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Construction Accounting Changes Under the ‘One Big Beautiful Bill’ Act

By Sam Woodell, Daniel Thorpe |

The One Big Beautiful Bill Act (OBBBA) brings major changes for the construction industry, particularly in how contractors account for revenues and expenses. For years, the Percentage of Completion Method (PCM) was the required standard for most long-term contracts, with only limited exceptions. Now, with the OBBBA in effect, more contractors — including those working on larger residential and longer-term projects — can take advantage of the Completed Contract Method (CCM). This expanded flexibility could significantly impact how and when income is reported, offering new planning opportunities but also introducing potential complexities.

What Changed?

Residential Construction Contracts

Previously, Section 460(e) limited the PCM exception to “home construction contracts,” which typically covered projects with four or fewer dwelling units. The OBBBA replaced this with the broader term “residential construction contracts,” removing the unit limitation.

Key details:

  • Larger multi-family projects now qualify for CCM.

  • No gross receipts test applies to residential contracts.

  • To qualify, at least 80% of total estimated costs must relate to the building or reconstruction of dwelling units at the construction site.

Other Construction Contracts

For non-residential projects, the law extends the PCM exception:

  • Contracts must now be completed within three years (up from two).

  • Taxpayers must meet the gross receipts test under section 448(c) – $31M average annual gross receipts for 2025 (indexed for inflation).

  • If eligible, taxpayers can use CCM to defer revenue and expense recognition.

Note: This gross receipts test does not apply to residential construction contracts.

Timing of the Change

These rules apply to contracts entered into in taxable years beginning after July 4, 2025. For calendar-year taxpayers, this means contracts started in January 2026 may qualify for CCM.

Potential Challenges

While CCM is now available in more scenarios, complications remain:

  • For residential construction contracts, CCM can be used for both federal and AMT purposes.

  • For other construction contracts, AMT rules still require PCM under Section 56(a)(3).

  • This dual tracking requirement (CCM for federal, PCM for AMT) may create additional complexity in recordkeeping and tax reporting.

How Perkins & Co Can Help

These changes are generally welcomed by the construction community, but determining whether CCM or PCM is the better choice depends on your specific contracts and tax profile.

Our construction tax advisors can help you:

  • Evaluate whether your contracts qualify for CCM.

  • Weigh the benefits and challenges of using CCM vs. PCM.

  • Minimize both current and future tax liabilities by aligning accounting method selection with your business goals.

If you have questions about how these changes may affect your contracts, our construction tax experts — Sam Woodell, Senior Manager, and Daniel Thorpe, Tax Manager (dthorpe@perkinsaccounting.com) — are here to help. Contact us today!