Architecture Tax Cut

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Architecture Tax Cut

Postby Architorture » Mon Oct 18, 2004 7:37 pm

Congress Passes Tax Cut for Architectural Firms
Major AIA legislative victory!

Congress has passed the "JOBS" tax bill, which includes a $358 million tax cut for architecture and engineering firms. Making sure A/E firms were included in the legislation was a priority that the AIA has been advocating since the 2004 Grassroots Conference in March. The new law provides for firms an across-the-board 9 percent tax deduction that will be phased-in over the next six years.

President Bush is expected to sign the bill, which passed with bipartisan support.

The central purpose of the tax legislation was to repeal certain tax breaks for exporters, that had been found to be in violation of international law by the World Trade Organization. In place of these old FSC/ETI export-related tax incentives, the legislation creates a new tax cut for a variety of manufacturing businesses, which includes architecture and engineering firms.

This new tax deduction is applicable to revenues derived from architectural and engineering services that are produced by sole proprietors, partnerships, LLCs, subchapter S corporations, and C corporations. For tax years 2005 and 2006, firms will be allowed to deduct 3 percent of their net revenues from projects undertaken within the U.S. That percentage increases to 6 percent for tax years 2007, 2008, and 2009. After 2009 it becomes 9 percent.

Koonce: Great victory

"This is a great victory for us," said AIA Executive Vice President/CEO Norman L. Koonce, FAIA. "This was a very difficult and complex issue and we were successful in our objectives. As a result, our members will receive a tangible benefit for years to come with the new tax deduction. It shows what the AIA can do when we work together for common goals."

Koonce thanked "the thousands of AIA members who have contacted members of Congress on this important legislation." He also praised AIA Government Advocacy Vice President Ron Faucheux and his team for "a job exceeding well done."

At times over recent months, passage of the overall bill was jeopardized by a variety of issues such as the tobacco buyout amendment. But ultimately enough House and Senate members were able to reach agreement on the tax legislation before adjournment.

The original Senate version of the bill extended the tax breaks to manufacturers but did not include architecture and engineering firms. That was changed with an AIA-supported amendment in the Senate that was sponsored by Sen. Kay Bailey Hutchison (R-TX).

The Senate bill also included a provision that would have repealed the 10 percent historic preservation tax credit program. That provision was eliminated after intensive lobbying by AIA members and preservationists last May.

The original House version of the bill applied the tax cut only to C corporations, which would have denied the benefit to the many architecture firms that are sole proprietorships, partnerships, S corporations, and LLCs. The AIA, along with engineering and small business groups, were successful in persuading the conference committee to extend the tax deduction to all architecture and engineering firms, not just C corporations.

Faucheux said the tax bill was a tough issue for the AIA to lobby because it involved fighting on three fronts. "First, we had to make sure architects were included. Second, we had to make sure all firms, not just C corporations, would benefit. Third, we had to save the historic rehab tax credit." He attributes the triple triumph to "the sustained grassroots efforts put forth by our members since March. Grassroots contact works. This victory proves that once again."

Revenue neutral

According to congressional sponsors, the bill is “revenue neutral” because it does not add to the federal budget deficit. This was accomplished because the legislation, in addition to lowering taxes on certain businesses, also raises revenues from a number of sources including eliminating the FSC/ETI manufacturing export incentives and eliminating corporate tax shelter abuse.

The conference report on the bill finally passed Monday when the Senate voted 69-17 for adoption. Voting for the bill were a bipartisan group of key senators that included Majority Leader Bill Frist (R-TN), Minority Leader Tom Daschle (D-SD), Senate Finance Committee Chair Chuck Grassley (R-IA), and Senate Finance Committee ranking member Max Baucus (D-MT).

Late last week, the House passed the conference report by a 280-141 vote.

Values and practice victories

The tax cut victory comes on the heels of another congressional win for architects last week with passage of the Brightfields/Brownfields legislation. Click here to see "AIA-Supported Brightfields/Brownfields Legislation Passes."

"These two successes show that AIA member activism can make a big difference on issues involving both values and practice," said Faucheux.

"But we've only just begun," noted Faucheux. "In the next Congress, we'll need member participation more than ever. We're currently seeking broad-based AIA member and Knowledge Community input on a long term legislative agenda that strongly reflects the values of our members on a range of sustainability, housing, education, energy, water resources, transportation, and community design issues. The fight goes on."
-thanks to the AIA website..


so what do people feel about this? obviously from a business standpoint it seems great, less taxes on revenue generated through services...

although does anyone take issue with the fact that architecture and engineering have more or less be recertified as 'manufacturing industry'?
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Postby Kevin » Thu Oct 21, 2004 2:53 pm

Overall, the legislation looks like a poor piece of public policy, apparently timed to the election cycle, widely distributing business tax breaks that come on top of successive tax reductions for wealthy U.S. residents, at a time when deficits are at record highs and U.S. social service and public health systems are badly stressed and underfunded.

