iTaxBlog

SourceCorp recently experienced a situation where an auto dealer was notified by the IRS that their 2008 and 2009 tax years were the subject of a routine IRS exam. The IRS also indicated it would be looking at §263A issues during the exam. After some negotiation, the IRS said it was willing to drop prior year §263A issues if the auto dealer elects the Safe Harbors as outlined in Rev. Proc. 2010-44. In addition, the IRS required the dealer to adopt the Safe Harbors via Form 3115 for the 2010 tax year by the 9/15 extended due date.

The IRS’ willingness to allow the dealer to move to Safe Harbor methods is in keeping with what IRS Motor Vehicle Specialist Terri Harris relayed late last year when the Safe Harbor guidance came out. Terri’s comments indicated that the IRS would be lenient on dealers for the 2010 and 2011 tax years, giving them time to transition to the Safe Harbors method. After that, dealers may face less forgiving IRS agents.

SourceCorp works with many auto dealers and their CPAs and has developed a seamless solution for the adoption of both safe harbors. We continue to monitor this issue closely and will post additional updates to our blog as they arise. For further information, contact me directly at chris.henderson@sourcecorptax.com.

In January 2011, the IRS issued Revenue Procedure 2011-14 that provided an alternative accounting method for claiming the EPAct 179D tax deduction for sustainable design. Rather than amending tax returns, architectural firms that had not previously taken the deduction were allowed to claim the deduction on their current year’s return using a Form 3115 along with a certification report and an allocation letter.

However, this week, IRS author of 179D guidance, Jennifer Bernardini provided clarification with regard to Form 3115. While admitting that ambiguity exists in Rev Proc 2011-14, she stated the Office of Chief Counsel, the IRS division that reviews accounting methods, was unlikely to grant any accounting method change submitted by architects that have not previously claimed the 179D deduction. She also indicated the IRS is working on guidance that would clarify the ambiguity found in Rev Proc 2011-14 but gave no timetable.

While Ms. Bernardini’s comments represent her own opinion and not those of the IRS, her comments can be interpreted as the prevailing thought at the Service. As such, SourceCorp recommends filing amended returns to claim 179D deductions associated with projects completed in prior tax years. To ensure that all 2008 projects are reviewed while still under statute, firms should gather complete blueprints and specifications as well as applicable allocation letters as quickly as possible.

SourceCorp is keeping close tabs on this issue and will communicate further updates.

Architectural firms in charge of the design of public schools, government and municipal buildings are eligible to claim the EPAct §179D tax deduction for sustainable design. This deduction was part of the Energy Policy Act of 2005 and was intended as an incentive for architects to incorporate energy-efficient building components in their designs. Until recently, firms were limited by a three-year rolling statute to claim the deduction on amended tax returns.

However, in January 2011, the IRS issued Revenue Procedure 2011-14 that provided an alternative accounting method. Rather than amending tax returns, architectural firms that have not previously taken the deduction may go back as far as 2006 and claim the deduction on their current year’s return using a Form 3115. A certification report and allocation letter must be filed with the Form 3115.

In most cases, claiming the §179D deduction on a Form 3115 is the preferred method. However, if a firm has already claimed the deduction on amended returns, their accounting method is established and should remain the same. For more information on the EPAct §179D tax deduction, please contact me at chris.henderson@sourcecorptax.com.

From Thomson Reuters

The lame-duck Congress departed for its Thanksgiving recess with no clear path in sight for dealing with pressing tax issues: extension of the Bush tax cuts; resolving the estate tax problem; patching the alternative minimum tax (AMT); and dealing with extenders, i.e., deciding whether to retroactively extend some or all of the tax provisions that expired at the end of 2009 (including the research credit). What’s more, it looks as if the lame-duck Congress may not resolve these issues until the very last minute, i.e., right before Christmas. On November 18, Senate Finance Chair Max Baucus (D-MT) told members of the press to “get your snow boots on.”

The thorniest issue is the expiring Bush-era tax cuts. The Democrats (and the Administration) want to extend the tax cuts for “non-high-income” taxpayers only. The Republicans want to extend the tax cuts for everyone. (Note: For an article the discusses the pros and cons of raising the tax rates on high-income taxpayers as highlighted in a recent Congressional Research Service (CRS) Report, see RIA Newsstand e-mail 11/11/2010.) The problem is that neither party has the votes to prevail. That inevitably will lead to a compromise of some sort. One possibility is an across-the-board, but temporary, extension of the Bush-era tax cuts for individuals.

SourceCorp is pleased to announce that Bob McPherson recently joined the company as the Director of Cost Segregation and EPAct §179D. Both of these areas have experienced rapid growth during the past two years, and this level of growth is expected to continue. Bob’s cost segregation and §179D experience at BDO Seidman as well as his construction background will be invaluable as he leads our team in the coming years.

