Hurricane Matthew Victims Receive Tax Relief from IRS

by Jim Dieterle 17. October 2016 09:00
Hurricane Matthew, which began October 4th, wrought havoc on the East Coast. Fortunately for many victims in the wake of its destruction, the IRS will provide tax relief. As with past natural disasters, specifically those declared a major disaster by the Federal Emergency Management Agency (FEMA), the IRS postpones certain deadlines for taxpayers living in or owning businesses in the affected areas. Specifically, deadlines falling on or after October 4, 2016 and on or before March 15, 2017 will be postponed to March 15, 2017. Also included are the quarterly payroll and excise tax returns due Oct 31st and Jan 31st. Additionally, the IRS will waive failure-to-deposit penalties for employment and excise tax due on or after October 4th, as long as they were deposited by October 19th. Details on available relief can be found on the disaster relief page on IRS.gov. The IRS automatically identifies taxpayers in the affected areas, but those that reside or own a business outside of that area that qualify need to call the IRS disaster hotline: 866-562-5227. More information can be found at: https://www.irs.gov/uac/irs-gives-tax-relief-to-victims-of-hurricane-matthew
Categories: Tax

Tax Court Ruling Expands Whistleblower Rewards

by Tim Marshall 9. August 2016 09:48
In a recent ruling by the U.S. Tax Court, two whistleblowers were awarded $17.8 million. This decision considerably increases the scope of what can be claimed, and could result in both larger awards and in more whistleblowers coming forward in the future. The IRS whistleblower program allows individuals with information about tax violations to file claims with the IRS confidentially, and it rewards those individuals with up to 30% of what the government collects as a result. This decision marks the first time a whistleblower received a portion of the criminal fines, civil forfeitures, and taxes that the government recovered, and it eliminated any concern by whistleblowers that they would receive less if the IRS pursued criminal charges rather than just tax collection. Note this ruling is recent, and can be appealed by the IRS. This was one of the largest awards ever. For context, award statistics for the most recent year show $103.5 million distributed in 99 awards.
Categories: Tax

Digital Product Sales Tax Enacted

by Kevin McGarry 4. August 2016 09:11
Residents of Pennsylvania are now subject to a six percent sales tax on digital products as defined under Act 84 of 2016. Digital products, as it pertains to this tax, include “any product transferred electronically to a customer by download, streaming, or through other electronic means”. Examples of this include e-books, digital video streamed through Netflix or Hulu, songs downloaded or streamed through iTunes or Google Play, and downloaded apps or add-ons. The tax is collected by the vendors of the product and the location of the sale is determined by the customer’s billing address. For more information on the Digital Product Sales Tax and other PA tax updates, please visit the Pennsylvania Department of Revenue’s website.
Categories: Tax

Good News for Pennsylvania Businesses

by Steven Sodini 5. June 2014 12:23
The Pennsylvania legislature has passed a bill that we expect will spur economic expansion and job creation within the Commonwealth by ensuring that local business taxes are collected more fairly and equitably. Previously a PA Supreme Court decision had undone the traditional process for determining business privilege tax (BPT), and this had effectively opened the door to double taxation of companies doing business in multiple jurisdictions.  The new legislation clarifies when a BPT can be levied, and eliminates potential for double taxation. HB 1513, which is now officially known as Act 42 of 2014, will take effect for taxable years commencing on or after Jan. 1, 2014.  The bill will prevent municipalities, cities, and other local governments from arbitrarily or excessively applying local business taxes to any company or employer that performs work within their boundaries for 15 days or less in a given calendar year.  It will also protect businesses from being charged the gross receipts tax twice by separate municipalities for the same earnings.   Click here for a detailed analysis of this legislation, prepared by the State and Local Tax office of our alliance partner BDO.
Tags:
Categories: Tax

