In the past, we have stressed the importance of taking advantage of the Employee Retention Credit (ERC), which was created by the Coronavirus Aid, Relief and Economic Security (CARES) Act and signed into law in March 2020, to encourage businesses to keep employees on their payroll. But since being implemented, there are several updates employers need to keep on their radar. Read on to learn about new IRS guidance that could mean bigger cost savings for you and your team.

To take full advantage of this opportunity, you need to understand the new ERC guidance the IRS released on August 4, 2021. Notice 2021-49 addresses changes made by the American Rescue Plan Act (ARPA) to the ERC that are applicable to the third and fourth quarters of 2021, including:

• Making the credit available to eligible employers that pay qualified wages after June 30, 2021, and before January 1, 2022
• Expanding the definition of eligible employer to include “recovery startup businesses”
• Modifying the definition of qualified wages for “severely financially distressed employers”
• Providing that the employee retention credit does not apply to qualified wages taken into account as payroll costs in connection with a shuttered venue grant under section 324 of the Economic Aid to Hard-Hit Small Businesses, Non-Profits, and Venues Act, or a restaurant revitalization grant under section 5003 of the ARPA

The new guidance also responds to frequently asked ERC questions, including:

• The definition of a full-time employee and whether that definition includes full-time equivalents.
• The treatment of tips as qualified wages and the interaction with the section 45B credit.
• The timing of the qualified wages deduction disallowance and whether taxpayers that already filed an income tax return must amend that return after claiming the credit on an adjusted employment tax return.
• Whether wages paid to majority owners and their spouses may be treated as qualified wages.

Eligible employers will report their total qualified wages and the related health insurance costs for each quarter on their employment tax returns. If a reduction in the employer’s employment tax deposits is not sufficient to cover the credit, certain employers may receive an advance payment from the IRS by submitting Form 7200, Advance Payment of Employer Credits Due to COVID-19.

On the horizon:

Earlier this month, the Senate passed its bipartisan infrastructure plan H.R. 3684, (the Infrastructure Investment and Jobs Act) by a vote of 69–30 which now goes to the House of Representatives for consideration. While this is a hugely historic piece of legislation that we suggest you follow separately, it’s crucial to note that the infrastructure bill would end the employee retention credit (ERC) early, making wages paid after Sept. 30, 2021 ineligible for the credit. The IRS and the Treasury said they’re closely monitoring the pending legislation related to the ERC and will provide additional information as needed. As a best practice, we suggest watching this legislative development closely in the coming days and weeks. Frequently asked questions and updates on the employee retention credit, tax credits for required paid leave and other items can be found on the coronavirus page of IRS.gov. Still need guidance to navigate the ERC? Contact our team of professionals today to set up a consultative conversation.

Sources: IRS, SHRM, Accounting Today

It’s a tough time to be a contractor or a person searching for housing in New York.

Lumber and material costs are handcuffing builders and contractors all over the country. The National Association of Home Builders estimates that the rising cost could add up to $24,000 to the price of a new build. Additionally, Hudson Valley is now officially a housing hot spot for those leaving New York City in the wake of the pandemic. The average asking price for homes in Kingston sits at $297,500, or $202 per square foot according to Realtor.com. That’s a whopping 32% higher than last year – pricing out a lot of Hudson Valley natives, but comparatively, it’s a steal for city dwellers used to two-bedroom apartments that are four times as pricey. So, this material cost explosion, coupled with a lack of available housing puts construction companies and potential buyers (or renters) in precarious financial positions. One possible trend on the horizon we want you to keep on your radar? Repurposing hotels and motels into coveted multifamily housing. Let us explain.

It probably comes as no shock to you that the hotel industry experienced the most devastating year on record in 2020.

