or morning, I guess, depending on where you're located in the country. My name is Daniel Fisher. I'm AAD's Senior Vice President of External Affairs. Thank you for joining for today's public policy webinar. Certainly a lot going on in Washington, D.C., and we got a full agenda here. And as a reminder, if you do have any questions, please put them in the chat box at the bottom, and we will answer them as best we can as soon as we can. So here's what I want to talk about a bit today. The month ahead, jam-packed agenda in D.C. with a lot of big-ticket items that both Congress wants to accomplish as well as things they actually have to do due to certain deadlines. I'm going to discuss a bit about the Infrastructure Investment and Jobs Act and what's in there and the impact it will have on the industry. We'll talk a bit about the Reconciliation Bill, otherwise known as the Build Back Better Act, or sometimes known as the sort of human infrastructure, caring infrastructure bill. The House Democratic Tax Plan, we'll discuss that, which is a part of the Reconciliation Bill. We'll discuss that with a couple of our friends from Keiko Isom. Then we'll have a political discussion with Chris McCannell of Gray Robinson, who's very close to Democratic leadership and will give us some insights into timing and what actually can get accomplished in this very evenly divided Congress. We'll do some discussions about the Washington fine, and then we'll have a question and answer. So go ahead and get started here. So Rubik's Cube on steroids, that's what Senator Mark Warner described these next couple of weeks. It's a very complicated politically and policy couple of weeks in D.C. In fact, for many of us who've been around for 20 years or so, this is probably one of the most challenging few-week periods I've ever seen. Just a lot of different issues kind of converging and also a lot of very difficult political situations, particularly in this case within the Democratic Party, very moderates against liberals, and a lot of kind of back and forth there. But just as a reminder, the House has 220 Democrats and 212 Republicans. That means they can lose only four Democrats on any vote, and the Senate's 50-50, so they can't lose any Democrats there. So as you know, the House and Senate are both controlled by Democrats, but the margin of error is just so slim that it's kind of like threading a needle here to get legislation through, and we're kind of seeing that with both the infrastructure bill as well as the reconciliation bill. Moderates against liberals, again, as I said, there's a lot of infighting with the Democratic Party. The Republicans have gone through this and oftentimes still go through this, but now Nancy Pelosi is having to deal with it. It's almost like John Boehner back in the day and him battling against the Tea Party side of the Republican Party. Right now, Pelosi is trying to corral her moderates and her liberals to agree and move forward on, again, these big-ticket items. So here's what we have coming up, some key dates here. So September 27th, we have a scheduled vote on the infrastructure bill, the bipartisan infrastructure bill. September 30th is the end of the fiscal year, so we have Congress has to either pass, well, is going to have, at this point, going to have to pass a continuing resolution to extend government funding until in the future in order to avert a government shutdown. That has to pass or the government shuts down. The FAST Act, which is the highway, the Federal Highway Program, that expires on September 30th. So Congress must either pass the bipartisan infrastructure bill or pass, again, a continuation of the FAST Act. And then you throw in kind of something we deal with every so few years, and there's the debt ceiling. Treasury is going to reach its borrowing capacity by, it's an estimate by, they say, around October 25th. Kind of every day you get a new number, it kind of goes up back a couple days, up a couple days. But around October 25th, Congress is going to have to do something to either increase the debt ceiling or to allow the Treasury to continue to pay its debts. And obviously not doing anything will have huge ramifications on the markets and the economy and government operations. So some really big ticket things that they have to get done here. And then you throw in the reconciliation bill, which they want to get done, and they're making a priority. So it's really a pretty jam-packed, busy couple months here in DC. So the bipartisan infrastructure bill, and I know there's a lot of misconceptions, it seems, out there, but this is truly a physical infrastructure bill. It invests more than $1 trillion in a variety of physical infrastructure, everything from roads, bridges, water systems, ports, waterways, airports, broadband, the electrical grid, power infrastructure, really every kind of infrastructure you can think of, it invests in. It doesn't contain the Green New Deal in it. It doesn't contain, I've heard, that it's a woke bill. It's nothing like that. It is actually a very traditional physical infrastructure bill. And importantly, it also includes a five-year highway reauthorization bill. So it extends the highway program for five years at about 35% above current funding levels. So every state will actually see at least a 25% increase in their, their state DOT will see that in their highway funding from the federal government. Your contractors support it, your customers support it, your manufacturers support it, the broader business community supports it. It really is truly a, everything we could have asked for, particularly in this Congress, as far as infrastructure goes. And it'll provide certainty and we'll get a lot of money flowing out there for all kinds of infrastructure projects. And obviously your equipment will be needed on all, most, all these projects. Importantly, it didn't raise taxes on the business community either. There are proposals out there where we thought, you know, they might raise the corporate rate or they might, you know, tinker with the, repeal some of the tax cuts and jobs act provisions to pay for the infrastructure, this physical infrastructure bill. They didn't do that. We will get to their attempt, the attempts by the Democrats to do that. And that's in the reconciliation bill, separate bill. This bill will be voted on September 27th. All indications are, it will be separate from the reconciliation bill, which we'll discuss here in a minute. This bill passed the Senate 69 to 30, 19 Republicans joined Democrats to pass this with Republican leader, Mitch McConnell support. I think most of you have heard leader McConnell speak at past AAD fines, if you've attended or past AAD events. I think that Mitch McConnell will be considered far from a liberal in most analysis. So he supports it. It's a pretty, like I said, a very good bill. In terms of investment numbers, there's $110 billion to repair the nation's aging highways, bridges, and roads. That's above baseline funding levels. Like I said, there's a five-year $370 billion highway reauthorization. And importantly, it includes provisions that industry has been pushing