December Construction Advantage
In this edition of The Construction Advantage, we discuss the doctrine of Nullum Tempus in New Hampshire, recent Internal Revenue Service guidance on when construction has begun for purposes of tax credits, and OSHA’s clarification on its new record keeping regulations. Happy 2017 to everyone!
Contractor Liability Narrowed, New Hampshire Rejects Doctrine of Nullum Tempus for City Contracts
By: Conor Shankman
Statutes of limitations dictate how long a party can wait to bring a lawsuit after an incident. They ensure that defendants receive timely notice of actions against them and protect defendants from stale or fraudulent claims. As with any rule, statutes of limitation are often subject to exception. For example, pursuant to the common law doctrine of nullum tempus occurrit regi (“time does not run against the king”) a sovereign body (e.g. the State of New Hampshire) is not necessarily barred from bringing suit just because the statute of limitations has run. Courts apply the doctrine of nullum tempus because governmental agents are not always able to promptly discover the existence of violations of contract or law and institute proceedings in a timely manner.
In City of Rochester v. Marcel A. Payeur, Inc., the New Hampshire Supreme Court held that nullum tempus did not bar the application of the statute of limitations to the City’s breach of contract claim which stemmed from the failure of a recently serviced water tank. There, the City brought suit against Payeur for damages resulting from service he performed on one of the City’s water tanks in 2009. As part of the suit, the City also named Chicago Bridge & Iron (“CB&I”) and AECOM Technical Services (“AECOM”) as defendants for failing to properly construct the water tank in 1985.
While the 29-year-old claim asserted against CB&I and AECOM would normally be barred by the State’s three-year general statute of limitations, the City argued that the statute of limitations was not applicable because the doctrine of nullum tempus applied. Ultimately, the New Hampshire Supreme Court held otherwise, reasoning that an application of nullum tempus to the City’s contract claim was not supported by public policy.
Because a municipality is always aware of the contracts it has entered into, contractual undertakings are unlikely to lead to unknown violations of public rights, therefore cities should not be granted additional time to bring suit. The Court’s decision had positive implications for contractors who work on municipal projects in New Hampshire by creating clear time limits by which a municipality must bring suit, therefore limiting liability for contractors.
Begin the Begin: IRS Issues New Guidance On When Construction Has “Begun.”
The IRS has recently released Notice 2007–04 providing guidance on the phrase “Begun Construction” which is an eligibility requirement for both the production tax credits (PTC), and the investment tax credit in lieu of the PTC. The notice is a continuation of prior notices submitted by the IRS to provide taxpayers with information regarding construction deadlines introduced by the American Taxpayer Relief Act of 2012, and further addressed in the Protecting Americans from Tax Hikes Act of 2015 (“PATH Act”). The PATH Act extended the PTC for certain renewable energy facilities, and the notice provides guidance regarding how to maintain eligibility through both the Continuity Safe Harbor and the Five Percent Safe Harbor for the relevant credits in three separate areas that are discussed in this summary. To see the actual notice, please click on the link: https://www.irs.gov/pub/irs-drop/n-17-04.pdf
First, the notice extends the completion timeframe during which the Physical Work Test for maintaining eligibility, which requires continuous construction activities from start of construction through completion. Under the new guidelines, the outside date for completion of current construction and placing a facility in service has been moved from the later of December 31, 2016 or in the calendar year that is no more than four years after the year in which construction began, to December 31, 2018 or in the calendar year that is no more than four calendar years after the year in which construction began. Note that there are also eligibility requirements related to beginning new construction within key timeframes that vary depending on the technology being deployed.
The notice also provides that the prohibition against beginning construction one year and then maintaining eligibility by using the Five Percent Safe Harbor in the following year if construction had been interrupted only applies to facilities that begin construction after June 6, 2016. If alternating methods for maintaining eligibility were performed prior to June 6, 2016, the later date is capable of being used as the beginning of the 4 year window of time to complete construction.
Finally, the notice articulates costs that are included in the Five Percent Safe Harbor Test for retrofitting facilities. The test can apply and allow eligibility for the tax credit if the used property within a retrofit does not comprise more than 20% of the fair market value of the project after the retrofit. The new notice further clarifies that the Five Percent Safe Harbor only applies if 5% of the costs of the new property and new construction have been incurred.
While generally favorable to taxpayers, these rules are complex, you should not rely on this article as legal advice, and you should seek advice on your own project. For further information, please feel free to contact Mike Bosse or Kat Joyce.
OSHA Clarifies Employers’ Continuing Obligation to Make and Maintain Records of Injury and Illness
By: Meredith Eilers
Recently, OSHA amended its recordkeeping regulations to clarify that the duty to make and maintain accurate records of work-related injuries and illnesses is an ongoing obligation. OSHA requires employers to make a record of certain work-related injuries and illnesses on an OSHA 300 Log and complete an OSHA 301 Incident Report within seven days (or within eight hours if there is a fatality). See 29 C.F.R. 1904.29. If OSHA discovers that employers are not in compliance with these recordkeeping requirements, it can issue citations and assess monetary penalties. The Occupational Safety and Health Act of 1970 (the “OSH Act”) contains a statute of limitations providing that no citation may be issued more than six months following the “occurrence of any violation.” 29 U.S.C. 658(c). OSHA’s recent amendments are to clarify that the “occurrence of any violation” is not limited to the moment an employer fails to make a record within the seven days following the injury or illness. Rather, the employer has a continuing obligation to make or correct that record. Failure to do so is considered a continuing violation, in the same way that the failure to correct hazardous workplace conditions is considered a continuing violation. For example, if an employer fails to record an injury or illness within seven days, the employer’s obligation to record continues and each successive day where the injury or illness remains unrecorded is a continuing “occurrence” of the ongoing violation.
OSHA states that the amendments to 29 CFR 1904 do not impose any new substantive recordkeeping requirements; the amendments simply clarify what has been longstanding OSHA policy. The need for clarification became clear after the D.C. Circuit concluded that OSHA must cite an employer for failing to record an injury or illness within six months of the first day the injury or illness should have been recorded because after six months from that date, any citation is barred by OSHA’s statute of limitations. See AKM LLC v. Sec’y of Labor, 675 F.3d 752 (D.C. Cir. 2012) (Volks II). In a concurring opinion, Judge Garland disagreed with the majority’s conclusion that the OSH Act did not permit continuing record-making obligations, but agreed that the specific language of the recordkeeping regulations did not clearly implement that authority. Taking its lead from Judge Garland, OSHA elected to amend the regulations to make the continuing obligation more clear. The final rule becomes effective on January 18, 2017.