Tax Incentives: Construction Companies

Construction Industry

Many construction businesses and affiliates are often unaware of whether they qualify for certain government tax incentive programs, or they may believe that such programs do not apply to construction companies. Even those that are aware often fail to capture the full extent of tax credits to which they are entitled.

For example, many taxpayers mistakenly believe only professionally licensed and educated civil engineers designing innovative and/or uniquely revolutionary infrastructures (e.g. roads, buildings, bridges) are qualified research activities to claim the R&D tax credit under the U.S. tax code. However, this is not true. Other collaborative employees and expenses outside of traditional civil or mechanical engineers may qualify for the R&D tax credit.

If your construction company performs any of the following (see examples below) there may be an opportunity your company could benefit from an R&D Tax Credit study.

  • Performing technical research on green energy building(s) development for energy efficiency certification (e.g. Leadership in Energy and Environmental Design (LEED) certification)

  • Performing foundation engineering development to mitigate the effect of landscape conditions (e.g. unstable surface, incline / decline terrain) 

  • Performing computer assisted design (CAD) modeling simulations to test experimental models or designs

  • Performing structural engineering development to protect against natural disasters (e.g. earthquakes, hurricanes, fires, floods)

  • Performing dew point analysis to evaluate temperature fluctuations and cooling for water vapor formation regarding structural components (e.g. walls, roofs, and floors)

  • Designing new and/or improved energy efficient structural components 

  • Designing new and/or improved Heating, Ventilation, & Air cooling (HVAC) system design for enhanced airflow and energy efficiency

  • Designing new and/or improved electrical system(s) for efficient power usage 

  • Designing new and/or improved plumbing filtration system(s) for efficient water usage

  • Designing new and/or improved lighting system(s) for energy efficiency

  • Designing new and/or improved drainage management systems

Below outlines various federal tax incentives which may be applicable to your business as a cash saving benefit and/or refund opportunity. If any of these credits appear relevant to your business, let AndreTaxCo help you claim the credits that you deserve!

Research and Development Credits 

Hiring Credits & Incentives

Alternative Fuel / Vehicle Industry Credits

Building Renovation & Modification (Disability Access) Credit & Incentives

  • Rehabilitation Credit (IRC § 47) – renovation of qualified rehabilitation building(s) (e.g. historical properties) credit

  • Disabled Access Credit (Form 8826) under IRC § 44(a) in the case of an eligible small business (as defined in IRC § 44(b)) 

    • ​See also "Barrier Removal Tax Deduction" pursuant to IRC § 190

      • ​The Architectural Barrier Removal Tax Deduction encourages businesses of any size to remove architectural and transportation barriers to the mobility of persons with disabilities and the elderly. Businesses may claim a deduction of up to $15,000 a year for qualified expenses for items that normally must be capitalized.

      • Businesses claim the deduction by listing it as a separate expense on their income tax return. Also, businesses may use the Disabled Tax Credit and the architectural/transportation tax deduction together in the same tax year, if the expenses meet the requirements of both sections.

      • To use both, the deduction is equal to the difference between the total expenditures and the amount of the credit claimed.

      • See IRS Publication 535; 26 U.S. Code § 190 (expenditures to remove architectural and transportation barriers to the handicapped and elderly).

Energy Credits & Incentives

  • Investment Tax Credit (aka "ITC") (Form 3468) under IRC § 46 

  • Energy Credit (IRC § 48)

  • Marginal Oil & Gas Well Production Credit (Form 8904) determined under IRC § 45I(a) – Permanent but may be phase out and unavailable based on commodity prices each period applicable. No credit is allowable unless an election is made not to claim the section 45K credit for that well.​

  • Enhanced Oil Recovery Credit (Form 8830) under IRC § 43(a) – Permanent but may be phase out and unavailable based on commodity prices each period applicable

  • Energy Efficient Home Credit (Form 8908) under IRC § 45L(a) 

  • Mine Rescue Team Training Credit (Form 8923) determined under IRC § 45N(a)

  • Production Tax Credit (aka "PTC", "Renewable Energy Production") (Form 8835) under IRC § 45 – The PTC expired for non-wind technologies at the end of 2017, while a reduced credit of 40% was available for wind facilities through the end of 2019, expiring for years 2020 and beyond. Under the tax extenders package, projects that begin construction in year 2019 are eligible for the 40% credit, and projects that begin construction in 2020 will be eligible for a 60% credit.​

    • Pursuant to the most recent package of tax extenders ("Taxpayer Certainty and Disaster Tax Relief Act of 2019"), the full PTC would be retroactively revived (non-wind technologies) and extended through 2020 for the following below. Under current law, those technologies are generally only eligible for the PTC to the extent construction began before 2018 (other than certain closed-loop biomass and qualified hydropower technologies, which must be placed in service before 2018). Under the recent extenders package, those dates would all be extended out to the end of 2020.

      • Closed loop biomass

      • Open loop biomass

      • Geothermal plants

      • Landfill gas (municipal solid waste)

      • Trash (municipal solid waste)

      • Qualified hydropower

      • Marine and hydrokinetic renewable energy facilities

  • Credit for Certain Nonbusiness Energy Property (Form 5695) under IRC § 25C)

    • ​*Lifetime Limitation: The credit allowed under this section with respect to any taxpayer for any taxable year shall not exceed the excess (if any) of $500 over the aggregate credits allowed under this section with respect to such taxpayer for all prior taxable years ending after December 31, 2005.​

Low-Income / Targeted Geographical Zone Credits

Business Benefit Plan Credits

Railroad Industry Credits

Note, many of these listed federal credit incentives have comparable state tax incentives that are often substantially similar to calculate or claim, subject to state specific procedural rules and regulations.

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