The Energy Tax Incentives Act of 2005 added Section 179D to the Internal RevenueCode, which allows a deduction for “energy‐efficient commercial building property” is placed in service. If you own, lease, design, or build energy efficient commercial buildings, you may be entitled to a federal income tax deduction for the cost of energy‐efficient property.
Section 179D caps this deduction at $1.80 per square foot. For example, a 250,000 square foot building may result in a potential deduction of $450,000 for qualifying energy‐efficient property. To qualify for the deduction, several criteria must be satisfied, including an energy savings threshold requirement. Partial deductions are available for buildings not meeting the overall energy savings building requirement.
There is a timely opportunity for companies to deduct previously capitalized repair and maintenance costs for a reduction of a taxpayer’s current tax liability or increase their net operating loss (NOL) to be carried back five years for federal income tax purposes. Due to an upcoming change in the regulations, companies may be significantly limited in the ability to deduct previously capitalized repair costs.
Many companies follow the book method of accounting for repairs and maintenance expenses and often times overcapitalize certain types of repair costs. Such costs maybe currently deductible for federal income tax purposes in the year in which they were incurred. Companies may be eligible to file an automatic accounting method change for the 2009 tax year and currently deduct the remaining basis of such improperly capitalized repair costs thereby resulting in accelerating cash flow. Many industries are impacted including retail, real estate, manufacturing, services, and energy. Typical capitalized repair costs include roofs, HVAC, parking, painting, and renovations.
Companies should consider filing the automatic accounting method change prior to the finalization of the Treasury Regulations for tangible property. True Partners Consulting can assist estimating the potential amount of overcapitalized repair costs for tax purposes.
OVERVIEW
True Partners’ Cap 2 Xpense team analyzes your company’s 2009 capital expenditures budget in order to maximize expiring taxincentives that the legislature has currently set to sunset by December 31, 2009.
THINGS YOU SHOULD KNOW
By carefully planning your remaining 2009 capital expenditure budget, you can recoup significant costs and maximize expiring tax benefits, including:
• Increased IRC §179 expense deduction (up to $250K)
• 50% bonus depreciation
• Accelerated placed-in service
• Refundable tax credits
It was the best of times, it was the worst of times,” so starts Dickens’ timeless masterpiece, A Tale of Two Cities. For many C-Class executives, the current recession has certainly been the worst of times, at least in their business careers. However, as companies take a hard look at their current operating structures, both legally and functionally, it is the best of times to achieve not only operational efficiencies but also tax efficiencies. This article discusses and illustrates, through a case study, some of the tax benefits that can be achieved through restructurings for a corporation conducting business in more than one tax jurisdiction.
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As the calendar year of corporate America enters into the fourth quarter with more financial uncertainty on the horizon, there is one thing which is known for sure: The financial world in which we all live and hopefully prosper provides a much more transparent view into the financial health of a company’s operations. To many of you this evolution may have seemed to take an eternity; the long hours, increased professional fees, and scrutiny over every minute detail associated with your corporate governance, internal controls, and financial reporting have been flowcharted, documented, and memorialized in volumes of text. To others this may be just the beginning, and you may soon feel much like Alice as she embarks on her incredible journey on the other side of the looking glass. No matter which side of the mirror you are on, transparency will certainly be the overriding theme.
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Employers who provide cell phones or other similar telecommunications equipment to employees must comply with IRS record-keeping requirements or risk losing their Tax deduction. The IRS requires taxpayers to support its tax deduction relating to employer-provided cell phones with written records inteming the amount of the use and expense, each time and place of such usage, and the business purpose of each expense or use.
On October 13, 2009, the Wall Street Journal published an article concerning President Obamaí’s international tax reform proposals. The article, Obama Administration Shelves Plan to Change How U.S. Treats Overseas Profits, stated that President Obamaí’s international reform proposals have been postponed for 2009. However, many tax practitioners believe that the Obama administration will reconsider some form of these proposals in 2010.
Recently, the landlord of a multi tenant office building in Chicagoí’s Loop reduced its taxes by over $500,000 after successfully demonstrating the building suffered from economic obsolescence given recent vacancies and the buildingí’s subsequent underutilization. Similarly, a real estate developer constructed an office building in Los Angeles and secured a property tax reduction of $300,000+ based on rent loss calculations. Also, an Indiana assessor reduced the tax liability of a large manufacturing company by $1,600,000 by accepting obsolescence calculations from the taxpayer for their tangible personal property. Companies with significant real or personal property tax liabilities may reduce their tax bill by identifying, quantifying, and demonstrating the obsolescence of their equipment and facilities.
Business combinations and transactions present companies with unique opportunities for growth and diversification. In recent years, transactions have become larger and more complex requiring the assistance of legal counsel, financial advisors, and accounting professionals to successfully execute mergers and other transactions. These endeavors often produce great results, but come with the burden of high fees, integration obstacles, and increased reporting requirements. To address the increasingly complex and variable reporting environment, the Financial Accounting Standards Board delivered guidance on business combinations in 2001 with Financial Accounting Statement No. 141 (“FAS 141”).
Canned software is a commodity that virtually all businesses use. As its purchase usually entails a significant investment for a business, its taxability status should be considered. Certain software purchases may be exempt from sales tax depending on where, when, and how the purchases were made. If the software purchase is found to be nontaxable, it is the economic equivalent of a 6 to 10% discount on the transaction. Even if the software purchase were found to be tax exempt after the purchase had been made, the business may still obtain, with sufficient documentation, a tax refund from the software vendor or the state or local taxing jurisdiction—generally, whichever jurisdiction had initially collected the tax on the purchase. Thus, on purchases of $1 million of software, savings or refunds of as much as $100,000 can be obtained.
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