for, for a number of years that will reform the permitting process and the environmental review process on road and bridge projects to expedite project delivery. This is something that the Trump administration worked very hard on, something that's been put in legislation in the FAST Act actually had this, but this goes a step further and really will create, has a lot of great permitting reform modifications that will again, get, make it quicker from project planning to get it actual to project delivery. There's $17 billion for ports, $25 billion for airports, all again, infrastructure, drinking and wastewater infrastructure, $55 billion, power infrastructure, $73 billion, and broadband infrastructure, $55 billion. Again, that's just a kind of a sampling of what's in there. In total, there's $550 billion of new funding for physical infrastructure over the life of the bill. And then of course they include baseline funding to get to the $1 trillion plus number. So then separately, we have the reconciliation bill. And just as a reminder, reconciliation is a process that Congress can use or the House and Senate can use only when, well, the only time it would work is when the same party holds both the House, the Senate, as well as the presidency. And what it does is it allows you to use the budget process. So once one time per fiscal year to pass legislation, it needs to be generally needs to be either spending or tax related to allows you to pass the by majority vote. And so this is important in the House. It doesn't matter as much, but in the Senate, it matters because of the filibuster rule, which is still in play, still in effect, much to the chagrin of some on the left, but you're still the filibuster. So this allows you to pass big ticket items without any support from the other side. This is how the Trump tax cuts passed. This is how the Affordable Care Act passed. So it's been used in the past, but it can only be used when in those rare circumstances where the House, Senate, and the administration are controlled by the same party. So the Democrats recently introduced and been considering in the House, in the House committees, a $3.5 trillion reconciliation bill known as the Building Back Better Act. And now this is what we would refer to as or could be referred to as the care infrastructure bill or the soft infrastructure bill. But really when it comes down to it, it's a lot of social spending. I'll get to what's kind of in it in a minute here, but it's been approved by the relevant House committees, but it's still a long way to get to the president's desk. I mean, this thing has still, there's infighting within right now. The House Democrats are trying to work out a deal in terms of what the legislation will look like when it gets to the House floor. The House Democrats are trying to work with the Senate Democrats who also have a very different view on how this should look. You've heard in the news, Joe Manchin, Kyrsten Sinema, they're really, even though this is being considered by the House right now, they're playing a huge role in shaping this thing, even though it's not even yet in their chamber. Liberal Democrats have been trying to link the infrastructure bill, what is the bipartisan infrastructure bill with the reconciliation bill, but the moderates within the Democratic party have really pushed back on this. And this is why we will have, or we are expected to have a separate vote on this physical infrastructure bill on September 27th. So while liberals would like to say that they're both linked together, the reality is they are separate bills. They will be considered separately while they kind of run on parallel tracks in many ways for mostly political purposes, they are very much separate and they will be considered separately. So what's in it? We have a significant expansion of government programs, particularly related, I'm sorry, Chris, did you have something you wanted to- Oh, I just, before we go in, we had a couple of questions in the chat box on some infrastructure, on BIF, so on IIJA too. So as before we, I don't know if you wanted to- Okay, sure. Thank you. Answer those first before going into what's in the Democratic reconciliation bill. Yeah, sure. As far as I will answer that, thank you for pointing that out. And Chris refers to the IIJA as I call it as BIF, which is the bipartisan infrastructure framework. So we will use those terms interchangeably here for this conversation. So what kind of power? So it's electrical grid power, it's renewable energy, such as solar and wind. It's really all of the above, but it certainly does, a lot of that money is to invest in the electrical grid to really, I think, satisfy at least partially the Democrats' attempts to move to more electrification and of particularly the vehicles. So Chris, I don't know if you have any other analysis on that. Yeah, but also the resiliency as well, some of the issues we saw in Texas and some other states and the wildfires in California, and the goal of the funding there is to build that resiliency too. And as far as when the dollars get out, I mean, the federal government will have them out probably in a couple of months. I guess really the question is how quickly can your state let the projects and get the money out the door as far as that goes. So I mean, generally, infrastructure bills before they're actually seen on the ground, it's usually about, I think, eight to 12 months is what they say in terms of when you actually see the benefits or start seeing the benefits. But one thing I can tell you in talking to contractor groups and a lot of the other folks is that immediately, this should give some confidence into construction markets. And so I think it will, even though the money might not be out the door, at least your customers will know what they're going to see for the next five years at least based on this piece of legislation. All right, so what's in the reconciliation bill then? It's a significant expansion of government programs related to healthcare, education, climate change. Childcare included right now is two years of free community college. So it's really kind of a grab bag of the priorities that, frankly, President Biden ran on and has been pushing in his Build Back Better agenda. But again, there's divisions within the Democratic caucus over price, how high this should be, $3.5 trillion. For some, seems to be the floor. For others, it seems to be the ceiling. And so, I mean, they haven't even agreed on really a price between Democrats in the Senate and the House as well as within the Democratic caucus as well. So they also haven't agreed on a lot of substance. There's differing views on how to proceed on healthcare, how to proceed on prescription drug issues, how even to proceed on climate change, addressing climate change as well. So there's still a lot to be worked out here. This is far, far, far from a done deal at all. And then there's also substantial tax changes that will penalize small to medium-sized companies in this legislation. And there's also some beneficial tax benefits in there as well. And at this point, I will turn it over to a much, Mark