S. 1687: Fair Accounting for Condominium Construction Act

The Fair Accounting for Condominium Construction Act aims to change how certain residential construction contracts are accounted for under U.S. tax law. Specifically, it introduces an exception to the existing 'percentage of completion' method of accounting for these contracts, which is used for reporting income from construction projects.

Key Provisions of the Bill

• Change in Terminology: The bill changes the terminology from "home construction contract" to "residential construction contract" in the relevant sections of the tax code. This broadens the definition of the types of contracts that can be affected by the new accounting rules.
• Adjustment in Completion Timeframe: For any residential construction contracts that do not qualify as home construction contracts, the bill allows for a modified accounting period. Specifically, it changes the timeframe from two years to three years for determining how income is reported for tax purposes.
• Impact on Alternative Minimum Tax (AMT): The bill also adjusts the treatment of residential construction contracts in relation to the Alternative Minimum Tax (AMT), ensuring that the new definition applies similarly for AMT calculations.
• Effective Date: The changes proposed in this Act will apply to contracts that are entered into after the law is enacted, meaning that any contracts made before this point will not be subject to these new rules.

Overall, this bill seeks to provide more clarity and flexibility in how residential construction contracts are accounted for, which could affect the financial reporting practices of companies involved in residential construction.

Relevant Companies

• KB Home (KBH): This homebuilding company may be impacted as the legislation could affect how they recognize income from their construction contracts.
• D.R. Horton (DHI): As one of the largest homebuilders in the U.S., changes in accounting practices could influence their financial reporting related to residential construction projects.
• PulteGroup (PHM): This company, involved in residential building, may see changes in their accounting methods due to the redefinition of residential construction contracts.