Resources

News

First | Prev | Page 20 / 20 | Next | Last

Favorable Tax Provisions That May Sunset Dec. 31, 2011

Posted 12:00 AM by

You never know what you have until it is gone. Given the volatile nature of national politics, many taxpayer-friendly provisions that are scheduled to sunset at the end of the year may either be allowed to expire or reinstituted with less favorable terms. With uncertainty in the air, taxpayers may wish to take advantage of programs by accelerating purchases, hiring, and making other business decisions.

Below are nine tax provisions that may sunset Dec. 31, 2011:

100 Percent Bonus Depreciation
Bonus depreciation allows for accelerated depreciation of certain qualified property. The 100 percent bonus depreciation allowance was written to apply to property that was placed in service between the dates of Sept. 9, 2010, and Dec. 31, 2011. The bonus depreciation allowance will be reduced to 50 percent beginning Jan. 1, 2012.

15-Year Depreciation for Certain Realty Assets
For a limited time, qualified leasehold improvement property, qualified restaurant property, and qualified retail improvement property were able to be depreciated over a 15-year term. For assets placed in service after Dec. 31, 2011, the depreciation period will be pushed back to 39 years.

 
Differential Wage Payment Credit for Employers
The differential wage payment credit provides small business employers with a credit of up to 20 percent of the first $20,000 of differential wages paid to active duty service members. Only differential wages paid before Jan. 1, 2012, are eligible for the credit.
 
Expensing of Environmental Remediation Costs
Under current law, taxpayers that bear costs in abating hazardous substances may be able to expense qualified environmental remediation expenses instead of capitalizing them. Remediation expenses paid or incurred after Dec. 31, 2011, will not be able to be expensed.
 
New Energy Efficient Home Credit
The new energy efficient home credit provides certain contractors with a credit of $1,000 or $2,000 for the construction of a qualified new energy efficient home. The credit will not apply to homes acquired after Dec. 31, 2011.
 
New Markets Tax Credit
The New Markets Tax Credit is a tool used to spur investment into projects located in targeted communities. A taxpayer who holds a qualified investment in a qualified community development entity may be entitled to a credit in the amount of 39 percent of the qualified equity investment. The program is set up with an annual limitation on the amount that may be designated, and the last limitation is for 2011.
 
Research Credit
The research credit is used to incentivize companies that carry on research and development. It can provide a 20 percent tax credit for certain research expenditures, including qualified research expenditures, university basic research payments, and expenditures for qualified energy research. Only amounts paid or accrued before Jan. 1, 2012, may be used in calculating the credit.
 
Section 179 Expensing
Section 179 permits property to be expensed rather than being capitalized. The maximum amount that can be expensed for tax years 2010 and 2011 is $500,000. Starting with 2012 tax year, the maximum amount will be reduced to $125,000. Further, there is an investment ceiling that reduces the expensing amount when taxpayers place additional property in service. The investment ceiling will drop from $2,000,000 to $500,000 for 2012.
 
Work Opportunity Tax Credit
The Work Opportunity Tax Credit (WOTC) incentivizes employers to hire members of targeted groups such as veterans, summer youth, ex-felons, and governmental assistance recipients. The program generally provides a 40 percent tax credit on first-year wages up to $6,000, with variations for certain targeted groups. Eligible wages are limited to those individuals who begin work before Jan. 1, 2012.
 
Utilizing Favorable Tax Provisions
With the threat of losing favorable tax provisions only months away, now is the time to consider whether you might be able to benefit from them. There are subtle distinctions in the provisions discussed above with respect to who can and cannot utilize them. We would be happy to discuss whether your business might benefit from any of the above programs.
 
Please contact your KSM advisor for more information.
link

Continued Debate on Lease Accounting Changes

Posted 7:00 PM by

The Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) (the Boards) jointly issued exposure drafts, Leases, on Aug. 17, 2010, which addressed accounting for leases by both the lessee and lessor. Since that date, the Boards have continued to discuss leases and have reached additional tentative decisions on lessee and lessor lease accounting.

The Boards’ objective of the lease project is to not only create common lease accounting requirements to ensure leases are recognized on the balance sheet, but also provide users of financial statements with useful and complete information about an entity’s leasing transactions. Lease transactions are widely used as a financing tool in today’s marketplace and have a major impact on the construction and real estate industries. The proposed changes will alter how both users of the financial statements and companies view lease transactions.

