Category: Hotel

The Great Shock of April 15th

This tax season I encountered a record number of business owners that were outright shocked to find out how much they owed for 2014 taxes. There are a few common questions I keep hearing.

#1 – How Did I End Up Owing Money?

There are four key areas that contributed this year to so many companies owing:

  1. Surprise Profitability
    The last several years have been decent if you’re lucky but dismal for most. This caused most companies to pull back on quarterly tax prepayments, or often eliminate them altogether.
  2. 2014 Was Better Than Expected
    There is no question that 2014 started an upswing that is continuing to get stronger with each passing quarter (even for those companies have yet to feel the impact of that upswing). Once income began to flow again, many businesses were forced to make capital investments that were years overdue. This means that although 2014 was in fact more profitable, it wasn’t “felt” by many Owners. Not all investments may be written off in the current year. Even if the bank account hasn’t recovered, the P&L sheets have and additionally the IRS considers many to be profitable and out of AMT. Even if the bank accounts don’t reflect the same.
  3. Tax Breaks Disappeared
    Without many major tax breaks that companies have not only come to enjoy, but have come to count on, many are finding themselves with unexpected increases to their tax liabilities.
  4. Tax Rates Increasing
    Tax rates have increased, for example; the recent Personal Limit increase to 40% and Capital Gains increasing from 15% – 25%.

#2 – Why Didn’t My CPA Warn Me?

Many owners are left wondering:

  • Did my CPA let me down?
  • Why didn’t they prepare me for this?

The reality is, your CPA only knows the information you provide to them And for most of us business Owners we don’t do our CPAs any favors. As Owners we know this, and if we are honest we’ll admit that we just don’t take the time necessary to discuss an overall tax strategy with our CPA.

Yesterday I spoke with one CPA that was completely unaware that their Client had purchased an additional building (over $2M in cost), and another CPA that upon delivery of our Cost Segregation report didn’t understand where we got our figures from only to find out the Client spent over $300K in renovations last year that they failed to tell the CPA about.

Most business Owners are guilty of … running their business. As business Owners, we make decisions today that are good for our company and good for our bottom line, with little to no regard of how it affects our tax strategy (and it usually wouldn’t cross our minds to call our CPA in the middle of summer to review something for next April).

#3 – What Can I Do About It?

Step #1 for most business Owners I’ve talked to is:

  • Pound their fist on the desk angrily while complaining about the government
  • When that ceases to provide relief move on to the below Step 2

Step #2 (True Step #1)

For some business Owners, you bit the bullet and made a payment yesterday, for others you either filed extensions or simply filed without making a payment and are going to wait for the dreaded IRS bills to arrive.

In either instance, the good news is that just because tax day has come and gone doesn’t mean your numbers are written in stone. There is over $200B in Federal Tax Incentives allocated to small and mid sized businesses to help offset your liability.

We’ve developed a simple online tool for business owners to check in 30 seconds if you qualify for any Federal Programs.

Click here to find out in 30 Seconds if you qualify for any Federal Tax Incentives.

 

Strategic Partnerships for Mutual Benefit

A strategic partnership is when two businesses join together for mutual benefit. The businesses would normally not be competitors but instead work cooperatively with a common goal in mind.

Strategic Partnerships allow businesses to gain a competitive advantage by mutually sharing of resources, markets, technologies, capital or people.

At Growth Management Group (GMG) we believe wholeheartedly in building Strategic Partnerships and actively reach out to industries and organizations that would benefit from such a partnership. In 2013 GMG entered into a strategic partnership with ELFA (Econo Lodges Franchisee Association).

ELFA’s goal is to “help each franchisee maximize the value of their property through networking and the sharing of creative ideas as well as time and money savings tips”. This strategic partnership supports ELFA’s goal by providing its members the opportunity to gain millions of dollars through specialized tax incentives.

