News from associated
builders and contractors

For many in the new Republican-dominated legislature, addressing the looming expiration of certain provisions of the Tax Cuts and Jobs Act is the top priority as the new presidential administration kicks off.

The expiring provisions include Section 199A, which allows sole proprietorships, S corporations and partnerships to deduct up to 20% of the income earned by the business. In 2017, the justification for the 199A deduction was simple: Allow America’s small-business owners to keep pace with the significant corporate tax cut included in the bill, which reduced rates from 35% to 21%. Recent analysis by EY reveals the stark consequences of allowing section 199A to sunset in 2026. With the combination of the top individual rate returning to 39.6% and the expiration of the Section 199A deduction, a 20% effective rate hike would be triggered for pass-through businesses.

Other key tax priorities include the continuation of TCJA estate tax treatment, revived expensing of research and development costs, restoration of 100% bonus depreciation and tackling the exclusionary labor mandates in the Inflation Reduction Act’s green tax credits.

Border security was a top campaign issue for Republicans in 2024 and will likely be one of the first issues addressed in the 119th Congress. Republicans could make H.R. 2, their comprehensive border-security bill passed in 2023, a top priority in the 119th Congress, which would provide increased funding for border enforcement. Any immigration reform package will have an impact on the construction industry, which is already experiencing a workforce shortage of more than 500,000 skilled laborers—all the more reason for instituting a new merit-based work-visa system for the industry.

Republicans will also prioritize an aggressive deregulatory agenda next year, targeting the repeal of Biden-era regulations using the Congressional Review Act, which allows Congress to overturn recently finalized federal regulations with a simple majority vote. Outside of the CRA process, Associated Builders and Contractors will prioritize rolling back President Biden’s controversial project labor agreement mandate.

PARTY LINES

While Republicans control the House and Senate, a slim 220-215 majority in the House will complicate the passage of partisan legislation. It is likely that attendance and contradictory member goals will threaten key priorities or force representatives to compromise on overarching legislation. At the same time, President Trump’s nominations of Representatives Elise Stefanik, Matt Gaetz and Mike Waltz will create vacancies in the House and reduce the Republican majority to 217-215 until Governors Kathy Hochul, D-N.Y. and Ron DeSantis, R-Fl., hold special elections to allow voters to select their successors.

On the other side of the Hill, Republican Senators maintain a 53-47 majority and have an easier time than the House in advancing spending bills due to reconciliation. While two Senators from the 119th Congress depart—with J.D. Vance as Vice President and Marco Rubio becoming Secretary of State—the process to fill their seats is more expedient than the House, as Governors DeSantis and Mark DeWine, R-Oh., can immediately select their replacements.

The 119th Congress presents challenges and opportunities for Republicans. However, they will have limited time to achieve their objectives before reelection campaigns begin in early 2026 and the American people determine a new Congress.