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Utility & Transportation
JRCRUZ Corp.
Completes Second Decade In Construction
december 2020
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tin bra e l e 5 & C E 82 g O n ti - IU ap Ad Years 100
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The employees of JRCRUZ Corp. congratulate Evarett and his family on 20 Years in Construction
MAKING OUR 33 W. Main Street olmde NJ 07733
AGAIN (732) 290-0700 TM
www.Jrcruz.com
C&HAGENCY
JRCRUZ CORP. CELEBRATING 20 YEARS IN CONSTRUCTION! -andtheENTIRE CRUZ FAMILY FOR 70 YEARS OF SERVICE IN NEW JERSEY CONSTRUCTION! WE ARE HONORED TO BE AFFILIATED WITH YOUR FAMILY AND FINE COMPANIES FOR SO MANY WONDERFUL YEARS.
BEST WISHES FOR CONTINUED SUCCESS! YOUR FRIENDS AT
C&H AGENCY
Exclusively Serving Contractors' Insurance & Bonding Needs for Over 50 Years 783 North Riverview Drive· Totowa, New Jersey 07512 P.O. Box 324 • Totowa, New Jersey 07511 PHONE 973.890.0900 • FAX 973.890.9038 • E-MAIL: info@chagency.com
www.chagency.com
president’s message
From the desk of: dave smith
A
s we wrap up 2020, it is hard to grasp the events that have taken place around the world in a single year. We endured a pandemic that has left us facing an uncertain future. We watched as extreme forest fires ravaged California and Australia. Sanctions were placed, removed, and reinstated against countries we have become overly dependent upon, and we saw the stock market soar, crash, and soar again. We witnessed an unprecedented Presidential election, and control of the U.S. Senate hangs in the balance. We weathered twenty-nine named storms across our country. Topping all this, we face record levels of political divisiveness. No state or country was fully prepared to face the challenges of this pandemic, and New Jersey was no exeception. However, the construction industry demonstrated exceptional resilence and versatility, achieving many milestones despite the global crisis. The total amount of tolls collected by the NJ Turnpike increased and will continue to increase annually gauging by the Consumer Price Index, which benefits the inducstry and will preserve higher spending levels for years to come. Decreasing gas consumption during the pandemic triggered a “true-up” provision in existing legislation, which increased the gas tax to preserve the TTF’s level of funding; this major victory was achieved as a result of past UTCA efforts. This year, we have also seen meaningful growth in the State’s Infrastructure Bank funding for clean water programs and local aid spending, and we successfully advocated for an additional $600 million increase in bonding capacity for the TTF program, supporting a $1.3 billion NJDOT Capital Construction Program for State FY 2021. The Murphy Administration deemed our industry not only essential but life sustaining, recognizing the critical services we provide, which allowed our companies to continue that important work and survive when many businesses did not.
2 Utility & Transportation Contractor | december| 2020
With such great accomplishments, it seems hard to believe that we are left with program challenges. Many industries, professional services, and supply chain companies did not continue to work during the first shut down. State agencies that lacked experienced personnel were further depleted by the pandemic, which caused a backlog of project advertising and awards. The need for an increased volume of projects has never been more critical. The Murphy Admisinstration and various agencies’ leadership have doubled-down on their commitment to getting work out. They have limited tools to accomplish this difficult task, but the UTCA leadership, Bob Briant, and his staff will work tirelessly with them to achieve our common goals in any way needed. As I wrap up the last President’s Message for 2020, I want to remind you all that despite our differences and the challenges that we face, the United States of America is still the greatest nation in the world. Our freedom was not and is not free. What will we do with it? I hope you have a wonderful holiday and enjoy your families, and please remember to support the charities that are most in need at this time of year.
Best regards,
Dave Smith
CONTENTS
Cover story 48 jrcruz corp. completes second decade of construction
DEPARTMENTS 2 7 13 23 31 37 71
President’s Message
48
FEATURES 58 adapting and celebrating 100 years - iuoe 825
Financial Overview Legal Dig Accounting Corner
NEWS
Legislative News
81 level-funded medical programs
labor relations
85 adult-use cannabis guide for employers
the pipeline
93 nj tax savings for construction projects
COVER PHOTO: JRCRUZ completes a 10-foot-diameter Microtunnel at Hudson yards on West 30th Street in Manhattan Published Bimonthly During 2020
1670 Route 34 North Farmingdale, NJ 07727 PO Box 728 Allenwood, NJ 08720 PH: (732) 292-4300 FAX: (732) 292-4310 www.utcanj.org
Publisher: Robert A. Briant, Jr. Editor: Helene Nasdeo Editorial Contributors: Dan Kennedy, Zoe Baldwin, Dan Neville Advertising Manager: Helene Nasdeo Production/Graphics: Lauren Hagan, Helene Nasdeo Circulation: Helene Nasdeo Printed By: American Plus Printers $I¿OLDWLRQV ARTBA, Clean Water Construction Coalition, Water Infrastructure Network UTILITY AND TRANSPORTATION CONTRACTOR (ISSN 0192-4843) is published six times a year by the Utility and Transportation Contractors Association of New Jersey, 1670 Highway 34 North, )DUPLQJGDOH 1- 3HULRGLFDO SRVWDJH SDLG DW )DUPLQJGDOH 1- DQG DGGLWLRQDO PDLOLQJ RႈFHV POSTMASTER: Send address changes to UTILITY AND TRANSPORTATION CONTRACTOR, PO Box 728, Allenwood, NJ 08720.
Utility & Transportation Contractor | december| 2020 3
Congratulations to JRCRUZCorp
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VOLLERS CONGRATULATES JRCRUZ CORP. Celebrating 20 years in construction and THE CRUZ FAMILY - for 70 years of service in NJ Construction IUOE 825
Celebrating 100 years
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VOLLERS FOUNDING PRINCIPALS -VISION, INTEGRITY, AND SENSE OF URGENCY
Does your 401 (k) plan cost too much in time and expense? Announcing our new
UTCA Member 401 (k) Program EXCLUSIVE FOR UTCA MEMBERS AND THEIR EMPLOYEES
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EMPOWER
RETIREMENT
Elizabeth D'Aleo Director offamily Offices
Kevin Ellman CFP and CEO
Michael Csedrik Director of Retirement Plans
Contact Kevin Ellman CFP Tel: 201.632.2022 Email: kellman@wpsllc.net Wealth Preservation Solutions, LLC. 45 Eisenhower Drive, Suite 550 Paramus, New Jersey 07652 wealthpreservationsolutions.com Securities offered through Kestra Investment Services, LLC (Kestra IS), member Fl NRA/SI PC Investment Advisory Services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. Wealth Preservation Solutions, LLC is not affiliated with Kestra IS or Kestra AS. Kestra IS and Kestra AS are not affiliated with Wealth Preservation Solutions, LLC or any other entity listed.
By: Kevin ellman, wealth preservation solutions
T
he number one question on everyone’s mind is: “Now that the election appears to be settled, what do I do with my money?”
We are reasonably optimistic about 2021. Why?
my will start to heal rapidly. The economy has been in a “medically induced coma,” and it will take a medical solution to help the patient recover. Some businesses and sectors have been permanently altered, while others will be newly invigorated. The economy will heal.
DIVIDED GOVERNMENT
EASY MONEY
As of Thanksgiving, it looks like we will have a Democratic President and House with a Republican Senate. Historically, this has been an excellent climate for stocks. Most investors prefer certainty. Once we know what the political backdrop will be, it will be easier to make investment and business plans accordingly. Generally speaking, in the past, once an election was settled, markets often rose. A good deal of the time, markets rise in a divided government climate.
You may have heard the expression “don’t fight the Fed.” The Federal Reserve Bank claims that it is committed to providing monetary stimulus as long as it takes for the economy to rebuild. Further, they are willing to tolerate more inflation than they have in the recent past. This stimulus is a powerful force that will encourage and support economic growth.
COMPROMISE ON TAXES AND REGULATION With a divided government, it will be challenging for either party to enact their most extreme policies. Instead, it will be necessary for both parties to compromise to get anything done. While it is likely that taxes may go up and regulations may increase, the rise may be less than initially feared. VACCINE Unfortunately, COVID-19 is still on the rise. We may have more shutdowns before the vaccine arrives, but we are now optimistic that a vaccine is on the way sometime in 2021. No doubt there will be challenges involved in manufacturing and distributing a vaccine widely. Once the vaccination process begins, we believe the econo-
Financial overview
what now?
ESTATE TAXES WILL GO UP One part of the tax code that will likely increase is the estate tax. Without new enabling legislation, the current Federal estate tax exemption of $11,580,000 per person is scheduled to expire on December 31, 2025. If this happens, the exemption will decrease to approximately $5,000,000 per person (adjusted for inflation). When and if this change takes place, it will dramatically expand the number of families subject to estate taxes. Now would be an excellent time to review your estate plan to determine if and how it might be impacted by these potential changes. Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. Wealth Preservation Solutions, LLC is not affiliated with Kestra IS or Kestra AS.
Utility & Transportation Contractor | december| 2020 7
Congratulations JHCruz Corp celebrating 20 years in NJ Construction Cruz Family celebrating 70 years in NJ Construction IUOE 825 on its 100th Anniversary
GU/DERAIL
FENCING SIGNS SIGN FOUNDATIONS
SPECIAL TY METAL FABRICATION ROBOTIC WELDING
A/SC A WS
1512 Mays Landing Road Hammonton, New Jersey 08037 Phone: 609-561-3800 EXT.32 Fax: 609-567-8349 www.ruberton.com Email: info@ruberton.com
Congratulations to: JR CRUZ CORPORATION
Celebrating 20 Years in Construction
THE CRUZ FAMILY
Celebrating 70 Years in NJ Construction
INTERNATIONAL UNION OF OPERATING ENGINEERS LOCAL825 Celebrating 100 Years of Service Whenever you drive on a highway, or ride a train, or fly into most airports in New Jersey, you probably have benefitted from Anselmi & DeCicco's expertise.
Unusual Challenges : Unique Solutions 197 7 Spr1119fleld Avenue Maplewood NI 07040
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973 767 3'l59
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"An Equa/Opportun,tyEmployer"
FLORIO
PERRUCCI
I
I
STEINHARDT CAPPELLI TIPTON & TAYLOR LLC
Legal Strategy • Government Advocacy • Business Solutions
IUOE 825 Celebrating 100 Years JRCRUZ Corp. Celebrating 20 Years in Construction
The Cruz Family Celebrating 70 Years in Construction
Construction & Public Contracting Law Louis Cappelli, Jr., Esq. (856) 853-5530 lcappelli@floriolaw.com
Cherry I I ill, New Jersey Berhlehem, Penn:-ykania
Brian R. Tipton, Esq. (908) 454-8300 btipton@floriolaw.com
Phillipsburg, NevY Jersey Harri:-bur,g, Pennsykania
www.floriolaw.com
Adrienne L. Isacoff, Esq. (201) 843-5858 aisacoff@floriolaw.com
New Prcwidence, New Jersey New York, New York
owner-controlled or contractor-controlled insurance programs (ocip/ccip): let's wrap it up
O
btaining adequate insurance for your construction project can be overwhelming. You might negotiate a commercial construction contract, provide it to your insurance broker, and advise that you need coverage. A plan is underwritten, you pay your premiums, and you obtain a policy. But how do you know that a potential claim will actually be covered?
after, commonly known as the extended reporting period or tail. OCIP and CCIP Coverage
Historically, every entity involved in a construction project obtained its own insurance. Once a claim was made, the insurer would make an initial assessment as to the apportionment of fault. If a claim could not be resolved, litigation would ensue, and settlement could incur mounting defense costs, expert fees, and treble damage statutes. To combat these issues, insurers developed owner-controlled insurance programs and contractor-controlled insurance programs.
