Tax Reform in the Construction Industry

Tax Reform is a Reality: What Construction Companies Need to Know

The first major legislative victory on behalf of President Trump, and the first major accomplishment since the appointment of Supreme Court Justice Gorsuch, and the largest tax reform package in over 30 years, the Tax Cuts and Jobs Act was finalized by Legislators on December 20, 2017 and was signed into law just days later.

While the bill will save money for nearly everyone (outside of high-income earners in high income tax states—due to the removal of the SALT deductions), the bill will create opportunities for a great deal of Americans and American employers. Today, we would like to discuss some of the important caveats and cutouts that affect the construction industry.

Six Things Construction Companies Need to Know about the Tax Cuts and Jobs Act

The construction industry is one of the many beneficiaries of the tax bill, set to reduce corporate tax rates, increase pass-through deductions, and make the United States more competitive in the global economy. Below, we would like to address some of the biggest benefits (and a few of the challenges) that will result from the new tax code.

Reduction in the Corporate Rate

One of the most prominent changes in the new tax code is the massive reduction in the corporate tax rate from 35% (the highest in the industrialized world) to a more competitive 21%. Construction companies, many of whom face cash flow challenges day in and day out, stand to benefit from keeping more of their own money.

Repeal of the Alternative Minimum Tax

Under current law, the Corporate Alternative Minimum Tax is 20%, with an exemption up to $40,000, and corporations averaging less than $7.5 million in gross receipts over the past 3 years were exempt.  Under the new law, the corporate alternative minimum tax is repealed.

The repeal of the AMT is hugely important for all corporations, especially those in the construction industry, as it removes a complex yet necessary process from the bookkeeping process. Under current law, the AMT required companies to essentially keep two sets of books making it both costly and paperwork-heavy. The new tax code will make life easier for accountants, bookkeepers, and business leaders at construction firms.

Section 179 Equipment Expensing

If there is one thing that will be advantageous for construction firms looking to purchase business equipment over the next five years, it will be the expansion of Section 179 equipment expensing—now doubled from $500,000 to $1 Million. There are two ways to look at this.

First, by doubling the amount that can be expensed, it will encourage investment in machinery and other equipment at construction firms. It will also reduce the hassles of depreciating an item over five, six, ten years, or eighteen years. However, there is huge value in expensing everything you can in 2017. With the corporate tax rates dropping in 2018, you will benefit from reducing your taxable income as much as possibly this year. We recommend expensing anything you can in 2017 to maximize your benefit.

Pass-Through Entity Tax Relief

Many construction companies exist as pass-through entities, and the new bill will allow them to keep more money. Now, sole proprietorships, partnerships, LLCs and S-corporations in architecture, engineering, and construction have been recognized for their role in building America, and will receive their reward for this role.

In the early versions of the bill, architects, engineers, doctors, lawyers, financial services firms and numerous other types of businesses were grouped together and excluded from the deduction. However, a redraft made a compromise for engineers and architects (including construction firms), recognizing their “integral role in facilitating capital investment” and ultimately qualifying them for the pass-through benefit.

Starting in 2018, Pass through entities (S-Corps / Partnerships) except for service entities will receive a 20% deduction on qualified income, subject to the greater of 50% of W-2 wages paid or 25% of W-2 wages paid and 2.5% of property placed in service.

Potential Challenges: Higher Interest, Increased Talent Demands, Lower Homeowner Demand

For some construction firms, the tax bill may not be 100% sunny. Raymond Torto, head of Raymond Torto Commercial Real Estate Advisory Services, believes that a tax cut during full employment could be too much of a good thing, ultimately leading to capacity strain and inflation. “Commercial real estate will suffer higher interest rates with steady demand—a good outlook if debt is not excessive for the asset class.”

Additionally, the new tax bill could pose challenges for realtors—and in turn, those in residential (single- and multi-family) construction. By doubling the standard deduction and reducing the mortgage interest rate deduction, the legislation blunts the benefit of the mortgage interest deduction—one of the key factors in the home-buying decision.