We are pleased to add Bob to the SourceCorp team and look forward to the opportunity to introduce him to you personally. Please feel free to contact Bob directly with any cost segregation or EPAct §179D issues.

Summary: The SEC is still getting comments on the IFRS work plan in Release No. 33-9109. According to the AICPA, public companies will have an easier time making the switch if the SEC ends the uncertainty and sets a firm date.

The AICPA said the SEC needs to make clear its commitment to adopting IFRS and abandoning U.S. GAAP. “The U.S. financial reporting system will take substantive, definite steps to ready itself for IFRS only when the SEC makes a decision to require IFRS and announces a date certain for adoption of IFRS,” the AICPA wrote in an October 14, 2010, comment letter. “We believe completion of the work plan will provide a solid foundation for the SEC to make a determination in 2011 on whether and how to incorporate IFRS into the financial reporting system for U.S. issuers,” the AICPA wrote in reference to Release No. 33-9109, Commission Statement in Support of Convergence and Global Accounting Standards.

In August the SEC issued Release No. 33-9134, Notice of Solicitation of Public Comment on Consideration of Incorporating IFRS Into the Financial Reporting System for U.S. Issuers, requesting comments on three topics from the work plan in Release No. 33-9109. The SEC sought comments on the effect of a switch on issuers’ compliance with contractual arrangements that require the use of U.S. GAAP; issuers’ compliance with corporate governance requirements; and the application of certain legal standards tied to amounts determined for financial reporting purposes.

To get feedback to take into consideration when preparing its comments, the AICPA held two conference calls with its members from business and industry who have backgrounds working with public companies. In its comment letter which can be viewed on its website at http://www.aicpa.org/Press/PressReleases/DownloadableDocuments/AICPAComment%20Letter_IFRS%20Work%20Plan_Final.pdf, the AICPA said it views contractual arrangements as “a distinct work stream” in an IFRS conversion process.

According to the AICPA, companies will have to review contracts and agreements and determine how they will be affected by adoption of IFRS. When the financial reporting requirements of a contract are based on U.S. GAAP, contracts may need to be amended to allow IFRS as the basis of financial reporting. Contracts with features such as lender covenants that are based on U.S. GAAP will be more of a challenge.

The AICPA said the effort required will be determined on a company-specific basis. Some organizations may have a large volume of contracts that need to be addressed, while others have only a few. The AICPA said its research indicates that companies will need five years to prepare for switching if the SEC is going to require two years of historical comparative financial statements. If only one year of comparative financial statements is required, a four-year transition should be sufficient. The AICPA said it will support a decision to require only one year of comparative statements and will also support an early adoption option.

The comment period for Release No. 33-9134 ends October 18.

Source: WG&L Accounting & Compliance Alert Checkpoint 10/18/2010

I’m passing this along from our friends at the National Electrical Manufacturers Association (NEMA).  We’ve seen this proposal before, but it would be  tremendously beneficial  for designers of government owned green buildings if this legislation becomes law.

Yesterday, Senators Bingaman (D-NM) and Snowe (R-ME) introduced S. 3935, the Advanced Energy Tax Incentives Act.   This contains a number of incentives that have been advocated during the past two years, including Section 102 which increases the deduction from $1.80 to $3.00 (partial deduction increased to $1.00 per square foot per system) and modifies Section 179(D) to facilitate the ability of REITs (real estate investment trusts) to claim the deduction.

A summary of its provisions is available online at http://bingaman.senate.gov/policy/aetia_summ.pdf.

Here are the statements made yesterday:  “We must continue to ensure that the Tax Code contains well-designed incentives that will help us transition to an energy efficient economy,” explained Senator Bingaman.  “Our bill will significantly expand domestic clean energy manufacturing; help American businesses and families reduce their energy use and dependence on fossil fuels; and create thousands of jobs.  This is a common-sense, bipartisan proposal that deserves priority consideration.”

“For far too long our country’s energy strategy has prioritized the technologies of the past while our policy debate has languished in partisanship.  The world is moving ahead with bold action on innovative technologies and it is past time that we set a new course for how we use and think about energy,” said Senator Snowe.   “Energy efficiency has emerged as one of the most effective and expeditious initiatives that can be taken to preserve valuable resources for producers and consumers and I believe we can build upon the success of past tax credits with these critical energy efficiency tax incentives, which will spark innovation in our building and industrial sector and afford our constituents and businesses financial incentives to simultaneously reduce their energy bills and invest in our economy.  I appreciate working with Senator Bingaman on this comprehensive energy tax package and look forward to enacting these provisions into law.”

The 111th Congress is now in recess until November 15 when they will return for a week prior to Thanksgiving, and then Congress will return for a week in early December.    Whether energy tax legislation will be taken up remains to be determined.