To negotiate a construction contract and obtain adequate insurance coverage, consider the needs of your project. Ultimately, insurance policies can be broken down into (1) a standard policy that defines what is covered, (2) the policy exclusions which define what is not covered, and (3) the policy endorsements that modify the language to afford coverage where it would have otherwise been excluded. Of course, these can be negotiated with the insurer, and coverage can likely be extended to parties who would otherwise be typically excluded for an increased cost. Ask the insurer about these exclusions and endorsements, noting how it typically defines an insured and what persons and entities are typically excluded.
What is an OCIP or CCIP?
Who is afforded coverage?
To minimize litigation costs, many insurers recently started offering controlled insurance programs. There are two types of controlled insurance programs: owner-controlled insurance programs (OCIPs) and contractor-controlled insurance programs (CCIPs). Also known as wrap-up policies, OCIPs and CCIPs are singular insurance policies that provide coverage for most parties involved on a specific project. OCIPs and CCIPs use a policy administrator and quality control entity as a means of preempting and mitigating claims. Further, coverage is provided on an annual basis and does not automatically renew. The policy is typically renewed so that it is in effect when the project becomes substantially complete and for a number of years there-
Typically, an OCIP or CCIP will provide coverage for the owner, general contractor, and all enrolled subcontractors. However, coverage is typically excluded for (1) contractors, subcontractors, and other individuals working in hazardous materials removal and/or transport companies; (2) vendors, suppliers, fabricators, material dealers, drivers, or others whose function is solely to supply materials, personnel parts, or equipment to and from the construction site and who do not provide or subcontract labor; (3) vendors, suppliers, off-site fabricators, material dealers, drivers, truckers, and crane owners and operators whose onsite employees are engaged solely in the delivery, loading, hauling, and/ or unloading of material to or from the site; and (4) contractors and subcontractors not working at the project site and others who occasionally work or visit the site. Ask your insurer about its definition of coverage to ensure adequate coverage for all persons engaged on your project.
Legal Dig
By: kerry cahill, esq., florio, perrucci, steinhardt, cappelli, Tipton & Taylor LLC
What type of coverage is typically afforded and excluded? A standard OCIP or CCIP policy only provides general liability coverage for bodily injury and tangible property damage. Consequently, most OCIPs and CCIPs do not provide builders risk or course of construction insurance, workers’ compensation insurance, project professional liability insurance, design professional liability insurance, employer’s liability insurance, employment practices liability insurance, off-site general liability, automo-
Utility & Transportation Contractor | december| 2020 13
Legal Dig
bile insurance (typically necessary for subcontractors), or excess coverage. Additionally, coverage typically excludes natural perils, pollution, hazardous materials and their transport, and terrorism. When negotiating a construction contract, particularly with an OCIP or CCIP, identify which parties are responsible for obtaining each type of coverage and the payment obligations of each party for such coverage. Any insurance coverage outside the OCIP should supplement it, particularly to ensure that there are no coverage gaps and to provide excess coverage if the wrapup limits are exhausted. Additionally, the contract documents should identify whether each party’s general liability policy will be secondary or in excess to that of the OCIP or CCIP. Joint Defense Costs and Coverage In the event of a claim, insureds under the policy often will be jointly defended by the attorney selected by the OCIP insurer. It is important to ask the insurer what the defense limitations are and what happens in the instance of a conflict between two of the policies’ insureds. If a conflict arises, the parties must understand whether the insureds are obligated to obtain their own counsel or whether separate counsel will be appointed by the OCIP or CCIP insurer.
14 Utility & Transportation Contractor | december| 2020
Public Bidding Considerations Most policy administrators offer sample language for insertion into a contract or bid. This language should explain the parties’ coverage, limits, and deductible obligations under the OCIP. Bidders should be asked to provide an insurance credit reflecting the money the contractor will save on their operational policies as an offset in their bid. Additionally, the bid request language must address the wrap-up program, including the enrollment process, how the policy will be administered, who is responsible for the deductible, and any other relevant provisions. Finally, the bid should identify what insurance obligations there are outside the OCIP or CCIP. Conclusion It is important to have a comprehensive understanding of your policy and its coverage so you can do your due diligence to find the right coverage for your project. You may want to contact counsel as well as your insurance broker before negotiating a contract that requires OCIP or CCIP coverage.
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Congratulations to
JRCRUZ Corp The Cruz Family and
Operating Engineers Local 825 -
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An Equal Opportunity Employer
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BUILDING THE FUTURE WITH PRIDE Ferreira is a first-rate company built on a foundation of integrity. We have experience and expertise in all facets of transportation infrastructure, utility/power, marine construction and construction management. We are a nationally recognized leader in the construction industry due to our proven track record of successful project execution, effective planning and emphasis on safety.
CONGRATULATIONS TO JRCRUZ CORP. FOR 20 YEARS IN CONSTRUCTION; CRUZ FAMILY FOR 70 YEARS IN NJ CONSTRUC TION AND IUOE 825 FOR CELEBRATING 100 YEARS FERREIRACONSTRUCTION.COM I A CERTIFIED MBE COMPANY BUILT ON A FOUNDATION OF INTEGRITY NEW
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uilding relationships with contractors, developers, decision-makers, and project owners is what we do to build things right-on time, on budget, no surprises, no problems. LIUNA delivers a
diverse, skilled and productive workforce, as well as the professional and industry support to move your projects and business forward. Working together works best and we practice this every day. That's the power of partnership. That's LIUNA.
LABORERS' INTERNATIONAL UNION OF NORTH AMERICA EASTERN REGIONAL OFFICE
Raymond M. Pocino, Vice President and Regional Manager
LIUNA, Eastern Region I 104 Interchange Plaza, 3rd Floor I Monroe Township, Nf 08831
Congratulations to
JRCRUZ Core The Cruz Family IUOE Local 825
KMETZ INC.
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LAWSON RESCINIO SCHIBELL
Sal Schibell, CPA, CFP®, MBA, MS Taxation - Tax Partner Lawson, Rescinio, Schibell & Associates, P.C. P: 732-539-7328 E: SalSchibell@lrscpa.com W: www.lrscpa.com
good news: irs approves salt work-around for new jersey and other states By: salvatore schibell, lawson, rescinio, schibell & assoc. P.C. 1. The Application for Forgiveness:
At the time of writing, media outlets have declared Joseph Biden the president-elect, although President Trump is contesting several states’ results. The congressional makeup has changed somewhat with Republicans gaining seats in the House, although Democrats still retain a majority, and Senate control prior to runoffs appears to be in a dead heat until several contested races are resolved.
Presently, there are three applications to utilize in the forgiveness process: Forms 3508S, 3508 EZ, and 3508. Form 3508S is for loans $50,000 and under. Form 3508 EZ is for borrowers who meet at least one of the following requirements:
Taking into consideration several tax laws already enacted and the impact of proposed tax changes under the Biden administration, I will first address important issues relating to The Paycheck Protection Program and the application for debt forgiveness — topics which are on the minds of many companies at this time.
b. The borrower did not reduce wages by more than 25% during the Covered Period compared to the period between January 1, 2020 through March 31, 2020 and did not reduce the number of employees and/or paid hours of employees between January 1, 2020 and the end of the Covered Period. Reductions that arose as of February 15, 2020 can be ignored if there was an inability to rehire similarly qualified employees for unfilled positions by December 31,2020, including reductions in employee hours that the borrower offered to restore and the employee refused.
A. Paycheck Protection Program (PPP) Loan Forgiveness as provided for under Section 1106 of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) and amended by the Paycheck Protection Program Flexibility Act (Flexibility Act). General Loan Forgiveness This program initially advanced businesses two-and-a-half times their average payroll costs as a loan to be forgiven if certain criteria were met. Payroll costs are comprised of cash compensation, health insurance, pension benefits, and state taxes paid by the company, and cash payroll is defined as the gross payroll before payroll deductions for taxes. The State tax element consists of the employer share of State unemployment and disability. Most companies should be able to satisfy the requirements for loan forgiveness by using the funds adequately on payroll spending in the allotted timeframe because the loan amounts to ten weeks average payroll and the Covered Period spans 24 weeks from the date the funds were advanced (not to exceed December 31, 2020). This 24-week time frame is used to tabulate payroll spending and other allowed expenses to determine if the borrower utilized the funds as required by the program, resulting in forgiveness of the advanced amount. The law also defines an Alternate Covered Period, which is used for companies that have a bi-weekly or more frequent payroll period. In this situation, the first day of the first payroll period following the loan disbursement is used to determine accountability. In this article, I will refer to the Covered Period and Alternate Covered Period synonymously.
a. Independent contractors, sole proprietors, and self-employed individuals who do not have employees.
c. The borrower did not reduce annual salary or hourly wages by more than 25% as defined in the previous section and was unable to operate during the Covered Period at the same level of activity of February 15, 2020 due to compliance with requirements established or guidance issued between March 1, 2020 and December 31, 2020 by regulatory bodies or any other work or customer safety requirements related to COVID-19.
Accounting Corner
Introduction
Form 3508 is used in all other cases where wages were reduced more the 25% and/or a reduction in the number of employees and hours worked does not meet with one of the Safe Harbor exceptions. 2. Timing of Request for Forgiveness The PPP loan forgiveness application forms (3508, 3508EZ, and 3508S) display an expiration date of November 30, 2020 in the upper-right corner, but this date does not indicate the deadline for applying for forgiveness. It serves to comply with the Paperwork Reduction Act and reflects the temporary expiration date for approved use of the forms. This date will be extended, and when approved, the same forms with a new expiration date will be posted. Borrowers can submit a loan forgiveness application any time before the maturity date of their loan, which is either two or five years from loan origination depending on whether the loan was received before or after June 5, 2020. However, if a
Utility & Transportation Contractor | december| 2020 23
borrower does not apply for loan forgiveness within 10 months of the last day of the Covered Period, then loan payments will no longer be deferred, and the borrower must begin making payments. For example, a borrower whose Covered Period ends on October 30, 2020 has until August 30, 2021 to apply for forgiveness before repayment begins. Currently, the borrower still has the option to apply for forgiveness during the loan prepayment period.
