Category: Policy


Georgia DOR Session

We attended the annual Institute for Professionals in Taxation (IPT) Georgia DOR One day session in November. There has been several updates and changes at DOR. The following is an overview:
  • Lynne Riley, new DOR Commissioner: Her CPA background will help with tax policy and regulation.
  • Staci Guest, Chief Tax Officer: In this new position, she is handling many of the tasks previously done by Ed Many.
  • Ronald Johnson, Jr, Director of Taxpayer Services (his dad also worked at DOR): Introduced special contact paths for CPAs and tax preparers: revenue.incometaxcpa@dor.ga.gov and 404-417-2395
  • Tax Tribunal Judge Larry O’Neal: Reported on this lower cost & quicker way to dispute tax issues.  Most of the 3,000 cases are individual income tax issues.
  • John Foster, Income Tax Policy Manager:
    • The film tax credits are undergoing more scrutiny due to higher $ volume. Due to the large backlog of approvals and audits by the state, DOR employees are being added to this area.
    • There were several tax credit changes that will start in 2016. These changes include the Conservation Tax Credit ending in 2016 (HB 464) and the Historic Building Tax Credit adding a new job creation bonus (HB 308) (Click here ).
    • 2015 income tax forms are being changed to better administer tax credits. For example, pass-through entities (forms 600S & 700) will list each shareholder and tax credit amount. C corporations and individuals (forms 600 and 500) will list tax credits used and amount to be carried forward.
  • Information Technology: DOR’s new Integrated Tax System (ITS) is leveraging technology to streamline processes, strengthen compliance and provide better customer service. The Georgia Tax Center (GTC) is will be adding income tax and tax credits capabilities soon (click here). There will be a new Business Credit Manager who will handle submitting tax credits for pre-approval (such as the private school tax credit). Finally, there is a new app for your smart phone called “myGATax.”

If you haven’t already done so, NOW is a great time to reach out to your clients to let them know about the tax credit $$ waiting for them!

JimSig

Healthcare: ICD-10 Update

According to the government’s CMS agency, there are less than 100 days before the ICD-10 mandate will begin on October 1, 2015 (see countdown page here ). To comply with this change, physician practices will need to upgrade software, change workflows, and retrain employees. Let your clients know that Georgia’s Retraining Tax Credit may be able to provide $$ to helpoffset the costs, time and effort for ICD-10.

Pennsylvania Credits and Incentives

As we’ve mentioned before, our Georgia clients frequently ask us to investigate potential credits and incentives in other states where they have operations, potential acquisitions or strong relationships with customers or vendors. In addition, private equity groups ask us about potential $$ for their portfolio companies.

One of our clients recently asked about credits and incentives for their location in Pennsylvania. I was able to speak with some Pennsylvania economic development professionals and learned some of their details (Pennsylvania’s Department of Community and Economic Development (DCED)site click here).

A big difference between Pennsylvania and most other states is that they have fairly high corporate tax rates.  Pennsylvania ranks 24th in the The Tax Foundation’s 2014 Business Tax Climate Index (click here).

Pennsylvania offers a wide array of incentives, credits, and funding programs to assist businesses in locating or expanding in Pennsylvania jobs and development.  DCED’s Single Application for Assistance enables companies to apply for most credits and incentive programs using one form.   The Governor’s Action Team (GAT) is the single point of contact for for new and expanding businesses planning significant growth or investments in PA (click here).  Keystone Opportunity Zones (KOZs, click here) provide special zones with reduced or eliminated state and local taxes.

One consideration — an application and approval process is required for all of Pennsylvania’s primary incentives.  And, Pennsylvania’s credits and incentives can be more complicated than other competitive states.

Compared to Georgia, Pennsylvania has:

  • Higher taxes:  Far higher corporate income taxes.  Similar personal income taxes.  Higher sales taxes and higher property taxes.
  • narrower range of industries eligible for incentives if adding jobs, a narrower range for capital investments, and a far narrower range for training incentives.
  • NO opportunities for incentives unless pre-approved by state and/or regional council officials.
  • Location, location, location — if that’s what is important to the business

To summarize, Pennsylvania is not highly competitive for new and expanding businesses, unless those businesses really need Pennsylvania’s prime location for global commerce, corporate headquarters, transportation and culture.

