Comments for iTaxBlog

Comment on IRS Clarifies on Use of Form 3115 for 179D Tax Deduction by Bob McPherson

Bob McPherson — Fri, 16 Mar 2012 13:35:29 +0000

According to the regulations, a general contractor that has significant influence on the design and implementation of a project may be assigned the deduction.

Comment on IRS Clarifies on Use of Form 3115 for 179D Tax Deduction by Jeff

Jeff — Wed, 14 Mar 2012 13:35:26 +0000

As a general contractor that is selling sustainability, can it get the public allocation of potential 179 EPAct deductions if it holds the design contract and not the public entity? Or is the designer only eligible? I would think that if the school/municipality signs the form and assigns the deduction to the general contractor who technically was responsible for managing the design, they could claim the deduction. What advice do you have for general contractors and how they structure their contracts going forward to claim the deduction?

Comment on IRS Clarifies on Use of Form 3115 for 179D Tax Deduction by Chris Henderson

Chris Henderson — Tue, 06 Dec 2011 17:22:10 +0000

While the IRS is still looking into this matter, no further guidance has been issued. We will provide an update as soon as one is available.

Comment on IRS Clarifies on Use of Form 3115 for 179D Tax Deduction by Jennifer

Jennifer — Mon, 05 Dec 2011 15:22:28 +0000

Have there been any further developments or updates on this issue?

Comment on IRS Clarifies on Use of Form 3115 for 179D Tax Deduction by Chris Henderson

Chris Henderson — Thu, 28 Jul 2011 14:29:28 +0000

Ms. Bernardini’s comments were made during a phone conversation with our tax attorney.

Comment on IRS Clarifies on Use of Form 3115 for 179D Tax Deduction by Adam

Adam — Wed, 27 Jul 2011 19:17:37 +0000

In what forum did Ms. Bernardini provide this clarification?

Comment on The Importance of the Allocation Letter to the EPAct §179D Tax Deduction by Chris Henderson

Chris Henderson — Fri, 03 Jun 2011 13:44:37 +0000

The federal anti-kickback statute (41 U.S.C. §51) prohibits individuals or entities from knowingly and willfully offering, paying, soliciting, or receiving remuneration to induce referrals of items or services. The 1986 Anti-Kickback Act modernized and closed loopholes applying to government contractors and subcontractors:

1- The Act prohibits attempted as well as completed kickbacks which include money, fees, commission, credit, gift, gratuity, thing of value, or compensation of any kind;
2- The Act requires that the purpose of the kickback be for improperly obtaining or rewarding favorable treatment to be illegal;
3- The Act prohibits kickbacks to prime contractors and their employees, subcontractors and their employees;
4- The Act defines kickbacks to include payments under any government contracts;
5- The Act requires that one knowingly and willfully engage in the prohibited conduct for the imposition of criminal sanctions;

In light of the above, a negotiated agreement, between an Architect and a school district, to perform services at a discounted price could be construed as improperly obtaining favorable treatment. The assertion would be that the cost of the services to be performed by the Architect would not be comparable to those that could be charged in the open market for the same services.

Comment on The Importance of the Allocation Letter to the EPAct §179D Tax Deduction by Ryan Hess

Ryan Hess — Thu, 02 Jun 2011 16:59:11 +0000

In your comment: “It is important the government entity is not viewed as requesting a kick-back for an incentive that was intended for architects.”; Do you know of a letter ruling, revenue procedure, or other legal document from the IRS that explains in depth the legality of a kick-back?

Thanks, Ryan Hess

Comment on IRS Provides Alternative for EPAct §179D Filers by admin

admin — Fri, 27 May 2011 15:44:29 +0000

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Comment on IRS Provides Alternative for EPAct §179D Filers by Chris Henderson

Chris Henderson — Sat, 23 Apr 2011 13:21:44 +0000

Unfortunately, you are correct. The usability is predicated on the entity having sufficient basis to absorb the 179D deduction. To the extent that there is insufficient basis in the entity because of routine distributions, the deduction creates the potential for long term capital gain treatment where distributions are in excess of basis. The benefit in this scenario would be the tax rate arbitrage between ordinary income and the long term capital gains rate.

While section 3.06 of Notice 2008-40 states that the designer will not include any amount in income on account of the 179D deduction, the mechanics of flow-through entities often create the unintended, but correct, long term capital gain situation you mention.

We presented this issue to Treasury in a face to face meeting last year and, while they were sympathetic, they did not see a resolution outside of legislative action.