Taxation
HARDI is advocating for the extension of the Tax Cuts and Jobs Act (TCJA) to protect crucial business tax incentives that drive investments in member businesses. These incentives are vital for fostering growth and ensuring the competitiveness of HVACR companies, particularly in the face of evolving market demands and regulatory landscapes.
The extension of the Tax Cuts and Jobs Act is essential for protecting business tax incentives that foster investment, innovation, and growth within the HVACR industry. Maintaining these provisions will help ensure that HVACR companies remain competitive, continue to invest in new technologies, and contribute to the overall economic health of the industry.
Top Tax Issues:
Section 199A
Section 199A helps pass-through businesses to compete with the permanent 21% tax rate for corporations.
Permanent Expensing Through Bonus Depreciation
Bonus Depreciation allows businesses to write off the cost of buying necessary equipment to operate their business
Repeal of Last-in, First-out (LIFO) Inventory Accounting Method
LIFO is a valuable accounting method for any business that carries inventory, the high value of LIFO reserves make it a valuable tax expenditure for offsetting other tax changes.
Extending Increased Estate Tax Exemption
Asset-heavy businesses like HVACR distribution increase the value of an owner’s estate, the current exemption allows for owners to more easily pass their business on to the next generation.
Keeping Section 25C – Residential Energy Efficiency Tax Credit
Provides homeowners with a deduction for installing energy efficient equipment in their primary homes
Extension of Interest Deduction Limits – Section 163(j)
Section 163(j) limits how much interest expense a business can deduct.
Extension of Current Marginal Tax Rates
The Tax Cuts and Jobs Act reduced marginal tax rates on all income brackets and is a key part of extending tax relief
Ending Taxation of Overtime Wages
President Trump has repeatedly called for ending taxation of overtime wages, if included will likely increase compliance regulations with what is considered overtime
Impact of the TCJA on the HVACR Industry
The TCJA, implemented in 2017, introduced several provisions that have been beneficial to businesses within the HVACR industry. Key among these is the reduction in corporate and pass-through tax rates, which has allowed HVACR companies to reinvest savings into their operations, enhance research and development, and expand their workforce. Additionally, the TCJA includes immediate expensing provisions, enabling businesses to deduct the cost of qualifying property and equipment in the year it is placed in service. This has been instrumental in encouraging investments in new technologies and infrastructure improvements.
Need for Extension
Many of the TCJA's provisions are set to expire at the end of 2025. HARDI is actively lobbying for the extension of these provisions to maintain a stable and favorable business environment. Extending the TCJA provisions will ensure that HVACR companies continue to benefit from reduced tax burdens, which is essential for ongoing investments in innovation and workforce development.
Business Tax Incentives and Economic Growth
Business tax incentives are crucial for the economic growth of the HVACR sector. These incentives help small and medium-sized enterprises compete on an equal footing with larger corporations. By lowering the effective tax rate and providing immediate expensing options, businesses can allocate more resources towards enhancing product offerings, improving service delivery, and adopting environmentally friendly technologies. This is particularly important as the industry faces increasing pressure to meet decarbonization goals and improve energy efficiency.
HVAC Incentives Included in Inflation Reduction Act
The Inflation Reduction Act (IRA), included several incentives like Section 25C, 25D, 45L, and expansion of 179D to help sell high-efficiency equipment. Green tax credits like these have been mentioned as possible pay-fors for the extension of TCJA. HARDI is working to protect these traditionally bipartisan tax provisions.
