CONTRACTOR COMMUNITY

ASA Begins Working with the 118th Congress

Since the members of the 118th Congress were sworn in a few weeks ago, ASA has been working to introduce our association to these newly elected members of Congress, along with maintaining our relationship with the returning members. ASA looks forward to continuing to serve as a critical voice for small and privately owned construction businesses in what is expected to be another challenging year on Capitol Hill. We will work with the 118th Congress to advocate for the protection and promotion of tax issues that are important to small businesses, privately owned businesses, and their owners, along with our continued commitment to maintain a high estate tax exemption to protect privately owned and small businesses from destructive taxes when they are passed down to future generations. Immediate priorities will include continued investment in infrastructure, tackling supply chain issues, addressing the labor shortage, promoting workforce development and contracting reform. Finally, opposing intrusive and burdensome legislation and regulations will be a major objective for ASA in 2023. Compliance and disclosure issues relating to ESG requirements, particularly those that are overly costly and/or burdensome, will be a major priority. We will keep you posted on our efforts throughout the year.

OSHA Adds “Instance-ByInstance” Citation Policy

On January 26th, the Occupational Safety and Health Administration (OSHA) issued new enforcement guidance allowing “instance-byinstance” citations for high-gravity” serious violations of several agency standards. Regional administrators and area office directors will have the authority to issue instance-byinstance citations for violations of fall protection, lockout/tagout, machine guarding, permit-required confined space, respiratory protection, and trenching standards, as well as for cases with other-than-serious violations of recordkeeping requirements. The new policy becomes effective March 27th. as expressly prohibiting discrimination against employees because of their pregnancy or pregnancy related conditions. To the extent that the employer is located in a state with no pregnancy accommodation law, the employer will need to make sure that they are complying with the Pregnant Workers Fairness Act by June of this year. date [generally limited to 30 days maximum]

In a separate enforcement memorandum, the agency reminded regional administrators and area office directors of their authority not to group violations but instead to cite them separately.

• Pump for Nursing Mothers Act –The Pump for Nursing Mothers Act expands employers’ obligation to provide employees with time and space for lactation. The major provisions of the new law went into effect at the time the legislation was signed into law.

The FY23 Omnibus Appropriations Bill Brings Employment Law Changes

The Fiscal Year (FY) 2023 Consolidated Appropriations Act contained two important employment law changes, which will go into effect this year.

• Pregnant Workers Fairness Act – The Pregnant Workers Fairness Act has been introduced in every Congress since 2011 and made it across the finish line as an amendment to the spending bill in large part due to bipartisan support and backing from some of the large employer-side groups including the Society of Human Resources Management (SHRM). The provisions will go into effect on June 27, 2023 and apply to all private employers with 15 or more employees. The new law requires covered employers to provide reasonable accommodations for pregnancy, childbirth or related medical conditions the same way that they would for other disabilities. Up to this point, federal law has only gone so far

New Core + HVACR Level 1 NCCERConnect Course Now Available

To help provide more seamless training options for introductory heating, ventilating, air conditioning and refrigeration skills, the National Center for Construction Education and Research (NCCER) is releasing the Core + HVACR Level 1 NCCERconnect course.

This new offering includes all the content from Core: Introduction to Basic Construction Skills, Sixth Edition and HVACR Level 1, Sixth Edition in a single online course. This will allow instructors to deliver both Core and the first level of the HVACR program using one learner access code, online grade book and classroom setup. To learn more about the Core + HVACR Level 1 course, sign in or register for NCCERconnect.

