Republican Congressman Walter Herger (R-CA), with cosponsors Shelley Berkley (D-NV) and David McKinley (R-WV), has introduced H.R. 1993, entitled American Job Builders Tax Reform Act, to provide some modest tax deferral for smaller construction contractors in the years beginning with calendar 2011. Yes, if the bill passes, it will apply for this calendar year’s taxes.
The legislation would permit construction businesses with annual gross revenues of up to $40 million to use the completed contract method of tax accounting for profits. Presently, only those contractors with annual gross revenues of $10 million or less are permitted to use completed contract tax accounting, while those with gross revenues over $10 million must use the percentage of completion method of tax accounting. H.R. 1993 would also increase the $40 million threshold each year to keep pace with inflation, according to the federal COLA.
The completed contract method of tax accounting permits deferral of income taxation on contractor profits until all work on a project is completed, and the business can accurately determine the amount of profit on the project, if any. Under the percentage of completion method, a construction business must pay taxes on the percentage of fee earned on all contracts in its tax year, even though the duration of some projects may make it impossible to determine whether or not a particular project will ultimately produce any profit at all.
H.R. 1993 has been referred to Congressman Dave Camp’s House Ways and Means Committee, where it will be considered by the Revenue Measures Subcommittee chaired by Representative Pat Tiberi (R-OH). Other members of the Revenue Measures Subcommittee include Representatives Rich Berg (R-ND), Shelley Berkley (D-NV), Charles Boustony (R-LA) John B. Larson (D-CT), Kenny Marchant (R-TX), Richard E. Neal (D-MA), Erik Paulsen (R-MD), Peter Roskam (R-IL), and Mike Thompson (D-CA).
If this bill will be helpful to your business, now would be the time to write to members of the subcommittee and let them know you support the legislation.
The legislation would permit construction businesses with annual gross revenues of up to $40 million to use the completed contract method of tax accounting for profits. Presently, only those contractors with annual gross revenues of $10 million or less are permitted to use completed contract tax accounting, while those with gross revenues over $10 million must use the percentage of completion method of tax accounting. H.R. 1993 would also increase the $40 million threshold each year to keep pace with inflation, according to the federal COLA.
The completed contract method of tax accounting permits deferral of income taxation on contractor profits until all work on a project is completed, and the business can accurately determine the amount of profit on the project, if any. Under the percentage of completion method, a construction business must pay taxes on the percentage of fee earned on all contracts in its tax year, even though the duration of some projects may make it impossible to determine whether or not a particular project will ultimately produce any profit at all.
H.R. 1993 has been referred to Congressman Dave Camp’s House Ways and Means Committee, where it will be considered by the Revenue Measures Subcommittee chaired by Representative Pat Tiberi (R-OH). Other members of the Revenue Measures Subcommittee include Representatives Rich Berg (R-ND), Shelley Berkley (D-NV), Charles Boustony (R-LA) John B. Larson (D-CT), Kenny Marchant (R-TX), Richard E. Neal (D-MA), Erik Paulsen (R-MD), Peter Roskam (R-IL), and Mike Thompson (D-CA).
If this bill will be helpful to your business, now would be the time to write to members of the subcommittee and let them know you support the legislation.
