Tax Credit Glossary

What is It?

Cost Segregation is the engineering-based study of commercial real estate to reclassify real property for depreciation purposes and reclassify it as more rapidly depreciating personal property. This reclassification results in significant cash flow benefits in both present and future years through considerably shorter depreciable tax life and accelerated depreciation methods.

Who Qualifies?

To qualify for cost segregation, you have to be a commercial property that has done any of the following since 1987:
-Purchased a commercial building or facility
-Constructed a new commercial building
-Renovated, remodeled, restored or expanded an existing facility
-Paid for facility leasehold improvements.

Your Benefits:

An average Cost Segregation Study offers approximately $150,000 in additional depreciation per $1 million dollars in purchase or construction cost over the normal 39-year straight-line method.

What is It?

The Coronavirus Aid, Relief, and Economic Security (CARES) Act created a new employee retention tax credit for employers who closed, partially or fully, OR experienced significant revenue losses resulting from COVID-19. The purpose of the tax credit is to keep workers on the payroll during the pandemic. The Employee Retention Tax Credit is an offset to payroll taxes, not an income tax credit. The original credit began March 12, 2020, and its original expiration date was the end of 2020. The Consolidated Appropriations Act of 2021 extended ERC through the first half of 2021, and then the American Rescue Plan (ARPA) extended it through the end of 2021.

As of December 21, 2020, and the passing of the Consolidated Appropriations Act of 2021, employers can take both PPP and ERC. Congress will allow employers to claim both, but not for the same dollars of payroll costs. The tax credits can be stacked for the highest benefit to the employer.

The COVID ERC is applied against the employer portion of payroll taxes. The ERC is “fully refundable” because if the credit exceeds the employer’s share of payroll taxes, then the excess is treated as an overpayment and refunded to the employer.

The tax credit is claimed on the employer’s quarterly return Form 941.

Who Qualifies?

For C-ERC 2021:
Private employers, including non-profits, carrying on a trade or business in 2020 that:
-Have operations partially or fully suspended as a result of orders from a governmental authority due to COVID-19
OR
-Experience a decline in gross receipts by more than 20% in a quarter compared to previous alternative quarters in 2020 or 2019

Your Benefits:

C-ERC is a 70% tax credit for the first $10,000 of earnings paid each quarter between January 1, 2021, and September 30, 2021, per eligible employee. This amount can include the employer portion of health benefits. Basically, for every eligible employee during this period, an employer would receive a $7,000 tax credit per quarter, totaling $21,000 for 2021.

Additionally, an employer can claim a 50% tax credit for the first $10,000 of earnings paid to an employee between March 12, 2020, and December 31, 2020. Claiming both 2020 and 2021 ERC would maximize the C-ERC for an employer at $33,000 per eligible employee.

What is It?

The Further Consolidated Appropriations Act, signed on December 20, 2019, included an extension to the existing Employee Retention Credit for employers affected by qualified disasters during 2018 and 2019. ERC or ERTC is a tax credit that has been around for years, specifically focused on disaster areas.

The Disaster ERC is a Federal income tax credit and should be filed with the employer’s tax return.

Who Qualifies?

Employers who operated in a qualified disaster zone and became inoperable due to the disaster continued to pay or incur wages for eligible employees. Currently (as of June 2, 2020), these areas were predefined by President Trump and included 282 counties in the following states:
Alabama, Alaska, Arkansas, California, Florida, Georgia, Hawaii, Indiana, Iowa, Mississippi, Missouri, Nebraska, North Carolina, Ohio, Oklahoma, South Carolina, South Dakota, Texas, and Wisconsin.

Your Benefits:

D-ERC is a 40% tax credit for up to $6,000 of earnings paid to each eligible employee (making the maximum credit $2,400 per eligible employee).

What is It?

WOTC stands for the Work Opportunity Tax Credit and is not one but several tax credits given to employers at a Federal level for hiring qualified employees. Annually employers claim over $1 billion in tax credits under this program. There is no limit on the number of individuals an employer can hire to qualify to claim the tax credit.

There was a dramatic shift and expansion to Hiring Incentives in the late 1990’s throughout the 2000’s which opened the door for “Job Creation” as the focus for Hiring Incentives. As a part of this change the Work Opportunity Tax Credit (WOTC) was created in 1996 and has been modified, extended and consolidated with existing Hiring Incentives repeatedly since.

