January/February 2018

PE Report
Tax Bill Victory

NSPE advocacy on behalf of small design firms paid off after lawmakers amended federal legislation that would have specifically excluded them from tax breaks.

NSPE joined with the American Institute of Architects and the American Society of Landscape Architects in sending a letter to legislators on worrisome provisions in two tax bills that were being considered by the House and Senate.

Both the House and Senate versions of the legislation would have affected engineering firms organized as pass-through businesses—including S corporations, partnerships, and LLCs. Pass-through businesses do not pay a corporate tax. Instead, these firms pay their business taxes through the owner’s personal income tax returns. Many design firms operate under this legal structure.

In the letter, NSPE urged Congress to amend the legislation to allow these firms to qualify for the new preferential tax rates.

The House bill (H.R. 1) would have set a new, lower 25% tax rate, but exclude engineering and other professional services firms. The Senate bill would have set a 23% tax deduction, raised from 17.4% in an earlier version, on the nonwage portion of the pass-through income.

Later, the final conference package was amended to include specific language stating that engineering firms are not subject to the limiting provision that applies to other kinds of service businesses.

At press time, a vote on the conference report was expected the week of December 18, followed by delivery to President Trump for his signature.