Accounting Corner
Loan Forgiveness Payroll Costs 1. Payroll costs incurred during or before the Covered Period but paid after are eligible for loan forgiveness if they are paid on or before the first regular payroll date following the Covered Period. Payroll costs that were incurred before the Covered Period but paid during the Covered Period are also eligible for loan forgiveness. 2. Borrowers are required to calculate payroll costs for partial pay periods. If borrowers use a biweekly or more frequent (e.g., weekly) payroll cycle, they can elect to calculate eligible payroll costs using the eight-week (for borrowers who received loans before June 5, 2020 and elect this Covered Period length) or 24week period that begins on the first day of the first payroll cycle following the disbursement date (referred to as the Alternative Payroll Covered Period). However, if a borrower pays twice a month or less frequently, they will need to calculate payroll costs for partial pay periods. The Covered Period or Alternative Covered Period for any borrower will end no later than December 31, 2020. 3. Employer expenses for employee group healthcare benefits are eligible for loan forgiveness if they are paid or incurred by the borrower during the Covered Period. However, this does not include expenses for group healthcare benefits paid by employees (or beneficiaries of the plan) either pre-tax or after tax, such as employees’ share of their health care premium. Expenses for group health benefits accrued from periods outside the Covered Period are not eligible for forgiveness. If a borrower has an insured group health plan, insurance premiums paid or incurred during the Covered Period qualify as payroll costs as long as the premiums are paid during the applicable period or by the next premium due date after the end of the applicable period. As noted, only the portion of the premiums paid by the borrower for coverage during the applicable Covered Period is eligible, not any portion paid by employees or beneficiaries or any portion paid for coverage during periods outside the applicable period. 4. Generally, employer contributions for employee retirement benefits that are paid or incurred during the Covered Period qualify as payroll costs eligible for loan forgiveness. Any retirement benefits withheld or paid by employees do not qualify. Owners’ Compensation For owners who work at their business, the amount of compensation that is eligible for forgiveness depends on the business type and whether the borrower is using an eight-week or 24-
24 Utility & Transportation Contractor | december| 2020
week Covered Period. In addition to the specific caps described below, the amount of loan forgiveness for owner-employees and self-employed individuals' payroll compensation is capped at $20,833 per individual across all businesses in which he or she has an ownership stake in the 24 week Covered Period. For borrowers who received a PPP loan before June 5, 2020 and elect to use an eight-week Covered Period, the cap is $15,385. If their total compensation across businesses that receive a PPP loan exceeds the cap, owners can choose how to allocate the capped amount across different businesses. The examples below are for a borrower using a 24-week Covered Period. 1. C Corporations: The employee cash compensation of a C-corporation owner-employee, defined as an owner who is also an employee (including where the owner is the only employee), is eligible for loan forgiveness not to exceed 2.5/12 of his or her 2019 employee cash compensation, $20,833, with cash compensation defined as it is for all other employees. Borrowers are also eligible for loan forgiveness for payments for employer state and local taxes paid by the borrowers and assessed on their compensation, for the amount paid by the borrower for employer contributions for their employee health insurance, and for employer retirement contributions to their employee retirement plans capped at the amount of 2.5/12 of the 2019 employer retirement contribution, $20,833. 2. S Corporations: The employee cash compensation of an S-corporation owner-employee, defined as an owner who is also an employee, is eligible for loan forgiveness up to the amount of 2.5/12 of their 2019 employee cash compensation, $20,833,with cash compensation defined as it is for all other employees. Borrowers are also eligible for loan forgiveness for payments for employer state and local taxes paid by the borrowers and assessed on their compensation and for employer retirement contributions to their employee retirement plans capped at the amount of 2.5/12 of their 2019 employer retirement contribution, $20,833. Employer contributions for health insurance are not eligible for additional forgiveness for S-corporation employees with at least a 2% stake in the business, including for employees who are family members of an at least 2% owner under the family attribution rules, because those contributions are included as part of cash compensation. 3. General Partners, LLC Owners: The compensation of general partners eligible for loan forgiveness is limited to 2.5/12 of their 2019 net earnings from self-employment subject to self-employment tax, which is computed from 2019 IRS Form 1065 Schedule K-1 box 14a (reduced by box 12 section 179 expense deduction, unreimbursed partnership expenses deducted on their IRS Form 1040 Schedule SE, and depletion claimed on oil and gas properties) multiplied by 0.9235. Compensation is only eligible for loan forgiveness if the payments to partners are made during the Covered Period or Alternative Payroll Covered Period. Separate payments for health insurance, retirement, or state or local taxes are not eligible for additional loan forgiveness because they are included in self-employment earnings. Loan Forgiveness Reductions and Remedies
1. Offer to rehire laid off Employees
$137,700. Wages between those two ranges would not be taxed.
The borrower will not be subject to a reduction in its forgiveness amount due to a reduction in Full Time Equivalents, (FTE), employees, computed based upon a reduction in employee hours worked, during the Covered Period if the borrower offered to rehire one or more laid off employees but the employees declined. Borrowers are required to inform the applicable State Unemployment Insurance office of any employee's rejected rehire offer within 30 days of the employee's rejection of the offer. The documents that borrowers should maintain to show compliance with this exemption include the written offer to rehire an individual, a written record of the offer's rejection, and a written record of efforts to hire a similarly qualified individual.
Biden also proposed capping itemized deductions at 28% of value for the wealthiest Americans.
The Tax Cuts and Jobs Act reduced the corporate tax rate to 21% from 35% for C Corporations. Biden will not restore the rate all the way back to its former level of 35%, instead raising it to 28%. He has proposed creating a minimum tax on corporations with at least $100 million in book profits, which means these corporations would pay either their regular corporate income tax or a 15% minimum tax – whichever is greater. Companies would also pay more on their foreign income. Capital Gains
In addition to calculating its loan forgiveness amount, a borrower may exclude any reduction in FTE employees if the borrower is able to document in good faith the following: (1) an inability to rehire individuals who were employees of the borrower on February 15, 2020 and (2) an inability to hire similarly qualified individuals for unfilled positions on or before December 31, 2020.
Another big change Biden wants to make is to tax capital gains at the same rate as ordinary income for households earning more than $1 million. Currently, short-term capital gains are taxed at the same rates as income, but long-term gains are taxed at lower rates. The top long-term rate is 23.8%, 20% for the sale of a trade or business in which the principal materially participates.
3. Elimination of employee wage reductions and restoration of hours worked
Estate and Gift Taxes
Certain pay reductions during the Covered Period or the Alternative Payroll Covered Period can reduce the amount of loan forgiveness a borrower will receive. If the salary or hourly wage of a covered employee is reduced by more than 25% during the Covered Period, the portion in excess of 25% reduces the eligible forgiveness amount unless the borrower satisfies the Salary/Hourly Wage Reduction Safe Harbor. The Safe Harbor in Section 1106 of The CARES Act, as amended by the Flexibility Act, requires certain reductions in a borrower’s loan forgiveness amount based on reductions in full-time equivalent employees or in employee salary and wages, subject to an important statutory exemption for borrowers who have eliminated the reduction on or before December 31, 2020. The Flexibility Act also adds exemptions from reductions in loan forgiveness amounts based on employee availability and business activity. In addition, the Small Business Administration and Treasury have adopted regulatory exemption to the reduction rules for borrowers who have offered to restore employee hours at the same salary or wages even if the employees have not accepted. B. Biden’s Tax Proposals Here is a look at some of the major tax changes Biden plans to enact provided his party controls Congress. Income Taxes Biden would repeal changes made to individual income tax rates for the wealthy (individuals with incomes over $400,000) under the 2017 Tax Cuts and Jobs Act, which means the top rate would revert to 39.6% from 37%. Additionally, income above $400,000 would be subject to the 12.4% Social Security tax split evenly between employees and employers. Currently, there is a wage cap of
The Tax Cuts and Jobs Acts essentially doubled the basic exclusion amount to $11.58 million in 2020. Assets exceeding that threshold are subject to a 40% tax rate. Biden’s plan would undo that change, meaning that you could transfer fewer assets without triggering the tax. Biden would also do away with step-up in basis, which means unrealized capital gains transferred to a beneficiary of an estate would receive the decedent’s basis — not the fair market value at death — resulting in additional gains taxed upon subsequent disposition by the beneficiary.
Accounting Corner
2. Inability to rehire employees who were employed on February 15, 2020.
Corporate Taxes
Tax Credits Biden is calling for an expansion of the Child and Dependent Care Tax Credit to provide a fully refundable, advanceable tax credit. Effects According to the Tax Foundation’s General Equilibrium Model, Biden’s collective policies would reduce GDP by 1.5% over the long run, reduce wages by 0.98%, and eliminate about 585,000 jobs. However, they would increase federal tax revenue by $3.8 trillion between 2021 and 2030 relative to current law. The Tax Policy Center estimates Biden’s proposals would increase federal revenues by $4 trillion between 2021 and 2030. It would also disproportionately raise taxes on the top quintile of the income distribution. C. Pension Reform as Per Secure Act 1. What Is the SECURE Act and How Could It Affect Your Retirement? The Setting Every Community Up for Retirement Enhancement
Utility & Transportation Contractor | december| 2020 25
Act of 2019, better known as the SECURE Act, which originally passed the House in July 2019, was approved by the Senate on December 19, 2019 as part of an end-of-year appropriations act and accompanying tax measure and was signed into law on December 20 by President Trump. The far-reaching bill includes significant provisions aimed at increasing access to tax-advantaged accounts and preventing older Americans from outliving their assets.
Accounting Corner
2. Major Provisions of the SECURE Act The SECURE Act will make it easier for small business owners to set up “safe harbor” retirement plans that are less expensive and easier to administer by increasing the cap under which they can automatically enroll workers in “safe harbor” retirement plans from 10% of wages to 15%. The act will also: • Provide a maximum tax credit of $500 per year to employers who create a 401(k) or SIMPLE IRA plan with automatic enrollment. • Enable businesses to sign up part-time employees who work either 1,000 hours throughout the year or have three consecutive years with 500 hours of service. • Encourage plan sponsors to include annuities as an option in workplace plans by reducing their liability if the insurer cannot meet its financial obligations. • Push back the age at which retirement plan participants need to take required minimum distributions (RMDs) from 70½ to 72 for those who are not 70½ by the end of 2019. • Allow the use of tax-advantaged 529 accounts for qualified student loan repayments (up to $10,000 annually). • Permit penalty-free withdrawals of $5,000 from 401(k) accounts to defray the costs of having or adopting a child. • Encourage employers to include more annuities in 401(k) plans by removing their fear of legal liability if the annuity provider fails to provide and not requiring them to choose the lowest-cost plan (This could be something of a double-edged sword. Employees will need to look extra-carefully as these options). One other key change in the new bill is paying for all this: the removal of a provision known as the stretch IRA, which has allowed non-spouses inheriting retirement accounts to stretch out disbursements over their lifetimes. The new rules will require a full payout from the inherited IRA within 10 years of the death of the original account holder, raising an estimated $15.7 billion in additional tax revenue. This will apply only to heirs of account holders who die starting in 2020. The Bottom Line Whether the SECURE Act ends up being a retirement game-changer or not remains to be seen. But one thing is abundantly clear: the current rules are not allowing nearly enough Americans to put away the nest egg they will ultimately need for a secure retirement.
26 Utility & Transportation Contractor | december| 2020
Internal Revenue Service Agrees to the Deductibility of Certain State Payments Made by Pass-through Entities (Partnerships and S corporations) Background The Tax Cuts and Jobs Act, passed into law in December 2017 and effective for tax years commencing thereafter, limited the individual itemized state and local tax deduction (SALT) on the Federal individual income tax return to an amount not exceeding $10,000. For example, if an individual taxpayer incurs $10,000 in real estate taxes and $15,000 in state income tax on income earned, the maximum the taxpayer can deduct as an itemized deduction is $10,000, and the balance is lost as a deduction. Various states have developed workarounds to mitigate the lost deduction and resulting tax benefit. On January 13, 2020, Governor Phil Murphy signed Senate Bill No. 3246 (S3246), the Pass-through Business Alternative Income Tax Act (BAIT), into law. The Bill establishes a new elective passthrough business alternative income tax with a corresponding income tax credit for members that applies to taxable years beginning on or after January 1, 2020. For a Pass-Through Entity (PTE) to make an election, the members of the PTE (at the time the election is filed) must execute a consent under penalties of perjury. The PTE election must be made annually on or before the due date of the entity’s return. PTEs are allowed to revoke an election until the due date of the return for that tax year. Tax rate The PTE tax is imposed on total distributive proceeds, which is the sum of each member’s share of distributive proceeds, at the following rates for taxable years beginning on or after January 1, 2020: • 5.675 percent, if the distributive proceeds of the PTE are less than or equal to $250,000 in the taxable year. • $14,187.50 plus 6.52 percent of the distributive proceeds greater than $250,000, but not over $1,000,000, in the taxable year. • $63,087.50 plus 9.12 percent of the distributive proceeds greater than $1,000,000, but not over $5,000,000, in the taxable year. • $427,887.50 plus 10.9 percent of distributive proceeds greater than $5,000,000 in the taxable year. Filing and payment requirements Electing PTEs is required to file an entity tax return and make payments on or before the 15th day of the third month following the entity’s taxable year for federal income tax purposes. Electing PTEs is required to make estimated PTE tax payments on or before the 15th day of the fourth, sixth, and ninth month of the taxable year and the first month succeeding the end of the tax year. In addition to entity-level filing requirements, PTEs must also report a member’s share of distributive proceeds to its members. Tax credit for members
The bill provides a refundable tax credit for members of an electing PTE subject to New Jersey gross income tax that is equal to the member’s pro-rata share of the PTE tax for that period. The legislation specifies that any credit is only available “after the application of all other credits allowed by law [ . . .] and claimed by the taxpayer in the taxable year.” If the amount of credit is greater than that of tax otherwise due, then the excess amount of credit over tax will generally trigger an overpayment (i.e., a refund). A trust or estate that receives the credit can allocate the credit to beneficiaries or use it against their tax liabilities. The Internal Revenue response
In the announcement, the IRS indicated that the forthcoming regulations would treat these types of state tax payments as deductible and thereby reduce the federal income passed through to the owners. This announcement is a welcomed clarification from the IRS and will alleviate much of the uncertainty surrounding these SALT Cap workarounds enacted by certain states, which might result in other states introducing similar tax regimes.