View Katz, Sapper & Miller’s Construction and Real Estate Industry Advisor to read more about the approach the exposure draft lays out for lessees to account for lease transactions.

link

Credit for Small Employer Health Insurance Premiums

Posted 2:18 AM by

Small nonprofit organizations may be eligible for a tax credit for health insurance premiums paid for tax years beginning in 2010. For tax-exempt small employers, the credit is 25 percent of employer paid premiums, is limited to the amount of certain payroll taxes paid, is limited to the state average premium chart, and cannot exceed the amount of payroll taxes for the organization.
A nonprofit is an eligible small employer if it meets the following requirements:

  • Paid at least 50 percent of the premiums for employee health insurance coverage
  • Had fewer than 25 full-time equivalent employees (FTE) for the tax year
  • Paid average annual wages for the tax year of less than $50,000 per FTE
  • Tax-exempt credit requirement: The organization must be described under Section 501(c)

Examples of qualifying health insurance coverage are as follows: medical care, dental plans, vision plans, nursing home plans, and home health care plans. Examples of coverage not allowed in calculation of the credit are as follows: workers' compensation, automobile medical payment insurance, coverage for on-site medical clinics, and liability insurance.

The credit is claimed as a refundable credit on Form 990-T, Exempt Organization Business Income Tax Return.

link

Form 8955-SSA Update

Posted 1:52 AM by

On June 21, 2011, the Internal Revenue Service (IRS) released the new 2009 Form 8955-SSA, Annual Registration Statement Identifying Separated Participants with Deferred Vested Benefits, and its instructions. The new form replaces the Schedule SSA, which was previously filed with the Form 5500.

The new Form 8955-SSA is intended to be used to report information about plan separated participants with deferred vested including those that:

  • have separated from service;
  • were reported as a deferred vested participant on another plan's filing if his or her benefits
  • were transferred (other than in a rollover) to the plan during the covered period;
  • were previously reported under the plan but have been paid out or are no longer entitled to those deferred vested benefits; or were previously reported under the plan but whose information is being corrected.

Information reported on Form 8955-SSA is provided to the Social Security Administration (SSA). The SSA provides the information to participants when they file for Social Security benefits.

The general filing due date is the last day of the seventh month following the last day of the plan year, plus extensions (similar to the annual Form 5500). However, the due date for filing the 2009 and 2010 Form 8955-SSA is the later of January 17, 2012 or the due date of the 2010 form. Information for the 2009 and 2010 plan years can be combined on one form.

Plan administrators must file Form 8955-SSA with the IRS and not through the EFAST2 filing system. EFAST2 filings are posted on the Internet and the Form 8955-SSA includes Social Security numbers. Due to privacy concerns, sensitive participant information cannot be posted on the Internet.

Note that the Form 8955-SSA is not required to be filed for a plan year if there is no information to report.

link

Sales Tax Savings Opportunities for Interstate Motor Carriers

Posted 7:07 PM by

A number of states provide a variety of sales and use tax exemptions to Interstate Motor Carriers (IMCs). The types of exemptions vary from state to state, but generally apply to the acquisition of tangible personal property used by IMCs in transportation operations. Common exemptions include the purchase and lease of rolling stock (tractors and trailers), repair parts for exempt rolling stock, property that becomes part of rolling stock (GPS type devices), and fuel.

Read the full text of our Truck Times newsletter.

link

FASB Issues New Guidance for Presentation of Other Comprehensive Income

Posted 7:12 PM by

The Financial Accounting Standards Board (FASB) has issued new guidance for how companies must present other comprehensive income (OCI) and its components in their financial statements. The guidance applies to all companies that report items of OCI but perhaps is most relevant for companies that have historically presented components of OCI as part of their statement of changes in stockholders’ equity, an option that is no longer available under this guidance.

ASU 2011-05
The new guidance, found in Accounting Standards Update (ASU) 2011-05, Presentation of Comprehensive Income, is intended to increase the prominence of items that are recorded in OCI and improve comparability and transparency in financial statements. The guidance should make it easier for users of financial statements to evaluate the effect of OCI on a company’s overall performance.

