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 »
Based on a report by the National Venture Capital Association, Network World has compiled its list of best places for tech startups and the DC area has come in at number 6. The NVCA list measures overall venture capital investment in each respective market to compile its data.
D.C. and the surrounding metro area are home to the federal government and this drives a lot of the trends in this busy market. The VC market is heavily connected to the government, specifically the department of homeland security and defense industry, according to the NVCA. (Source)
On June 28, 2012, the Supreme Court narrowly voted to uphold the majority of the Affordable Care Act (“the Act”). In the end, the basis for the decision was the federal government’s authority to tax. Under the Act, certain individuals that do not elect health insurance coverage must pay a financial penalty. This is commonly referred to as the Individual Mandate component of the Act. Five of the justices agreed that, while President Obama has taken great care to stay clear of the word “tax” in his healthcare reform efforts, such a financial penalty may reasonably be characterized as a tax. While the “tax” versus “penalty” debate makes for good TV, it remains to be seen how relevant it is to the overall healthcare reform debate. Surely from now until the Presidential election in November, the Democrats’ position Continue reading »
The state taxation of digital goods and services that are delivered electronically (i.e., music and book downloads) may soon be regulated under legislation currently working its way through both houses of Congress. HR 1860 (S. 971 in the Senate), the Digital Goods and Services Tax Fairness Act of 2011, was introduced on May 12, 2011, “to promote neutrality, simplicity, and fairness in the taxation of digital goods and digital services”. The bill is intended to prevent discriminatory taxation on digital goods and services (such as tax imposed at a higher rate than the rate that would be applied to non-digital goods and services), and taxation in multiple jurisdictions.
Under H.R. 1860, taxes on the sale of digital goods and services may only be imposed by the state of the customer’s address. If the sale of digital goods or services is made to multiple locations of a customer, the seller may determine the customer’s tax address using the address as provided by the customer.
The legislation also places a limitation on the expansive interpretation of existing tax laws that apply to the sale or use of tangible personal property, telecommunications services, Internet access services, or audio/video programming services that may be construed to be imposed on the sale or use of a digital good or service.
Since digital goods and services are not tangible personal property, many states, at present, do not tax the sales of such items. There is concern, however, by proponents of the legislation, that states – in the midst of an economic downturn – will begin aggressively seeking revenue and begin taxing digital goods and services at potentially discriminatory high rates – and in multiple jurisdictions.
Opponents of the bill, the Federal Tax Administration (FTA), point out that the bill’s provision giving exclusive taxing jurisdiction at the purchaser’s address would preclude the seller’s state from imposing a tax on the sale, potentially causing the sale to escape taxation entirely if the seller does not have presence in the purchaser’s state (since the purchaser’s state is also not allowed to impose a sales tax unless the seller has a physical presence there (Quill Corp v. North Dakota, 504 U.S. 298 (1992))). (This is an argument used by the FTA – not necessarily the position of Aronson LLC – as there are more complex state sales and use tax laws that could apply here as a counter to the FTA’s position.)
If you offer digital goods or services of any kind, it is important to keep close track of your sales, including the states your customers are in. You should also consult with a tax expert if you have any questions regarding compliance with state sales tax laws.
By: Laura Miller
The Qualifying Therapeutic Discovery Project provides $1 billion in Federal tax credits or grants to biotech firms. The grant was initially a one-time grant that was introduced last year to encourage research and development in biotech firms. Nearly 3,000 firms received an award but there was wide spread disappointment in the manner the grants were distributed and how much each firm was awarded.
Recently, Congresswomen Susan Davis, D-Calif., and Allyson Schwartz, D-Pa., introduced a bill that would renew the $1 billion annual grant until 2017. According to BIO CEO Jim Greenwood, the renewal of the grant will provide needed financial support to biotech firms that are working on breakthrough therapies and cures that could eventually lower the cost of health care over the next 30 years.
By: Tosin Hassan
The Federal government is providing an exclusion on the gain of Qualified Small Business Stock meeting certain requirements. While this is not specifically geared at the technology industry, many technology companies would meet the requirements to be a “Qualified Small Business”. The investment date has recently been extended through the end of 2011 providing an excellent incentive for investors to jump on board and for companies to identify themselves as Qualified Small Businesses and promote it to potential investors.
The article below was originally published by Patrick Smith, CPA, Seattle, WA, Francois Hechinger, CPA, San Francisco, CA, and John M. Nuckolls, J.D., San Francisco, CA. Published May 01, 2011 in The Tax Advisor, an AICPA publication.
For those technology companies that don’t qualify as a “Qualified Small Business” for the Federal exclusion, Virginia is offering capital gain exemption for technology businesses. While this means that the investor may have to pay Federal capital gains tax on any gains from their investment in the technology company, they would be able to exclude the gain from their Virgina tax return. The memo below, as posted on the Virginia government website, describes the details for the qualification and exemption process.
Maryland has also lined up some tax policy changes to encourage investors to invest in technology in their state including extending their research and development tax credit (http://business.marylandtaxes.com/taxinfo/taxcredit/randd/default.asp) and increasing funding for the biotech tax credit (which is discussed in more detail in a separate blog post).
The Qualified Therapeutic Discovery Project Program (QTDP) provides a credit or grant that covers up to 50 percent of the cost of qualified research incurred in 2009 or 2010 up to a maximum credit of $5 million per company. For those companies that applied during 2010 and ultimately received certification from the IRS for 2009 qualified expenses, an amended 2009 return may be necessary.
Because grants/credits were ultimately paid late in 2010 even for the 2009 tax year, many taxpayers had already filed their 2009 tax returns. The IRS has been very clear that those that receive the credit or grant can not deduct the expenses that were certified by the IRS as part of the QTDP program. This ensures that there is no double benefit to the taxpayer. Further, if a research tax credit (or orphan drug credit) was also claimed on the 2009 return, the calculation for that credit must be reviewed and adjusted as necessary to ensure that expenses claimed through the QTDP program were not also claimed in calculating the research tax credit.
Does your business provide research and development services using a milestone arrangement? The new FASB standards in ASU 2010-17 provides guidance on defining a milestone and determining when it may be appropriate to apply the milestone method. Research and development arrangements frequently include payment provisions whereby a portion or all of the consideration is contingent upon milestone events such as successful completion of phases in a drug study or achieving a specific result from a research and development effort. An entity that recognizes these milestone payments as revenue in their entirety upon achieving the related milestone is using the milestone method. Continue reading »
Submitted by Don Gutman
One of the constant accounting challenges companies face is the development of an appropriate revenue recognition model for the broad array of products and services they sell to customers. We have seen many examples of public companies restating financial statements as a result of using inappropriate revenue recognition methods. A classic example of this issue can be found in the cell phone industry where it is common for the seller to provide a free phone, a multiple-year service contract and other services all in one contract with the customer. The customer in turn may pay a one-time activation fee, a highly discounted fee for the phone and a separate monthly fee for the basic service. In this fairly basic example, products have been delivered, cash flows have started and a reasonable expectation of future payments exists. Continue reading »
Does your business sell a product that includes a software component that is essential to the product’s overall functionality? If so, the newly approved FASB Accounting Standards Update (ASU) (2009-14) provides guidance that will be applied prospectively for revenue arrangements entered into or materially modified for fiscal years beginning on or after June 15, 2010, and early adoption is permitted.
The FASB standards require that all hardware components of a tangible product containing software components be excluded from software revenue recognition guidance Continue reading »
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