On Nov. 4, American voters elected a wave of Republican candidates who will soon take control of the U.S. Senate and increase their current majority in the U.S. House of Representatives. And while some industry leaders think the power shift may help loosen the gridlock that has plagued the 113^th Congress, and perhaps lead to a renewed focus on energy legislation and other issues beneficial to the HVAC industry, others are less optimistic.

Power Shift

On Nov. 4, American voters elected a wave of Republican candidates who will take control of the U.S. Senate and increase their majority in the U.S. House of Representatives in January 2015. (Photo courtesy of Ed Schipul)

In January 2015, control of the Senate will change hands with Republicans set to hold 53 seats compared to Democrats’ 44. Two seats are held by independents while another, in Louisiana, will be decided by a Dec. 6 runoff election.

“Republicans now have the largest majority in the House since the Great Depression,” said Charlie McCrudden, senior vice president of government relations for ACCA.

With the election of several moderate Republicans, McCrudden anticipates less tension among House Republicans during the next session. “The tea party Republicans who went against Speaker John Boehner are now offset by some of the more moderate Republicans, who will likely line up with the speaker more frequently.”

Jon Melchi, director of government affairs for Heating, Air-conditioning, and Refrigeration Distributors International (HARDI) said the election will also affect House committees, which “will have a slightly more Republican flair” in 2015.

“Chairmanship of several committees of interest to the HVACR industry is changing hands, such as the House Committees on Ways and Means, Oversight, and Small Business, and the Senate Committees, which will flip to GOP control,” Melchi said. “Those are going to have an impact. But, as far as the legislation that comes from the House, I don’t know that we’ll see a big difference.”

Guido Zucconi, assistant vice president of congressional affairs for Air-Conditioning, Heating, and Refrigeration Institute (AHRI), anticipates many changes in Senate committee leadership and membership.

“AHRI has worked well with past chairmen as well as the incoming heads of pertinent committees,” Zucconi said. “We expect to continue to work on a bipartisan basis, especially in the Senate, where the minority party remains an integral part of the legislative process.”

Industry Regulation

When it comes to HVACR industry regulation, industry leaders are not expecting federal regulatory agencies, including the U.S. Department of Energy (DOE) and Environmental Protection Agency (EPA), to slow down anytime soon.

“AHRI is concerned with the pace and scope of regulations affecting the HVACR and water heating industry,” Zucconi said. “We have looked to Congress for improved oversight of regulatory agencies, but, to date, have been unsuccessful. While we are hopeful that Congress, in general, will become a more effective legislative body, we understand the complexities of Senate procedures and the veto power of the president. While a difficult political environment will continue, especially with the presidential campaign looming, we are hopeful new leadership will vigorously exercise its role of oversight over federal agencies.”

Melchi agreed, stating he anticipates increased coordination between the House and Senate on some of these oversight investigations in the next Congress. “This is the time within the presidency where you’re going to see a lot of legacy-leaving,” he said. “The House Committee on Oversight and Government Reform is getting a new chairman this fall, so you’re going to see more coordination and more publicity. But, anybody who is anticipating a slowdown in the speed of regulatory action is going to be disappointed. There’s been nothing that indicates regulatory action will slow down.”

The only option Congress may have to slow down current regulatory efforts by the DOE, EPA, and other regulatory bodies is to tighten their budgets.

Mark Menzer, director of public affairs at Danfoss, said Congress always has “the power of the purse” to control regulatory bodies, to some extent.

“They promised not to shut the government down again, but they always have the power of funding these agencies,” Menzer said. “They can hold oversight hearings, and they can defund the agencies to a point where it becomes difficult for them to work at the pace they did before. That’s not a constructive way of dealing with things, however, and what we’d like is for the DOE to just be more transparent and make their analyses clear and open.

“DOE has been successful in conducting negotiated rulemakings, and it’s not clear why they decide to do them on some regulations, but not others. I’d say, certainly, our priorities are looking for more sensible energy-efficiency regulation including what’s going on now with DOE trying to promulgate so many efficiency standards in a limited time. They do have a huge number of standards they want to get out in the last two years of the Obama administration, so they’re rushing to regulate, and the industry has responded with litigation.”

Industry leaders will also be monitoring upcoming standards and rules being developed by the EPA and Occupational Safety and Health Administration (OSHA), McCrudden said. “We know the EPA power plant emission standard regulation is out there. It’s going to take a while, but that’s on the horizon.”

ACCA is also keeping tabs on an upcoming OSHA rule that could directly affect HVAC contractors.

