MORE COMPANIES QUALIFY THAN YOU THINK
We hear this every day: “I don’t think I qualify”, or “my CPA says he/she doesn’t think I qualify.”
In regards to the R & D, in layman’s terms, if you make, modify, invent, innovate, create or make better ANY aspect of your business, and perform research activities either in house or hire contractor(s), congratulations, you qualify! So, ask yourself, “Do I do any of these?” 19 out of 20 businesses qualify. The real questions are:
- How much do I qualify for? Answer: We have no idea how much you will get back until the no cost initial analysis is done.
- How much is this going to cost me? Answer: $0 dollars to see if you qualify. If you qualify. If you don’t qualify AND recover your credits, you don’t owe us a dime.
Industries such as software development, aerospace, tech and biopharmaceuticals can take advantage as there are no restrictions on the type of industry. The R&D incentives and credits may apply to any taxpayer that incurs expenses for performing Qualified Research Activities (QRA) on U.S. soil. The credit is a percentage of qualified research expenses (QRE) above a base amount established by the IRS in a four-part test as follows:
- Elimination of Uncertainty (do you know the results of?)
- Process of Experimentation (do you test/experiment with to find the desired results)
- Technological in Nature (Technology refers to methods, systems, and devices which are the result of scientific knowledge being used for practical purposes, i.e.; biology, chemistry, computer science, formulations and/or physical science)
- Qualified Purpose (to be used by you, licensed or leased)
IF YOUR COMPANY IS INVOLVED IN ANY OF THE FOLLOWING QUALIFIED RESEARCH ACTIVITIES (QRA), YOU MAY BE ABLE TO CLAIM THE R&D INCENTIVE
- Developing an innovative product that is new to the market
- Research aimed at discovering new knowledge for in-house use, or to license or lease
- Designing product alternatives or improvements to existing products
- Significant modifications to the concept or design of a new or improved product or process
- Experimenting with new technologies and materials
- Developing and modifying research methods / formulations / products
- Engineering and designing a new product
- Materials testing
- Certification Testing
- Environmental Testing
QUALIFIED RESEARCH EXPENSES (QRE)
The following are Qualified Research Expenses (QRE):
- Wages paid to employees for qualified services (this includes amounts considered to be wages for federal income tax withholding purposes), basic research payments made to qualified educational institutions and various scientific research organizations, allowable up to75% of the actual cost.
- Supplies (this may include any property not subject to depreciation) used and consumed in the R&D process.
- Third party contractors’ expenses for performing QRAs on behalf of the taxpayer, regardless of the success of the research, allowable up to 65% of the actual cost.
EMPLOYEE RETENTION CREDIT
Which businesses qualify and how?
There are multiple ways that a business can qualify for ERC: 1. full or partial suspension of business operations as a result of government order or, 2. a significant decline in revenue compared to the same quarter in 2019, 3. Alterations or modifications to the business in order to stay open, 4. Federal, State, County, Local and/or Health Department Mandates of Orders, 5. Supply chain challenges (ie. Supplier cannot procure raw materials and/or parts to make products), Decline in revenue is defined as equal or greater than 50% for 2020 and equal or greater than 20% for 2021.
How do eligible employers obtain their ERC?
American Business Incentive Services (ABIS) will review the relevant financial records to calculate the dollar amount of the eligible employer’s expected credit and present the Recovery to you. If you approve ABIS will then complete and file the relevant IRS forms for the employer and retain all necessary documentation.
ENERGY EFFICIENT COMMERCIAL BUILDING DEDUCTION – 179D:
The 179D commercial buildings energy efficiency tax deduction primarily enables building owners to claim a tax deduction for installing qualifying systems and buildings. Tenants may be eligible if they make construction expenditures. If the system or building is installed on federal, state, or local government property, the 179D tax deduction may be taken by the person primarily responsible for the system’s design. The 179D tax deduction does not apply to other non-tax paying entities including but not limited to NGOs or churches unless there exists an energy-as-a-service agreement that is owned by a tax paying company. Please see IRS Notice 2008-40 or FAQs for additional information. The 179D tax deduction has been in effect since January 1, 2006, and is now a permanent program enacted as part of the Consolidated Appropriations Act of 2021 signed into law on December 27, 2020.
The following information is still applicable for properties placed into service on or before December 31, 2020. Updated information will be made available for properties placed into service on or after January 1, 2021, upon anticipated IRS Notice release.
A tax deduction of $1.80 per square foot is available to owners of new or existing buildings who install (1) interior lighting; (2) a building envelope; or (3) heating, cooling, ventilation, or hot water systems that reduce the energy and power cost of the interior lighting, HVAC, and service hot water systems by 50% or more in comparison to a building meeting minimum requirements set by ASHRAE Standard 90.1. Cost savings must be calculated using qualified computer software, which we link to below.
For properties placed into service on or before December 31, 2020, the energy and power cost shall be compared with the minimum requirements of ASHRAE Standard 90.1-2007. Projects placed into service on or after January 1, 2021, shall use the most recent Standard 90.1 affirmed no later than the date that is 2 years before the date that construction of the qualifying property begins, or the date the construction permit of the qualifying property is issued. Details and associated updates to this webpage are awaiting an anticipated IRS Notice.
Deductions up to $0.60 per square foot are available to owners of buildings in which individual lighting, building envelope, or heating and cooling systems partially qualify by meeting certain target levels or through the interim lighting rule. For properties placed into service on or before December 31, 2020, following IRS Notice 2012-26, choose the appropriate compliance pathway shown in the table below. Updates for properties placed into service on or after January 1, 2021, will be made available upon anticipated IRS Notice release.
COST SEGREGATION SERVICES
What is Cost Segregation? Cost Segregation is an application by which commercial property owners accelerate depreciation and reduce the amount of taxes owed. This savings generates substantial cash flow that owners often use to reinvest in business, purchase more property, apply to their principal payment or spend on themselves.
How Does Cost Segregation Work? ABIS has an experienced and qualified company, performs an engineering-based cost segregation study on your property. The study accelerates the depreciation of your building/renovation components into shorter depreciation categories such as 5-, 7-, 15-year rather than the conventional 27.5- and 39-year schedules. Five- and 7-year items might include decorative building elements, specialty electrical for dedicated computer equipment and medical equipment, and carpet, tile, etc. Fifteen-year items might include site utilities, landscaping, and paving. This engineering-based cost segregation study results in a much higher depreciation expense and significantly reduced taxable income for the property owner. Best of all, tax code ruling states cost segregation can be applied to categories of buildings purchased or built since 1986, including renovations.