Leaders in Corrosion Control Technology Corrosion Prevention Tax Credit NACE Corrosion 2006 Front Page Issues March 13 th , 2006 San Diego, California
Leaders in Corrosion Control Technology
Corrosion Prevention Tax Credit
NACE Corrosion 2006Front Page Issues
March 13th, 2006San Diego, California
Leaders in Corrosion Control Technology
Office of Corrosion Policy and Oversight
Establishment of a National Committee on Corrosion with NRC/National Academies
Industry – Affect Policy to Warrant Investment in Corrosion Control Technologies
Leaders in Corrosion Control Technology
CORROSION:CORROSION:
An Unnecessary Threat to Economic Growth
Leaders in Corrosion Control Technology
Special Program Note
The governmental outreach initiative that we will describe today has only been tested to date with the US Congress.
However, its concepts and processes can serve as a template for similar initiatives in
countries throughout the world.
Leaders in Corrosion Control Technology
Annual Direct Cost of Corrosion in the USA
3.1% of $9 Trillion US GDP (1998) Greater than annual cost of all natural disasters in the USA
(tornadoes, hurricanes, flooding)
Greater than the Agriculture component of the US GDP ($127 billion) Greater than the Mining component of the US GDP ($106 billion)
Leaders in Corrosion Control Technology
Economic Indicators
– Business closures/job losses– Jobs and companies outsource to foreign
countries– Decreased federal tax revenues
Leaders in Corrosion Control Technology
Repair & rehabilitation alone creates waste
– Hampers our ability to compete globally
– Endangers public safety– Contaminates
environment
Waste/costs are avoidable using already fully developed corrosion prevention technologies
– Creates & retains jobs– Increases productivity– Increases federal tax revenues
Our Mantra
Leaders in Corrosion Control Technology
Invest in the Future “Request to Congress”
Corrosion Prevention Tax Credit
– 50% Tax Credit on Corrosion Prevention Strategies Investments
– Tax Credit to all businesses, in all industries based on new initiatives
Leaders in Corrosion Control Technology
Corrosion Prevention Tax Credit
Assuming Businesses Reinvest their Corrosion Savings
Leaders in Corrosion Control Technology
Annual Cost of Corrosion $276,000,000,000
Potential Savings (1/3) 92,000,000,000
Cost to Implement Savings -9,200,000,000
Net Savings $ 82,800,000,000 (30%)
Jobs created in corrosion technology field 128,800
Jobs created/retained due to reinvestment of tax savings 1,288,000
Annual Value of 1,416,800 new Jobs $56,672,000,000
Additional Tax Revenue (@18% Individual Rate) $ 10,200,960,000
Less 50% Federal Tax Credit for Corrosion Prevention -4,600,000,000
Net Tax Revenue Increase $ 5,600,960,000
US Treasury’s Return on Tax Credit 122%
}1,416,800
Asset Owner Model:
US Treasury Model:
Leaders in Corrosion Control Technology
Corrosion Prevention Tax Credit
ROI to the US Treasury almost tripledif the savings are not reinvested
Leaders in Corrosion Control Technology
Annual Cost of Corrosion $276,000,000,000
Potential Savings (1/3) 92,000,000,000
Cost to Implement Savings -9,200,000,000
Net Savings $ 82,800,000,000 (30%)
Jobs created in corrosion technology field 128,800
Jobs created/retained due to reinvestment of tax savings -0-
Annual Value of 128,800 new Corrosion jobs $ 5,152,000,000
Corporate Income (70% of Savings) $ 57,960,000,000
Additional Federal Tax Revenue (34% Corporate Tax Rate) $ 20,633,760,000
Less 50% Federal Tax Credit for Corrosion Prevention -4,600,000,000
Net Tax Revenue Increase $ 16,033,760,000
US Treasury’s Return on Tax Credit 349%
Asset Owner Model:
US Treasury Model:
Leaders in Corrosion Control Technology
Tax Credit Results– Provides incentives for business to consider corrosion
preventive strategies versus “find it and fix it” mentality– Allows U.S. businesses to become more competitive in
world market by reducing wasted costs– Provides a favorable Federal tax revenue impact to the
US Treasury• Net tax revenue of >$5.6 billion• Return on Tax Credit of >120%
Leaders in Corrosion Control Technology
Congress’ Role
Corrosion Prevention Investment Tax Credit Bill
Leaders in Corrosion Control Technology
Corrosion Prevention Tax BillBill Concept
Typical Corrosion Prevention Program Elements
40%25%
35%
Engineering/Maintenance
Materials/Equipment
Application/Implementation
Corrosion Prevention Tax BillBill Concept
A 50% tax credit will be granted for implementation of corrosion prevention strategies listed herein that are applied to new or existing metallic structures or assets that are buried, submerged, concrete-encased or atmospherically exposed that are permanently located in the US. To qualify for the tax credit, the corrosion prevention strategy must be conducted by providers who are headquartered in the USA and all components of the corrosion prevention system must be of US origin.
