Energy Policy in Development
On Tuesday next week, President Bush is scheduled to deliver his State of the Union address to Congress. Rumor circulating Washington indicate that this speech will devote a considerable amount of attention to the issue of renewable fuels, with some speculating that the administration’s previously reported goal of deriving 30 percent of the nation’s energy from renewable resources by the year 2030 could be a theme. This objective would likely include electricity generated from hydro, wind and geothermal resources in addition to renewable transportation fuels. 

Not to be outdone, Senate Democrats this week also took action on energy policy. Among the various proposals touted different Senators were:  increase the fuel efficiency standard for cars and light trucks to 35 miles per gallon; require 15 percent of electricity be produced from renewable sources by 2020; reduce oil imports by 7 million barrels per day by 2026; and require 25 percent of the nation’s energy supply to come from renewable resources by 2025.

Clearly, renewable energy  and energy security will remain a high priority item for the next two years.

Meanwhile, in the House of Representatives, Rep. Bart Gordon (D-TN), Chairman of the Science and Technology Committee, introduced legislation commissioning research into the alternative fuels and ultra low sulfur diesel. Chairman Gordon recognizes that there are some impediments to retailers offering certain alternative fuels, such as the corrosive properties of E-85 which often require the replacement of storage and dispenser infrastructure. This legislation, HR 547, Advanced Fuels Infrastructure Research and Development Act, would direct research to determine if a mechanism could be developed to improve the compatibility of these alternative fuels with existing infrastructure in order to lower the cost of entry for these products.

In addition, the legislation directs research to develop an affordable and accurate method for testing the sulfur level of diesel fuel at retail and other points throughout the supply chain. If successful, the industry will be better able to monitor sulfur levels on a more frequent basis to ensure continued compliance with federal regulations.

Tobacco Again in the Crosshairs
Two years ago, NACS fought against ill-conceived legislation that would have provided the Food and Drug Administration with regulatory authority over the retail sales of tobacco products. If enacted, this legislation would have been disastrous for retailers. We were successful and the legislation was not enacted.

Sen. Ted Kennedy (D-MA), Chairman of the Health, Education, Labor and Pensions Committee, recently announced his intent to reintroduce legislation providing the FDA with such regulatory authority. He further announced that his committee would begin holding hearings on this issue during the month of February.

Unless this legislation is dramatically different from that sponsored by Sen. Kennedy previously, the threat to the convenience retailing industry will be the same. NACS is meeting with interested legislators in both the House and the Senate to explain our concerns and suggest ways in which Congress can amend the language.

Closing the Indian Loophole in Campaign Finance Law
NACS has long advocated that Members of Congress who wish to clean up the campaign finance laws of the nation have repeatedly missed one of the most egregious loopholes in statute. Through this loophole, Native American tribes can contribute directly from their general treasuries. These contributions, considered “soft” dollars, are illegal from other groups, yet tribes are able to make them in large numbers. In addition, tribes are not subject to the aggregate limits on contributions that apply to individuals. The result is that Indian tribes can take the profits from casinos, smoke shops and other tribal businesses and contribute them directly to federal election campaigns. All other business interests in the United States must form PACs to make these contributions.

In the past, amendments to close this loophole were not even afforded the benefit of an up or down vote in either the House or the Senate. This week, however, Sen. David Vitter (R-LA) was able to offer his amendment to close this loophole. Although the amendment was defeated 56-40, NACS applauds the Senators perseverance on the issue and looks forward to working with him in the future to generate additional support for the effort and eventually level the playing field for all involved in political activism.

Senate, Minimum Wage and Small Business Offsets
The Senate Finance Committee this week passed its “Small Business and Work Opportunity Act of 2007.” This bill will likely be attached to a minimum wage increase in the Senate to offset the Federal minimum wage increase to $7.25. A few provisions that could be helpful to our industry include:

• The Work Opportunity Tax Credit (“WOTC”). WOTC allows employers credits against wages for hiring individuals from one or more of nine targeted groups (such as recipients of public assistance, qualified veterans on assistance, and “high risk youth”). The proposal extends WOTC for five years (for qualified individuals who begin work for an employer after December 31, 2007 and before January 1, 2013). In addition, eligibility would be expanded to post-9/11 disabled veterans, designated community residents (formerly “high risk youth”) up to age 40, and disabled workers referred by Employment Networks. 
  
  
• Fifteen-Year Straight-Line Cost Recovery for Qualified Retail Improvement Property. The proposal extends the 15-year recovery period for qualified leasehold improvements to improvements made by retailers who own their buildings. For purposes of the provision, qualified retail improvement property does not include any improvement for which expenditure is attributable to the enlargement of the building, any elevator or escalator, or the internal structural framework of the building. For purposes of this proposal, retail establishments that qualify for the 15-year recovery period include those with a physical store front open to the general public in order to sell tangible personal property and/or services. The proposal applies to property placed in service after the date of enactment. The proposal expires on March 31, 2008.
  
  
• Small Business Expensing. In lieu of depreciation, small business taxpayers may elect to deduct (or expense) the cost of qualified assets (or property) they purchase in the year when the assets are placed in service, within certain limits. Under the Jobs and Growth Tax Relief Reconciliation Act of 2003, the amount that small businesses may expense under section 179 was increased from $25,000 to $100,000 for tax years beginning after 2002 through the end of 2005 and indexed for inflation. The American Jobs Creation Act of 2004 extended a slightly expanded version of small business expensing (with higher phase-out levels for small business) through 2007. The Tax Increase Prevention and Reconciliation Act of 2005 extended that enhanced provision through the end of 2009. In 2007, small business taxpayers are allowed to expense $112,000 (indexed for inflation), and the phase-out threshold is $450,000 (indexed for inflation). The proposal extends the present-law rules for one year, through the end of 2010. The proposal is effective for taxable yeas beginning after December 31, 2009.
  
  
• Capital Gain Not Treated as Passive Investment Income. An S corporation is subject to corporate-level tax, at the highest corporate tax rate, on its excessive net passive income if the corporation has (1) accumulated earnings and profits at the close of the taxable year and (2) gross receipts more than 25 percent of which are passive investment income. In addition, an S corporation election is terminated whenever the S corporation has accumulated earnings and profits at the close of each of three consecutive taxable years and has gross receipts for each of those years more than 25 percent of which are passive investment income. The proposal eliminates gains from sales or exchanges of stock or securities as an item of passive investment income. The proposal applies to taxable years beginning after the date of enactment.

As you can see, things are starting to move quickly in Washington. Look for more updates next Friday. Have a great weekend!

John Eichberger
Vice President, Government Relations