Navigating the future of construction: Key takeaways from AGC’s June 2024 Financial Issues Forum

As we move through 2024, the construction industry faces a dynamic landscape influenced by legislative, economic, and regulatory shifts. Here are the critical insights and takeaways from the Associated General Contractors (AGC) June 2024 Financial Issues Forum.

Legislative update

One of the most pressing issues is the impending expiration of key provisions from the Tax Cuts and Jobs Act (TCJA) at the end of 2025, unless Congress takes action. These provisions include:

??????Individual rate cuts

??????Individual Alternative Minimum Tax (AMT) exemption amount

??????20% qualified business income (QBI) deduction

??????Doubled estate tax exemption

??????Phase down/out of bonus depreciation

Currently, the H.R.7024 - Tax Relief for American Families and Workers Act of 2024 has passed the House but remains stalled in the Senate, with no significant movement expected before the November elections.

Economic update

Ken Simonson from AGC provided an economic update highlighting several key trends:

??????Material costs: While most material costs have stabilized, cement and ready-mix prices continue to be volatile.

??????Wages: Labor wages are projected to increase by 6-8% over the next year.

??????Sector performance: There are steady declines in multifamily, warehouse, and office sectors, contrasted by strong growth in data centers, manufacturing, power, and infrastructure sectors.

??????Funding acts: The Infrastructure Investment and Jobs Act (IIJA), CHIPS Act, and Inflation Reduction Act (IRA) are set to finance construction projects, particularly in infrastructure, manufacturing, and power generation.

??????Labor shortage: The industry continues to grapple with a skilled labor shortage, exacerbated by slower population growth.

?IRS update

?Several updates from the IRS are crucial for contractors to be aware of:

??????Employee Retention Credit (ERC): Major processing delays persist. However, the withdrawal program remains open for claims not yet received or cashed, allowing claimants to withdraw 100% of their claim with penalty relief.

??????Audits and investigations: The IRS has thousands of ERC audits in the pipeline, including ongoing civil and criminal investigations. The IRS generally has three years from the filing date to conduct an audit.

??????Section 179D: For 2023 and beyond, the federal deduction for installing energy- efficient lighting, HVAC, hot water systems, and building envelopes in commercial buildings is up to $5.36 per square foot.

??????Audit rates: Audit rates for high-income individuals, large corporations, and complex partnerships are expected to increase by the 2026 tax year. Additionally, a new audit campaign is focusing on the potential misuse of corporate jets.

??????Service improvements: The IRS plans to enhance taxpayer services by expanding online services, reducing paper use, and simplifying notices.

?Moving forward

The AGC’s June 2024 Financial Issues Forum underscored the importance of staying informed and adaptable in an evolving economic and regulatory environment. As we navigate these changes, construction professionals must remain proactive in managing costs, understanding legislative impacts, and leveraging new funding opportunities.

By staying ahead of these developments, the construction industry can continue to grow and thrive, even in the face of challenges. Let’s remain vigilant and prepared as we build the future.