is half the man he used to be, and Clint looks better as well. But I'll turn it over to Mark Johnson and Clinton Baker of Keiko Isom to work through the tax provisions in the legislation and the impact it could have on AAD members. So most of you know Mark and Clint, if you've been participating in any AAD webinars or programming over the last two years, going all the way back to the CARES Act, I believe, which seems like, you know, what, like the decades ago. But Mark and Clinton, we've appreciated their partnership and the partnership of everyone at Keiko Isom to help us get through some of these complicated tax and accounting issues. So I will turn it over now to Mark and Clinton. All right. Well, thanks, Daniel. It's always a pleasure to partner with AAD on these. Our clients have been bugging us to give them some more information about this for months. And I'm sure your members are doing the same thing. And it feels like they thought we were hiding things. And honestly, we didn't know much until here recently. There's just been a lot of speculation about this bill for months. And, you know, I was just thinking, you said earlier that for the infrastructure spending, it usually takes 8 to 12 months to hit the ground with that money. It sometimes takes a little bit of a nap for us to pay for stuff. And, you know, we always hear about kicking can down the road. PPP might have been about 8 to 12 months ago. So it's maybe time to start paying for some of that. So anyway, there's been a lot of speculation about what's going to be in this bill. We're going to focus on just a few of the key points in there. And depending on time, Daniel gives Clinton the, you know, the proverbial cane to pull him off the stage here, then we'll go as far as we can. You know, I think one thing that's important to mention, well, first off, for those of you who don't know us, Clinton and I know lots of you on the phone. So we work with a lot of dealers, do a lot of the normal accounting stuff, obviously, a lot of tax. So our dealers are just as concerned about this bill as you are, you know, obviously, that's usually one of the top things that they say, hey, what's, what's something that could derail how good you guys are doing this year. And one of the things that's always comes back as well, we don't know what our tax situation is going to look like. And a lot of people have been for a long time, we might even go back to January and tax this year, a different kind of tax rate. So hopefully, we'll shed a little bit of light on that today. I think one thing that's important to mention at the front of this is we're going to talk about the House bill today. And that's all Clinton and I are really going to talk about as far as what's out there. The House make lots of changes by the time it gets there, the Senate could do something completely different. I don't, I don't really know what the crystal ball says for what the final legislation is going to look like. So we're going to talk about what we do have out there. And that's, that's this. So this bill is over 600 pages long, by the way, which means, you know, Congress people can read through that in about 32 seconds. Clinton, I just a little bit longer than that. So you're assuming that you read, you're assuming they actually read the bills before they vote on them. So what's that, Daniel? So you're assuming they actually read the bills before they vote on them. But exactly. So, Clint, why don't you get us started off with some of the specific business tax provisions that are in this for dealers on the phone? Sure, absolutely. So, you know, the first thing I would say is we start out with corporate tax rates. And so if you'll remember, in 2017, when we had the, the Jobs and Tax Act of 2017, we wound up with a flat corporate tax rate of 21%, the lowest it had been in years. Anytime in my practicing career, I can tell you that also made us more competitive on global market from a tax rate perspective, there's a lot of other things that go into it, but at least from a tax percentage perspective, made us a lot more competitive. So they haven't completely done away with that. But the current proposal from the House Ways and Means Committee here has a bracket system, we're back to a bracket system, if the small corporations would be at 18%, if their taxable income is under under $400,000, then we would hit that 21% for kind of midsize corporate taxpayers. And then as you go over $5 million, we would actually wind up with a higher higher tax bracket. Even as you go over $10 million, there's some, there's some some recapture of those lower rates to get to a higher percentage. So that's what's interesting from a corporate perspective is, it's, I hate to say it this way. I know we're being recorded, but it's pretty easy planning when you know that it's that it's that crystal clear, you know, on tax rates. A couple of the other things from a business perspective that have been proposed here, one of them is that this interest expense deduction limitation would be at the at the shareholder and partner level, not at the entity level. There's also I will tell you this, I'm going to talk a little bit later on about a different proposal that's out there that would make that at the entity level. And so we even have some some conflict between proposals that have been that have been set forth here. And then from an international tax perspective, I doubt that affects many people on the call. I believe most of the dealers we're working with, at least that we work with would be here in the United States, although there may be Canadian dealers on the call as well. From a US perspective, getting much more aggressive, much more progressive, maybe is the way to say it with our international tax system. Some of those some of those campaign promises about bringing dollars back in the United States and taxing them, those types of things. If you want more information about that, we have it. But we really have a limited time here today. I'm gonna let you read this slide yourself. These are just some miscellaneous business tax provisions. The first one, when people see that they worry about what's excess employee compensation. That's generally publicly traded companies, not for profits, you know, where someone might be making more than a million or $2 million a year for our for profit businesses. We've not run into that. I mean, a lot of times they're tied to performance, which which is okay. Probably the biggest bullet point on here that I would direct your attention to is the fifth one down there allowing certain S corporations to reorganize as partnerships without tax. So, you know, a lot of times when businesses are formed, back decades ago, they were of course, corporations, sometimes you might hear them called C corporations, C just means it's a regular corporation. Eventually, you know, we had this corporations come around in the 80s. And then we had LLCs, of course, pop up in the 80s and 90s. They are usually taxed as partnerships, but they don't have to be, they usually are. And once you get into a certain entity structure, a lot of times it's difficult to get out of