At $240,000 the hotel and hospitality industry is currently number two for the largest average savings received per client with GMG. This is because nearly all business owners in the hotel industry own their building, and usually own multiple locations. With that basic qualification hotel owners substantially qualify for :

GMG offers ELFA members additional benefits including:

  • Free Consultation
  • 30% Discount on Study Fees

GMG believes in building and sustaining strategic partnerships to ensure the continued benefit for all involved. Hasu Patel, President of ELFA said, “The Econo Lodges that have worked with GMG so far are please with the results in savings. I encourage more Econo Lodges to reach out to Growth Management Group”.

If you would like to know more about the GMG’s ELFA partnership or Strategic Partnerships please call 888-705-5557.

Hotel Rebranding & Cost Segregation

The Hotel Industry is unique in that like a commercial product a hotel follows a definite life cycle. If a hotel owner does not keep this in mind, their facility can quickly become worn out and dated in comparison to their competition. To stay competitive, Owners must acknowledge that there will be constant new brand competition. A newer, swankier hotel that offers the latest amenities to its guests will quickly put an outdated hotel out of business. This fact leaves few options of staying competitive for a hotel owner. The most prominent option would be to rebrand. What does “rebranding” entail?

Rebranding can be a broad term ranging from a simple revamping of a logo but more often is a much larger undertaking with the ultimate goal of retaining guest loyalty and awareness. Rebranding is especially important today because of major social, environmental and technological changes that have taken place over the past five years. For example, five years ago wifi throughout a hotel was rare, flat screen televisions were a novelty, the expectation of a hot breakfast almost unheard of, and eco friendly was a word most people were unfamiliar with. All of those ideals have changed, and are now an expectation for most travelers. This new expectation has forced hotel brands to insist their franchises undertake multi million dollar rebranding to live up to their flag.

What does this mean for Hotel Owners?

There is a little known opportunity for Hotel Owners that would directly affect the rebranding of their organization. The opportunity is Specialized Tax Incentives, specifically:

Specialized tax credits are an essential fiduciary component when building, purchasing or renovating a hotel or motel.  These credits affect rebranding and the constant renovation of non-structural components of their building such as:

  • Carpeting / Flooring
  • Decorative Lighting
  • Cabinetry
  • Dedicated Electrical & Plumbing Systems
  • Power Generators
  • Security Systems
  • Wifi / Internet Cabling
  • Parking Lots
  • Curbs
  • Sidewalks
  • Landscaping
  • Fountains
  • And many more…

A Cost Segregation Study is an engineering based tax analysis in which these types of components are broken out and allocated to a shorter life class, depreciating them at an accelerated rate.  This means a building purchased, constructed or renovated since January 1, 1987 and costing in excess of $500,000 should have all improvements and renovations qualifying based on their individual completion dates.  So, every hotel having performed renovations through rebranding within that time frame have a potential benefit sitting on the take just waiting to be captured!

To determine if your facility could capture a benefit, simply contact Growth Management Group and ask for a basic calculation, performed at no charge.

The #1 Lie About Cost Segregation

Cost Segregation on Older Buildings?

It is impossible for me to calculate the number of calls I’ve had with building owners and CPAs on the subject of Cost Segregation. Working some numbers in my head (ok, on my calculator), the number is likely well over 10,000. Out of all those calls there is one particular item that continues to rear its ugly, uninformed head and I can no longer stay silent. I must respond… with vigor!

The “item” in question comes in the form of the following quote, which I’ve heard too often to count:

“You can only do Cost Segregation on a new building or new renovation.”

I have no idea where this rumor started. I hear it weekly and now I am blogging in rebuttal.

First, I will say an unequivocal “Yes”, it is beneficial to have a Cost Segregation study done when you purchase/construct/renovate a new building. In fact, anyone constructing or renovating a commercial property should have a study completed. However, the true power of Cost Segregation is displayed on buildings that are not new!

“But, you can only do Cost Segregation on a new building or new renovation”.