Conclusion The Internal Revenue Service’s action might mitigate the effect of the Tax Cuts and Jobs Act on state tax deductions for taxpayers who are members of pass-through entities. Individual taxpayers with Schedule Cs, One-owner LLCs, and W2 wages earners who are not members of a pass-through entity are not affected by the change. Each taxpayer must evaluate their individual tax situation to determine any potential benefit.
Accounting Corner
The IRS released a notice on Monday, November 11, 2020 proposing regulations that will be released shortly to allow passthrough entities, partnerships and S corporations, to deduct state and local income taxes. This development resolves an issue that has been around since Connecticut enacted the first passthrough tax following the passage of the Tax Cuts and Jobs Act.
The proposed regulations described in this notice will apply to Specified Income Tax Payments made on or after November 9, 2020. Prior to the issuance of the proposed regulations, taxpayers may rely on the provisions of the notice.
Utility & Transportation Contractor | december| 2020 27
Transformative Solutions
WE SOLVE TECH PROBLEMS It's why we're trusted by 500+ of the region's leading companies and business leaders.
At Mindcore, we provide more than IT services; we provide solutions that will transform your business. Solving IT problems is our thing, it's why we're trusted by 500+ of the region's leading companies and business leaders. Through business management coaching, real time collaboration, and customized solutions, we help leading companies take back control of their technology, streamline their business, and outperform their competition.
We are currently offering a free Technology Risk Assessment to all UTCA members, vendors, and partners. The assessment will be done by our CEO, Matt Rosenthal. Simply call Matt at the number below, and let him know you are calling from the UTCA community. 973-664-9500 ext 7123
''Thank you to all the members and vendors of the UTCA. It's been an honor to serve so many of you over the years. We wish you all the best in 2020." Matt Rosenthal, CEO of Mindcore matt.rosenthal@mind-core.com
in the lobby By: zoe baldwin
N
However, the candidates weren't the only ones on this year's ballot. Voters also overwhelmingly approved the legalization of recreational marijuana, a move that will undoubtedly have repercussions in our industry. While the voters have made their decision, the Legislature must now begin the arduous task of developing legislation that will establish a framework to govern the new industry, after which the state must set up a regulatory system for how marijuana will be regulated, sold, and taxed. The law will not go into effect in New Jersey until Jan. 1, 2021. UTCA is already working directly with our elected officials as well as our partners in labor to ensure that the needs of our highly regulated industry are taken into account. We will continue to keep you updated as the legislation progresses and more details become available. Design-Build – A1285/S2874 (Greenwald/Singleton) Legislation to enable design-build procurement across local and state government has recently been advancing. UTCA has been working with Assembly Majority Leader Lou Greenwald as well as other partners to tighten up the bill language and expect the measure to pass before the end of the year. This would be an in-
valuable procurement tool for our state, especially now, when we need to make the most out of every state dollar. We thank the Majority Leader for his initiative and look forward to final passage. Electronic Permit Processing Review System - S1739/A1145 (Oroho/Freiman) Would establish a web-based system allowing for the electronic submission of applications for construction permits, plans, and specifications pursuant to the "State Uniform Construction Code Act," for the electronic review and approval of applications, plans, and specifications, for the scheduling of inspections, and for the exchange of information between the applicant, the applicant’s professionals, and the department or enforcing agency during the review process. This bill has passed the full Assembly and is awaiting a full vote in the Senate. Prevailing Wage Certification - S2414 (Singleton/Wirths) The bill would require a firm whose low bid is 10% lower than the next lowest bidder to “provide proof to the satisfaction of the public body that the prevailing wage … shall be paid.” There are no further details; the bill leaves that up to Department of Labor rulemaking. UTCA opposed the bill in committee and requested amendment to the bill removing section 1 entirely, or short of that, to clarify the definition of “proof.” Senator Singleton expressed some openness to suggested language, and as of this writing, we have scheduled a meeting with him, UTCA staff, and members of the UTCA legislative committee. The legislation has not advanced in the Assembly.
Legislative News
ew Jersey's first predominantly vote by mail election went off without a hitch, with voters backing former Vice President Joe Biden by a margin of 61%. Senator Cory Booker also won reelection, as did most of our state's House delegation. The only upset remaining is in House District 7, where Democratic incumbent Tom Malinowski leads Republican challenger Tom Kean by a mere 4,500 votes. As of this writing in mid-November, results have not yet been called.
Buy American – S853 Another bill has been moving that would require State agency highway and bridge projects, where feasible, to use American steel. This version of the bill has a $1m threshold, grants full discretion to the Commissioner, and contains significant exemption language including price, availability, and effect on federal projects, among others. Further, as stated in the legislation, “nothing in the bill is to be interpreted to require a contractor performing a surface highway or bridge contract to certify that the iron or steel product used in a surface road or bridge is made in whole, or in substantial part, in the United States.” The legislation has passed the Senate but does not yet have an Assembly companion.
Utility & Transportation Contractor | december| 2020 31
Legislative News
Fleet Tracking Notification – A3950/S3180 (Verrelli/Greenstein) This legislation would require employers to notify their employees when tracking devices are used in company-owned vehicles. In committee, the sponsor clarified that the inclusion of this information in employee handbooks and manuals would suffice. The bill does not apply to devices used for the purposes of documenting employee expense reimbursement. The bill has passed the full Assembly but has yet to be heard in the Senate.
Gateway Tunnel Transit agencies and advocates across the region are hopeful that the election of Joe Biden will help deliver the long sought-after Gateway Tunnel project. The project languished under the Trump Administration and faced pushback from both the President and Transportation Secretary Elaine Chao. President-elect Biden is a lifetime supporter of Amtrak and rail in general, and there is much anticipation that his administration will deliver on the critical trans-Hudson project.
Federal Funding The bipartisan leadership of the Senate Transportation, Housing and Urban Development Appropriations Subcommittee has released the FY21 spending bill. The measure funds all core highway, transit, and airport construction programs at the levels authorized in the current surface and aviation authorization laws. However, it would also provide additional funding for capital projects above and beyond those authorized levels. Congress has added similar supplemental funding during the previous three fiscal years (FY2018-20). The Senate bill introduced in mid-November proposes an additional $4.5 billion in funding for highway, public transit, and airport capital spending.
Please consider supporting the UTCA PAC, Constructors for Good Government UTCA continues to be a leading voice for the infrastructure construction industry in Trenton and Washington DC. Whether it is providing expert testimony before business and legislative groups or positively effecting the legislative process, UTCA stands alone in its record of achievement for our industry. This success is only possible with your support and more importantly, by supporting the industry PAC: Constructors for Good Government. Please consider contributing as a robust PAC greatly strengthens our voice. Thank you for your continued support.
Before passage, the FY 2021 transportation appropriations bill still needs to work its way through the Senate, where it will then be conferenced with the version passed by the House earlier this year. The House bill included dramatically increased spending levels for core highway and transit, but never advanced, with Congress instead extending the FAST Act for one year. Ultimately, we expect the conference process to produce an FY 2021 appropriations bill that looks much like the Senate proposal, including the supplemental spending levels.
32 Utility & Transportation Contractor | december| 2020
union paving
1140 Globe Ave. Mountainside, NJ 07092 Phone: 908.232.4100 www.unionpaving.com An Equal Opportunity Employer
We would like to congratulate JRCRUZ Corp for 20 years in construction, the Cruz Family for 70 years of service in NJ Construction and to IUOE 825 for celebrating 100 years! We thank you all for your dedicated service in the construction industry.
� berl<Owitz &.. ASSOCIATES, P.C. Construction Attorneys
856.350.6060
sberkowitz@berkpc.com
CONGRATULATIONS ON REACHING THESE INCREDIBLE MILESTONES! JRCRUZ Corp for 20 years in the construction industry! The Cruz family for 70 years in the construction industry! Local 825 for 100 years!! Here is to the next 100!
For over 22 years our firm has been at the forefront of the public bidding process. As a mechanical engineer and an attorney Steven Berkowitz has a unique technical knowledge and legal expertise of the entire construction process. At Berkowitz & Associates we are dedicated exclusively to clients in the construction field. We focus on the complete legal needs of contractors and owners in all areas of the bidding process.
New Jersey I New York I Pennsylvania www.berkpc.com
FROM
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CREAMER J. FLETCHER CREAMER & SON, INC. POWliR&Dâ– YIIPiGraup
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covid-19 alert: requiring employees to vaccinate By: jonathan landesman, esq. & hope e. kildea, esq., Cohen, Seglias, Pallas, Greenhall & Furman, P.C.
A
s the race for a COVID-19 vaccine gains momentum (and seems to be approaching the finish line), many employers are still wondering whether or not they can require employees to get vaccinated. Generally speaking, employer-mandated vaccination requirements are legal, but they are also subject to exemptions and limitations. Before implementing a mandatory vaccination policy, employers should be aware of restrictions imposed by employment discrimination laws and consider the labor relations issues, administrative costs, and liability risks associated with such policies. Exemptions Arising under Employment Discrimination Laws
The Americans with Disabilities Act (ADA) and Title VII of the Civil Rights Act of 1964 (Title VII) place restrictions on an employer’s ability to implement “blanket” vaccination requirements for all employees. More specifically, under the ADA, an employer may need to exempt employees from a mandatory vaccination policy who have pre-existing medical conditions that would prevent them from being vaccinated. Additionally, under Title VII, an employer may need to exempt employees with sincerely held religious beliefs that are offended by vaccination. These situations must be addressed on a case-by-case basis. In 2009, the Equal Employment Opportunity Commission (EEOC) issued guidance on pandemic preparedness in response to the H1-N1 influenza (swine flu) pandemic, in which the EEOC recommended, based on the ADA and Title VII exemptions, that employers encourage, but not require, employees to get the flu vaccine. The EEOC has since re-issued and updated its guidance to address the COVID-19 pandemic. Notably, the EEOC’s updated guidance dodged the issue of employer-mandated COVID-19 vaccination requirements by noting that a vaccine is not yet available. However, other recent developments and EEOC guidance related to employee COVID-19 screenings suggest that the
Labor Relations Employers with union-represented employees face additional legal hurdles under federal labor law. These employers, or the associations to whom they have assigned their bargaining rights, will be required to notify and bargain with union representatives before implementing mandatory vaccination policies. Generally, employers and employer associations may only be excused from their duty to notify and bargain in two situations. The first situation arises where a management rights clause in a collective bargaining agreement (CBA) contains clear and unequivocal language establishing that the employer has the right to unilaterally implement a vaccination requirement. Employers and employer associations must tread carefully when reviewing the terms of their CBAs before jumping to the conclusion that they have such a broad management right.
