By Mark Valentini, Vice President of Legislative Affairs
On April 10, Congress agreed to a budget resolution that will serve as the template for comprehensive legislation embodying the Republican majority’s policy priorities, which will include reform of current U.S. tax policy.
Since passage of the Tax Cuts and Jobs Act of 2017 (TCJA), many PHCC members report that they have benefited or stand to benefit from TCJA policies such as higher estate tax thresholds, individual income tax deductions for qualified business income, significant deductions on newly acquired equipment in the first year of its service, and a reduction in the corporate income tax rate to 21%. These policies have allowed contractors to mitigate their tax burdens, in turn allowing them to invest more in their businesses and workforce, be more resilient during periods of stagnant workflow, retain and hire more employees, and have much-needed certainty when it comes to transferring business operations to the next family generation.
However, several of these policies are set to expire at the end of this year if Congress does not take action to pass tax reform.
- Estate Tax thresholds must be at least maintained if not increased. If Congress does not pass a comprehensive tax reform package, beginning in 2026, the estate tax threshold will be cut in half from its current exemption of $13.1 million to its pre-TCJA levels of $6.12 million.
- Section 199A deduction prevents contractors from being taxed twice. If Congress does not pass a comprehensive tax reform package, contractors will no longer be able to deduct their qualified business income which will in essence tax them twice for their earnings. Under current statute, contractors drawing income from a qualified business entity can deduct up to 20% of those earnings on their individual returns.
- Bonus depreciation must not be allowed to sunset. Under TCJA, bonus depreciation allows contractors to deduct a larger portion of the cost of newly acquired construction equipment the first year it’s placed into service rather than spreading out the expense over time, regardless of whether the equipment is brand new or used (i.e. “new to you”). Expensing under current statue stands at 40%, will be reduced to 20% in 2026, and sunsets beginning 2027. However, the Trump administration’s proposal for 100% expensing retroactive to January 20, 2025, is under serious consideration by Republican tax writers.
- Congress must continue to cut the corporate rate without increasing the individual rate for certain incomes. It is unclear whether the corporate rate will be further reduced to 15%-which would allow even more businesses to thrive as we encounter economic uncertainty. But currently there are discussions to increase the individual rate up to 40% for certain incomes, negating any reduction in tax burdens at the corporate level.
Congress needs to hear from you.
- Click here to identify your elected federal representatives on Capitol Hill and contact them to urge them to pass a comprehensive tax reform package that extends TCJA provisions to help America prosper, and reduces the corporate rate so employers can continue to thrive.
- You will also have the opportunity to tell your legislators IN PERSON by registering for the 2025 PHCC Legislative Conference on May 20-21 in Washington, DC. Time is running out to secure a spot at the early bird rate (expires April 30) and steeply discounted hotel room rate (expires April 20), so register TODAY!
