrats recapture the House, vowed to put all of President Bush's 2001 and 2003 tax cuts ... on the chopping block."
***9/20/06 -- Bloomberg News: “[Rangel] said he 'cannot think of one' of President George W. Bush's first-term tax cuts that merit renewal.”
***9/26/06 -- Congress Daily: "Asked whether tax increases across the income spectrum would be considered, he replied, 'No question about it'.
And there are numerous post-election indications that the tax cuts may in fact be in jeopardy. For example, in a noteworthy speech last week to the Economic Club of Washington, Clinton Treasury Secretary Robert Rubin openly called for tax increases, saying : “You cannot solve this nation's fiscal problems without increased revenue.”
AMT REFORM, “PAY-GO” AND THE “TAX GAP”:
Democratic Leaders say that repeal of the Alternative Minimum Tax (for individuals) is a top legislative priority, but also promise to restore the so-called “pay-go” rules that would require that any tax cut be offset by spending cuts or other tax increases. The “cost” of repeal of AMT in terms of lost Federal revenue would be immense -- about $50 billion for one year and near $1 TRILLION over ten years -- so Democrat efforts to enact repeal would require huge tax increases.
Congresswoman Pelosi and others have suggested that they might seek new tax revenue to “pay for” AMT reform by closing the “tax gap” -- the amount of money owed to the IRS but not collected - and taxing big oil companies.
But, as reported by Congressional Quarterly on November 3rd:
“[S]everal tax experts said it would be extremely hard to pay for an AMT fix without rolling back some of Bush's tax cuts ….
'I don't think it's realistic to have a permanent fix to that without finding some other revenue to fill the hole,' said Bob Bixby, president of the fiscally conservative Concord Coalition …. If you want to do AMT relief and continue to pay for the war and fund the prescription drug benefit,' he said, 'inevitably you have to look at rolling back some of those tax cuts.'”
And the Washington Post reported just this past weekend:
“Rangel said he would not roll back tax cuts that President Bush won from the Republican Congress. But budget experts predict that Democrats will revisit at least some of them, such as lower rates for the richest Americans, lower rates on capital gains and dividends.”
The “Tax Gap” …
Few in the business community oppose closing the tax gap -- collecting the taxes owed to the government but not collected. But even here we need to pay close attention to what is proposed to ensure that new taxes or regulatory burdens are not placed on law-abiding taxpayers in pursuit of new revenue. Clint Stretch, managing principal of tax policy with Deloitte Tax, recently said “I think we will see some reforms targeted at getting better compliance from the small business sector.” (San Francisco Chronicle, 11/12/06).
WHAT TO EXPECT IN THE NEAR TERM - THE FISCAL YEAR 2008 BUDGET:
While we do not yet know what tax legislation will be considered next year, and although some of the new Democratic Congressional Leadership indicate that they will not propose repeal or roll-back of the existing tax cuts, they will give us an early signal of their intent through the Congressional Budget Resolution early next year.
Most of the Bush tax cuts are scheduled to expire in 2010, resulting in a massive tax increase that year if Congress fails to extend them. Congressman Rangel has said that he does not plan to address those expiring tax provisions next year, since they do not expire until 2010.
However, the annual Budget Resolution which the Congress will adopt next April will be required to include estimates of expected annual revenues for five years -- through the 2010 budget year. In other words, the new Congress will have to include in its next Budget an estimate of what they expect the Federal revenue to be in 2010 -- so we will know whether they plan to have the Bush tax cuts extended, or allow them to expire.
A November 9th Congressional Quarterly report on the incoming Chairman of the Senate Budget Committee, Kent Conrad (D-ND), includes this explanation:
“Conrad … is likely to face pressure from many Democrats to allocate more money to domestic programs, even if that requires finding new revenue ….
“Conrad has said he will not seek to roll back Bush tax cuts for the middle class. Democrats will have to decide, in drafting their first congressional budget resolution, whether to seek a rollback of tax cuts enjoyed by the wealthiest Americans.” (emphasis added)
NEXT STEPS AND PLANS FOR TRC:
The mission of the Tax Relief Coalition remains the protection of the 2001 and 2003 tax legislation which helped foster many consistent months of economic growth and job creation. The President remains committed to permanent enactment of those critical tax provisions, and although permanency is not likely to succeed in the next Congress, it remains the long-term goal of TRC.
In the interim, we must be fully engaged to prevent the new Congress from eroding those essential tax laws. We fully expect efforts to roll back the tax cuts for “the wealthy” and the reduced rates on capital gains and dividends, as the new Congress looks for new sources of revenue to offset their promised spending programs and repeal of the Alternative Minimum Tax.
TRC was an instrumental part of the successful efforts to enact tax cuts in 2001 and 2003, and we will need to be equally involved next year. To that end, we will resume regular communications with you when the new Congress convenes, re-activate the TRC website so that you can easily access up-to-date information on events and Congressional actions, and ask you to again be prepared to contact your Congressman and Senators when such actions are warranted.
-Courtesy of the Tax Relief Coalition
Pact Sets Builders Searching for New Lumber Sources
Expressing disappointment that the Canadian government is doing what’s politically expedient instead of the right thing in accepting a controversial U.S. lumber deal that will push up prices, NAHB Executive Vice President and CEO Jerry Howard said that the nation’s home builders will be looking to widen their supply of lumber once the pact goes into effect.
“Legal victories achieved by Canada in the NAFTA process, at the World Trade Organization and in the U.S. Court of International Trade were close to eliminating the current duties,” said Howard. “This deal not only undermines NAFTA itself, it fails to address housing affordability concerns. It’s unfortunate that Ottawa pressured its lumber industry into giving grudging support in order to ink a deal with the U.S.”
Canadian Prime Minister Stephen Harper announced last week that his government will give parliament legislation to implement the agreement next month and seek to have the accord ratified by early October.
Far from promoting free trade, the settlement would establish a complex system of quotas and new tariffs that artificially boost prices during periods of normal or weak demand.
It is also expected to increase the volatility of the lumber markets.
“With quotas being set month-to-month, mills won’t know whether they will be able to meet supply contracts without exceeding their quotas, and if they are unable to ship due to transportation bottlenecks, this could create even more uncertainty in the marketplace,” said Howard.
In addition, the lumber accord provides no incentive or means for Canadian softwood lumber companies to withdraw from the terms of the managed trade agreement, which Howard said would likely keep prices high and increase housing costs.
