Tom Pace, CFO of Thomas & Hutton and Chair of the ACEC Tax & Regulatory Affairs Committee, testified in front of the House Ways and Means Committee Main Street Tax Team on the importance of the Section 199A passthrough tax deduction to the engineering industry. The roundtable discussion was part of the Ways and Means Committee’s overview of tax provisions that will be up for debate in 2025 when significant portions of the 2017 Tax Cuts and Jobs Act (TCJA) expire.
The Section 199A deduction was created as part of the TCJA at the same time as the corporate tax rate was lowered from 35 percent to 21 percent. This balanced tax treatment of all business structures is essential to ACEC because its membership is a mix of C corporations and passthrough entities, such as S corporations, partnerships, and LLCs.
Pace’s statement discussed how Section 199A has given Thomas & Hutton the financial flexibility to increase salaries as a workforce retention measure. In addition, he provided the legislative history of why engineering and architecture are treated differently than other professional services that do not have full access to the deduction.
ACEC also submitted comments to the Ways and Means tax teams on all of the Council’s priorities in the 2025 tax debate and is engaging with all House and Senate tax writers to ensure that the engineering industry’s concerns are front and center.
As a result of ACEC’s advocacy efforts, a new federal rule was recently finalized that specifically prohibits the use of so-called reverse auctions for procuring architect and engineering (A/E) services.
A reverse auction is often presented as an online competition where contractors can submit multiple bids to win a contract. Often described as a “race to the bottom,” the process directly conflicts with Qualifications-Based Selection laws at the federal and state levels.
The Construction Consensus Procurement Act of 2021 (P.L. 117-28, July 26, 2021) required the rulemaking clarifying a prohibition on the use of reverse auctions for procurements of A/E services that are subject to the Brooks Act (40 U.S.C. Chapter 11) by adding language to Federal Acquisition Regulation 17.803. The rule also prohibits reverse auction use for design-build contracts. The final rule was published in the Federal Register on July 30, 2024, and became effective on August 29, 2024. Go to https://bit.ly/3YaLnhN to read the final rule.
