Forecasted Impact of the Infrastructure Investment and Jobs Act in the Construction Industry

On November 15, President Biden signed the $1.2 billion Infrastructure Investment and Jobs Act (IIJA), offering an economic boost in the construction industry. The bill includes a five-year Surface Transportation Reauthorization Act, devised to invest $304 billion in roads and bridges.

Investment in Infrastructure

The breakdown of the investment in physical infrastructure, according to the Associated General Contractors (AGC) is as follows:

  • Freight and passenger rail (Amtrak): $66 billion
  • Broadband deployment and broadband affordability: $65 billion
  • Water infrastructure: $55 billion
  • Roads and bridges (in addition to the reauthorization): $47 billion
  • Modernizing electric grid and clean energy transmission: $73 billion
  • Transit: $39 billion
  • Airport projects: $25 billion
  • Ports: $17 billion

The Cost of the Bill

There is some debate about the cost of the bill. According to the White House, the new spending will be funded with more than $250 billion in unspent COVID-19 relief funds, tax enforcement and new revenue. However, the Congressional Budget Office estimates the bill could add up to $256 billion to the national deficit over the next 10 years.

Minimal Tax Changes under the Infrastructure Act

The infrastructure bill includes limited tax law changes. The most significant provision is the termination of the Employee Retention Credit (ERC) as of September 30, 2021, except for eligible recovery startup businesses. Therefore, the last eligible quarter for the ERC is the third quarter of 2021 for most employers. Other provisions include reporting of cryptoasset transfers and modification of automatic deadline extensions for taxpayers impacted by federally declared disasters.

One tax provision of interest to contractors is the delay of excise fuel tax reductions due to expire on September 30, 2022. The new law extends current excise tax rates on fuels, diesel and special fuels, retail sales of heavy trucks, trailers and tires until after September 30, 2028.

Improvements in the Construction Industry

While the impact of the new infrastructure funding will not be felt immediately, economists generally agree that the bill will allow greater worker mobility and improve transportation of goods, resulting in increased productivity. For the construction industry, the AGC stated that “The IIJA is the most significant infusion of investment in our infrastructure since the enactment of the Interstate Highway System in the mid-1950s,” and will provide opportunities for a variety of contractors.

To see the expected allocation by state, please click here.

Our team has decades of experience working with construction leaders to meet their tax and business goals. To learn more about how the infrastructure bill may impact your construction business, please contact our experts.

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