Contractors Center Point

Construction Material Cost Rise Again in February Fueled by Global Expansion

Fueled by upward pressures in materials demand by overseas markets, the cost of construction materials prices rose 0.1 percent in February. Materials prices are 2.8 percent higher than one year ago, according to a March 17 producer price index (PPI) report by the U.S. Department of Labor (DOL).

Softwood lumber experienced one of the largest increases in February, up 7.5 percent monthly and 17.7 percent year over year.  Iron and steel also continued to rise, seeing a 3.6 percent increase in February and a 13.5 percent increase over February 2009.  Fabricated structural and metal products saw a price increase of 0.9 percent on a monthly basis, but they are still down 4.8 percent year over year.  

In contrast, prepared asphalt, tar roofing and siding prices saw a decline of 0.5 percent in February, but are still 2.6 percent higher compared to one year ago.  Prices for plumbing fixtures and fittings also decreased slightly for the month, dropping 0.6 percent, while still remaining 1.4 percent above February 2009 prices and concrete prices still hovered 0.4 percent higher than one year ago despite a decrease of 2.7 percent in February.  The largest monthly decline in prices belonged to nonferrous wire and cable, which saw a decrease of 3.1 percent in February; however, prices are still 2.2 percent higher than February 2009.

Overall, the nation’s wholesale prices fell 0.6 percent – the largest drop in seven months – although prices are still 4.4 percent higher on a year-over-year basis.  The DOL attributed the decrease to a 2.9 percent drop in energy costs. 

 

First Model Code for GREEN Construction is offered by Industry Groups

On March 15th, The International Code Council (ICC) released the first comprehensive model green building code, the International Green Construction Code (IGCC), for the construction of new and existing commercial buildings.  

Public Version 1.0 of the IGCC places an emphasis on building performance and addresses site development and land use, including preservation of natural and material resources, while seeking to significantly reduce energy use and greenhouse gasses.  The IGCC also includes a section devoted to “jurisdictional electives,” which allows the code to be customized to address local priorities and conditions.  

IGCC Development Concepts

• Will use the “model” code approach • Minimum & advanced levels of performance (Green & high performance buildings) • Will work as an overlay to the ICC Family of Codes • Written in mandatory language that provides a new regulatory framework • Will provide performance, prescriptive and pre-engineered solutions • Will account for local conditions • Reflect the AIA 2030 Challenge • Work in tandem with leading Green rating systems • Designed with local, state & federal law in mind

In addition, the American Society of Heating, Refrigeration and Air-Conditioning Engineers (ASHRAE), the U.S. Green Building Council (USGBC) and the Illuminating Engineering Society (IES) joined their existing Standard 189.1-2009 for the Design of High-Performance Green Buildings, Except Low-Rise Residential Buildings with the IGCC to act as an alternative jurisdictional compliance option. 

Each updated document along the development process can be adopted as is, or used as a resource in the development or revision of other green regulations.  Each version is designed to integrate with existing ICC codes.  

For more information, visit the ICC website. 

Nonresidential Construction Starts 2010 Slow

The New Year started on a down note for private nonresidential construction as spending fell 2.1 percent in January, according to the March 1 report by the U.S. Census Bureau. On a year-over-year basis, private nonresidential construction was 19.9 percent lower. Total nonresidential construction spending slipped 1.4 percent in January and was down 10.6 percent from the same time last year. Nonresidential construction spending totaled $615 billion on a seasonally adjusted annual rate in January

Thirteen of the 16 subsectors that showed the largest decreases in January were lodging, down 9.8 percent; water supply, down 7 percent; communication, down 6 percent; and manufacturing-related construction, down 4.8 percent. Meanwhile, those subsectors with the largest drop in spending from January 2009 to January 2010 were lodging construction, down 45.5 percent; commercial construction, down 32 percent; manufacturing construction, down 28.5 percent; and office construction down 25 percent.

Only three of the 16 subsectors of nonresidential construction increased spending in January, including amusement and recreation, up 1.7 percent; power, up 1.2 percent; and highway and street construction, up 1.2 percent.  Five subsectors had higher construction spending compared to the same time last year. They were conservation and development, up 31.1 percent; power construction, up 14.2 percent; transportation construction, up 10.8 percent; and highway and street construction, up 5.6 percent.

In contrast, residential construction spending increased 1.1 percent for the month, but is still down 6 percent compared to January 2009. Overall, total construction spending has slowed 0.6 percent in January and was down 9.3 percent compared to the same time last year.

 

Tax Tips to Remember as Tax Filing Deadlines Approach

If you are a C or an S corporation, March 15th is your filing deadline. As you prepare to file your return, here are a couple of last minute tips and items to remember before you file that return or even if you put the return on extension until September 15th.

Take advantage of new net operating loss carryback deduction periods. New tax law opened up opportunities for taxpayers of all sizes to choose an extended carryback period for net operating losses (NOLs). This provision allows contractors that have NOLs to choose a five-, four- or three-year carryback period (increased from the normal two-year rule) for NOLs incurred in a tax year beginning or ending in 2008 or 2009.

Don't forget bonus depreciation deductions. As an incentive for investment in equipment, taxpayers are allowed to deduct half of the cost of 2009 qualifying property in the first year of use, and then depreciate the remaining half of the asset over its normal useful life. For five-year equipment (the most common tax life for construction equipment), this allows a deduction of 60 percent of the asset’s cost in the first year of its life.

How will capital gains and dividend tax rate increases impact you? Under current law, capital gains and qualified dividends are taxed at a favorable 15 percent federal income tax rate. Taxpayers with significant capital gains transactions should work with tax advisers to analyze whether accelerating capital gains and dividends into 2010 is a prudent tax move.

Utilize capital asset expensing deductions. Rules were expanded significantly to allow contractors to expense up to $250,000 of 2009 fixed asset costs, provided less than $800,000 of assets were placed in service throughout the year. Unlike bonus depreciation, this applies to new or used assets. However, this deduction cannot be taken if a contractor is already in a tax-loss position.

Is deferring Income still the right option. With potential tax increases for 2011 and beyond, taxpayers would be well-advised to consider whether deferring taxable income is still the most cash-efficient option.

For more information on these tax tips or to inquire about other tax services and support, please contact David B. Blain at dblain@macpas.com.

Construction Materials Prices Rise in January. Are We In Store for Inflation?

Prices for construction materials and supplies were up 1.3 percent in January, according to the February 18 producer price index (PPI) report by the U.S. Labor Department. Year-over-year, construction materials prices are up 1.6 percent.

Iron and steel prices jumped 4.7 percent for the month and are up 5.9 percent since last January, the first year-over-year increase since November 2008.  Nonferrous wire and cable prices went up 0.7 percent since December and are up 25.1 percent since January 2009.  Prices for softwood lumber increased 0.6 percent last month and are up 8.0 percent since the same time last year.

Prices for plumbing fixtures and fitting had a slight increase of 0.3 percent on a seasonally adjusted basis and are up 1.1 percent since January 2009.  Fabricated structural metal products prices also had little change as they increased 0.2 percent for the month, but are still down 7.1 percent from prices one year ago. Prepared asphalt, tar roofing, and siding prices slid 2.0 percent for the month after a 5.2 percent increase in December. Year-over-year, prices are down 5.0 percent.

Crude energy prices surged 16.8 percent in January as prices for natural gas jumped 25.5 percent.  Overall, the nation’s wholesale prices increased 1.4 percent since December and are up 4.6 percent since January 2009.