|
|
|
|
|
Save the Date! | |
The UHY LLP 2014 Annual Construction Outlook seminar is set for October 24, 2013.
More details to come... |
|
|
Archive
| |
Missed an issue? New subscriber? Visit our
news archive.
| |
|
|
|
|
2013 Construction Industry Forecast
The outlook for the construction industry appears to be heading in right direction for 2013 despite recent economic challenges, according to a study released by The Associated General Contractors of America (AGC).
Indicators that show the industry is re-emerging include growth in private sector projects, expectations that workforces will be increased, increased home construction, and new technology.
The study predicts that 31 percent of firms plan to hire employees, compared to just 9 percent of firms who plan to lay off employees. Even though more firms are looking to hire employees, the hiring of employees by the firms will likely be modest at best. Of the firms that plan to add headcount, 79 percent of those firms will be hiring 15 or fewer employees, and just 13 percent plan to hire more than 25 new employees.
Regarding homebuilding, according to the Home Builders Association of Michigan it is forecasted that single-family home construction in 2013 will increase by 39 percent over 2012 levels, with almost 14,000 permits expected to be issued. This is attributable to a stronger Michigan economy and state legislation that has had the effect of stimulating the housing industry.
On the technology front, the AGC reports that Building Information Modeling (BIM) appears to have found its niche within the construction industry. BIM increases productivity in building design and construction by using three-dimensional, real-time, dynamic building modeling software on projects. Of those surveyed, 43 percent of firms expect demand for BIM to grow in the upcoming year. Many firms are planning of improving their information technology either by making investments in their IT departments (60 percent) or purchasing new financial and job costs software (11 percent) to increase efficiency, cut broader costs and become more competitive.
Despite the positive trends, there are still factors pulling in the other direction. The demand for public buildings and facilities is expected to decline, along with the demand for "green" construction; costs of maintaining a productive workforce, such as healthcare costs, will continue to rise; and materials prices are expected to rise.
According to the study, just 64 percent of firms plan to purchase some kind of new equipment while 77 percent of firms plan to lease new equipment. The exception to this purchase/lease scenario is the highway contractors, 79 percent of which plan to purchase new equipment in 2013.With the fiscal cliff legislation extending the provisions for the immediate expensing of purchased equipment - Section 179 and bonus depreciation - those figures may improve as a result.
The AGC also published its 2013 Construction Outlook Survey for the Michigan market, with some mixed results. Within the state, 21 percent of firms expect to hire employees in 2013, with the amount of hiring expected to fall under 25 employees while 37 percent of firms expect to lay off employees, in most cases, those layoffs will be five or fewer. Also in Michigan, tighter credit lending conditions have caused just over 50 percent of firms said that customer projects were delayed or canceled due to bank credit issues.
The beginning of several large jobs will help spur growth in the Michigan market. Construction on the Wayne County Jail is expected to continue through September 2014. The Capital Improvement Program of Cobo Center, which began in 2010, is currently in its third phase and is expected to continue into 2015.
And more recently in the news is expected construction of a new arena for the Detroit Red Wings, which could create up to 8,300 new construction jobs in the metropolitan area, and construction of the New International Trade Crossing Bridge (NITC) between Detroit and Windsor. The NITC is a projected 7-year project with construction potentially starting in 2014, and its labor footprint could exceed that of Comerica Park and Ford Field combined.
For more information or questions on this topic, please contact your professional at UHY LLP in Farmington Hills
248 355 1040 or Sterling Heights 586 254 1040 or visit us
on the web at www.uhy-us.com.
Back to top |
|
Sales and Use Tax Exemptions for Contractors
You've seen the scenario before. A large bid is due at 5 p.m. Everything is ready, except for a final decision on pricing. The business development team calls the Chief Financial Officer to ask whether sales tax should be built in to the cost of the materials. The project is the construction of a church or hospital. "We should be good," the business development manager pleads. "Aren't there sales tax exemptions for those types of projects?"
All too often, contractors assume that materials purchased for construction are free from sales or use tax. Most states specifically cite contractors as the end users of purchased and installed materials on a job site. This makes them liable for sales or use tax. If sales and use tax is not factored into the expected job cost, it will negatively impact the job's profitability when it was not accounted for in the bid.
Back in April 1999, the Michigan Department of Treasury published Revenue Administrative Bulletin (RAB) 1999-2 in an attempt to clear up confusion on this issue. The RAB is written using straightforward language that does not have to be read by a tax professional to understand.
RAB 1999-2 outlines five sales and use tax exemptions available to a contractor. The rules are very specific as to what purchases are exempt. It is recommended to re-read the appropriate section of 1999-2 before concluding that any job materials are exempt from sales and use taxation. Each of the five exemptions is explained briefly below.
