Tag: R&D

The Permanence of the R&D Tax Credit, a Reality?

The R&D Tax Credit has been in existence for the past 33 years, having been extended by Congress 15 times since it was created in 1981. On Wednesday, May 20th the U.S. House of Representatives passed a bill known as the “American Research and Competitiveness Act of 2015” or H.R. 880, to make the federal research and development tax credit permanent. The bill passed with a 274-145 vote, indicating that the bill has support from both parties however it still needs to make it through the Senate and many hurdles await the bill there. Republicans hold the majority in the Senate so the bill seems favorable to pass but President Obama has threatened to veto.

The threat of veto is based on the belief by the White House that the credits estimated 10 year cost of $180 million in lost tax revenue should be offset elsewhere. It is hard to anticipate how President Obama will act as he has expressed both positive and negative remarks in regard to the bill. Whether President Obama chooses to veto the bill or not, Congress could override the veto by a two-thirds supermajority vote of both the House and Senate however, a supermajority vote is not easily obtained.

Looking past the technicalities of governmental red tape, there is cause to be optimistic because this is now the second year in a row that a stand alone proposal to make the R&D credit permanent has been not only been seriously considered but successfully voted upon in at least one of the two houses. Additionally, the bill is receiving support from both parties which is a necessity for it to succeed. These steps of forward momentum lead us to believe that even if it is not this year, the the outlook of the R&D Tax Credit becoming a permanent part of the U.S. tax code is very favorable.

Making the R&D Tax Credit permanent would boost the confidence of American businesses to invest in the development of new technologies leading to the creation of quality jobs. The bill would also make the credit easier for small businesses to obtain by allowing them to use it to offset tax liability, including the alternative minimum tax. Many believe as Texas Rep. Kevin Brady the writer of this bill does that this bill needs to be passed and become law so that the United States can remain competitive in innovation and within the world wide economic marketplace.

What the Last 5 Presidencies Have In Common and How It Affects Every Manufacturer In America

Believe it or not, there is at least one thing that the last five Presidential Administrations have unilaterally supported, and we can feel quite certain the next will as well.

There is a little known tax credit that is part of Section 41 of the Internal Revenue Code, allowing manufacturers to reclaim a small portion of their annual payroll simply by performing activities manufacturing companies are already doing as part of daily operations.

This credit may be the only thing both sides of the aisle can actually agree on.   It has bipartisan support in both houses, backing of the Obama Administration, and has been renewed by every single Presidential Administration over the last 32 years.  How can there be such a disconnect between what may be the only thing the last five presidencies have in common?

A lot of the confusion is in the name.  Many manufacturers don’t believe they do “R&D” because they don’t have a traditional R&D department.  The IRS definition of R&D is quite different than yours or mine.    It often includes activities such as:

  • Manufacturing
  • Fabrication
  • Engineering
  • New Product & Process Development
  • Developing New Concepts or Technologies
  • Design – Layout, Schematics, AutoCAD
  • Prototyping or Modeling
  • Testing / Quality Assurance:  ISA 900X, UL, Sigma Six, etc.
  • Integration of new machinery (CNC, SLA, SLE, etc.) into existing processing
  • Software Development or Improvement
  • Automating or Streamlining Internal Processes
  • Developing Tools, Molds, Dies
  • Developing or Applying for Patents

Just to name a few…….

Only the folks in Washington DC could take unilateral support and turn it into unilateral confusion.

Since 2004 Growth Management Group has been educating and assisting Manufacturers and other Commercial Property Owners on their rights to programs buried deep within the tax code.   To date we’ve assisted small and mid sized companies discover over $300M in benefit.   Contact us for a comprehensive review.

$14B Available in Manufacturing Tax Credits

$14B Available in Manufacturing Tax Credits

There is a new bill that would put $14B in tax credits back into the pockets of manufacturers.  What makes this bill unique amongst its predecessors is that manufacturers don’t have to wait around for this one to pass through its bureaucratic channels (or stall out in a constant state of delay and confusion).

Manufacturers can take advantage of this program before it passes.  This is because a largely unknown version of the program already exists called the R&D Tax Credit.  A temporary version is in place through the end of 2013 as part of the American Taxpayer Relief Act of 2012.  So, manufacturers can actually begin receiving funds this year based on previous years activities.

5 Reasons Manufacturers are not taking advantage of the current version of this credit:

  • They don’t understand the IRS definition of R&D (see article:  R&D I don’t think we do that!)
  • They believe their companies are too small
  • They believe the benefit won’t outweigh the work
  • They believe they have to change the way they operate in order to qualify
  • They believe that the credit is not being renewed

Not only will this credit most likely be renewed, but congress has continually made it easier to qualify and expanded the eligibility to include not only the Fortune 1000 but also small to mid sized firms who can utilize the credit to significantly affect their bottom line.

When working with manufacturers we ask two questions to determine qualification:

  1. Are you expecting to be profitable this year, or were you profitable in any of the last 4 years?
  2. Is your annual payroll for any of these years in excess of $1 million?

