AGC helped bring together nearly 200 organizations to oppose efforts to increase taxes on small, individually, and family-owned construction businesses amid record-setting levels of inflation.

On July 11, AGC helped lead an effort joined by 192 trade associations outlining opposition to two tax increases that, if enacted, would adversely impact small, individually, and family-owned construction businesses.  On July 14, Senator Joe Manchin (D-W.Va.) agreed with AGC, at least for now.

In recent weeks, media reports indicated that, in order to resurrect the previously moribund “Build Back Better Act,” Senate Democrats were considering two tax proposals that would fall entirely on “pass-through” businesses whose owners are taxed on their individual, rather than corporate, tax return. One proposal would expand the so-called “net investment income tax,” which is a 3.8 percent tax on investment income—such as capital gains, dividends, rents, royalties, and the like—to apply to pass-through businesses where the owners actively participate in the business. This would result in an 11 percent tax increase on these businesses during a potential economic downturn, unprecedented supply chain challenges, 40-year high inflation, and a chronic labor shortage.

Another potential tax increase under consideration would disproportionately impact construction firms, along with other cyclical industries, by limiting the amount of losses that pass-through businesses can deduct during an economic downturn. During the Great Recession, many construction firms were able to stay afloat, in part, by accessing previous years’ tax payments as the economy recovered. This policy limits the ability of construction firms to access these losses, jeopardizing their viability as we head into a potential recession.

While the negotiations between Senate Democrats continue, discussions about these and other tax proposals remain fluid. AGC remains hopeful that, if Congress does pass some version of President Biden’s Build Back Better agenda, it is not on the back of small, individually, and family-owned businesses.

If you have questions about this issue, please contact Matthew Turkstra at (202) 547-4733 or [email protected].