Learn the latest tax strategies as well as happenings at ICS Tax, LLC

tax-alert

A new study published by a leading regional economic modeling and policy analysis firm published a report on of the economic effects of extending the §179D Energy Efficient Commercial Buildings Tax Deduction. The results are astounding. The analysis shows that in addition to advancing the goal of energy independence, the §179D Deduction is an engine of economic and employment growth. Specifically, the study finds that:

  • Strengthening and extending the §179D Energy-Efficiency Commercial Buildings Deduction will create jobs and expand the nation’s economy. These benefits would be compounded by increasing the dollar value of the deduction in accordance with several Congressional and administration proposals.
  • These enhancements to §179D would support up to 76,529 jobs annually and contribute annually almost $7.4 billion to national gross domestic product (“GDP”), as well as over $5.7 billion towards national personal income.
  • Expanding the availability of the deduction to nonprofit organizations and tribal governments, while increasing the applicable energy efficiency standards, also provide clear positive impacts to the economy.

A background on this incentive as well as recent legislation to extend §179D beyond 2016 can be viewed in the ICS Tax Alert titled “Promising Future for the §179D Energy Efficient Commercial Building Deduction and the §45L Energy Efficient Home Credit”.

ICS Tax, LLC is a leader in providing energy modeling and certifications for the §179D Energy Efficient Commercial Buildings Tax Deduction. For more information on this valuable tax incentive or other related tax planning strategies, please contact an ICS Tax representative.

Author: Alexander Bagne, JD, CPA, MBA, CCSP. Contributing Authors: Mike Piper, LEED AP and Kevin Johnson, LEED AP

ABOUT ICS TAX, LLC

ICS Tax, LLC (ICS) is a consulting firm providing innovative tax planning strategies. ICS collaborates with taxpayers and their tax professionals to identify credits and incentives that reduce tax liabilities and increase profitability. ICS provides nationwide service through its Twin Cities headquarters as well as its offices located in Northeast Ohio, on the Pacific Coast, in the Tristate area, and the Dakotas.

ICS Tax, LLC is pleased to announce a strategic partnership with the Construction Industry CPAs/Consultants Association (CICPAC); a national association of accounting firms serving over 11,000 construction companies. Founded in 1989, CICPAC has grown from an alliance of six firms into a nation-wide organization with over 70 member firms. This strategic partnership allows various training and networking opportunities for ICS Tax with the goal of increasing the firm’s presence within the industry.

Our sister company, ICS Consulting, Inc., has vast experience and knowledge within the construction industry, providing customized planning and project-related consulting, management and owner representation services. ICS Consulting’s team, with over 100 years of combined experience, provides our ICS Tax team members with a current perspective on issues that construction professionals face.

ICS Tax serves clients nationwide with multiple tax planning strategies including Energy Efficiency Incentives (§179D, §45L), Comprehensive Fixed Asset Reviews, Research & Development Tax Credits, Cost Segregation Studies, IC-DISC Export Incentives, Like-Kind Exchanges (1031), Accounting Methods and Utility Rebates. Our experienced and knowledgeable tax team brings decades of experience within the industry and has previously worked with all Big Four accounting firms including Deloitte, PricewaterhouseCoopers, Ernst & Young and KPMG. With corporate clients including Mead Johnson Nutrition, Lifetime Fitness and LED Supply Co., ICS is committed to advocating for our clients in identifying all potential saving opportunities through strategic tax planning.

ICS Tax President Alex Bagne stated that “having current experience in the construction industry best positions our firm to provide strategic tax planning to taxpayers and their CPAs within the industry. Our strategic partnership with CICPAC elevates our ability to promote this expertise to a greater audience.” Alex, with over 17 years of consulting experience, has saved his clients millions in tax dollars through specializing in various tax planning strategies. The unique collaboration between ICS Consulting and ICS Tax proves to be a key differentiator within the market and will prove to be a valuable asset for this partnership with CICPAC.

