President Biden’s recently approved Infrastructure Investment and Jobs Act includes a provision which may save one NAHB member at least $100,000, according to NAHB Now. For the past three years, the NAHB has been fighting to restore an exemption for water and sewer contributions in aid of construction (CIAC).
The new law ends a tax liability for builders installing new water or sewer infrastructure to support additional housing in areas served by a corporate, for-profit water utility. As a result, some builders will see significantly reduced water and sewer costs, and one Tennessee builder expects to save $100,000 on one development alone.
The background of CIAC can be traced to the Tax Cuts and Jobs Act enacted in 2017, when Congress eliminated an exemption for water and sewer CIAC, making such contributions taxable if the utility is a privately-owned, for-profit entity.
As a result, in areas served by a corporate, for-profit water utility, when a builder installs new water or sewer infrastructure to support additional housing — at no cost to the existing residents — that infrastructure is taxed by the federal government. In some states, affected utilities were required to pass this tax liability to the developer, resulting in CIAC surcharges as high as 40%.
The new law, which is effective for CIAC contributions made after Dec. 31, 2020, ends this tax liability and could not come soon enough for James Carbine, a residential builder/developer in the Nashville area.
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