Forging Ahead: Construction Industry’s Future under the New Tax Plan

In 2017, Construction is one of the most heavily-taxed industries in the United States—second only to the retail industry in effective tax rates at 28.7%, and stands to benefit from this bill. While the new tax plan hasn’t made strides to cut spending and tackle the long term sustainability of the United States fiscal future, this has been a much-needed break for companies across the United States. As you forge ahead into the coming years, we would love to help.

In 2017, rinehimerbaker launched its construction-focused accounting technology practice, designed to help construction companies simplify their accounting, save time and money, and grow their business.

By working with one of the most trusted names in construction accounting software—Sage—we are proudly helping construction firms to find their way into the cloud with Sage Intacct—a best-in-class cloud ERP designed to help you increase project profitability and visibility. Contact us to learn more.

How Churches Can Embrace Modern Finance

How Church Financial Leaders Can Break Their Spreadsheet Habit

Spreadsheets. Used to manage everything from personal activities and budgets to organizational financial activities, the latter of these poses a multitude of dangers for religious organizations who try to manage funds, cash flows, and expenses using them.

The use of spreadsheets is prevalent in finance, but poses a danger, as a majority of spreadsheets contain errors. Worse, the time spent copying, manipulating, and pasting data is time better spent driving the organization’s strategy or focusing on the mission of your religious organization. Today, we’d like to share with you the dangers of spreadsheet gluttony and how to break your religious organization’s spreadsheet habit.

The Pains of Spreadsheet Gluttony

Spreadsheet gluttony is just one of the seven deadly sins of financial management—joining other common pain points like lack of compliance and slothful tracking—but it is often the most painful and risky ones that plagues financial leaders at churches.

Inaccurate Fund Management

When it comes to managing the different funds at your religious organization, your job includes disbursing, recording, and reporting how the church is managing its funds. When you use spreadsheets, however, you can’t guarantee speed or accuracy in doing this, and the distribution of money into different funds and the management of said funds becomes more challenging with growth.

If you can’t manage the funds, you can’t share in detail what you’re doing with parishioners’ money (which we will discuss below) and you risk the tax man’s hammer. An improperly filed Form 990 can result in the loss of tax exempt status. Learn more about the Form 990 here.

Lack of Detail

The biggest pain of spreadsheets is the lack of insights they provide into the numbers. Even if you are an expert at writing formulas and building relationships between data, this is still only scratching the surface of what could really be measured.

Now you may be thinking, “I don’t need all of these bells and whistles,” but when push comes to shove, you have to realize that your parishioners are more taxed than ever and have more choice in where they send their money as well. This means you need to share with parishioners that you are making good use of their money, as well as knowing when to ask for more.

Details matter, and being able to communicate these details efficiently and accurately to stakeholders, parishioners, and institution leaders was one of the biggest challenges we highlighted in our last blog, Three Common Annoyances Faced by Church Financial Teams.

Less Time Focusing on the Mission

It’s unlikely you got into managing the finances at your religious institution for the lucrative paycheck. It’s more likely you joined for the rewarding work and to help more people to find the grace of religion.

When you rely on spreadsheets and other antiquated processes in accounting, you are taking time directly away from this mission. By automating your processes, you can take the time back your time so you can give back more (or recognize the hidden value of wasting time).


An overreliance on spreadsheets is just one warning sign that your church is outgrowing its accounting software. If you are plagued by extended times generating reports, getting information to decision makers, or even buying paper, it’s time to learn about your options.

At rinehimerbaker, we are focused on helping your church, synagogue, or other religious institution to select, implement, and operate accounting software and other complementary applications. We welcome you to download our guide for organizations outgrowing QuickBooks, to take a look at Intacct’s 2017 Buyers Guide to Selecting Accounting Software, and to read the following to learn even more:

IRS Form 990 for Nonprofits

IRS Form 990: What Nonprofits Need to Know

For nonprofits who follow a January 1-December 31 calendar, one of the most important dates of the year is coming up: Form 990 filing day. Just as March 15 for corporations and April 15 for individuals, May 15 holds a great deal of importance for tax-exempt organizations, nonexempt charitable trusts, and section 527 political organizations who have to file this form to provide the IRS with the information required by section 6033.

Used by the government to determine whether you can retain tax exempt status for the year and charity evaluation organizations who determine if donor money is being used properly. As the date rapidly approaches, it’s important to have your house in order so as to avoid any kind of last-minute issues or crunches that could pop up if you wait.