To officially rebut this statement, I will go straight to the source. The first sentence in the IRS Cost Segregation Audit Techniques Guide – Chapter 6.2 reads:

[box style=”2″][googlefont font=”Sanchez” size=”16px”]”A taxpayer may conduct a cost segregation study on used property and then recompute its depreciation deductions for prior years”. *[/googlefont][/box]

Not only “may” a taxpayer do this but over 75% of our projects are older properties. In the industry we call this the “Catch Up” method, and it can produce powerful results.

Here is an example:

Mr. Client acquires a commercial property for $3,500,000 five years ago and never completed a Cost Segregation Study.

Despite rumors to the contrary, Mr. Client recognizes he may now have an opportunity to benefit from a study (maybe he read this blog post).

Mr. Client hires an expert (GMG for example), who identifies 20% ($700,000) of components that should have been allocated to 5-year life instead of 39 years. Mr. Client jumps for joy when he realizes the IRS will allow him to “catch up” $700,000 of missed accelerated depreciation on his next tax return!

Why doesn’t every building owner and CPA know this?

The answer is simple; it is not their area of expertise. Although some building owners and CPAs have substantial experience with Cost Segregation, most do not. There is a dearth of true educators in this field, which unfortunately leads to much misinformation. These factors have caused countless thousands of building owners to miss out on this powerful tax savings strategy.

All is not lost!

If you own a building and have not had a Cost Segregation study performed, you have not missed the boat. Hundreds of thousands, or even millions, of dollars in tax savings may be available to you. Now that you are aware, let’s see how much you qualify for!  Contact Us today for more information.

* Full Link: http://www.irs.gov/Businesses/Cost-Segregation-ATG-Chapter-6-2-Change-in-Accounting-Method

Specialized Tax Incentives for the Hotel & Motel Industry

Hotel owners have three major tax incentives available to them, yet most are not taking advantage and consequently losing money. The main three programs that most in this industry are missing out on are:

1) Engineering-based Property Cost Allocation
2) Energy EPAct / 179d
3) Property Tax Reduction

Engineering-based Cost Allocation

Engineering-based cost allocation identifies opportunities for federal, and in some cases, state tax advantages to owners of commercial industrial real estate by accelerating the depreciation on their property. As an expert in this field, we have performed several hundred studies for large and small hotels across the U.S.

Taxpayers are typically correct in depreciating personal property such as equipment and furniture over five or seven years, but they often neglect available federal and state tax benefits by erroneously depreciating their entire investment in constructing or acquiring a building over 39 years. To do this correctly, one must hire an experienced engineer with a thorough understanding of construction finance.  The engineer will review all blueprints, architectural drawings, and electrical plans to isolate structural and mechanical components from those that are considered personal property in addition to identifying architectural and engineering fees that can be segregated.  The resulting cost allocation report will allow a taxpayer to:

  • Adjust the timing of deductions thus maximizing tax savings
  • Create a complete audit trail to resolve any IRS inquiries
  • Capture immediate retroactive savings on qualifying properties
  • Reduce real estate tax liabilities significantly

Energy EPAct / 179d

The second program often missed by those in this Industry is Energy EPAct / 179d. This is a federal deduction available for energy efficiency items placed in service after January 1, 2006. If you upgraded lighting, HVAC, or any part of the building envelope with energy efficient items you are likely eligible for a deduction of up to $1.80 per square foot.

We recently completed a project on a 65,000 square foot Holiday Inn Express and were able to assist in capturing $1.20 per square foot. This resulted in a $78,000 federal deduction for the owner of the property!

Property Tax Reduction

Probably the most frustrating bill that comes each year (or in some cases, twice each year) is the property tax bill. As of this writing, our studies indicate the average Hotel in the United States is being overcharged by 15% on their property taxes. There are many reasons Hotels are overcharged but mainly it is the result of improper assessments by the municipality. If you are a Hotel owner and are paying property taxes over $50,000 per year, you should have a review completed on your facility. Reductions in this area are direct to your bottom line!

 

If you have not had a thorough review on your facility, especially as it relates to the areas of Property Cost Allocation, Energy EPAct, and Property Tax Reduction, you are likely losing money that should remain in your pocket.

Building, Purchasing or Renovating a Hotel or Motel? Read This First!