ICS Tax is looking forward to being a part of this established and reputable organization, leveraging our existing clients and CICPAC’s training and networking opportunities to further our presence and relationships within the construction industry. Find more about CICPAC here.

ABOUT ICS TAX, LLC

ICS Tax, LLC (ICS) is a consulting firm providing innovative tax planning strategies. ICS collaborates with taxpayers and their tax professionals to identify credits and incentives that reduce tax liabilities and increase profitability. ICS, based in Minneapolis, Minnesota, provides nationwide service with offices in Los Angeles, New York, Ohio and the Dakotas.

tax-alert

On May 4, 2017, Senator Ron Wyden along with 21 other Senators introduced The Clean Energy for America Act in the Senate. The bill contains several tax incentives that foster both energy efficiency as well as renewable energy, including modifications and extensions for the §179D Energy Efficient Commercial Building Deduction and the §45L Energy Efficient Home Credit.

CURRENT LAW

The §179D Energy Efficient Commercial Building Deduction is a Federal tax incentive promoting energy efficient buildings for both new and existing structures. Further, architects, engineers, contractors, environmental consultants or energy services providers may also be eligible for the incentive on public projects. This incentive is often referred to as the EPAct Deduction after the Energy Policy Act of 2005 that created it, or as the §179D Deduction, which relates to its tax code section. Commercial building owners can take a Federal tax deduction of up to $1.80 per square foot of the building’s floor area if they install certain property (e.g., efficient lights or HVAC systems, added wall or roof insulation, etc.) that reduces energy and power costs. The §179D Deduction is allowed for both new construction and renovations completed between 2006 through 2016.

The §45L Energy Efficient Home Credit, a companion tax incentive to §179D, allows eligible residential developers to claim a $2,000 tax credit for each newly constructed or substantially reconstructed qualifying residence. Examples of housing for which this credit applies include single family homes, apartments, condominiums, assisted living homes, and student housing. The residence or building must be three stories or less in height. This incentive applies to residences sold or leased before December 31, 2016.

SUMMARY OF CHANGES

Currently, §179D covers both new construction as well as renovations of existing buildings. Under the proposed legislation §179D would apply to ground-up construction whereas new §179F would apply to retrofitted commercial buildings. Section 179D under the proposed bill creates a performance-based incentive for increased energy conservation. New commercial buildings that are at least 25 percent more efficient than ASHRAE 90.1-2016 standards can receive a $1.00 per square foot tax deduction, which escalates with larger efficiency gains up to a maximum of $4.75 per square foot.

Under §179F, retrofitted commercial buildings can qualify for a $1.25 per square foot deduction for a 20 percent reduction in energy use with greater energy reductions qualifying for larger incentives of up to a maximum of $9.25 per square foot. The energy reduction from retrofits is verified by third-party modelers who are certified by the Treasury Department and the Department of Energy. The reduction is based on energy use prior to the retrofits as compared to energy use modeled after the retrofits are placed in service. Both §179D and §179F would be available through the end of 2018.

Currently, the EPAct Deduction can be allocated to architects, engineers, contractors, environmental consultants or energy services providers for public projects only, as public agencies pay no Federal income tax. The proposed rule expands upon those who can allocated the §179D Deduction to include §501(c) organizations, such as non-profit hospitals and educational facilities.

For §45L, the bill creates performance-based incentives for new and existing homes. The credits are based on the level of whole-home energy reduction. For new residences, buildings that are at least 25 percent more efficient than the 2015 International Energy Conservation Code baseline receive a $1,500 tax credit. More efficient homes receive a larger credit up to of $3,000 per unit. The credit is available for the contractor who builds and sells or leases the residence.

If these changes are not accepted, The Clean Energy for America Act also has provisions for extending §179D and §45L through December 31, 2018 without further modification. For the full text of the bill, please click below.

