MAPPS Member Firm, Keystone Aerial Surveys hurt by Northeast Flooding

Keystone Aerial Surveys is still functioning! Flooding in the area around their headquarters at Northeast Philadelphia Airport due to Hurricane Irene and Tropical Storm Lee has crippled telecommunications lines. KAS has been without full Internet and phone capabilities since September 4. Mary Potter, President, says that they anticipate to have communication lines restored by Monday, Sept 19.

“We apologize if you have attempted to contact us via email or phone and have been directed to a voicemail box or have not received a response,” said Potter. “Our facility will be operational by Monday and we will return to business as normal.”

MAPPS Opposes 3% Withholding on Federal Contracts at IRS Public Hearing

On September 12 MAPPS Executive Director John Palatiello was one of five witnesses who testified at a public hearing by the Internal Revenue Service (IRS) entitled, “Withholding on Payments by Government Entities to Persons Providing Property or Services.” The hearing was to address legislation enacted by Congress calling for a 3 percent withholding on all federal contracts, including mapping, surveying and geospatial activities, with the IRS in charge of implementing regulations on  section 3402(t) of the Internal Revenue Code.

Palatiello reiterated MAPPS opposition to the 3 percent withholding. He said even with a recent change in the Federal Acquisition Regulation (section 52.232-10), A/E firms, including those in surveying and mapping, still face a potential retainage or withholding of 13 percent on Federal contracts, an amount often in excess of the net profit. He said small business cannot afford to be in the banking business, making interest free loans to the federal government. He also said the withholding will drive firms out of the Federal contracting market at a time when we should be encouraging more competition.

As a means to help business, Palatiello urged that all long-term contracts be grandfathered. In particular, an indefinite delivery/indefinite quantity (ID/IQ) contract should be grandfathered, and the 3%withholding should not apply to any task order entered into or against the ID/IQ contract after the effective date of the IRS regulation.  The same policy should apply to other types of contract vehicles, such as GSA Schedule and Basic Ordering Agreements (BOAs), he told the IRS.

In 2009, MAPPS testified at an IRS oversight hearing opposing 3 percent withholding.

MAPPS is a member of the Government Withholding Coalition (the Coalition), led by the U.S. Chamber of Commerce. The Coalition was formed to seek repeal of Section 511 of Public Law No. 109-222, which mandates the sweeping new requirement that federal, sate and local governments withhold 3% of their payments for goods and services (the government withholding regime).

Currently there is bi-partisan support in Congress to repeal the withholding. H.R. 674 and S. 164 are intended to “amend the Internal Revenue Code of 1986 to repeal the imposition of 3 percent withholding on certain payments made to vendors by government entities.” The bills are cosponsored by a bipartisan group of 250 members of the U.S. House of Representatives and 21 U.S. Senators. This legislation is a priority for the Republican leadership in the House and is scheduled to be debated this fall. President Obama has included a delay in the effective date of the withholding in his recently unveiled jobs package.

Those Aren’t Rich Corporate Executives’ Jets, They’re Small Businesses – The Backbone of America’s Economy

President Obama - and almost every other political figure on the American landscape – has at one time or another declared that small business is the backbone of America’s economy. Then why is the President proposing to raise taxes on the very entrepreneurs he’s counting on to create jobs?

 Photo provided by Keystone Aerial Surveys

On Monday, President Obama formally sent his “American Jobs Act” to Congress.  As promised in his address to Congress and the Nation last Thursday, the package includes measures to pay for his latest proposal to jump start the American economy. Included in the bill is a provision on “General Aviation Aircraft Treated As 7-Year Property”. That’s tax jargon for the President’s now infamous but inaccurate attack on a tax loophole for corporate jets.

The fact of the matter is most general aviation aircraft is owned by small to mid-sized businesses, not corporate fat cats.  These planes and helicopters are not used to whisk CEO’s off to exotic destinations.  Rather, they are used for aerial photography in support of surveying and mapping of new highways, monitor dangerous encroachment of underground pipelines, conduct danger tree surveys to prevent power outages, apply fertilizer and pesticides to crops for maximum yield of food by farmers, researching the atmosphere and environment, keep an eye on traffic, and move employees, customers, cargo and products.

The President’s plan is based on polling and focus group sessions that show average Americans frustration with tax loopholes that permit some individuals and businesses to pay little or no taxes. In fact, what is at issue is the length of time a taxpayer is permitted for depreciation of an asset, in this case an airplane. Owners of business aircraft can depreciate their investment over five years. President Obama has proposed changing the depreciation schedule for general aviation aircraft to seven years calling the current five year schedule a tax loophole. The depreciation schedule for general aviation aircraft has been in existence since the early 1980s.  Business aircraft are treated similarly to other assets such as cars, trucks, and certain equipment, which can be depreciated over a five year period when purchased for business use.

According to the General Aviation Manufacturers Association (GAMA), in the first six months of 2011, total general aviation airplane shipments worldwide fell 15.5 percent, from 936 in 2010 to 791 this year.  There is no doubt the Obama proposal would only make this situation worse.

Shorter depreciation schedules create jobs. The faster a business can expense capital equipment, the faster it can buy more – putting more people to work. Making it difficult for businesses to purchase and depreciate aircraft will not punish wealthy CEO’s, but reduce jobs for the pilots, crews, mechanics, airport operations workers, and ultimately the folks that work the assembly lines at aircraft factories. At a time when application of digital aerial imagery, LIDAR and other airborne acquired geospatial data is exploding, aerial photographers, surveyors, and users of geospatial services will also see their jobs jeopardized.

It is difficult to see how taxing aircraft supports the broader goal of addressing the nation's job crisis. This proposal is virtually identical to what happened in 1990 when Congress imposed a “luxury” tax on yachts. The rich people who could afford these boats were unaffected, but the workers built them lost their jobs. As a result, Congress scrambled to repeal the tax. Pardon the pun, but Congress should not let the plane tax proposal ever get off the ground.