By Mike Baach, Chairman – NACE Congressional Affairs Subcommittee (mkb44256@zoominternet.net)

On March 9, 2006, the Corrosion Prevention Act of 2006 (H.R. 4913) was introduced in the US House of Representatives. This bill provides a 50% tax credit on all qualified investments in corrosion prevention systems on privately owned metallic structures in the US. The Bill requires that a corrosion professional designing the corrosion control system is certified by a recognized independent entity, such as NACE International, in area of concern (i.e. chemical treatment, coatings, cathodic protection and/or material selection.) All phases of the corrosion prevention systems, including design, materials and application/installation, over and above the costs of those required by existing regulations will qualify for the tax credit provided that they are determined to do so by the certified corrosion professional.

H.R. 4913 has been referred to the House Ways and Means Committee. It may be sent to a Ways and Means subcommittee for review. The bill will likely be marked up, ’scored’ by the Joint Committee on Taxation, discussed in hearings and become the subject of a Congressional report before it is voted on by the members of the House of Representatives. To pass in the House, the bill will require 218 votes after which is will be sent to the Senate where it will be subjected to the same process as the House conducts. When it receives a majority vote of the 100 Senators, the bill will then be sent to the President for signing.

To ensure the success of this important legislation, NACE International is requesting assistance from our members in a grass-roots campaign to solicit support from your Congressmen. This process is described in detail in other areas of this Public Affairs website section.

NACE International’s Education and Certification Committees are in the process of preparing a guide for corrosion professionals that will outline the process to be followed to properly certify corrosion control systems as being qualified for the tax credit. Training for use of this guide will be made available to corrosion professionals via the internet and through workshops. Further details regarding the guide and associated training programs will be published soon.

NACE International's process to encourage the introduction of this tax bill goes back several years. To ensure the quality of bills that come out of Washington DC, Congress follows a very detailed and rigorous process for all pieces of legislation. Our initiative for supporting the introduction of this bill has been a lesson in patience, as will be the program that we are just now starting to encourage Congress’ support. The following provides an historical perspective of NACE International’s process to get to where we are today with this legislation.

The economic benefits provided by the implementation of comprehensive corrosion prevention strategies have long been recognized by the owners of regulated structures such as pipelines and storage tanks. It has been an accepted premise in these industries that the cost of preventing corrosion is generally one-tenth or less than the cost to replace a structure. However, this 10:1 return on investment is often unknown to many U.S. business segments whose buried, submerged, concrete-encased or atmospherically exposed metallic structures are subject to the ongoing, natural corrosion forces. These businesses will inevitably be faced with the costly burden of replacing their structures that fail due to otherwise preventable corrosion. These added costs make these businesses less competitive in the global economy, resulting in business closures and outsourcing of activities overseas. In the end, jobs and government tax revenues are needlessly lost forever. From NACE International’s perspective, this downward economic spiral is preventable if only businesses become aware of the compelling economic benefits of employing corrosion control technologies.

In an effort to increase the awareness of corrosion, the U.S. Department of Transportation issued a report to Congress titled “Corrosion Costs and Preventive Strategies in the United States” in March 2002, which was cosponsored by NACE International. The report showed that the annual direct costs of corrosion to the U.S. economy were a staggering $276 billion–and one-third of these costs can be saved if public and private owners of the nation’s infrastructure implement already fully developed corrosion prevention strategies and technologies. The NACE Board of Directors soon recognized the need for a group of its concerned members to focus on bringing to the attention of Congress the problems and associated solutions identified in the study. As a result, the board established the Congressional Affairs Subcommittee of the Public Affairs Administrative Committee in early 2003.

Members of the Congressional Affairs Subcommittee made several approaches to encourage Congress to take definitive action to motivate structure owners to implement corrosion control technologies. One such approach was the idea of providing an investment tax credit to entities that implement corrosion prevention strategies.

The Congressional Affairs Subcommittee prepared a financial model to demonstrate that a Corrosion Prevention Investment Tax Credit, which was based on the U.S. Energy Tax Credit of the late 1970s, would provide the needed incentive for private businesses to protect rather than wait for corrosion-induced failure of their structures. This tax credit would also contribute to the financial resources that businesses need to grow and better compete in the complex global market. This could in turn allow businesses to create and retain 1.4 million jobs (almost 130,000 of which would be in the corrosion industry) while improving their safety, insurance, and environmental protection programs. Of great interest to the Congress and its Joint Committee on Taxation, with whom NACE members met, was that for every dollar that is given to businesses by way of this tax credit, between $1.20 and $3.50 would be returned to the U.S. Treasury.

Based on the favorable response from both Republican and Democratic members of Congress, NACE sponsored a “NACE Legislative Day” in Washington D.C. this past May. During this event, the NACE volunteers in attendance were presented with our tax credit message and briefed on how to present our concept to members of Congress. They then met in teams with their local representatives and senators. The teams reported back after their meetings that our tax credit concept received almost universal interest. Several Congressmen also offered that they would be interested in cosponsoring such a bill, with Congressman Michael Fitzpatrick (R-8th PA) indicating that he and his staff were prepared to begin drafting the bill immediately.

Members of the NACE Congressional Affairs Subcommittee and Helena Seelinger, NACE Director of Public Affairs, have since provided documents and attended a number of meetings with members of Congressman Fitzpatrick’s staff. This has resulted in the introduction into the US House of Representatives of the Corrosion Prevention Act of 2006 that, if passed by Congress in its current form, would provide businesses that invest in approved corrosion prevention strategies on both new and existing facilities in the U.S. a 50% tax credit on their investment.

Although the success of this bill is not certain, the positive and significant potential impact on structure owners and corrosion prevention providers makes this an issue worthy of strong support of all associated with NACE. Through future issues of this newsletter and Materials Performance magazine, NACE staff will keep you updated on future developments in this process.