Engineering Inc - January/February 2018 - 12

"We're not at the pinch point yet, but it's clear there
will be problems soon if we don't see improvements to
airport infrastructure."
THOMAS O'GRADY | HNTB CORP.

reliable source of energy for base load energy production. Consequently, Farrar supports the expansion of nuclear-powered
electricity generation, which he describes as clean and safe. The
biggest issue is spent fuel storage. "Right now, it's kept on-site, but
that is not the ultimate solution," he says.
Ultimately, energy policies must focus on a balanced approach.
"We need to move toward alternative energy sources in a smart
and careful way," McFarland says. Other countries, as well as cities
and private entities in the U.S., have demonstrated that alternative
energy is viable-and it leads to economic gains.
TAXES

Tax reform is the one major agenda item expected to become
law early in 2018. The final bill appears to be a major win for
the engineering industry, particularly for ACEC's effort to secure
tax benefits for firms of all sizes and tax structures.
The final tax plan will reduce corporate tax
rates from the current 35 percent to 21 percent,
which will help engineering firms organized as C
corporations be more competitive in the global
marketplace. The bill also preserves the ability of
firms to use cash accounting versus undergoing the
expensive process of switching to accrual accounting. And the final package maintains existing tax
incentives for retirement and employee ownership,
such as ESOPs, which were key industry priorities.
For firms organized as "passthrough" businesses-S corporations, partnerships and LLCs-
where the taxes are paid through the filings of
individual firm owners, the bill will create a new
20 percent deduction instead of a reduced tax
rate. While the original House and Senate versions
of the bill initially excluded many engineering
passthrough firms from the proposed tax benefit
(along with doctors, lawyers and other service
industries), ACEC was successful in securing
changes that will treat the industry the same as
other nonservice industries in qualifying for the
new deduction. Like those industries, engineering
passthrough owners with incomes below $315,000
for joint filers and $157,500 for individuals can
claim the full deduction. Owners with higher
incomes will be able to claim the deduction using
rules similar to those that apply to the Section 199
deduction that many A/E firms claim.
Other changes included in the final tax bill-
including the elimination of the Section 199

deduction, reductions in state and local tax deductibility, and
changes in the application of the alternative minimum tax-will
affect individual firm owners in different ways.
Infrastructure funding and finance is an area where tax reform fell
short of expectations. Federal action here is long overdue. The ongoing push for lower taxes, resistance at the national level to increasing the federal gas tax and the distaste for toll roads have made it
extraordinarily difficult to fund transportation and infrastructure
upgrades. Infrastructure improvements are further complicated by
a growing need for cybersecurity protections-particularly as smart
cities and autonomous vehicles roll into the landscape.
There's been no increase in the federal gas tax since 1993,
and the introduction of hybrid and electric vehicles is making it
harder to fund projects in the traditional way. While some states,
such as Oregon, have studied and even tested mileage-based
transportation taxing, and Congress included funding in the FAST Act in 2015 to support additional
pilot projects, there's still no consensus about how
best to move forward, or when. "The question our
country must answer is: How do we invest in our
collective economic future to meet the needs of a
population exceeding 300 million people?" McFarland says.
WSP's Connor points out that more than 24
states have raised their gas tax over the last few
years, and voters have increasingly passed initiatives funding projects. "Pushing responsibility to
the state and local level can be a positive thing, but
it cannot become a substitute for federal action,"
Connor says.

There's
been no
increase
in the
federal gas
tax since
1993

ENGINEERING INC.

JANUARY / FEBRUARY 2018

BUILDING ON THE FUTURE

In the end, Connor and others are taking a
tempered view of the current legislative and
executive environment. They realize that while the
acrimony and divisiveness in Washington aren't
likely to vanish anytime soon, there's a growing
consensus that political leaders will be forced to
find some common ground.
"We will eventually hit the point where some
type of action is taken on the key issues, especially
infrastructure," Connor says. "These issues are too
important to ignore. They are vital to our nation's
economic well-being." ■
Samuel Greengard is a technology writer based in
West Linn, Oregon.

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