Do any of your clients have Pennsylvania connections?  Make sure you review their potential qualifying activities early to maximize their $$ benefits!!

DaleSig

Single Factor Apportionment and Tax Credits

For companies that sell in multiple states, the amount of state income tax paid to each state is typically determined by applying an “apportionment factor” to its total net income, or some other measure depending on the state. Georgia has a Single Factor Gross Receipts Apportionment formula (click here) that is solely based on the sales factor (that is, sales within Georgia as a percentage of sales everywhere). In other words, a company’s Georgia income tax liability decreases as its percent of sales outside of Georgia increases. As this happens, the company’s ability to utilize Georgia income tax credits also decreases. A company may have a lot of tax credits due to its activities, but limited ability to utilize the tax credits. An exception may be when the company can utilizes the tax credits against Georgia payroll withholding taxes (click here for list).

Lately we are seeing manufacturers and distributors increasing their sales outside of Georgia. Initiatives such as e-commerce, Fulfillment By Amazon (click here) and other strategies are helping drive this. As you reach out to clients, make sure you discuss their sales plans outside of Georgia and the potential impact of Georgia tax credit utilization.

 

JimSig

Looking Forward to Tax Credits!

As part of your tax filing for extended returns and preparation for year-end planning, make sure you help your clients look forward as they plan for 2015. Many of their planned business activities could qualify for tax credits and incentives. Your early advice could make the difference between qualifying and not qualifying. For example, if they plan to add jobs, make sure they know the minimum required for a job tax credit. Most states require advance notice and approval before tax credits and incentives can be utilized.

So reach out to your clients and discuss their plans for expansion, relocation, employment growth, new software and capital expenditures. Anyof these could be signals for potential benefits. Then you and your clientscan look forward to tax credits! 

JimSig

New Jersey Credits and Incentives

As we’ve mentioned before, our Georgia clients frequently ask us to investigate potential credits and incentives in other states where they have operations, potential acquisitions or strong relationships with customers or vendors. In addition, private equity groups ask us about potential $$ for their portfolio companies.

We were recently asked about credits and incentives in New Jersey. I was able to speak with some New Jersey economic development professionals and learned some of their details (New Jersey Economic Development Authority click here).

A big difference between New Jersey and most other states is that they have some of the highest corporate and personal tax burdens.  New Jersey ranks 49th in the The Tax Foundation’s 2014 Business Tax Climate Index (clickhere).

But if you are the right kind of company, and in the right place, New Jersey has a wide selection of incentives, credits, and programs to assist businesses and communities for increasing and retaining New Jersey jobs and increasing business investments.  Grow New Jersey Assistance Program (GROW)is a new initiative, consolidating and expanding several expiring programs, that provides 10-year credits for firms considering moving to or leaving the state (click here).  Another program allows certain biotech and tech companies to sell unused NOLs and R&D credits.  There are LOTS of hoops to jump through, including business type, size, wages, location, and other factors.

Another big consideration — a long application and approval process is required for all of New Jersey’s primary incentives.  And, New Jersey’s credits and incentives are far more complicated than most other states. 
 
Compared to Georgia, New Jersey has:

  • Higher taxes:  Higher corporate income tax.  Far higher personal state income taxes.  Higher sales taxes and far higher property taxes.
  • A narrower range of industries eligible for incentives if adding jobs, a narrower range for capital investments, and a far narrower range for training incentives.
  • NO opportunities for incentives unless pre-approved by state and/or local officials.
  • Location, location, location — if that’s what is important to the business

To summarize, New Jersey is not very competitive for new and expanding businesses, unless those businesses really need New Jersey’s prime East Coast location between the New York and Philadelphia business centers. Most of New Jersey’s incentives seem to go toward paying off large companies not to leave the state!
 
Do any of your clients have New Jersey connections?  Make sure you review their potential qualifying activities early to maximize their $$ benefits!!

 
DaleSig

New York Credits and Incentives

As we’ve mentioned before, our Georgia clients frequently ask us to investigate potential credits and incentives in other states where they have operations, potential acquisitions or strong relationships with customers or vendors. In addition, private equity groups ask us about potential $$ for their portfolio companies.