Travel restrictions meant historically low occupancy, massive job loss, and hotel closures across the country. According to a report by the American Hotel and Lodging Association, many industry challenges persist in 2021, so it anticipates that travel will not return to 2019 levels until 2024. And even as the hotel industry begins to slowly recover from the short-term decline in demand during the pandemic, its long-term recovery will likely depend on how the industry will compete with hosts that offer short-term rentals and home-sharing through companies like Airbnb. Locally, Hutton Brickyards in Kingston has recently been transformed from a former brick manufacturing property into a riverfront resort with private cabins, a spa, restaurant, and events space. While this is an example of a hotel expansion rather than multifamily housing conversion, it reflects the growing consumer trend (especially among millennial travelers) toward authentic and localized experiences, through lifestyle hotels and experiences. The Hutton Brickyards project captures the essence of repurposing underutilized spaces in Hudson Valley and providing revitalization, revenue, and value.

The National Association of Realtors recently completed a revealing research study.

It surveyed groups that were already pursuing hotel/motel conversions across the country. According to study findings, in 65% of hotels/motels converted into multifamily housing, the rent was either 100% below market rate or a mix of below-market and market rate. Private investors are the main financiers of hotels/motels being converted into multifamily housing, accounting for 27% of the source of funding of transactions reported by NAR members. Local banks are the next largest source of funding, and government financing accounted for 7%. Affordable housing developers also provide financing. Federal financing is available to developers who convert hotels into below-market-rate units, such as the Low Income Housing Tax Credits (LIHTC) and the Home Investment Partnership Program (HOME).

Ultimately, the redevelopment of properties within Hudson Valley could range from a straightforward to a complex redevelopment with an assortment of public-partnership arrangements or purely private redevelopment.

Of course, zoning can pose a significant challenge when converting a hotel/motel to multifamily housing, but one approach may be to acquire extended-stay hotels/motels as they have more traditional kitchens or kitchenettes. Simply put, you can take advantage of properties that already have good bones. Working with local government and neighborhood residents throughout each phase of a project to meet zoning regulations and address neighborhood concerns would be essential to the success of any future property conversion. Beyond the variety of services we perform for our clients at RBT, we aim to pass along useful, relevant information to help our communities succeed, grow and prosper. As we continue to dedicate time and resources to helping our construction clients achieve success, we look forward to connecting with you and your team.

Sources: NAR, AHLA

Are you considering purchasing an existing construction company? Congratulations, we hope you have your hard hat on and are ready for some (figuratively) heavy lifting. Whether this is part of your long-term plan, or you’re already deep into the process, there are a lot of critical considerations you need to make before you take the plunge. One of the most overlooked factors: unfunded pension liability. Don’t fall into the trap of being unprepared when it’s negotiation time.

Why are unfunded pension liabilities my problem now?

You know the saying once you own it, you own all of it – the good, the bad, and the ugly? You need a clear financial picture of what you’re walking into. There’s no room for surprise costs popping up, and unknown unfunded liabilities can quickly become your responsibility. With nearly 40 percent of all multiemployer defined benefit (DB) plans operating in the construction industry, you probably already know these plans tend to be poorly funded. A 2020 federal study even revealed that the multiemployer insurance program is highly likely to become insolvent by 2025.

Ask yourself, is this an asset or a stock sale?

If it’s an asset sale, successor liability law typically states that the buyer won’t assume the seller’s corporate liabilities. Usually in this type of sale, the withdrawal liability stays with the seller, who can then dissolve. However, in certain cases, courts have found successor liability for the buyer in an asset acquisition.

If it’s a stock sale, a withdrawal from a multiemployer pension plan typically isn’t triggered, as long as there is no interruption to the obligation of the sold entity to contribute to the plan.

What can you anticipate from the seller?

It’s not uncommon for sellers to categorize withdrawal liability as irrelevant to deal pricing. But certain situations arise where liability can be triggered against the wishes of the employer, or without any affirmative action, such as a union decertification, a significant business downturn, or an asset sale. It’s always a best practice to ask the seller to go back to the unions and find out what the withdrawal liability is in advance. Once you have this insight, get to negotiating. Perhaps you suggest that the seller uses some of the sale proceeds to pay off the withdrawal liability so you get a fresh start, or you might suggest a reduced selling price.

How can buyers protect themselves?

