Industry Insight
May 2009
- Manufacturing Utilities Sales and Use Tax Rates Reduction Update
- Senator Wants Action This Summer on New EFCA Bill
- Survey Finds Economists Expect Recession to End This Year
- Industrial Production Falls by Smallest Amount in Six Months
- Obama Curbs Bush Administration’s Preemption Policy
- SEC Proposes Allowing Shareholders to Elect Independent Directors
- Downturn Accelerating Decline of Traditional Company Pensions
- Oppose EPA Decision to Regulate Greenhouse Gases Under Clean Air Act
- Obama Unveils New Fuel Economy, Emissions Standards for Cars
- Ford Executives Expect Sales to Recover This Year
Manufacturing Utilities Sales and Use Tax Rates Reduction Update
Act 691 and 695, which was passed during the 87th General Assembly and signed into law by Governor Beebe after a major lobbying effort by the State Chamber/AIA, reduces the state sales and use tax rate for natural gas and electricity purchased by a qualified manufacturer classified within NAICS codes 31 through 33 and used or consumed directly in the actual manufacturing process to three and one eighth percent (3.125 percent) beginning July 1, 2009. The total rate will be 3.25 percent when combined with the Conservation Tax levied by the Arkansas Constitution.
manufacturers that qualify are eligible to apply for the reduced sales and use tax rates for electricity and natural gas used directly in the manufacturing process. However, manufacturers must first obtain a certificate establishing the percentage of manufacturing use from the Sales and Use Tax Section of the Arkansas Department of Finance and Administration (DFA) for each eligible utility meter.
To apply for the certificate(s), Form ET-185A must be completed and submitted to the Sales and Use Tax Section,
-8054. To access Form ET-185A, click here.
If a meter is not used exclusively for the eligible purchases of manufacturing electricity and natural gas, a determination must be made by the manufacturer for the percentage of qualified use. A narrative of how the percentage was determined must be provided by the manufacturer when submitting their application for a certificate.
Upon receipt of the approved certificate form the Sales and Use Tax Section, a manufacturer may provide the certificate to the utility company for its eligible meters and the utility can charge the reduced sales tax rate on the monthly billing statement. This is common practice for a meter which has 100 percent of the usage eligible for the reduced rate. At this time, utility companies are not able to charge the reduced rates for a meter which has mixed usage, a portion of the usage for manufacturing (reduced rate) and a portion for general business use (full rate). For mixed use meter situations, taxpayers have two alternative methods to receive the reduced tax rate benefit:
- For taxpayers holding direct pay permits with DFA, the taxpayer purchases the utility services without tax and reports the tax directly to DFA at the reduced rate on their monthly Excise Tax Returns for the eligible portion; or
- A taxpayer applies to DFA for a refund of excess tax paid to their utility provider when the utility provider is unable to charge the reduced rate. The utility provider would charge the full 6 percent sales tax rate on the billing statement and the taxpayer would apply directly to DFA for a refund of the portion of the billing eligible for the reduced rate.
Requests for refunds may be submitted for utility usage periods beginning July 1, 2007 if the facility has meters which were eligible for the reduced rate at that time. There is a 36-month statute of limitation from date of purchase on the refund requests. To apply for the refund, copies of the utility bills for each meter must be provided which show the meter number, dates of usage, and tax charged along with the completed refund claim form. Forms needed to apply for the refund are available on the state’s website listed below. There are several versions of the forms depending on which time period the refund request covers.
The forms to apply for the certificate, refund request, and Rule 2007-5 are available on the state’s web site by clicking here.
According to the DFA, at this time less than 1,000 companies in
out of approximately 3,000 which are eligible for the reduced sales and use tax rates are taking advantage of this opportunity. One State Chamber/AIA member that recently filed the necessary paperwork estimated it will save as much as $2 million with the reduced rates.
Sen. Tom Harkin (D-IA), who is managing the Employee Free Choice Act (EFCA) debate in the Senate, has indicated that he wants to see a new version of EFCA come to the Senate floor within a month.
In an effort to meet this deadline, conversations on Capitol Hill continue regarding potential EFCA “compromise” proposals. The compromise provisions being discussed include efforts to replace the “card check” language of the EFCA in exchange for “quick snap elections” or increased access to employees by paid union organizers. The proposal to impose “quick snap elections” would require union representation elections to be held within just a few days (potentially 10-14) after the required amount of union authorization cards are submitted. Union access provisions would give non-employee, professional union organizers the right to enter a workplace during work hours to solicit support during a union organizing campaign.