that entity structure tax free. I mean, there are certainly spinoffs and reorganizations, there are certainly reconstitutions of partnerships. But to move between a C corporate and S corporate partnership, usually there's some form of taxation that happens. This is a small window, I think it's only two years, if I remember right, basically, you'd have to have it done before the end of 2023 to get out of an S corporation into a partnership setting. It's one that I think has intrigued people. But from a dealership perspective, I don't see a lot of dealerships out there reorganizing, they might, you know, depending what they have in their S corp. So I want to I want to take a slide here and just clarify up front. What I'm talking about on this slide is not part of the House Ways and Means Committee's proposal here. It's not my part of this budget reconciliation. This actually comes from the Senate Finance Chair, Chairman Wyden here, who has has a number of proposals out there. His partnership taxation proposal, though, is probably one of the more, more interesting ones from from our perspective, because so many of the dealers we work with our partnerships, they are LLCs. And a lot of the reason why businesses organize as a partnership is because they want flexibility. You know, corporations, including S corporations are pretty rigid in terms of their state administration, of annual meetings and passing resolutions and having boards and that sort of partnerships, LLCs, taxes, partnerships, you know, they get they get they get pretty loose. I'm not gonna lie. One of the things that partnerships have been used over the years to do is, you know, it's an opportunity for people to form a business together, and maybe one person's bringing the cash and one person's bringing the knowledge, but yet they can enter a partnership. And that that's, you know, generally, you can do that tax free, there's a couple rules you have to watch out for. But by and large, that's tax free. And so what they are, what what what Chairman Wyden's proposal includes is really to he calls it simplified partnership taxation, I'm going to read this bullet point to you by removing unnecessary options, closing loopholes, and facilitating taxpayer compliance. All that all that really means is taking away some of your choices and making sure you're paying your tax is probably the it's probably the nice nice way to say that you can see the four points here. Sorry, I've got a typo in the first one. But but this first one really is is pretty significant, because it gets to that idea of what I said earlier, where two people can come together and form a partnership. One puts the money in one brings the knowledge of the sweat equity, and then they can own it together. What they're trying to do is to get away from that substantial economic effect concept I just described and really get to where it's the partner's interest in the partnership concept. I'm going to I call that follow the money. I don't have anybody else has called it that. But that's what I call it, where it's really much more about I put this much money in, you didn't really put any money in, guess how we're going to own this, we're following the money. It's a proposal, we'll see if it we'll see if it happens. There are certainly industries affected much more by that than equipment dealers and distributors are. But generally, you know, when you think of hedge funds, mutual funds, oil and gas interests, anything like that would be affected more by this next this next bullet point, a required revaluation of partnership assets when a partner is bought out or admitted. What that is, that's an option today. And many dealers, especially the larger equipment dealers and distributors already have this election in place 754 election, where if Mark and Daniel and I and Chris, the four of us own a partnership together, and, you know, we go and we buy Mark out, well, there's an election we can put in place that says revalue the assets and restart depreciation on that, that that gain that Mark got paid out that he's paying tax on, but we get to go ahead and get more tax deductions. A lot of small, a lot of smaller partnerships don't do that because it is it is an administrative burden to keep track of. And just the cost of compliance sometimes outweighs the benefit. Certainly larger partnerships do have these in place. Usually, this would take that option away and just say you have to do it. Then these last two things are then these last two things are really tightening down a couple of a couple of areas. One is called disguise sale. Disguise sale is the transaction where, again, Mark and I maybe form a partnership. I put money in. He brings this equity, but then Mark takes a big distribution out. That's called a disguise sale. It's like I sold part of it to him. And so they want to tighten those rules. We don't see that very often in equipment dealers. This last one, this business interest income limit or expense limitation. This is where all of a sudden today, this interest limitation came about in twenty seventeen. And today we get to apply those rules and pass those that information on to partners and let the partner make the decision. How much do you get to deduct? What's limited? This would actually restrict that and say that that's going to be calculated at the partnership level, which administratively as a practicing CPA, I'm going to tell you is a lot easier, actually, if it is just done at the at the entity level. But I could tell you from a taxpayer's perspective, a partner in a partnership, I can tell you I'd rather have as much flexibility as I can. So that's really what this this proposal is about. Mark, I'm going to turn it back over to you and have you walk us through some of the individual tax provisions. OK, well, as you guys will remember, and President Biden is one of presidents, one of his primary campaign promises to not tax anybody that made less than four hundred thousand dollars a year. And although the interesting part about that is never really clarified what exactly the definition of making less than four hundred thousand dollars a year was, you know, was that full income? Was that gross income? Was that adjusted gross income or or even worse? There's one that they they invented a few years back called modified adjusted gross income, which is just when they really want to tighten things up on us. So never really clarify what those were. So you'll see some wording in here, those things trying to dodge, dodge that a little bit. So as you can see here, the biggest thing is that it increases the top individual income tax rate. I'm gonna use air quotes for a second, actually. The top individual income tax rate to 39.6 for people that make more than $450,000. That 39.6 might sound familiar to you. That's what it was prior to 2018. The reason I put air quotes around the top individual income tax rates is because there's a few other taxes that get put on top of that that are still in here. Increases the top capital gains rates to 25% effective September 13th. That's a little bit, as the question I was asking, or I was alluding to earlier that