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Final Tax Reform Legislation Offers Major Benefits for Construction Businesses


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Congress has passed the final version of the federal tax reform bill, and it will soon head to President Donald Trump to be signed into law. The question on most construction business owners’ minds is likely, “How will it affect me?” 

The legislation will lower tax rates, spur economic growth, and benefit construction businesses for years, according to Stephen E. Sandherr, chief executive officer of Associated General Contractors of America.

Congress has passed the final version of the federal tax reform bill, and it will soon be signed into law. 

AGC, which represents more than 26,000 companies that mostly focus on nonresidential construction, was one of several construction-industry associations to kick start a lobbying campaign that focused on tax reform and fighting for a better outcome for the industry.   

“Our efforts included connecting construction company CFOs and CPAs with tax writers, and generating thousands of pro-construction messages from members to key legislators,” Sandherr said. 

Some of the provisions in the newly passed Tax Cuts and Jobs Act that will benefit the construction industry include: 

  • Reducing the corporate tax rate by 14 points, from 35 per cent to 21 per cent

  • Lowering individual income tax rates 

  • Lowering pass-through tax rates to 20 per cent, which will affect construction companies because many are pass-through entities where owners are allowed to include business profits on their personal tax returns

  • Doubling the estate and gift tax exclusion to $11 million (or $22 million for married couples)

  • Protecting tax-exempt status for Private Activity Bonds which help finance transportation projects, airports, water and wastewater facilities, multi-family housing projects and others 

  • Preserving the Historic Tax Credit for historic building rehabilitation and renovations

Details of these provisions are available here. Most are expected to go into effect January 1, 2018. 

Associated Builders and Contractors President and CEO Michael D. Bellaman also praised the passage of the act. 

“This is a historic day for the construction industry,” he said in a press release. “For too long, ABC’s 21,000-plus members have paid the highest effective tax rate of any sector of the economy. We are a capital-intensive, domestically-oriented industry comprised mostly of small, family-owned and closely held merit shop construction companies employing hardworking Americans. Our members have waited for Washington to let them keep more money in their paychecks, which would enable them to invest back in their businesses, create new jobs in their communities, and grow the economy. The wait is finally over.” 

Despite these wins, Sandherr says there’s still a lot of work to be done. 

Bellaman says most construction companies will particularly benefit from the new 20 per cent deduction for qualified pass-through income, as well as changes to accounting methods that will ease burdens on small contractors. Ultimately, it gives the industry “a simpler and fairer tax code that will lead to more economic freedom and global competitiveness.” 

Despite these wins, Sandherr says there’s still a lot of work to be done. 

“Though Congress missed an opportunity to address the long-term solvency of the Highway Trust Fund via tax reform, we remain focused on ensuring that this administration keeps its promise to rebuild the nation’s infrastructure,” he said. “And, we are committed to efforts to modernize multi-employer pension plans for the future, among other priorities for the industry.”  

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