HOW WE CAN HELP

Out of all the buildings and residences that qualify, few taxpayers are taking the steps necessary to claim the available incentives for them. While currently expired, these incentives often provide current benefit on projects from 2016 and prior. ICS can provide a free analysis to determine if these tax strategies are feasible, and if so, provide the necessary third-party certifications and other assistance to benefit from these valuable incentives. For a free consultation, please contact an ICS Tax representative.

ABOUT ICS TAX, LLC

ICS Tax, LLC (ICS) is a consulting firm providing innovative tax planning strategies. ICS collaborates with taxpayers and their tax professionals to identify credits and incentives that reduce tax liabilities and increase profitability. ICS provides nationwide service through its Twin Cities headquarters as well as its offices located in Northeast Ohio, on the Pacific Coast, in the Tristate area, and the Dakotas.

Author: Alexander Bagne, JD, CPA, MBA, CCSP. Contributing Authors: Mike Piper, LEED AP and Kevin Johnson, LEED AP

ICS Tax is proud to be an exhibitor at the 34th Annual President’s Seminar for the Tax Executives Institute. Come visit with the ICS Tax team and learn about specific tax-planning strategies at the MPLS Convention Center today and tomorrow. See the full seminar schedule here.

ICS Tax, LLC will be at Groundbreak in Austin, Texas from March 29-31. Stop by kiosk #8 and visit with ICS Tax team members. Our own Lacey Robb and Alex Bagne will be presenting on tax planning strategies within the construction industry. Additional conference information can be found here.

ICS Tax, LLC (ICS) welcomes Steve Ruda as Project Manager and Business Development Specialists. Steve earned a BSBA in Accounting from the University of Sioux Falls. Steve will assist on every facet of providing specializing tax consulting services, from the initial sale through project completion. Prior to joining ICS Tax, Steve spent six years working for McGladrey, LLP as a tax supervisor as well as the local market cost segregation lead. By possessing an extensive knowledge of both tax compliance and specialized planning ideas, Steve has a unique ability to quickly identify suitable candidates for a tax strategy, implement the idea, and deliver final results. Steve’s passion for serving his clients and fostering relationships allows him to provide outstanding service while exceeding expectations.

Steve resides in Sioux falls with his two kids, Mathew and Gracie. He is engaged to Lindsay Hup with a fall wedding date. He enjoys officiating sports and is both an avid hunter and fisherman. Steve will primarily be servicing both the Midwest and Rocky Mountain regions.

In its commitment to matching top talent to its clients, ICS Tax, LLC (ICS) welcomes Lacey Robb as the Pacific Coast Practice Leader. Lacey will operate out of a new ICS office located in Los Angeles, California.

Lacey has over 14 years of tax and legal experience, which includes the Big Four accounting firms KPMG and EY as well as various law firms. Lacey specializes in the R&D credit and numerous other tax planning ideas. Her background in corporate taxation, M&A, SALT and complex tax issues allows her to provide a holistic approach for servicing her clients.

Lacey received her B.A. in Psychology and Juris Doctorate from the University of North Dakota, as well as an LLM in Taxation from the University of Denver. Additionally, she has taken the core accounting classes from North Dakota State University. In her free time, she is an avid scuba diver and participates in annual marathons benefiting cancer research.

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NOTICE 2017-6: GOOD NEWS FOR TAXPAYERS WANTING TO BENEFIT FROM THE TANGIBLE PROPERTY REGULATIONS

BACKGROUND

The IRS released Notice 2017-6, which better allows taxpayers to take advantage of the Tangible Property Regulations (TPRs). Taxpayers generally are not permitted to make an automatic method change if they made or requested a change for the same item during any of the five tax years ending with the year of change. This effectively prevents taxpayers from using the automatic change procedures to change the treatment of the same item more than once within a five-year period.