7 Changes New Revenue Standard May Bring

by Steven Sodini 27. January 2014 14:48
As we have recently entered into the first quarter of 2014, companies should start planning for a new converged revenue recognition standard that’s currently in the final stages of development by FASB and the International Accounting Standards Board, which will lead to changes in financial reporting for almost all entities that operate under U.S. GAAP or IFRS. The standard is set to be released this quarter. Companies should begin, if they have not already done so, to take inventory of major revenue streams to prepare for the implementation of the standard. The seven major changes companies should expect to deal with include the following: 1. Updated criteria for contract determination Companies may need to adjust their accounting policies and begin to review their current arrangements for meeting contract criteria to establish the new standards to be considered a contract.  Under the new contract guidance the following must exist:  Commercial substance, or changes to cash flows  Approval and commitment by both parties Identification of rights and payment terms by both parties 2. New depictions of contract modifications In addition to new criteria related to contract arrangements, companies will face a contract modification changes. This will be a large undertaking for companies who retrospectively adopt the new standard because they will need to consider past contract modifications in determining their contract balances. 3. Identifying different performance obligations A new recognition method for contract components or components that companies will now need to identify separately is a change from contract accounting under the AICPA Statement of Position 81-1, where companies generally view the contract as the unit of account. 4. Judgment in selling price estimate Furthermore, it will be import for companies’ management to be on top of, as well as thoroughly document the estimation of the selling prices. Companies should build an infrastructure to support the estimates that will recognize credits. Some credits companies should pay close attention to include, rebates and returns and price protections. 5. New depiction of transfer over time The new standard will cause companies to shift to the “cost-to-cost” approach to show the transfer of goods and services to the customer, which will display the ratio of cost already incurred compared to the expected total cost of completing a project. This will be a change for many companies currently using the “units-of-delivery” method. 6. Change in performance incentives With the change in revenue recognition companies may need to adapt different employee incentives. For example, changing policies to avoid employees engaging in channel stuffing will need to be address. 7. New Disclosures Brought on by all the changes from the new standard, there will be significant adjustments to disclosure requirements as well. Disclosures will need to include, disaggregation of reported revenue, narrative explanations of changes in balances, information about performance obligations, judgments about the timing and allocation of performance obligations, and the determination of transaction price.     Due to the vast changes companies will start to face, as the new revenue recognition standard is put into effect, “It’s going to be a significant implementation effort,” GE Technical Controller Russell Hodge, CPA said. Hodge followed up by saying contracts will need to be looked at in a whole new way. 
Tags:
Categories: Advisory | Tax

