Standards & Legislation

Distributors Take Issues to Capitol Hill

Tax Reform takes Center Stage at HARDI Congressional Fly-In

June 24, 2013
Trans

On May 22, roughly 100 Heating, Air-conditioning, and Refrigeration Distributors International (HARDI) members canvassed Capitol Hill to meet with more than 170 members of Congress and their staff during the 2013 HARDI Congressional Fly-In in Washington, D.C.

The goal of the annual event is to educate members of Congress on the issues and legislation most important to HARDI’s many members — and the HVACR industry as a whole.

“You’d be shocked by the number of staffers who don’t know anything about HVAC distribution,” said Jon Melchi, HARDI’s director of government affairs. “These are issues you can talk about with them in real-time, in real life.”

HARDI members took to the Hill after spending a day discussing HARDI’s position on key pieces of legislation, including the Patient Protection and Affordable Care Act (PPACA), the Last-in, First-out (LIFO) method of accounting, and other tax-reform legislative issues.

Plan of Attack

Before HARDI members set off to canvass Capitol Hill, they discussed the organization’s position on several legislative issues, including its support of the Marketplace Fairness Act, which would require retailers in member states to collect taxes on online purchases; the Promotion and Expansion of Private Employee Ownership Act of 2013, which would expand the availability of employee stock ownership plans in S corporations; the American Job Protection Act, which would repeal provisions in the PPACA that require certain businesses with 50 or more employees to provide health insurance; and the Protect Small Business Jobs Act of 2013, which provides small businesses with more time to rectify a regulatory issue before enforcement action is taken.

Members also discussed tax reform at length during the legislative briefing. Talbot Gee, executive vice president and COO of HARDI, said it is important for HARDI members to get members of Congress to realize that many of HARDI’s members are family-owned small businesses that would be greatly affected by current tax-reform legislation.

“When you hear ‘small business,’ you immediately think of the very small companies, the mom and pop stores, and they don’t think of us,” Gee said. “They don’t know how to deal with us in terms of tax reform, so our knowledge is really valuable in these meetings.”

Estate Tax

Several issues relating to tax reform, including the estate tax, rising premiums under PPACA, and LIFO proved to be major issues at the Congressional Fly-In.

“Everybody’s taxes went up on social security and all taxes associated with the health care bill, so if they’re going to do tax reform, it’s going to need to be much simpler,” Melchi said. He added that HARDI members, like all Americans, spend too much time and too much money on tax compliance.

Melchi discussed the estate tax, which has a direct, detrimental effect on family-owned businesses. Recent changes to the estate tax are a step in the right direction, he said, though HARDI members need to remain vigilant in pushing for elimination of the estate tax. “They raised the tax rate from 35 percent to 40 percent, but they did cap it at $5 million —adjusted for inflation, so we still need to press on,” he said. “This is just a bad, bad tax, and it affects people in our industry in a huge way.”

Melchi said the estate tax is double taxation, plain and simple, and it’s not fair. “I firmly believe in no taxation without respiration,” he said. “Simply dying doesn’t mean you should have to write out a check to the government.”

Save LIFO

In addition to advocating for the repeal of the estate tax, a top concern for many HARDI members proved to be the potential repeal of LIFO — the accounting method that uses the last inventory purchased as the first inventory sold in order to calculate taxes. The accounting method has been widely used since the 1940s, and roughly half of HARDI distributors use the LIFO method. “This would be a retroactive tax,” Melchi explained to attendees. “How are you guys going to pay that tax? This is a big deal.”

Melchi added that many large corporations, including pharmaceutical and oil companies, use the LIFO method and have a large LIFO reserve. But for many of HARDI’s members, repealing LIFO could result in the company having to liquidate property or even eliminate jobs in order to pay the retroactive tax.

“This would be unprecedented and very bad,” Melchi said. “We need to stay diligent on this. The reason we talk about it all the time is because a lot of our folks would be in a lot of trouble if we didn’t talk about it all the time.”

Importance of Advocacy

In order to advocate effectively for the HVACR industry, Melchi said HARDI members need to be informed, involved, and persistent. “We need to teach Congress about our industry and your business,” Melchi said. “We’re trying to develop relationships with members and their staff. It’s important that we develop contacts.”

Melchi added that, while it is possible to travel to the Capitol individually to speak with elected officials throughout the year, it is most impactful when a large group of business owners with a common agenda, such as HARDI members, participate in an event like the Congressional Fly-In. He added that speaking to congressional members’ staff and following up with them after the visit is equally as important as the visit itself.

“One in five members of Congress today is a former staff member,” Melchi pointed out. “So, when you’re meeting with these staff members, remember that one of them may be a Congress member in the future.”

Ruth Ann Davis, vice president of Williams Furnace Co., Colton, Calif., said the event gave her an opportunity to speak not only on behalf of HARDI, but also on behalf of the 300 workers employed by Williams Furnace Co. “It’s really important to be involved with HARDI, to know what’s happening, and to be involved in the advocacy,” she said. “As an industry, we represent a lot of lives.”

Russ Geary, regional vice president of Geary Pacific Supply, Orange, Calif., agreed that events like the HARDI Fly-In provide members with an opportunity to share their voices in unison.

“As the years have gone on, I’ve discovered that having a voice is really, really important,” Geary said. “Our representatives are very accessible, whether it be through a staffer or the actual representative. They do want to listen to you. Even if they oppose your view, they, for the most part, want to hear what you have to say.”

“We know that if we’re not here, our voice won’t be heard,” said Adam Dykstra, CEO of Rapid Recovery in Peoria, Ariz. “We felt it was important to have the voice of the distributors heard in Washington, and try to get the things that are near and dear to our hearts, our families, and our businesses out in front of our congressional members.”

Melchi said that even though it may not seem productive to speak with elected officials whose views on certain legislation differ from HARDI’s view, it is still important to attend events like the Congressional Fly-In to make sure that lawmakers, regardless of the side of the aisle they sit on, are at least aware of how these issues impact the HVACR industry.

“Sometimes our issues align with certain folks, and sometimes they don’t,” Melchi said. “We have got to stay persistent on these issues.”

Prepping for December

Before the event began, more than 30 HARDI committee members and employees convened to give committee updates and hammer out some of the details of HARDI’s upcoming annual meeting, including scheduling speakers and determining discussion topics.

Emily Saving, director of education and research for HARDI, announced the keynote speakers for the meeting, to be held from Dec. 7-10 in Phoenix. Those speakers include Michael Marks, managing partner of Indian River Consulting Group; Clyde Fessler, former vice president of business development for Harley-Davidson Motor Co.; and Alan Beaulieu, CEO of ITR Economics.

The annual conference — which has the theme: “Evolve ’13: New Pathways to Success” — will focus on the importance of embracing new methods and technology in conjunction with time-tested practices in order to achieve success.

“The old school and new school are starting to blend together,” said Cameron Perkins, chair of HARDI’s Supply Chain Technology committee and vice president of marketing & vendor relations for Johnstone Supply. “We want to bring in a more progressive contractor who is using apps, social media, etc. to enhance business.”

Perkins added, “If you don’t jump onboard, you’re going to get left behind.”

The group also announced the soft launch of HARDI’s Emerging Leaders program, which aims to “bring together those sharing the experience of growing into a business leader to earn and develop relationships,” according to the program’s mission statement. The program, which will officially launch this summer, pairs up-and-coming leaders, including business successors, with established mentors in order to cultivate their leadership skills.

Publication date: 6/24/2013 

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