Market Opportunities to Be Affected by Federal Legislation and Regulation

Congress and federal regulators already play a major role in shaping the marketplace for mapping and surveying firms. With uncertainty dominating the national economy, firms and individuals in the geospatial marketplace are facing numerous threats and opportunities.
 

3% Withholding

In 2006, Congress enacted section 511 of Public Law 109-222, which mandated that 3% of payments to contractors and grants to state and local government be withheld. Small businesses have complained they cannot afford to be making interest-free loans to Uncle Sam on 3% of their revenue on government contracts. In some cases, that is more than their profit!

At a September hearing by the IRS, MAPPS executive director John Palatiello urged that all long-term contracts be grandfathered, or exempt, from the 3% withholding. In particular, MAPPS said an indefinite delivery/indefinite quantity (ID/IQ) contract should be grandfathered, and the 3% withholding should not apply to any task order entered into against the ID/IQ contract for architecture, engineering, surveying, and mapping services after the effective date of the IRS regulation. The same policy should apply to other types of contract vehicles, such as the GSA schedule and basic ordering agreements in other industries and professions.

As of the writing of this article, it appears the withholding may be on its way out.  President Obama’s jobs bill included a provision delaying implementation of the rule until January 2013. In October, the House Ways & Means Committee approved a repeal bill, H.R. 674, and action by the full House was in late October. Senate Republicans included repealing the 3% withholding in their jobs package. Minority leader Mitch McConnell (R-KY) introduced S.1726, the Withholding Tax Relief Act of 2011, and Senator Scott Brown (R-MA) introduced an identical measure, S.164. Late October action in the Senate is also expected and will be reported in a future column. 

“Inherently Governmental” Activities

The Office of Federal Procurement Policy (OFPP, within the Office of Management and Budget) published a final rule in September on the definition of “inherently governmental” functions and activities. OFPP decided to keep the definition found in current law, the 1998 Federal Activities Inventory Reform (FAIR) Act, Public Law 105-270, but introduced new categories of functions that are neither inherently governmental or commercial. The new categories—“critical” and “closely associated with the performance of inherently governmental functions”—create a buffer zone of activities that do not meet the definition of inherently governmental, but contracting with the private sector for such activities will be more rigorously questioned. 

The new rules particularly affect surveying and mapping activities in two respects.  First, the “construction of buildings or structures intended to be secure from electronic eavesdropping or other penetration by foreign governments” is defined as closely associated, jeopardizing contracts for surveying, architecture, engineering, mapping, and other design-professional activities, because virtually any federal building could be subject to foreign surveillance. 

Additionally, the rule finds that “professional and technical services … are likely to be commonly found among those considered to be either critical or closely associated with inherently governmental functions and spending in this area has grown disproportionately over the past few years.”  OFPP said it will review “use of support contractors in these areas and consider the need for additional guidance” to limit the use of private contractors.

LightSquared

The House Small Business Committee and the Science Committee held separate oversight hearings on the impact of LightSquared’s technology on GPS. Earlier this summer, the House Appropriations Committee passed an amendment to the Financial Services appropriations bill, which includes funding for the Federal Communications Commission, barring the use of funds for approval of the LightSquared application if GPS interference is not resolved.

Aircraft Tax

President Obama proposed a federal debt and deficit reduction plan that included slower and longer depreciation schedules for business-owned aircraft. While billed as eliminating a tax loophole for corporate executives’ jets, the proposal would also adversely affect small businesses, including aerial imagery and geospatial-data-collection operators. The “President's Plan for Economic Growth and Deficit Reduction” included a proposed $100-per-flight fee for air traffic control services.  This is a double-whammy on the aerial survey community.

National Parcel Data

In 2010, President Obama signed into law a controversial, comprehensive, financial services regulatory reform bill commonly referred to as “Dodd-Frank.” Public Law 111–203 creates a new Bureau of Consumer Financial Protection within the Federal Reserve, and section 1094 provides for the agency to collect the “parcel number that corresponds … [to] real property pledged or proposed to be pledged as collateral” to help track the number and dollar amount of mortgage loans and completed applications.

The legislation amends the Home Mortgage Disclosure Act (HMDA), 12 USC 2802, to collect the “parcel number to permit geocoding” on mortgage transactions. The Federal Reserve Board has not yet begun implementation of the provision and has hinted it may turn over the program to the new bureau. A robust new market for mapping and surveying firms should occur once the bureau places the proper emphasis on parcel information. Recent data and news reports of a double-dip housing foreclosure rate makes parcel data essential to monitoring mortgage activity.

FLAIR Act

Legislation to develop a current, accurate inventory of all real property owned by the U.S. government has been introduced in the House and Senate.  Representatives Ron Kind (D-WI) and Rob Bishop (R-UT) introduced H.R. 1620, the Federal Land Asset Inventory Reform (FLAIR) Act, while S. 1153 was introduced by Senators Orrin Hatch (R-UT) and Mike Lee (R-UT).

An accurate inventory of land owned by the federal government has been recommended by the Government Accountability Office and the National Academy of Sciences. The FLAIR Act implements these recommendations, as well as calls for an inventory of existing inventories to eliminate duplication and save tax dollars. Previous introductions of the FLAIR Act have earned the support of organizations including MAPPS, the American Congress on Surveying and Mapping (ACSM), and the National States Geographic Information Council (NSGIC). 

A recent report by the Inspector General of the Department of the Interior found one million miles of BLM surveys are out of date or inaccurate, causing millions of dollars to be lost in government revenue from royalties and fees from public land activities that could otherwise take place if surveys were current and accurate, providing further evidence of the need for a federal land cadastre.

Meanwhile, Rep. Jeff Denham (R-CA) introduced H.R 1734, the Civilian Property Realignment Act (CPRA), a proposal to dispose and realign federal real property through a commission, similar to that which has governed military bases. When the House Transportation and Infrastructure Committee approved the bill in October, Rep. Randy Hultgren (R-IL) sought to include an accurate, geo-enabled property database of government properties. Reps. Denham and Hultgren are working on the cadastre provision. Similar legislation has been offered in the Senate by Sen. Scott Brown (R-MA), with the support of Sen. Tom Carper (D-DE). This legislation is also favorable to the White House.

Infrastructure Bank

President Obama’s jobs bill, S. 1660, would create an infrastructure bank. There appears to be bipartisan support for this, and it could increase demand for mapping and surveying services in support of upgrading existing, or constructing new, infrastructure in highways, airports, water supply and wastewater treatment, and other public works.

Thomas Jefferson is said to have observed, “eternal vigilance is the price of liberty.” In this column, we will keep readers informed of legislative and governmental action affecting your practice and profession.
John “JB” Byrd is the government affairs manager for John M. Palatiello & Associates, a public affairs, association management, and consulting firm in Reston, VA. He has more than 10 years of public-policy experience. He is also the government affairs manager for MAPPS, the national association for private-sector geospatial firms.

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