Fair Accounting for Condominium Construction Act
This bill, the Fair Accounting for Condominium Construction Act, would revise how certain long-term residential construction contracts are treated for federal income tax purposes. It specifically recalibrates the rules under the percentage of completion (POC) method in Section 460 of the Internal Revenue Code, renaming the eligible contracts from “home construction contracts” to “residential construction contracts,” and adding a special rule for those residential contracts that are not considered home construction contracts. The bill also updates the related Alternative Minimum Tax (AMT) provisions to reference the new terminology. The changes would apply to contracts entered into after the date of enactment, making the effect prospective rather than retroactive. In practical terms, the bill modifies which residential construction contracts qualify for or are governed by the POC method and how those contracts are treated for AMT purposes. The intended effect appears to extend or adjust the accounting timing for revenue and tax recognition on condominium and other residential construction projects.
Key Points
- 1Replaces the term “home construction contract” with “residential construction contract” throughout Section 460(e) and related AMT provisions, broadening the category of contracts being addressed.
- 2Adds a specific rule for residential construction contracts that are not home construction contracts, involving substituting a 3-year period for a 2-year period in a referenced subparagraph. This creates a distinct timing rule for non-home residential contracts within the POC framework.
- 3Updates the AMT cross-reference (Section 56(a)(3)) to reflect the new definition, so AMT treatment aligns with “residential construction contracts” rather than “home construction contracts.”
- 4Applies the amendments to contracts entered into after enactment, making the changes prospective rather than retroactive.
- 5The overall aim is an “exception to the percentage of completion method” for certain residential projects, potentially altering when income is recognized for tax purposes.