This credit is currently extended through December 31, 2025.

Who Qualifies?

Anyone who hires candidates for employment that fall into the categories of eligibility for WOTC by the Federal Government. Basically, any company that hires.

Your Benefits:

WOTC allows employers to claim a credit against their federal income tax liabilities for qualified employees. WOTC can also be used to offset AMT (Alternative Minimum Tax). Employers generally can earn a tax credit equal to 25% or 40% of a new employee’s first-year wages, up to the maximum for the target group to which the employee belongs. Employers will earn 25% if the employee works at least 120 hours and 40% if the employee works at least 400 hours.

The average benefit per employee is $2,400.00 and can be as much as $9600.00. That means potentially 10 qualified employees could yield a federal income tax credit between $24K – $96K. Additionally, WOTC credits may be carried back one year and carried forward 20 years.

What is It?

Outside of income taxes, the single largest recurring charge for commercial property owners are Property Taxes. In most states, owners are required to pay taxes on both their real estate as well as their personal property. These charges are often an immense expense and a constant hit to the bottom line. To ensure clients are not being overcharged on their Property Taxes, we use an industry specialist with extensive market experience in valuation, tax, and law to review their current property tax situation.

As far back as 1796 there has been some level of property tax in the United States. By 1900, more than half of the states enacted clauses that required taxation of property. Over the past hundred years, local governments, municipalities, townships, school districts, and other bodies have enacted specific methods for the calculation of property tax in their jurisdiction. This has led to innumerable protests and legal mitigations that continue to this day.

Who Qualifies?

Any Commercial Property Owner who pays over $50,000 per year in Real or Personal Property Tax is worthy of a free review to determine potential reduction opportunities.

Your Benefits:

The immediate benefit is the reduction of taxes owed and the potential of refunds on prior taxes paid. The future benefits would similarly be a reduced tax burden going forward, producing an increased cash flow for the business.

What is It?

The R&D Tax Credit is a Federal program that is listed under Section 41 or the IRC (Internal Revenue Code) and continues to be amended on an annual basis as the U.S. Manufacturing landscape continues to evolve. This is an engineered based program that focuses on a company’s operations and processes in order to determine their qualification for incentives. This benefit provides an avenue to receive ‘tax money’ back from prior years while also reducing current taxable income on a dollar-for-dollar basis.

The Research & Development Tax Credit was originally enacted as a Federal Tax Program in 1981 and was designed to encourage American investment in innovation. In 2004, tax regulation changes significantly expanded the credit opportunity. Today, the credit is accessible to many small and medium sized companies whose activities include design, manufacturing and process improvements.

Who Qualifies?

Who and what qualifies as research and development (R&D) is much broader than most realize. Activities and costs related with developing or improving a product and/or process often qualify for R&D tax credits. Furthermore, engineering, design, testing, and programming are now included as Qualified Research Activities (QRE).

Some industries that most commonly qualify are: Manufacturing, Startups, Fabrication, Software Development, Tool & Die, Pharmaceutical, Biotechnology, & Breweries / Wineries

Your Benefits:

-Dollar for dollar credit against taxes owed or previously paid
-Carry forward credit for future profitable years
-Immediate increase in company cash flow
-Credit average is over $25,000 per $1,000,000 in total company payroll

What is It?

The Technical Tax Credit (section 41 credits) are for employers with employees that perform tasks that are technical in nature.

The credit was originally enacted as a Federal Tax Program in 1981 and was designed to encourage American investment in innovation. In 2004, tax regulation changes significantly expanded the credit opportunity. Today, the credit is accessible to many small and medium sized companies whose activities include design, manufacturing and process improvements.

Who Qualifies?

Employers generally qualify if they have employees that perform any of the following tasks: Quality Control, Software Development, Process Improvement, Product Development, Engineering, Manufacturing, and other work technical in nature

Your Benefits:

-Dollar for dollar credit against taxes owed or previously paid
-Carry forward credit for future profitable years
-Immediate increase in company cash flow
-Credit average is over $25,000 per $1,000,000 in total company payroll