Other compromise proposals such as “postcard check” have suggested that employees be able to mail in their union authorizing cards instead of having them collected by union organizers. Industry groups fear this system could expose the election process to fraud and misconduct by preventing NLRB agents from protecting workplace rights. Many other proposals focus on the “arbitration” provisions of the EFCA. One such proposal would impose a “baseball style” arbitration process where both parties would submit their “last and best” offer to a government arbitrator. This system would still allow government arbitrators to determine the terms of the relationship between employers and their employees.
We encourage all State Chamber/AIA members to remain involved and help us to defeat EFCA. Please contact Senators Lincoln and Pryor and your district representative to let them know that any compromise that eliminates the secret ballot, imposes mandatory binding arbitration or jeopardizes the prosperity of
businesses is not acceptable.
For additional information or to become part of the Coalition against EFCA, contact Coalition Coordinator Sarah Beth Turner at (501) 975-8344 or e-mail her at info@yoursecretballot.com or sarahbeth.turner@cjrw.com.
Survey Finds Economists Expect Recession to End This Year
The AP reported, "More than 90 percent of economists predict the recession will end this year, although the recovery is likely to be bumpy," according to a National Association for Business Economics survey that "is generally in line with the outlook from Federal Reserve Chairman Ben Bernanke and his colleagues." The survey found that "about 74 percent of the forecasters expect the recession...to end in the third quarter. Another 19 percent predict the turning point will come in the final three months of this year, and the remaining 7 percent believe the recession will end in the first quarter of 2010." NABE president Chris Varvares said, "The economic recovery is likely to be considerably more moderate than those typically experienced following steep declines.
Industrial
Production
Falls
by Smallest Amount in Six Months
The AP reported, "The nation's industrial production fell in April by the smallest amount in six months, fresh evidence that the pace of the economy's decline is slowing." Output by
factories, mines and utilities fell "by 0.5 percent last month, after revised declines of 1.7 percent in March and 1 percent in February...Analysts expected a drop of 0.6 percent in April." Still, the report shows "that
industry remains weak. Industrial production has fallen in 15 of the 17 months since the recession began in December 2007, and is down 16 percent since then." Manufacturing production fell "0.3 percent, as the factory operating rate dipped to 65.7 percent from 65.8 percent. That's the lowest on records dating to 1948."
Bloomberg News reported that the "figures signal that manufacturing is bottoming out after companies slashed their stockpiles of unsold goods the most on record in the first three months of the year." The Treasury said separately that "international demand for
financial assets gained in March, when American stocks and government bonds rallied as the Federal Reserve stepped up its campaign to end the credit crisis. Foreign net purchases of long-term equities, notes and bonds rose to $55.8 billion, the highest level since September." And a private survey showed "consumer sentiment improved for a third straight month in May."
Obama Curbs Bush Administration's Preemption Policy
The Washington Post reported that President Obama "continued to reverse his predecessor's policies last week" by "undoing a controversial Bush administration rule known as 'preemption' that used federal regulations to override state laws on the environment, health, public safety and other issues." In a memorandum to federal agency heads issued late [last] Wednesday, Obama "said his administration should undertake regulations preempting state laws in rare instances and 'only with full consideration of the legitimate prerogatives of the states and with a sufficient legal basis for preemption.'" The U.S. Chamber of Commerce "warned that Obama's move could wreak havoc on businesses that would have to deal with different state laws, causing a flood of lawsuits" while the Administration "described the move as another step toward rescinding Bush administration policies and protecting the constitutional rights of states."
The National Law Journal reported that the shift "gave plaintiffs lawyers a reason to celebrate." The "American Association for Justice, formerly the Association of Trial Lawyers of America, released a statement praising Obama's action: 'The Obama Memo on regulatory preemption makes clear that the rule of law will once again prevail over the rule of politics.'" Less happy was the National Association of Manufacturers. "Rosario Palmieri, the trade group's vice president for infrastructure, legal and regulation policy, issued a statement calling the memo 'troubling.'"
The Blog of Legal Times quoted Palmieri as saying, "Manufacturers sell products into a national market, and a single, national regulatory standard helps ensure predictable treatment in the courts. It's unwise to replace a regulatory system based on objective science and agency experts with a 50-state patchwork of often arbitrary jury decisions."
SEC Proposes Rules for Shareholders to Elect Independent Directors
The New York Times reported, "The Securities and Exchange Commission proposed rules [last] Wednesday that would make it possible for a company's shareholders to elect a limited number of independent directors." Described as "the most significant change in decades," the proposed rules "would permit large shareholders - typically institutional investors - or alliances of shareholders to nominate as many as a quarter of the directors." The vote was "3 to 2 to put the proposal out for comment, with the two Republican members dissenting."