Because a company’s financial statements are not required to disclose the amount of pension plan liability in the event of withdrawal, buyers often overlook the amount of any such potential liability when setting the purchase price at the bid stage. This can wind up being a huge mistake. Remember, you want the price of the sale to suitably account for potential liability. If a recent estimate of the company’s potential withdrawal liability is unavailable, collect information so an expert can estimate withdrawal liability exposure. Protect yourself by reviewing the plan’s level of funding, a detailed history of the target company’s contributions to the plan, and information about the company’s contributing plan members. It’s also critical to find out the number of unions the company participates in.

What other steps should I take?

Keep in mind there are certain exceptions for construction employers, and the recent American Rescue Plan Act provided funding for some of the severely underfunded pension plans which may relinquish the liability for some employers. Projections estimate that qualified plans will receive approximately $86 billion in assistance. The regulations are expected in early July, you can stay up to date here. Ultimately, every union contract is different. Consider special purchase agreement provisions: an agreement that sellers will pay withdrawal liability assessments, broad indemnification rights, or purchase price adjustments. It might make sense to establish an escrow account to cover potential liability. Most importantly, always consult with a team of financial professionals and legal representatives to navigate this issue so you set your company up for success.

Source: TaxExecutive, Congressional Research Service, PBGC

One of the biggest challenges the construction industry faced before the pandemic, still exists today. We need to expand efforts to engage the next generation and get young adults excited about this field. More than 40% of construction workers are baby boomers, meaning that most of that 40% will be of retirement age in the next five to seven years. Studies also show that construction workers retire from their field earlier than workers in other industries, largely due to the physical demands of the job. In addition to the generational gap, there is a gender balance gap plaguing the industry, as well. There is a considerable gap between the number of working women and those who choose to work in construction. While women comprise up to 47% of the total US labor workforce, only 9.9% of the construction workforce are women. While there are many issues to address, our Construction Accounting Services team wants you to be aware of vital undergraduate and graduate scholarship funding available through The Associated General Contractors of America (AGC) so you can pass on time-sensitive information to your partners and communities.

As the leading association for the construction industry, AGC represents more than 27,000 firms, including over 6,500 of America’s leading general contractors, and over 9,000 specialty-contracting firms. The AGC Education and Research Foundation offers undergraduate and graduate-level scholarships to students enrolled in ABET or ACCE – accredited construction management or construction-related engineering programs. Over $10 million in scholarships have been awarded to more than 4,000 students attending colleges and universities across the country. The criteria to apply for undergraduate and graduate scholarships outlines the eligibility to apply. A maximum of $2,500 per student per year will be distributed for undergraduate scholarships and may be renewable for up to three years of undergraduate study in construction-related engineering, construction, or a dual degree with construction or construction-related engineering as one part. The Graduate Scholarship recipient(s) will receive $3,750 annually to be used for the duration of the student’s graduate degree program, up to $7,500. Scholarship winners will be notified in March 2022 and award(s) will be announced at the AGC Annual Convention. Applications for 2021 will be accepted until June 1, so it is essential to get the word out to any eligible students as soon as possible.

Many challenges undoubtedly lie ahead as the construction industry struggles to attract and retain the next generation, but it is our hope that by presenting young people with information about financial opportunities, we can help advance the next wave of contractors. AT RBT, we pride ourselves on assisting construction professionals to build the most sustainable businesses you can with our comprehensive services. But beyond the variety of services we perform, we aim to pass along useful, relevant information to help our communities succeed, grow and prosper. As we continue to dedicate time and resources to helping our construction clients achieve success, we look forward to connecting with you and your team.

Across the country, small businesses create two-thirds of new jobs and employ nearly half of America’s workers, yet nearly a year into the COVID-19 pandemic, many are still struggling to survive. If you feel like there are constant updates surrounding the Paycheck Protection Program, you’re not alone. This week, the Biden administration announced several PPP changes in an effort to reach minority-owned and very small businesses that may have previously missed out on accessing loans. With the March 31^st PPP application closing date looming, your business may benefit from some of the updates. Below is a summary of the main updates to keep in mind.