The new guidance described in ASU 2011-05 will supersede the presentation options in Topic 220 (previously known as Statement of Financial Accounting Standards No. 130, Reporting Comprehensive Income). The guidance, however, affects only the presentation of OCI, not the components that must be reported in OCI.

Comprehensive Income Presentation Standards
Both U.S. Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS) require financial statements to present comprehensive income (CI) in two parts:

  1. Net income and its components, such as income from continuing operations, discontinued operations and extraordinary items, and
  2. OCI and its components.

CI measures all of a company’s changes in equity that result from “nonowner changes.” Therefore, it captures all recognized transactions and other economic events that affect equity in a period, except transactions with the company’s owners, like investments by owners or distributions to owners. According to FASB, even though CI is a “useful measure,” information about the components of CI can reveal significantly more than the total amount of CI does.

OCI includes all of the components of CI that are not recorded directly on the income statement as a component of net income. Examples include:

  • Foreign currency translation adjustments
  • Unrealized holding gains and losses on available-for-sale securities
  • Unrealized holding gains and losses that result from a debt security being transferred into the available-for-sale category from the held-to-maturity category
  • Gains and losses relating to pensions and other postretirement benefits
  • Prior service costs or credits associated with pension or other postretirement benefits

Even companies that do not have any of the above items need to be aware of the new guidance. FASB has indicated that other potential upcoming accounting standard changes likely will mean more items must be presented as OCI in the future.

New Alternatives for Presenting OCI
Until now, U.S. GAAP gave companies three alternatives for presenting their OCI:

  1. As part of the income statement, below net income and listing the various OCI components, to arrive at CI,
  2. In a separate statement (“statement of comprehensive income”), which begins with net income and then lists the various OCI components, to arrive at CI, or
  3. As part of the statement of stockholders’ equity, in a column titled “Accumulated OCI,” which totals all OCI amounts recorded.

FASB’s new guidance requires companies to present OCI in one of two ways. The first option is to present OCI in a single continuous statement of comprehensive income that lists the components of net income and total net income, the components of OCI and total OCI, and the total of CI.

Alternatively, a company can take a two-statement approach. An income statement must present the components of net income and total net income, and a statement of OCI, immediately following the income statement, must present the components of OCI, a total for OCI and a total for CI. The second statement may begin with net income.

Regardless of the option selected, companies no longer can present adjustments for items reclassified from OCI to net income in their footnotes. They must present the adjustments on the face of the financial statements where the components of net income and OCI are presented, and corresponding adjustments must appear in both net income and OCI.

The idea is to avoid the double counting of items in both net income and OCI. For example, a company might realize gains from investment securities and include them in net income in the current period. An adjustment is necessary because the gains were already included in OCI as unrealized holding gains in that period or earlier periods. The company must deduct the gains through OCI for the period in which they are included as net income so that they are accounted for only once.

As in the past, companies are free to present OCI components either net of related tax effects or before related tax effects, with one amount shown for the aggregate income tax expense or benefit related to the total OCI. The tax effect for each component must be disclosed in the financial statement notes or presented in the statement that presents OCI.

What about IFRS?
Like other recent changes to FASB’s accounting standards, the new guidance is designed to facilitate the convergence of U.S. GAAP with IFRS. But the changes do not completely converge the requirements for presenting OCI under the two sets of standards.

Differences remain over whether an item of income is initially reported in net income or OCI. Nonetheless, users of financial statements will now find it easier to compare statements of CI prepared under U.S. GAAP with those prepared under IFRS.

Effective Dates
The guidance in ASU 2011-05 takes effect for public companies during the interim and annual periods beginning after Dec. 15, 2011. It is effective for private companies for annual periods beginning after Dec. 15, 2012, and interim and annual periods thereafter. Early adoption is permitted.

Companies impacted by the guidance must apply it retrospectively for all periods presented in the financial statements.

Please contact your KSM advisor for more information.

link

Fee Disclosure Requirements for Qualified Retirement Plans

Posted 1:46 AM by
While gasoline prices have captured the headlines over the past several months, fees related to 401(k) plans may soon also gain attention, as well as the attention of plan participants. Based on a recent 2010 American Association of Retired Persons (AARP) study, 71 percent of participants believed they paid no fees for their 401(k) plans. Contrary to popular opinion, 401(k) plans and their investments are not free. 

