Contact legislators to VOTE NO on B&O tax increases in HB 3191 and SB 6143!

URGENT! Contact your  legislators immediately and tell them to oppose the House and Senate proposals to increase the business and occupation tax rates paid by professional service firms.  The legislature reconvened today in a “special” session to adopt a budget. Gov. Chris Gregoire, in calling the  special session, gave lawmakers a deadline. She wants the budget done in a week. So, time is of the essence.

Even if you have already done so, it is critical to have real people contacting their legislators NOW , by email and phone, to have any chance at stopping the proposals.  Feel free to use the message below and edit how you see fit, but it  is critical for people to deliver “real world” stories on the impact on their livelihood and that of their employees.   I have provided several examples below that members have already sent to their legislators.

Please OPPOSE an increase in the B&O tax rate on design professionals!

SENATE EMAIL HOUSE EMAIL FIND YOUR LEGISLATOR

House and Senate revenue packages (HB 3191 and SB 6143) include an increase in the rate paid by engineers, landscape architects and land surveyors and environmental consulting firms.  These businesses simply cannot absorb additional tax burdens during these challenging times.  The end result will be additional layoffs which will add to the unemployment rate, erode any potential for economic recovery, and further exacerbate the state’s revenue problem!

• Any increase in the B&O rate would be devastating for design businesses reeling in the current recession.  Since 2008, more than 4,200 design industry jobs have been lost in Washington and 33,100 jobs were lost in the entire construction industry in 2009.  Since just last March,  ACEC member firms have lost 19% of their workforce. This proposal threatens the viability of many of these firms.

• The B&O is a gross receipts tax applied irrespective of profitability, which is particularly harmful in a down economy like the one we are currently experiencing.  Design professionals and the thousands of good paying jobs they support are hurting, with no end in sight. A B&O increase will only make things worse.

• Studies have shown that previous B&O increases had a distinctly negative impact on the design professions – the 1993 increase caused a 9% drop in professional level employees in the following two years, according to a study conducted by Bellevue-based Hebert Research.

Some of our state’s leading engineering firms had this to say about the proposal:

“We have had multiple staff layoffs and our work load is decreasing.  Last year we laid off 15 percent of our staff and have already had to lay off an additional 5 percent in 2010.  A quick calculation suggests the proposed B&O surcharge will result in an additional $100,000 in taxes for my firm.  Considering we have already cut staff and eliminated all discretionary (and some nondiscretionary) spending and are still losing money, this $100,000 bottom line hit will result in the layoff of an additional 2 people.”

“This won't come out of profits…there aren't any…we will have to pay this increase with the loss of one person's job.”

“The economic viability of Architectural and Engineering Design firms is critical to keep design professionals in our State so that we are ready to put people back to work in the construction industry.”

“This current business environment is the toughest I have seen.  Our business has gone through several series of layoffs and now have staff farmed out to work in at least 4 other states as we struggle to stay viable until the local business environment turns around.  This proposed tax increase on gross receipts would be particularly harmful and result in addition job losses and permanently closing the doors of some engineering consulting firms.”

“Because we are a full service A/E firm our  projects “integrate” not only design and traditional A&E work but environmental and

technical work as well. It would be very difficult if not impossible to determine where A/E work begins and environmental and technical services end.”

VOTE NO on B&O tax increases in HB 3191 and SB 6143!

SENATE EMAIL HOUSE EMAIL FIND YOUR LEGISLATOR

Effort to oppose Section 2002(e) of HB 3191

Oppose Section 2002(e) of HB 3191 –
B&O tax increase affecting design firms

- Bill Overview
The House released its version of the budget this week  HB 3191 – (specifically Section 2002) which proposes the following:

"A temporary B&O surtax of 0.5 percent is imposed on the following service categories:

5. Management, scientific, and technical consulting services including, administrative management services, human resource consulting services, marketing consulting services, logistic consulting services, and environmental consulting services"

House Finance Committee Chair Ross Hunter agrees that A/E firms are not included, however the bill includes environmental consulting and other activities typically performed by engineering firms.

ACTION NEEDED

CALL OR EMAIL BEFORE SATURDAY your state senators and representatives and tell them you are opposed to the business and occupation surtax imposed on selected business services in Section 2002 of HB 3191.  Urge them to take out scientific, and technical consulting services and environmental consulting services from Sec. 2002

Please send a copy to bgarrity@acec-wa.org

Talking points - Please be specific in discussing your own story, the following points highlight issues with a B&O tax on services.