To mitigate any damaging effects of the pact, NAHB is working to ensure that builders will be able to purchase lumber at a consistent and reasonable price.
“First, we are seeking to facilitate increased imports from Europe,” said Howard. “We have delegations planning to visit Sweden and Russia this fall. We will meet with the lumber industry representatives there, establish contacts with producers and identify any policy barriers to raising the volume of imports from the current 5% level. And we are also promoting the use of steel and other alternative building materials wherever practical.”
The seven-year pact, which includes a six-month termination clause after the agreement has been in force for 18 months, would cap Canadian lumber imports at 34%.
The treaty would require both countries to end all litigation efforts and would eliminate current duties now totaling about 11% on softwood lumber shipments into the U.S. It also calls for the U.S. to return $4 billion in duties to Canada and keep about $1 billion, half of which would go to the domestic lumber firms that originally brought suit against their Canadian competitors.
If the pact were in effect today, Canadian lumber producers would be forced to pay duties of 15% because current prices for framing lumber are well below a $315 per 1,000 board foot threshold that is included in a complicated system of export taxes and quotas based on market prices.
The decision by the Canadian government to proceed with the accord is perplexing, in light of several recent legal victories.
Earlier this month, the World Trade Organization ruled that the current tariffs violate international trade rules. This was the third ruling in Canada’s favor since July 1, when that country indicated it would agree to the deal with the U.S.
Last month, the U.S. Court of International Trade essentially ruled that softwood lumber duties are illegal and that the Byrd Amendment, which allows U.S. firms to receive duties from foreign rivals, violates the terms of NAFTA.
“Finishing the litigation would allow Canada to obtain a complete refund of duties with interest,” said Howard. “It would also establish important precedents and make it much more difficult for the U.S. lumber coalition to successfully petition for new duties.”
While some Canadian government officials are trumpeting the agreement as a way to end the long-running cross border lumber conflict and litigation, Howard said that is just wishful thinking.
“Because the accord wipes out many of Canada’s legal victories and dispenses half a billion dollars to the U.S. lumber coalition, it will actually encourage future trade disputes during and after the agreement,” he said.
For more information, e-mail Michael Strauss at NAHB, or call him at 800-368-5242 x8252.
For Immediate Release
June 20, 2006
NAW - Washington, D.C.: Congress has considered, but not yet enacted, broad immigration reform this year. While they are still debating the issue, and no new law has been enacted, Federal agencies are very visibly stepping up enforcement of laws and regulations currently on the books, including those that require employers to verify that immigrants they hire are here legally and eligible to work in the United States. One of the verification methods is a cross-check of the employee’s social security number against Federal records.
For a recap of those regulations, please see NAW's newest Legal Advisory, “Employers Get Guidance on Response to ‘No-Match’ Letters As Workplace Enforcement Accelerates.”
Go to: http://www.naw.org/nomatch/
SMALL BUISNESS HEALTH PLAN BILL STALLS IN THE U.S. SENATE
National Association of Wholesale-Distributors
An NAW-backed bill to allow the formation and multi-state operation of association-sponsored small business health plans (S. 1955, the Health Insurance Marketplace Modernization and Affordability Act) was defeated May 12th in the United States Senate.
A bill that would allow the formation and multi-state operation of association-sponsored small business health plans (SBHPs) has stalled in the United States Senate. By a vote of 55 to 43, the Senate failed to invoke “cloture” (i.e., limit debate, for which 60 votes are required) on S. 1955, the “Health Insurance Marketplace Modernization and Affordability Act”, also known as the “SBHP Bill”. This first vote ever taken in the Senate on this issue broke almost entirely along party lines: only one Republican Senator – Lincoln Chafee (RI) -- voted to prevent an up-or-down vote on S. 1955, while just two Democrats – Mary Landrieu (LA) and Ben Nelson (NE) – voted to allow the Senate to complete action on the bill. As a result, the Senate has moved on to other business and it appears highly unlikely it will return to the SBHP Bill again in this session of the Congress.
By way of contrast, the House of Representatives passed a bill of similar purpose for the eighth time last July. The vote on H.R. 525, the “Small Business Health Fairness Act” was 263 – 165. 36 Democrats joined all 227 voting Republicans to pass the bill, while 164 Democrats and one Democrat-leaning independent opposed it.
Senate passage of the SBHP Bill, sponsored by Senator Mike Enzi (R-WY) and cosponsored by Senators Conrad Burns (R-MT), Richard Burr (R-NC), John Cornyn (R-TX), Larry Craig (R-ID), Ben Nelson (D-NE) and Pat Roberts (R-KS), has been a leading priority on NAW’s legislative agenda for the year, and enactment of federal legislation permitting trade associations to operate uniform health insurance programs on a multi-state basis for the benefit of their members has been NAW’s top health policy priority for several years. The purpose of this legislation is to enable more small employers to offer health insurance benefits to their employees by reducing health insurance costs. This would be accomplished by making the small group health insurance market more competitive and providing small employers greater choice in the selection of health insurance plans, by enhancing their bargaining power in dealing with insurers, and by dramatically reducing administrative costs. Large employers would benefit from the enactment of this legislation as well: as greater affordability allows more small employers to insure more people, the ranks of the uninsured and under-insured would decline, easing the burden of cost shifting (by which providers increase the cost of care to insured patients to offset the uncompensated cost of serving the uninsured) on all health insurance premium payers.
The purpose of this legislation is to reduce the cost of offering health insurance as an employee benefit, to increase small employers' clout in the marketplace, and to increase small employers' choice of health insurance plans.
To read about Senate action on S. 1955 (also known as the "SBHP Bill") and to find out how Senators voted, please go to http://www.naw.org/sbhps/
KEY HOUSING ISSUES AWAIT CONGRESSIONAL ACTION
Following the recent winter board of directors meeting in Orlando, Fla., the NAHB leadership will be focusing its 2006 legislative efforts in Washington on several priorities. Issues at the top of the agenda include congressional proposals to reform the Government Sponsored Enterprises (GSEs) and the recent tax reform plan presented by the President’s Advisory Panel on Federal Tax Reform.
Key legislative issues this year include:
To read legislation, click here and enter the bill number in the box at the center of the page.
