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Tax Loophole for Architects

kakacabeza

I just heard on NPR that part of the new corporate tax-cut legislation reclassifies architects as "manufacturers" and allows them to write off the first 9% of profits as untaxed income. Anyone else hear about this?

 
Oct 12, 04 5:37 pm
trace™

No, but I like it.

Oct 12, 04 5:41 pm
alphanumericcha

kak are you sure about this? specifically!?

Oct 12, 04 5:42 pm
kakacabeza

Yep, architects were specifically mentioned. It also reclassifies plumbers and engineers. Sounded like every lobbyist in Washington was working overtime to get their interest reclassified, so someone on the AIA wasn't sleeping for this bonanza.

Another silver lining is that the infamous SUV loophole, allowing huge writeoffs for luxury SUVs has been somewhat closed. You can only write off $25,000 of the value of a SUV or heavy truck, instead of the $100,000 allowed previously. Expect to see fewer new Hummers.

Oct 12, 04 5:50 pm
kn825

anyone have a link about this? Do you have to be a firm owner, licensed, or simply in the field?

Oct 12, 04 5:57 pm
Tectonic

What architects thinking in a business minded manner............what in the hell is going on now a days!!!!!! This world is sure getting ugly.

Oct 12, 04 5:58 pm
alphanumericcha

what a shame about the hummer. Oh hell you mean the SUV...

amazing, on the phone with my accountant and senator first thing in the morning. they of course unlike me have been on the golf course all afternoon... geez. what a job i picked.

thanks for the "heads"-up kak!

Oct 12, 04 5:59 pm
alphanumericcha

Yes an owner/partner/principal participating in the profits. Not a done deal but has bipartisan support and don't think w will veto in an election year. Brilliant timing far as I can tell. Have no independent verification of what kak is saying, but will know late morning.

It would probably not apply to this fiscal year.

Oct 12, 04 7:12 pm
TED

got email from aia....


Congress Passes Tax Cut for Architectural Firms
Major AIA legislative victory!

Congress has passed the "JOBS" tax bill, which includes a $358 million tax cut for architecture and engineering firms. Making sure A/E firms were included in the legislation was a priority that the AIA has been advocating since the 2004 Grassroots Conference in March. The new law provides for firms an across-the-board 9 percent tax deduction that will be phased-in over the next six years.

President Bush is expected to sign the bill, which passed with bipartisan support.

The central purpose of the tax legislation was to repeal certain tax breaks for exporters, that had been found to be in violation of international law by the World Trade Organization. In place of these old FSC/ETI export-related tax incentives, the legislation creates a new tax cut for a variety of manufacturing businesses, which includes architecture and engineering firms.

This new tax deduction is applicable to revenues derived from architectural and engineering services that are produced by sole proprietors, partnerships, LLCs, subchapter S corporations, and C corporations. For tax years 2005 and 2006, firms will be allowed to deduct 3 percent of their net revenues from projects undertaken within the U.S. That percentage increases to 6 percent for tax years 2007, 2008, and 2009. After 2009 it becomes 9 percent.

Oct 12, 04 9:49 pm
alphanumericcha

Good job reporting TED. How about some AIA gov funds going to good purposes. Will be a help over time...

Oct 12, 04 11:08 pm
mm

Even if the SUV tax loophole is closed, architects will now be able able to afford gold-rimmed Hummers thanks to the new profit tax savings!


Oh wait, 9% of profits isn't likely to buy an eraser, is it?

Oct 13, 04 9:23 am
alphanumericcha

depends on your profits mm!

Oct 13, 04 9:51 am
TED

probably most of us 'get rid of the cash/profits' by the end of fiscal year in order to not pay corp tax or take the pay salary instead. i know that's what our accountant says.....

would have much more prefered 'tax cut insentive = if you created real jobs' [via no ss/medicare contribution for x years / new employee] does nothing to stimulate economy unless you really believe archs buying those hummers with their 9% stimulates growth.



isnt this just a bit of 'archi-pork-barrell-ism' so that as congress/senate recesses they can go to their constituate districts to campaign as 'tax cut politicians' ?

Oct 13, 04 10:25 am
alphanumericcha

We can keep money in reserves year to year under current laws, up to certain limits, and this deduction will help supplement that eventually when 9% money. Can certainly make a difference to cash flow and sure beats the hell out of borrowing for the leaner times!

I agree this is obvious pork, but I appreciate that we architects can belly up to the trough for once! Watch out you lawyers... (Laughing)

Sweet pig pic TED...

Oct 13, 04 11:26 am
kakacabeza

Caesar flinging coins at the masses . . .

well, not at the masses, at the corporations. At this point in my career, I doubt I'll see a penny of the pork. But if it allows my boss to take more vacations, I won't have to deal with him as much!

Really, I'm just happy that the great emperor of the universe has deigned to look my way, to cast a fleeting glance at me as I wallow in my miserable condition.


Could help a little if I decide to strike out on my own though.

Oct 13, 04 11:50 am
alphanumericcha

By the way TED, I think buying hummers to stimulate growth is illegal most everywhere except maybe somewhere in Nevada I hear...