we get a lot is, will this be retroactive? Will it be effective January 1st? When does all this stuff take place? Still not completely sure on everything, but way back in May, the president actually threw out a date. I don't remember now if it was May 1st or May 21st. It almost looked like that would be a date he was kind of reserving to go back and say that's the date we're gonna go back to on capital gains. Well, I don't know what happened to that date. It disappeared. Now we see it's the September 13th, 2021. The rest of the dates I'm guessing at this point are most likely gonna be the date of the legislation itself and we'll probably have a split year on things. But this is a somewhat good news because the capital gains rate at 25%, it's 20 now, less than that if you make less money. There was a proposal that there wasn't gonna be such thing as a capital gains tax rate at one point and we just have the 39.6 on capital gains. So the tax on capital gains doesn't feel actually horrible, right? As compared to 39.6. Next one here is back to my air quotes earlier. So it does though apply the net investment income tax to actuary business income in excess of 400,000 or 500,000 if you're married jointly. This is the extra 3.9% tax that gets added on when you've got investments and high income. And then there's also still a 0.9% extra that you pay that's often referred to as the Obamacare tax and things like that. So if you add all those three together, my air quotes at the beginning, 39.6 and the 44.4 and it gets a little bit, all of a sudden that's a substantial amount of your income gone if you're making over $400,000. I mean, the last point is increases IRS funding for tax enforcement activities. The one thing I'd say about that is the IRS, I would have never thought in my career I would have said this, but IRS needed a little bit more money because we can't get them to even open their mail for the last two years. There was something like 25 million pieces of mail unopened at the end of 2020. They don't answer their phone. It's, we've got refunds out there waiting for clients that have been sitting out there forever. So that has not felt good, but this was to give us the IRS some more funding to go after people for whether it's audits or whether it's compliance or whatever. And already we are starting to see, I think right now we've got four dealerships that are under IRS audit just currently right now of our dealership, which is a pretty good number. We hadn't seen any audits in a couple of years and except for the repeat offender seem to get past one. So anyway, there could be some targeting involved there. So the other part that got affected a little bit was on retirement plans. So this might not affect on this call, but there are some things on here that could. So there's, it's created some contribution limits for high income taxpayers. So in other words, already contribution limits, you can never just put whatever you want in your IRA or your 401k. There's always some phasing in and phasing out. And those, this is on top of all that and limits individuals that are making more than $450,000 a year. Or if their balances in their retirement accounts already exceed a certain amount, it's limiting what else they can put into that. And then some more reporting as well. There's also now increased requirement minimum distributions, income tax paper, high income taxpayers, as well as the prohibits Roth IRA rollovers. And what that actually means is one of the reasons a lot of our clients back when Roths came into play went to Roths was because in a regular IRA, you get to a certain age and they do this required minimum distribution. You gotta start drawing it out. You gotta start paying the tax that you deferred so that according to the retirement or the death table, essentially you would have paid all your tax that you deferred by the time you died. Roth, we could put it in there and never take the money out. We could essentially, we could let our heirs take our Roth IRA and we didn't have any distribution requirements. So it was kind of a neat piece of the Roth IRA. So this prohibits the Roth IRA rollovers. Essentially, it is putting some minimum distributions on Roth IRA. So now the good news is you've already paid your tax. So it wouldn't be a taxable event when you start taking stuff out, but it's a way that it's limiting how much longer we can defer that. And in the last few years, the way the stock market's done a run up, there's a substantial amount of deferred tax and excluded tax inside Roth IRA. So that's probably part of what they're after there. And then also it prohibits you from having any interest in things that are included in your IRA accounts. All right, child tax credit. Another one, again, might hold a lot of people on this call. Not saying you're all old like me and your kids are past that, but maybe you make a little bit more money and you weren't allowed to claim these child tax credits. But actually on this side, the child tax credits are one of the things that would be that a lot of taxpayers are gonna be excited about. Because this is actually more money in your pocket versus less money like the slides before. It increases the tax credit to 3000 per child, 3,600 if the child's under six and it's indexed for inflation. And most people are already getting that money. So they're advancing that credit in advance, which is things that that's good when you're getting the check every month. It's bad when you go to pay your tax bill at the end and you thought you were gonna give a big refund and find out you've already got it. So there's, yeah, so that's monthly. Expands the definitions of who gets it and who's eligible. And there's penalties for abuse. And this is more of a, this is kind of a, we're gonna throw some good stuff out there so we can get people's support for it. And this is where that kind of hit. Clinton, how about, we hear a lot on the estate side. Good news or bad news there? Well, that depends on your perspective. From our perspective, bad news. You know, this is something that a lot of equipment distributors, I think you need to pay attention to. You know, we're seeing, Mark and I work a lot in this industry on merger and acquisition trends and succession planning transactions. So we're seeing more and more consolidation. We're seeing, you know, more and more increase in the value of these companies. And so a lot of our clients have an estate tax problem. Estate tax issue is probably the right thing to say. So, you know, estate taxes get changed every few years. They seem pretty stable, you know, kind of in the 80s and 90s. Although I make that up again, I didn't start my career till the late 90s. But since then, it seems they get changed about every four or five years. And so we had one of the best set of rules that got passed there in 2017 with the Tax and Jobs Act, which really made very large exemptions. So it set the exemption amount for an estate at $10 million. And because estate tax is one area in taxation where husband and wife are treated separately, that really meant a married couple had a $20 million exemption. They could pass $20 million of assets to heirs through their estate, get a step up in basis, pay no tax on it. That's adjusted for inflation. We're at about 11.7 right now per person. So we can still do 23 and a half. And that's scheduled to continue to go up until 2026. And then in 2026, 2027, I mean, it goes back down to this $5 million. So estate tax is already scheduled to revert back to old rules here in just a few years. But this bill that we have in front of us right now goes ahead and accelerates that to date of enactment. And so, or next tax year, I guess, is probably really what they would do with the estate tax. And so we're looking at that being basically cut in half to go to about a $6 million exemption because it's adjusted for inflation, somewhere around 5.7 to $6 million. So we would be seeing a decrease in half of the amount that can be distributed. It's kind of one of those things, we're talking with a lot of our clients about, if we're mid plan or they've already engaged us, we need to go ahead and get this done. A hurdle right now is candidly just service providers. I mean, if you need appraisals and business valuations and your accountant's working on it and your attorney's working on it, it's like there's already such an influx that our concern is not whether all the customer can move fast enough, it's whether all these other pieces can move fast enough, with the bank and that sort of thing, your OEM, if they have to prove it. So it's something, if you're not already working on this and if you need to, then make a call this afternoon. Couple other bullet points here that are of interest. One of them is this requires the inclusion of certain grants or trust in an individual's taxable estate. I'm gonna put that bullet point with, I'm gonna skip down a couple more and say it requires recognition for income tax purposes on previously disregarded sales. Basically, typically a grant or trust and the grantor, the person who sets it up, they are viewed as one. And so they can do transactions for income tax purposes that are not taxed, but for estate tax purposes are recognized. And so what they're really taking aim at candidly here are a couple of very powerful estate planning tools that lawyers and accountants have been using to really be able to minimize taxation. So that's big. But the third bullet point here about valuation discounts, you've probably heard that they have an attack on valuation discounts. We were concerned initially that they were gonna attack valuation discounts completely. Meaning if we have a business, you can't apply minority, lack of control, lack of marketability or minority discounting, especially among family member generations. Good news, bad news on this. Good news is they didn't complete, they're not proposing to get rid of it completely, but they are proposing to get rid of it on the passive assets. So if you have a dealership and inside of it are the operations, that's perfectly fine. We can still use discounting to push more assets through an estate tax-free. But if you have assets that are not, let's say you're holding onto some land and you're thinking someday down the road, we're gonna build a store there, a location there. If it's unimproved land, it's probably gonna be viewed as a passive asset or an inactive asset. And therefore, you all of a sudden you start having to peel things out and say, this isn't really part of the operations. We're holding this for the production income later. Those are a couple of big things. This, I'll let Mark talk about that. Good news is Litecoin Exchange didn't get attacked again. Biden's opening salvo looked like it was going to be that way. The only thing that we can do on Litecoin Exchange to be more as a reminder is real estate. And that survived. It looked like it was gonna not survive. I think the biggest warning I give to everybody on the phone is a reminder that when they took Litecoin Exchange from you, away from you a few years ago, you haven't felt that sting yet because you had bonus appreciation still out there. You were able to buy stuff for your rental fleet and your bonus and all that. So you were able to kind of stave off the hit from Litecoin Exchange. Two things, one, you don't have very much inventory this year. You weren't being able to buy stuff for your rental fleet. So you might get burned on that a little bit this year. If you haven't already looked at that, please do. But even past that, starting in 2023, bonus appreciation starts going away unless Congress picks that back up, which we hope they will at some point. Yeah, and the last slide I'm gonna cover here before I turn back to Daniel and Cruz here. This is just a list of some of the other incentives that are in this bill. So we've talked a lot about the pay for things, the tax increases, decreasing deductions, but there are a lot of incentives. There are a lot of tax credits that are not, this is not the infrastructure bill. Like Daniel said earlier, this is the reconciliation bill, but in this bill, there are a lot of construction-related tax credits that they have proposed. I remember when I was in graduate school, one of my tax professors, he said, don't ever confuse tax legislation with being fair, equal, or simple. You don't get the three of them. And it's really not about that. It's about changing behavior. Why does the United States have the highest, if not the highest, one of the highest homeownership rates in the world? We are also one of the few countries that allows you to deduct your mortgage interest. And that's kind of the way these incentives are right here. I don't think many equipment distributors will necessarily be able to take advantage of them themselves, but a lot of your customers are. There are tax, in addition to the infrastructure bill, Daniel talked about earlier, there are a lot of tax credits out there also aimed at construction improvements and different types of, a lot of them are green initiatives, but basically getting people to spend money on construction projects, which is good for distributors. Daniel, I think we went a little long, man. I apologize to Chris. No, that was great. So if there's any questions, please submit them in the chat box. And I did, there is a question about whether the slides will be available afterwards and we will be sure to share my slide deck as well as the Keiko slide deck. So what I'm gonna do is use the next, the remainder part of our time to have a discussion with Chris McCannell from Gray Robinson. As I mentioned, Chris is very close to democratic leadership on both the House and Senate. He works closely with the Blue Dog Democrats as well as the New Democratic Coalition, which is more of the business-friendly democratic, business-friendly part of the Democratic Caucus. So he has a real great pulse on some, to answer a lot of the questions that I, or some of the questions that were in the chat box, particularly as it relates to what are the chances of passage, when is passage and stuff like that. So Chris, let's first of all, start off on the bipartisan infrastructure. Let me get to my next slide here. There we go. Chris is much better looking in person