Top 10 Tax Changes and Strategies For 2013

by Steven Sodini 1. November 2013 17:28
Top 10 Tax Changes and Strategies for 2013   With two months left in 2013, tax planning strategies should definitely be examined now, as there is still sufficient time for both individual and business taxpayers to make changes or adjustments to their income and deductions before year-end. However, in order to do so, most taxpayers will have to consider the changes made by both the American Taxpayer Relief Act of 2012 (ATRA) and the Patient Protection Affordable Care Act of 2010 (Affordable Care Act) before year end. To help assist taxpayers with their planning, we are going to examine our Top 10 Tax Changes and Strategies for 2013 below as follows: Individual Tax Rates In 2013 there will be a continuation of the "Bush-era" tax rates from 2012, but there will also be a revival of the 39.6 percent tax rate for the highest income earners. The AGI thresholds for the new 39.6 percent tax bracket in 2013 will be: Single ($400,000) Married Jointly and Surviving Spouse ($450,000) Head of Household ($425,000) Married Separate ($225,000)   These thresholds are scheduled to be adjusted annually for inflation for tax years after 2013. In addition, for estates and trusts, the threshold income amount is only $11,950 for 2013, so executors and trustees should consider making distributions to beneficiaries before year-end, so that amount of taxable income will not be included in the taxable income of the estate or trust, and will instead be passed through to the beneficiaries, who may be in a lower tax bracket.   Capital Gains and Qualified Dividends The top rate for capital gains and qualified dividends will also rise from 15 to 20 percent for individuals in the 39.6 percent income tax bracket based on the same income levels as noted above. Due to the rising capital gains rate, a taxpayer may want to consider using carryforward losses from 2012 as, barring a change by the IRS, carryforward losses from prior to 2013 will be able to be used to offset capital gains at the new 20 percent rate without an adjustment for the rate change. It may also by prudent in some case, for investors to sell off certain types of investments (ie, bonds) before year-end to generate additional capital losses to offset capital gains for the year if little or no capital loss carryforwards are available to the taxpayer. In addition, for dividends to be subject to the lower qualified rates, the underlying stock should be held for at least 61 days within a 121 day period.   Medicare Surtax on Net Investment Income and Compensation Beginning in 2013, many higher income taxpayers may also be liable for two new Medicare surtaxes. The first is the Net Investment Income (NII) Medicare surtax of 3.8 percent. Net investment income includes taxable interest, dividends, net capital gains, net rental income (except for real estate professionals), and net income from an activity in which the taxpayer is a passive participant. According to a Draft Form 8960 released by the IRS over the Summer, net investment income can also be offset by investment interest expenses and investment fees from brokers, but this could change once the final form is released in early 2014. The surtax on individuals equals 3.8 percent of the lesser of; the taxpayer’s net investment income for the tax year, or, the excess of modified adjusted gross income (MAGI) for the tax year over the threshold amount. The threshold amounts are:   Married Jointly and Surviving Spouse ($250,000) Married Separate ($125,000) Single and Head of Household ($200,000)   Because of this new surtax, any investment income in 2013 should be examined to determine whether or not it will be subject to the surtax. The IRS has also indicated that the surtax will be subject to penalties for underpayment of estimated tax, so to the extent this has not been considered for the first three quarters of 2013, a revised calculation should be done for the fourth quarter to determine whether any additional estimates are required. However, it should also be noted that there has also been no indication that the IRS will not allow the traditional estimate safe harbors to continue to be used for 2013.   The second is a separate Medicare Surtax of 0.9 percent of wages (or self-employment income) in excess of higher income level threshold amounts is also effective for 2013. The threshold amounts are the same as noted above for the NII tax. Employers are required to withhold for this additional surtax for wages paid above the threshold amounts shown above and unlike Social Security Taxes, there is no cap on the amount of compensation that is subject to this tax once the thresholds are exceeded. However, for self-employed taxpayers, careful attention should be paid to estimates, particularly for the fourth quarter.   To plan for both additional Medicare surtaxes, a taxpayer may also request that their employer(s) withhold an additional amount of income to be applied to the taxpayer’s income tax return for November and December, which will in turn spread the additional payments over all four quarters for estimate purposes. At this point, it does not appear that the thresholds for either of the Medicare surtaxes will be adjusted for inflation for tax years after 2013.   Pease Limitation The Pease limitation (named after the member of Congress that sponsored the original legislation back in 1990), which was eliminated with the Bush-era tax cuts, will now return in 2013. The Pease limitation reduces the total allowable itemized deductions by three percent of the amount of the taxpayer’s adjusted gross income that exceeds the set thresholds, but not more than 80 percent in total. Certain itemized deductions are excluded from the limitation such as, medical expenses, investment interest, and casualty, theft, or wagering losses. The thresholds will be adjusted for inflation for tax years after 2013. These new limits (along with the personal exemption limits below) should also be considered for 2013 estimate purposes. The 2013 thresholds for the Pease limitation are:   Married Jointly and Surviving Spouse ($300,000) Married Separate ($150,000) Single and ($250,000) Head of Household ($275,000)   Personal Exemption Limitation Much like the Pease limitation, an individual’s Personal Exemptions will also be phased out to the extent an individual’s adjusted gross income exceeds the same thresholds noted above.   Same-Sex Marriage Filing Status On June 26, 2013, the US Supreme Court struck down Section 3 of the Defense of Marriage Act in E.S Windsor, 2013-1 ustc 50,400. Under the court ruling, all same sex marriages that have been legally recognized under state or local laws (currently allowed in 13 states and DC), will also be recognized for federal tax purposes, regardless of whether the couple actually resides in a jurisdiction that does or does not recognize same-sex marriages. Therefore, for all tax returns filed on or after September 16, 2013, these couples must now file using the married joint filing status.   Estate and Gift Taxes After much uncertainty over the past decade, a permanent structure has now been provided for estate and gift taxes. Estate and gift tax rate is now capped at 40 percent with a $5 million exclusion adjusted annually for inflation. The annual gift tax exclusion has risen to $14,000 for an individual and $28,000 for a married couple who elects to gift-split. There is currently no limit to the amount of individual donees to whom tax free gifts may be made under the exclusion rules noted above, so maximizing the annual exclusion continues to be a popular tax planning idea.   Section 179 Expense For taxpayers involved in a owning or operating a business, there are changes in IRC Section 179 regarding expensing of qualified fixed assets used in business. For 2013, the annual dollar limitation for Code Section 179 expensing is $500,000 with an overall investment limitation of $2M (with a dollar for dollar phaseout above that limit). However, absent Congressional action, for tax years beginning after 2013 the dollar limit is expected to decrease to $25,000, with the phase out ceiling also scheduled to decrease to $200,000. Unlike bonus depreciation (discussed below), Section 179 allows both new and used business assets (including off-the-shelf computer software) to qualify for current deductions. In addition, Section 179 also allows expensing for certain types of qualified real property, including qualified leasehold improvements, but this is also scheduled to expire after 2013. Thus, taxpayers should strongly consider placing assets in service before year-end to take advantage of the taxpayer friendly current rules.   Bonus Depreciation Similarly, for 2012 and 2013, 50 percent bonus depreciation is allowed under the ATRA. However, after 2013, bonus depreciation is scheduled to expire completely, once again pending any Congressional extensions. At present, qualified property subject to bonus depreciation must be new (unlike Section 179 as noted above), must be depreciable under the Modified Accelerated Cost Recovery System (MACRS.), must have a recovery period of 20 years or less, and must be placed in service before January 1, 2014. Along with the expiration of bonus depreciation, the additional $8,000 of first year depreciation limitation for passenger automobiles under IRS Section 280F is also scheduled to expire after 2013, again subject to any Congressional extensions. As with Section 179 above, taxpayers should consider placing qualified assets into service before year-end.   Final Repair/Capitalization Regulations Final regulations have been put in place with guidelines to determine when taxpayers must capitalize costs and when they can deduct expenses for acquiring, maintaining, repairing, and replacing tangible property. These regulations will apply to tax years beginning on or after January 1, 2014. However, these Regs also provide taxpayers with the option to apply the final or temporary regulations to the tax years beginning after 2011 and before 2014. Even more importantly, the Final Regulations include a new de minimis expensing rule. This allows the taxpayer to deduct certain amounts paid or incurred to acquire or produce a unit of tangible property. If a taxpayer has an Applicable Financial Statement (AFS) the Final Regulations allow up to $5,000 to be deducted per invoice. To take advantage of the rule, taxpayers must have written policies at the start of the tax year that specify a per-item dollar amount that will be expenses for financial accounting purposes. Even for a smaller business without an AFS, the Final Regs have a per item or invoice threshold amount of $500.
Categories: Tax

