Tax Policy Planning in Construction and Real Estate: Advice from Redpath’s CRE Lead

With a new administration in place, the next few years may bring significant policy considerations for construction and real estate businesses.

As leader of Redpath's construction and real estate team, I've observed two primary forces shaping these industries in 2025: tax policy changes and public funding developments. While most of our advisory work focuses on tax implications, the impact of public funding on our clients' projects cannot be understated. Let me share what we are seeing and how businesses can prepare.

Effects of Tax Policy Changes on Projects

Tax planning might seem like a game of “wait-and-see,” especially early in a new government administration. There is still much to be determined, and many decisions are driven by assumptions about what will be floated by the government.

The most significant challenge our clients face is the timing of these policy changes. When changes are announced in mid-December, businesses often have just days to make crucial decisions about restructuring entities or implementing tax planning strategies. This timing, typically falling during the holiday season, creates unnecessary stress and complexity.

Looking ahead, we anticipate potential changes to estate tax exemptions through budget reconciliation. For business owners considering ownership transitions or succession planning, waiting might not be the best strategy. Current exemption levels provide opportunities that might not be available in the coming years.

The research and development (R&D) tax credit landscape may also shift, potentially returning to pre-2018 processes. This remains an active area of discussion in budget reconciliation, and we're helping clients evaluate their R&D tax positions accordingly.

Navigating Public Funding Allocation

One of the most misunderstood aspects of public funding is its implementation timeline. For example, funding authorized early in the Biden administration is only now beginning to be allocated. 

This creates an interesting dynamic where current projects often operate under previous administration policies, providing a buffer between policy changes and market impacts.

However, political priorities significantly influence which sectors receive funding attention. 

• The Biden administration limited funding oil and gas projects, while the Trump administration is expected to expand them. This shift in funding priorities requires construction companies to carefully evaluate their market positioning. 
• We've seen how political priorities dramatically influence sector funding. For businesses positioned in growth areas, this means careful preparation–from upgrading systems to restructuring organizations to handle increased project volume.

Strategic Planning in Uncertain Times

Despite the uncertainty, we're advising our clients to engage in proactive planning discussions now. This means mapping out multiple scenarios and understanding the implications of each. 

Take the renewable energy sector as an example. While its growth seems inevitable, businesses need to carefully consider how to position themselves based on administration priorities while maintaining flexibility for market-rate work.

Looking Ahead

While we don't anticipate dramatic changes to the overall tax structure, we do expect some concessions through the budget reconciliation process. The key to success in 2025 will be maintaining flexibility while having clear plans for multiple scenarios.

For construction and real estate businesses, we recommend:

1. Scheduling strategic planning discussions early, even without policy certainty.
2. Reviewing entity structures and succession plans while current exemptions remain in place.
3. Evaluating growth opportunities in sectors likely to see increased funding.
4. Maintaining operational flexibility to adapt to policy shifts.
5. Keeping open dialogue with tax advisors about contingency planning.

The construction and real estate industries have always required adaptability. In 2025, this skill will be more valuable than ever. While we can't predict every policy change, we can prepare for the most likely scenarios and position ourselves for success regardless of the outcome.

Prepare your business for 2025's policy changes with expert guidance from Redpath. Our construction and real estate team offers complimentary initial consultations to discuss your specific situation.