Protective Coatings Cathodic Protection Inhibitors Material Selection
Description
Application of protective barriers between the metal and its environment
An electro-chemical method to prevent a refined metal from returning to its native state (ore or rust)
Chemicals that are placed in fluids or in contact with a metal to reduce or eliminate its rate of corrosion
Selection of a metal that is compatible with the environment in which it will be installed to reduce its rate of corrosion
System design System design System design System design
Specification and drawings Specification and drawings Specification and drawings Specification and drawings
Design Implementation inspection Implementation inspection Implementation inspection Implementation inspection
Performance monitoring Performance monitoring Performance monitoring Performance monitoring
Paint Anodes Chemical injection equipment Corrosion resistant alloys
Coatings Cable Internal corrosion monitoring equip Insulating gaskets/unions
Materials Linings Power supplies Chemical inhibitors Casing seals and insulators
Primers Test stations
Blast aggregate Thermit welding equipment
Old coating removal Anode boring Piping/vessel tapping Gasket/union installation
Construction Surface preparation Cable/wiring installation Corrosion coupon/probe installation Casing seal/insulator installation
Primer application Power supply installation
Coating/paint/liner application Resurfacing/grading
Leaders in Corrosion Control Technology
Corrosion Prevention Tax Bill
• House Sponsors– Cong. Michael Fitzpatrick (R-8th PA): Lead Sponsor
– Cong. Al Green (D-9h TX): Co-Sponsor
– Endorsed by 2 environmental groups
• Ways and Means (protectors of the Tax Code)
– Wm. Thomas (R-22nd CA): Current Chairman– Jim McCrery (R-4th LA): Possible Incoming Chairman (2007)
• All Representatives (& Senators) will be important– We need 218 votes in the House to passWe need 218 votes in the House to pass – Bill clearly has bipartisan appeal– Shame on anyone who does not support it!
Bipartisan Focus
Leaders in Corrosion Control Technology
Corrosion Prevention Tax Bill
HR 4913
The Section will be called
SEC 45N. CORROSION PREVENTION AND MITIGATION MEASURES,
revision to the 1986 IRS Code
‘‘Corrosion Prevention Act of 2006’’
Leaders in Corrosion Control Technology
Corrosion Prevention Tax BillBill Language
1. Tax credit would be equal to 50 percent of qualified corrosion prevention and mitigation (cpm) expenditures
Leaders in Corrosion Control Technology
Corrosion Prevention Tax BillBill Language
2. The term qualified cpm expenditures applies to amounts paid for design, materials, application and installation
Leaders in Corrosion Control Technology
Corrosion Prevention Tax BillBill Language
3. A cpm system or component is qualified if certification is made by someone properly accredited in the technical area of concern
Leaders in Corrosion Control Technology
Now What
• Referred to Ways and Means Committee•Bill Thomas, Chr – CA (Bakersfield)
Chr – Joint Committee on Taxation• GAO, OMB, Hearing, Mark-up in Committee,
Send to House• Need 218 Votes in House of Representatives• Send to Senate – Re-enter Committee Process• Need 51 Votes and Match with House Bill• President’s Desk
Leaders in Corrosion Control Technology
Corrosion Prevention Tax BillNext Steps
• The Bill requires a Gatekeeper to ensure quality of the Tax Credit implementation
• Determine a means for NACE to provide Tax Bill specific training and/or certification
Leaders in Corrosion Control Technology
Corrosion Prevention Tax BillA Call for NACE Membership Action!
• NACE Congressional “Blitz”–Promote benefits of Bill by local members with selected
congressmen• Letter (e-mail) writing campaign
–Advocate Kiosk
• Personal meetings (individuals)• Meet-n-Greets (groups)• NACE “Legislative Days”
Leaders in Corrosion Control Technology
Corrosion Prevention Tax BillChallenges
1. Distractions in Washington
War on terror/Iraq; Port Security; Lobbying Reform; 2006 elections
2. GY 2006 Budget Deficit
3. Corrosion lacks “sex appeal”
Leaders in Corrosion Control Technology
Corrosion Prevention Tax BillTimeline. . . “A lesson in patience!”
9/0
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03 Summer thru Fall 2003
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Initial NACE Tax Bill Strategy Drafted
Summer 04 thru Spring 05
NACE Tax Bill concept tested on Congress
and refined
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May 05 to March 06
Bill Drafting
Future
Diligent Follow Up
3/0
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Leaders in Corrosion Control Technology
Good Government
Good Citizenship
Rising above the storm:
We must work together
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