•              Any increase in the B&O rate would be devastating for any design businesses reeling in the current recession. Since 2008, more than 4,200 design industry jobs have been lost in Washington and 33,100 jobs were lost in the entire construction industry in 2009. This proposal threatens the viability of many of these firms.

•              The B&O is a gross receipts tax applied irrespective of profitability, which is particularly harmful in a down economy like the one we are currently experiencing.

•              Studies have shown that previous B&O increases had a distinctly negative impact on the design professions – the 1993 increase caused a 9% drop in professional level employees in the following two years, according to a study conducted by Bellevue-based Hebert Research.

•              Even if architectural and engineering services are not intended to be included in this new category of B&O taxpayers, it is difficult to separate the activities such as environmental consulting or scientific or technical work which are deeply integrated in the practice of engineering. This could result in all services of design consulting firms to be taxed at the higher rate and/or higher administrative costs when such separation is impractical or impossible.

Contact your officials today. To find and contact your state Senator or Representative, click here.

2010 Legislative Highlights

Yesterday marked the third cutoff in Olympia, where bills must be passed out of their house of origin in order to continue.  Some of the bills we opposed did not make it past this deadline.  Sometimes good things happen in a short session!

Two of the areas we expected to see a lot of activity in this short session were liability issues, along with the budget and taxes, of course. Below are some of the highlights (or lowlights) of the session so far.

Budget/Taxes

We have been anxiously awaiting details on a new revenue package to fill the huge gap in the state budget, for fear that it would contain a B&O tax increase on professional services. But when a new omnibus revenue proposal (HB3176) was introduced this week, there was no B&O tax increase included! The bill was heard in the House Finance Committee over the weekend. It includes major tax policy changes in order to raise revenue to help balance the state budget. HB 3176 includes language from Tax Avoidance HB 2970, Tax Preferences HB 2971, Limiting Tax Incentives HB 2972 and Economic Nexus HB 3157 among other bills. HB 3176 will:

(1) Establish economic nexus standards;
(2) Create tax avoidance transactions;
(3) Place a cap on the first mortgage deduction;
(4) Clarify direct seller business and occupation tax exemption;
(5) Limit business and occupation tax preferences for manufacturers of products derived from certain agricultural products;
(6) Eliminate tax preferences for bullion;
(7) End the preferential business and occupation tax treatment received by directors of corporations;
(8) Impose airplane excise tax;
(9) Impose public utility tax on interstate hauls;
(10) Limit foreclosure exemption;
(11) Address tax debts;
(12) Repeal the nonresident sales tax exemption;
(13) Remove the sales and use tax exemption for livestock nutrient equipment and facilities; and
(14) Eliminate the business and occupation tax credit for new employment for international service activities.

We are not out of the woods until “sine die,” so far there is no increase in store for professional services. One might wonder how they will ever squeeze $2.8 billion out of the above list, so we remain vigilant.

By this Thursday, Senate Democrats plan to unveil their plan for closing the budget shortfall.

Liability

Senate Judiciary Committee Chair Adam Kline resurrected a homeowner’s warranty bill (SB6701) that would establish statutory implied warranties for the new construction or substantial remodel of residential real property. These provisions are uninsurable for engineers and architects. ACEC and the construction industry support a striking amendment from Senator Haugen that would tighten licensure requirements for contractors and exempt A/E’s from the bill. The bill has been sent to the floor of the Senate and placed on the floor calendar for a second reading.

Despite the financial dire straits of the state and local governments, many lawmakers seem insistent on adding to the budget woes by increasing government liability in the form of expanding the wrongful death and survival statutes, e.g., the Senate’s vote to pass ESSB 6508 over the weekend. Before moving to final passage, the Senate adopted an amendment (#152 offered by Senators Hargrove and Brandland) to limit the joint and several liability of government entities for the class of new claimants under the bill. It is the same amendment that was rejected on a 23-23 tie vote on Saturday. The amendment was adopted by voice vote yesterday.

After the amendment was adopted, the bill was approved by a 30-18 vote. The House Judiciary Committee will hold a public hearing on ESSB 6508 on February 17 at 8:00 am.