for those of you who haven't seen him, but so let's see here. Am I sharing the slides or? No, okay. Well, we'll just go with that. So Chris, what, so by infrastructure bill, so there's a September 27th vote set. You have the liberals in the Democratic Caucus threatening, so the AOC types, threatening to vote against that bill because the reconciliation bill isn't ready for prime time yet. What's going to happen on September 27th? Great, well, that's a great question, Daniel. And thanks again for AED for having me be part of the team and really appreciated Clinton and Mark's comments. But I would say, I think you said this at the beginning, Daniel, I want to just reiterate, I think throughout my career and being up on Capitol Hill 15 years and chief of staff for 10, I have never seen a more controversial time in our, in government and advocacy than these next few weeks. I think you did a good job of laying out what's sort of coming down the pike. So remember back in August to kick off this whole spending and tax scenario that we talked about and some of the other issues that were coming up in the chat, which I enjoyed, they had to pass what was called a budget resolution to kick off the reconciliation process. And at that point, there was some friction between the moderates and the progressives, those liberals, the AOC types and others, who were reticent to move forward on this recently passed Senate bill because they were afraid that moderates would not vote for reconciliation, would not vote for this bill back better, would not vote for all those things that Clinton and Mark talked about. Remember what Clinton and Mark talked about? We don't know what's gonna happen, what's gonna come true, what's not. There's a lot of lobbying and engagement behind the scenes. What we do know is that the Senate passed a bipartisan infrastructure bill. We do know that there are votes in the House of Representatives to support that, to support the president, to put shovels in the ground, to put new electricity systems in place, to put new infrastructure, water, water infrastructure, telecom, and so forth. So they came up with an agreement that they were going to guarantee a vote on the bipartisan bill on September 27th. Well, guess what? That's less than a week away. We're kind of, reconciliation itself has run into a bunch of different snags. First and foremost, is there's some problems on the House side with some of the pay-fors that some moderate Democrats are having when it comes to prescription drugs. There are some issues that I think Clinton did a great job with, and Mark talking about, and sort of the behind the scenes on things like IRAs, as well as the S Corp, and 199 cap pay, and other technicalities where Democrats are trying to make changes that, you know, do have an impact down the road, that has just kind of slowed down the entire process. But what's the biggest process is too, and I think this came up in the chat, the biggest rate limiting, is that there's really no agreement as to how big this is gonna be. You know, 3.5 trillion is what Democrats have talked about. Remember, this is a cut from where Sanders wanted it to be, six, seven trillion. The 3.5 trillion is what was agreed upon in July. So, but there's still, but now we have Senators Manchin and Sinema, and actually others who are also joining the discussion, saying, hey, wait a second, we don't think it should be this high. Hey, wait a second, we don't think it should do all these different things. You know, maybe there should be an increase in the individual tax rate. Maybe there should be some increase in the corporate tax rate. But when you start looking into what they wanna do with IRAs, what they wanna do with the estate tax, with other pieces there, it becomes a lot more problematic. So, and you know, frankly, there's no agreement on what that price is. So that's causing, you know, so the House, so the House Act recognizes this. You know, I think AOC and others recognize it, even though as much as they tweet and post, they know that, you know, we're in a 50 vote Senate, the Democrats are, and that folks like Kyrsten Sinema and Joe Manchin have, you know, they have a very strong say, stronger than they would have if the Democrats had a few more seats. So that's delaying how everything moves. But you asked about the infrastructure bill. Right now, and we have heard the latest news, this could change, is that the House is gonna bring it up. Is it gonna be Monday the 27th? That's the day they're supposed to. It could slip, it could, you know, go into later next week, with the goal being twofold. I'll give, you know, Daniel was talking to a member of leadership this morning, and I mean, Daniel, do you mind me saying that he said that, you know, they're hoping to come to a more of a top line agreement on these numbers that Daniel heard from a member of the Democratic leadership, which perfectly makes sense that this, maybe the 3.5 trillion gets down to something else where, you know, that gives Manchin and Sinema green lights with press's conceived movement. I've also been talking to some folks, and amongst, I will say amongst the moderates, who've been, you know, they've been full square behind this every step of the way. The messaging is really being like, come on, guys, you are holding up President Biden's achievement, his agenda, part of Build Back Better, which was the infrastructure, part of, he also campaigned on working across the aisle, of doing things in a bipartisan way, you know, we joke about how many, you know, infrastructure week was an ongoing thing in the previous administration, but now we actually really have a bill, you know, that can go to the president's desk and money can start being spent almost immediately. And to keep holding it up longer is really, does a disservice. It also changed, it also shows the political dynamics changing. Last month, it was Afghanistan. This week, it's what's going on in Texas and the border there. Who knows what happens two, three weeks from now as the broader reconciliation gets itself worked out. So there's a cautious optimism that they're gonna be able to move forward. Danny, Daniel, do you wanna add anything in from your conversation with leadership this morning? Yeah, I mean, I think I'm a little more confident, I think, in that it will be voted on September 27th and it will be a September, I'm sorry, it will be a successful vote. I was also on a call this morning with Chair, one of the leaders in the Blue Dog Coalition, and she seemed pretty adamant that it's September 27th infrastructure vote or no reconciliation package. So, and Kristen Sinema has alluded to the same thing that it's September 27th was not a suggested date, that that is the deadline to vote on infrastructure. And if we are any, if the reconciliation process is gonna happen, it's gonna, that bill is gonna be cleared off the house floor. Yep, and the progressives have to say, get the message that they are standing in the way from a win from president, but they're also standing in the way from the jobs, from the folks that you all work with, the folks that you employ, and the important