The Senate passed and sent to President Bush on October 11 the “JOBS” tax bill, which includes a $358 million tax cut on architectural and engineering services performed in the U.S. for construction projects 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 in the U.S. That percentage increases to 6 percent for tax years 2007, 2008, and 2009. After 2009, it becomes 9 percent.

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, closing corporate tax loopholes and eliminating corporate tax shelter abuse.

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.

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.

The conference report on the tax 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).

Originally, the Senate bill also included a provision that would have repealed the 10 percent historic preservation tax credit program.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

AIA Executive Vice President/CEO Norman L. Koonce, FAIA, called this a “major victory for the AIA” and thanked “the thousands of AIA members who have contacted members of Congress on this important legislation.” The AIA-member-based grassroots campaign, coordinated by the AIA Government Advocacy team, was to get architecture firms of all sizes included in the bill. For details, visit the AIA Angle page on AIA.org.

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