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STATEMENT: House Committee on Ways and Means Hearing: Moving America Forward: With a Focus on Economic Growth

National Roofing Contractors Association

Statement for the Record

House Committee on Ways and Means Hearing:

Moving America Forward: With a Focus on Economic Growth

Jan. 13, 2015

The National Roofing Contractors Association (NRCA) would like to thank Chairman Paul Ryan (R-Wis.) for holding this hearing on the important topic of economic growth. NRCA is grateful for the opportunity to share the thoughts of entrepreneurs in the roofing industry on how changes to the tax code can help create jobs and grow the economy. NRCA looks forward to working with Chairman Ryan and other members of the Committee to advance pro-growth tax policies during the 114th Congress.

Established in 1886, NRCA is one of the nation's oldest trade associations and the voice of professional roofing contractors worldwide. NRCA represents approximately 3,500 members located in all 50 states. Its members are small, privately held companies, who on average employ 45 people in peak season and generate sales of about $4.5 million per year.

Although there are other government policies that hamper economic growth in the roofing industry, this statement focuses solely on the major issue of concern under the jurisdiction of the Ways and Means Committee. NRCA supports reform efforts the remove obstacles in the tax code that hinder economic growth. Any tax reform legislation considered by Congress must be comprehensive and contain policies that enable entrepreneurs to invest in and grow their business, which will, in turn, create more jobs.

One of NRCA's top priorities has been to reform the depreciation schedule for commercial roof systems. During the 113th Congress, Congressmen Tom Reed (R-N.Y.) and Bill Pascrell (D-N.J.) introduced bipartisan legislation (H.R. 4740) to reform the depreciation schedule for commercial roof systems. The legislation simplifies taxes for small businesses of all types by reducing the depreciation schedule for commercial roof systems from 39 years to 20 years. Reforming this section of the tax code will facilitate the creation of an estimated 40,000 new jobs in the construction industry among roofing contractors and manufacturers.

As Congress looks to enact policies that help put more people back to work, this legislation is critical to the roofing industry, which is slowly coming back to life many years after the Great Recession. The unemployment rate in the construction industry is still well above the national average at 8.3 percent. By enacting tax policies that lead to the creation of thousands of good- paying jobs, we can help strengthen the nation's economy and help working families.

Depreciation reform for commercial roof systems is crucial because between 1981 and 1993 the depreciation schedule for nonresidential property was increased from 15 years to 39 years. A study by Ducker Worldwide, a leading industrial research firm, determined the average life expectancy of a commercial roof system to be 17 years. The current mismatch between the economic life of the asset and the 39-year depreciation schedule is contradictory to efforts to provide equity in the tax code and must be addressed.

The large disparity between the current 39-year depreciation schedule and the actual 17-year average life span of a commercial roof system is a major obstacle for building owners to replace failing roofs. This slows economic activity because an owner who replaces a roof before the 39 years have elapsed must continue to depreciate that roof for tax purposes even though it no longer exists. A Treasury Department Report to Congress from 2000 titled Depreciation Recovery Periods and Methods corroborated this problem by finding " ...'cascading' effect, where several roofs are being depreciated at the same time, even though only one is physically present." Given this situation, many building owners choose to do only piecemeal repairs, most often with older technology, rather than replace a failing roof in its entirety.

Commercial roof system depreciation reform that would lead to the creation of an estimated 40,000 jobs annually enjoys the support of a broad array of constituencies, including business, manufacturer, labor union and energy efficiency organizations. This is not a special tax incentive but the removal of an obstacle in the tax code that restricts economic growth within commercial buildings.

NRCA looks forward to working with the Committee and Congress towards enacting depreciation and tax reform that will generate greater economic growth. If you have questions or need more information regarding this matter, please contact Duane Musser or Andrew Felz at (202) 546-7584

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