Shareholder Dave McGuire provides an outline of Congress’ long-awaited stimulus and omnibus spending mill and how it impacts specialty tax provisions.

Audrey Asfoor joins specialty tax and consulting firm as R&D consultant.

As COVID-19 has forced countless industries to redefine how they do business in 2020 and beyond, the McGuire Sponsel team has assisted current and prospective clients in navigating the domino effect of new rules.

Recently, dental practices have been discussing eligibility to claim the Research and Development Tax Credit (R&D Credit). Though manufacturing companies, software developers, and engineering firms primarily claim the R&D Credit, the IRS definition of R&D is not exclusive to these industries. As long as taxpayers’ projects meet the criteria found in Section 41 of the tax code—which outlines criteria to receive credit for research activities—they are able to claim qualified expenses associated with those projects.

Over the past few months, the landscape of how we work has continuously evolved in response to COVID-19. While it may come as no surprise manufacturers are among those who have experienced the biggest disruptions to their operations, we at McGuire Sponsel have been pleasantly surprised to see many of our clients in various manufacturing industries experience an increase in R&D activities.

David Seibel returns to McGuire on the Wire to explain the background, opportunities, and potential challenges of the Research and Development Tax Credit.

Coined in 2006 by then Google CEO Eric Schmidt, “cloud computing” is a general term that encompasses any shared computer utility that a business and its employees have access to through any computing device at any time and from anywhere. In recent years, cloud computing has become an essential company resource vital to a company’s growth. For taxpayers, correctly calculating the tax treatment of cloud computing expenses for research and development activities has become increasingly important.

As covered in our previous article, the passing of the Agricultural Improvement Act of 2018 (2018 Farm Bill) declassified hemp as a federally controlled substance beginning January 1, 2019. Hemp is defined as the plant Cannabis sativa L. and any part of that plant, including the seeds thereof and all derivatives, extracts, cannabinoids, isomers, acids, salts, and salts of isomers with no more than a 0.3 percent concentration of THC on a dry weight basis. The removal of hemp from the controlled substance list allows growers to claim expenses and deductions on their tax returns, provided they follow their state’s USDA-approved guidelines.

As published in Accounting Today: Dave discusses R&D Tax Credit and the coronavirus.

 

 

On this week’s episode Dave explains the how the R&D Tax Credit could be affected by the Paycheck Protection Program (PPP).

Consolidated Appropriations Act, 2021 Impacts PPP, Unemployment, and Tax Credits

Late on Monday, Dec. 21, Congress passed the long-awaited stimulus as well as an omnibus spending bill as part of the Consolidated Appropriations Act, 2021. Most of the interest will be on the expansion of the Paycheck Protection Program (PPP), expanded unemployment, and direct payments to taxpayers. Additionally, there are a multitude of tax-related provisions hidden in the bill that are important for taxpayers and CPAs to understand going into 2021.

One of the most anticipated portions of the law involves the PPP. As part of this stimulus package, certain businesses can apply for a second round of funding. To qualify, businesses need to have less than 300 employees and demonstrate a loss in gross receipts of 25% or more. Additionally, the bill allows for more expenses to be included in forgiveness.

For companies that have already applied for PPP loans, one of the main questions has been the deductibility of expenses forgiven under the PPP program. Under the CARES Act, PPP forgiveness was not considered taxable. However, shortly after the CARES Act came out, the IRS issued Notice 2020-32, stating taxpayers who receive forgiveness cannot deduct covered costs. The Consolidated Appropriations Act fixes this issue and states “no deduction shall be denied, no tax attribute shall be reduced, and no basis increase shall be denied” for expenses paid with PPP proceeds. This is a welcome reprieve for taxpayers who received PPP loans.

The 5,593-page bill contains many other provisions including, but not limited to:

  • Permanent extension of 179D Energy-Efficient Building Deduction
  • One-year extension of 45L Energy-Efficient Home Tax Credit
  • Extension of Work Opportunity Tax Credit (WOTC)
  • Extension of New Market Tax Credit (NMTC)
  • Extension of green energy investment tax credit and production tax credit
  • Temporary allowance for deduction of business meals
  • Extension and expansion of Employee Retention Tax Credit

These are just a few of the details in this expansive bill. McGuire Sponsel will continue to review and will present the webinar, “Stimulus and Tax Provisions included in the Consolidated Appropriations Act, 2021,” detailing the provisions for this bill. To register for Tuesday, December 29, click here. To register for Tuesday, January 5, click here.

If you have any questions about how this bill will affect you or your clients, feel free to reach out to your McGuire Sponsel representative.

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