Bigger Focus on Small Business

Did you know that 98% of small businesses have fewer than 20 employees? Maybe this describes your business or a local vendor you work closely with. Starting Wednesday of this week, small businesses with fewer than 20 employees will have a two-week exclusive window to apply for the funding. Bigger businesses will be blocked during that time period. The 14-day exclusive application period will allow lenders to focus on serving these smallest businesses.

Other Eligibility Changes

Starting in March, self-employed, sole proprietors and independent contractors will now qualify for more money. They were previously excluded altogether or received as little as $1 because the loan amounts were calculated based on the number of employees. The loan program will also open up to small business owners with non-fraud-related felonies as long as the applicant or owner is not incarcerated at the time of the application. With millions of Americans delinquent on student loans, those struggling to pay off student loan debt can now apply to the program, too. Working with the Departments of the Treasury and Education, the SBA will remove the student loan delinquency restriction to broaden access to the PPP. Some non-citizen residents, such as Green Card holders or those in the country on visas were previously excluded but can also now apply by using their Individual Taxpayer Identification Numbers (ITINs) for relief.

The PPP application is currently being revamped and the SBA website is being updated to help more applicants find relief option resources and complete applications. To improve access to capital for small businesses, the SBA is also in the process of launching a new initiative to deepen its relationships with lenders. This model will increase the opportunity for lenders to provide recommendations and ask questions about the PPP and drive the resolution of open questions and concerns in a more streamlined way. The latest PPP, which began on January 11 and runs through the end of March, has already paid out $133.5 billion in loans — about half of the $284 billion allocated by Congress — with an average loan under $74,000.

Do you have questions about your construction company and the new changes we mentioned above? To learn if previous restrictions were preventing you from accessing the funds you need, contact our team today before time runs out. If you want streamlined construction accounting in Mid-Hudson Valley, NY, RBT has the essential services you’re looking for.

Sources: Whitehouse, Forbes

Green-tech.

Depending on which side of the grass you’re standing on, it’s a term you either love or hate. For years, the misconception that going green is too costly for small and medium-sized contractors has prevented companies from getting a piece of the sustainable construction market action. A market which, I might add, is projected to top $523 billion by 2026. As customers have become increasingly aware of environmental concerns, research and development of sustainable materials have exploded. What does that mean for you? More building options, more growth opportunity, and a wider pool of potential clients if you’re willing to shift with the changing times. There are several innovative ways to go green. Some may be more relevant than others in your daily operation. Here are a few examples to get your creativity flowing:

• Use of RMC (Ready Mixed Concrete) instead of bricks to reduces wastage
• Radiant-cooling technology
• Rainwater harvesting
• Biodegradable or recycled construction material usage
• IoT Integrated Automated Building Systems
• DGU Windows to reduce sound and heat from coming in
• Shadow concept construction

Off-site fabrication, improved on-site maintenance, lean practices, and landfill avoidance – the list truly goes on.

The reality is, as state and local governments get serious about going green, the opportunity for your business to integrate innovations is there for the taking. Consider that 77% of millennial consumers agree they will pay more for products from sustainable sources, according to Nielsen. Now more than ever, environmentally conscious clients are willing to trade off a slightly higher upfront investment for ongoing savings, especially when a contractor can prove their suggested design will perform as desired with advanced energy use modeling.

If you’re just breaking into this arena, it’s best to follow New York’s green building requirements, you can reference guidelines here. For starters, you should know financial solutions exist to make going green more affordable and cost-efficient for your operation. The Environmental Protection Agency (EPA) provides grants for qualified, environmentally responsible programs and The Small Business Administration (SBA) offers still more options for green solution construction. The New York State Energy Research and Development Authority offers financial and technical assistance programs and the New York Financial Incentives for Renewables and Energy Efficiency finds state and local financial incentives that promote renewable energy upgrades. Your organization can even achieve a Leadership in Energy and Environmental Design (LEED) rating by adhering to guidelines outlined and advocated by U.S. Green Building Council (USGBC). LEED-certified buildings qualify for tax benefits and incentives from tax credits, grants, and expedited building permits to reductions or waivers in fees. When you consider the federal tax credits for building energy efficient projects, you can start to see the true value of incorporating green practices.

