ABC Releases Construction Backlog Indicator

From the Associated Buildings and Contractors website:

ABC June 22 released its inaugural Construction Backlog Indicator (CBI), a forward-looking measurement reflecting the amount of work to be performed by contractors in the months ahead. A high backlog value a large amount of work is due to begin in the near term, leading to a positive economic impact, and a low backlog value indicates fewer projects are under contract, leading to a more uncertain economic impact. 'Commercial and industrial construction is a major part of the American economy. We have developed this new, innovative measurement not only to track the level of commercial and industrial construction activity, but also to look into the future for signs of recovery,' said ABC Chief Economist Anirban Basu. 'Significantly, we are able to track backlog by region as well as by industry sector and company revenue to paint a complete picture of this critical economic segment on an ongoing basis.' The overall CBI in the nation’s nonresidential construction industry, which includes industrial, infrastructure, and commercial/institutional segments, rebounded in May to 6.3 months, up from 6.2 months in April, but is still down by roughly 0.8 months since November 2008, when ABC began collecting data. During the past seven months, nonresidential backlog is down by an average of 24 days. To read the view the full report, including charts and graphs, and to learn about the methodology, visit www.abc.org/backlog. To sign up to receive the Construction Backlog Indicator every two months, visit www.abc.org/subscriptions.

Where is all of Obama’s stimulus money going?

On February 17, 2009, President Obama signed the American Recovery and Reinvestment Act (ARRA). The Act explicitly lists the following five purposes of the Act:

• To preserve and create jobs and promote economic recovery.
• To assist those most impacted by the recession.
• To provide investments needed to increase economic efficiency by spurring technological advances in science and health.
• To invest in transportation, environmental protection, and other infrastructure that will provide long-term economic benefits.
• To stabilize State and local government budgets, in order to minimize and avoid reductions in essential services and counterproductive state and local tax increases.

Federal, state, county, and city resources are now dedicated to ARRA opportunities (all of the websites noted below use the term "opportunities" to describe projects funded by ARRA).

Federal business opportunities are available at FBO.gov, which provides extensive search options to find Federal contracts. A simple search for California opportunities as of today resulted in 160 projects that many of our clients may be interested in bidding on. Opportunities that are funded by ARRA are noted as such.

California's governor and the city of San Francisco have created dedicated agencies and websites that provide information about the impact of ARRA. Contra Costa County and local cities have also added links and information to their existing websites about ARRA opportunities.

Governor Schwarzenegger has created the California Recovery Task Force, which will be tracking ARRA funds. The Task Force's website provides information so that Californians can access the stimulus money. The site includes information on how to bid for contracts, apply for grants, and get some tax relief . We highly recommend that you check out this site.

San Francisco's Office of Economic and Workforce Development provides information for small businesses owners. Its website is jam-packed with business assistance information such as tax credits and incentives, construction development in the pipeline, neighborhood revitalization projects, and workforce development. The site has links to other city resources that may be helpful to you and your business.

Contra Costa County has expanded its website to provide information about ARRA. For the most part, the site encourages you to search for local opportunities at FedBizOpps.gov and Grants.gov. However, we found that individual cities in Contra Costa County, such as Walnut Creek, are predominately displaying RFPs for ARRA projects on their homepages, rather than making you go search for them.

If you become aware of other resources that provide local ARRA opportunities, please email them to lsilva@ty-llp.com and we will get them posted for all of our readers to explore.

AFRs for August 2009

Applicable Federal Rates (AFRs) for August are...

	Annual	Semiannual	Quarterly	Monthly
Short-term	0.83%	0.83%	0.83%	0.83%
Mid-term	2.80%	2.24%	2.23%	2.23%
Long-term	4.26%	4.22%	4.20%	4.18%

Builder confidence on the rise?

BusinessWeek reports that "U.S. homebuilders seem to be coming out of hibernation as the gloom over the housing market begins to lift. " A National Association of Home Builders/Wells Fargo Housing Market Index reported a slight increase in builder confidence, as the index measuring builder confidence in the current market for newly built single-family homes rose 3 points. Another index measuring the traffic of prospective buyers rose 1 point.

This level of confidence is the highest it's been since September 2008, so perhaps things really are starting to turn around. We can certainly hope.

Will Your Company Be Eligible For Federal Contracts?

