On Wednesday, AGC provided commentary to Internal Revenue Service (IRS) and Treasury Department officials during a public hearing on IRS’s Notice of Proposed Rulemaking [REG–136459–09] regarding the Section 199 domestic production activities deduction (DPAD). Specifically, the testimony given by Brian Lenihan, AGC’s Director of Tax and Fiscal Affairs addressed the definition of “substantial renovation” as well as the current administrablity of DPAD and proposed reasonability tests for contractors. The government panel consisted of IRS staff from Office of the Associate Chief Counsel: Paul Handleman, Branch Chief; James Holmes, Attorney with a focus on Pass-throughs and Special Industries; John Aramburu, Senior Counsel for Income Tax and Accounting; and Ken Buck, Tax Policy Advisor at Treasury.
During his statement, Lenihan summarized that the “legislative intent and regulatory policy do not support an exhaustive and precise standard for determining whether activities constitute substantial renovation,” and added that “the intent of these rules was not to require a contractor to step into the shoes of the owner and make a capitalization determination, nor to impose on contractors the complexities of a unit of property determination, determination of underlying components, and measuring improvements under precise thresholds”. AGC will request a private meeting with IRS and the Treasury Department next year to further illustrate the need to understand AGC’s recommendations to any proposed changes to the DPAD.
For more information, please contact Brian Lenihan at lenihanb@agc.org or (202) 547-4733.