Did You Know That the NFL is a Tax-Exempt Non-Profit: Round 2

by Steven Sodini 15. May 2013 13:02
      Back in December, we posted a blog regarding the surprising non-profit tax-exempt status of the NFL, NHL, and many other professional sports organizations, under Section 501(c)(6) of the Internal Revenue Code.  That blog was primarily based on the 2012 Wastebook that is published annually by Republican Senator Tom Coburn of Oklahoma and ranks the 100 largest wastes of taxpayer monies each year.  The non-profit tax-exempt status of these sports leagues ranked as the #2 biggest waste of taxpayer money for 2012.  Since that time, according to an article in the New Jersey Star-Ledger this week, Senator Coburn has tried to educate his Senate Colleagues on the tax-exempt status of many of these organizations, and recently crafted legislation an amendment to the recent “Marketplace Fairness Act” (aka “Internet Sales Tax Act”), known as the “Property Reducing Overexceptions for Sports Act” (aka “PRO Sports Act”), in order to strip these professional sport organizations of their non-profit tax-exempt status.   This issue, as outlined in the 2012 Wastebook, was in fact originally brought to Senator Coburn’s attention from an article written back in 2010 in the Arizona State Law Journal by a law student.  That original article noted that based on the NFL & NHL alone, revoking the tax-exempt status of these professional sports organizations could generate at least $91 million of new federal tax revenue each year.  As noted in our original blog, while individual sports teams operate as for profit entities, the underlying sports leagues (set up as trade associations to promote the common business interest of their particular sport) do not, and often even avoid state and local taxes as well, based on this tax-exempt status.   Obviously, it is difficult to ascertain the precise revenue impact of this tax-exempt status since the leagues do not disclose financial reports, but as an example, it is known that the NFL alone paid 8 top executives nearly $55 million in 2012, and generated approximately $10 billion of revenue in the same year.  In 2010, they reported a net profit of about $1.3 billion.  The NFL also collects about $192 million ($6 million in annual membership dues from each of the 32 NFL teams), then each team writes off the dues as charitable donations.  The $192 million is then put into a stadium fund for owners to get interest free loans as long as they can secure public funding for constructing a new or renovating an existing sports stadium.   As outrageous as this may all sound, from a practical standpoint it may not amount to anything in the long run. Among other reasons, the NFL alone has powerful lobbyists, and many members of Congress are longtime sport fans (that may have been directly involved in securing public funding of sport stadiums for their local sports teams and constituents).  Even though the average worker likes to complain about sports figures, Hollywood celebrities, etc. making too much money, he or she won’t hesitate to spend their own money to support their favorite sports team, or attend that opening day screening of the latest Hollywood blockbuster.    
Categories: Tax