“There are rules about working in a confined space, and there are measures you have to take, and OSHA has been working on a confined space rule specifically for the construction industries,” McCrudden explained. “One of the things I’m concerned about is a determination that crawlspaces and attics will be defined as ‘confined spaces.’ If they’re all placed under that definition for the purposes of this new rule, you’d have to have an extra person with you if you’re working in a crawlspace or an attic, as well as all the equipment necessary to pull them out if they were to become incapacitated, so it could potentially be very expensive to contractors. That’s a rule that OSHA has been working on for 10 years now.”

Lame-Duck Session

Before the end of the year, there are several major issues that have to be addressed.

“Funding for the federal government runs out on Dec. 11, so the Democrats may push an omnibus continuing resolution (CR) to finish the rest of the fiscal year. But, the Republicans may want to do a short-term CR to avoid a shutdown and come back in January, when they have control of the House and Senate,” McCrudden said.

The renewal of dozens of tax provisions that either expired at the end of 2013 or will expire at the end of this month — including the 25C credit for installing high-efficiency HVAC equipment — could also appear on the lame-duck agenda. “There is a move by some to get these tax extenders done and off the table before the next Congress,” Melchi said.

However, the politically charged tax issues may be more complicated than that, which could extend a potential resolution into 2015.

“There is talk that House Republicans would prefer to deal with expiring tax provisions in January, when Republicans control both Houses of Congress, rather than accept a deal from Democrats prior to that shift,” Zucconi said. “Senate Democrats want to renew the provisions for two years with minimal changes, and House Republicans want to permanently renew a select few provisions. It may come down to which credits Democrats are willing to accept and whether both parties can come to an agreement on whether the provisions should be paid for.

“If they wait for the next Congress to address the more than 50 tax provisions that expired at the end of 2013, the government could be forced to delay the upcoming 2015 tax filing season, delay tax refunds, and force taxpayers to file twice,” Zucconi continued. “This scenario may motivate this lame-duck Congress to pass a one- or two-year extension of many credits while permanently extending popular and essential parts of the tax code.”

There is also potential for serious gridlock during the lame-duck session.

“If the president exercises his executive authority during the lame-duck session, it’s going to change the tenor of that session,” McCrudden explained. “Should the president come out with his rumored proposal on stopping deportation of undocumented individuals before the end of the year, then that is going to make this lame-duck session really interesting. If that happens, all bets are off on how Congress and the White House work together.

“Republicans are in a position of strength in the next Congress,” McCrudden explained. “They can play hardball against the Democrats, who want to move while they’re still in control of the Senate, and elect not to do anything. For Republicans, things are going to get better in January, and they’re going to be more strongly positioned.”

Legislative Issues

On the legislative side, industry leaders will be tracking several issues, including energy efficiency, tax reform, tax extenders, and the Affordable Care Act, among others.

“There are attempts to get the Shaheen-Portman bill passed between now and the end of the year … or it could come back in the 114^th Congress,” said McCrudden. “Senator Rob Portman, R-Ohio, is a potential presidential or vice presidential candidate in 2016, so he may take a lower profile on things like the energy debate, but not necessarily on his own energy bill.”

Menzer expressed cautious optimism for the Shaheen-Portman bill in the next session of Congress. “Hopefully, with the new chairman [of the Senate Committee on Energy and Natural Resources], Lisa Murkowski, R-Alaska, who is certainly committed to meaningful energy policy, something can be resurrected from the ashes of the last Shaheen-Portman bill and passed. I think Congress does want to come up with an energy bill, so we’ll be looking at that.”

Zucconi said the Shaheen-Portman bill “continues to enjoy industry consensus and bipartisan support,” though it has experienced numerous political roadblocks in the Senate. “There are a number of provisions within the bill that make its path even more difficult in the House, whether considered in the 113^th Congress or the upcoming 114^th. It remains to be seen if this issue will be a priority for the next Congress. However, energy efficiency, reducing regulations, and agency oversight remain top priorities for AHRI and its members. We look forward to working with Senators Shaheen and Portman, and their respective party leaders, to achieve our goals through thoughtful, smart, and effective legislation.”

HARDI also still supports the Shaheen-Portman bill, though, “in an effort to make the Shaheen-Portman bill more palatable to a wider audience, many of the provisions of the bill that generated excitement in its earlier state have had to be removed or altered,” Melchi said. “It’s a good bill, but it’s a bill that doesn’t, on a wide scale, make any significant changes or alterations.”

