The U.S. sheet metal industry is pressing the U.S. Senate to approve a high-priority measure that would help ensure completion of economically essential “megaprojects” under construction or planned across the United States.
At a time when sheet metal companies are instrumental in the completion of the largest construction projects in the nation, the measure would boost equipment purchases, increase productivity, alleviate operational challenges and help grow the nation's construction sector.
At issue is a proposed tax law (H.R. 7024) passed by the U.S. House of Representatives in January but still awaiting action in the Senate. The bill would extend provisions for 100% bonus equipment depreciation, expand interest deductibility for equipment expenses and renew the R&D tax development credits. Put simply, the legislation would advance hundreds of billions of dollars in equipment and project-related tax credits and deductions for a wide range of construction industry companies and manufacturers, allowing them to make the needed investments to stay competitive and innovative as more megaprojects get underway.
Without the measure, the impact will be devastating to industry productivity and needed capital formation. Of particular concern is the impact on hundreds of “megaprojects” in the U.S., a mixture of large infrastructure and commercial projects. These typically cost at least $1 billion and require thousands of workers to complete – enough to have a substantial economic impact on the regions where they are located. Their success hinges in large part on a robust supply of sheet metal contractors investing in new equipment and a workforce that meets exacting technical and safety standards.
Melius Research says about $700 billion worth of megaprojects have been announced in North America since 2021. Eaton Corp., an energy equipment company, says the total is closer to $933 billion. Examples of megaprojects include a mixed-use development currently underway in Santa Clara, California, covering 240 acres. Valued at $8 billion, it will be the largest mixed-use private project in Silicon Valley. Others include a $40 billion chip manufacturing complex in Arizona and the American Legion Bridge replacement in Bethesda, Maryland, valued at $6 billion.
The concerns of the sheet metal industry are echoed by the U.S. Chamber of Commerce, which has also called on the Senate to pass the measure quickly to “provide critical, long-awaited support and certainty to American small and midsize businesses.”
The R&D tax development credits issue in particular may sound arcane, but its effect is sweeping. The U.S. government since the 1950s has allowed American businesses to deduct research and development expenses in the year incurred, incentivizing companies to invest in innovation and new products and services. But since 2022 when the tax code was changed, businesses have been required to amortize R&D expense over several years.
As the Chamber explains, R&D amortization over years “reduces economic growth, penalizes investments by companies in R&D-intensive industries—which has a disproportionate effect on smaller manufacturing and technology companies—and puts American businesses at a competitive disadvantage.” The proposed law would revert the tax code to its tried-and-true previous iteration.
Sheet metal work is unique among the trades. It is the only one that takes raw material and fabricates the architectural pieces, ductwork and HVAC systems they install. Sheet metal contracting delivers myriad projects like commercial office towers, stadiums, hospitals, microchip and EV battery plants, strip malls and data centers.
But if the Senate fails to extend these vital tax incentives, the construction sector, and others, will be seriously hobbled. What’s more, the Senate’s failure will undercut the competitiveness of an essential trade the nation relies on for a wide range of projects, from the ordinary to mega.