UP Office Hours

by Evin Jethroe 15. March 2013 09:35
    Urish Popeck will host our first ever Office Hours on Wednesday, March 20th at 12:30 pm. For an hour our dedicated tax team will be available to answer general tax questions asked via our firm Twitter account. Be sure to follow us on twitter, @UrishPopeck. We look forward to chatting with you!
Tags:
Categories: Tax

Hidden Taxes on Mutual Funds

by Steven Sodini 5. February 2013 16:28
Thanks to the recently enacted American Taxpayer Relief Act of 2012, tax rates are going up for the highest income taxpayers. Even those slightly lower on the earnings ladder are getting hit with new taxes from the 2010 Affordable Care Act (aka “Obamacare”), and all of these tax increases are arriving just as many mutual funds are poised to pay out larger taxable gains. A recent insightful article in the Wall Street Journal offers some suggestions on how to limit and reduce the tax impact from fund returns. To begin with, investors may want to think twice about strategies marketed recently for unstable markets. Some strategies that may be good in dealing with the ups and downs of the market, might also may produce more tax liabilities than investors are willing to endure.  The primary reason is that the more actively a fund is managed, the more potential it has to produce short-term gains and thus higher taxes. Gains from securities owned for a year or less are taxed as ordinary income, and under the new tax laws noted above, these rates that for most investors are now much higher than the new maximum 20% on long-term gains. The easiest way to see the tax impact of a fund's return, is to go to Morningstar.com and search for a certain fund, then just click on the tax tab. There you'll see the fund's tax-adjusted returns broken down for various periods of time.  In addition, Morningstar also shows how funds rank with their peers, in terms of how much of their returns are lost to taxes.  A fund that generates a lot of interest (such as a taxable bond fund) or short-term capital gains (such as funds with active trading goals) should go into a tax-deferred retirement account, like an IRA or 401(K).  Distributions from retirement accounts are taxed as ordinary income, and most investors are normally in a lower tax bracket when they retire. But regardless of what bracket you retire in, many advisers often recommend deferring paying tax on interest and capital gains for as long as possible. Meanwhile, your taxable account should be used for stock funds whose trades mostly qualify for the long-term gains rate, along with tax-exempt municipal-bond funds and equity funds that focus on dividends that qualify for the maximum 20% rate.  A fund's prospectus usually will state whether its portfolio is managed with an eye toward holding down taxable distributions. Also look for the "turnover rate," or the percentage of a fund's holdings that change in a 12-month period. Many funds have turnover of around 100%, so for a fund to be in a taxable account, the turnover rate should be about 25% or less.  When a fund sells more securities at a loss than a gain, the excess losses can then be applied to reducing or eliminating taxes in future years.  Before 2010, funds could carry losses forward for up to eight years, but following a change in tax law, losses incurred in fund tax years that begin after Dec. 22, 2010, can now be carried forward indefinitely.  Since the 2008 market downturn, many funds have been able to keep distributions low by using losses to offset gains.  However, many funds have now used up all their loss carry-forwards, so when they sell profitable positions now, they likely will have to pay out taxable gains. However, be very cautious with funds that had outstanding performance over the past three years.  If a fund has had a good run the past few years and is near the end of a successful run, a lot of investors could bail out, forcing the fund manager to realize gains in order to meet redemptions.  Therefore, such a fund may have to pay out substantial gains, even though its net asset value is declining.  A fund's annual report should say whether it is carrying unrealized gains or losses, which can also be found by clicking the tax tab on the fund's page at Morningstar.com, which shows how much of a fund's portfolio represents unrealized gains or losses.  If there is a larger unrealized gain or 30% or more and the fund has high turnover, then it’s likely to distribute gains in the next few years. Many advisers also caution against letting taxes alone drive investment decisions. But there can be advantages to generating losses when the chance arises, especially if you plan to raise cash later in the year by selling securities at a profit. During a time of sudden market shifts, losses may not stay losses indefinitely.  Under current tax law, you can also avoid taking a big gain in appreciated fund shares by donating the shares to a charity, which is a good way to be both charitable and reduce your tax bill.  By giving the shares to the charity, you can deduct the full value, and avoid paying capital-gains tax on the appreciation at the same time.  Furthermore, once the donation is completed, you could actually buy new shares of the same fund at the current, higher price, establishing a higher cost basis and reducing the tax bill on any future sale.  Furthermore, many firms offer tax-managed equity funds that aim to minimize taxable distributions. When such funds sell part of a position in a stock, they pick shares that will trigger the lowest tax bill, and they try to match up gains with losses taken elsewhere in the portfolio.  Passive funds that are based on broad market indexes can be among the best at avoiding taxable gains distributions. Their portfolios change only infrequently, and primarily because of component changes in the indexes they track. Tax-cost ratio is the percentage of a fund's annualized return that is reduced by taxes paid by shareholders on its distributions. The average tax-cost ratio for all funds followed by Morningstar is around 1%, which is another way of saying that an average one percentage point of fund return is lost to taxes each year.  Some passive funds, like small-cap index funds, change more often. As small-cap companies mature, they graduate to other categories and need to be replaced in an index. Tax implications should be of less concern than whether a fund meets your investment objectives. But the funds that you own should be tailored to your specific tax situation.  A taxpayer in one of the two lower federal tax brackets may actually do better by owning a taxable bond fund than a tax-exempt municipal-bond fund. An investor in a long-term municipal-bond fund would get less than 3% interest. Even after paying tax at 15%, an investor might get nearly 4% from a taxable high-yield bond fund.  At the end of the day, it's after-tax total return that will matter to most prudent investors.
Categories: Tax