-Published on NAHB's Nations Building News
IRS ISSUES PROPOSED REGULATION: INCOME TAX DEDUCTION FOR CERTAIN U.S. PRODUCTION ACTIVITIES (November 2005)
On November 4, 2005, the Internal Revenue Service published proposed regulations in the Federal Register (70 Fed. Reg. 67220-67276) under Internal Revenue Code section 199, on the recently enacted deduction relating to domestic production activities. For background information please refer to the Background section of this Advisory. The proposed regulations expand on the initial guidance, Notice 2005-14, that was issued in January 2005. This NAW Advisory supplements our earlier advisory issued in February 2005.
The proposed regulations include many of the rules contained in the initial guidance issued in January. In addition, in response to over 80 public comment letters received, the proposed regulations provide many more comprehensive rules, definitions, and examples to help taxpayers implement this new provision.
The regulations are proposed to be effective for taxable years beginning after December 31, 2004, including for pass-thru entities. Until proposed regulations are finalized, taxpayers are generally permitted to rely on the Notice 2005-14 as well as the proposed regulations.
Please note that electronic or written comments on the proposed regulations must be filed with the IRS by January 3, 2006 and a public hearing is scheduled for January 11, 2006 in Washington, D.C. Tax code provisions and IRS regulations are usually complex and need to be applied to a company’s specific activities, with the advice of tax professionals. Code section 199 and the proposed IRS regulations are no exception. For more information on this income tax deduction provision and related proposed regulations, and the potential applicability to your business, refer to:
Background:
The American Jobs Creation Act signed into law by President Bush on October 22, 2004 included a new tax benefit for certain “production activities” conducted in the United States on or after January 1, 2005. On January 19, 2005, the Treasury Department and IRS issued a Notice under section 199 of the Internal Revenue Code regarding the deduction relating to income attributable to domestic production activities. The Notice provides interim guidance on which taxpayers may rely until proposed regulations are issued.
The income tax deduction under section 199 is not limited to the traditional manufacturing company. It is available for a wide variety of production activities, including many activities which may be carried on by a wholesaler-distributor or its affiliated businesses.
Qualified Production Activity Broadly Defined:
The following activities are among the qualified production activities which are eligible for the income tax deduction:
The term “produce” includes (1) construct, build, install, manufacture, develop, improve, create, raise or grow (26 CFR 1.263A-2(a)((1)(i); and (2) also includes reconstruct, making of property out of scrap, salvage or junk material, as well as from new or raw material, processing, manipulating, refining or changing the form of an article, or by combining or assembling two or more articles, and includes soil cultivation, raising livestock and mining materials (26 CFR 1.48.1(d)(2)).
Amount of Income Tax Deduction:
For 2005, the deduction equals 3% of the lesser of taxable income derived from a qualified production activity; or taxable income, for the taxable year. However, the deduction for a taxable year is limited to 50% of the W-2 wages paid by the taxpayer during the calendar year that ends in such taxable year. In 2010, when the deduction is fully phased-in, the 3% rate will have increased to 9%.
-From NAW Legal Advisory
OPPOSITION AGAINST TAX OVERHAUL MOUNTING ON CAPITOL HILL
As the Administration weighs a proposal by its advisory tax reform panel to abolish mortgage interest and state and local tax deductions and replace them with a much more limited 15% housing credit, members of Congress from both sides of the political aisle are starting to voice strong opposition to the plan, and concerned citizens are being encouraged to follow suit.
Last week, eight Republican members of the tax-writing House Ways and Means Committee sent a letter to Treasury Secretary John Snow urging the White House to “preserve some important incentives for homeownership investment that clearly work.” (To read the letter, click here.)
“While many investment opportunities exist today,” the correspondence states, “perhaps none provides more in return for individuals, families and communities than homeownership. That is why we urge you to preserve the deductions for mortgage and home equity interest, and state and local taxes, which underpin homeownership and the social and economic benefits it generates.”
Ways and Means Committee members who signed the letter opposing removal of the housing tax incentives were: Reps. Jerry Weller (R-Ill.), Kevin Brady (R-Texas), Eric Cantor (R-Va.), Mark Foley (R-Fla.), Wally Herger (R-Calif.), Nancy Johnson (R-Conn.), Ron Lewis (R-Ky.) and Clay Shaw (R-Fla.).
Late last month, Rep. Charles Rangel (D-N.Y.), the ranking member of the Ways and Means Committee, wrote the President warning that buyers may decide to defer home purchases if they believe that the “benefit of the deduction may be dramatically reduced by being converted to a 15% tax credit.”
In addition, Reps. Katherine Harris (R-Fla.) and Robert Wexler (D-Fla.) sent a joint letter to the Administration opposing the proposal to restrict tax deductions for mortgage interest, and 25 members of the New York State congressional delegation, in a written communique to Treasury Secretary John Snow, voiced their opposition to the elimination of the deduction for state and local taxes and the elimination of the mortgage interest deduction.
The White House and Treasury Department have yet to comment on the proposal. While President Bush is under no obligation to follow the recommendations of his tax panel, which is also calling for doing away with deductions for home equity loans and second homes, he is widely expected to embrace the concept of tax reform during his State of the Union address in January.
When the panel’s proposal was unveiled on Nov. 1, NAHB Executive Vice President and CEO Jerry Howard voiced strong opposition, warning that it amounted to the “biggest tax hike for home owners ever considered.”
“Equally disturbing,” he said, the plan “would reduce home values, eliminate one of the few tools (the Low Income Housing Tax Credit) available to construct or renovate affordable rental housing and send a chill through the housing market, which has been leading the economic expansion for the past three years.”
As previously reported, NAHB has conducted detailed scenarios analyzing how typical home-owning families in Chicago; San Jose, Calif; and Binghamton, N.Y. would face tax hikes under the proposal.
In addition, results from a national survey commissioned by NAHB and conducted earlier this month by Public Opinion Strategies found overwhelming voter disapproval of replacing tax incentives that promote homeownership with incentives to invest in the stock market. (Click here for survey results and examples showing how home owners would fare under the tax plan.)
Contact Your Members of Congress
Voters troubled over how these recommendations would affect their bottom line and home values are encouraged to contact their members of Congress and the Administration before policy makers begin to craft their own legislative proposals.
It is particularly important to urge members of the House Ways and Means Committee and Senate Finance Committee to oppose the advisory group’s tax plan.
To voice your opinion to Capitol Hill lawmakers, call the U.S. Capitol Switchboard at 202-224-3121 and then ask for your member of Congress.
Or send a letter to President Bush and your federal lawmakers asking them to reject the panel’s recommendations by logging on to www.capitolconnect.com/nahb.