If you haven’t heard, property Cost Allocation (aka Cost Segregation) is back with a vengeance!

A cost segregation study is an essential fiduciary component when building, purchasing or renovating a hotel or motel.  Hotel owners and operators who do not work with a qualified expert to perform a cost segregation analysis will fail to take advantage of significant tax benefits!

What Benefits?

Cost Segregation is an engineering based tax analysis in which certain non-structural components of a building are broken out and allocated to a shorter life class thus depreciating them at an accelerated rate.  This process reduces a taxpayer’s federal and state taxable income.

Examples of personal property for hotels would include:  carpeting, most other flooring, decorative lighting, cabinetry, dedicated electrical and plumbing systems, power generators, security systems, wifi/internet cabling, parking lots, curbs, sidewalks, landscaping, fountains and more.

All hotels and motels have substantial areas requiring daily maintenance and frequent updating due to use.  For example entries, lobbies and hallways are notorious for having carpeting and flooring commonly replaced every 3 to 4 years.  Most depreciation schedules will reflect all assets being depreciated over 39 years because this is the simplest way, however not the method that provides the most befit to the owner or operator nor is it tax compliant.

Cost Segregation fixes this problem because it applies MACRS to those short life assets thus accelerating the depreciation and reducing the owner or operators income tax burden.  What is the benefit?

  • New purchase or construction will result in increased cash flow in the first 6 years
  • Owned for 5 or more years qualifies for all unrealized depreciation carried forward into the current tax year
  • Purchased or constructed from January 1, 1987 – all improvements and renovations will qualify based on individual completion dates

In most cases the ROI for hotel and motel owners engaging in cost segregation is very high.  Typically they can see a 200% return on investment.  The standard fee that a hotel or motel owner can expect to see when engaging a cost segregation firm should be between ten and twenty thousand dollars per building.  The fee is dependent on several factors:  size of property, quality of construction, location, availability of construction documents, closing statements and more.

In summary, a Cost Segregation Study performed on a hotel or motel can provide significant immediate and long-term tax savings. Even properties purchased years ago can capture benefit.  Any hotel or motel whether purchased, constructed or renovated costing in excess of $500,000 should consider this service.

 

Flint Journal: Company Helping Find Stimulus Money, Tax Breaks for Local Businesses

FLINT, Michigan — A Flint company that helps local businesses qualify for government stimulus money is doing so well that it plans to hire about 100 employees in the next year.

Growth Management Group managing partner Ryan Maddock said the company, at G-3490 Miller Road, directs businesses to stimulus act provisions that have secured an average of $200,000 for establishments in Genesee County.

Rowe Professional Services Company is one company that has benefitted. Rowe Controller Douglas Kline said his company claimed tax breaks on its building, at 540 S. Saginaw St., provided through a cost segregation plan that “takes this big monster of a building and breaks it down into components.”

Depreciation on the building has been calculated and the company receives lower tax bills for years to come, Kline said. He could not provide specific figures on tax breaks for the $23 million project, calling the breaks “beneficial.”

Growth Management Group also found tax breaks during a research and development study for Rowe. Kline said tax law changes in 2009 allowed the company to refile its tax returns for 2006, 2007, 2008 and 2009, and it will do so for the 2010 tax year for some “very significant tax credits” on federal income tax returns.

The management group has worked “hand-in-hand” with Rowe’s accounting firm, and Kline said the business has been “really pleased with the results.”

Maddock said several of the breaks come through three main stimulus plans, including the Hiring Incentives to Restore Employment Act, which allows an employer to take a tax credit of up to $1,000 per worker hired between Feb. 3, 2010, and Jan. 1, 2011. The act also offers up to $250,000 for small businesses to write off equipment investments.

The Small Business Jobs Act has allowed more than 1 million companies to receive stimulus money, the biggest stimulus expansion since 1981, said Maddock, who pointed out that a stimulus act of some kind has been done every year in Michigan and nationwide since the early 1980s.

