Legislation Heads to President’s Desk for Signature
Earlier this week, both houses of Congress passed the Republican tax reform bill, H.R. 1, the Tax Cuts and Jobs Act. For a full accounting of the tax reform bill and its impact on provisions important to the construction industry, please consult this comparison chart. During the conference negotiations between the House and Senate, AGC outlined the construction industry’s priorities for tax reform. The legislation now heads to President Trump for his signature, which could be signed as early as this week or as late as January, depending on year-end spending negotiations.
Of the priorities AGC identified as critical to the construction industry, the conferees adopted a host of AGC’s recommendations, including:
- Reducing the corporate tax rate—to 21 percent;
- Providing tax relief for pass-through businesses—lower individual rates, and a new 20 percent pass-through deduction;
- Ensuring trust owners of pass-through businesses are eligible for the deduction;
- Repealing the corporate Alternative Minimum Tax (ATM);
- Substantially increasing the individual AMT thresholds, reducing its overall impact;
- Increasing the “small contractor exemption” from the percentage-of-completion method of accounting to $25 million;
- Increasing the exemption from the uniform capitalization rules (UNICAP), and availability of cash accounting to $25 million;
- Preserving the tax exemption for private activity bonds (PABs);
- Preserving a modified version of the historic tax credit;
- Doubling the estate tax exemption level to $10.98 million;
- Allowing used equipment to be fully expensed; and
- Preserving the work opportunity tax credit (WOTC).
Unfortunately, the conference report does retain the individual AMT (albeit at a much higher level than under current law), allows the individual tax relief (including the pass-through tax relief) to expire after 2025, does not fully repeal the estate tax, and does not include a long-term funding solution for the Highway Trust Fund, but, on balance, the final bill contains many construction industry priorities and AGC supported final passage.
It’s important to note that AGC did not support the initial tax reform bill as it provided little relief for construction firms organized as pass-throughs, eliminated Private Activity Bonds, and repealed the Historic Tax Credit. Whereas other construction groups endorsed that version of tax reform, AGC continued to fight for a better bill for our industry. By undertaking a rigorous direct lobbying campaign, connecting construction company CFOs and CPAs with tax writers, and generating thousands of pro-construction messages from members to key legislators, AGC helped ensure Congress understood the impact of these provisions on the industry.
Nevertheless, there is still much work to be done in the New Year. Though Congress missed an opportunity to address the long-term solvency of the Highway Trust Fund, we remain focused on ensuring that this administration keeps its promise to rebuild the nation's infrastructure. We are also committed to modernizing multiemployer pension plans for the future, among other priorities for this industry.
We look forward to providing educational resources and opportunities soon via webinars and in-person conferences—like the AGC Convention—to help you and your construction business plan for future growth under this new tax law.
For more information contact Matthew Turkstra at [email protected] or (202) 547-4733.