The Joint Committee on Taxation May 6 released a report summarizing the findings and comments obtained from 11 working groups that were formed by the tax-writing Ways and Means Committee related to tax reform. The report is a part of an effort to overhaul the U.S. tax code.

The report featured recommendations by ABC and its construction industry allies to relieve compliance challenges within the construction industry by allowing more small commercial construction firms to use the Completed Contract Method (CCM) of accounting on long-term contracts.

Specifically, the report mentioned:
  • Increasing and index the completed contract method threshold under section 460 from $10 million of gross receipts to $40 million;
  • Modifying the look-back rules to exempt contracts spanning less than 36 months with a $25 million gross price threshold; and
  • Repealing the look-back rules.
The 1986 tax overhaul placed new limits on the use of CCM accounting, restricting the method to small businesses with $10 million or less in annual revenue.  Unfortunately, this figure was not indexed for inflation and, in the 26 year interim, tens of thousands of small businesses have fallen into the administrative trap of “look-back” accounting required by the Percentage of Completion Method. By raising the current $10 million CCM eligibility threshold to a more contemporary $40 million per year level, these small and mid-sized companies would be spared the many hours and thousands of dollars per job spent on look-back calculations, with no net change in the contractor’s liability to the Treasury.

ABC has been a long-time advocated for these changes. In addition, ABC has advocated for other tax issues, listing its broader priorities for reforming the tax system as parity, simplicity and certainty.

Comprehensive tax reform legislation has been designated H.R. 1 in the House of Representatives and is expected to be introduced soon now that JCT has released its conclusions.