I spoke with John Gregerson of the Engineering News-Record about the impact of the Tax Cuts and Jobs Act on the construction industry:

Following numerous proposals, TCJA eventually implemented a 20% tax deduction on qualified business income pass-throughs. Those results could prove significant, given that “pass-throughs account for up to 75% of U.S. builders,” notes Liam Donovan, a [Principal at Bracewell LLP and consultant] for Washington, D.C.-based Associated Builders and Contractors.

But the deduction cannot exceed the greater of 50% of the W2 wages of the business or 25% of W2 wages, in addition to 2.5% of the cost of property used in the business, Donovan says. When the dust settles, the provision reduces the effective top tax rate on business income to 29.6% for many smaller firms.

…

For many industry firms, expiration of the pass-through deduction in 2026 is a potential concern.

…

“TCJA implemented several sunset provisions on individual tax rates, the pass-through deduction included, to limit the scope of the legislation to $1.5 trillion,” Donovan says. “The administration has indicated it would like to extend the pass-through deduction, but, in the meantime, the provision creates uncertainty. As a result, some pass-throughs may want to run the numbers to determine whether it makes sense to reorganize as C corporations, given the permanency of their 21% tax rate.”

You can read the full piece here.

I spoke with Keith Goldberg of Law360 about the Bipartisan Budget Act of 2018 and its impact on renewable energy:

The orphaned credits were included in sprawling tax overhaul legislation last year, but ultimately left out of the version signed into law. But now, projects including fuel cells, combined heat and power and small-scale wind will regain their ITC eligibility and be subject to a phaseout schedule similar to that of solar projects.

“This is the end of a two-year saga,” said Liam Donovan, a lobbyist and principal with Bracewell LLP’s policy resolution group. “It gets those [orphaned credits] off the table as extenders going forward and it’s a model of how to wind these credits down.”

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The budget bill also slashes the amount of carbon emissions that facilities have to capture in order to claim the credit from 500,000 metric tons per year to 100,000 metric tons per year, which Harrell said will encourage industrial facilities and other smaller emitters to invest in CCS technologies.

One factor working in favor of pumped-up CCS credits making it into the final budget bill was their bipartisan support, from coal country Republicans to Democratic climate change hawks.

“Any time you can get Sheldon Whitehouse [D-R.I.] and Shelley Moore Capito [R-W.Va.] on the same page, it’s an interesting mix,” Donovan said.

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ew ITC guidance is included on an updated priority guidance plan put out on Wednesday by the U.S. Department of Treasury that outlines projects it hopes to complete by June 30, 2018. But leading that priority guidance plan is Treasury’s implementation of the tax overhaul bill, which has Donovan wondering if ITC guidance will get pushed aside for the time being.

“My hunch is that it will be behind more immediate and urgent priorities,” Donovan said.

You can read the full piece here.

I spoke to Laura Davison of Bloomberg BNA about the implications of the Senate’s 11th hour reinstatement of the AMT:

Curbing the state and local tax deduction while keeping the AMT creates an interesting interaction because many AMT payers are the same people who could have large SALT write-offs. SALT isn’t deductible under the AMT, but lawmakers had used the argument that repealing the AMT would lessen the pain of restricting SALT deductions, said Liam Donovan, a tax lobbyist at Bracewell LLP in Washington.

“This makes it harder for the medicine to go down,” he said.

Read the full piece here.

I spoke to Bloomberg BNA‘s Allyson Versprille about the pass-through state of play:

The pass-through approach in the final tax legislation is likely to be closer to the Senate’s version, according to Liam Donovan, a tax lobbyist at Bracewell LLP in Washington.

“Their package has cleared the all-important procedural traps under the Byrd Rule,” Donovan said. The Byrd Rule is a condition of the budget reconciliation process that prohibits legislation that increases the deficit outside the 10-year budget window.

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The Senate bill would allow publicly traded partnerships (PTPs) to take advantage of the 23 percent deduction. The benefit wouldn’t extend to private equity firms classified as PTPs, such as Blackstone Group LP and Carlyle Group LP, but oil and gas firms classified as master limited partnerships (MLPs) would be able to take advantage of the deduction.

This change puts MLPs on a level playing field with similar entities, such as real estate investment trusts, Donovan said.

“Most MLPs are structured in a way that would have prevented them from taking advantage of the pass-through deduction created in the Senate bill,” he said.

The Senate bill would limit the deduction based on the amount of wages paid. MLPs, which pay their investors and their employees from separate entities, wouldn’t be able to avail themselves of the deduction without this provision in the legislation.

Read the full piece here.

I spoke to Sam Stein from The Daily Beast about the GOP tax plan and why Red State Democrats have thus far proved resistant.

“My sense is that there is potential for a bit of a cascade should Republicans do the necessary lifting on their own,” said Liam Donovan, a Republican strategist. “It could get you from 50 to 53 or so. Generally I think the pressure is nonexistent until this thing is assured.”

But even then, Donovan added, the defining political feature of the tax debate may very well be that vulnerable Democrats felt such little pressure to support it at all.

Read the full piece here.

I told Sam, and I’d add here, that while Republicans probably could have done more to lure Dem votes, at the end of the day this is a reflection of the current political reality. We are polarized to the point where triangulation yields diminishing returns, particularly when the policy in question isn’t terribly popular. You don’t survive as a Red State Dem in 2017 by being GOP-lite, you do so by sticking to your guns and cultivating an authentic personal brand. The electoral fortunes of these members will hinge far more on macro factors than it will how they voted on any given piece of legislation. And for now at least, the big picture looks ok.

I’d add that I had my doubts from the beginning. From August:

Liam Donovan, a former National Republican Senatorial Committee staffer who now handles legislative and political affairs for the Associated Builders and Contractors, said estate tax repeal — which Republicans have promised to include in their effort — could be floated as a carrot in front of vulnerable Democrats like Manchin, Heitkamp and Donnelly to bring them to the table. Manchin was the lone Democrat to cross the aisle on a 2015 bill to repeal the estate tax.

But, “at the end of the day I don’t expect them to be there,” said Donovan.