Glenn Carniello is a Construction CPA based in Southern California. Glenn is a Partner with SingerLewak LLP, a CPA firm specializing in serving contractors. Topics include surety, accounting/reporting and tax matters, legal, succession planning, information technology, etc. If you wish to ensure delivery of new content as it is posted, please complete the subscription link below (to the right) and click on the confirmation link sent via email once received.
Monday, February 15, 2010
Tax Savings Opportunities - Enterprise Zones, Green Building Deduction, etc.
As I wrote in November, we’ve added a specialty group to our firm’s tax practice…our “SALT” Group (State and Local Tax). Since then, we’ve really been focusing on identifying opportunities surrounding the tax incentives in place for having a labor force work within an enterprise zone as well as the green building tax deductions available.
The credits for employees working in Enterprise Zones can be as much as $37,000 per employee earned over a 5 year period. This credit is front loaded (more is earned the first year than subsequent years) and is designed to incentivize hiring within these designated zones. Some of our contractors are benefitting signficantly from this program. Even if the office locations of the contractor do not fall within a zone, we explore whether any jobsites may fall within zones. If an employee spends at least half their time over the year in zone areas, the contractor may be eligible for a credit. As you can imagine, if a contractor's office(s) is located within a zone, or it has jobsites within zones, the dollar amount of the credit earned can be large.
There are many areas within Southern California and around the U.S. that are designated as enterprise (or Federal empowerment) zones as outlined in IRS Publication 954, Tax Incentives for Distressed Communities. If you aren’t a fan of reading IRS Tax Publications, an easier read might be found here at Wikipedia on Empowerment Zones. The tax credits available can be substantial and we are having great success working with our contractors in identifying, and taking advantage of, these tax savings opportunities.
There are also Local Agency Military Base Recovery Areas that are designated by the government which provide for tax incentives for the development of closed military bases. The Tustin Marine Corps Air Station and San BernardinoInternationalAirport and TradeCenter are examples of areas that have been designated with this program.
Another area where tax savings opportunities exist is with the Section 179D deduction. Different from the immediate expensing of capital expenditures, this deduction provides for an immediate tax deduction for implementing energy efficient systems within a building. These systems include improvements to the building envelope, HVAC, lighting and hot water delivery systems to name a few. Energy savings must be demonstrated in accordance with specified criteria contained in Standard 90.1-2001 of the American Society of Heating, Refrigerating and Air Conditioning Engineers and the Illuminating Engineering Society of North America. The systems must have been placed in service beginning January 1, 2006 through December 31, 2013. The deduction is the lesser of the cost of implementing the systems up to $1.80 per square foot. If only one system is implemented, the deduction is limited up to $0.60 per square foot.
A few useful websites on the subject are listed below…