Kateri Callahan, president of the Alliance to Save Energy, said in a statement she is very optimistic about the prospects for enactment of meaningful energy-efficiency policies at the national level and believes there is a chance the Shaheen-Portman bill may pass before the end of the year. “Energy efficiency is the one place in the national energy policy landscape where we can set politics aside and really get something done for our nation’s economy, energy security, and the environment,” she said.

Industry leaders are also going to be closely watching what happens with several tax provisions that directly impact the HVACR industry.

“There are about 60 tax incentives that help small businesses, big businesses, and individuals that expired last year, or will expire at the end of this year, and they need to address those,” McCrudden said. “Some of those are significant. There’s the 25C tax credit for homeowners who purchase and install high-efficiency HVAC equipment, and there’s 179D, a tax deduction for making qualified energy-saving improvements to a commercial building that expired at the end of last year and was never reauthorized. It needs to be done.”

Menzer also mentioned 179D and said the current 39-year depreciation schedule for HVAC equipment is impractical for commercial building owners.

“If you’re trying to keep the stock of equipment in commercial buildings refreshed and efficient, it doesn’t make sense,” Menzer said. “We see so many old, inefficient systems being repaired when they really need to be replaced. We will be looking to work with Congress.”

Tax reform, in general, is also going to be an issue during the 114^th Congress, McCrudden said.

“Lowering the tax rates on corporations and fixing the inequity for pass-through entities, like S corporations, partnerships, and LLCs that pay their business taxes on a 1040, while their C corporation counterparts have a lower tax rate — that would be a big help to smaller businesses.”

Finally, the Affordable Care Act will likely come under scrutiny again in the new Congress, which could impact many small HVAC business owners.

“Up to this date, the president has been reluctant to accept any legislation to tweak the Affordable Care Act, instead offering executive actions like the employer mandate for providing employee health care. It will be interesting to see if they’ll sign into law some of these changes, and I think there will be some bipartisan support to do so.”

Looking Ahead to 2016

Any pressing issues that are not resolved in the lame-duck session will dominate the first part of 2015. Additionally, the debt ceiling expires in March, and other time-sensitive issues are bound to demand Congress’s attention.

Meanwhile, industry leaders are waiting to see just how well the new Congress gets along and how it interacts with the White House before making any real predictions about industry-related legislation. But, with less than two years until the next presidential election, it’s hard to predict what Congress may or may not be able to accomplish.

“There is probably a 10-month window to really be productive in this next session — to keep them focused on the task at hand and doing what they don’t like to do, like taking controversial votes in election years,” Melchi said. “After that, Republicans may say, ‘We’re not going to compromise because we think we can get a better deal with our guy in office,’ or Democrats will say, ‘Why would we compromise when we’ll take Senate majority and the presidency next year?’ There’s an awful lot of Republicans who will be up for re-election in 2016 who will be from states where Obama won in 2012, so they’re going to want to show they can work well across the aisle.”

Menzer agreed the 2016 elections will create an interesting atmosphere in the 114^th Congress.

“There are 34 senators up for re-election, 24 of them Republican, in 2016,” Menzer said. “Many of them are spending the next two years trying to be promoted to the presidency, so the dynamic is really interesting there.”

Yet, despite the signs pointing to another potentially gridlocked Congress, history has shown the legislative and executive branches still manage to work together to pass important legislation.

“Reagan had a Democrat-controlled Congress in 1987-1988, Clinton had an all-Republican Congress in 1999-2000, and George W. Bush had a Democrat-controlled Congress in 2007-2008,” McCrudden said. “Things got done during those times.”

Melchi said it is up to party leaders to work together, and the pressure is on.

“The Republicans have said, ‘put us in charge and we’ll get things done,’ so, now, they have to show us they can do that, and the president is going to have to decide whether he wants to work with them or veto everything,” Melchi said. “The GOP is going to have to prove they can work together, and so is the president.”

Zucconi said the Nov. 4 election results sent a powerful message.

“AHRI sincerely hopes this administration will view this congressional power shift with an eye on President Obama’s legacy,” he said. “The election results were a message from voters that they want a change to the obstructionist ways of the past two years. The 114^th Congress is an opportunity for Congress and the White House to meet each other halfway and actually govern the country. Governing through executive orders and aggressive regulations is not how the Founding Fathers intended the government to work. AHRI hopes the two branches will finally begin to perform their duties and govern in a smart, effective, and consensus manner.”

Publication date: 12/1/2014

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