If your construction company is planning on tapping into that vast pot of stimulus money offered by the federal government you need to be aware of the newest obstacle which you will need to navigate in order to be eligible for federal contracts. See below: "Department of Homeland Security (DHS) Secretary Janet Napolitano today strengthened employment eligibility verification by announcing the Administration’s support for a regulation that will award federal contracts only to employers who use E-Verify to check employee work authorization. The declaration came as Secretary Napolitano announced the Department's intention to rescind the Social Security No-Match Rule, which has never been implemented and has been blocked by court order, in favor of the more modern and effective E-Verify system....." After a careful review, the Administration will push ahead with full implementation of the rule, which will apply to federal solicitations and contract awards Government-wide starting on September 8, 2009. If you haven't already signed up for the E-Verify system and you want to be eligible for federal contracts you should consider signing up now. Entire article can be found at http://www.dhs.gov/ynews/releases/pr_1247063976814.shtm More information about E-Verify can be found at www.uscis.gov/everify

7 Tips When Starting a Business

Last week, the IRS published the top seven things it wants you to know if you plan to start a new business:

• First, decide what type of business entity you are going to establish.
• Identify which taxes you must pay and how you pay them. The four general types of business taxes are income tax, self-employment tax, employment tax and excise tax.
• Obtain an Employer Identification Number (EIN).
• Implement a good recordkeeping system.
• Determine your company's tax year end.
• Determine your accounting method for calculating income and expenses. The most commonly used accounting methods are the cash method and an accrual method.
• Visit the Business section of IRS.gov for resources to assist entrepreneurs with starting and operating a new business.

The page includes links related to starting a business, operating a business, and closing a business. As unexciting as these issues seem, it's a good idea to take care of them. When it comes to taxes, an ounce of prevention is worth a pound of cure - and then some.

We Made it Through Our First Peer Review!

Yesterday was the last day of our peer review process and we are very pleased with our passing results. Since we are a newer firm and this was our first peer review, we were uncertain of what to expect. By subjecting ourselves to the peer review process we can ensure that we are consistently providing services in compliance with the latest standards and requirements of our industry. The AICPA defines the program as follows: "The Peer Review Program is dedicated to continually enhancing the quality of accounting, auditing and attestation services performed by AICPA member in public practice. To protect public interest, the AICPA's Peer Review Program is driven by adherence to the highest possible professional standards and understanding of changing business and regulatory environments." As soon as we recieve our peer review report from the independent reviewer we will post a copy on our website.

Important issues when selling a business

CPA and Tax Attorney Peter Pappas suggests 10 important issues to consider when selling you business:

1. Asset or Stock Sale
2. Employee Retention
3. Vendor Relationships
4. Non-Compete Agreement
5. Indemnification and Hold Harmless Clauses
6. Consulting Agreement
7. Allocation of Sales Price
8. Unpaid States Sales Taxes
9. Owner Versus Third Party Financing
10. Intangible Assets

He further lists the basic legal documents required in a typical asset sale transaction:

• Asset Sale and Purchase Agreement
• Bill of Sale
• Promissory Note (if partly financed by seller)
• Non-Competition Agreement
• Employment/Consultant Agreement
• Security Agreement
• Lease assignment or sublet agreement

In closing, he advises: "Finally, you should never try to sell your business or buy a business without first consulting with an experienced business transaction lawyer."

How healthy are your finances?

As the big banks undergo stress tests, we are reminded that our personal finances could always use a check-up. If you're interested in a short pop quiz, CNNMoney provides a simple online stress test for your personal finances.

California issues IOUs

California taxpayers who are waiting on refunds will continue to wait. The Franchise Tax Board has announced: "all requests for direct deposit of a State income or franchise tax refund will be issued as a paper registered warrant." If you receive a registered warrant in lieu of payment, the State Treasurer will not redeem it for cash until it matures on October 2, 2009. However, some banks will accept registered warrants as cash, so you may be able to deposit it into a bank account (and let the bank deal with redeeming the warrant in October). FAQs about registered warrants are available on the State Controller's website.

IRS Construction Industry Guide

The IRS recently published a current version of their Construction Industry Audit Technique Guide to the IRS website. Here is a link to view the guide. www.irs.gov/businesses/small/industries/article/0,,id=208324,00.html The guide is "intended for examiners conducting audits in the construction industry and as information for taxpayers and practitioners associated with the construction industry". If you are curious about the processes the IRS uses when auditing a construction company or are a construction company faced with an audit the guide may be helpful to you. The guide's effective date is May 2009 and includes all current law related to Internal Revenue Code Section 460, Special Rules for Long-Term Contracts. Happy reading.