Archive for the ‘Tax Incentives’ Category

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Would you like to schedule us for an outstanding 179D Energy Tax seminar, webinar or conference? Please contact us. We are adding new events all the time and welcome requests.

For more information about our Green By Design: Understanding 179D Energy Tax Benefits for Architects and Designers series of seminars, or to schedule a speaking engagement, please contact Loryn Nash at 888.607.2425.

By Don McDougall

With Circular 230, tax preparers were made responsible for decisions that were not theirs and are now acting as much as anything else as the first line of enforcement. EPACT certification creates a major issue for CPAs, as many do not have enough experience with the process to protect themselves and their firms. EPACT has provisions to prevent fraud that are embedded in the regulations. Under Circular 230, it becomes the CPA’s responsibility to confirm that the requirements have been met. In order to protect your firm and yourself, please read on.

WARNING! EPACT is not just like Cost Segregation. EPACT generates a tax deduction; Cost Segregation accelerates the depreciation of an asset by giving it a shorter life. If you have been told they are just versions of the same accounting issue, you need to beware.

Who can do your reports? – More importantly, who can sign your reports? The reports MUST be completed by a licensed firm or individual. This means both the field verification and the energy calculations must be done by licensed people.

The reports themselves must be signed by a licensed firm (engineering or contactor) and should contain copies of the licenses for the individuals who did the work. Consider an example of a company that has CPAs on staff. Exxon-Mobile has CPAs on staff, but Exxon cannot do your tax returns. Likewise, a CPA firm or consulting firm cannot sign your EPACT certification. The reports may completed by firms that are not licensed engineering firms, but must be signed by the licensed engineer who actually did the work. The firm that subcontracted them or hired them cannot sign the report. In addition, that engineer carries 100% of the liability for any errors. Like the example above, you can have a friend who is a CPA that works at Exxon to do your taxes, but he cannot do it on Exxon letterhead.

There are also issues of liability and coverage in the event of an audit. If the firm is not licensed as an engineering firm, not only can they not sign the work, they also cannot defend it to the IRS. This frequently leaves you, their tax-preparing CPA, holding the liability bag. Who signs the reports matters to you even more than it matters to the IRS (because there will be consequences for YOU, not the IRS).

In addition, ALL of the field work and the calculations must be completed by licensed individuals. A common mistake many Cost Segregation firms make is using their non-licensed staff to complete the field inspections to save money. This is clearly not allowed under the guidelines: all work must be completed by licensed individuals.

Another caveat in the certification process: the firm performing the EPACT Certification may not be related to any part of the transaction. For example, a lighting contractor may not certify his/her own work. Contingency fees that rely on the conclusions of the certification to set the cost of the study are also to be avoided.

Summary – The 179D Certification must be signed by a licensed engineering firm, or a licensed individual. Reports not completed by a licensed engineering firm put you (the Tax Preparer) at risk. The firm completing the certification also cannot be involved in the installation or design of the properties that are being certified.

Follow these simple guidelines and you will protect your licensure as well as your firm.

Don McDougall is a National Director with Engineered Tax Services. He is responsible for operations on the West Cost with some national efforts as well. Don is an innovator in the fields of valuation and tax-based engineering. He has proudly contributed and pioneered many of the commonly-integrated services and components used in the industry. He has been providing cost segregation services since before cost segregation existed, having worked heavily in the field of investment tax credits (the depreciation services that pre-date cost segregation).

The Research & Development (R&D) tax credit is one of the most significant domestic tax credits remaining under current tax law – a substantial tool for maximizing a company’s cash flow and bottom line. No one can afford to leave money on the table. Nevertheless, when it comes to the R&D credit, cash is left untouched all the time. Despite the fact that the R&D credit has been available off and on since 1981, only a third of eligible companies recognize that they qualify for the credit. Even if companies claim an R&D credit, they frequently do not claim the entire credit to which they are entitled, either because they do not understand what qualifies or do not have the processes in place to properly document the credit. Without competing for your accounting work, we can help you and your clients identify and capture the R&D credit and increase cash flow for all involved. 

Read the Full Article for details.

Joel Ackerman, CPA

The Energy Policy Act of 2005 (EPACT) provides substantial tax benefits. Under Section 179D of the Internal Revenue Code, owners of energy-efficient commercial buildings may take a tax deduction of up to $1.80 per square foot for qualifying construction or retrofits. 

To help reduce the energy consumption and CO2 pollution from commercial properties, Congress passed The Energy Policy Act of 2005, which provides substantial tax benefits where energy efficiencies are designed within a building.

The IRS Regulations require an independent engineering study in order to substantiate and make a valid claim for these federal tax deductions. These deductions became available as of January 1, 2006 and have recently been extended through December 31, 2013.

How does entity type affect the taxable income to building owners? Read the Full Article for details about the general tax treatment of each type of entity.

By James K. Zahn, FALA, Esq.

Recently, I received a call from my accountant. She called to inquire if I have ever had one of my architect clients attempt to receive a § 179D Deduction for Energy Efficient Commercial Buildings granted under Title 26 of the US Federal Regulations (fondly known as the “IRS Tax Code”). I was unaware of this particular section of the Code until her call, as none of my clients have ever asked about it or brought it to my attention. This article will concentrate on publicly-owned commercial buildings, because that’s where the architect is really in a position to greatly benefit from this unusual regulation. 

According to the US Government Printing Office, the IRS Tax Code is 13,458 pages long, and is contained in twenty volumes available for purchase at only $974, plus shipping and handling. Section 179D is a very small provision buried within a voluminous document and can easily be missed. I looked up § 179D on the internet and was astounded by what I found. This particular section of the tax code is a must read for all practicing architects and their accountants!

Read the Full Article for information every architect should know.

Federal tax law offers an incentive to taxpayers who contribute to the preservation of our nation’s old and historic buildings.

By rehabilitating directly or investing in the rehabilitation of eligible buildings, taxpayers can take advantage of one of a two tax credits.

The federal income tax credit is equal to 20% of the cost of rehabilitating historic buildings or 10% of the cost of rehabilitating non-historic buildings constructed before 1936. These credits provide a dollar-for-dollar reduction of income tax owed.

Read the Full Article for details.