Introduced May 25, 2011 and referred to the House Committee on Ways and Means.
On May 25, 2011, Reps. Wally Herger (R-Calif.), David McKinley (R-W.Va.) and Shelley Berkley (D-Nev.) introduced the American Job Builders Tax Reform Act of 2011 (H.R. 1993), a bipartisan bill that will modify the tax code to help small construction contractors and address the following tax issues facing ABC members:
- Under current law, construction contractors cannot use the completed contract method (CCM) of accounting if average annual gross receipts exceed $10 million, which has not been adjusted for inflation since 1986.
- H.R. 1993 would increase the threshold to $40 million and would index the threshold for inflation.
- Adjusting this threshold for inflation would allow more than 90 percent of ABC members that are small businesses to utilize CCM.
- The bipartisan bill also provides relief from the Alternative Minimum Tax (AMT) and “look-back” provisions.
- Because H.R. 1993 allows small construction contractors to utilize CCM, taxes on the gross profit can be deferred until the project is complete. However, under current law gross profit is not deferred for AMT purposes.
H.R. 1993 proposes eliminating this AMT adjustment to help small contractors avoid falling into the AMT trap.
- By increasing the threshold and eliminating the AMT adjustment under this bill, small construction contractors will no longer be subject to “look-back” calculations for both regular and AMT purposes.
- Upon completion of a project, current law requires contractors to “look back” and perform calculations that substitute the actual costs and revenues for the estimated costs and revenues that were used in the Percentage of Completion Method calculations. By increasing the threshold and eliminating the AMT adjustment under this bill, small construction contractors will no longer be subject to “look-back” calculations for both regular and AMT purposes.