Around the globe, countries are continuing to build incentives for going green.

The UK recently introduced the Green Homes Grant and similar structures are likely to be introduced in the states. The New York State Department of Environmental Conservation has already rolled out an aggressive plan to reduce greenhouse gas emissions to 40% of 1990 levels by 2030. They’ll no doubt need to further incentivize, support, and partner with contractors to accomplish that hefty goal. This could mean huge financial motivations for your client pool down the road, all the more reason to be progressive and familiarize your team with green practices now. In many instances, reducing energy consumption has gone from being a “good idea” to a business necessity. The more you explore adopting environmentally-friendly technology and materials, the more we think you will find building green is good for public health, the environment, and your bottom line. Have questions about your business plan? RBT’s dedicated team is here to answer your pressing questions. Contact us here, today.

It’s 2020 and many of us have happily embraced couch culture. Beyond binge watching your favorite show on Netflix, you’ve proven that you can successfully run business meetings, write papers, and teach makeshift math classes to your kids all while sporting your signature sweats. You can’t however – build a skyscraper from the comfort of your couch – unless it’s made out of Legos. But while some in-person aspects of the construction industry can never truly be replaced, major technological advancements are breaking down barriers and helping crews succeed, even in the middle of a global pandemic. Long before the Covid-19 pandemic caused operations to shut down this past spring, a technological industry shift was underway. Big data, artificial intelligence (AI), and automation, as well as technologies like drones and 3D printing have been implemented industry-wide. With restrictions on job sites and safety measures in place to protect both worker and client health, construction companies need to do everything they can to stay competitive. Let’s explore what big data means, and how tele-building can help you save money, improve efficiency and prepare for the remote possibilities of the future.

Big Data

“The world’s most valuable resource is no longer oil, but data.”

The huge quantities of information that have been stored in the past and that continue to be gathered every day is known as big data. This information can come from a combination of people, computers, machines sensors, and any other data-generating device. Generally speaking, it helps to streamline a construction operation. Historical big data can be analyzed to identify construction risk probabilities, or weather and traffic patterns to help you plan more efficiently. It can even be used to help you save money by evaluating previous projects’ overspend or unused materials. Machine sensor input can help to determine active and idle machine operating time so you can make smarter decisions about buying or leasing equipment. So, what do you do with the data once you’ve collected it? You can get an even more accurate building process in place once your data is fed into a solid Building Information Modeling (BIM) program. A 2018 case study found data-driven BIM can cut construction expenses by 18% and reduce completion time by up to two weeks. The possibilities for cost-cutting are endless, and as you know, time is money. One way that data collection is further fueling faster, more efficient construction, is through enabling what’s being described as tele-building.

Tele-building

“Just as telehealth has transformed life, so will tele-building.”

Industry expert Jeevan Kalanithi believes that just as telework and telehealth have erupted, so will a concept he describes as tele-building. “We believe that tele-building will soon take off to scale the expertise of our superintendents, project managers, inspectors, and foremen,” said Kalanithi. “If your captures of the site are high-quality, you can reduce the amount of in-person visits needed, saving time and money, as well as improving knowledge transfer.” As the CEO of OpenSpace, Kalanithi envisions digitally strolling sites as the way of the future. OpenSpace offers a photo-documentation solution that allows builders to walk a job site with a small camera on their hardhat. The solution then automatically handles the capture, uploading, and organization of those images. The result is a maneuverable experience similar to Google Street View, made possible by computer vision that can be viewed and analyzed from anywhere, bringing the job site to remote workers. While larger projects like renovations or multi-year megaprojects will cost you, you can trial the concept by using OpenSpace Photo to capture smaller areas and quickly generate 360 degree photo documentation for free.

Every day, new tech is emerging. It can feel overwhelming to stay caught up on the latest breakthroughs or cutting-edge trends you need to know about to keep your business running smoothly. The professional team at RBT is here to help you navigate the fast-paced world we live in. Please do not hesitate to reach out and schedule a conversation to discuss your business needs, today.