THE WAIVER

Rev. Proc. 2016‐29 waived the “5-year rule” for implementing TPR changes for any tax year beginning before January 1, 2016. Notice 2017-6 extends this waiver, which now applies to any tax year beginning before Jan. 1, 2017, effectively providing an additional year for taxpayers to comply with the TPRs. The applicable sections and Designated Change Numbers (DCNs) that Notice 2017-6 applies are as follows:

  • Section 6.14, relating to a change from a permissible to another permissible method of accounting for depreciation of MACRS property under § 1.168(i)-1, § 1.168(i)-7, and § 1.168(i)-8 (DCN) 7);
  • Section 6.15, relating to a change in method of accounting for dispositions of a building or structural component under § 1.168(i)-8 (DCN 205);
  • Section 6.16, relating to a change in method of accounting for dispositions of tangible depreciable assets (other than a building or its structural components) under § 1.168(i)-8 (DCN 206);
  • Section 6.17, relating to a change in method of accounting for dispositions of tangible depreciable assets in a general asset account under § 1.168(i)-1 (DCN 207); and
  • Section 11.08, relating to changes in methods of accounting for tangible property under the final tangible property regulations (DCN 184).

Click here to view Notice 2017-6.

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HOW CAN ICS TAX HELP?

ICS Tax has nationally-renowned experts in the Tangible Property Regulations that can assist with compliance-related issues as well as take advantage of several taxpayer-friendly provisions under the TPRs. For a free consultation, please contact an ICS Tax representative.

Author: Alexander Bagne, JD, CPA, MBA, CCSP. Contributing Author: Mike Piper, LEED AP

The First National Bank Building sign is officially lit after being dark for 10 months. ICS Tax is proud to be a part of this exciting project in Downtown St. Paul. See the Star Tribune article here for more information.

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tax-alert

Corporate Tax Planning in a pre-Trump Regime

 

For many businesses and business owners, the outcome of the 2016 election could be quite rewarding. President-elect Donald Trump proposed $6.2 trillion in tax cuts over the next decade. While it remains uncertain as to whether Trump can get such large tax cuts through Congress, even one controlled by the GOP, Republicans remain committed to overhauling the U.S. tax system in a manner that they think will help grow the economy. Overall, some sort of tax reduction seems inevitable.

In years where taxpayers expect tax rates to decrease in future tax years, the standard advice is to accelerate deductions into the current year while defer income until future years. Examples include making major equipment purchases in the current tax years while delaying invoicing of clients until the next tax year. With a tax rate differential, these planning techniques yield permanent tax savings. At ICS Tax, LLC, we are very experienced with tax planning opportunities to accelerate deductions. While the benefits from the time value of money are substantial, permanent tax savings make these planning opportunities even more valuable. Below are some ideas:

  • Cost Segregation/Individual Asset Review – Commercial buildings are depreciated slowly over 39 years. A cost segregation study carves out components from buildings that qualify for more rapid depreciation, such as land improvements and personal property. Likewise, individual assets are often inappropriately depreciated building assets, such as process-related plumbing, electrical, and ventilation systems. This study identifies assets qualifying for more rapid depreciation.
  • §179D Energy Efficient Commercial Building Deduction – Taxpayers who construct new buildings or make improvements to existing ones can take an immediate deduction of up to $1.80/SF for investments in efficient lighting systems, HVAC and hot water systems, and the building envelope.
  • Capital to Expense Studies – The new Tangible Property Regulations allow taxpayers to retroactively review expenditures that were capitalized but qualify as repair and maintenance expenses, such as replacing roof membranes, resealing parking lots, and replacing of HVAC components.
  • Retirement Studies/Partial Dispositions – Taxpayers often have ‘ghost assets’ in their fixed asset systems, such removed roofs and HVAC components. A retirement study identifies these assets, allowing taxpayers immediately deduct the remaining undepreciated basis. Similarly, taxpayers who make improvements to their facilities can immediately deduct the cost of the removed building components and to instantly write-off undepreciated basis amounts.

To learn more about these tax planning ideas and several more, please contact an ICS Tax representative.

