Companies in Northern Nevada confident on heels of tax overhaul
Since the Republican tax bill passed in Congress in late December, Justin Ivory, president at A-1 Steel Inc. in Sparks, has been beaming with excitement.
The enthusiasm stems from the centerpiece of the $1.5 trillion tax bill: a reduction in the corporate income tax rate, which drops to 21 percent from the current 35 percent.
Meaning, companies like A-1 Steel, a C corporation, now paying tax at a flat 21 percent rate, will have deeper pockets.
In construction, for example, the savings from the corporate tax cuts allows for contractors to reinvest in new equipment and its employee base, said Craig Madole, CEO of the Associated General Contractors of Nevada.
“This tax plan will get companies to do a lot of the things they were quite frankly afraid to do in the unknown economic conditions that they were experiencing,” Madole said. “It gives them a lot more confidence to reinvest their money.”
Ivory didn’t hesitate. Right off the bat, A-1 Steel would reinvest a portion of the savings into their employees, executives decided.
“We were so giddy about it,” Ivory said, “The first thing we did, we took it upon ourselves to implement eight paid holidays for our employees next year. Everyone in construction gets days off, very few workers get paid days off for holidays. For us, we felt that was about as fair of a way as we could spread it out to our employees.”
Ivory said A-1 Steel also directed the savings from the corporate tax cut toward purchasing new equipment and “modernizing.” He said for many years, in the midst and on the heels of the recession, the company would avoid buying new pieces of equipment.
“We would just say, you know what, we’ll keep fixing this one,” Ivory said. “Because we had no confidence where our next job was coming from.”
For Ivory, with a burgeoning Reno-Sparks economy, those days are far in the rearview mirror — and that was before the tax reform.
“Now, it’s really about how we’re going to get it all done,” Ivory said with a chuckle. “It’s a much better time when you’re wondering how you’re going to get it all done as opposed to ‘what are we going to do?’”
“It’s nice knowing we’re going to be paying a little bit less in taxes and the economy is coming back around. We feel like 2018 is going to be another really busy year for us.”
Reaping the benefits
That same confidence is reciprocated by pass-through entities such as Haus of Reed, a custom furniture company based in Sparks.
“For us, the fact that these companies have more money to spend, it’s an opportunity for us to grow in this climate,” said Reed, whose company has done projects for giant corporations like Walt Disney and Ceasars Palace, among others. “For us, the opportunities now have basically doubled with them all being more cashflow happy.
“All of a sudden the tax cut makes it so much better — like the cherry on top. Projects that were shelved before are being let out.”
Under the tax reform, pass-through entities may be eligible for a new 20 percent deduction on qualified business income, according to Deane Albright, CEO of Albright & Associates in Reno. In addition, Albright noted, there are more generous depreciation provisions, with the maximum deduction increasing to $1 million (up from $510,000) for qualifying properties.
One such property is expeditor ITS Logistics out of Sparks.
“That’s a significant savings for the company,” said Dan Allen, director of strategic initiatives at ITS Logistics in Sparks. “It’s been revitalized for a handful of years where we can write off a million dollars a year worth in capital. Obviously, in our industry it’s very capital heavy. We will benefit from being able to invest more in the company and take immediate write-offs.”
Banking on it
For banks, the tax reform is a net positive, said Bob Francl, executive vice president and regional president of First Independent Bank in Northern Nevada.
“Banks pay among the highest average tax rate of corporations today,” Francl said. “So, cutting that rate has significant benefits for the banking industry as the benefits are proportional to the cost savings. The new tax policies coupled with a growing economy, particularly in Nevada, have helped boost expectations for the banking industry.”
Yanus Nelson, the region bank president at Wells Fargo, said one of the first things the corporation chose to do was raise the minimum pay from $13.50 to $15 an hour.
“Several banks have come out and changed their starting salary pay, and we were one of the first ones to announce that,” Nelson said. “We chose to reinvest in our team members.”