Construction Industry Quarterly Update | Q1 2018


Now that winter is behind us and we leap into spring, the construction industry hopes to emerge from the cold and find some momentum heading into one of the busiest times of the year.  As we exit the first quarter of 2018, we take a closer look at the industry outlook for the year and also examine the future implications of the recently passed tax reform legislation.

2018 Industry Outlook

It’s been a while since we’ve seen as much optimism regarding the future outlook of the industry as we are seeing heading into 2018.  As a whole, most contractors are expecting an increased volume of work activity, with the anticipation of hiring additional staff to meet these demands.  According to a recent survey conducted by AGC and Sage Construction and Real Estate, 53% of industry leaders expect to see increased activity over 2017, while only 9% expect a decline.  The sectors showing the highest growth potential according to the survey are private office, retail, warehouse, lodging, and manufacturing.  Healthcare and highway construction are expected to see solid growth as well.

From a workforce perspective, 75% of construction firms expect to increase their headcount for 2018.  Of this 75%, approximately 40% expect an increase of between 1 and 10 total employees.  Of those not planning an increase, 22% expect staffing to remain stable while only 3% anticipate a decline.

Investing in technology will also be a key initiative heading into 2018, as productivity is a common buzzword throughout the industry.  Software platforms that appear to be gaining steam are document management, estimating, project management, fleet tracking, and accounting.

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Recently Passed Tax Reform

In our last quarterly update, we gave some insights and perspective into the pending tax reform legislation that was being contemplated by Congress.   On December 22, 2017, the Tax Cuts and Jobs Act was passed, which marked the most sweeping tax reform legislation since 1986.  A key emphasis of the new tax law was lowering the corporate income tax rate from 35% to 21%, giving a potential 20% deduction to the owners of pass-through entities such as LLC’s and S-corporations, and lowering the top individual tax rate from 39.6% to 37%.  In addition, more liberal capital expensing and depreciation provisions should prove to be a boon for many industries, particularly construction.

Most of the recently passed provisions did not take effect until 2018.  Thus, most taxpayers saw little change with regards to the tax attributes on their 2017 tax filings.  Now that the 2017 filing season has passed for taxpayers not requesting extensions, it will be important to address how the new tax rules and rates will impact both business and personal tax situations moving forward.  Planning for quarterly estimated tax payments and the implementation of a well thought out equipment and capital asset acquisition strategy will be of utmost importance.

Our YHB team is thankful for the strong relationships we have with our current clients and friends of the firm.  We have worked closely with many of you over the last few months during year-end financial reporting and the tax filing process.  We look forward to continuing to provide proactive advice as you and your businesses navigate into new territory in 2018 and beyond.

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About Chris

frye-chrisChris joined Yount, Hyde and Barbour, P.C. in 2004 after graduating from Virginia Tech, where he earned a B.S. degree in accounting. During his time with the firm, Chris has focused his efforts on providing audit, review, compilation and tax services to clients in a variety of industries, including construction and real estate and not-for-profit entities. Chris also specializes in assisting clients with strategic performance management, including the implementation of dashboards and overall process improvements.

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