For more information, go to www.nahb.org/taxreform; or e-mail NAHB tax counsel Jim Tobin, or call him at 800-368-5242 x8258.
-Published on NAHB's Nations Building News
SENATE CANDIDATE RECRUITMENT: WHICH PARTY HAS THE EDGE?
The evolution of a national election for federal office below the presidential level can be complex. While fundraising is always a front-burner priority, the single most important stage within the evolutionary process is candidate recruitment. There’s an old political saying, “you can’t beat somebody with nobody.” A corollary to that rule that is just as certainly true: “You can’t beat somebody with just anybody.”
Candidate recruitment is critical. State and local political party leaders want to win elections and are necessarily involved in the effort to recruit the strongest possible candidates to run for the U.S. Senate and for Congress. National political party leaders want to win partisan majorities in the U.S. Senate and House of Representatives and play a substantial role in candidate recruitment as well.
The process of candidate recruitment is not always nice and neat. Not surprisingly, different players involved in recruiting candidates for a particular race do not always see eye-to-eye regarding the relative strengths and weaknesses of various potential candidates. Nor should it surprise you to know that different players bring an agenda to the process that is not always shared by all other players.
One final general observation about candidate recruitment: it’s not only the political parties at various levels that do it. Interest groups (organized labor is a good example) motivated by issue interests will not infrequently try to lure a favorite candidate into a race for the Senate or House, and those forces may not agree with or even care what any or all of the political powers think.
From a pure political vantage point, the object of this whole exercise is to produce the strongest possible candidate to bear a party’s standard in the general election. Well, sometimes it works…and sometimes it doesn’t.
As we enter the fourth quarter of the “off” (i.e., non-election) year, the candidate recruitment process in many House races likely to be competitive is just beginning to mature. However, the recruitment process for the more expensive and earlier-to-develop state-wide races for the U.S. Senate is just about at its finish line. While there is no perfect “crystal ball” for handicapping a future election’s outcome, an assessment of what the recruitment process has produced can be useful in giving us a sense of where an election may be headed.
“Red” Senators in “Blue” States
Let’s first take a look at Senate races in three states that voted for the Democratic presidential candidate in both 2000 and 2004 (so-called “blue” states) featuring Republican incumbents seeking re-election: Maine, Pennsylvania and Rhode Island.
In Maine, Sen. Olympia Snowe (R) is running for a third six-year term. Snowe, chair of the Senate’s Small Business Committee, is a former state legislator and eight-term Congresswoman from Maine’s sprawling Second Congressional District who won her first two Senate terms with over 60 percent of the vote. Because she’s a moderate who sometimes bucks the GOP leadership on economic and social issues, some speculated that Sen. Snowe could face a conservative Republican primary challenge, but that has not materialized. Neither has a credible Democratic challenge to her re-election. State Attorney General and former House Speaker Steve Rowe and five-term 1st District U.S. Rep. Tom Allen are thought to be the strongest potential challengers, but neither has yet taken the plunge.
Pennsylvania is quite another story. Sen. Rick Santorum is a two-term incumbent who has climbed the Republican leadership ladder and now, as Chairman of the Republican Conference, occupies the third ranking post in the Senate’s GOP hierarchy. His Democratic opponent in the fall general election will be State Treasurer and former Auditor General Bob Casey. Recent polls show Sen. Santorum trailing his likely Democratic opponent, the namesake of the late popular two-term Democratic governor.
Rhode Island is yet another story. Sen. Lincoln Chafee is completing his first full term in the Senate (he was initially appointed to the seat in 1999 to fill the vacancy created by the death of his father, Sen. John Chafee) where he has compiled a record as the Senate’s most liberal Republican member. He frequently votes with the Senate’s Democrats and did not endorse the re-election of President George W. Bush. This has earned Sen. Chafee a serious conservative challenge to his re-nomination from Cranston Mayor Steve Laffey.
The Democrats were not able to lure to the race either of their preferred candidates: 1st District U.S. Rep. Patrick Kennedy or 2nd District U.S. Rep. James Langevin. Instead, the Democratic nominee will be either Secretary of State Matt Brown or former Attorney General Sheldon Whitehouse.
Expect Sen. Chafee to be pressed both in the primary and, if he wins re-nomination, in the general election in this heavily Democratic state.
“Open” Republican Seats
At press time, the lone GOP retiree is Tennessee Senator Bill Frist, the Senate Majority Leader, who is widely thought to be leaving the Senate to organize a campaign for the 2008 Republican presidential nomination. In the race on the Republican side to succeed Sen. Frist are former 7th District U.S. Rep. Ed Bryant, former 4th District U.S. Rep. Van Hilleary, and former Chattanooga Mayor Bob Corker. Both Bryant and Hillary have experience running state wide: Rep. Bryant left the House in 2002 to run for the GOP Senate nomination and Rep. Hilleary left the House that same year to run unsuccessfully for governor.
The Democratic nominee will in all likelihood be Memphis Congressman Harold Ford, Jr. The Ford name is a well-known political name in the Memphis area and across Tennessee. In fact, the 9th District Congressman’s father held the House seat now occupied by his namesake for 22 years. The Congressman is widely known for having challenged then-House Democratic Whip, U.S. Rep. Nancy Pelosi (D-CA), for Minority Leader following the 2002 elections. Although the most liberal member of Tennessee’s nine-member House delegation, he has compiled a centrist record during his five-term House career, and his moderate image combines with his name recognition to make Congressman Ford a strong competitor in this race.
“Blue” Senators in “Red” States
There are four incumbent Democratic Senators running for re-election in “red” states; i.e., states won by President Bush in both 200 and 2004: Sen. Bill Nelson in Florida, Sen. Ben Nelson in Nebraska, Sen. Kent Conrad in North Dakota, and Sen. Robert Byrd in West Virginia. As of press time, none is thought to be facing a “first-tier” GOP opponent.
In Florida, the presumptive GOP nominee is 13th District U.S. Rep. Katherine Harris, now serving her second term in the House. Congresswoman Harris is, of course, widely known due to her prominence as then-Secretary of State (Florida’s top election official) during the recount tug-of-war in the 2000 presidential contest in Florida. Despite the Congresswoman’s clear strength among the GOP rank and file, leading national Republicans would prefer a candidate other than Ms. Harris to face-off against the vulnerable Sen. Nelson, believing she is simply too polarizing a figure to be able to draw needed unaffiliated and Democratic voters to the GOP column in this race. This skepticism seems validated by recent polls showing Sen. Nelson with a healthy double-digit lead in a head-to-head match-up. Nonetheless, GOP efforts to lure a stronger general election candidate into this race do not appear likely to succeed.