The SBJA, providing eight tax cuts and $30 billion in small-business lending, applies only to businesses that have $50 million or less in annual sales. Companies can apply for funds retroactively back to 2007.

A commercial property owner’s benefit is open to anyone who purchases a commercial property for $650,000 or up, or has done at least $250,000 in renovations within the past 20 years.

Lawrence Moon Funeral homes, with locations in Saginaw, Flint and Pontiac, has received such money. One of the misconceptions people have about the money, Maddock said, is that the benefits come “with a lot of strings attached.”

Business is going so well for Growth Management Group that it will move to the former Diplomat Pharmacy headquarters at the corner of Corunna and Elms roads in the next 45 days, Maddock said.

He said he hopes to add more than 100 Flint-area employees at the new location in the next 12 months, with positions in sales, customer service, law and engineering. Pay will range by position and experience.

Growth Management Group does charge for its services, between 10 and 33 percent of the benefit garnered. And while the funding is referred to as stimulus, Maddock said the laws are giving back to those who have invested in the community.

“This is a reward for work that you’ve already done,” Maddock said. “You are honestly getting some of your own money back.”

The above article was reposted from The Flint Journal.
Original Article By:  Roberto Acosta 


Who Qualifies for Tax Incentives and Stimulus Money?

We hear a lot about stimulus money these days. We hear who is getting it and what kind of positive things it is doing for the nation. Those stimulus dollars, however, should be working to benefit more local, small to mid-sized businesses. If you fall into this category, your money is likely going to someone else’s business; potentially your competition.

Wading through government forms, even on the simplest level, can be aggravating and time consuming. The idea of ‘free money’ from the government can also be a very scary prospect for skeptical investors and business owners. But there are people out there who have spent a great deal of time learning how these programs work to provide businesses with opportunities that can be extremely beneficial.

Ryan Maddock and Jeremy Harrison of Growth Management Group (GMG) lead a small but growing team of dedicated, positive and knowledgeable staff members that help business owners bridge the daunting gap between not having stimulus money and having it. These funds are not the same as grants which typically need to be used for ultra-specific purposes. Stimulus money can, in many cases, be used as discretionary funds. This frees up the business owner to use the funds as his or her vision sees fit whether it is for new software, equipment, tax offsets, etc. Manufacturing firms in the area, businesses in other states, hotels, restaurants such as Leo’s Coney Island and even Lawrence Moon Funeral Home have capitalized on stimulus money through GMG’s services.

There are currently four programs in full swing for a variety of businesses; manufacturing across the U.S. and in some cases Canada, commercial property owners who have purchased their property within the last twenty years, the HIRE act which pays employers that hire 25 new employees a year (that includes turnaround) and energy credits/energy incentives which is a program that will probably evolve further. Currently the Obama administration has set aside 60 billion dollars for renewable energy. While these programs do have other stipulations and guidelines, GMG has been successfully wading through paperwork for clients in 38 states. Ryan pointed out that stimulus funds have been around since the 1980’s. These programs usually morph into new programs over time and they’re not going anywhere.

If you’re wondering why you’ve not heard much about the eligibility for these funds that is simple to explain; the federal government isn’t always that great at advertising and marketing. As a result, ninety-two percent of companies that qualified for these funds last year didn’t access them and the eight percent that did, were larger companies who tend to have an easier time accessing these sorts of programs

Staying on top of the changes in federal programs is crucial to the success of the service offered by GMG. Fees are based on a percentage of funds obtained, not a flat or hourly rate which business owners have to come out of pocket for. And in many instances, the funds can be applied retroactively from as far back as 2006.

Worried about how your CPA feels about these “too good to be true” stimulus dollars? GMG works with local CPA firms so they understand the hesitancy that comes along with these types of government programs and are able to alleviate those fears. Do you feel a sense of malaise when it comes to paying taxes? There’s good news for you too. Since stimulus funds are made up of tax dollars, this might be your chance to cash in on all the money you’ve doled out over the years to upgrade your business.

