Several tax incentives that benefit the construction industry are set to lapse on Dec. 31, and industry officials say Congress isn't likely to extend them before that deadline. Lawmakers may act in 2014 to revive these "extenders" and make them retroactive. Some groups are more worried than others about the tax breaks' coming expiration, but most agree that yearly extensions are a poor substitute for broad tax reform.
Some construction firms immediately will feel the loss of accelerated bonus depreciation for equipment, says Liam Donovan, Associated Builders and Contractors director of legislative and political affairs. Through 2011, companies could write off 100% of the cost of new equipment purchased that year. In 2012, they could expense 50% of such costs. The incentive will disappear for 2013, unless Congress extends it. ABC prefers the 100% write-off to the 50% provision. At the lower level, it is not a major incentive to buy big-ticket items, Donovan says.
Nick Yaksich, Association of Equipment Manufacturers vice president of government and industry affairs, says that a bigger priority for his group is the expiration of the current level of Section 179 expensing. Starting on Jan. 1, the amount a firm can deduct annually will drop to $25,000, from $500,000. Yaksich says it is unlikely Congress will address either depreciation tax break before Dec. 31. But he says they could be extended in 2014 and applied retroactively. On the other hand, ABC's Donovan notes that the current emphasis on comprehensive tax reform may dampen the appetite for a narrower, extenders-only package.
For the short term, the American Wind Energy Association (AWEA) does not feel the urgency that some groups do about the expiring tax incentives. In 2012, Congress made a key change in the production tax credit for renewable-energy projects that AWEA says will keep work flowing well into 2015. Rob Gramlich, AWEA senior vice president of public policy, says, "At the same time, the industry still lacks certainty in the medium and long term, and that is something Congress needs to address in the next piece of tax legislation." He adds, "This can't drag out for too long, or else disruptions will occur again."