ASA Supports Public-Private Partnership (P3) Water Infrastructure Projects

In the 117th Congress and now in the 118th Congress, ASA will continue to support public-private partnership (P3) water infrastructure projects. At the very end of the 117th Congress, Reps. Lynch (D-MA) and Balderson (R-OH) introduced, H.R. 9665, which would apply payment and performance requirements for all construction projects receiving Water Infrastructure Finance Innovation Act (WIFIA) funding. In most instances (95-99%), the states’ “Little Miller Acts” require bonding at 100% or in practice, states and localities are requiring bonding at 100% for traditionally procured projects, so state or local applicants can merely attest to the Environmental Protection Agency (EPA) that the project(s) will be bonded as required under the state’s “Little Miller Act” and provide the percentage of bonding. Additionally, the legislation would provide a floor for security (bonding) at 50% of the construction costs, implementing a recognized industry standard minimum level of bonding, for security for large water projects to protect the federal interests in the prudent use of federal financing. This removes the burden from EPA to determine what would be an “appropriate” level of bonding. This would address the gaps existing in the bonding requirements for newer forms of project delivery, specifically P3s and possibly others. In those instances, the legislation contains a provision requiring state or local statutes or regulations for security requirements to be accepted by EPA so long as these requirements are at a minimum of 50% of the construction costs. As this legislation matriculates through Congress, we will keep you posted on it.

Latest from SESCO: Staff Recommendation Inclement Weather

This is article is from our friends at SESCO Management Consultants, ASA's Human Resource company. To learn more about this and all of the member benefits available through your ASA membership, click here.

Poor weather conditions in the winter months often raise pay-related questions for employers and employees. Employees may not report to work because of hazardous conditions or your business may close for the day. The issue is straightforward for nonexempt employees (i.e., paid on an hourly basis, subject to overtime pay). Nonexempt employees are paid for the actual time worked in a given workweek. Thus, if they do not report for work or the business is closed, they are not paid for the day. An employer may choose to allow these employees to use vacation or other paid time off to cover the lost wages.

The issue is a little more complex for salaried exempt employees. The question of pay is determined by whether or not the employer is open for business and whether the exempt employee works any part of the day. An employer that remains open for business during a weather emergency may lawfully deduct one full-day’s absence from the salary of an exempt employee who does not report for work for the day due to adverse weather conditions. In a recent opinion letter, the Department of Labor considers this an absence due to personal reasons; therefore, a deduction of a full-day’s pay will not violate the salary basis rule or otherwise affect the employee’s exempt status. It should be noted that deductions from salary for less than a full-day’s absence are not permitted for such reasons under the wage and hour regulations. The Wage and Hour Division has stated that an employer may, as an option, require an exempt employee who fails to report for work in this situation to take vacation or other paid leave to cover the full-day’s absence.

What about the pay of a salaried exempt employee if the business is closed? An employer may not make deductions “for absences occasioned by the employer or by the operating requirements of the business.” If the employer closes operations due to weather or other emergency for less than a full workweek, then the employer must pay an exempt employee “the full salary for any week in which the employee performs any work without regard to the number of days or hours worked,” because “deductions may not be made for time when work is not available.”

Again, the Wage and Hour Division has ruled that an employer may direct exempt employees to take vacation or other paid leave in this situation, provided the employees receive in payment an amount equal to their guaranteed salary. However, if an exempt employee has no vacation or paid leave, they would still receive the full week’s salary in this situation (where the business is closed for less than a week).

Nonexempt employees paid based on a fluctuating workweek provide yet another challenge. Since an employee who works fluctuating hours for a fixed rate of pay is supposed to get the same pay whether he works short or long weekly hours, the government does not permit deductions for absences of less than a week, whether for illness, personal reasons, or other reasons including the employer’s failure to provide work or the inability to reach the workplace because of weather conditions. In other words, whether the business is closed for part of the week or remains open during inclement weather, nonexempt employees on the fluctuating workweek plan are paid their fixed weekly rate without having to use vacation or paid time off.

As a reminder, state regulation may differ from the federal Department of Labor, Wage and Hour Division’s wage payment regulations. Before making any weather-related deductions from guaranteed salary exempt employee wages, please contact your SESCO Consultant of record to verify compliance with state and federal regulation.

