Government Contractor’s Domestic Production Activities Deduction Upheld

Generally, to be eligible for the domestic production activities deduction (DPAD), a taxpayer must earn gross receipts from a disposition of qualifying production property. This typically involves a sale and delivery of a manufactured product by the taxpayer to a customer. However, the IRS recently ruled that a government contractor made a disposition for DPAD purposes despite the fact that title to the property reverted back to the contractor (Technical Advice Memorandum 201314043, 04/05/2013). The ruling disposition was not requiring
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International Tax Developments in FY2014 Greenbook

The U.S. Treasury Department released its General Explanations of the Obama Administration’s Fiscal Year 2014 Revenue Proposals on April 10, 2013. The publication, known as the Greenbook, includes the following international tax proposals that would effectuate reform of the U.S. international tax system. (See General Explanations.)

1. Defer Interest Expense Deduction Related to Deferred Income of Foreign Subsidiaries
The proposal would defer the deduction of interest expense. The deferral rule would apply to the extent that interest expense is properly allocated and apportioned to stock of a foreign corporation that exceeds an amount proportionate to the U.S. taxpayer’s pro rata share of income from such subsidiaries that is currently subject to Continue reading »

Sale for Resale – An Easy Concept That’s Costly if Missed

A recent Virginia sales and use tax ruling illustrates how ignoring basic sales and use principles can be costly for businesses. The concept is simple – a sales tax is a consumption tax imposed on the end user of a product. Thus, if your company purchases tangible personal property with the intent of reselling the property (i.e., not consuming it), it generally should not pay sales tax on that purchase. This concept holds true for leases as well. However, a purchaser must notify a seller of this intent by providing a certificate to the seller indicating that the purchased product will be resold. Otherwise, the seller is obligated to collect sales tax.

The failure to apply this foundational sales and use tax concept had a costly result for Continue reading »

Online Donations OK By IRS

The IRS released an Information Letter on March 29, 2013 stating that there is no prohibition against a 501(c)(3) utilizing an internet fundraising platform to raise funds. Which is good because that’s been around for a few years.

They did include some good suggestions.

• Be sure to consider any state laws and regulations that may apply.
• Be sure to make it clear on the website the status as a 501(c)(3).
• Providing something of value to donors may violate the rules against private benefit or inurement, so be sure to disclose the value and a statement that it is de minimus (unless it isn’t).
• Be sure to disclose whether or not, and how much, of a donation is tax deductible for the donor.

Read the letter here.

Charity Overstated Revenue by $222-Million and You Thought Your Restatement Was Bad

A Christian relief charity, World Help, grew rapidly in recent years but not as rapidly as originally reported. The organization’s Form 990 reported $239-million in revenue for 2011. The audited figure came in at $17-million. That’s 1400% off-base for those of you punching your 5-key along.

Once again, we have an issue of claiming value for donated medicine which is an ongoing blight in the nonprofit community, but in this case, the donors say they never gave any donation. The finger-pointing is heated and people are no longer cooperating with the press.

A significant impact is to the recipients of the donated medicine. The restatement has caused organizations that received goods from World Help to go scrambling to ensure their valuation is accurate and supportable.

Restatements are never fun but just think of World Help to help you keep perspective when you feel scandalized by one. Read more about the story here.

Maryland Bolsters R&D and Biotechnology Investment Tax Credits

Maryland Governor Martin O’Malley has signed into law legislation enhancing both the research and development tax credit and the biotechnology investment tax credit. The research and development tax credit will become a refundable credit and some companies that have been in business for more than 10 years will now be eligible for the biotechnology investment tax credit. Additional details on these changes are outlined below.

Research and Development Tax Credit

The research and development tax credit has been modified to allow a Continue reading »

Man Admits to Embezzling $1.1Mil from Atlanta Non-profit

Ralph Clark was the Director of Facilities at the Woodruff Arts Center in Atlanta, GA, comprised of the Atlanta Symphony Orchestra, Alliance Theatre,  High Museum of Art, and Young Audiences. He plead guilty to charges of embezzling over $1.1 million from the organization over approximately 8 years.

A few different schemes were in place. As part of his leadership position, he was allowed to authorize any vendor contracts up to $50,000.  He arranged for kickbacks  from vendors that totaled $168,000. He signed off on $780,000 worth of invoices for services that were not performed by his wife’s cleaning company. He billed $41,000 for services supposedly performed by students and $153,000 for services supposedly performed by himself after hours. It is unlikely much of any of that will get repaid.

According to the Atlanta Journal-Constitution, “some observers in the city questioned [the organization's] management oversight.”

Read more about the case here.

Ace Your School’s Annual Audit!

All public charter schools, and many private schools and parochial institutions, undergo an annual audit. While best practice is to structure work throughout each year to ensure a clean audit, now is a good time to assess where you are and address potential deficiencies. A little preparation goes a long way in ensuring a smooth and painless audit.

 Join Craig Stevens and Rob Eby of Aronson LLC for a free webinar led by Brad Olander, CEO of GoldStar, on May 16th at 11am.  During this convenient 30-minute session, we will address common questions including:

•  What does working throughout the year with the audit in mind look like?
• How do you assess potential deficiencies now?
• Who should be involved in the audit planning process?
• What are typical key audit tasks, processes, and deliverables?

 Executive directors, controllers, CFOs, principals and other school professionals serving in an administrative or finance role should register today for this important webinar!

 If you missed April’s webinar: “Financial Reporting-Support your board so they can support you,” be sure to visit our resources page to download the webinar!

Your Sales Tax Collection Obligations May Soon be Expanding

Federal courts have consistently ruled that retailers must have a physical presence in a state to be required to collect sales taxes. That has allowed online retailers to offer many customers tax-free shopping.  Equally important, the physical presence requirement has allowed smaller businesses using common carriers to expand their customer base without the administrative burden of collecting sales tax.  But, with Congress making headway on federal legislation that would eliminate the physical presence rule for many retailers and a recent New York State Court of Appeals decision going against Amazon and Overstock.com, the sales tax collection obligations for retailers may soon become more burdensome.

On March 19^th, 75 U.S. Senators supported a non-binding vote of approval for the Marketplace Fairness Act of 2013, a heavily-debated bill that is backed by a coalition of brick-and-mortar retailers such as Wal-Mart and Best Buy and vehemently opposed by certain online retailers such as eBay.  Although the vote was only a preliminary approval of a vague summary of the bill that was an amendment to a budget bill, the bipartisan nature of the vote suggests that remote seller legislation could be voted into law this year.

If enacted as is, the bill would allow states to require remote sellers with over Continue reading »

Obama’s FY14 Budget Proposal NOT Retirement Plan Friendly!

The Obama Administration’s recently released fiscal year 2014 budget contains several provisions that are less than advantageous as they relate to retirement plans. These provisions are by no means final, however, as Congress has yet to work its way through them. The proposed budget contains two specific provisions that would greatly reduce the attractiveness of retirement plans to small businesses: Continue reading »