Hot Industry Topics for the Construction Industry
Banking, Insurance/Surety, Equipment, and Accounting News You Need. Hot Topics content contributed to United Contractors by Associate Committee members.
Banking
WSJ Prime Rate went up .25% from 3.25% to 3.50%, effective 3/17/2022. Variable loans will adjust/increase immediately. Banks are in the final stages of PPP forgiveness – Both F&M Bank and Heritage Bank experienced high success rates in loans being fully forgiven.
Contributors: Kelly Attebery - F&M Bank and Clinton Pickering - Heritage Bank of Commerce
Insurance/Surety
Cyber-attacks are becoming more frequent and rates for that coverage are skyrocketing. Property rates are also increasing due to natural disasters and strikes overseas. Lead times for getting material are as high as 8-10 months for materials such as steel. Many companies are purchasing material ahead of time to mitigate the risk of price hikes in a volatile market which is making it difficult for some to find storage/warehouses for this purchased material. Owners are not as lenient this year; for example, the force majeure clause is not acceptable for COVID-19 anymore since it is not an “unpredictable” event at this point.
Contributors: Chelsea Arnold - Andreini & Company, Kevin Reimers - Woodruff-Sawyer & Co., Lacey Torkelson - Newfront, Salina Wong - CNA Surety, and Sean Xavier - CNA Surety
Equipment
It is a struggle to get equipment built as most of the parts (engine, transmission, brakes, collision avoidance systems, etc.) need chips to work. Most of these chips are made overseas. The issues piled up as follows:
- Parts and semiconductor chip factory shutdowns
- Port shutdowns are causing a major backup of container chassis off the coast
- Container ships stuck off the port caused no containers being sent back to be filled again, causing even more slowdowns
- Starting in December of 2020, orders for equipment ramped way up, putting even more strain on the system
Equipment orders are at an all-time high and manufacturing capacity is at an all-time low, these conditions are expected to continue for the foreseeable future. The war in Ukraine and interest rate uncertainty are likely to exacerbate this problem.
Contributors: Teresa Dias - Peterson Trucks, Inc., Kat Faria – Volvo Construction Equipment & Services, and Tim Smith - LogoBoss
Accounting
Tax credits continue to be a benefit to the industry that isn’t always explored.
- Employee Retention Credits - just need to show a quarterly decline in revenue of 20% in one quarter in 2021 compared to that same quarter in 2019, with the benefit being about $7,000 per employee per quarter. Traditional CPA firms charge about $10-$20k but there are tax credit specialty groups that are contingency-based and charge 25% of the actual benefit so do your diligence.
- IRC §179(d) for energy-efficient improvements to government buildings is a permanent credit.
- SALT workaround AB150 permits passthrough entities such as S-Corps and Partnerships to make an election to permit entity owners a nonrefundable tax credit on their personal income tax returns equal to the elective tax paid on their behalf (up to 9.3% of their qualified income). GAAP treatment of the election is different and is treated as a stockholder/partner distribution.
Contributors: Dave Heier - Moss Adams LLP, Matt Hennagin - Moss Adams LLP, and Jason Herrera - BFBA, LLP