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12/08/2017

Tax Reform Update--Conference Committee at work

The Tax Reform bill has gone to conference committee and Senator Rob Portman from Ohio is one of the conferees.  See below for analysis from ACEC:

Going into conference, we’re generally in good shape with the larger C corporations. All C corporations – including engineering firms – are generally treated equally and uniformly under both the House and Senate bills in terms of qualifying for lower 20 percent rate. ACEC actually favors the Senate bill on this point, as it applies the 20 percent rate both to corporations and “personal service corporations” – a category many of our corporate members fall into in order to use cash basis accounting, whereas the House bill provides personal service corporations a 25 percent rate. The key problem remains with the passthrough firms, and limitations imposed on the small and mid-sized engineering firms organized as passthroughs that make up the majority of firms in your state and throughout the country. The House bill largely excludes engineering firms from the 25 percent passthrough tax rate, while the Senate bill would allow some firm owners to qualify for the 23 percent passthrough tax deduction, but not others (based on a taxable income limitation). Both the House and Senate bills also eliminate the Section 199 domestic production activities deduction, which engineering and architecture firms qualify for and use. If engineering passthrough firms are denied tax benefits provided to other passthrough industries in the final conference report, and they also lose the Section 199 deduction, these firms will pay a higher tax burden than under current law.

ACEC’s message to Congress is to remove engineering from the ‘specified services’ category, and allow small and mid-sized engineering firms the same access to tax relief that larger firms will have. Please continue to use the ACEC Action Alert page and Tax Reform Fact Sheet to voice your opinion on the tax reform bill.

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