Yesterday House Speaker John Boehner (R-Ohio) unveiled his “Plan B” approach that the House will likely vote on today. By piggybacking on a bill already in the pipeline, Boehner’s proposal can move quickly to the floor for a vote and then back to the Senate.

The vehicle for the legislation is H.J.Res. 66, the “Senate Amendment to Approving the renewal of import restrictions contained in the Burmese Freedom and Democracy Act of 2003.”

Included in Boehner’s Plan B is a repeal of the current estate tax, replacing it with a  permanent, inflation adjusted, $5 million exemption level with a 35% top rate, spousal transfer, and stepped up basis. This differs greatly from the President’s estate tax plan that simply reinstated the 2009 estate tax levels, with a $3.5 million exemption, and a 45% rate. If Congress were to do nothing, the estate tax would revert to the pre-2001 level of a $1 million exemption and 55% rate.

As reported in the media, Plan B would allow the tax rates on income over $1 million to rise to 39.6%, a provision that would apply to many small businesses organized as a pass through entity. It would also extend the section 179 expensing for small businesses ($250,000 and indexed for inflation); permanently extend the Alternative Minimum Tax (AMT) from hitting middle class families, and extend parity for capital gains and dividend taxes, preventing dividend taxes from being taxed at the highest rates.

ACCA and its allies will continue to monitor the negotiations between the House and Senate leadership and the respective tax-writing Committees, emphasizing the importance of the implications of the estate tax, the small business expensing allowances, and the proposed top level income tax increase on small businesses.

More than 50 other tax incentives are set to expire on December 31 if Congress does not take action, along with billions in spending cuts. As is typical with Congress over the last decade, there won’t be much time left on the clock if and when they do come to an agreement.

Charlie McCrudden is ACCA Vice President for Government Relations.

https://www.acca.org/archives/industry-resources/government-affairs/hot-air/8156

“2012 is going to be an interesting year, because there is a lot at stake politically. News reports say people are feeling more confident in 2012, so this could be a good sign that the economy may start to make a steadier upward climb,” said Stalknecht. “However, I don’t have a crystal ball, so we will all have to see what the economy does this year. We are optimistic we will see some rebounding that will continue far beyond this year.”

Stalknecht is embracing a future that includes a number of untapped opportunities.

“As we look at what has happened over the past few years and then look at what could happen, all we see are opportunities,” said Stalknecht.

“Like we have said many times before, the good contractors who are focusing on their businesses, doing things correctly through quality installations, and building their customer relationships will have no problem taking advantage of these opportunities.”

ACCA’s Contractor Comfort Index (CCI), which was launched in February 2010, gauges short-term growth prospects including new customer acquisitions, existing business, and employment numbers. An index of 50 or above indicates anticipated growth, and in 2011, the CCI consistently painted a picture of a cautiously optimistic contracting industry.

“2011 was a fairly good year. We have heard some contractors say that it was their best year ever,” said Stalknecht. “Since we began the CCI it has never fallen below 50, which means our contractor members are feeling optimistic in terms of short-term growth. However, in 2011, CCI did show that our contractor members were a little more cautious in their outlook.”

ACCA Accomplishments

ACCA celebrated several accomplishments last year, including gaining ANSI recognition for two of its standards.

Manual Zr is the first ANSI-recognized standard for residential zoning. It was put together by OEMs, zoning equipment producers, HVAC contractors, and allied industry experts — providing a broad perspective on the industry-recognized best zoning practices. It includes topics such as zoning advantages, appropriate use of the zoning concept, types of systems, equipment, air damper zoning components, zoning metrics and methods, doable owner expectations, and more.

ANSI/ACCA 12 QH-2011, the Existing Homes Evaluation and Performance Improvement Standard, is an industry-developed standard that establishes how to audit, evaluate, develop a scope of work, perform the work approved by a homeowner, and test completed work. ACCA 12 QH-2011 was developed by ACCA in cooperation with the Residential Energy Services Network (RESNET) and will be used by RESNET for the foundation of its EnergySmart® teams.

ACCA also established the Radiant and Hydronics Council (RHC) and launched the IE3 Magazine.

“We felt this segment of the industry was really underrepresented and it was time for there to be a contractor-led organization that could meet the needs that those contractors in the market segment have,” Stalknecht said. “We have already begun providing some of those things through the RHC sections of the ACCA website and five webinars that are free to RHC members.

“IE3media Inc. is focused on creating new value for ACCA’s members and customers through expanded online, mobile, and print services,” he said. “The first offerings were IE3 Magazine and its website, and more offerings will be available soon.”

