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Credits and Incentives

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As the Leading National Specialty Tax Service Provider, since 2001 alliantgroup has Helped more than 27,000 Businesses Claim more than $16 Billion in Tax Credits and Incentives
Headquartered in Houston, Texas, alliantgroup ensures our clients receive the full benefit of available federal and state government-sponsored tax credits and incentives, such as the Research and Development Tax Credit and the Energy Efficient Commercial Buildings Deduction (179D). Over the years, alliantgroup’s team of experts has been on the forefront of major tax legislation, working directly with members of Congress to represent the needs and interests of small and middle-market businesses. We are dedicated to strengthening American business!

Putting it simply, the Employee Retention Credit (ERC) is exactly what it sounds like—business owners are being rewarded for their efforts to keep employees on payroll during the pandemic. We are working closely with decision makers in Washington on this nationwide effort to help the U.S. economy not only recover from the pandemic, but to come back stronger than before.

Congress recently passed a $1.9 trillion COVID-relief bill to streamline this recovery, and the Employee Retention Credit is one of the most lucrative opportunities business owners should take advantage of as we work towards our future and leave this pandemic behind us.

Below you will find additional information to better understand the ERC, estimate your credits, understand how you can benefit, and start the process of working with alliantgroup.

Who Qualifies for the ERC

The ERC has gone through significant updates, so even if you or your advisor have reviewed this credit before, we encourage you to take another look with one of our specialists. Unfortunately, the program is not yet living up to its full potential because many business owners are prematurely disqualifying themselves due to misinformation and rumors about who does or doesn’t qualify.

The overarching theme for businesses to focus on is how the coronavirus pandemic impacted our economy as a whole…so even if your business grew or was deemed an essential business during the pandemic, there are more qualifying factors to look at before you disqualify yourself.

This payroll tax credit is available to essential and non-essential businesses in any industry who endured the effects of the pandemic. Government orders—on federal, state, and local levels—are a major factor that many business owners had to adapt to over the last year and a half. Examples of affected businesses include a restaurant that could not let customers dine indoors or a manufacturer that had to slow their operations due to new health and safety restrictions.

Here are some impacts to consider that qualify your business for the Employee Retention Credit:

  • Full shutdowns;
  • Partial shutdowns;
  • Interrupted operations;
  • Supply chain interruptions;
  • Inability to access equipment;
  • Limited capacity to operate;
  • Inability to work with your vendors;
  • Reduction in services or goods offered to your customers;
  • Cut down in your hours of operation; and
  • Shifting hours to increase sanitation of your facility.

Consolidated Appropriations Act of 2021

In response to the rapid effects of the pandemic on our economy, the CAA was revamped in 2021. This was officially approved and signed by President Biden on March 11, extending deadlines and eligibility requirements for the Employee Retention Credit and other incentives. Another exciting update is the fact that businesses can now claim the ERC alongside PPP and other paycheck protection programs. Even if you already claimed PPP and got your loan forgiven, you still qualify for this credit!

Small and medium-sized businesses make up over 99% of all U.S. businesses in the U.S. When big players like Google, Apple, and other large companies are the only ones thriving, our economy is not in a good place. In 2021, the new COVID relief bill expanded the guidelines to help more businesses qualify. Even if you are in losses or do not have tax liability, you can still benefit.

Value of the Employee Retention Credit

The Employee Retention Credit was revamped in 2021 to reach more businesses and help more Americans stay employed. This is achieved by providing a refundable credit to offset or potentially eliminate payroll tax for business owners who were impacted by the pandemic. This is currently one of the largest credits available to business owners, delivering thousands of dollars in credits per employee with qualified wages.

A manufacturing company with an annual revenue of $115 million and 246 employees received a credit equal to $1.06 million in Q1 of 2021.