See Full Article as Featured in Downtown Revival Magazine.   Click Here

Michigan Company Helps Find Millions in Tax Breaks for Small and Mid Sized Companies

Jeremy Harrison of Growth Management Group interviewed by Michigan Business Magazine about helping small and mid sized businesses find tax breaks and stimulus money.

——–

For many businesspeople, the word “stimulus” might as well be a four-letter word.  For Flint-based Growth Management Group, tax incentives are no dirty word, but rather spell opportunities for businesses to find federal and state incentives to help their bottom lines.

The company seeks out the tax incentives, energy savings and hiring incentives that businesses and many certified public accountants miss during their tax preparation. The company began in the mid 2000s as a lean consulting firm, helping manufacturers remain competitive. By chasing incentives that manufacturers left on the table, GMG stumbled upon a business opportunity as manufacturers in the state were battered by the economic downturn. Sales Manager Jeremy Harrison took time to speak with MiBiz about the 25-person firm and its role turning over the rocks in companies’ books looking for the untapped tax incentives there.

 

MiBiz: How much is out there for companies in terms of untapped incentives?

Harrison: We target the small to medium size business. The state and federal programs are called stimulus incentives when really they are tax based.  If someone is getting ready to write a check (for taxes), they should be looking at every single program to help offset them. The areas of the programs are anywhere from commercial property owners to manufacturing research and development and payroll, such as the HIRE act. That is just part of the hiring incentives out there. There are hundreds of incentives that vary by state and by some municipalities.  For our average client, we can save around $200,000. For some people, it is significant. For others it is a drop in the bucket. We don’t go after the GMs or Fords of the world — they’ve got their own teams of lawyers and accountants looking for these incentives. For a client who may have paid a couple thousand in taxes over the last couple of years, they’re excited about getting that back.

 

MiBiz: What’s preventing companies from tapping these programs themselves?

Harrison: The number one roadblock is that your CPA is not your consultant in these areas. If you have a large firm, they may have an entire division devoted to finding tax incentives. We have 200 attorneys (in our network) and can tap them when needed.

A normal CPA is already buried up to their eyeballs with paperwork for their clients. People assume that their CPAs have a grasp of all the incentives that are out there, (but) almost every CPA says they know the programs are out there. They have been to a seminar and know about them, but are they taking it to the next level and able to file all the necessary paperwork? Standard CPAs don’t have time to dig into those areas without some help. We help the CPAs consult with their clients.

We don’t want Michigan businesses to lose money because of the disconnect that is out there.

MiBiz: The stimulus was a major campaign issue, with many business interests coming out in opposition to the ARRA. Are you encountering reluctance to take part?

Harrison: We hear that “we don’t want any of that Obama money.” There has been stimulus money out there as long as there has been a United States. Nobody paid attention until there was the economic downturn. Until the government came in with TARP and ARRA, no one paid much attention.

Many of these incentives came in the tax reforms of 1986. A lot happened in both Bush Administrations. Manufacturing incentives have been around almost as long as there have been manufacturers. The government makes (these incentives) extremely difficult to get. We have the expertise. That is not money that is out in the middle of nowhere. We are lowering the amount of money you are paying in.

We do have a challenge that customers have to know that there are incentives for them. Mileage is a deduction on a tax return. Now imagine if (the government) said that you have to have a 500-page technical report for that deduction — that is what we’re talking about.

MiBiz: Where do you see opportunities going forward?

Harrison: The manufacturing credits sunset at the end of the year. It is annually updated and used as a political bargaining chip. They never sunset, but it has always been threatened. President Obama himself said that he wants to make these credits permanent. He said that, but it hasn’t happened.

I see the hiring incentives as becoming increasingly important. With the economy and unemployment rate where it is, the government really wants to be seen helping improve the employment picture.

On the energy side, everyone under the sun knows energy is a hot button issue. Government is pushing a number of mandates about renewable energy, federal and state incentives are being talked about at various levels. We truly feel that energy will be at the top of the chart of things that we are going after for clients.


Featured in MiBiz Magazine
By Nathan Peck | MiBiz 

For Full Article Click Here