Government Outreach

Last year, ACCA representatives were very busy on Capitol Hill, testifying on behalf of contractor members. “After thousands of contractors’ messages were sent to Capitol Hill, ACCA was able to declare victory over two pending tax laws that would have buried small businesses in paperwork and recordkeeping,” said Stalknecht. “In April, Congress repealed the 1099 filing requirement on small businesses that was snuck into the health care reform bill in 2010. In October, Congress repealed the requirement that all businesses that do work for a local, state, or federal government agency or board withhold 3 percent of the contract value.

“On the regulatory side, the manufacture of dry-charged R-22 condensing units continues to have an impact on the transition to systems with more environmentally friendly refrigerants.”

Stalknecht said contractors remain frustrated and concerned by Congress’s inaction with spending and the economy.

“Congress failed to set a budget early in the year, delayed action on raising the debt ceiling, and couldn’t come to an agreement on spending cuts. By the end of the year, Congress did not extend the residential energy tax credits and a host of other tax incentives that help small business owners invest in their businesses,” he said. “Some of the issues that really concern contractors are coming from the regulatory agencies at the direction of the Obama administration.”

ACCA is keeping tabs on several issues that could influence members this year.

“In 2012 ACCA will be focusing on getting the residential energy tax credits modified and extended, along with monitoring the actions of the federal agencies,” said Stalknecht.

“One of the most critical topics is the imposition of new energy conservation standards for residential HVAC equipment along with regional standards for furnaces and central air conditioners. Over the next 12 months the Department of Energy will be formulating an enforcement plan for regional standards for furnaces in the north that takes effect on May 1, 2013. Regional standards are likely to impose new regulatory obligations and responsibilities on contractors. It’s critical that contractors have a seat at the table during this rule-making.”

Looking Ahead

Stalknecht said a number of ACCA members will continue to succeed in 2012 by dedicating themselves to resisting substandard practices and pushing themselves to become even better.

“Contractors have shifted their focus from surviving the economic downturn to thriving in it, so when we see the full recovery, they will see even more success,” he said. “The industry and the public both win when our members take this approach.”

Contractors who have focused on their businesses, made smart business decisions, and are continually looking for ways to improve operations and relationships are the ones who have fared the best — and will continue to succeed — through economic ups and downs, said Stalknecht.

“Contractors keep telling us that they are looking for ways to stand out from the pack. Many of them have begun to diversify their service offerings and are taking a whole-house approach,” he said.

“The truth is our members are more than just heating and cooling contractors. They are focusing on energy efficiency, indoor air quality, and how to make their customers’ homes or businesses better as a whole.”

ACCA continues to maintain a budget surplus and has embraced a thriving membership. The association’s offerings, including conferences, products, applications, and other training programs have seen significant growth, which has allowed ACCA to flourish during this recession.

“ACCA’s financial situation remains good, though like everybody the last few years we’ve had our challenges,” said Stalknecht. “We continue to operate in the black, as we have for the past eight years, which is our mission as good financial stewards of our members’ resources. At the same time, we keep expenses low and margins very tight to ensure that ACCA members get the best possible value.”

Last year ACCA changed its mission statement, which now reads: “To lead America’s professional indoor environment and energy contractors to business success.”

“That is what ACCA is here to do. We help our contractors stay ahead of the competition by providing them with quality products, services, support, advocacy in Washington, D.C., and business development resources. On top of that we have a dedicated staff that is ready and willing to help our members when they need help,” said Stalknecht.

“Contractors are looking toward the future and the challenges and opportunities that lie ahead. We are certain our members will continue to be successful, and we will be here to help them each step of the way.”

HARDI appealed to the courts through the legal advocacy group Cause of Action, which is a nonpartisan organization that uses public advocacy and legal reform tools to ensure greater transparency in government, protect taxpayer interests, and promote economic freedom.

The Rule

According to the new rule, the country will be divided into three regions, and the minimum efficiency standards for residential HVAC appliances will vary depending on the region in which they are installed. The new rules become effective in May 2013 for non weatherized furnaces, and in January 2015 for weatherized furnaces, central air conditioners, and heat pumps.

“The Department of Energy utilized a direct final rule procedure which is designed to expedite rule-makings when there are few challenges,” said Jon Melchi, HARDI director of government affairs. “There are certain procedures that they are required to fulfill in order to utilize this regulatory tool, and we have contended that they did not do so. In December, the American Public Gas Association petitioned the court of appeals regarding the direct final rule process that established regional standards. We are intervening in the case on APGA’s behalf.”

HARDI believes there are a handful of procedural requirements that the DOE has to undergo in order to make a direct final ruling and that those requirements simply were not fulfilled. According to HARDI, the DOE failed to recognize significantly affected entities such as distributors and contractors when considering the consensus agreement negotiated between the Air-Conditioning, Heating, and Refrigeration Institute (AHRI) and environmental advocates. HARDI also believes the DOE added items to the direct final rule that were not part of that consensus agreement and ignored over 40 comments filed in opposition to the Direct Final Rule.

