Chuck Grassley: “this small business tax bill includes legislation that helps home buyers. The provision is called contributions in aid…”

“this small business tax bill includes legislation that helps home buyers. The provision is called contributions in aid of construction. It repeals the gross-up tax imposed on families building homes since the 1986 Tax Act. It will save families and small businesses up to $2,000 off the price of a new home or building. The gross-up tax is one where under current law, regulated public utilities must include in their taxable income contributions from customers, or potential customers. These utility services include water and sewer systems. Customers routinely must finance the cost to the utility of extending the necessary capital improvements to the family home. Therefore, State utility commissions require that homes hoping to get utility services contribute to the company both the cost for the capital improvements necessary to extend the service, and the amount of tax that the utility will have to recognize on the receipt of the funds or assets needed for those improvements. This gross-up tax can increase the cost of the contribution in aid of construction by 70 percent. The cost to families of the present law encourages the proliferation of small, uneconomical, and environmentally unsafe water and sewer systems. This legislation is paid for by the water utility industry. Contributions in aid of construction are so important that the water utility industry has volunteered to change the depreciable lives of its property to finance the law change.”