Author: Alexander Bagne, JD, CPA, MBA, CCSP. Contributing Author: Mike Piper, LEED AP

Alex Bagne and Mike Piper are heading to Orlando, Florida to attend the annual conference of the American Society of Cost Segregation Professional (ASCSP). Both Alex and Mike are members of ASCSP, which provides education, credentials, technical standards and a Code of Ethics within the cost segregation industry. Alex will be speaking on two panels. For the first panel, he will be discussing Accounting Method Changes and the new Form 3115, the Tangible Property Regulations, and Partial Asset Dispositions. On the second panel, he will be discussing the new depreciation category called Qualified Improvement Property, the PATH Act, and the §179 Expense Election.

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ICS Tax is looking forward to presenting information regarding Federal tax incentives for the Dakota Electric Association’s Commercial & Industrial Fall Meeting on November 3rd. The DEA is a member-owned, electric utility with more than 100,000 members and ranked among the 25 largest electric distribution cooperatives in the nation. Click here for more information on the DEA.

The IRS released final regulations concerning the application of the R&D tax credit to “internal use software” (i.e., software which is developed by or for the benefit of the taxpayer). Examples of internal-use software include software for use in human resources, support services and financial management. Software that is not for internal use needs to meet a lower threshold to qualify for the credit. These final regulations also include examples to illustrate the application of the process of experimentation requirement to software. Click here to view the full regulations.

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Alex Bagne and Mike Piper presented tax planning strategies specifically for the construction industry at the Columbus Contractors Network’s Construction Success workshop. See additional information here: www.columbuscontractorsnetwork.com.

BACKGROUND

The IRS recently released an Audit Techniques Guide titled “Capitalization of Tangible Property”. Audit Techniques Guides (ATGs) help IRS examiners during audits by providing insight into issues unique to specific industries. While designed to provide guidance for IRS employees, these guides are useful to business owners and tax professionals as they are more reader-friendly than the code and regulations, and they often discuss the implications of case law as well as other relevant authorities.

WHAT THIS MEANS TO TAXPAYERS

The Capitalization of Tangible Property ATG deals primarily with issues related to the Tangible Property Regulations (TPRs). In March of 2012, the IRS issued a directive that suspended current field examinations on the repair vs. capitalization issues to permit taxpayers to file accounting method changes under recently issued temporary regulations and revenue procedures. The IRS has since been lenient on examination of TPR issues to allow taxpayers time to adopt the new rules. The new ATG shows that the IRS has renewed interest in auditing TPR issues to ensure proper compliance.

HOW CAN ICS TAX HELP?

ICS Tax has nationally-renowned experts in the Tangible Property Regulations that can assist with compliance-related issues as well as take advantage of several new, taxpayer-friendly provisions. For more information, please contact an ICS Tax representative.

Click below to view the full Audit Techniques Guide

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The ICS Tax, LLC sister company, ICS Consulting, Inc., was just named one of the Minneapolis/St. Paul Business Journal’s Best Places to Work in 2016 for the second year in a row! Click here for more information.

ICS is providing specialty tax and cost segregation related services for Ted Glasrud Associates, a Twin Cities based property management and development firm, for approximately 2 million square feet of commercial and industrial space.

ICS Tax president Alex Bagne co-published an article on Avoiding Recapture Tax in Cost Segregations, featured in the AICPA’s Tax Insider newsletter. The recapture tax rules require taxpayers to pay back any tax deductions for accelerated depreciation when appreciated property is sold. While the effects of a cost-segregation study can magnify recapture issues, tax professionals should consider a number of worthwhile opportunities to reduce or avoid recapture tax that would otherwise be realized upon sale of property. To learn more, please click here.

ICS happy to announce that we are working on behalf of Eide Bailey, LLP to provide specialty tax consulting services for the Scheels All Sports facilities portfolio.

ICS Tax President Alex Bagne coauthored an article on the Tangible Property Regulations in “Disclosures” magazine, a publication by the Virginia Society of CPAs.

Click below to view the article.

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