work that needs to be done. I, this reminds me, when you talk about the infrastructure week under the past president, I was telling someone else, this reminds me a lot about how the Republicans, I mean, we all remember how they went in on Obamacare, right? That was, they were gonna repeal Obamacare, they couldn't figure out, kept doing it, figuring out one other thing, this, that, you know, it's gonna take something to sort of believe, you know, to Lance's boil, to get that energy down. And I hope you're right, it's gonna be on Monday when we pass this infrastructure bill, get it to the president, have him sign it, and then, you know, put together those progressives, the moderates and others in the Senate, and figure out what part of this Build Back Better initiative that human infrastructure that, you know, they wanna, they can move forward on, and at what price point. And I can tell you the same, and, you know, back to the tax discussion a little bit, because the same member of the Blue Dog Coalition also has, is very reticent to support tax increases right now, considering that she's heard from, you know, from businesses in her district that are struggling, obviously, like all businesses to find workers, supply chain shortages, you know, the economy is not on as solid footing as, you know, that we'd like to think, and that raising taxes in this environment is not, is just gonna, I mean, not good, and then you have the inflation situation as well. So I think there's, there's a lot of pushback, I think, in that, on the tax increases. So that's my next question to you, Chris, is so, I think, so I guess to put a number, I've been asked for a percentage on what I think the infrastructure bill, the bipartisan infrastructure bill will pass. I would say that it's, I'd say 90%, anything can happen. I would say that, I think it will pass September 27th or before September 30th, or else they're gonna have to pass another continuing resolution of the highway bill. And right now they haven't shown any indication of wanting to do that. So I think leadership's planning on bringing it and telling the liberals that they can, you know, to fall in line, basically. Exactly, I'd agree. And then, so as far as the reconciliation bill, now, I think you're a little more, I would say, bullish on that passing in some form. I, for one, you know, but you're closer to it, so I'm gonna be wrong, and I'm gonna put this on a recording here so everyone can tell me at the 80 summit how wrong I was. But I just, I'm not sure that there's a deal to be had on reconciliation. I just think the sides are so far apart. We saw that on the widen has a completely different way on dealing with partnerships than the house does. So it's not just inner caucus in the house or the Senate, it's bicameral as well. And I just don't know how you get together on this, especially as we start getting into next year and the election's coming up. I just don't know how it happens. So that's, I guess, tell me I'm wrong, I guess. Tell me why I'm wrong. I think, I think you're not wrong. I think you're gonna see a smaller bill. I think, you know, and I think Clinton and Mark touched on some stuff. If you look at what they can do, where the pay for is at, changing the corporate rate to 25%, which, you know, is remember back, you know, before TCJA businesses were lobbying for 25, 28% corporate rate, right? So putting it to 25%, reverting to the higher personal tax rate, one that expires anyways on incomes over $400,000. They both Clinton and Mark talked about IRS sort of enhancing this enforcement that can be scored at about 400 billion by giving IRS some money to enhance enforcement and to really, you know, kind of do their job. And there's also a global tax initiative that's churning as well on a 50% minimum tax rate that can be scored. So I think you can have about a $2 trillion, $2 trillion in change that you can play with that doesn't really offend anyone in the Democratic caucus at this point. So I think it's gonna, when people start realizing there's a lot, there's a lot more areas of agreement and the speaker mentioned this as well, then there are disagreement and then we'll have to see what falls off and then what can really be done with that. And it's gonna take, you know, the leader, the speaker and the administration of the president kind of say, what are the most important priorities? What are the ones that really matter to those who put Joe Biden in the White House? And right now it's sort of, we have a laundry list of Democratic priorities. I'm gonna be interested to see this bill sort of becomes Joe Biden's priorities and to, you know, reward those folks and engage those folks that, you know, got him to the White House and, you know, how they do that at a lower price. Well, actually I think it's more likely what is Joe Manchin's bill. Yeah. And so that will be- Joe Manchin's gonna have a big say in that and Kyrsten Sinema, yeah. Yeah, I think that might be the determining factor. So, well, we're out of time here and Chris, thank you. Clinton, thank you. Mark, thank you. What I do wanna say though is that the AD Washington fly-in, we canceled it last year. This year it's October 25th to the 27th here in DC. It's really important that we have a lot of dealers there advocating and pushing back on particularly these tax policies. Hopefully we have an infrastructure bill by then, but there's not just tax, there's energy policies, there's, you know, pro-labor, pro-union policies. There's a lot going on here in DC that really we need to get as many industry members in DC to advocate, meet with their members of Congress as possible. This thing's not moving fast, as we said. This thing is still open to changes. It's open to pushback. And so we really need as many AD members in DC on October 25th to the 27th as possible. For those who haven't been, it's, I think everyone ends up leaving, having a lot of fun. Maybe they need a new pair of shoes because they're walking around the halls of Congress so much, but it does make a difference. We'll get you up to speed on all the issues. You'll hear from top policy, people, leading members of Congress, leading members of the Senate, and we'll schedule all your meetings for you on the Hill. So I just wanna encourage everyone to come. This year, it's more important than in recent years because there are a lot of threats out there to your business, that will increase your cost of doing business and threaten your profitability. So with that, we will circulate all the information as well as a link to the fly-in registration for everyone. Again, thank you, Clinton, Mark. Excellent job outlining these tax provisions. Really appreciate our partnership with Keiko Isom. And Chris, thank you for your insights. And we'll see who's right here over the next couple of months. Thank you. Thanks, everyone. Thank you, everyone, for joining.

Washington, D.C.

Infrastructure Investment and Jobs Act

Reconciliation Bill

government programs

tax changes

Democratic Party divisions

bipartisan infrastructure bill

reconciliation bill uncertainty

AAD Washington fly-in

rapidly changing political landscape