A few more bucks in the pockets of big U.S. architecture and engineering firms is well and good for them. Ra, ra. But I'm not so sure the AIA does the profession well in the long term by crowing about such a narrow deep-pockets issue.

Would you be content for architecture to be about, for, and by rich people?

Wouldn't the broader cause of architecture, and intelligent investment in the quality of our built environments both public and and private, perhaps be better supported in the long run by a broader perspective on fairness and equity in the distribution of societal benefits?
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Postby Architorture » Thu Oct 21, 2004 9:56 pm

the tax cut applies to all levels of firms, large and small...

and i mean come on...architecture needs a client, you can't practice architecture without a client, who is going to pay the bills...

i think it was nietzsche who said that architecture is showing the power to build form...

architecture is built by rich people and big corporations...often for rich people and big corporations...

so you don't think architects should have access to more income? which could help grow firms, creating more architecturally minded people out in the world...which i think is good for architecture in general
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Postby Kevin » Fri Oct 22, 2004 3:52 pm

the tax cut applies to all levels of firms, large and small...


Read more carefully.

i think it was nietzsche who said that architecture is showing the power to build form...


So? I don't find that compelling in the least.

Does the idea, "architecture is showing the power to build form", lead to a better architecture, or a better culture of building? If you think it does, then how?

Or does it serve more to justify past exercises of power itself?
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Postby Architorture » Fri Oct 22, 2004 4:08 pm

This new tax deduction is applicable to revenues derived from architectural and engineering services that are produced by sole proprietors, partnerships, LLCs, subchapter S corporations, and C corporations. For tax years 2005 and 2006, firms will be allowed to deduct 3 percent of their net revenues from projects undertaken within the U.S. That percentage increases to 6 percent for tax years 2007, 2008, and 2009. After 2009 it becomes 9 percent.


who is being left out here?

the quote is supposed to demonstrate that architecture is only realized through some force...in our current age that force seems to be money

are you going to argue that the practice of architecture is not provided for by the upper echeleons of the economic world? granted the government funds more architecture than any other group...but outside of the government who is supplying the capital to allow for the creation of architecture? certainly not the poor and disenfranchised...

unlike the other noble professions law, medicine, teaching, clergy, ect...architects can't simply donate their skills to a cause...since our skills can only be realized through built form, which someone still needs to provide for...why do architects feel so divorced from upper classes that provide them with most of their clientel outside of the governemnt?
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Postby Kevin » Fri Oct 22, 2004 5:59 pm

I agree with your reading of the specific aspects of the bill refering to A/E firms as described. My point was in reference to other provisions of the bill which seem to favor larger enterprises with a bigger proportion of overseas business, which would favor larger firms.

I'm still asking for a larger perspective on taxes and public budgets than 'making sure I get mine'.

unlike the other noble professions law, medicine, teaching, clergy, ect...architects can't simply donate their skills to a cause...since our skills can only be realized through built form, which someone still needs to provide for...


But architects do donate their skills to causes. Maybe not as much, or "enough", but it happens. And I think if you look at medical service donations, for instance, you'll find that the percentage of cost which is direct to the professional may not be all that different from that for architecture projects.

Maybe it would happen more if architects were simply more generous. Or: more organized in their generosity.

Think out of the box!

And Donald, welcome back!
Last edited by Kevin on Mon Oct 25, 2004 12:45 pm, edited 1 time in total.
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Postby Richard Haut » Sat Oct 23, 2004 3:06 am

"The most powerful men have always inspired the architects; the architect has always been influenced by power" - Friedrich Nietzsche.

(a slightly different emphasis from the other quote).

What you are talking of is Pro Bono work - Pro Bono Publico : for the public good. In the legal profession this is very important because it is often the only way that many people can get access to legal advice.

It used to be seen as a moral obligation on the professions to do a proportion of Pro Bono or charitable works. These were either undertaken without charge or on an "at cost" basis.

This was seen by many as a way of contributing to the society in which they lived and worked. I am sure that there are still those who still feel like that in Britain or America today, but I doubt that it is as widespread as it used to be.

(I am glad to see that the DesignCommunity prisoner of conscience has been released).
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Egad

Postby SDR » Sat Oct 23, 2004 10:06 pm

Two (or even three) literate correspondents on the same web site -- be still, my heart!

Seriously, it is such a pleasure to read well-crafted prose and convincingly-enunciated argument, when all about are the ravings of the rabble. . .please, please don't stop. (Sorry, rabble; although a picture may be worth a thousand words, here words are about all we have.)

Salutations, SDR
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Postby Architorture » Sun Oct 24, 2004 4:55 pm

Richard Haut wrote:"The most powerful men have always inspired the architects; the architect has always been influenced by power" - Friedrich Nietzsche.