Labor Relations
Given the unprecedented nature of the COVID-19 pandemic, it is difficult to predict exactly how administrative agencies and courts will view employer-mandated COVID-19 vaccination policies. However, existing regulations and court opinions addressing flu vaccination requirements can provide us with some insight.
EEOC will likely permit relatively more exGenerally speaking, tensive workplace conemployer-mandated trols in response to the COVID-19 pandemic vaccination than were previously requirements are legal, allowed. In that regard, the EEOC’s more but they are also permissive treatment subject to exemptions and of other workplace measures during the limitations. COVID-19 pandemic indicates that the agency may recognize mandatory COVID-19 vaccination policies as a permissible temporary workplace measure. That said, unless and until the EEOC actually issues guidance to that effect, employers should defer to the EEOC’s updated 2009 guidance and assume that the ADA and Title VII exemptions apply to mandatory COVID-19 vaccination requirements, including with respect to employees with medical conditions and religious beliefs opposed to vaccinations.
The second situation arises where an employer implements a mandatory vaccination policy pursuant to a non-discretionary government mandate. In that case, the employer must show that a local, state, or federal law or regulation mandates the employ-
Utility & Transportation Contractor | december| 2020 37
er’s vaccination policy and that, under the relevant government mandate, the employer lacks discretion to decide how to implement the policy. If the government mandate allows the employer to decide any terms of implementation, such as the timing or location of vaccination, the method of confirming employee vaccination, or the consequences for an employee’s failure to get vaccinated, the employer or the association representing it must notify and bargain with the union’s representatives before implementing such terms. Thus, even in this second situation, union employers or their employer associations will most likely be required to notify and bargain with union representatives before implementing a mandatory vaccination policy. Additional Considerations
Labor Relations
Employers should also consider the practical consequences of implementing mandatory vaccination policies. Employers who choose to implement such policies should anticipate a flood of exemption requests from employees covered under the ADA or Title VII, as well as those with safety or ethical objections to vaccination. The time and energy associated with processing these requests and training human recourses personnel to do so may be substantial. Employers should also consider liability risks
38 Utility & Transportation Contractor | december| 2020
associated with a vaccine requirement, including liability under the ADA and Title VII for potentially mishandled exemption requests and liability for workers compensation claims based on adverse reactions to an employer-mandated vaccination. Given the likelihood of numerous exemption requests, limitations, costs, and potential liabilities associated with employer-mandated vaccination policies, employers should at least consider adopting the EEOC’s advice and encourage, but not require, COVID vaccination by hosting on-site vaccination clinics or by incorporating COVID vaccination into their employee wellness programs. Ultimately, however, it is up to every employer to decide what policy is right for their business and for the safety and well-being of their employees. Should you have any questions about mandatory vaccinations or any other issues related to the COVID-19 pandemic and your workplace, please do not hesitate to contact Jonathan Landesman, Esquire or Hope E. Kildea, Esq. at Cohen, Seglias, Pallas, Greenhall & Furman, P.C. About the Authors. . . . Jonathan Landesman, Esq. and Hope E. Kildea, Esq. are members of the Labor and Employment Group where they focus their practice on representing contractors and subcontractors in all matters relating to the workplace, including employment litigation, human resources counseling, and labor relations.
Congratulations to JRCRUZ Corp.
20 Years in Construction
The Cruz Family
70 Years in NJ Construction
IUOE 825 100 Years
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CONGRATULATIONS JRCRUZ Corp. 20 Years in Construction Cruz Family 70 Years in NJ Construction IUOE 825 Celebrating 100 Years
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Congratulations to JRCruz Corp, The Cruz Family & /VOE 825 on your achievements and success
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Pillari Bros. Construction Corp. offers a full line of services from site development co underground utilities, infrastructure and heavy construction.
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·-----------------------------· r
True & Associates INSURANCE • SURETY• BENEFITS Celebrating over 35 years in business
Congratulations to
JRCRUZ Corp. Celebrating 20 Years in Construction The Cruz Family Celebrating 70 Years in the New Jersey Construction Industry Operating Engineers Local 825 Celebrating 100 years
"Advising for today, insuring for tomorrow" 6 Leigh Street Cllnton, NJ 08809
908-7�711
325 North Avenue East Westfield, NJ 07090 908-232-0760
30 Wall Street, 8th Floor New York, NY 10005 212-766-1400
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Proud member of the UTCA
108 B Walnut Avenue Cranford, NJ 07016 908-901-9030
�
CAMPBELL Serving NJ contractors since 1921 FOUNDRY
800 BERGEN ST. HARRISON, NJ 07029 Ph:973-483-5480 Fax:973-483-1843 sales@campbellfoundry.com
BERLIN YARD
175 JACKSON RD. BERLIN, NJ 08009 Ph: 856-767-0400 Fax:856-767-4320 greg@bridgestate.com
MATERIALS 1235 HARRISON AVE. KEARNY, NJ 07032 Ph:201-998-3765 Fax:201-998-3764 sales@campbellmaterials.com
Congratulations to Everyone at JRCRUZ on 20 Years of Success, and to All in the Cruz Family for 70 Years of Contributions to the Industry, to the UTCA, and to Training Generations Of People Who Have Made this Industry The Best.
Campbell ls Pleased To Announce That Our Full Line Of Municipal Castings and Underground Construction Materials Are Now Available In Our Berlin Yard.
All Your Construction Needs, Now In Two Places
CONGRATULATIONS TO JRCRUZCORP AND THE
CRUZ FAMILY FOR YOUR MANY DECADES OF SERVICE TO THE CONSTRUCTION INDUSTRY
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INSURANCE & BONDINC 651 Old Mount Pleasant Avenue Suite 255 Livingston, NJ 07039 Tel: (973) 251-2646 Ext 104
CONGRATULATIONS 20 YEARS IN CONSTRUCTION Thank you! Looking forward to the next 20!
Factory & Corporate Office: 207 LAKE STREET (Route 32) NEWBURGH, NY, 12550
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Cover Story
jrcruz corp. completes second decade of construction By: zoe baldwin
B
uilt upon the legacy of Evaristo Sr., the Cruz family has grown into a Northeast construction dynasty with a solid reputation for hard work and success. Since the formation of Cruz Construction in 1951, Evaristo’s children, nephew, and grandsons have built upon that legacy, joining together and striking out on their own to build some of our region’s most critical infrastructure. One very successful branch of the family tree is occupied by Evaristo Jr. (Evarett), whose firm JRCRUZ is celebrating its twentieth year in the industry. JRCRUZ is known for their expertise in a variety of areas including micro-tunneling, piles, foundations, landscaping, wastewater, water supply, transportation, and site work. We recently sat with Evarett to hear more about his firm and about the last two decades of accomplishment. “Cruz Construction was started by Evaristo, Sr. in 1951, which happened to be the same year I was born, in the Ironbound section of Newark,” Evarett begins. “Then in 1965 he stepped back and allowed my older brother Edward and his nephew, my cousin, Evaristo G. Cruz to run the business. I was still in high school then, but I started working for them almost full time as soon as I graduated. When I began, I was mostly doing punch list work or helping around the office doing quantity take-offs and running in bids.” Evarett kept with the family business, working part time alongside his older brother and cousin while studying Civil Engineering Technology at the New Jersey Institute of Technology. He came on full time after graduating in 1976, rising to become managing member of the company when his older brother Ed and cousin Evaristo G. Cruz left to form their own firm, EE Cruz, in 1984. “All of the responsibility fell to me when they left. At the time we were finishing up a major subway project in Boston and building sewers and watermains in the New Jersey, New York, Boston, and Hartford, CT markets. We did fairly well, but I wanted to start expanding into different aspects of construction.” And expand they
48 Utility & Transportation Contractor | december| 2020
JRCRUZ installs a CFA Pile foundation for a large sewer system under the Manhattan Bridge in downtown Brooklyn, NYC.
did. For the next 15 years, Evarett tackled increasingly diverse construction disciplines including heavy highway work and an array of complicated water and sewer projects. A major advancement came in 1990 when, with Evarett at the helm, Cruz Construction made the calculated decision to get into micro-tunneling. “There were some big jobs coming out in New York City, and we took the gamble to get into that world. This work required highly specialized equipment, but we felt there was an opening to get into that business. Not many people were doing it in this country at the time. It was fresh out of the box so to speak and we were one of the first contractors to use this method in the United States. For a good ten years or so, there was limited competition because it was an esoteric market. It took a lot of courage and faith to make that move, but we were ultimately successful.” Under Evarett’s leadership, Cruz Construction became known as an innovator and pioneer for introducing several new techniques to the US construction market. Sunken caisson construction was virtually unheard of in America and presented the ability to avoid dewatering on certain projects, which is critical in the water-rich environments of our region. His efforts did not go unnoticed by the industry, and in 1992, Evarett received the Medal of Excellence Award from Engineering News Record (ENR) and was featured in a cover article for Civil Engineering Magazine. In 1995, Evarett was named president of the company, then in 1997, Evaristo Sr. passed away and control of the company shifted to a brother and two sisters. After two years, Evarett made the decision to strike out on his own, selling his interest to his brother and sisters. Evarett took the next two years to spend time with his family and recharge before jumping in with both feet to start JRCRUZ.
“In 2001, I formed JRCRUZ Corp. Why JRCRUZ? Well I couldn’t call it E Cruz because that was kind of taken, and I was always known as ‘Junior’ in the family, everyone used to call me that, so I thought, well, why not call it JRCRUZ?”
“Our second job was maybe $10 or $12M and it piggybacked off the first. I was always able to get a follow up job in the middle of the other one. I had limited funding, but I was able to put things together because of my contacts. I had a lot of help from Foley Equipment and a lot of help from our bonding people at Liberty Safeco because they knew me, and we had built up a lot of good will over the years. They knew that a Cruz in this business was a proven commodity, and I was smart enough to know I’d need those blue-chip relationships to be successful in this new endeavor. I parlayed those assets into the business, and there was no looking back.” The size of that first job is also what enabled Evarett to attract the talent he needed to hit the ground running. He was able to take with him some of the key people he had worked with previously and had also recruited his eldest son, David, who had just completed two years of a four year program at NJIT, forming the base crew he needed to make that first project a success. Evarett attributes the addition of his son David as invaluable to his success. “After spending the summer of 2001 helping us get off the ground, David said to me, ‘Dad, you need me more than I
JRCRUZ installs a 110-foot-deep sunken caisson shaft and water intake pipeline in Midland, PA supplying water to Beaver County.
Pictured from left to right: Charles Lada, Jason Cruz, David Cruz, Evarett Cruz, Peter Lauro, Carlos Catao, Mike Russo and Matthew Cruz (not pictured).
need school right now.’ I agreed and realized that what he would learn working during a startup of a company would be a much greater education than what he would get in school. David now serves as the firm’s Executive Vice President and General Superintendent. Like his father, David credits those early days with the family business as an invaluable real-world experience.
Cover Story
Armed with an arsenal of experience and contacts from his years at Cruz Construction, Evarett was able to secure an important bond for his first job. “It was a $20M job in Staten Island. Not many companies have the opportunity to start that way, but I was starting from a good place. The project was right up our alley, just over the Outerbridge Crossing in Tottenville, Staten Island. It was perfectly located for us to hit it and hit it hard. It was a sewer and watermain job, with some micro-tunneling. We did the job and did it well, and that translated into more work. I think it was crucial to get a large job right off the bat. If it had been a $2M job, it would’ve been much harder because I wouldn’t have been able to get the economy of scale I needed to ramp up. Getting that $20M job was the ice breaker that made our success possible.”