Nebraska Sen. Ben Nelson, a centrist who frequently sides with the Republicans, dodged a potential bullet when the President named the Senator’s strongest potential adversary – then-Nebraska Gov. Mike Johanns (R) – to his cabinet as Secretary of Agriculture. When the prospect of a Johanns candidacy evaporated, GOPers first turned to 3rd District Congressman Tom Osborne, the legendary former Nebraska Cornhuskers football coach, who instead opted to challenge Gov. David Heineman (R), Mr. Johanns' successor, for the state’s top job. A subsequent effort to lure Gov. Heineman into the Senate race has proven unsuccessful as well. Consequently, the GOP challenge to Senator Nelson will come from one of three “lower-tier” candidates: former Attorney General Don Stenberg (whom Sen. Nelson defeated in the 2000 Senate race), former Republican State Chairman Dave Kramer, and former Ameritrade CEO Peter Ricketts. Although Sen. Nelson is doubtless breathing a bit easier these days, this race could still become competitive due to the state’s clear Republican leanings.
North Dakota senior Senator Kent Conrad is running for his fourth full term in the Senate. If Governor John Hoeven (R) challenges him this is a horse race – one of the most competitive in the country. If not, Senator Conrad should coast to victory. To date, the Governor’s not a candidate.
Senator Robert C. Byrd (D-WV), the Senate’s former just about everything – President Pro Tempore, Majority Leader, Majority Whip, Minority Leader, and Appropriations Committee Chairman – is a legend both in the Senate and back home in West Virginia. Now in his eighth term in the Senate, Senator Byrd boasts a Congressional career of nearly 54 years duration and a career in elective office approaching 60. Republicans believe Senator Byrd may be vulnerable to a strong challenge in 2006 and would like nothing better than to lure third term U.S. Rep. Shelley Moore Capito (R-WV-2), the daughter of former Governor Arch Moore, into the race. If she runs, this is likely to be 87-year-old Senator Byrd’s toughest re-election race ever. If not, Robert C. Byrd will make history by surpassing the late Strom Thurmond (R-SC) as the Senate’s longest serving member. To date, the Congresswoman has not jumped into the race, and not many observers expect that she will.
“Open” Democratic Seats
Two Democratic Senators are calling it quits at the conclusion of the 109th Congress – Sen. Mark Dayton in Minnesota after a single term, and Sen. Paul Sarbanes in Maryland after five.
Republicans in Minnesota were able to “clear the field” in favor of the candidate they want in third-term 6th District U.S. Rep. Mark Kennedy, while the race for the Democrat Farmer Labor (DFL) nomination is wide open. Minnesota is a “blue” but nonetheless competitive state: the governor is a Republican; the state Senate features a four-seat DFL majority; the GOP has a two-seat majority in the state House; the U.S. Senate and House delegations are evenly split; and the Democratic presidential nominee carried the state in 2000 and 2004 by two and three percentage points respectively. In short, the Republicans see Minnesota as their most promising pick-up opportunity of the 2006 cycle, but the highly competitive nature of the state that elected Jesse “The Body” Ventura governor just eight years ago means this one’s likely to stay at least interesting to the end.
In Maryland, one of the “bluest” of the nation’s blue states, the GOP will likely nominate Lieutenant Governor Michael Steele for the Senate, clearly their strongest possible candidate to replace the retiring Sen. Paul Sarbanes (D). The race for the Democratic nomination boasts a stable of candidates that has continued to grow until just recently, and most prominently features Baltimore’s ten-term veteran U.S. Rep. Ben Cardin and former U.S. Rep. and former NAACP President Kwese Mfume. Just four years ago, Lt. Gov. Steele was on the GOP’s first successful gubernatorial ticket in 36 years and his running mate, Gov. Bob Erlich, will lead the Republican ticket in Maryland again this time. If Mr. Steele, a former GOP State Chairman, can pull this off, he will be the first Republican elected to the Senate from the Free State in more than two decades.
The fourth and final Senate retirement known to date belongs to Vermont’s Sen. Jim Jeffords. Although technically an Independent, Sen. Jeffords has, since abandoning the Republican Party in 2001, allied himself with Senate Democrats, so his retirement puts some added pressure on the Senate minority. Another Vermont Independent, eight term At-Large Congressman Bernie Sanders, a self-described Socialist who allies himself in the House with the Democrats, is running. Early polls make the Congressman, a former eight-year Burlington mayor who has had just one close state-wide race for the House and hasn’t faced a Democratic opponent since 1996, a strong favorite to succeed Sen. Jeffords, with the Democratic Party’s support.
Republicans hoped that two-term governor Jim Douglas, clearly their strongest potential candidate, would make the race. However, last spring the Governor, who won re-election in 2004 in a 21-point landslide following his narrow 2002 win in a three-way race, bowed out.
Finally, New Mexico is the only one of just three “purple” states; i.e., which voted for President Bush in either the 2000 or 2004 election and for the Democratic nominee in the other, to feature a Senate race in 2006. Republicans have not been able to entice 1st District Congresswoman Heather Wilson, a five-term House veteran, into the race, so Sen. Jeff Bingaman, running for a fifth term, is unlikely to face a challenge of any real consequence.
And the Winner Is…
At this point in our environmental scan, give the recruiting edge to the Democrats. They’ve done reasonably well in “blue” states featuring GOP incumbents running for re-election and in the one GOP “open” seat. At the same time, the GOP is not yet mounting “first-tier” challenges to Democratic incumbents running in “red” states. That, along with the primary challenge to Sen. Chafee in Rhode Island, must roil the Republicans who have twice the opportunities the Democrats have in these categories.
At this point, neither a Democratic Senate majority nor a Republican filibuster-proof margin in the Senate following the 2006 elections appears anywhere sight.
Next time: Vulnerable “red” Senators from “red” states and endangered “blue” Senators from “blue” states: Michigan, Missouri, Montana, Ohio and Washington.