The Wall Street Journal noted the SEC "split along party lines," in forwarding the proposal "which SEC Chairman Mary Schapiro has made among her top priorities on the agenda for the year." Also, "questions about the SEC's jurisdiction in this area abound, and were cited by the Republicans on the commission as part of the reason for voting against proposing the rule."
Downturn Accelerating Decline of Traditional Company Pensions
USA Today reported the economic "downturn has accelerated the decline" of companies choosing to offer "traditional defined benefit pension plans." There are several reasons for the general decline in traditional pensions; among them are declining corporate profits, "competitive pressures," and a lack of interest from younger employees who "were more interested in a 401(k) plan, because they assumed they would change jobs several times during their careers." Additionally, "pension plan sponsors are facing stricter funding requirements to strengthen the long-term health of pension plans." Dena Battle, director of tax policy for the National Association of Manufacturers, said "those requirements, combined with the investment losses, are forcing companies to shovel more money into their pension plans at a time when they can least afford it."
Oppose EPA Decision to Regulate Greenhouse Gases Under Clean Air Act
The National Association of Manufacturers (NAM) is urging companies to contact the Environmental Protection Agency (EPA) and oppose its April 17 announcement that six greenhouse gases (GHGs) may endanger public health. In a key 2007 decision, the U.S. Supreme Court acknowledged that EPA had broad discretion to determine whether or not GHG emissions "endanger public health.” Meanwhile, recent documents from the Office of Management and Budget show that federal policymakers realize that the proposal will further burden the economy. EPA is receiving public comments on its “endangerment finding” through June 23. The
has created a Web site, www.nam.org/epa , that provides additional information on EPA's action and includes an online petition and sample letter that can be e-mailed to EPA and included as part of the record.
Obama Unveils New Fuel Economy, Emissions Standards for Cars
President Obama last week unveiled new fuel standards for cars. Reporting on "the toughest" fuel standards "in
history," NBC Nightly News showed Obama saying, "Ending our dependence on oil, indeed ending our dependence on fossil fuels represents perhaps the most difficult challenge we have ever faced." NBC added that "to break the addiction, Obama outlined a plan that boosted the overall fuel economy average from 25 miles per gallon today to 30.5 by 2016."
The CBS Evening News, meanwhile, showed the President saying, "At a time of historic crisis in our auto industry, when domestic auto manufacturers are making painful choices and restructuring their businesses to be viable in the future, this rule provides the clear certainty that will allow these companies to plan for a future in which they are building the cars of the 21st century."
The Financial Times noted that "after decades of discord over improving environmental standards, executives from companies including Toyota, Honda, BMW and Nissan joined...Obama at the White House to support the scheme." Bloomberg News reported David McCurdy, president of the Alliance of Automobile Manufacturers, said in a statement that the new standard "launches a new beginning. ... The president has succeeded in bringing three regulatory bodies, 15 states, a dozen automakers and many environmental groups to the table."
According to USA Today, "the plan would effectively end a feud between automakers and states over emission standards - with the states getting tougher standards they want, but automakers getting the single national standard they've been seeking." The Wall Street Journal reported "green groups applauded the administration announcement as a significant step toward addressing global warming and achieving energy independence."
Meanwhile, USA Today noted in a separate article, "new fuel-economy rules could backfire if people drive more," thanks to better mileage from cars and trucks, and, as a result, cheaper driving costs.
The Washington Post reported, "the new fuel-efficiency and tailpipe-emissions standards unveiled yesterday at the White House will push automakers and motorists in a direction aimed at reducing U.S. oil dependence and the emissions of greenhouse gases, just part of the administration's program for remaking the ailing American car industry.
Ford Executives Expect Sales to Recover This Year
The Detroit News reported, "Top Ford Motor Co. executives said car and truck sales are beginning to stabilize worldwide and they are confident a modest recovery will begin later this year." In addition, they said Ford's "restructuring plan has put the company in position to emerge from the economic crisis stronger, and more competitive than it was before automobile sales collapsed last year, in part because of its globalization strategy." Speaking to reporters at the company's 54th annual shareholders meeting in mid-May, CEO Alan Mulally said "actions on both the fiscal and monetary fronts by nations worldwide are starting to gain traction." CFO Lewis Booth said "programs to encourage motorists to trade in older models for new, more fuel-efficient vehicles are having an immediate impact in countries that have adopted them."