Since 2004 Growth Management Group has been educating and assisting Manufacturers and other Commercial Property Owners on their rights to programs buried deep within the tax code.  To date, we’ve assisted small and mid sized companies discover over $300M in benefit.  Contact us for a comprehensive review.

 

 

For A/E/C Companies, Finding New Profit Centers is a Must

“Profit Center”, it’s the new buzzword being tossed around like a football across corporate America. It sure sounds good, doesn’t it?  Of course it does, who doesn’t like profits? Unfortunately saying the words “Profit Center” and actually having one are two different ball games.

To put it simply, a Profit Center is defined as, “The branch or division of a company that creates profits individually and separately from the main organization.”

There are essentially two methods of creating a profit center for your organization. First, you can offer a new service that creates a profitable revenue stream.  Second, a cost center can turn into a profit center by selling those administrative “cost of doing business” services to other firms. As Management Professor William E. Halal so eloquently stated to USA Today Magazine, “When a business firm becomes a corporate community of entrepreneurs who buy, sell and launch new products and services internally as well as externally, it gains the same creative interplay that makes market economies so advantageous.”

For the purpose of this article we will focus on creating a new profit center rather than converting a cost center into a profit center.  The easiest way to create a new profit center is to add service offerings that align with an existing client base.

For example, CPAs, A/E/C firms, and even most Contractors have an existing base of business clients and referral partners who own commercial property. Are they maximizing on the plethora of accumulated property data, let alone the hard-earned relationships they’ve developed? These are not cold leads or warm contacts but EXISTING CLIENTS who have already paid money for their services.  Failing to monetize an existing client base with value-added services is just bad business.

So, how do I create a new service offering and market it to my existing client base?  The easiest way to accomplish this is to partner with an organization that already has a profitable service on the market that would be a benefit to your clients.  Once a partnership is established, the next step is to effectively spread the word to your existing client base. Communicate how your new opportunities will benefit them and move them through the sales cycle. If you have done it right, your existing clients will thank you for your high level of client service. This truly becomes a “win-win-win” proposition!

Growth Management Group, LLC (GMG) provides custom services to business owners across the nation to increase sales, reduce cost, and procure specialized tax incentives. GMG also offers strategic partnership to firms looking to utilize their existing client relationships to generate new revenue streams.

For additional information contact: Growth Management Group, LLC (888) 705-5557, www.gmgsavings.com.

 

Senate Finance Committee Votes to Pass Landmark Bill Extending over $200 Billion in Tax Incentives

On August 2, 2012, Congress voiced the sentiment of the American business owner by introducing major tax incentive legislation. The Family and Business Tax Cut Certainty Act of 2012 is bipartisan legislation extending dozens of tax- cuts that have expired or are scheduled to expire at the end of this year. This is the best news possible for millions of companies across the nation.

Highlights of the Bill

  • Renewal of the Section 41 Research & Development Tax Credit
  • Reinstatement of Hiring Incentives / Worker Opportunity Tax Credits
  • Updated Alternative Minimum Tax (AMT) relief
  • Property Cost Allocation Extensions – Qualified Leasehold Improvements
  • Updated Alternative Minimum Tax (AMT) relief
  • Energy Incentives

Research and Development Credit

The bill extends for two years, through 2013, the research tax credit equal to 20 percent of the amount by which a taxpayer’s qualified research expenses for a taxable year exceed its base amount for that year and provides an alternative simplified credit of 14 percent. The bill also modifies rules for taxpayers under common control and rules for computing the credit when a portion of a trade or business changes hands. Based on preliminary estimates, a two-year extension of this proposal is estimated to cost $14.3 billion over ten years.

Work opportunity tax credit

This bill extends for two years, through 2013, the provision that allows businesses to claim a work opportunity tax credit equal to 40 percent of the first $6,000 of wages paid to new hires of one of eight targeted groups. These groups include members of families receiving benefits under the Temporary Assistance to Needy Families (TANF) program, qualified ex-felons, designated community residents, vocational rehabilitation referrals, qualified summer youth employees, qualified food and nutrition recipients, qualified SSI recipients, and long-term family assistance recipients.

Empowerment zone tax incentives

The bill extends for two years the designation of certain economically depressed census tracts as Empowerment Zones. Businesses and individual residents within Empowerment Zones are eligible for special tax incentives.

Cost Allocation

15-year straight-line cost recovery for qualified leasehold improvements, qualified restaurant buildings and improvements, and qualified retail improvements. The bill extends for two years, through 2013, the temporary 15-year cost recovery period for certain leasehold, restaurant and retail improvements, and new restaurant buildings, which are placed in service before January 1, 2014. The extension is effective for qualified property placed in service after December 31, 2011.

Extend AMT relief to 2013

Currently, a taxpayer receives an exemption of $33,750 (individuals) and $45,000 (married filing jointly) under the AMT. Current law also does not allow nonrefundable personal credits against the AMT. The proposal increases the exemption amounts for 2012 to $50,600 (individuals) and $78,750 (married filing jointly). The modified proposal would also increase the exemption amounts for 2013 to $51,150 (individuals) and $79,850 (married filing jointly). The proposal also allows the nonrefundable personal credits against the AMT in both 2012 and 2013. The proposal is effective for taxable years beginning after December 31, 2011. Based on preliminary estimates, a two- year extension of this proposal is estimated to cost $132.2 billion over ten years.