Oct 13, 04 12:05 pm
A

TED - I really like your idea of not paying taxes for new employee hires for X years. Brilliant, just brilliant, and it would stimulate the economy. If those employees were previously unemployed and on the gov't dole in some manner it'd save lots of fed $$$. Problem is nobody in Washinton would go for it on either side of the aisle. Can you imagine all the whining that would happen from org's like AARP if you temorarly gave a SS/Medicare tax credit? Neither the Dem's or Rep's would want to upset the apple cart that much and never reduce those taxes - ever. (Disregard the fact that that cash goes in the same pool as all others and the fact that they are split on your pay stub means little to nothing.)

The whole 9% thing is nice but I'm not expecting any huge bonus thanks to it. I'm also sure that this new tax law opens as many loop holes as it reportedly closes. If you were to read it I'm guessing it's twice the size in length as the IBC and makes 1/2 as much sense.

That ridiculous SUV write off thing was some fancy work by the big three auto because they hold the market on over 7000lb vehicles. I'm glad to see that one gone but from what I hear the next round of pork is going to make us see a lot more hybrids. Not as bad for the enviro but still I question why anyone needs a tax break on a car?

Oct 13, 04 1:26 pm
threshold

Additional Info
---------------------------------------

Congress Passes Tax Cut for Architectural Firms

Major AIA legislative victory!

Congress has passed the "JOBS" tax bill, which includes a $358 million tax cut for architecture and engineering firms. Making sure A/E firms were included in the legislation was a priority that the AIA has been advocating since the 2004 Grassroots Conference in March. The new law provides for firms an across-the-board 9 percent tax deduction that will be phased-in over the next six years.

President Bush is expected to sign the bill, which passed with bipartisan support.

The central purpose of the tax legislation was to repeal certain tax breaks for exporters, that had been found to be in violation of international law by the World Trade Organization. In place of these old FSC/ETI export-related tax incentives, the legislation creates a new tax cut for a variety of manufacturing businesses, which includes architecture and engineering firms.

This new tax deduction is applicable to revenues derived from architectural and engineering services that are produced by sole proprietors, partnerships, LLCs, subchapter S corporations, and C corporations. For tax years 2005 and 2006, firms will be allowed to deduct 3 percent of their net revenues from projects undertaken within the U.S. That percentage increases to 6 percent for tax years 2007, 2008, and 2009. After 2009 it becomes 9 percent.

Koonce: Great victory

"This is a great victory for us," said AIA Executive Vice President/CEO Norman L. Koonce, FAIA. "This was a very difficult and complex issue and we were successful in our objectives. As a result, our members will receive a tangible benefit for years to come with the new tax deduction. It shows what the AIA can do when we work together for common goals."

Koonce thanked "the thousands of AIA members who have contacted members of Congress on this important legislation." He also praised AIA Government Advocacy Vice President Ron Faucheux and his team for "a job exceeding well done."

At times over recent months, passage of the overall bill was jeopardized by a variety of issues such as the tobacco buyout amendment. But ultimately enough House and Senate members were able to reach agreement on the tax legislation before adjournment.

The original Senate version of the bill extended the tax breaks to manufacturers but did not include architecture and engineering firms. That was changed with an AIA-supported amendment in the Senate that was sponsored by Sen. Kay Bailey Hutchison (R-TX).

The Senate bill also included a provision that would have repealed the 10 percent historic preservation tax credit program. That provision was eliminated after intensive lobbying by AIA members and preservationists last May.

The original House version of the bill applied the tax cut only to C corporations, which would have denied the benefit to the many architecture firms that are sole proprietorships, partnerships, S corporations, and LLCs. The AIA, along with engineering and small business groups, were successful in persuading the conference committee to extend the tax deduction to all architecture and engineering firms, not just C corporations.

Faucheux said the tax bill was a tough issue for the AIA to lobby because it involved fighting on three fronts. "First, we had to make sure architects were included. Second, we had to make sure all firms, not just C corporations, would benefit. Third, we had to save the historic rehab tax credit." He attributes the triple triumph to "the sustained grassroots efforts put forth by our members since March. Grassroots contact works. This victory proves that once again."

Revenue neutral

According to congressional sponsors, the bill is "revenue neutral" because it does not add to the federal budget deficit. This was accomplished because the legislation, in addition to lowering taxes on certain businesses, also raises revenues from a number of sources including eliminating the FSC/ETI manufacturing export incentives and eliminating corporate tax shelter abuse.

The conference report on the bill finally passed Monday when the Senate voted 69-17 for adoption. Voting for the bill were a bipartisan group of key senators that included Majority Leader Bill Frist (R-TN), Minority Leader Tom Daschle (D-SD), Senate Finance Committee Chair Chuck Grassley (R-IA), and Senate Finance Committee ranking member Max Baucus (D-MT).

Late last week, the House passed the conference report by a 280-141 vote.

Values and practice victories

The tax cut victory comes on the heels of another congressional win for architects last week with passage of the Brightfields/Brownfields legislation. Click here <http://www.aia.org/nwsltr_angle.cfm?pagename=angle_nwsltr_se100704&archive=1#brown> to see "AIA-Supported Brightfields/Brownfields Legislation Passes."

"These two successes show that AIA member activism can make a big difference on issues involving both values and practice," said Faucheux.

"But we've only just begun," noted Faucheux. "In the next Congress, we'll need member participation more than ever. We're currently seeking broad-based AIA member and Knowledge Community input on a long term legislative agenda that strongly reflects the values of our members on a range of sustainability, housing, education, energy, water resources, transportation, and community design issues. The fight goes on."

Oct 13, 04 8:44 pm

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