To address the lack of fee transparency in the defined contribution market – 401(k), profit sharing and 403(b) plans – the Department of Labor (DOL) has taken the position that the plan sponsor, as a plan fiduciary, must understand how much is being paid for each service performed, that the services are appropriate, and that the amounts are reasonable.  

DOL Initiatives

In December 2007, the DOL proposed regulations under a three-pronged approach to enhance fee transparency relating to qualified retirement plans that have been, or will soon be, implemented. These three initiatives include:  

  • An updated Form 5500 Schedule C (effective with the 2009 filing)
  • Fee Disclosure by Service Providers to Plan Fiduciaries (effective Apr. 1, 2012)
  • Fee Disclosures by the Plan Fiduciaries to Plan Participants (effective for the first plan year, beginning on, or after, Nov. 1, 2011) 

Most plan sponsors have already begun to comply with the first initiative by filing their 2009 Form 5500 Schedule C. Any plan service provider that received compensation from plan assets is required to disclose to the plan sponsor the amount and nature of service for which they are receiving compensation. The DOL will certainly take a much closer look at this information with the 2010 filings. 

The second initiative, under The Employee Retirement Income Security Act of 1974 (ERISA) 408(b)(2), requires covered service providers to give the plan fiduciary disclosures that outline all services to be provided and all compensation (direct, indirect, non-monetary, etc.) earned by the service provider and any affiliates and/or sub-contractors of the service provider. The fee disclosures must also reflect the fiduciary status of the provider, fees related to the termination of their services, a reasonable and good faith estimate of the plan’s recordkeeping costs, and expense information relating to the plan’s investment alternatives (expense ratios, sales charges, redemption fees, wrap fees, etc.). 

The final initiative addresses the DOL’s concern that participants are not provided with the necessary information to make informed decisions about their plan’s investment choices. Effective Jan. 1, 2012 for a calendar year-end plan, plan sponsors, under ERISA 404(a)(5), must now furnish annual and quarterly disclosures to all participants in participant-directed plans. The disclosures must include Plan-Related Information, such as:

  • general information about the plan’s investment options;
  • administrative expense information (plan level fees); and
  • individual expense information (individual transaction-based fees).   

Additionally, the disclosures must include Investment-Related Information, such as:

  • performance data;
  • benchmarking information;
  • fee and expense information;
  • an Internet website address; and
  • a glossary to assist participants with investment terminology. 

Fiduciary Responsibility

ERISA requires that plan fiduciaries, when selecting and monitoring service providers and plan investments, act prudently and solely in the interest of the plan’s participants and beneficiaries. A major responsibility of a plan fiduciary is to ensure that the plan’s fee arrangements with its service providers are “reasonable,” and that only “reasonable” compensation is paid out of plan assets for services provided to the plan. Several recent court cases have focused on this “reasonable” standard with mixed results for plan sponsors. 

How Should a Plan Fiduciary Prepare?

As a plan sponsor and as the plan fiduciary, the following actions are recommended to comply with the new fee disclosures requirements:

  • identify service providers;
  • determine all applicable fees to which the plan is subject to;
  • analyze the fees for reasonableness;
  • document the process and the reached conclusions;
  • discuss the expected timing, method and compliance of the disclosure requirements with services providers;
  • communicate the plan fees with participants; and
  • establish a process to periodically review service provider agreements for performance. 

Taking the above steps may prevent having to answer some tough questions from plan participants once they receive their first quarterly statement in 2012 and are made aware of possible fee charges to their individual accounts. Let the rising and falling of gas prices keep the headlines, not the company’s 401(k) plan costs.




 

link

Charity Gaming: Credit Cards

Posted 2:15 AM by

The Indiana Gaming Commission recently implemented changes to charity gaming legislation. SEA 340-2011 included the expansion of the use of credit cards at an allowable event. Effective July 1, 2011, organizations may not accept credit cards or extend credit to a player for the purchase of a chance to play in a game of chance during an allowable event or for the purchase of licensed supply. However, a qualified organization is permitted to accept credit cards for the non-gaming portions of an allowable event; such as the purchase of food, beverages, merchandise, and retail goods and services offered at a benefit auction.

In addition, the legislation allows for the use of a volunteer ticket agent, removes related activities from the inclusion in gross revenue to determine license fees, and increases the number of days a qualified organization may hold a festival.

link
First | Prev | Page 20 / 20 | Next | Last