Another mind-boggling bill passed the Senate today, SB 6764, which increases the tort judgment interest rate (the amount of interest a defendant pays on an award while awaiting appeal) from two points above the T-bill to at least 12%. That increases the rate by about nearly ten percentage points. At this point the bill only impacts private sector defendants, not public entities. The Senate adopted an amendment (#185 offered by Senator Carrell) providing that  nonprofit, charitable organizations or businesses employing fewer than 50 people will pay interest on judgments founded on tortuous conduct at a rate of 2% above the T-bill rate. The final vote was 29-19, with Senators Haugen and Sheldon joining 17 Republicans in an otherwise party-line vote.

Finally, some good news on the liability front! The second draft of the ACEC amendment to the anti-indemnity statutes is out of the Code Reviser’s Office. It parrots language that was passed in California in 2008 that limits public agencies’ ability to obtain contractual indemnification from design professionals. The bill requires that all indemnity clauses be limited to claims that arise out of, or relate to, the negligence, recklessness or willful misconduct of the design professional. Previously, public agencies could obtain contractual indemnification from design professionals for claims that also involved the public agencies’ negligence or other fault.

Rep. Bruce Dammeier (R-25^th) has agreed to co-sponsor the bill. We are currently seeking a co- sponsor from the other side of the aisle and are looking forward to introducing the bill. Take a look at the bill.

ACEC Washington Day on the Hill

I met with AELC lobbyist Cliff Webster and Advocacy Chair Chris Robertson to work out a new plan for ACEC Washington’s Day on the Hill in early March. It was originally scheduled for February 11, 2010, but there appeared to be significant strategic advantage to pushing it back.

Webster believes a B&O tax increase on professional services will be debated sometime after March 1st, and he thinks we will be most effective if we descend upon Olympia during the floor debate.  All three of us recalled the impact ACEC members had in 2005 during floor debate on the Transportation Partnership Funding bill.  Many key legislators told us that our being there that day helped push that legislation through, and we hope to duplicate that effort again.

So, here is the new plan! We’ll have to remain agile, because we need to be ready to move on 72 hrs notice. We’ll get as many people as we can to go down, get a briefing from Cliff and go “work the doors.”

The B&O tax increase vote is likely to be a close vote, so our efforts could be the determining factor in whether the increase passes or not.  It is another rare opportunity to have that “instant impact.”

Call or email Bill Garrity, or RSVP your spot if you are interested in participating.

Landmark Supreme Court Case Opens Door to Corporate Funding of Election Ads

Earlier this month, the U.S. Supreme Court held that corporations and unions have the same right to engage in independent political speech as do individuals, including the right to expressly advocate the election or defeat of candidates. This is a significant victory for businesses and trade associations, as well as unions.

Reversing two decisions that held political speech could be banned merely because the speaker was a corporation, the Supreme Court held that laws may not prohibit a corporation from using its own corporate treasury funds to independently advocate the election or defeat of political candidates. Thus, a corporation may use its own treasury funds to pay for an ad that urges the public to "vote for" or "vote against" a particular candidate.

While the decision is a significant victory for free corporate speech, it is also important to note what today's decision does not do:

•              The ban on corporate contributions to candidates and parties remains.  A corporation cannot make a direct contribution from its general treasury funds to a federal candidate or to a PAC that contributes to federal candidates. All such contributions must be personal funds.

•              The opinion does not change what federal PACs can and cannot do under federal law.

ACEC Day in Olympia Moved to March

Based on discussions with our lobbyist Cliff Webster and Advocacy Chair Chris Robertson, we have decided to postpone ACEC Washington’s Day in Olympia until early March.  It was originally scheduled for February 11, 2010, but there now appears to be significant strategic advantage to pushing it back.

Webster believes a B&O tax increase on professional services will be debated in the few days after March 1^st, and he thinks we will be most effective if we descend upon Olympia during the floor debate.  All three of us recalled the impact ACEC members had in 2005 during floor debate on the Transportation Partnership Funding bill.  Many key legislators told us that our being there that day helped push that legislation through, and we hope to duplicate that effort again.

So, here is the new plan!   We’ll have to remain agile, because we need to be ready to move on 72 hrs notice. We’ll get as many people as we can to go down, get a briefing from Cliff and go “work the doors.”

The B&O tax increase vote is likely to be a close vote, so our efforts could be the determining factor in whether the increase passes or not.  It is another rare opportunity to have that “instant impact.”

I apologize for any inconvenience this causes, hopefully we will be rewarded with a victory.

Please email Bill Garrity (bgarrity@acec-wa.org) with your availability March 1-11 and your home legislative district #.
P.S. We will either coordinate carpools or charter a bus for the trip.