Image: pexels.com
The recent far-ranging overhaul of the nation’s tax system should have a generally positive effect on architects, engineers, AVL designers and other businesses as they work with house-of-worship space.
The Tax Cuts and Jobs Act of 2017 focuses primarily upon easing the federal tax burden of these and other types of businesses for tax-years 2018 and forward.
The most notable provision boosts their bottom lines through a 20% deduction for businesses organized as “pass-through” entities, such as S-corporations, sole proprietorships, and limited liability partnerships, subject to income limitations.
The most notable provision boosts bottom lines through a 20% deduction for businesses organized as “pass-through” entities....
The Act also contains a plethora of other provisions that impact individual taxpayers for tax years 2018-2025. These are led by lower tax rates for all individual tax filers, a change that should result in many paying less in taxes; and a doubling of the standard deduction, which is projected to result in a dramatic reduction in the number of filers that itemize expenses – including charitable deductions.
The impact of these new individual-tax provisions on church giving – which of course is an important component in the funding that fuels any kind of house-of-worship project involving architects, engineers, AVL and/or other consultants – is something the church community is keeping an eye on.
“Doubling of the standard deduction means that a lot of people who attend churches and used to itemize deductions now may not be able to,” says Matthew Branaugh, editor of the Church Law & Tax team at Christianity Today, “so there is now some concern that these people may give less than previously.”
But, there are a couple of important factors working against this happening to any appreciable extent, he notes.
For one thing, “The way people can handle their deductions is not a primary driver for their giving habits,” says Branaugh.
Instead, “People in church environments and houses of worship are oftentimes not giving because of any tax incentive – they are doing it because they believe in a ministry, and want to contribute to what it is doing,” he says.
“And, especially in Christian churches, there is a Biblical call to give – and responding faithfully when God asks us to is part of our role as Christians,” Branaugh states.
At the same time, with the lowering of tax rates, “There are a number of people who, at least in theory, will be seeing a bump in their take-home pay,” notes Branaugh, “which might actually make them inclined to give more.”
Other business ramifications
At the same time, tax reform likely won’t do anything to affect the supply of loan dollars that are available for church capital improvement projects.
“Churches, of course, do not pay any taxes,” says John Berardino, president of Griffin Capital Funding. “So as far as tax reform, we haven’t heard of anything that would impact mortgage financing for church projects.”
The new tax act’s repeal of the Alternative Minimum Tax (AMT) for corporations, as well as an increase in the AMT exemption amount for individuals, should make it easier for companies working in the AVL technologies space to take advantage of the R&D Tax Credit, according to Chuck Wilson, executive director of the National Systems Contractors Association (NSCA).
Meanwhile, the new tax act’s repeal of the Alternative Minimum Tax (AMT) for corporations, as well as an increase in the AMT exemption amount for individuals, should make it easier for companies working in the AVL technologies space to take advantage of the R&D Tax Credit, according to Chuck Wilson, executive director of the National Systems Contractors Association (NSCA), not-for-profit association representing the commercial electronic systems industry.
Also available to designers, architects, engineers, and a multitude of others, this section of the tax code, enacted in 1981, is a wage-based, dollar-for-dollar credit for companies and their owners engaged in “qualified projects” that have been determined to stimulate innovation, technical design and/or manufacturing within the U.S.
“The [R&D Tax] credit has been available since 1981, but few companies have used it because, income-wise, it threw them into AMT territory,” says Wilson. Now, at the individual level, “The credit can be particularly beneficial to owners of companies organized as pass-through entities, lowering their effective tax rates,” he adds.
