The amendments arose during the reconciliation of the Senate and House tax bills that began on December 4. Notably, the changes keep the Historic Tax Credit (HTC), an incentive that spurs revitalization of older buildings in both blue and red states.
Originally, the Senate’s plan kept the HTC but spread the current 20 percent credit for recognized historic structures over five years, a move that would have diluted the credit’s impact. (The bill also would have nixed the ten percent credit for buildings erected before 1936.) The House’s version would have eliminated the HTC entirely. The reconciled, final bill, officially known as the Tax Cuts and Jobs Act, gives architects more flexibility to use the 20 percent credit.
The revised bill also allows a 20 percent deduction for what are known as pass-though businesses. These include S-corps, sole proprietorships, and Limited Liability Partnerships (LLPs) and are often (but not always) small businesses.
Due in part to the AIA’s lobbying, the bill also exempts architecture and engineering firms from restrictions on deductions that apply to other service-oriented businesses.
In a prepared statement on the changes, AIA 2018 President Carl Elefante thanked members for their support in opposing key provision of the bill, and explained the outcome of the AIA’s advocacy: “The AIA lobbied hard and successfully to improve this bill, and to ensure that architects continue to be major job creators in the American economy. Gaining tax relief for architects who organize as pass through companies—which includes the majority of U.S. architecture firms—is a significant improvement over earlier drafts. So is preserving at least in part the Historic Tax Credit, which was totally abolished by the original House tax reform bill.”