The Democrats’ reckless tax and spend reconciliation bill, the Inflation Reduction Act (H.R.5376), which raises taxes and imposes new restrictive labor policies tied to tax incentives was signed into law on Aug. 16, 2022.
The legislation, opposed by ABC, provides more than $369 billion in tax credits for the construction of solar, wind, hydrogen, carbon sequestration, electric vehicle charging stations and other clean energy projects. Developers/taxpayers can receive a bonus tax credit 500% greater than a baseline tax credit of 6%, but this is conditioned on requirements that project contractors pay Davis-Bacon prevailing wages and utilize apprentices enrolled in government-registered apprenticeship programs. This new policy is an unprecedented expansion of Davis-Bacon and registered apprenticeship requirements/enticements onto private construction projects via the federal tax code.
Critically for the construction industry, ABC believes this bill penalizes employers that believe in fair and open competition and pay wages based on experience, quality and market rates and limits opportunities for thousands of construction workers and industry-recognized apprentices.
The bill reinstates the Hazardous Substance Superfund financing rate on crude oil and imported petroleum products at the rate of 16.4 cents per barrel, indexed to inflation. ABC is concerned that this tax would cause further increases in gas prices, utility costs and additional price spikes in petroleum-based products. Many construction materials are petroleum-based and already have seen a price increase of 100% or more over the past year.
As the U.S. economy faces recessionary trends, rising costs of doing business, and supply chain delays, adding a substantial tax burden would make it even more difficult for America’s job creators to grow their business and fully recover from the economic effects of the COVID-19 pandemic.
While supporters of the legislation have stated this bill will reduce inflation, the Penn Wharton Budget Model shows low confidence that the legislation will have any impact on reducing inflation.
ABC believes that the bill imposes anti-competitive policies that will handicap merit shop construction contractors and further jeopardize the nation’s economy at this critical time.
On Oct. 31, an ABC-led coalition of 22 construction and energy groups sent the U.S. Department of Treasury and the Internal Revenue Service a letter requesting a 60-day extension of the Nov. 4 deadline in response to their request for comments regarding implementation of the IRA’s clean energy tax credits. Specifically, the agencies requested comments on Davis-Bacon and government-registered apprenticeship requirements for applicable clean energy construction projects. A previous extension request by ABC received no response.
On Nov. 4, ABC submitted comments in response to this notice, opposing the unnecessarily burdensome and costly Davis-Bacon and apprenticeship requirements the act would impose.
Maintaining pro-growth tax policies will be essential to ensuring the economy is able to fully recover from the COVID-19 pandemic. ABC will continue to advocate for the beneficial tax proposals included in the Tax Cuts and Jobs Act that will spur economic growth and create jobs throughout the country.
ABC will advocate for fixes to the bill’s most harmful tax and labor policies that will burden the construction industry.