“In the Know”
FEI’s Private Company Roundtable Email Update
February 16, 2011
With the beginning of a new year and a new Congress, a host of new requirements and regulations will be heading in the direction of private companies. They encompass everything from health care to financial regulatory reform to environmental issues. In fact, during FY 2010, 43 new major regulations were adopted by the Obama Administration. According to a Small Business Administration report, small businesses spend 36 percent more (roughly $10,585 per employee) than larger firms to comply with federal regulations. Some estimates have the costs of requirements and regulations as high as $26.5 billion per year to businesses. Please read the Issue Analysis section of this newsletter to get a better understanding of exactly what changes could impact your business.
As the year progresses, FEI will be unveiling some exciting new initiatives that will be aimed at private company members, including a professional development webcast series. The webcasts will hit on vital issues that are important to our Roundtable members. We are anticipating the webcasts beginning in early March.
As always, please feel free to respond to this email with any comments or suggestions. The group continues to actively recruit new members and we are closing in on the 300 member mark. We would like to acknowledge Richard Steele, President of the Chicago Chapter, for helping promote the Roundtable by giving our group a dedicated space in the Chicago Chapter newsletter. We thank our private company members, as well as our Chapter Presidents, for their continued participation and feedback, which is essential to the success of the Roundtable. Please let us know if you would like briefing materials on the Roundtable for your chapter newsletters.
We look forward to working with you in 2011 as the Private Company Roundtable continues its success.
Co-Chair, Private Company Roundtable
Co-Chair, Private Company Roundtable
The most recent Roundtable call took place on January 12, 2011. Two speakers presented during this call. Josh Odintz, who played a major role as chief tax aide to the National Commission on Fiscal Responsibility and Reform discussed the recommendations of the commission. The Commission was a bi-partisan commission charged with identifying policies to improve the fiscal situation of the federal budget in the medium term and to achieve long-term fiscal sustainability. While it did not receive the necessary number of votes required to be presented to Congress for a vote, it did garner a significant number of Republican and Democratic votes, as well as the votes of the two business leaders on the Commission. Please click here to read the December issue of In the Know on this topic.
Maya MacGuineas, one of the top policy minds in Washington, discussed the likelihood of the Commission's findings being placed in the 2012 Obama Budget as well as potential tax reform proposals. MacGuineas oversees the New America Foundation's efforts to bring accountability to the budget process, address the challenges presented by the nation's underfunded entitlement programs, and propose comprehensive tax reforms that would improve both the efficiency and equity of the tax code.
This was the third teleconference held by the Roundtable with an average number of callers per call around 100!
Issue Analysis: Rules, Regulations, and Requirements - A Look at What’s Coming from Washington that Could Impact Private Companies.
New rules, regulations, and requirements seem to be coming at businesses from all directions these days, which should be expected after a year in which significant legislation was passed through Congress. With the passage of the Wall Street Reform and Protection Act as well as the Patient Protection and Affordable Care Act, private companies are facing an uphill battle as they try to thrive during this sudden onslaught of rules, requirements and regulations. This edition of In the Know will touch on five potentially costly requirements and regulations that will hit private companies in the coming months and years.
1) The Employer Health Insurance Mandate: Starting in 2014, this provision will require that all companies with 50 or more employees provide health benefits or face a penalty of $2,000 per employee. This has already caused a tremendous headache for companies who have studied the extensive cost behind the requirement. While a large number of companies have promised to keep their health care packages as is, a growing list of companies have threatened to drop all health care benefits for employees, which would place them on the new government exchange. Some analysts have determined that paying the penalty per employee is actually less expensive than providing the necessary coverage as required by the Patient Protection and Affordable Care Act. The new mandate means that employers will need to continually assess their competitive position relative to their health care programs and packages.
2) IRS 1099 Provision: This onerous requirement was born out of the Patient Protection and Affordable Care Act. Despite the bipartisan call to remove this regulation from the law, it stands as a perfect example of a new regulation’s impact on a company’s bottom-line. The 1099 reporting requirement requires companies to report to the Internal Revenue Service any purchases of goods and services over $600 a year from another business or individual. This regulation is particularly hard on small and mid-sized companies that do not have the resources or systems to cover such a requirement. Recent work in the United States Senate has aimed at removing the 1099 reporting requirement. It is likely that this reporting requirement will be removed in the next few weeks.
3) Environmental Protection Agency Endangerment Finding: The Environmental Protection Agency (EPA) has been sidestepping Congress in order to pass strict climate and environmental legislation due to the fact that no serious climate change/environmental legislation has been passed by Congress in the last two years. Using the Clean Air Act, the EPA has classified carbon dioxide as a dangerous pollutant. This classification as a dangerous pollutant will lead the EPA to develop regulations which will likely impose costly requirements on millions of businesses around the United States. It will also hit apartment buildings, office buildings, and even churches.
4) Three-percent Withholding from Government Contracts: This burdensome law mandates that federal, state, and local governments withhold 3% from payments for goods and services. This withholding mandate will affect all government contracts as well as Medicare payments, farm payments, and some grants. The legislation was signed into law by President Bush on May 17, 2006, with an effective date initially set for January 1, 2011. It was delayed one year to January 1, 2012 by the American Recovery and Reinvestment Act that was signed into law on February 17, 2009. This regulation is expected to raise $215 million per year in increased revenue, but is expected to cost much more in increased tax compliance. As an example, the Department of Defense estimated in a 2008 report that it will cost the Department more than $17 billion in the first five years to comply with the 3% withholding requirement. It also hits more than just government contracts, including Medicare and farm payments, touching many more industries than expected, including local and state governments.
5) Consumer Financial Protection Bureau: The Dodd-Frank Wall Street Reform and Consumer Protection Act authorized federal regulators to implement over three hundred new rules that are expected to be implemented by July 2011. One of the most concerning aspects of this financial reform law is the creation of a brand new bureau to regulate consumer safety of virtually all financial products and services including credit cards, loans, and other sources of credit for businesses. Furthermore, businesses should monitor increased regulation on the institutions offering these lines of credit, as costs may be passed on to consumers and businesses using these products.
These are just a sampling of the various rules, regulations and requirements that will impact private companies in the next few years. With the regulations implemented in just the last year expected to cost companies and taxpayers $26.5 billion annually, it is likely that the costs and number of regulations will grow much larger in the coming year. With the costs being high, members of both political parties are asking for in-depth studies on the costs of new and current rules and regulations. President Obama issued an order a little over two weeks ago for a government-wide audit of the regulatory process. On February 8th, Republicans on the House Rules Committee took up a resolution that directs all committees in the House of Representatives to do a review process and inventory of all regulations and their effect on jobs. Republicans also plan to vote on a bill that would require congressional approval of any regulation over $100 million.
Upcoming Events/Roundtable News:
The next Private Company Roundtable call is scheduled for April 20, 2011 at 2:00pm eastern. We are currently working on a robust agenda and look forward to a lively discussion. To register for the call, please click here.
FEI is seeking interested Roundtable members who might be interested in serving on the Advisory Council, a leadership group that will support the Co-Chairs in furthering member recruitment and the planning of future calls and programming. If you are interested, please contact Tyler Roberts, Policy Analyst, at firstname.lastname@example.org or 202.626.7807.
FEI is currently in the process of developing a private company webcast series. We are finalizing a date and time in early March to unveil this programming. Please stay tuned for further information or visit www.financialexecutives.org for more information.