Vote to repeal ‘death’ tax could help small contractors

The U.S. House of Representatives’ vote to permanently repeal the estate, or “death”, tax could benefit many small, family-owned construction companies.

There is no specific date set for the Senate’s vote on the bill.

A repeal of the death tax is supported by contractor organizations such as the Associated General Contractors of America and the Associated Builders and Contractors because of the financial burden the tax places on some family-owned businesses, which are common in the construction industry.

“If they’re not a big firm … it could drive them out of business,” said Carin Nersesian, director of legislative affairs for ABC.

The average construction company has between $3 million and $7 million in equipment, property and plant assets to complete jobs and produce income. More than 70 percent of family-owned businesses don’t survive to the second generation, and more than 80 percent fail to make it to the third generation, according to ABC statistics.

“Family-owned construction companies are hit hard by the death tax because of their investment in heavy equipment and other assets,” said AGC CEO Stephen Sandherr.

Introduced by Reps. Kenny Hulshof, R-Mo., and Robert Cramer, D-Ala., the Death Tax Repeal Permanency Act of 2005 (H.R. 8) would make permanent the temporary repeal of the estate tax signed into law by President Bush as part of his tax relief package, the “Economic Growth and Tax Relief Reconciliation Act of 2001.”

The estate tax was enacted to tax a percentage of money or property given to heirs upon the giver’s death. It is related to the federal gift tax.

In the 108th Congress, the House approved similar legislation, the Death Tax Repeal Permanency Act of 2003 (H.R. 8), which was introduced by Cramer and former Rep. Jennifer Dunn, R-Wash. However, the legislation stalled when the Senate failed to vote on its version of the bill.

If this year’s Senate does not vote on the repeal, the death tax will be fully reinstated in 2011 and contractors will assume the same level of taxation as 2001 levels.

Nersesian said if a contractor goes out of business, it should be because of the capital economy, not from a tax. “It’s an issue that ABC has followed because family-owned businesses are the backbone of our economy,” she said.

Patrick Beeson can be contacted at