Corrosion Prevention Tax Credit

Leaders in Corrosion Control Technology

Corrosion Prevention Tax Credit

NACE Corrosion 2006Front Page Issues

March 13th, 2006San Diego, California


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


CORROSION:CORROSION:

An Unnecessary Threat to Economic Growth


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.


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)


Economic Indicators

– Business closures/job losses– Jobs and companies outsource to foreign

countries– Decreased federal tax revenues


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


Invest in the Future “Request to Congress”


– 50% Tax Credit on Corrosion Prevention Strategies Investments

– Tax Credit to all businesses, in all industries based on new initiatives



Assuming Businesses Reinvest their Corrosion Savings


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:



ROI to the US Treasury almost tripledif the savings are not reinvested


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:


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%


Congress’ Role

Corrosion Prevention Investment Tax Credit Bill


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


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


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’’


Corrosion Prevention Tax BillBill Language

1. Tax credit would be equal to 50 percent of qualified corrosion prevention and mitigation (cpm) expenditures



2. The term qualified cpm expenditures applies to amounts paid for design, materials, application and installation



3. A cpm system or component is qualified if certification is made by someone properly accredited in the technical area of concern


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


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


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”


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”


Corrosion Prevention Tax BillTimeline. . . “A lesson in patience!”

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NACE Tax Bill concept tested on Congress

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Future

Diligent Follow Up

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Good Government

Good Citizenship

Rising above the storm:

We must work together

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Documents

Corrosion Prevention Tax Credit