Evarett is also grateful for the help he received from his brother and cousin at EE Cruz. They allowed Evarett to rent equipment such as steel plates, boxes, and slide rails — things that you typically can’t rent — which proved incredibly helpful as the new firm found its footing. With a crew in place and support from family and industry, Evarett was able to translate his past experiences into the new organization. He set out to establish an office, ultimately landing in Aberdeen, NJ. As he tells it, “We didn’t have a yard yet. You have all these things that you take for granted when you’re at a big company like Cruz Construction. Things like a yard, mechanics, steel plates, trench boxes, even tools like shovels and picks. It’s an interesting challenge having to start all over. I had to overcome all of that. I took it step by step – you kind of just have to swallow hard and do the right thing. That was how it evolved.” The yard came about four years later, when Evarett was able to purchase an existing yard in Piscataway that was up for auction. “Once we had the yard and the mechanic, everything kind of grew proportionately as the business grew in every realm. First equipment, then we started buying plates and other things here and there. The economy of scale helped us because we were able to pick up jobs where we could build those costs into the bid. Eventually we started to build up a war chest and it all ended up coming together successfully.” With the New York operation up and running and with a full complement of equipment and staff, Evarett eventually began looking to expand JRCRUZ’s horizons. For example, in 2016 they got a micro-tunnel job in Midland, PA tunneling into the Ohio River and began looking around the region for other opportunities. “Ohio is just across the river, so we bid some jobs there.
Utility & Transportation Contractor | december| 2020 49
We’ve bid jobs everywhere from Texas to Rhode Island and are looking at work in other areas like Florida and even Canada.”
Cover Story
A big part of JRCRUZ’s success has been their ability to innovate – a talent that was highlighted by the Professional Engineers in Construction in 2016. Evarett was the recipient of the Engineer Constructor of the year award for his work in advancing micro-tunneling and sunken caisson methodology. That penchant for innovation also paid off on one of Evarett’s most memorable projects: the Bergen Basin micro-tunnel under the Belt Parkway in Queens, New York. The project had a value engineering clause in the contract that JRCRUZ was able to put to good use. The project was designed as a 48” tunnel under the Belt Parkway that required complicated construction methods to avoid an existing storm drain under the eastbound shoulder. The shoulder protection was complicated and very costly, so Evarett had the idea to run two 36” pipes that would carry the same amount of water, all for the same cost. His redesign avoided the storm drain and ultimately saved the City $5 to $6 million in unnecessary construction. Another interesting job for JRCRUZ finished a few years ago and involved tunneling through solid rock in the middle of Midtown Manhattan. The 10’ diameter tunnel was right at the intersection of 30th and 8th, leaving no room for error. JRCRUZ was up to the task and the project went smoothly, despite its inherent challenges. Today, JRCRUZ is operating at peak performance and growing. Evarett’s three sons all work for the company: David as the Executive Vice President, Matthew as Project Manager, and Jason as a Project Manager and Estimator. They have 30 people working on their office staff and about 300 people in the field during peak season. They’ve expanded their footprint to include capabilities such as milling and paving, piles, foundations, underpinning, dewatering. They also just opened a new office in Holmdel to accommodate their growth, and the building reflects the very heart of the company. “If you look at the elements, there are steel panels, a concrete element on the walls as you enter, and there’s reclaimed wood and brick elements as well. Those are four materials we use in our industry that we chose as a play on what we do out in the field.” The new building provides all the space JRCRUZ needs to continue to grow and flourish. While they don’t have a company motto, Evarett prides himself on running an open and collaborative workplace where anyone can weigh in. “For example, in our meetings, there’s no boss; everyone has a seat at the table, so whoever has the better idea that day is the boss, so to speak. It’s resonated; people have taken it seriously and really appreciate the ability to contribute.” As for the future, Evarett feels confident he will be able to adapt and change along with the market, as he has always been able to
50 Utility & Transportation Contractor | december| 2020
JRCRUZ completes the second drive of a double barrel 36-inch Microtunnel for the NYC DEP Jamaica Bay WWTP.
do. JRCRUZ’s broad portfolio makes them a dynamic business that’s able to move with the market and across the nation. Ultimately, Evarett sees funding as the industry’s biggest challenge. “As a sign of the times, our last UTCA article was in 2016. We talked about the gas tax and how we had hoped it would benefit our industry — but it hasn’t changed. Five years later and we’re still waiting for gas tax funding to get work going in New Jersey.” Right now, he’s looking at an increasing number of design-build projects on the horizon. He reflected on the nature of design-build, noting, “What my father used to say he liked about this business was that low bid is kind of an equalizer. It doesn’t matter who you are so long as your bid is the lowest. With design build its more built on relationships; it’s more subjective.” Beyond the work, Evarett looks forward to settling into the new headquarters and moving on to the next project with his sons and key staff. He is grateful for the consistent hard work and camaraderie of his whole team, led by President Peter Lauro and General Superintendents and Vice Presidents of Construction Carlos Catao and Mike Russo. While the list is long, some of the other members of the team that are instrumental to their success include project managers Chris Lada, Richard Kolodziej, Faheem Kahn, James Benson, Rui Pinho, Piotr Wiszowaty, Andrew Flory, and Joe Walsh, as well as Ilona Gliszczynski as Controller and Charles Lada as Chief Financial Officer. UTCA congratulates Evarett and the JRCRUZ family on this milestone and wishes them all the best in the decades to come.
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Congratulations to our friends at JRCRUZ Corp for 20 years in Construction, the Cruz Famny for its- 70 years in the NJ Construction Jndustry & to the Operating Engineers Local 825 as they cerebrate 100 yearst
Deep Foundations• Site Work• Utilities Marine • RecfamationJEnvironmental
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Congratulations to
JRCRUZ Corp. Liberty Mutual Surety celebrates your 20 years in business, applauds your accomplishments and wishes you continued success! We also congratulate the Cruz family for marking 70 years of service in New Jersey construction.
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CONGRATULATIONS IUOE 825 on your 100th Anniversary JRCRUZ CORP. for celebrating 20 successful years in business
Best Wishes For Continued Success!!
CohnReznick congratulates Evarett Cruz and his family on JRCRUZ Corp.'s 20 years in construction. We also congratulate IUOE 825 on its 100 years in business.
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Feature Story
adapting and celebrating 100 years in a covid-19 world
O
perating Engineers are men and women who move mountains, and for the last 100 years, Local 825’s members have been on the forefront of every major project in our region’s rich history. Chartered in 1920, Local 825 of the International Union of Operating Engineers (IUOE) has participated in the construction of the largest infrastructure achievements throughout New Jersey and the five counties of New York State that they represent. According to Greg Lalevee, IUOE General Vice President and Local 825 Business Manager, Local 825’s members have helped build the major crossings of the Hudson and Delaware rivers; the highways and transit systems that crisscross our communities; dams and reservoirs; power plants; high rises; stadiums; and megastructures that outline our cities and define our daily lives.
Eugene Reardon taken around 1927, seven or eight years after Local 825 was chartered. He later became Local 825's president in the late 1950s until 1959. His grandson, John Reardon, now is a member of Local 825's Executive Board.
were protected and that their work could continue. These have remained in place since and have allowed thousands to continue earning a living and building our state back.
As the calendar turned to 2020, Local 825’s 100th anniversary celebration was supposed to be a year filled with activities and events to honor the past and look toward another century of success. Instead, the celebration was halted by COVID-19, which sickened millions and claimed the lives of far too many loved ones.
However, the series of celebratory events were still cancelled. So, what to do? As Local 825 began its second century, we utilized all of our new digital capabilities to honor the generations of men and women who preceded us and paved the way for a better work life. Our digital footprint, social media channels, and member publications told the stories of the men and woman who came before; through diligent research, we learned that some families still active in the Local date back to its founding.
The seriousness of the virus began to become known in midMarch while several members of Local 825 and ELEC were attending the CONEXPO convention in Las Vegas. Those who attended went into quarantine on their return and adopted the local imposed protocols to protect the health and safety of their members and administrative staff. What was foreign to all at the time has become part of the new normal. In the same way robotics would baffle members from 100 years ago, the term social distancing was a strange concept and Zoom was something a camera lens did. But despite all the tumult, Operating Engineers did what their forbearers have done for the past century – they got to work in a time of crisis. Road construction workers were deemed "essential" while non-essential commercial and residential projects were put on hold, putting hundreds of members out of work temporarily. As summer neared, jobs restrictions began to be loosened and members began going back to work. Working directly with the contractors and respective associations, new safety protocols were put in place to ensure that those on the jobs
Construction of the second bridge over the Raritan River in New Brunswick. This allowed for Route 1 to be widened and to be a divided highway, allowing the existing bridge to serve northbound traffic and this new one to serve southbound traffic. Photo was taken by Edward Cremone and submitted by his son, member Anthony Cremone.
58 Utility & Transportation Contractor | december| 2020
What better way to celebrate the history in the Zoom world than by researching and re-telling the stories of those who came before to remind us of all that was accomplished and all that was built. These members were part of the greatest generations who fought for and achieved an eight-hour work day, continuous training, fair compensation, and comprehensive benefits to ensure health, safety, the ability to raise a family, educate children, and retire with dignity. Many went to war, fought for our freedom, and then returned home to rebuild the America we know today. These same men and women also weathered the drastic changes in technology, from steam-driven engines to cables to hydraulics
-XVW DV ZH KDYH EHQH¿WWHG from those Operating (QJLQHHUV ZKR EOD]HG WKH trail before us, we must DGDSW WR FKDQJLQJ WLPHV DQG seize opportunities that will HQVXUH FRQWLQXHG VHFXULW\ IRU RXU \RXQJHU DQG IXWXUH PHPEHUV DV ZH ORRN DKHDG WR WKH QH[W \HDUV - Greg Lalevee, Business Manager
While the formal celebrations have now been put off until sometime in 2021, planning for the next 100 years continues. Local 825 is converting its stateof-the-art training centers into institutions of higher learning that will prepare members for careers developing hardware and software to maintain and operate heavy equipment. They will ensure our next generations of members continue to be the besttrained, most productive heavy equipment operators available anywhere.
Feature Story
Modern day photo taken at the training center
that lift tons and move mountains. Today’s changes are coming at a fast pace, with GPS, robotics, and artificial intelligence promising to alter the landscape once again. Like their forefathers, Local 825 members are determined to prepare for a future that will leave succeeding generations with a mastery of their trade.
Looking toward the future – the Portal Bridge and Gateway Tunnel projects, development of 5G technology, and updating our water infrastructure – the men and woman of Local 825 are ready to build New Jersey for the next 100 years.
Congratulations Local 825 Operating Engineers on 100 years of dedication to the construction industry.
We at UTCA wish you continued success! Utility & Transportation Contractor | december| 2020 59
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IUOE LOCAL 825
MOUNT CONSTRUCTION COMPANY, INC.
(856) 768-8493
427 S. WHITE HORSE PIKE • BERLIN, NJ 08009 www.themountgroup.com
"Building A Better New Jersey Through Transportation And Utility Construction"
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Congratulations to
IUOE 825
for 100 Years of Service to the Industry
Dave Smith - President, UTCA Robert A. Briant, Jr. - CEO, UTCA
Utility Contractors Industry Advancement Fund Phil Schifano - Chairman, UCIAF
UTCA of New Jersey PO Box 728 Allenwood, NJ 08720 (732) 292-4300 www.utcanj.org
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NAP WOULD LIKE TO CONGRATULATE JRCRUZ Corp
Cruz Family
20 Years in Business
70 Years in NJ Construction IUOE 825
Celebrating 100 Years
Congratulations to JRCRUZCorp 20 Years in Construction
The Cruz Fatnily 70 Years in NJ Construction
Operating Engineers Local 825 100th Anniversary
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JRCruz Corporation for celebrating 20 years of experience taking on challenging projects and providing solutions for your clients in the heavy construction Industry. The Cruz family for 70 years of excellent service In construction.
-.......