We were recently asked about credits and incentives in New York. I was able to speak with some New York economic development professionals and learned some of their details (New York’s Business First site click here).

A big difference between New York and most other states is that they have some of the highest corporate and personal tax burdens.  New York ranks 50th in the The Tax Foundation’s 2014 Business Tax Climate Index (clickhere).

That being said, New York has a vast array of incentives, credits, and programs to assist businesses, education, nonprofits, and communities for “investment” in New York jobs and development.  The Regional Economic Development Council (REDC) initiative yearly application round closed on June 16.  It covers up to $750 million in grants, tax credits, loans, and “other resources.”  A Consolidated Funding Application (CFA) serves as a single application for state economic development resources from numerous state agencies and regional councils.  START-UP NY is a new initiative that sets up university-sited or connected tax-free zones for new and expanding businesses (click here).  You may have seen the TV advertisements for this program, and it sounds great, but there are a LOT of hoops to jump through, including business type and location.

Another big consideration — a long application and approval process is required for all of New York’s primary incentives.  And, New York’s credits and incentives are far more complicated than most other states. 
 
Compared to Georgia, New York has:

  • Higher taxes:  Higher corporate income tax.  Far higher personal state income taxes.  Higher sales taxes and far higher property taxes.
  • narrower range of industries eligible for incentives if adding jobs, a narrower range for capital investments, and a far narrower range for training incentives.
  • NO opportunities for incentives unless pre-approved by state and/or regional council officials.
  • Location, location, location — if that’s what is important to the business

To summarize, New York is not very competitive for new and expanding businesses, unless those businesses really need New York’s prime location for global finance, corporate headquarters, global media and culture.  
 
Do any of your clients have New York connections?  Make sure you review their potential qualifying activities early to maximize their $$ benefits!!

 
DaleSig

Upcoming Event

We will be speaking at the upcoming 2014 Council of Development Finance Agencies (CDFA) Georgia Financing Roundtable Conference on Wednesday, June 4, 2014 in Atlanta (click here for details).

Georgia DOR One Day Tax Seminar

We recently attended the annual DOR-IPT (Institute for Professionals in Taxation) One-Day Georgia Tax Seminar. Commissioner Doug MacGinnitie gave an overview of the year’s milestones, then Deputy Commissioner Pete Donnelly reviewed Compliance Division highlights.  Throughout the day, we heard from DOR reps from Taxpayer Services, Compliance Discovery Unit, Tax Policy Legislation and Regulation, the Streamlined Sales Tax board, and the Georgia Tax Tribunal.  Here are some highlights:

  • State revenues are back up to $17 billion, close to the 2008 high.  50% comes from individual income tax, 5% from corporate income tax, 31% from sales tax, 5% from motor fuel tax, and 9% other.
  • Georgia is now the 8th most populous state — 9.9 million
  • The department spent $40M+ on the new Integrated Tax System (ITS), with big improvements in accessibility, reporting, and process workflows.
  • All day long, we heard process process process — the department is really working to improve operations and customer service
  • Customer service — greatly reduced call wait times and work backlog
  • Significant headcount reductions — overall better processes, but fewer people to help with tax credits!
  • Encouraging all businesses to go online at the Georgia Tax Center (GTC).  Driving to eliminate paper. Future plans to add mobile apps and chat (!).
  • Film tax credits are now huge — over $328 million since 2009. DOR is auditing a high percentage, and now offers Certification Services, a voluntary program for Film Tax Credit Certification, $55/hour plus costs.
  • Overall attitude — less confrontational, more professional.

For a DOR summary of the 2013 tax legislation, click here.

 

JimSig

South Carolina Credits and Incentives

As we’ve mentioned before, our Georgia clients frequently ask us to investigate potential credits and incentives in other states where they have operations, potential acquisitions or strong relationships with customers or vendors. In addition, private equity groups ask us about potential $$ for their portfolio companies.

We were recently asked about credits and incentives in South Carolina. I was able to attend an educational session, hosted by Marcella Forest of the South Carolina Department of Commerce, and learned some of their details (DOC site click here).