Why You Need to File Your Form 990

If you’ve been operating for a while, it’s likely you know why it’s so important to file a Form 990—providing the public with information about your financials so that possible donors know your funding sources and so that you can prove that their money is going toward your mission. It’s also important so that you can keep your tax exempt status—failure to file for three years in a row means automatic revocation of tax exempt status.

According to Cullinane Law Group, since 2011, more than 500,000 nonprofits across the country automatically lost their tax-exempt status for this reason. Additionally, the IRS has no appeal process for automatic revocations due to failure to file an appropriate Form 990 for three years. Without this status, your organization could be subject to paying income taxes. Additionally, you can avoid paying user fees and filing additional documents with the IRS by submitting your Form 990 each and every year.

Different Variants of Form 990

Depending on your size and organizational focus, there are three variants in addition to traditional Form 990: 990-EZ, 990-N (e-Postcard), and 990-PF.

  • Form 990-N (e-Postcard): For organizations with gross receipts normally under $50,000, this is the easy way to satisfy reporting requirements. There are only eight things to file, and can be done in minutes. For more information, click here.
  • Form 990-EZ: For organizations ranging from $50,000 to $200,000, and Total Assets less than $500,000, Form 990-EZ is the short version of Form 990. Consisting of six parts and four pages, 990-EZ instructions can be found here, and the form can be found here.
  • Form 990: For organizations whose gross receipts exceed $200,000 or total assets equal or exceed $500,000, Form 990 is the traditional form, consisting of twelve parts on twelve pages. Additional schedules may need to be filed for both 990 and 990-EZ.
  • Form 990-PF (Private Foundations): For Private Foundations who need to report all grants, trustees, officers, and more, they need to file a Form 990-PF. Foundation Center shares an interesting article, Demystifying the 990-PF.

Schedules for 990-EZ, 990, and 990-PF

Additionally, those filing a Form 990 may need to complete additional Schedules in order to communicate their funding and status, listed below:

Public Charity Status and Public Support (Schedule A), Schedule of Contributors (Schedule B), Political Campaign and Lobbying Activities (Schedule C), Supplemental Financial Statements (Schedule D), Schools (Schedule E), Statement of Activities Outside the United States (Schedule F), Supplemental Information Regarding Fundraising or Gaming Activities (Schedule G), Hospitals (Schedule H), Grants and Other Assistance to Organizations, Governments, and Individuals in the United States (Schedule I), Compensation Information (Schedule J), Supplemental Information on Tax-Exempt Bonds (Schedule K), Transactions With Interested Persons (Schedule L), Noncash Contributions (Schedule M), Liquidation, Termination, Dissolution, or Significant Disposition of Assets (Schedule N), Supplemental Information to Form 990 (Schedule O), Related Organizations and Unrelated Partnerships (Schedule R).

Companies Exempt from Filing Form 990

Not all nonprofits have to file annual returns. Generally, the following do not have to file Form 990:

  • Most faith-based organizations, religious schools, missions or missionary organizations
  • Subsidiaries of other nonprofits – those that may be covered under a group return filed by the parent organization
  • Many government corporations
  • State institutions that provide essential services.

The Form 990 is Necessary and Important

Much like a 10-K for publicly traded organizations and their potential investors, Form 990 will be seen by the public. However, your organization relies on donations, volunteers, and grants, so making sure the form is accurate, that overhead is minimized, and that you can prove yourself as a viable mission-focused organization can be the difference between growth and collapse.

For many nonprofits, using spreadsheets and hope is not a strategy that can lead to high ratings. With spreadsheets and other manual financial processes so error prone, they could be forcing your organization to hire additional accounting professionals or worse, putting you at risk for audits.

Our friends at Intacct recently presented an on-demand webinar on strengthening accountability and preparing for the precipice of an audit. Learn more about how you can improve reporting, accuracy, and your ability to remain compliant by watching the webinar, Strengthening Nonprofit Accountability through Audit-Ready Financials, or by reading The Nonprofit CFO’s Survival Guide: A Mini “Field Manual”

Learn more about Intacct for Nonprofits and how rinehimerbaker can help you implement it for success in future years as it grows with you.