When asked for a comment on the lawsuits, AHRI president and CEO Steve Yurek said, “We are disappointed that our industry partners have taken this action. Even if this lawsuit is ultimately successful — and we don’t believe it will be — regional standards are inevitable and a settled issue. There are many more important threats that our industry must unite to meet. It is our hope that we can put this behind us quickly and move on.”

The associations now wait for the U.S. Court of Appeals to respond to their respective petitions. ACCA estimated there should be a response in anywhere from two weeks to two months. In the meantime, HARDI and ACCA are both advising all of their members to proceed as if the rules are going to go into effect on May 1, 2013.

“The DOE simply did not do a thorough economic analysis, especially their due diligence in assessing the economic impact to small businesses,” Melchi said. “And that has been a bone of contention for us all along and something every federal agency should be compelled to do for any regulatory proceeding.”

HARDI is concerned that what it believes is DOE’s failure to follow proper procedures will cause financial harm to HARDI’s distributor members. They also worry about the precedent this will set for the HVACR industry going forward.

“If we were to simply ignore this abuse of statutory process, all federal agencies would remain unchecked,” Melchi said. “This rule completely changes the nature of HVAC distribution forever going forward, and for the DOE to not impart all due diligence in creating a regulation that impacts the livelihoods of businesses and individuals is counter to the way the regulatory process is supposed to work. This process is a perfect example of why small businesses are angry with Washington, D.C. Our voices and views were not considered. We had hoped that DOE would do a thorough analysis as required by law for decades and make sure that the new regulation is economically justified, technologically feasible, and likely to save considerable energy before a new standard is established.”

ACCA Perspective

ACCA filed suit so it could have a seat at the table if the court agrees with the organization’s contention that steps were skipped. It would be a seat ACCA feels it did not have the first time around.

“ACCA is essentially an affected stakeholder in this case,” said Charlie McCrudden, ACCA vice president, government relations. “The consensus agreement that became the final rule directly impacts our members because it creates new regulatory obligations and liabilities which are still unclear. We never had a say in the drafting of the consensus agreement. Some would argue we had an opportunity to comment on it in the direct final rule process, but there was a step skipped by using that process. So our ability to comment and effect change was shortcut.”

If the court finds in favor of the APGA, which ACCA believes it will, the court will decide to either remand it to a negotiated settlement or send it back to the DOE and tell the department it needs one more step to allow more comment.

Contractors are mostly concerned about enforcement and installation issues that arise with condensing furnaces in some households. Requiring a condensing furnace means a contractor must address ventilation and condensate. In some cases, the installation requirements can add anywhere from $1,500 to $5,000 on a project.

Also, in some cases the furnaces need to be placed by an exterior wall, so contractors will need to move the furnace from its original location to the center of the home, which might end up smack in the middle of a finished basement. In other cases, when the furnace must be moved from its original location and the hot water heater is orphaned, the chimney may need to be relined, further adding to the costs.

“The timetable for coming up with the enforcement rule is also a concern,” McCrudden said. “Let’s assume DOE takes the maximum amount of time to develop this enforcement rule. That means it will conclude in mid-January of next year and that is approximately 100 days before the rule goes into effect. That is a very short timetable. I believe this enforcement rulemaking is much more complicated than people realize.”

Carrier Greenspeed intelligence, which will be available as part of the Infinity® heat pump line ranging from 2 to 5 tons, was introduced at the Air Conditioning Contractors of America (ACCA) Conference & Indoor Air Expo in San Antonio, Texas. This new product uses a variable speed scroll compressor, giving homeowners the comfort of consistent indoor temperatures associated with variable speed technology while reducing their use of fossil fuels and lowering their electric heating costs. The new heat pump with Greenspeed intelligence will deliver a Heating Seasonal Performance Factor (HSPF) heating efficiency rating up to 13 and cooling efficiencies of up to 20 SEER (Seasonal Energy Efficiency Ratio).

“Carrier is committed to developing residential heating and cooling products that take innovation to a higher degree,” said Chris Nelson, vice president sales and marketing, Carrier Residential and Commercial Systems. “We are very proud that the new Infinity heat pump with Greenspeed intelligence will be the highest heating efficiency residential air source heat pump available. In the commonly sold 3-ton size, consumers will enjoy a heating efficiency rating 29 to 69 percent higher than any other air source heat pump on the market today.”

“The Infinity heat pump with Greenspeed intelligence is a revolutionary breakthrough for home comfort and advances Carrier’s natural leadership in environmental technologies,” said John Mandyck, Carrier vice president of Sustainability & Environmental Strategies. “Greenspeed intelligence also demonstrates how technological innovation can reduce energy use and carbon emissions, continuing Carrier’s long-standing commitment to providing sustainable solutions.”

The new line of heat pumps is currently in the final stage of field testing, with consumer availability scheduled for this summer.