Do you know exactly how much money you're making on each project, and why? Are you confident you're bidding as aggressively as possible without risking your margin? Knowify has just published "The Essential Guide to Construction Job Costing," which answers what to track, how to job cost, how to come up with a bid. If you've got questions, check out their 31-page, well-organized guide.

You can find it here in the InfoHub resource library along with a multitude of other critical resources like The Subcontract Document Suite, Negotiating Tips, Retainage Laws and so much more.

Starting his business in 1985 an electrician that saw a brighter future with him at the helm, Calvin Mims had a mentor, Fred Churchman, of Enterprise Electric, who encouraged him to network with other subcontractors. He recommended ASA as an excellent means to do that. Calvin’s been a member of the Baltimore chapter since 2007, as well as the National Electrical Contractors Association (NECA) and the President’s Roundtable of Baltimore.

Calmi Electrical Company provides clients with electrical construction, electrical maintenance, and electrical control installations in the commercial, industrial and institutional environments in the Baltimore metro region, DC, and Virginia. Since June 2002, Calmi Electric has continuously provided security installation services and general electrical installations at the Martin State Airport Facility and at the BWI Thurgood

Marshall Airport Facility. As well as several other notable projects through the Baltimore Metropolitan area.

As an African-American owned business, Calvin’s advice to other businesses is: “maintain exemplary integrity. Treat your employees as you would want to be treated. They are the backbone of your company.”

And yes, 2023’s going to be a good year for business.

Mental Health Resources for African Americans

Coffee, Hip Hop, & Mental Health: Their mission is to bring awareness to the importance of mental health, emotional intelligence, and self-awareness to one’s quality of life, particularly in the black community. Their primary service is to provide access to mental health and therapeutic services by removing the financial, systemic, and emotional barriers which prevent healing.

Melanin & Mental Health: Melanin & Mental Health connect individuals with culturally competent clinicians committed to serving the mental health needs of Black & Latinx/Hispanic communities.

Black Emotional and Mental Health (BEAM): BEAM is a national training, movement building, and grant-making institution that is dedicated to the healing, wellness, and liberation of Black and marginalized communities.

Mental Health America: Throughout the month, they are highlighting Black and African American contributions to the mental health movement. Also, offering a multitude of resources.

The Contractor’s Compass is recognizing excellence in ASA’s ranks. Every month we are highlighting the activities, achievements, and actions of ASA members that might inspire others. Do you have something you want to share?

Send us an email at communications@asa-hq.com.

Is it time for my construction company to become an S-Corp? How will it benefit me?

by Timothy Wingate Jr., EA, G+F Business and Financial Consulting

I think I’m an S-Corp, so what does that mean, and how can I find out if this is true? These questions are asked every year. My goal is to clarify how and when to use these designations.

So, you’re a construction owner currently running your business as a sole proprietor or SMLLC (single member LLC). Are you ready to become an S-Corp? Start with two questions. Are you paying more than 25.3% in income taxes without considering state taxes or more than 28.2% if you’re paying state income taxes? If you are paying more than the applicable income tax rates, it’s worth going down this road. Do you have a company generating at least 10% to 15% net income/profit after your draws or payments to yourself are considered? If so, you are ready to discuss this strategy with your tax professional.

Becoming an S-Corp, how will this benefit me?

The primary reason construction companies convert to an S-Corp is to save on the 15.3% self-employment tax. For example:

If my business earned $100,000 as a sole proprietor or SMLLC, you would pay federal income tax, self-employment taxes, and state income taxes on the total $100,000. This income is getting beat up by three tax rates. If you become an S-Corp and pay yourself a salary of, let’s say, $50,000. The $50,000 you are paying yourself will get hit with federal income tax, selfemployment taxes, and state income taxes. The other $50,000 left in the company’s bank account will only be hit with federal and state income taxes, not selfemployment taxes. This will give you a possible tax savings of $7,650.

