The November midterm elections saw the Democrats take the House of Representatives and the Republicans maintain their majority in the Senate. How do the midterm election results effect the HVAC industry?
Several issues important to contractors and the HVAC industry will remain up for negotiation (or renegotiation) in the upcoming session of Congress. The 115th Congress brought some exciting gains that industry representatives are eager to lock-in through bipartisan legislation. New regulations are at an all-time low and for each new regulation created, 22 have been eliminated.
Legislatively, the Tax Cuts and Jobs Act that passed last December made huge improvements to policies affecting HVACR distributors, without which the industry would not be thriving the way it is. This year, the amount families can protect from the estate and gift tax was doubled to nearly $12 million per family and $24 million per couple. Additionally, individual tax rates were cut, a new small business deduction of 20 percent was created, 529 savings plans were expanded, the child tax credit was increased, and the standard deduction was doubled. The expensing of HVAC equipment became a first-year write-down versus the 39-year schedule that previously existed. With a new majority in the House, Democrats may want to revisit the particulars, which could involve the threshold’s dollar amount or its duration at this level. Industry representatives will encourage lawmakers to maintain the current version and extend its timeframe.
It is not expected that the HEAT Act — which allows immediate tax deduction expensing for commercial HVAC equipment purchases — will be revisited in the upcoming session. However, it would become a top priority for ACCA should it come under pressure.
TRADE & TARIFFS
Trade continues to be an important priority for the HVACR industry. The signing of USMCA, which keeps most of NAFTA intact, was a huge step to start the 116th Congress. Based on input from industry members, HARDI wrote to the US government with concern over tariffs and highlighted the importance of their trading relationships to the industry. Secretary of Commerce Wilbur Ross responded that he had received the concerns and was working hard to solve the trade divide between Canada, Mexico and the US. HARDI, ACCA and the rest of the industry will continue to push Congress and the administration to support free trade.
DEPARTMENT OF LABOUR OVERTIME RULE
The Department of Labor overtime rule could be coming back into play next year. During the Obama Administration the Department of Labor increased the minimum salary threshold for overtime pay by over 100 percent. The wage increase was unsustainable for employers from across the nation. Thankfully, the regulation was struck down by the courts. DOL plans to reissue the regulation next year with a more realistic wage threshold.
EFFICIENCIES AND STANDARDS
Although the continued debate over equipment performance continues, the common interest continues to be better performance. Democrats are expected to pursue higher minimum efficiencies for HVAC equipment, some of which were established during the Obama administration and since rolled back. Meanwhile, ACCA maintains that it is equally effective and less expensive to pursue greater realized efficiencies and to “not focus on the box”.
Various interests could overlap legislatively in the form of increased funding for the Environmental Protection Agency’s (EPA’s) Energy Star program. In particular, ACCA would like to see a boost in support for Energy Star’s Verified HVAC Installation (ESVI) program. Contractors who participate in the ESVI program earn accreditation from a third-party organization and can then offer customers added assurance with an ESVI certificate that verifies their new equipment was installed correctly.
AHR is hopeful that in the next Congress they will tackle reforms to modernize the Energy Policy and Conservation Act of 1975 (EPCA). EPCA requires DOE to review and, when necessary, implement or revise minimum energy conservation standards. EPCA established a six-year review cycle. Many business leaders complain that the six-year cycle demands almost constant changes in plants and equipment because as managers prepare for the new standards, they quickly confront the next round of review, and, yet again, new investments that, over time, only yield smaller and smaller gains in efficiency.
Both parties agree on improving education in the trades. The Strengthening Career and Technical Education Act for the 21st Century Act was signed by the president this summer. One of the most pressing issues for the industry as a whole is having enough qualified professionals to install and service machines. This bill provided nearly $2 billion to high school and technical school programs across the country.
It will be interesting to see how much change can be affected with the change in House majority. The president will likely make deals with Democrats in the House where possible, which means that 2019 may yield some meaningful results for HVAC contractors and consumers alike. ACCA made this statement: “The HVAC industry is the backbone of our economy, responsible for keeping our food fresh, our IT and data centers operational, making modern medicine possible, providing essential comfort and healthy air to hundreds of millions of Americans, and employing millions of skilled workers. It is essential that policy makers understand the essential role that contractors play in our economy. ACCA looks forward to working with the new Congress, the Trump administration, and policy makers across the country on workforce development programs, reducing regulatory burdens, and expanding tax reform.”