Ways And Means Considering Modest Tax Relief For Smaller Contractors

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.

Ways And Means, Agriculture Committees May Punt Climate Change Measure

Given a June 19 deadline for marking up the Waxman/Markey climate change bill by House Speaker Nancy Pelosi, House Ways and Means Chairman Charles Rangel and House Agriculture Chairman Collin Peterson both suggest that their committees, which have jurisdiction over large parts of the proposed legislation, may skip full markups of the bill before it goes to the House floor. Pelosi wants climate change off her docket before health care reform is addressed, but these two chairmen complain they can't work on both bills at the same time. The complexities of carbon cap and trade have so split these two committees that neither chairman sees any early resolution. Ducking out may be the only way to keep the bill on Pelosi's aggressive schedule.

Construction Spending Clears House Appropriations Committee

The $550 billion spending portion of President Obama's economic stimulus legislation, including over $153 billion for the construction industry, was reported out of the House Appropriations Committee January 21, and is expected to come to a vote on the House floor next week. Republican amendments offered in the committee in efforts to move $122 billion from spending into tax cuts were all defeated. The committee vote to discharge the bill was strictly along party lines, Democrats supporting it and Republicans opposing it.

In the order they were taken up on the agenda, the following changes were made to the committee print of the bill which has been in circulation:

The committee voted 55-0 to add a requirement that all steel used in construction projects funded by the bill be produced in the United States.

The committee voted 42-16 to require all construction projects funded by the bill to pay tradesmen prevailing wages under the Davis Bacon Act.

On a voice vote the committee approved a requirement that contractors on projects funded by the bill check the immigration status of new hires, and use the federal government E-Verify system to screen out all employees who are illegal immigrants.

The House Ways and Means Committee is marking up its $275 billion tax portion of the bill January 22, and is expected to extend the new five year tax loss carry back provision a few months into 2010, to give the break to retailers whose fiscal year ends in January because of Christmas shopping revenues.

Balancing the added cost of that provision is the exclusion of any financial institution receiving TARP funds from the tax loss carry back.

The home building industry is lobbying for additional tax benefits, in the form of a two year suspension of the taxability of debt restructuring as gross income. While Ways and Means may not include this extra tax break, Senator John Ensign of Nevada expects to introduce it into the Senate version in the Finance Committee.

Majority Leader Reid expects the Senate Finance and Appropriations Committees will both mark up the bill January 27, and he agrees with Speaker Pelosi that Congress will have the final bill on President Obama's Oval Office desk before the scheduled February 13 recess.