IEC opposes the Death Tax and supports its permanent repeal.
Prior to the end of 2017, Congress passed a long-awaited tax reform bill. The bill’s ultimate impact on small business and pass through entities continues to be evaluated, but some of the provisions that impact IEC members include the following:
- An increase to the current Section 179 expensing from $500,000 to $1 million for smaller businesses.
- A 20% deduction (reducing the maximum marginal rate to 29.6 percent) on qualified pass-through business, including those that are estates and trusts. Noncorporate taxpayers are not permitted to deduct business losses in excess of business income plus $500,000 (for joint return filers). This deduction was available beginning January 1, 2018, but expires after December 31, 2025.
- Retention of the estate tax, with a doubling of the estate tax exemption thresholds to approximately $11 million and $22 million, with continued inflation indexing after December 1, 2019 (but reverting to pre-Act law after 2025).
IEC favors legislation that will address technical corrections that will further assist pass through entities as well as a permanent rate cut for these businesses.
The federal Estate Tax, commonly referred to as the Death Tax, is a tax on the estate of a deceased person and is a major hurdle in passing down family owned small businesses to future generations. As part of a larger tax package signed into law in December 2010, the death tax was re-instituted for 2011 and 2012 at a top rate of 35% and an exclusion amount of $5 million.
Legislation was introduced in the 115th Congress that would completely repeal the Death Tax. In the Tax Reform bill passed at the end of 2017, the death tax was retained, but with a doubling of the exemption thresholds to approximately $11 million and $22 million, with continued inflation indexing after December 1, 2019 (but reverting to pre-Act law after 2025).
It is critical over the next decade that investments be made in our energy infrastructure and in the delivery of alternative and renewable energy sources to meet the ever growing demand for energy.
IEC supports expanding incentives for renewable energy including emphasis on solar and wind technologies and supports reducing the recovery period for investment in electricity transmission lines and smart grid devices from 20 years to 10 years.
The "Energy Savings and Industrial Competitiveness Act" was introduced in the 113th Congress, creating a variety of voluntary measures (such as “Tenant Star”) to reduce energy consumption in the industrial and government sectors that will help electrical contractors as they work with manufacturers of electrical components and building owners to improve the energy efficiency of building systems.
The bill also incentivized the production and use of energy efficient motors and transformers, which IEC members include in both retrofit projects and new construction jobs. Both the House and Senate have introduced legislation, but no bill has made it through both chambers. In the 114th Congress, Tenant Star was added as an amendment to the Keystone XL Pipeline bill that was ultimately vetoed by President Obama. There’s been little movement about the Tenant Star in subsequent Congresses.
Commercial Building Tax Deduction
The Energy Policy Act of 2005 set a precedent by containing a market transformation incentive in the form of a tax deduction for owner investments in commercial building energy efficiency (179D). Eligibility is open to building owners, designers, and contractors to help offset some of the high costs of energy efficient components and systems incorporated in the construction of commercial and larger multifamily buildings.
To qualify for the deduction, improvements must reduce total annual energy and power costs with respect to the interior lighting, systems, heating, cooling, ventilation, and hot water systems by 50% at a rate of $1.80 per square foot, with less-efficient improvements still qualifying for a deduction at a prorated amount.
This deduction is important to many IEC members who incorporate energy efficiency into their projects. The 179D tax deduction had been in effect since January 1, 2006, but the systems and buildings must have been placed in service by December 31, 2017, which is when 179D expired, prior to its revival in the December 2019 year-end omnibus bill. This legislation renewed the policy retroactively for 2018 through the end of 2020.
IEC supports making 179D permanent and increasing the deduction from $1.80 to $3.00 per square foot. IEC also supports further extension of the deduction to apply to retrofit projects.
Solar Investment Tax Credit (ITC)
First enacted in 2006, the Investment Tax Credit (ITC) is currently a 30% federal tax credit claimed against the tax liability of residential (under Section 25D), commercial, and utility (under Section 48) investors in solar energy property. The credit reduces to 26% for projects beginning in 2020, 22% for projects beginning in 2021, and in 2022, the residential credit drops to zero, while the commercial credit drops to a permanent 10%. The Section 25D residential ITC allows the homeowner to apply the credit to his/her personal income taxes. This credit is used when homeowners purchase solar systems outright and have them installed on their homes. In the case of the Section 48 credit, the business that installs, develops, and/or finances the project claims the credit.
Contact the national staff member below for any questions regarding advocacy.