January 20, 2021

COVID-19 Relief – Opportunities for Construction Companies

When the Consolidated Appropriations Act, 2021, (CAA) was signed into law on December 27, 2020, it provided a second round of desperately needed stimulus to American businesses and families. The combination of individual, government, and business provisions mean help is on the way to combat the persistent pandemic. The opportunity for Atlanta construction companies arises from changes to various tax and federal loan programs, but also in the funding in areas such as transportation, energy, and schools, which is sure to create new demand. This is especially welcome news given the high rate of project delays and cancellations over the past year. To help clients, prospects, and others, Wilson Lewis has provided a summary of the key points below. 

New Program Funding

The CAA allocated billions of dollars in funds to various sectors, in part, to incentivize building modifications or new construction projects to meet established goals. These include:

• State Transportation – The CAA included $10 billion for state highway agencies which include block grants to be used for the construction of highways, bridges, and tunnels.
• Energy – An estimated $35 billion has been allocated to the wind, solar, and other clean energy initiatives. A portion of the funds is allocated to energy tax credits to incentivize the inclusion of clean energy systems in current buildings and new projects.
• Education – Through the $82 billion allocated for education does not immediately seem relevant for the construction industry, contractors should take note that some money can be used for the construction and renovation of HVAC systems, larger classrooms, and alternate school facilities.
• Maritime Infrastructure and Military Housing – The CAA also allocates the Army Corps of Engineers $10 billion to improve federal ports, harbors, and inland waterways. Contractors in this sector may want to prepare for federal RFPs requesting bids. Additionally, separate legislation also approved $11.8 billion in funding for more military housing.

Business Funding & Tax Incentives

Paycheck Protection Program (PPP2)

Many construction companies applied for and used PPP loans created by the CARES Act. With replenished funds and options for a second draw, industry companies now have access to additional working capital needed to manage through 2021.

First-time PPP borrowers have mostly the same requirements as before: less than 500 workers, an economic need requirement, a loan maximum of $10 million, and a covered period ranging from eight to twenty-four weeks.  Second-time PPP borrowers must have had at least a 25 percent drop in gross receipts in any 2020 quarter compared to the previous year, and loan amounts are capped at $2 million.  Both first- and second-draw PPP loans are still eligible for up to 2.5 times the average monthly payroll for 2019, although first-time borrowers may use 2020 payroll.

Additionally, Congress confirmed that forgiven PPP funds are non-taxable and that certain PPP expenses, like rent and utilities, remain tax-deductible.

Employee Retention Tax Credit (ERTC)

Construction companies can also benefit from the extension of this CARES Act tax credit, which gives a refundable credit against the employee portion of FICA taxes. Recall that the ERTC can be claimed on a quarterly basis.

The CAA not only extended ERTC to June 30, 2021, but also increased the amount to 70 percent of the first $10,000 in qualified wages, per eligible employee, per quarter. Thus, if a contractor is eligible to claim ERTC in both the first and second quarters of 2021, they can claim up to $14,000 in tax credits per employee.

Eligibility requirements have also been relaxed. To qualify, a business must have at least a 20 percent decline in gross receipts when compared against the same period in 2020 and have less than 500 employees. This is an important modification because many of those unable to claim the credit in 2020 due to employee size, are now eligible.  

Finally, it is important to note PPP recipients can now qualify to take advantage of the credit, but only when PPP proceeds were not used on the same employee’s payroll for which the credit is claimed. In other words, no double-dipping.

Paid Sick Leave Tax Credit, Extended and Optional

The CAA extends through March 31, 2021, the payroll tax credits available to employers that provide paid family and medical leave. Originally designed to alleviate the cost of paid time off, employers receive a 100% refundable tax credit against the employer’s portion of Social Security taxes on eligible wages paid. The requirement to provide paid family and medical leave was not extended. This means the credit is only available to companies that continue to offer paid leave.

Work Opportunity Tax Credit, Extended

This was not a new COVID-era tax credit, though the WOTC was amended in 2020 to include long-term unemployed individuals as a targeted group. Any contractor that hires from one of the targeted groups, which include veterans, food stamp recipients, people living in certain federally designated communities, and yes, the long-term unemployed, can receive several thousand dollars in tax credits for first-year (and in some cases, second year) wages.

Contact Us

The CAA provides both the expanded funding to drive new projects and the financial relief to help Atlanta construction companies weather the storm. While it may take some time for project demand to increase, the tax-saving opportunities can be claimed immediately. If you have questions about the information outlined above or need assistance with an audit or tax issue, Wilson Lewis can help. For additional information call us at 770-476-1004 or click here to contact us. We look forward to speaking with you soon.