-Published on NAW.org
Seeking Tariff Reductions Through WTO, NAM Leads Industrial Delegation to Geneva
Asia-Pacific, European Manufacturing Groups Join Two-Day Beginning Tomorrow
WASHINGTON, D.C., October 4, 2005 — As follow-up to a similar effort this past April the National Association of Manufacturers will lead a global delegation of manufacturers to the World Trade Organization (WTO) in Geneva, Switzerland, on Wednesday and Thursday to make certain that manufacturing priorities are addressed in the Doha Round of trade negotiations. More than 15 individuals from manufacturing organizations around the world will participate.
“The principal objective of our second global fly-in is to demonstrate that manufacturing organizations from around the world are unified and determined to see the Doha Round include truly ambitious cuts in industrial tariff barriers,” explained NAM Director of International Trade Policy Christopher Wenk, a member of the NAM delegation. “As we approach the Hong Kong Ministerial in December, we’re concerned that too many WTO member countries continue to overlook the need to liberalize industrial trade in ongoing Non-Agricultural Market Access negotiations.
“While manufacturers agree that the Doha Round cannot succeed without a good agricultural deal, they also insist that success will require large cuts in tariffs faced by manufactured goods in many countries around the world,” Wenk added. “Manufactured goods account for three-fourths of all global trade in goods, and tariff barriers facing these goods must be reduced significantly if the world’s industrial sector is to lend its support to Doha.”
Wenk reported that the manufacturers’ delegation is scheduled on Wednesday and Thursday to meet with several key individuals, including Ambassador Stefan Johannesson of Iceland, WTO Deputy Director General Rufus Yerxa and ambassadors from several key developing countries including Brazil, China, Mexico and Pakistan.
Participating organizations besides the NAM include the Korea International Trade Association (KITA), the Union of Industrial & Employers’ Confederations of Europe (UNICE), Le Mouvement des Entreprises de France (MEDEF), the Confederation of Norwegian Business and Industry (NHO), and the Confederation of Swedish Enterprise, among others. A joint statement from these groups is posted at: http://www.nam.org/s_nam/bin.asp?CID=484&DID=235341&DOC=FILE.PDF.
The National Association of Manufacturers is the nation’s largest industrial trade association, representing small and large manufacturers in every industrial sector and in all 50 states. Headquartered in Washington, D.C., the NAM has 10 additional offices across the country. Visit the NAM’s award-winning web site at www.nam.org for more information about manufacturing and the economy.
The Duty of Opposition Is...
Few of our readers will remember the late Indiana Congressman Charles A. Halleck, a distinguished 34-year veteran of the U.S. House of Representatives who served from 1935 to 1969. Mr. Halleck, a Republican, served as House Majority Leader for four years and then from 1959 to 1965 was House Minority Leader. Throughout his six years as Minority Leader, Mr. Halleck’s counterpart in the Senate was the legendary Everett McKinley Dirksen (R-IL) for whom one of the three Senate Office Buildings is named. Senator Dirksen and Congressman Halleck appeared together at press briefings that came to be known as the “Ev and Charlie Show.”
Congressman Halleck, leader of the “loyal opposition” in the House throughout the New Frontier and during the earliest days of the Lyndon Johnson Administration, reflected on the minority’s role in those days and commented, “The duty of the opposition is to oppose.” More on that in a moment.
But first, to complete the history lesson, Congressman Halleck did run for re-election as Republican Leader for the 89th Congress that convened in January 1965 in the wake of the Johnson landslide. Mr. Halleck was defeated by an eight-term Michigan Congressman who just under nine years later would become Vice President and then the 38th President of the United States, Gerald R. Ford.
The reason for climbing aboard our version of a “time machine” is to reflect for a moment on what Leader Halleck discerned to be the Congressional opposition’s duty. It seems that in recent years and, most important, today, the approach of the Congressional opposition has been reminiscent of that earlier time. But is it really that cut-and-dry today? And even if it should be or could be that simple, is opposing for its own sake smart politics?
A somewhat less drastic blast to the past takes us back to the mid-to-late 1990s. Bill Clinton was President, much to the Republicans’ continuing consternation, and they smelled their political nemesis’ political blood in the water. The seemingly constant tug-of-war between Capitol Hill and the White House, a partial shut-down of the Federal Government and impeachment gave many voters the impression that the Republicans had become, simply, the anti-Clinton party, themselves without ideas and intent solely on frustrating the President’s agenda. Something of a wake-up call came for the Republicans on the first Tuesday in November 1998, when the GOP not only failed to deliver the typical stinging political defeat to the President’s party in the second mid-term election; the Republicans actually lost seats that year.
The Democratic minority in the House and Senate seem not to have learned much from their opponent’s painful experience of the not-so-distant past, and they appear to have paid and continue to be paying a political price for this failure. In the 2002 mid-term elections, the Republicans picked up seats in the House and Senate. This is the first time in memory that the President’s party actually gained Congressional seats in back-to-back mid-term elections. In the 2004 elections, the political burden of obstructionism weighed so heavily on the Democrats that no less a figure than the Democratic Leader of the United States Senate was defeated in his bid for re-election.
Now we find ourselves more than half way through the first session of the 109th Congress with the 2006 mid-term Congressional elections less than a year and a half away. What will the Democrats offer the voters this time? For their part, the Republicans have at the very least their stewardship of the Federal Government and the unfinished elements of their rather considerable policy agenda on which to run. Will it be enough for the Democrats to simply be the “not-Republican” anti-Bush party? Not according to the polling data we’re seeing. While there appears to be a softening of the President’s and Congressional Republicans’ support driven by anxiety over Iraq and other issues (a recent NBC News/Wall Street Journal poll gives the Republican Party 38 percent/42 percent positive/negative ratings), the Democrats are not benefiting – their approval numbers are anemic at best (the same poll gives the Democratic Party positive/negative ratings of 34 percent/36 percent) for an opposition party heading into a mid-term election.
Indeed, it may be that the Democrats are on the horns of a terrible dilemma: barring developments that are politically catastrophic for the Republicans regardless of what the Democrats do, to win in 2006 the party of Jefferson, Jackson, FDR, Kennedy and Clinton will have to offer more than a merely anti-Bush/anti-GOP message on Iraq, tax relief, Social Security reform, judges, health care and tort reform. The Democrats are going to have to offer a program of their own on these and other issues. Leader Halleck was right: the duty of the opposition is to oppose – but with creative ideas that offer real alternatives and not simply obstructionism.
