Certainty, simplicity, fairness: The AIA’s position on tax reform
The American Institute of Architects supports comprehensive tax reform that broadens the base, lowers rates, and maintains parity among corporate and pass-through entities. The AIA urges Congress to ensure these three principles are reflected in comprehensive tax reform:
- Preserve tax policies that support and strengthen small businesses, which account for the vast majority of U.S. architecture firms;
- Consider tax policies that support innovative, economically vibrant sustainable, and resilient buildings and communities; and
- Ensure fairness in the tax code. Nearly all architecture firms are small businesses, and a significant portion are organized as pass-through entities. The AIA believes that it is imperative that tax reform is comprehensive. “Corporate-only” tax reform would leave pass-through entities at a severe disadvantage, harming small businesses, including architecture firms.
As tax reform progresses, it is important to consider policies that support innovative, economically vibrant, sustainable, and resilient buildings and communities. The AIA urges Congress to make a particular effort to continue and improve tax policies aimed at energy efficiency. One such example is the Energy Efficient Commercial Building Tax Deduction; in the case the deduction is retained close to its current form, we strongly urge Congress to make it permanent and enhance it by: (1) ensuring the ability of pass-through entities to capture the full value of an allocated deduction in the case of a public owner; (2) allowing non-profit owners of buildings, similar to public owners of buildings, to allocate the deduction; and (3) increasing the value of the deduction.
Lastly, it is important that any reform preserve and improve fairness in the tax code. A tax policy of significant interest to the architecture industry is the Domestic Production Activities Deduction contained in section 199 of the IRC. Proposals have been offered to repeal or reform section 199. Proponents of such proposals assert that repealing section 199 could provide revenue to offset the cost of lower marginal tax rates. However, we urge that, if section 199 is retained in some form, that it be retained for currently eligible trades and businesses, including architectural services.
We recognize that tax reform is a balancing act. Lowering tax rates will require curtailing or discarding many tax expenditures, while maintaining and improving a limited number of tax policies that support important policy objectives. We are hopeful that, at the end, tax reform is an opportunity to provide taxpayers with much-needed certainty, simplicity, and fairness, while at the same time encouraging economic growth and job creation.