Orientation

Stephanie Vance, author and Congressional advocacy expert, briefed HARDI members prior to their Congressional visits. Vance has spoken at all five fly-in events and told members that government is only effective when citizens are active participants.

“Legislators are interested in meeting you and knowing that you are a resource on a topic,” said Vance. “You need to assure them that you are a link to the people they represent, that you offer a connection to their constituency.”

Vance shared that it is very important to not only share insight on a topic, but to also ask for support. “If you just come in and share information, these individuals aren’t going to pay you any attention. You have to ask for their support,” she said. “Congress members are meeting with dozens of lobbyists each day, so by asking for something you are forcing them to take notice and pledge support or opposition.”

Other presenters, including Gregory S. Casey, president and CEO, Business-Industry Political Action Committee (BIPAC); John S. Satagaj, attorney and executive director of the Small Business Legislative Council; Jade West, senior vice president, National Association of Wholesaler-Distributors; and Drusilla Hufford, Office of Air and Radiation, Environmental Protection Agency (EPA), shared insight on the national debt, partisanship, environmental and refrigerant policy, and more.

Before heading to the U.S. Capitol, Jon Melchi, HARDI’s director of government affairs, encouraged members to be persistent and passionate. “This is a very challenging legislative climate, and it is very difficult for anything to get accomplished right now,” he said. “But, without action, everyone will see their taxes raised at the end of this year. Without action, we could fall back into recession. You are business people, and all this uncertainty is impacting your business on a daily business. Now is the time for your voice to be heard.”

The Issues

Among the main issues HARDI members shared their concerns about were the estate tax and the possibility of LIFO repeal.

The current estate tax levied on business owners who pass away is 35 percent — with an exemption up to $5 million on all assets. If Congress does not act on the measure by midnight, Dec. 31, 2012, the tax will increase to 55 percent, and the exemption will be reduced from $5 million to only $1 million.

President George W. Bush’s 2001 tax package reduced the estate tax each year, beginning in 2002. The tax was eventually cut to zero in 2010. Since then, Congress has not reinstated Bush’s vision, and the tax has risen to 35 percent for estates worth more than $5 million. If Congress fails to act by the close of the calendar year, current estate tax rates will escalate to pre-2001 levels.

“The estate tax and the constant changing of the formula for determining its rate places an undue burden on businesses in our industry and small businesses everywhere,” said Talbot Gee, executive vice president and COO of HARDI. “A significant portion of our members are family businesses, and they generate an estimated 80 percent of the dollar value of HVACR products sold through distribution. There has to be some clarity about the estate tax and some consistency regarding the rate if it isn’t repealed.”

HARDI also stressed that Congress should act immediately to extend the current tax rates and work toward long-term reform of the tax code for both corporations and pass-through entities.

“If Congress fails to act by the end of the year, Americans will be hit with a substantial tax increase,” said Melchi. “This ‘taxmageddon’ is a $500 billion tidal wave of tax hikes — not over 10 years, but in a single year and each year thereafter. This is an average tax hike of nearly $3,800 per taxpayer. Congress has no excuse for threatening the economy with this tax hike with the entire summer legislative schedule wide open for business.”

The distributor group also believes that the Last-In-First-Out (LIFO) accounting method should be preserved. LIFO has been permitted in the U.S. tax code since 1939 and assumes a business will sell or utilize its newest inventory first. The LIFO method of pricing allows materials to be issued at current market prices, allowing businesses to show a lower profit, thus reducing the income tax burden.

President Barack Obama has proposed a repeal of LIFO on three separate occasions, citing that a tax on LIFO reserves may generate approximately $70 billion over a decade. HARDI officials disagree with the president’s position.

“LIFO is a widely taught accounting method that should not be included in discussions regarding tax reform and deficit reduction. It should be preserved in its current state,” said Melchi. “A repeal would place a massive, retroactive tax hike on job creators, increase costs for businesses, and ultimately result in job losses and less economical growth.”

HARDI also pledged support for the Regulations from the Executive in Need of Scrutiny (REINS) Act, which would require an up-or-down vote by the House and Senate — and the signature of the president — prior to new regulation with an economic impact of $100 million or more. Additionally, HARDI offered opposition to the Implementation of National Consensus Appliance Agreements Act (INCAAA), which would enact regional HVAC efficiency standards.

Making a Difference

Following their visits, several distributors relayed the notion that their opinions were well received.

Russ Geary, vice president, Geary Pacific, Orange, Calif., met with California Sens. Barbara Boxer and Dianne Feinstein.

“This is my fifth year as a fly-in member, and this was the second time I’ve visited with Senator Feinstein. She was very open to listening to us, even though she sits on the Democratic side of the aisle,” said Geary. “The staff of Senator Boxer got a little argumentative regarding our discussion on the estate tax, and I’d say there is a lot of work to be done in that office.”

Lance Rantala, CEO, Blue Hawk, Chicago, said his business has representation all over the nation and thus spoke with three different senators from all corners of the country.

“I met with Senators Jon Kyl, a Republican from Arizona; Richard C. Shelby, a Republican from Alabama; and Richard J. Durbin, a Democrat from Illinois. Senators Kyl and Shelby seemed to be aligned with our concerns, while Senator Durbin’s staff was more tight-lipped and didn’t seem to agree with HARDI’s positions. It is a lot of fun to be here and share these concerns on behalf of our industry.”

During a visit to Sen. Lindsey Graham’s, R-S.C., office, Bud Mingledorff, president of HARDI and chairman of the board at Mingledorff’s Inc., Atlanta, said the inconsistencies in Washington, D.C., are affecting business operations nationwide.

“Business makes the world go round and in this current climate, people are suffering,” he said. “We want to hire people — in fact, we’d love to hire people — because when we are hiring people we’re growing our business. But there are too many questions that need to be answered here in Washington before we consider expansion. We know how to run our businesses, but what we can’t figure out is what is going on in Congress. All we’re asking for is some consistent direction.”

Following the event, Melchi encouraged members to follow up with the leaders by inviting them to their headquarters for a meet-and-greet tour.

“It’s important to constantly remind Congress that you exist, you matter, and that you are a major player in their communities,” said Melchi. “Invite them to your businesses. It doesn’t have to be anything fancy. If you are having a cookout, makes sure to invite your Congressman. It’ll cost you a couple bucks to cook up a burger, but the long-term impression you’ll make with these individuals could really leave a lasting impact.”

Publication date: 7/16/2012