August 17, 2010

U.S. builders win battle on timing of income tax

WASHINGTON, D.C.

Associated Builders and Contractors (ABC) welcomed the introduction of the American Job Builders Tax Reform Act of 2010, a bipartisan bill that will modify the tax code to help small construction contractors who are facing increased costs in energy, labour and materials.

“For far too long, construction contractors have been forced to pay income taxes on projects based on estimates rather than having the option of paying taxes when the contract is completed,” said Robin Word, chairman of ABC’s Tax Advisory Group and president of Word CPA Group in Jackson, Miss.

“The definition of ‘small contractor’ under this bill will enable more contractors to report contract income at the conclusion of their jobs.”

Under current law, American construction contractors cannot use the completed contract method accounting method if average annual gross receipts exceed $10 million — a figure that has not been adjusted for inflation since the threshold’s inception in 1986. Instead, contractors are required to use a percentage of completion method which does not accurately reflect results because of the required use of estimates. The American Job Builders Tax Reform Act increases the threshold to $40 million and also indexes the threshold for inflation.

“What is exciting is that this bill’s provisions will enable contractors to retain capital in their businesses for a longer period of time thereby enabling both investment and potential opportunities for job growth,” said Rich Shavell, CPA, a member of ABC’s Tax Advisory Group.

DCN NEWS SERVICES

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