Keeping it Fresh

Navigating tax reform in the US, by John Parkinson, executive director, Association for the Improvement of American Infrastructure (AIAI)

The end of 2017 has been nearly as interesting as it began. Efforts by the administration to achieve a landmark legislative win on Capitol Hill have been more challenging than once thought possible. As the year draws to a close, tax reform has become the latest battle ground for testing political will and the legislative agenda for the Trump administration and the Republican leadership in the Senate and the House of Representatives.

House Resolution 1, the “Tax Cuts and Jobs Act” was introduced to initiate the tax reform debate. It was passed by the House. Its counterpart in the Senate has also cleared the floor vote; which now clears the way for a joint conference to reconcile differences between the two bills. The stated intent is to have a bill on the president’s desk for signing into law as soon as practical. The end of the session looms, as does the end of the calendar year.

For the infrastructure industry, there are issues related to the proposed legislation. In HR 1, there are challenges which could impact how public works are developed and delivered, including private finance participation for the improvement of American infrastructure.

The House version eliminated the PABs tax exemption while the Senate left the exemption in place. A conference committee needs to reconcile those differences. It also includes potentially onerous provisions related to deductibility of business-related exclusions and deductions, as well as a repeal of the alternative minimum tax.

The P3 Coalition which AIAI coordinates; a collaborative engagement of organizations representing private industry, have all come together to express their concerns with the proposed tax bill. The issues highlighted, and the opportunities to reconcile them as the bills head to conference, are critical to the administration implementing an effective and important reform package. Not to be lost in the discussions are stated objectives of the administration and Congressional leadership to encourage private investment and participation in the development and delivery of much needed infrastructure. The movement appears to be gaining momentum, as the voices of more industry partners are raised, as evidenced by growth in the number of members of AIAI.

Another example of increased interest in infrastructure was the recent “Federal P3 Conference” in Washington, DC. The event featured senior administration officials, as well as perspectives related to Capitol Hill. Large audience engagements, including public officials from around the country, as well as private partners who are active in the P3 sector, heard about challenges and possibilities, programs and policies in which the federal government agencies are involved. Priority topics of discussion included: sustainable job growth and regional economic development; risk transfer through alternative and accelerated project delivery; OMB federal budget scoring reform; perceptions of the costs of capital; alignment of interests in public infrastructure investment and delivery; and opportunities for the federal government to partner with states to improve American infrastructure.

Will a broader infrastructure bill make its long-awaited appearance in the new year? The administration has been clear that it first needs to address tax reform. There will, after all is said and done, not be a funding windfall to jumpstart the restoration and renewal of public works. There is no “shovel-ready” holiday surprise in store. First things first, and this starts with a tax overhaul; which promises to be the most significant set of changes in more than a generation. Key components of the aligned programmatic interests of tax reform and an infrastructure package will be incentives and partnerships.

DJ Gribbin, special assistant to the president for infrastructure policy, addressed the Federal P3 Conference. In his remarks, he spoke of the administration’s commitment to funding infrastructure and leveraging private investment. He shared the objectives to partner for the improvement of American infrastructure, as noted in his comments: “We are your partners, and will measure our success by your success.” In speaking to state agencies and municipal officials, he called upon both civic leaders and industry practitioners to be creative, to introduce innovative solutions to accelerate the development and delivery of infrastructure improvements.

Given the steadily rising interests in P3s to improve American infrastructure, and the reinforcement of aligned interests by the administration, partnership and collaboration could very well be the theme for 2018. With a proposed tax plan in place to start the new year, and infrastructure as a mainstay of the jobs platform in the first mid-term election, and a substantial number of gubernatorial elections coming in 2018, it could very well start as 2017 is finishing... interesting.