South Carolina’s main tax credits and incentives cover new capital investments, new jobs, infrastructure, R&D, and workforce training.  Local incentives can include property tax abatement.  Incentives and credits are available to a fairly wide range of targeted industries that include manufacturing, processing, warehousing and distribution, agribusiness, R&D, qualifying technology intensive facilities, headquarters facilities, and others creating 10+ net new jobs.  Service-related facilities must hit a much higher threshold depending on location, wage rates, and other factors.

South Carolina’s credits and incentives are more complicated than many states, but are generally more generous. 

  • South Carolina Enterprise Program provides large tax credits taken against payroll withholding taxesRequires pre-approval and takes the form of a legal contract.  Includes Job Development Credit and Retraining Credit.  Discretionary and performance-based.  Up to 5 years to complete requirements, then up to 10 years to claim.  Very complex but potentially large $$.
  • Jobs Tax Credits are tied to threshold levels determined by a complex county tier system.  These credits can can offset 50% of state income taxes, are available for a five year period, and have generous carryforwards up to 15 years.
  • Investment Tax Credits offset up to 100% of state tax liability and apply to new production equipment.  Percentages depend on IRS recovery periods.
  • Headquarters Tax Credits offset costs associated with relocating or expanding corporate headquarters.  Minimum 40 new jobs, can be carried forward up to 10 years.  Enhanced credit for larger projects.
  • Other incentives include tax credits for SC Port usage, Recycling Facilities, Solar Energy, Biomass Resources, Renewable Fuels, Renewable Energy Systems, and Energy Conservation; there’s also a Corporate Income Tax Moratorium program for less developed and poverty areas
  • readySC Job Training Assistance Program offers comprehensive job recruiting, training, and other programs(click here).
  • Local property and sales tax abatements are very generous and widely available, but negotiated locally.

Compared to Georgia, South Carolina has:

  • A wider range of incentive and credits, including lower job creation thresholds.
  • A wider range of companies eligible for most credits.   
  • A complex approach to determining company qualifying activities and $$ incentive amounts.
  • Larger incentives that must be pre-approved and carefully planned
  • Many other credits that can be taken after the fact and on amended tax returns.

To summarize, South Carolina is very competitive for new and expanding businesses.  Representatives at both the Departments of Commerce and Revenue are alert and eager to help for Enterprise Zone projects, they basically hold your hand all the way through the process!

Do any of your clients have South Carolina connections?  If so, South Carolina economic developers will be very helpful in finding incentives.  But make sure you review your clients’ potential qualifying activities today to maximize their $$ benefits tomorrow!!

DaleSig

Revenue Recognition and Tax Credits

It’s funny how your audit practice can get involved with tax credits. We recently attended the GSCPA Southeastern Accounting Show (click here). An interesting sessions was on the new FASB five step model for revenue recognition audit rules, presented by Chris Rouse of Windham Brannon. Even though these standards will not be effective until Dec. 2017 for non-public companies, auditors and their clients need to start analyzing business process, systems, and workflow changes soon to prepare. These changes will require employee training and may provide an opportunity for a retraining tax credit. Here is an overview:

  • Auditors need to understand how the client’s business operatestoday & its plans for the future.
  • Requirements such as “probability-weighted estimates” and other historical data-intensive analysis may require new software (and employee training) to collect and analyze revenue and related data.
  • Key processes and controls that support the client’s internal control structure would need to be updated, and their IT systems and manual processes that support the accumulation and reporting of data would need to be modified (more employee training).
  • Your firm may be able to proactively consult with your clients in reviewing, gap analysis, planning and implementing these changes(and provide training to employees).

Your audit partners and staff should reach out and engage clients in planning and implementing these changes. The retraining tax credits from the employee training may be able to finance a significant $ portion of the time and costs associated with this effort. But watch out — your audit partners may think they have become tax credit experts!