Now, here’s the dilemma: if the Democrats’ creative alterative ideas really amount to more taxes for the Federal treasury, higher payroll taxes for Social Security, a bigger and more invasive Federal Government and an even bigger pay-day for trial lawyers, they will in all likelihood be in for a long and disappointing night on the first Tuesday in November 2006.
Because elections have consequences, the Wholesaler-Distributor Political Action Committee (WDPAC) will be fully engaged on behalf of the wholesale distribution industry throughout the 2006 election cycle in support of pro-business candidates for the U.S. Senate and House of Representatives. WDPAC’s ability to work on your behalf to expand the Congressional pro-business majorities depends entirely on your support – you are the only source of funds for WDPAC, so please invest in WDPAC as early and generously as you possibly can.
-Published on NAW.org
NAW Applauds House Passage of Small Business Health Bill
AHP Bill Leads Wholesaler Trade Group's Health Policy Agenda
Washington, DC (July 26, 2005) ... The U.S. House of Representatives today passed H.R. 525, the Small Business Health Fairness Act of 2005, legislation authorizing the formation and multi-state operation of Federally certified association health plans (AHPs). The AHP Bill, sponsored by Representatives Sam Johnson (R-TX-3), Nydia Velazquez (D-NY-12), John Boehner (R-OH-8), Albert Wynn (D-MD-4) and 132 additional co-sponsors and supported by the Bush Administration, prevailed on a bipartisan vote of 263 - 165.
“Today’s action by the House successfully concludes the first chapter in what can be a very good story for the Nation’s smaller employers and their workers,” said Jade West, Senior Vice President – Government Relations of the National Association of Wholesaler-Distributors (NAW). “A tough battle lies ahead in the Senate, but the solid bipartisan vote achieved in the House should help build positive momentum there.”
“NAW member companies, like other smaller employers across the country, are truly struggling in today’s highly concentrated health insurance marketplace and their workers are highly affected by that struggle,” said NAW President Dirk Van Dongen. “The AHP Bill employs an effective marketplace approach to this problem, and one that involves little if any cost to the taxpayers. For these reasons, enactment of the AHP Bill is among NAW’s top legislative priorities and in fact leads our health policy agenda,” Van Dongen said.
“Health care costs are a big and growing problem across the board, but particularly hard-hit are small and mid-size employers and their workers,” observed NAW Vice President-Government Relations Jim Anderson. “After all is said and done, the AHP Bill is about providing those employers the same opportunities for economies of scale, bargaining clout and administrative efficiencies that the Nation’s largest employers and labor unions now enjoy in the health insurance marketplace, and to allow greater competition to begin to level the playing field for those smaller employers,” Anderson said.
“Ultimately, it is workers and their families who will benefit from this bill,” Anderson continued, “people who either don’t now have or are in danger of losing their health benefits because of rapidly rising costs. That’s the message Members of the House heard and to which they responded in this debate.”
-Published on NAW.org
NAW Applauds U.S. Senate and House for Passing Junk Fax Prevention Act
Washington, DC (June 28, 2005) … The National Association of Wholesaler-Distributors (NAW) applauds and thanks the U.S. Senate and House of Representatives for passing S. 714, the Junk Fax Prevention Act of 2005. This legislation effectively reverses burdensome regulations issued by the Federal Communications Commission (FCC) in July, 2003, which if allowed to take effect, would have made it illegal for a business to send a commercial fax to even a long-standing customer without first obtaining written permission from that customer, specific to the fax number being used.
“The regulations issued by the FCC, and three times postponed by the Commission in response to Petitions for Stay filed by hundreds of businesses and trade associations, were completely nonsensical but would have imposed a very serious and costly burden on virtually every business in the country. Just as important, the regulations would not have achieved the intended purpose of getting rid of annoying junk faxes, since those faxes are already illegal and will remain so under this legislation,” said Jade West, NAW Senior Vice President-Government Relations.
NAW was a co-founder and serves as executive secretariat of the “Fax Ban Coalition,” a loose federation of over 600 businesses and trade associations which was organized to oppose and reverse the FCC’s regulations.
“Every member of the Fax Ban Coalition, and every business which routinely utilizes a fax machine to communicate with customers and vendors, is grateful to the leaders of this legislative effort in both the House and Senate.” Senator Gordon Smith (R-OR) was the author of the Senate legislation, and was joined as original co-sponsors by Commerce Committee Chairman Ted Stevens (R-AK) and Ranking Minority Member Dan Inouye (D-HI), and several others. In the House, Congressmen Joe Barton (R-TX-6), Fred Upton (R-MI-6), John Dingell (D-MI-15) and Ed Markey (D-MA-7) led the successful effort to pass this necessary legislation.
The legislation just enacted, which is expected to be signed by the President this week, will maintain by statute the “established business relationship” (EBR) exception to the long-standing ban on the sending of unsolicited commercial or advertising faxes, which had existed since 1992 until the FCC issued its July, 2003 regulations. “The EBR exception is a logical recognition of the right of a business to communicate with its customers and vendors by fax,” said West, “and the FCC’s sudden and unexpected regulations which would have removed right two years ago was frankly inexplicable.”
“We appreciate the leadership of the sponsors and co-sponsors of this legislation, and their persistence in the two-year successful effort to pass this critically important legislation.”
OSHA's NEW APPROACH TO WAREHOUSING
By Susan Lacefield, Associate Editor, Logistics Management - March 1, 2005
If you mention "OSHA" to a warehouse manager, you're likely to get a frown in response. That's because relations between warehouse operators and the Occupational Safety and Health Administration, the government's watchdog on industrial safety issues, haven't always been friendly.
In the 1990s, OSHA began to crack down on violations, and in 2000 the agency developed a controversial set of ergonomics standards that met with strong objections from many industries, including warehousing. Congress repealed those standards in 2001, just weeks before they were to take effect. Without standards in place, it became harder for OSHA to issue violation notices—and for warehouse operators to know when they'd done something wrong.
That lack of certainty has prompted OSHA to change the way it works with business, an approach that promises to improve safety and reduce warehouse operating costs.
OSHA's new approach is based on four activities: best practices guidelines, enforcement, outreach and assistance, and a national advisory committee. As part of this initiative, OSHA has been forming cooperative partnerships, or "voluntary protection programs," with companies and has been soliciting advice from industry associations.