Federal Research Tax Credit Extension for 2012 and 2013

by Steven Sodini 9. January 2013 10:45
FEDERAL RESEARCH TAX CREDIT EXTENDED AND MODIFIED FOR 2012 AND 2013   On January 2, 2013, President Obama signed the American Taxpayer Relief Act of 2012 (the “Act”) to address the so-called “fiscal cliff” and extend the federal research tax credit to cover expenses paid or incurred in 2012 and 2013; Since the credit had expired December 31, 2011, the Act also includes technical changes modifying rules for how to compute the credit when a portion of a trade or business changes hands and for taxpayers under common control.   As provided for in section 41, the federal research credit actually consists of three credits: (1) an incremental credit for “qualified research” and “basic research” equal to 20% of, respectively, (2) a taxpayer’s qualified research expenses (“QREs”) and basic research payments that exceed a base amount; and (3) a non-incremental credit for “energy research” equal to 20% of amounts a taxpayer paid or incurred to an energy research consortium.  Generally, activities conducted in the United States as part of a trade or business to attempt to develop or improve the functionality or performance of a product, manufacturing process, or software may qualify.   The provisions outlined in the Act outlines how taxpayers are to treat QREs paid or incurred in periods before they acquired and after they dispose of the major portion of either a trade or business or a separate unit of a trade or business.  When a taxpayer makes such an acquisition from another person, its QREs and gross receipts, for any period which needs to be taken into account to determine the credit for such year (called a “measurement period”), must be increased by an amount equal to (1) the QREs paid or incurred by and, in some cases, the gross receipts of the person from whom the business was acquired with respect to the acquired business during the measurement period, multiplied by (2) the number of days in the period beginning on the date of the acquisition and ending on the last day of the taxable year in which the acquisition is made, divided by the number of days in the acquiring person’s taxable year. The Act provides special rules for coordinating taxable years in the case of an acquiring person and a predecessor whose taxable years do not begin on the same date. When the taxpayer disposes of the major portion of either a trade or business or a separate unit of a trade or business, then, if it furnished to the acquiring person such information as is necessary for the acquiring person to follow the guidance above, it shall reduce its measurement-period QREs and gross receipts by (1) its measurement-period QREs and gross receipts multiplied by (2) the number of days in the period beginning on the date of acquisition and ending on the last day of its taxable year in which the disposition is made, divided by the number of days in its taxable year.   The Act also modified the language for determining the amount of the credit for members of a controlled group of corporations and for trades and businesses under common control (“members”). Specifically, the amount of each member’s allocable credit shall be determined on a basis proportionate to the member’s share of the aggregate QREs, basic research payments, and amounts paid or incurred to energy research consortiums taken into account by the controlled group or trades or businesses under common control.   Please be aware that taxpayers should not recognize a benefit for fiscal periods ending prior to the date of the enactment of the Act—viz., January 2, 2013—related to credits generated by QREs paid or incurred after December 31, 2011.  However, disclosure of the retroactive extension of the credit might be warranted, if material.   If you’ve already filed a return without a credit, or with a credit that doesn’t take into account expenses paid or incurred during 2012, you may amend the return to claim such a credit.   If you have any questions or issues with these new rules, or believe you have unrealized benefits available, please contact the tax professionals at Urish Popeck.  In concert with the R&D specialists of the federal tax practice at BDO, we have specialized expertise to help you to maximize all available tax benefits.  
Tags:
Categories: Tax