IUOE 825 for 100 years of playing a critical role in every major construction project from the Hoover Dam to the Alaska Pipeline. Locally lets not forget their participation in the NY and NJ skylines, Holland and Lincoln Tunnels, and sadly the demolition of the World Trade Center.
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rulemaking process for environmental justice law begins By: dan kennedy, director of environmental & utility operations
A
s previously reported, Governor Phil Murphy this past September signed into law Senate Bill 232, which requires the New Jersey Department of Environmental Protection (NJDEP) to “evaluate the environmental and public health impacts of certain facilities on overburdened communities when reviewing certain permit applications.” Specifically, the law mandates “environmental justice impact statements” from proposed and existing facilities seeking certain emissions permits in what the State now deems “overburdened communities.”
This law, when it becomes effective, could have the effect of delaying or even blocking approvals for new facilities and expansions in areas that meet the definition of “overburdened.” However, advocates of this effort believe this approach will begin to address the cumulative effects of environmental impacts on communities that already host industrial facilities. UTCA Position During the development of this now law, UTCA worked with a coalition of business and industry leaders, including members of the New Jersey State Building and Construction Trades Council, to express concerns related to this “environmental justice bill.” Amendments were sought and some were achieved before the bill went to the Governor’s desk. The effort had an extraordinary amount of support in the Legislature and was backed strongly by Governor Murphy. UTCA’s opposition was based on the fact that aspects of this bill were too broad and unintended consequences were not thoroughly considered. For example, the definition of “overburdened community” in S232 empowers the DEP to require this additional analysis in more than 300 communities, which account for well over half of the state. Further concerns were raised that this bill would add both uncertainties and delays to the eight types of facilities targeted due to the unclear application and broad definitions of many provisions.
In comparison to regulations for new facilities, the law does not require or even expressly allow NJDEP to deny existing permit renewals or expansions based on EJ concerns alone. Instead, NJDEP may impose conditions on a facility for permit approval after considering the EJ analysis, which is an assessment process identical to that imposed on new facilities. Many unresolved questions still remain and will need to be resolved in the rulemaking process, which is discussed below. Facilities Impacted The new law affects eight types of facilities, including several that typically suffer from the classic “Not in My Backyard” (NIMBY) reaction regardless of where they are located. These include:
The Pipeline
The new law makes New Jersey first in the nation to require mandatory permit denials under state law for new facilities and to expressly allow the imposition of conditions on renewal and expansion permits for existing facilities based on “environmental justice” (EJ) concerns alone. A denial will be required for new facilities “where an [EJ] analysis determines a facility will have a disproportionately negative impact on overburdened communities.” How the NJDEP and courts will interpret this language will be the matter of serious discussion for years to come.
One large concession achieved was the addition of language that allows NJDEP to grant a new permit or the renewal of a permit if the analysis shows that the facility “will serve a compelling public interest in the community where it is to be located.” Other language was clarified to include a distinction between new and existing facilities by requiring NJDEP to deny a permit for new facilities in certain circumstances, while allowing NJDEP to impose conditions in a permit for expansion of an existing facility or the renewal of an existing facility permit. An exception to the EJ impact statement was added for permits that remediate or modify a facility’s major source permit if the activities or improvements “do not increase emissions.”
• Major sources of air pollution • Resource recovery facilities or incinerators • Sludge processing facilities, combustors, or incinerators • Sewage treatment plants with a capacity of more than 50 million gallons per day • Transfer stations or other solid waste facilities, or recycling facilities intending to receive at least 100 tons of recyclable material per day • Scrap metal facilities
Utility & Transportation Contractor | december| 2020 71
• Landfills, including, but not limited to, landfills that accept ash, construction or demolition debris, or solid waste • Certain medical waste incinerators, excluding those attendant to a hospital or university for disposal of self-generated regulated medical waste I expect that owners of power plants, co-generation facilities, refineries, and manufacturing or other stationary locations that utilize major emitting sources such as large boilers, engines, or emergency generator equipment will have the most focus on them. What is an “Overburdened Community”
The Pipeline
An “overburdened community” is defined as “any census block group, as determined in accordance with the most recent U.S. Census, in which: (1) at least 35 percent of the households qualify as low-income households; (2) at least 40 percent of the residents identify as minority or as members of a state recognized
72 Utility & Transportation Contractor | december| 2020
tribal community; or (3) at least 40 percent of the households have limited English proficiency.” Estimates indicate that there are approximately 310 municipalities in NJ (565 total) with populations totaling approximately 4,489,000 that have overburdened communities within their municipalities. Stakeholder Process / Rulemaking The law is not effective until the NJDEP promulgates administrative rules. This was another concession in the legislative process, as earlier versions would have had these new standards become effective immediately. The rulemaking process for this new law is a high priority for NJDEP that will take a year or more. UTCA is already engaged directly in the rulemaking process and is working with partners to coordinate our efforts and maximize the impact of our advocacy. Given the scope of affected municipalities and communities, I expect that the process of developing administrative law regarding the EJ review standard and exceptions will be challenging and ripe with tension. Stay tuned.
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By: tim fitzpatrick, senior vice president, employee benefits, ioa & nancy damato, rda benefit services
S
mall employers face considerable challenges when managing their group medical programs. Annual rate increases, high participation requirements, and a shrinking marketplace all create a heavy burden for companies looking to maintain competitive solutions to attract, retain, and reward their employees. The majority of options that exist for these organizations fall within the fully insured market. However, options in the self-insured market, traditionally installed by larger groups, can present a practical alternative for smaller employers.
A 2016 Cigna white paper explains the market differences well: “In a fully insured arrangement, the employer pays a fixed monthly premium to the insurer providing the medical benefits. The premium amount covers the expected claims and administrative costs, as well as an insurance risk charge. If actual claims are lower than expected, the insurer keeps the difference. If actual claims are higher than expected, the insurer pays the difference. In a self-funded arrangement, the employer typically pays a fee to a plan administrator, who performs functions such as claim processing and securing discounted services from health care providers. The employer takes on the risk of claim fluctuation, paying the actual claims incurred by enrolled employees and their covered dependents.” The claims fluctuation referenced above can present a limiting dynamic for some organizations when considering self-funding. If an employer is paying claims as they are incurred, there can be months where large variations in cost occur. This volatility in cash flow may deter employers from engaging in this type arrangement. This is where the level-funded market may provide a potential solution. A level-funded program is a form of self-insurance where variation in claims costs can be stabilized by attaching a monthly accommodation arrangement. Employers are charged a set or “level” amount each month. These costs are based on current plan enrollment and are comprised of a number of underwriting factors including (but not limited to) administrative fees, stop loss insurance, and expected claims. A portion of the employer’s payment is used to fund a claims account, which the third-party administrator uses to pay claims as they incurred, on behalf of the employer.
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level-funded medical programs can provide a practical alternative for small employers Benefits of Level Funding: • Flexibility in Benefits and Network: Many level-funded carriers allow for flexibility in plan design and provide options for robust national networks. This allows an organization to tailor their offering more easily to fit the needs of their employees. • Access to Claims Data: Employers are typically provided with detailed access to information regarding their claims on a group level. This information allows an organization to better understand their overall plan spend and project their program costs. It also provides an opportunity to adjust their benefits and deploy strategic resources based on utilization. • Opportunity for a Return: As mentioned above, a “level” amount is charged each month, which helps to fund a claims account. If a portion of that money is left unused at the end of the contract year, many administrators will return a portion of those dollars to the employer. • Wellness Incentives: Many level-funded programs are heavily invested in employee wellness. Often, clients are paired with dedicated health improvements specialists, online educational resources, and even carrier-sponsored funds to develop internal wellness initiatives within the company. Level funding can present a great alternative to the traditional fully insured market for smaller employers. These programs are, however, a self-insured arrangement and should be analyzed carefully prior to engagement. There are many important factors to consider which exceed the scope of this overview. We recommend that any company considering these options seek the guidance of an educated professional, such as their broker or insurance consultant, as the employer-sponsored group medical market is ever changing and evolving to fit the shifting needs of companies of all sizes. It is essential, therefore, for small employers to explore all of their options to ensure that they are effectively addressing the financial and coverage needs of their employees and organization as a whole.
Utility & Transportation Contractor | december| 2020 81
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Congratulations to IUOE 825 on Celebrating 100 Years
And to JRCRUZ Corp on 20 Years in Construction and Cruz Family on 70 Years in NJ Construction
what does that mean for nj construction employers? By: seth tipton, florio, perucci, steinhardt, cappelli, tipton & taylor lLC
A
fter passing the adult-use cannabis referendum this November, residents in New Jersey will join a third of the country living in a state where adults over the age of 21 will be legally permitted to purchase, possess, and use cannabis. The referendum was the culmination of two busy years for cannabis in the Garden State, beginning almost immediately after Governor Phil Murphy took office in January 2018. Responding to an executive order made by Governor Murphy on the first day he was in office, the Department of Health issued sweeping changes to the New Jersey medical cannabis program in 2018, intending to remove barriers to the use of cannabis as a first-line treatment for a host of conditions. The Jake Honig Compassionate Use Medical Cannabis Act (the “Jake Honig Act”) followed in 2019. The Jake Honig Act expanded the list of medical conditions eligible for treatment with cannabis; created a new regulatory commission, the Cannabis Regulator Commission or CRC, to oversee the program; and established a host of new license types for cultivators, processors, and dispensaries to deliver cannabis to patients. These developments have resulted in a drastic increase in the number of registered medical cannabis patients, exploding from approximately 18,000 patients in January 2018 to more than 86,000 patients as of September 2020, with thousands more added each month. If you are a New Jersey employer with a drug screening program, there is an increasing likelihood in the months and years to come that more and more of your workforce is going to test positive for cannabis use. In years prior, the solution might have been straightforward: discipline or termination. However, with a significantly expanded medical cannabis program that includes employee protections and the looming adult-use cannabis laws that will permit ordinary citizens to purchase and use cannabis as easily as liquor, employers must anticipate much more nuanced responses to positive drug screens. Some employers may also consider eliminating all or certain parts of previously used drug screening programs to avoid employment discrimination claims and other potential liability. Employee Protections Under the Jake Honig Act Among the notable changes included in the Jake Honig Act were employee protections for medical cannabis patients. Specifically, the law provides that an employer may not take “adverse employment action” against an employee who is a medical cannabis patient based “solely” on the patient’s status as a registered patient. Prohibited adverse employment actions include “refusing to hire,” terminating, or discriminating against such employees. Further, if
