If proposed tax deferments on incomplete projects set to benefit condo developers and contractors are approved, they likely wouldn’t take effect until 2010, according to a tax expert lobbying for the change.
The proposed change would allow developers to treat each of their unsold units as a separate building and qualify for deferred tax exceptions already in effect for builders of single-family homes and townhomes.
Some following the issue hoped the change would be effective for the 2008 tax year and beyond. But, the likely scenario pushes approval into next year and its implementation into 2010, said accountant Rich Shavell, chairman of the tax advisory group for Associated Builders and Contractors (ABC).
The change would be monumental for condo developers and contractors. The Internal Revenue Service currently bases taxes on a percentage-of-completion formula. So, developers and contractors are being taxed for partially completed units yielding no revenue. Developers collect up to 20 percent of a unit’s sale price until it’s sale closes, and contractors are paid in installments.
Shavell’s involvement on the issues goes back to the 1990s, a few years after the IRS narrowed the definition of which builders could apply for the deferment. Most Recently, he met with IRS officials in 2005 and again in 2007.