Congress and the White House just handed the construction industry a rare, sweeping win with passage of the Comprehensive Budget and Tax Act. Both the Sheet Metal and Air Conditioning Contractors’ National Association (SMACNA) and Associated Builders and Contractors (ABC) are calling the new law a game-changer for contractors, suppliers, and the broader workforce.
Aaron Hilger, CEO of SMACNA, said the law restores a slate of “vital tax initiatives” after years of association advocacy – from bonus depreciation and Section 179 expensing to a boost in CHIPS Act tax credits and enhanced R&D incentives. Hilger points to the law’s impact on “creating a more certain and predictable business environment for the HVAC construction and supplier network across the industry and nation.” But he’s not ready to suspend his industry advocacy just yet, adding, “This is a good start, but further work is needed.” He flagged bipartisan support for another reform package next session and said SMACNA plans to “continue to advocate for greater incentives for energy-efficient building systems and retrofits to existing structures – residential, public, and commercial.”
Over at ABC, government affairs VP Kristen Swearingen called the new law “long-overdue tax certainty that empowers construction businesses to invest in their workforce, expand operations and keep America building.” She also highlighted tax relief for “the millions of hardworking Americans who build and power our economy,” and urged Congress to push further on regulatory reforms.
Key Provisions for the Industry
Both SMACNA and ABC pointed to a host of critical measures now enacted:
- Bonus Depreciation Restored: 100% first-year deduction on qualifying property, retroactive for past projects – a major cash flow boost.
- Section 179 Expensing Expanded: Instantly expense up to $2.5M in equipment or property, with higher limits and inflation adjustments.
- Section 179D Deduction: Up to $5.00/sq ft for commercial energy upgrades, available through 2026 for both private and public projects.
- Advanced Manufacturing Tax Credit: Raised from 25% to 35% for high-tech and chip plant projects started by the end of 2026.
- Section 45L Home Energy Credit: Survives repeal efforts; $2,500–$5,000 per unit for energy-efficient single-family/multifamily housing.
- Section 174/174A R&E Deduction: Immediate deduction for domestic R&D costs, retroactive to 2022.
- Section 41 R&D Tax Credit: Enhanced credit (6–20%) and now stackable with 174A deduction.
- Section 199A Deduction: 20% deduction for pass-throughs now permanent.
- Estate Tax Relief: Permanent higher exemption for family-owned businesses – a key ABC priority.
- SALT Deduction: State and local tax deduction cap temporarily increased.
- Excess Business Losses: Permanent, indexed for inflation.
- 529 Accounts: Expanded to cover skilled trades training.
ABC also underscored the bill’s provision exempting overtime pay from federal income tax and restoring immediate expensing for R&D costs – both direct financial relief for contractors.
Ongoing and Unfinished Business
Both groups see unfinished business on the table. SMACNA flagged disappointment that several contractor-friendly residential tax credits (25C, 25D, 45L) are set to expire after 2025 or 2026. ABC is pushing for continued momentum on regulatory reform to help contractors stay competitive.
Additional Wins for Contractors
- Employer-sponsored health insurance remains deductible.
- Municipal bonds retain their tax-free status.
- Paid family and medical leave credit is now permanent.
- Expanded HSA eligibility for bronze and catastrophic health plans.
What Contractors Should Know:
- Many lucrative incentives sunset in 2026 – timing is critical for capital projects, upgrades, and retrofits.
- Bonus depreciation and 179D remain powerful tools for HVAC system replacements and building performance work – but deadlines matter.
- R&D incentives and 179A/199A changes create new options for innovation and small business cash flow management.
With the law now on the books, both SMACNA and ABC advise members to review upcoming projects for eligibility and act soon to capture these benefits. The groups also signal that the fight isn’t over – both will be pushing for more incentives and improvements in future legislative sessions.
The bottom line: Congress and the White House delivered a rare tax win for contractors, but the window on several provisions won’t stay open forever. Smart planning – and quick action – will be essential to maximize the impact.