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adult-use cannabis is going to be legal. an employee or potential employee tests positive for cannabis use as part of a drug testing program, that person must be given written notice from the employer that the employee or potential employee must have an opportunity to “present a legitimate medical explanation” for the positive test result, including proof of authorization for medical cannabis from a doctor or proof of registration with the Department of Health. While this seems like a relatively bright-line rule, the practical implications present significant challenges for employers. First, with respect to job applicants, an employer may no longer refuse to hire an applicant based solely upon a positive drug screen for cannabis if that applicant is a registered medical cannabis patient. This means that not only should the positive screen be potentially disregarded, but that the employee could theoretically be immune to discipline or termination for future positive drug screenings for cannabis for as long as that employee is a medical cannabis patient. If an employer were to take an adverse employment action against such an employee at a future date, it might invite a claim by such employee that they were discriminated against as a result of their protected cannabis use. Similarly, if a current employee enrolls in the medical cannabis program and suddenly tests positive for cannabis, the employee might gain a similar protection, insulating that employee from discipline or termination for future positive drug screens for cannabis. In fact, recent case law has held that if an employee has a medical condition for which cannabis is a legal treatment, an adverse employment action against an employee stemming from cannabis use could give rise to liability under the New Jersey Law Against Discrimination. Adult-Use Cannabis Despite the passage of the referendum, adult use of cannabis outside of the medical program remains illegal as a matter of state and federal law in New Jersey. The referendum does not make adult use of cannabis legal, rather, it amended the New Jersey Constitution to authorize the New Jersey Legislature to adopt laws to enable the new CRC to administer, regulate, and most importantly, tax the program. That process has just begun, with bills in committee with the Assembly and Senate pending as of the date of this article. The lead bill, Senate Bill 21 or S21, includes new protections for employees, prohibiting employers from taking adverse employment action against an employee “because that person does or does not smoke, vape, aerosolize, or otherwise use cannabis items.” However, employers are still permitted to drug test employees “upon a reasonable suspicion of an employee’s” usage of cannabis while working, “upon finding any observable signs of
Utility & Transportation Contractor | december| 2020 85
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intoxication,” or following an accident. Should such a test be positive, an employer is not prohibited from taking action, including, “dismissal, suspension, demotion, or other disciplinary action.” While it is not clear whether this language will remain in the bill that is ultimately signed into law, it gives rise to many of the same concerns that the Jake Honig Act raises. Cannabis use can result in a positive test days or weeks after the use, and traditional drug screenings do not prove actual intoxication or impairment at the time of the test. As a result, if an employer fires an employee who is not a medical cannabis patient as a result of a positive drug screening without proof of intoxication during work hours, that employee could allege discrimination or that the employee’s responsibilities do not bear any relation to off-hours use of cannabis. What Should Employers Do? Rules on adult use of cannabis will continue to change in the coming months as the law is finalized and the CRC adopts regulations for the program. However, employers should use this time to immediately review and update existing policies for cannabis use and screening. Investigate and Document Use or Impairment During Work Hours As noted above, both the Jake Honig Act and S21 provide protections for employees who test positive for cannabis. However, these laws provide no protections for employees who use cannabis during work hours or are otherwise impaired at work. Employers remain free to discharge or discipline employees who use cannabis at work or are impaired during work hours. The difference now is that a positive drug test will not be sufficient on its own to justify adverse employment actions. Employers should update policies to require human resources personnel to conduct a detailed evaluation of employees who are suspected to be intoxicated. The evaluation should involve more than one employee and have a rigorous, written reporting requirement to provide a defense to any allegation of discrimination. Review Who You Are Testing A review of who you are testing is also prudent. Employers subject to the Federal Drug-Free Workplace Act as a result of federal contracts or otherwise often mistakenly believe that they are required to test all employees. This is not the case, however, as all that the law requires is that the employer “make a good faith effort to provide a drug-free workplace.” Consequently, employers should carefully review drug testing policies to limit testing for cannabis perhaps only to those employees who are in safety-sensitive positions or for post-accident or incident investigations. For non-safety-sensitive positions, employers may be able to avoid potential discrimination liability by not knowing whether an employee is or is not using cannabis during off-hours. In fact, a New Jersey court suggested in a recent decision that an employer could not discriminate against an employee for cannabis use if the employer is not aware of the use. This analysis is highly fact sensitive, but with the number of persons using cannabis legally likely to dramatically expand, employers should update these policies now and review
86 Utility & Transportation Contractor | december| 2020
them periodically as the laws and regulations are adopted. Require Employees to Acknowledge Receipt of Drug-Testing Policy Employers should also evaluate policies to make sure that employees are notified in advance of their right to prove a legitimate reason for a positive drug screening under the new Jake Honig Act. If applicable, the policy should provide specific categories of safety-sensitive positions that will be subject to drug testing, the rationale for testing employees in connection with certain state or federal projects, as well as what types of incidents or accidents will trigger automatic testing regardless of the position. Employees should also be required to acknowledge receipt of the policy in writing. Conclusion Legal cannabis use is coming for New Jersey, and with an anticipated market of millions of adults, employers will undoubtedly begin to see increased usage among employees. These enormous changes in the law will likely precede a proliferation of discrimination claims and vast changes in labor law. Employers should consult with legal counsel to review and update drug testing and intoxication policies as the law develops to avoid future liability and disruption. 1 NJ Health Executive Order 6 Report, Acting Commissioner Sherreef Elnahal, M.D., M.B.A (March 23, 2018) available at https://www.state.nj.us/health/medicalmarijuana/documents/EO6Report_Final.pdf. 2 N.J.S.A. 24:6I-1. 3 “N.J. Must Quadruple the Number of Medical Weed Growers to Meet Demand, Lower Price, State Says,” Susan K. Livio (April 2, 2019) available at https://www.nj.com/marijuana/2019/04/nj-must-quadruple-thenumber-of-medical-weed-growers-to-meet-demand-lower-price-state-says.html. 4 “Garden State Dispensary Issued Permit to Dispense Medical Marijuana in Eatontown,” Commissioner Judith M. Persichilli (September 14, 2020) available at https://www.nj.gov/health/news/2020/approved/20200914a.shtml. 5 N.J.S.A. 24:6I-6.1. 6 Id. 7 N.J.S.A. 24:6I-6.1(b)(2). 8 Wild v. Carriage Funeral Holdings, Inc., 458 N.J. Super. 416, 432-33 (App. Div. 2019), affirmed, 241 N.J. 285 (2020). This decision was based upon a prior version of the Jake Honig Act that did not include the employee protections adopted in 2019. 9 “Top Lawmaker Introduce Bill to Launch Weed Industry Days After Vote to Legalize Passes in N.J.,” Amanda Hoover and Susan Livio (November 6, 2020) available at ttps://www.nj.com/marijuana/2020/11/top-lawmaker-introduces-bill-to-launch-weed-industry-days-after-vote-to-legalize-passes-in-nj.html. 10 Senate Bill 21 §46 (introduced November 5, 2020); Assembly Appropriations Committee Amendments to Assembly Bill 21 §47 (November 16, 2020). 11 Assembly Appropriations Committee Amendments to Assembly Bill 21 §47 (November 16, 2020). 12 “Marijuana Delta-9 Tetrahydrocannabinol (THC),” Mayo Clinic Laboratories available at https://www. mayocliniclabs.com/test-info/drug-book/marijuana.html. 13 “Drug-Impaired Driving,” National Highway Traffic Safety Administration available at https://www.nhtsa. gov/risky-driving/drug-impaired-driving. 14 N.J.S.A. 24:6I-6.1(c)(1). 15 Notably, versions of the legalization bill have included a provision for a “Workplace Impairment Recognition Expert” certifications. Employers would be required to have an employee with this certification who would be responsible for “identifying an employee’s usage of, or impairment from, a cannabis item . . . .” It is not clear whether this certification will remain in the bill that is passed into law. Assembly Appropriations Committee Amendments to Assembly Bill 21 §47 (November 16, 2020). 16 41 U.S.C. 8103. 17 Id. at (b)(1). 18 Wild, 458 N.J. Super. at 431-33.
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AFFILIATED WITH: NJ STATE AFL-CJO NJ STATE BUILDING & CONSTRUCTION TRADES COUNCIL PARENT ORGANIZATION LABORERS' INTERNATIONAL NION OF NORTH AMERICA
172 Anthony Capaccio
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Folsom Office 1100 Blackh01·se Pike Folsom, NJ 08037 (609) 567-4488 (609) 567-9498 FAX
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new jersey tax savings for construction companies By: andrew schoenemann, cpa, senior manager, withum
N
ew Jersey pass-through entity tax (new for 2020) provides significant tax savings opportunities for construction companies.
On January 13, 2020, New Jersey Governor Phil Murphy signed legislation creating the Business Alternative Income Tax (BAIT), an elective entity-level tax on pass-through businesses for tax years beginning on or after January 1, 2020. As many construction companies are organized as pass-through entities (partnerships or S-corporations), this election could potentially provide significant tax savings for the business owners. At the onset, the COVID-19 pandemic slowed issued guidance and forms from the NJ Division of Taxation. However, recently the state and IRS have both released more information. Below are some of the highlights and important points regarding the BAIT. Purpose: The purpose of this law change is clear: to effectively eliminate the federal limitation on the state and local tax (SALT) deduction of $10,000 imposed by the 2017 Tax Cuts and Jobs Act (TCJA). By imposing an income tax directly on the pass-through entity (PTE), the state's tax on pass-through entity income would now become deductible by the pass-through entity for federal income tax purposes and would not be limited. Notable points: • Pass-through entities can elect to pay New Jersey income tax at the entity level, and the owner(s) would receive a credit on their personal return(s) for the entity-level tax paid. o Credit is derived from the tax imposed on each member's share of distributive proceeds attributable to the PTE for the tax year (i.e., NJ sourced income). o For individuals, the credit is refundable, and any excess credit is treated as an overpayment. • Election is made annually and must be made on or before the original due date (March 15th for calendar year filers). o Election is not covered by extension to file return (election must be made electronically on or before the original due date, not including extension). o It appears as though there will be an electronic form for the election, and the state has set up a mechanism on its website to e-file the election and pay estimated taxes. • Election cannot be made retroactively.
• Revocations of the election must also be made on or before the original due date. • For fiscal year filers, effective taxable years begin on or after January 1, 2020. • At least one partner or shareholder must be subject to NJ gross income tax (GIT) to make the election. o The PTE must have the consent of: all members; or an officer, manager, or member of the electing entity who is authorized to make the election. • Several other states have passed similar workarounds in recent years, including Connecticut. However, Connecticut's change was mandatory, not elective. • Per the NJ Division of Taxation, since 2020 is the first year the election is available, taxpayers will not be penalized under the safe harbor provisions for the failure to file or make estimated payments this year. o Post-2020, quarterly estimated tax payments for the BAIT will be required to avoid penalties. o Taxpayers must use Form PTE-100 to file and pay. • Estimated tax payments made for the BAIT tax return will not be transferred to other taxes. • Refund and revocation forms are currently not available. • The IRS issued Notice 2020-75 in response to several states who have recently enacted laws to allow entity-level income tax. The notice provides that partnerships and S corporations are not subject to the $10,000 state tax deduction limitation, which ultimately gives the green light for the NJ BAIT and confirms the IRS will allow it. • Although the state has given a pass on underpayment of estimated tax penalties in this first year, the IRS notice has made it clear that to get the benefit of the federal deduction in 2020, the deduction is permitted in the year tax payments are made. Therefore, payments need to be made by December 31, 2020. Risks and considerations: • Per the statute, the BAIT is pursuant to the NJ GIT Act, which generally applies the partnership apportionment rules. Thus, an S-corporation could potentially be subject to different apportionment/receipts sourcing rules by making the election.
Utility & Transportation Contractor | december| 2020 93
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• The election doesn't eliminate the requirements to file other returns or pay additional taxes, such as NJ-CBT-1065 for non-resident withholding. This presents a cash flow concern; potentially, non-resident taxpayers could have to make duplicated estimated payments, paying both BAIT and NR withholding on the same income. In this case, they would then have to wait to file a personal return to recover a refund for the duplicate payments. • Because election is not made until after the yearend, consideration needs to be given to which estimated tax payments partners or shareholders make – that is, whether the payments were made at the individual level or at the entity level. There is potential for underpayment penalty exposure by paying in estimates on the wrong forms and not transferring the payments. • It is possible that the resident state of a non-resident member may not allow a resident credit on their individual returns for taxes paid at the entity level in New Jersey.
94 Utility & Transportation Contractor | december| 2020
Conclusion: Now that the IRS has given its blessing, the NJ BAIT is a great tax savings opportunity, primarily for New Jersey-based construction companies with resident partners and shareholders. Although the election itself doesn't have to be made for a few months and the state has put a pause on BAIT estimated tax penalties for 2020, the time is now to consider your options and make a decision on whether or not to elect. To get the benefit of the federal deduction, which is the point of this entity-level tax, you will need to make an estimated tax payment before the end of this crazy year, so act now.
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