OSHA also has targeted warehousing and other industries with above-average rates of ergonomic injuries for participation in its initiative, says Rich Fairfax, director of the agency's enforcement program. One industry group that was very interested in working with OSHA is the International Warehouse Logistics Association (IWLA), an organization for warehouse-based third-party logistics providers. "For most warehouse operators, OSHA is a four-letter word. But we didn't want that to be the case," says Nathan Noy, IWLA director of government and legal services.
Last year the IWLA formed an alliance with OSHA. The alliance's goals are to collaborate on improving warehouse safety, reducing regulatory violations, and developing training and information programs.
Participants quickly decided that they should focus on ergonomics because the majority of warehouse safety incidents are ergonomics-related. IWLA members say they welcome OSHA's assistance in improving ergonomic practices. "What we applaud is that they are really trying to find a practical way to do that," says Ernie Harban, manager for training and loss prevention at third-party logistics provider Saddle Creek Corp.
OSHA's outreach programs aim to produce concrete benefits for participants. Noy, for one, expects the alliance will help his group spread information on ergonomics to its members, which will reduce the likelihood of OSHA inspectors showing up on their doorsteps.
The agency has indeed issued fewer ergonomics citations in recent years than it did in the 1980s and early 1990s, says Prof. Donald Bloswick, an industrial ergonomics and safety specialist at the University of Utah. That's a good thing, he says. "I'd much rather see companies spending their dollars abating hazards than paying OSHA citations."
According to OSHA's Fairfax, participants in voluntary protection programs can indeed expect some breaks. If they do appear on OSHA's inspection list, the agency will defer an inspection and give the company time to develop and implement an improvement program.
It would be foolhardy, though, to put ergonomics on the back burner because OSHA is focusing more on outreach than on enforcement these days. "I think this would be a mistake for two reasons," says Dave Alexander, president of consultants Auburn Engineers. "First, you're still responsible for providing a safe and healthy workplace. And second, if you're having enough injuries to be worried about OSHA, you should really be worrying about your pocketbook. You're probably paying a lot more money than you have to for workers' comp."
What type of ergonomics program should you have to make sure that you don't hurt your employees' backs—or your wallet? "The worst level of program is to be completely reactive, to only do something when someone gets hurt," says Tom Albin, an ergonomics specialist at Auburn Engineers.
Instead, many industry experts recommend that warehouse managers adopt the following four-step program for preventing ergonomics problems.
Step 1: Identify existing and potential problems.
Look at injury and illness records. If those costs average a few hundred dollars per person, per year, you probably have a pretty good ergonomics program, says Alexander. If you're spending several thousand dollars, you need to improve your program, he says.
Zack Koustandreas, vice president of consulting firm Ergoworks, recommends asking employees questions such as: Are you tired at the end of the day? Why are you tired? Which muscles are sore? "Is this a comprehensive and thorough analysis? No, but it will give you a hotspot—or two or three—that's a great place to start," he says.
Walk through a facility to see what the risk factors are. How far are people reaching? How much do boxes weigh? How many times are they performing a specific task? You can do this yourself, bring in a consultant or insurance company, or use OSHA's consultation service. Under the OSHA program, inspectors will conduct an inspection at no cost. If they find a hazard, however, you will be obligated to correct it.
Step 2: Train and educate correctly.
Good training is specific to each warehouse's unique operation. If it isn't, employees are likely to respond to recommendations with "yes, buts," according to Kim Monroe, president of Emmons Ergonomics Consulting.
Make sure training is practical and instructions make sense. "I can tell you to lift with your knees bent and your back straight, but if you've got to bend over to go into a slot, how are you going to do that?" says Albin. "If I train you to do something you cannot do, I've wasted your time and my money."
Step 3: Establish an effective injury-response program.
Encourage employees to report injuries and soreness early so you can identify problems before they become serious. It's helpful to work with a medical professional who is certified in occupational medicine and is familiar with your operation. If you don't have someone on staff, find someone who can visit your facility periodically.
Step 4: Earn continuing support for compliance.
Both employee involvement and management buy-in are critical to the success of any ergonomics program. "You really have to make sure that you have all your ducks in a row before you roll out the program, that you have management support and a certain amount of funding. That's the only way you can overcome resistance and skepticism," says Monroe.
And have patience. "You're not going to immediately see an effect on your injury and illness rates," Monroe warns. "In fact, when you first put in an ergonomics program, you might see your numbers go up because you have increased awareness and more people are reporting injuries early."
But stick with the program and you'll see improvements not only in the number of reportable injuries, but also in employee satisfaction.
New Business Income Tax Deduction Available For Certain U.S. Production Activities
The American Jobs Creation Act signed into law by President Bush on October 22, 2004 included a new tax benefit for certain “production activities” conducted in the United States on or after January 1, 2005. On January 19, 2005, the Treasury Department and IRS issued a Notice under section 199 of the Internal Revenue Code regarding the deduction relating to income attributable to domestic production activities. The Notice provides interim guidance on which taxpayers may rely until proposed regulations are issued.
The income tax deduction under section 199 is not limited to the traditional manufacturing company. It is available for a wide variety of production activities -- including many activities which may be carried on by a wholesaler-distributor or its affiliated businesses.
Qualified Production Activity Broadly Defined --
The following activities are among the qualified production activities which are eligible for the income tax deduction:
The term “produce” includes (1) construct, build, install, manufacture, develop, improve, create, raise or grow (26 CFR 1.263A-2(a)((1)(i); and (2) also includes reconstruct, making of property out of scrap, salvage or junk material, as well as from new or raw material, processing, manipulating, refining or changing the form of an article, or by combining or assembling two or more articles, and includes soil cultivation, raising livestock and mining materials (26 CFR 1.48.1(d)(2)).
Amount of Income Tax Deduction --
For 2005, the deduction equals 3% of the lesser of taxable income derived from a qualified production activity; or taxable income, for the taxable year. However, the deduction for a taxable year is limited to 50% of the W-2 wages paid by the taxpayer during the calendar year that ends in such taxable year. In 2010, when the deduction is fully phased-in, the 3% rate will have increased to 9%.
More Information --
Tax code provisions are usually complex and need to be applied to a company’s specific activities, with the advice of tax professionals. New section 199 is no exception. For more information on this income tax deduction provision and its potential applicability to your business refer to:
Treasury Department Fact Sheet dated January 19, 2005 (5 pages); go to: www.ustreas.gov/press/releases/reports/199factsheetjs2200.pdf
IRS Notice 2005-14 (102 pages); go to:
www.treas.gov/press/release/reports/notice200514js2200.pdf