How to set up an S-Corp properly?

You may be asking yourself what is needed to set this up properly. First, you need an EIN. Next, you must register your business with your state revenue department to pay reemployment taxes and other state business requirements. Thirdly, set up payroll for yourself; you must pay employment taxes and file a quarterly and annual payroll tax return. Next will be to have your tax-professional file a timely form 2553 to make the S-Election. If you want the S-Corp status for the current year, this form must be filed by March 15th. Once the IRS approves your S-Election, you will receive a letter stating your S-Election effective date. Lastly, I recommend scanning this letter into a cloud document storage like Google Drive, Dropbox, etc., if you want to keep this letter. Send this letter to your tax professional so they can also store it in their records.

Now there are three major IRS compliances to consider by having the S-Corp status.

If you ever lose or voluntarily remove this status, you lose it for five years. You will no longer file a form Schedule C for your business, which is generally filed with your individual tax return. Compliance #1 you need to file a form 1120S for your business that will be filed or extended by March 15th of every year. You must pay yourself reasonable compensation. Compliance #2 paying yourself reasonable compensation requires you to set up payroll, and I highly recommend Gusto as a payroll provider. The IRS hasn’t given us guidance or clarity on determining reasonable compensation for an S-Corp Owner. Here at G+F, we can conduct a reasonable compensation analysis; click here to get your analysis. Compliance #3 you need to keep track of your stock and debt basis. Having enough basis determines whether your draws and net income will be taxed. You must have enough basis to take a net loss. In other words, I recommend not converting to an S-Corp if you see consistent net losses yearly.

Can I still deduct my home office and vehicle expenses as an S-Corp?

The short answer is yes. Can you pay these expenses out of your business bank account? The answer is it depends. We will discuss how to deduct these expenses if they are paid from your personal account or business account.

Let’s start with if they are paid from your personal bank account. You need to be reimbursed for these expenses just like any other employee. Remember, as an S-Corp owner, you are considered an owneremployee. The S-Corp needs to have a documented accountable plan; this is a plan that describes how expenses should be reimbursed. First, we need to know what home office expenses are deductible. You will have indirect and direct expenses related to the home office.

Indirect expenses apply to the home, like electricity, water, internet, security, and home depreciation, just to name a few. Direct expenses only apply to the home office, like paint for the office, office furniture, etc... You may be asking how much of the indirect expenses are deductible for the business. We must first figure out what percentage of the expense gets applied to the home office; to do that, we must come up with an allocation. To do this, you must take the home office's square footage and divide it by the home's square footage to determine your percentage.

For example, the home office is 300 square feet, and the house is 1900 square feet. 300/1900 = 15.8%. So if the electric bill were $250, the amount allocated to the home office would be $39.50 = $250 x 15.8%.

I want to pay my home office and vehicle expenses from my business bank account. How can I do this? You can follow the same process as mentioned above. This is essentially an accountable plan written, documented, and followed as part of the company’s process. You can also pay from the business account under a nonaccountable plan. This means that the amount paid by the company will need to be included in the owner's gross income. This recorded income will not be hit with social security, Medicare, or federal unemployment taxes.

I hope that you now understand what it truly means to be an S-Corporation if it’s the right decision for your construction company, and if you already have made the election, that you know what is required now that you are an S-Corporation.

About the Author

Timothy’s father owned a general contracting business in Florida, and he worked alongside him for many years. Timothy saw the sacrifices he made to keep the business running. Everyone was depending on him. That pressure can get overwhelming at times. But you don’t have to go it alone. G+F can be your trusted adviser who will craft the blueprint you need to set up your business for financial success. He is a Licensed Enrolled Agent authorized to practice before the IRS. Member: Associated General Contractors of America Florida East Coast Chapter; QuickBooks Online Certified ProAdvisor. If you have any questions about this topic or construction accounting and tax, you can contact Timothy by clicking on this link.