 

JimSig

ACA Feedback

We have done a non-scientific sampling of our clients and their plans for ACA (Affordable Care Act, or Obamacare). Check out this feedback:

  • “The implementation of the ACA is still in limbo to some degree…we see no need to change, but if our costs do go up significantly, then we may rethink this approach.”
  • “We have been somewhat relaxed with part time employees’ hours in the past but can’t be going forward. 30 hours is the threshold for part time employees, so we are monitoring this closely.”
  • “We have 250 seasonal workers who we will try to keep under 30 hours. Typically we don’t earn tax credits for this group of employees, but are aware now they need to average 24 hours if the (Retraining Tax) credit can be applied.”
  • “We used to cover 100% of health insurance but have now had to ask employees to contribute due to a large increase in premiums.”

What are your clients telling you?  How will their plans (or lack thereof!) affect their businesses and your relationships with them?

 

DaleSig

ACA and Net After Tax Credit Savings

We have heard a lot of concern about the new ACA healthcare program (also known as the Affordable Care Act, Obamacare, and other names) that starts in 2014. Many companies are considering big employee changes, such as reducing headcount, moving employees to part-time basis, and leveraging staffing firms/independent contractors. But be careful — these changes could negatively impact your clients’ tax credits and their net after tax savings.

We recently attended the Georgia Chamber of Commerce’s conference on the new Federal Healthcare program (click here for upcoming sessions). Watch out for these state tax credit variables:

  • Number of employees – different programs for small groups (49 or fewer employees) and large groups (50 or more employees), based on Full Time Equivalent (FTE) employees.
  • Employee – employees that work 30 hours/week or more must be offered coverage.
  • Unknowns – lots of unknowns such as affiliated service group impact, common law employee clarification, and play-or-pay penalties.
  • Federal Small Business Health Care Tax Credits –  may be available (company has 24 or fewer full-time employees and less than $50,000 in average employee wages, click here )

The following Georgia tax credits may apply to your clients’ employees:

  • Retraining Tax Credit – Each employee must average 24 hours/week or more and can include regular and leased employees
  • Job Tax Credit (including Opportunity Zones, Less Developed Census Tracts and other) – Each employee must average 35 hours/week or more and can include regular and leased employees

Your clients may think they are saving $ by making these changes, but their net after tax credit savings may not justify the changes! For example, if employees are reduced to less than 30 hours/week, the Job Tax Credit can’t be utilized, since the total head count for employees (35 hours/week) goes below the Job Tax Credit head count minimum threshold. Pretty confusing! So get on top of this now, and reach out to your clients to discuss these issues.

 

JimSig

State Tax Expenditures = $$ for Your Clients!

Finding the right credits and incentives for your clients is not easy. Especially if you have clients doing business in more than one state, it can be overwhelming to dig out all of the possible credits and incentives for them.  Tax information services such as CCH or others may only scratch the surface.  Often there are multiple departments, agencies, and organizations within each state that are responsible for credits and incentives.

We found one source that can help.  It’s the Institute on Taxation and Economic Policy (ITEP) page for “Tax Expenditure Reports” (access ithere) that lists reports from each state.

It’s funny how states call tax credits, exemptions, and incentives “expenditures.”  That’s one way to look at it.  But we say those expenditures are just another way you can help make $$ for your clients. 

Combine that with investigating the state economic development sites, and you will have a pretty good idea of which credits and incentives to pursue.  Your clients will appreciate your help in turning state “expenditures” into $$ for them!

 

DaleSig

Legislative Update

The Georgia Legislature is about to wrap up this year’s session, and there have been few changes that relate to business incentives or tax credits. But an interesting one is for the Opportunity Zones. SB 137makes changes that allow Opportunity Zones to be designated by the commissioners of the departments of Economic Development and Community Affairs — IF they agree! (click here for details)

DaleSig

Legislative Update

We’ve been checking our sources and can report no major changes are planned for Georgia’s corporate income tax credits.  We attended the recent 2013 Georgia Chamber “Eggs and Issues” breakfast, the Georgia Economic Developer’s Association Legislative Luncheon, and we discussed current legislation with representatives of the Georgia Department of Economic Development.

Bottom line:  No plans for significant changes to tax credits.  Some new credits will be proposed for development in historic downtown districts as well as some new wrinkles for angel investors and clean energy initiatives, but that’s it.

That being said — things can change during the legislative session. We will keep you posted.

 

DaleSig