With 2017 coming to a close, construction companies are working hard to put the finishing touches on key projects before heading into the winter season. In addition, financial managers are wrapping-up the annual reporting period and planning for any necessary maneuvers required prior to year-end. Before we turn the page to 2018, let’s take a closer look at two major issues that have been at the forefront of the industry in recent months: 1: Workforce development and 2: Potential tax reform.
Workforce development has been a hot topic within the industry for the last several years as the economy has slowly rebounded from the recession felt from 2007 – 2012. While the recession caused construction activity to slow substantially, it also caused a tremendous number of workers to exit the industry entirely. Now, with the economy and industry outlook trending upward, construction managers find themselves wondering where the manpower to sustain the work will come from.
A 2017 survey conducted by the Associated General Contractors of America (AGC) recently found that nearly two-thirds of construction companies reported having difficulty filling craft positions. To put it into perspective, there were approximately 172,000 job openings in the industry in March 2017 compared to just 66,000 in March of 2011. With baby boomers in the industry retiring at a rapid pace, it is anticipated that it will be difficult to find individuals to replace these workers in the long-term.
Statistics show that the average age of a construction worker is approximately 42 years old, and the workforce is predominately occupied by males at 91%. Finding younger talent and diversifying the workforce will be key challenges facing almost all construction companies going forward. We encourage you to support the construction trade associations and the efforts they are taking with regards to workforce development initiatives.
Potential Tax Reform
It would be hard to find a more talked about and polarizing topic coming out of Washington in recent months than the ongoing debates with regards to tax reform. While the Trump administration hoped to get this accomplished early in 2017, they now find themselves scrambling to get Congress to come to an agreement as to what tax reform will ultimately look like.
Key items being addressed include lowering the corporate tax rate from 35% to near 20%, lowering the amount of tax that pass-through entities pay either through rate reductions or additional deductions, and providing mechanisms for increased expensing of capital expenditures. In addition to business provisions, there are many proposed incentives and potential elimination of items that will impact individual tax payers. There is much give and take required during this process, as the 10-year budget cannot be increased by more than $1.5 trillion as a result of the proposed tax changes.
Congress is steadily working to pass this pending legislation before the end of the year. Nevertheless, it appears as if most provisions will not be effective until 2018. YHB will provide more information regarding these changes and their potential impact as soon as any tax bills are signed into law. Continue to work with your CPA to plan for year-end strategies based on current law as well as the changes as they are being proposed.
We hope 2017 has been a prosperous year for both you and your company. YHB is thankful for our clients and extended network of family and friends of the firm. We wish you a joyful holiday season and a Happy New Year.
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Chris 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.