(a slightly different emphasis from the other quote).


is that it? maybe whereever i first read it, it was a mis-quote...but i would still argue that the ability to build architecture is a demonstration of power...like the 1893 chicago world's fair as an attempted demonstration of parity with europe through architecture...

kevin wrote:But architects do donate their skills to causes. Maybe not as much, or "enough", but it happens. And I think if you look at medical service, donations, for instance, you'll find that the percentage of cost which is direct to the professional may not be all that different from that for architecture projects.

Maybe it would happen more if architects were simply more generous. Or: more organized in their generosity.


oh i wasn't saying architects never donate their skills... i'm just saying that an act of architecture...such as a building...is rarely donated...and even if it was...who ever donated it was still showing their power through architecture, albeit donated...

what i'm trying say is that if we reciognize architecture, medicine, law, ect ect as basically services...that the other professions, in order to do their work, aren't gernerally dealing with the amount of money necessary to bring a building into reality...

unless you believe architecture is created when a drawing is done...rather than when the building is done...then i guess anyone has the power to create architecture...
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Postby Richard Haut » Sun Oct 24, 2004 5:51 pm

or to put it another way:

"The physician can bury his mistakes, but the architect can only advise his clients to plant vines." - Frank Lloyd Wright
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Postby Kevin » Mon Oct 25, 2004 1:30 pm

Architorture wrote: what i'm trying say is that if we recognize architecture, medicine, law, ect ect as basically services...that the other professions, in order to do their work, aren't generally dealing with the amount of money necessary to bring a building into reality...


Which still sounds to me like a like a kind of easy "self-evident" assumption about things -- which, as is often the case for such things, does not really bear lose scruntiny.

Have you compared the bill for the design and construction costs of an average US single family house with the costs of a major medical event (a full course of cancer treatment, or something calling for open heart surgery, with diagnosis and followup)? Ever looked at the costs to a corporation for a serious product liability lawsuit?

It feels like you're looking for an excuse for the profession. It's not clear to me there's a sound basis or the excuse.

But more importantly, why look for an excuse at all? Is it needed?

How much more valuable to focus on how to find, support, and reward real architectural generosity, and on how to surmount barriers to there being more of it!
Last edited by Kevin on Mon Oct 25, 2004 4:00 pm, edited 1 time in total.
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Taxes

Postby SDR » Mon Oct 25, 2004 2:46 pm

Donald -- Your eye candy comes up a little too small on my screen, but I think I read it correctly; would that be an all-too-typical knee-jerk reaction to the 'evil liberal-think enemy' of the Left? (Clever of them to turn 'liberal' into a dirty word, wasn't it?) I guess the question always comes back to: who will pay for the services ALL Americans take for granted and expect? I truly don't understand how my Libertarian friends can think the country will not descend into anarchy if their prescriptions are followed -- or would that be the 'necessary evil' preceding the 'new dawn' of true every-man-for-himself 'free society'? 'Taxes' is the other word / idea that the "loyal opposition' has converted into The-Work-of the-Devil-Himself, winning converts by pandering to the basest instincts rather than the noblest ideals of their fellow citizens. . .Site Administrator note: If this comment belongs at the Fireside Chat forum (or elsewhere), I apologize. The above post seemed to call for some (necessarily 'political') response.

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Postby Kevin » Mon Oct 25, 2004 4:20 pm

SDR, et al.,

I think the response in this thread is appropriate to wrap up the thought.

And also, as the discussion drifts farther from architecture and more into general social policy, I agree that the continuation should go to the Fireside forum...

http://fireside.designcommunity.com
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Postby Architorture » Mon Oct 25, 2004 7:51 pm

Kevin wrote:
Architorture wrote: what i'm trying say is that if we recognize architecture, medicine, law, ect ect as basically services...that the other professions, in order to do their work, aren't generally dealing with the amount of money necessary to bring a building into reality...



Have you compared the bill for the design and construction costs of an average US single family house with the costs of a major medical event (a full course of cancer treatment, or something calling for open heart surgery, with diagnosis and followup)? Ever looked at the costs to a corporation for a serious product liability lawsuit?

!


how many average US single family homes are designed by architects? a marginal percentage at best...and those that are, probably have a price tag that would rival most major medical operations...

and ultimately if you distill out of medicine and law the service that is being charged and leave only the material cost...i doubt it could ever compare to the material cost you find in a building...especially if you look at the cost of materials involved versus the cost of services... i think medicine and law obviously get compensated far more for their services than architects

i'm not looking for excuses for a tax cut... i think the tax cut is a good idea, and will help firms keep a little more of the abismally small amount they make off of a building
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Postby Kevin » Mon Oct 25, 2004 11:19 pm

Architorture, with all due respect, your arguments are going in circles, you're coddling assumptions instead of learning from data, and in the process, the big picture seems to be passing by unrecognized.
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