Energy Investment Credit 

Under current law, facilities that produce electricity from solar facilities are eligible to take a thirty percent (30%) investment tax credit in the year that the facility is placed-in-service. Facilities that produce electricity from wind, closed-loop biomass, open-loop biomass, geothermal, small irrigation, hydropower, landfill gas, waste-to-energy, and marine renewable facilities are eligible for a production tax credit for electricity produced over a ten-year period. The investment tax credit is better for small and offshore wind facilities. The bill would allow facilities qualifying for the production tax credit to elect to take the investment tax credit in lieu of the production tax credit for facilities that begin construction by the end of 2013.

What does it all mean?

If you own a business or commercial real estate, it is time to review what credits are available to you. The Senate has enacted significant legislation that is geared toward providing incentives to U.S. based businesses. If you fall into this category, it is time to investigate this new bill in detail.

 

“R&D, I don’t think we do that!”

If, when you hear R&D, you think of people in lab coats tinkering with chemicals, ultra high tech industries and Fortune 500 companies, you are not alone.  However, things have changed!

In 2001 the IRS changed the definition of R&D and the changes were so broad that it virtually encompasses all manufacturing or technology organization in some way.

Why is this?  It’s because, by and large what do manufacturing companies do?  They design new products, improve existing products, come up with new processes, or make improvements to existing processes used to make products.  Most of these organizations don’t have an R&D department and probably don’t consider that what they are doing is “R&D”.  They are making these improvements and changes because they MUST stay competitive and yet, as the government sees it, “R&D” is exactly what they are doing.

Here are some of the everyday activities that would qualify for the credit:

  • Designing the process to fabricate the metal to reduce shrinkage and increase its quality
  • Programming CNC machines
  • 3D CAD Engineering with programs like SolidWorks
  • Developing and testing of prototypes
  • Quality assurance – First-piece quality inspections
  • Designing and developing of specialty tooling and fixtures
  • Considering alternative metals to develop the product
  • Considering different metal thicknesses
  • Developing engineering drawings
  • Developing weld procedures
  • Bending of metal (e.g. sheet metal) has to consider the stressing and stretching
  • Considering strength of final product for application (meets specifications)

So, the next obvious question is…”How do We get some money?”  The IRS allows companies to go back three open tax years to take advantage of the credits they may have missed.  (Nice of them isn’t it?)  Just 120 days after submitting the amended returns, you can get cash in your pocket.  Additionally, you can take credits for current and future years if you continue to perform activities that qualify for this credit.

To find out if your organization would qualify ask yourself a few questions:

  1. Are you expecting to be profitable this year, or were you profitable in any of the last 4 years?
  2. Is your average annual payroll for these years in excess of $1 million?
  3. Is your company structure a C Corp, or an S Corp/Partnership?

If you answered yes to all of these items then you definitely need to have an R&D Tax Consulting firm take a look at your organization.    You could potentially have a five-figure credit, even higher credits are available for organizations with higher payrolls.

Local Flint Businesses Teaming Up To Stimulate Flint Economy

Flint based organization, Growth Management Group, LLC (GMG) is proud to announce they are teaming with Insight Institute of Neurosurgery and Neuroscience (IINN) to perform a stimulus review allowing both organizations to continue moving towards their combined goal of transforming Flint’s economic state.

GMG’s Total Savings Review will focus on stimulus incentives in the areas of Research & Development, Commercial Property and Hiring. Although it is too early to determine final benefits, GMG anticipates procuring IINN a NET tax benefit of over $1,500,000 over the next five years.

GMG National Director of Sales, Jeremy Harrison states, “We are extremely excited to partner with Amer and the entire IINN team. Procuring these incentive and savings opportunities, especially for local firms is why we are in business. We look forward to a long term relationship that will not only provide a great business partnership but will help facilitate the economic recovery of Genesee County.”

GMG is a Flint-based full service training, development and cost savings consulting firm. Their vision is to stimulate local economies by providing an extensive array of products, services and strategies that help people and businesses fulfill their potential. GMG recently announced their move to a new national headquarters, taking over the recently vacated Diplomat Pharmacy headquarters at Elms and Corunna Roads in Flint Township. With this move the company plans to add up to 100 new employment positions for Genesee County residents.

IINN plans to invest $18 million over the next 10 years in expansion and create an up to 120 additional jobs over the next 5 years. IINN has teamed with Diplomat Specialty Pharmacy to expand the Great Lakes Tech Center – former home to GM Headquarters and create more than 1,000 jobs over the next five years.

GMG and IINN look forward to helping restore the local economic climate and encourage local businesses to pursue all available opportunities to recover incentive dollars.

More information regarding GMG can be found online at www.gmgsavings.com or by calling 888-705-5557. To learn more about IINN, please visit www.iinn.com.