Nonprofit Hospitals
This applies to real estate owned by a nonprofit hospital. In order to qualify for this exemption, a nonprofit hospital must meet four criteria:
- The hospital must be separately organized
- Its primary purpose must be acute or intensive healthcare and nursing
- It must perform these services to persons requiring them
- And the hospital must not be operated for profit, and no benefit from the real estate is attributed to individuals or private shareholders
Qualified Nonprofit Housing
Private qualified nonprofit housing must have received an exemption certificate from the Michigan State Housing Development Authority (MSHDA). Public nonprofit housing does not qualify since it is not covered by MSHDA.
Church Sanctuaries
This exemption is only effective for purchases made on or after July 22, 1998. It applies only to materials affixed to or made a structural part of the "sanctuary" portion of the building. The building must be owned, occupied, and used by a religious organization qualified under Section 501(c)(3) of the Internal Revenue Code.
The state is very clear that the exemption does not apply to the entire building - it is limited to portions that are predominantly (more than 50%) and regularly used for worship service. RAB 1999-2 specifically excludes areas for social functions, day care, schooling, religious education, and any other activity that does not constitute public worship.
Portions of a building structurally necessary to the portion of the building where worship takes place count as part of the exemption. Per RAB 1999-2, these portions include roofing covering worship areas, foundations, basement walls which support the interior worship area, exterior walls and their finishing materials directly adjacent to worship areas.
Qualified Water Pollution Control Facilities and Qualified Air Pollution Control Facilities
This exemption is only available for facilities where the State Tax Commission has granted certification. The exemption is not available prior to receiving the signed exemption from the State Tax Commission. Also, the contractor must obtain a written statement from the property owner specifying the legal basis for the exemption.
It's important to know these exemptions well so you can make the right decision with your bids on deadline days.
For more information or questions on this topic, please contact your professional at UHY LLP in Farmington Hills
248 355 1040 or Sterling Heights 586 254 1040 or visit us
on the web at www.uhy-us.com.
Back to top |
|
Contracting and Tax Accountability Act Passes the House
On April 15, the House of Representatives unanimously passed a bill that would bar the U.S. government from entering into contracts, or awarding grants to companies that owe federal tax monies. H.R. 882, titled the Contracting and Tax Accountability Act, has yet to be passed by the Senate.
Under the bill, persons with "seriously delinquent" tax debts are prevented from being awarded federal contracts in excess of $150,000. As written, the Act prohibits the awarding of a contract or grant to a prospective contractor or grantee unless the contractor certifies in writing that it has no seriously delinquent tax debts. The contractor must also authorize the Secretary of Treasury to disclose information regarding whether such person has a seriously delinquent tax debt.
Seriously delinquent tax debts are defined as an outstanding federal tax debt under the Internal Revenue Code for which a notice of lien has been filed in public records. There are exceptions for contractors who are paying their debt in a timely manner pursuant to an approved installment agreement, as well as if the contractor has requested a due process hearing, or such a hearing is pending.
Per the Act, a person is an individual, a partnership or a corporation. A partnership will be considered to have a seriously delinquent tax debt, if the partnership has a partner who holds an ownership interest of 50% or more and has a seriously delinquent tax debt. A corporation will be considered to have a seriously delinquent tax debt, if the corporation has an officer or a shareholder who holds an ownership of 50% or more, or a controlling interest that is less than 50% of the outstanding shares of corporate stock.
The bill was introduced by Representative Jason Chaffetz (R-Utah). Chaffetz cited a statistic from the U.S. Governmental Accountability Office that federal contractors collectively owe about $5 billion in unpaid taxes. The bill's co-sponsor, Representative Jackie Speier (D-California), claims that even the Internal Revenue Service has awarded contracts worth $356 million to 11 companies that owed back taxed in the past year alone.
If passed, the Act will apply to contracts and grants awarded 270 days after its enactment.
For more information or questions on this topic, please contact your professional at UHY LLP in Farmington Hills
248 355 1040 or Sterling Heights 586 254 1040 or visit us
on the web at www.uhy-us.com.
Back to top |
|
|
|
Our firm provides the information in this newsletter as tax information and general business or economic information or analysis for educational purposes, and none of the information contained herein is intended to serve as a solicitation of any service or product. This information does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisors. Before making any decision or taking any action, you should consult a professional advisor who has been provided with all pertinent facts relevant to your particular situation. Tax articles in this newsletter are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided "as is," with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.
UHY LLP is a licensed independent CPA firm that performs attest services in an alternative practice structure with UHY Advisors, Inc. and its subsidiary entities. UHY Advisors, Inc. provides tax and business consulting services through wholly owned subsidiary entities that operate under the name of "UHY Advisors." UHY Advisors, Inc. and its subsidiary entities are not licensed CPA firms. UHY LLP and UHY Advisors, Inc. are U.S. members of Urbach Hacker Young International Limited, a UK company, and form part of the international UHY network of legally independent accounting and consulting firms. "UHY" is the brand name for the UHY international network. Any services described herein are provided by UHY LLP and/or UHY Advisors (as the case may be) and not by UHY or any other member firm of UHY. Neither UHY nor any member of UHY has any liability for services provided by other members.
�2013 UHY LLP. All rights reserved. [0613]
|
|
|
|
|
|