A few of their qualifying factors:

  • 20% drop in quarterly revenue
  • Numerous projects were canceled or delayed to COVID-related disruptions
  • Delayed production timelines caused by supply chain disruptions

Get $1000s per Employee

Since Congress passed the latest relief bill, we’ve helped many businesses and their advisors reduce or eliminate payroll tax, and even receive a refund. It’s important to review your impact and file with our team before the upcoming deadline. We have 1,000+ experts with hands-on experience working in every industry. Our specialists are passionate about helping U.S. businesses and will work closely with you and/or your financial advisors to maximize your credit while minimizing risk.

In addition to helping you claim the ERC, we will also review your business activity in relation to other credits you may qualify for to uncover more funding opportunities for your business to hire/retain more employees and invest in capital necessary to grow your business.

We are committed to reinforcing our economy and believe in the spirit of American business owners. We want to ensure nothing gets in the way of our country becoming #1 once again—not even a global pandemic!

The Research and Development (R&D) tax credit continues to be one of the best opportunities for businesses in the U.S. to reduce their tax liability substantially. Companies from various industries can qualify for this government-sponsored tax benefit just by performing their day-to-day activities. The R&D tax credit, as prescribed in 26 U.S.C. § 41, may be claimed by taxpaying businesses that develop, design, or improve products, processes, formulas, or software.

The credit was introduced in 1981 to increase technical jobs in America by encouraging businesses to invest in innovation. The distinction is calculated based on the wages of the employees performing the qualifying work, making it the most valuable tax incentive available to American businesses. Furthermore, it can be availed at the federal and state levels, with over 30 states giving credit to balance state tax liability.

The R&D tax credit is for businesses of all sizes, not just major corporations with research labs. However, what constitutes R&D concerning the credit is much more expansive than business owners realize, now with an extensive list of activities qualifying for the credit, such as processes related to applied sciences or other technical projects.

Who Qualifies for the R&D Tax Credit

Many businesses are still unaware that R&D credit eligibility extends beyond product development to include activities and even operations such as the latest manufacturing methods, software development, and quality improvements. Even start-ups may be able to utilize the R&D tax credit against their payroll tax for up to 5 years.

Several factors go into claiming the research and development tax credit. Since companies may claim the credit for both current and prior tax years, they can benefit from documenting their R&D activities to ensure that they are eligible to claim the credit in both situations.

Businesses need to continuously evaluate and document their research activities to authenticate the expenses consumed for each qualified research activity. While some estimations may be involved, they must have a genuine basis for the assumptions used to create those estimates.

So, if your company does any of the following, your business likely qualifies for the R&D tax credit:

  • Develops or designs new products or processes
  • Enhances existing products or processes
  • Improves upon existing prototypes and software

What Costs Qualify for the Credit?

Wages, sub-contractors, raw materials & supplies, and computer costs coupled with credible employee testimony can form the basis of an R&D tax credit claim. And here at alliantgroup, our comprehensive services can quickly identify and gather this information to substantiate your claim, ensuring you receive the total value you are entitled to under relevant I.R.S. guidelines and Treasury regulations.

How Has the R&D Tax Credit Expanded Over the Years?

Established in 1981, the R&D tax credit has gradually evolved, with new legislation, regulations, and judicial precedent expanding the number of businesses that can benefit from the credit and the savings accrued through this incentive.

The most impactful changes have occurred within the last two decades.

2003

With the removal of the Discovery Rule, a new and much more favorable standard to taxpayers was introduced, which stated that research activities no longer had to be “new to the world“ but instead “new to the taxpayer.“

2015

The Protecting Americans from Tax Hikes (PATH) Act made the R&D tax credit permanent and modified the credit for the benefit of small and mid-size businesses, and opened up its availability to start-ups.

How Do the New I.R.S. Updates Affect How We Claim the R&D Tax Credit?

The new information requirements pertain to the research credit claim’s business components, activities, and costs. For a claim to be valid, taxpayers need to provide the following:

Can the R&D Tax Credit Be Used To Offset the Alternative Minimum Tax?

Yes! The Protecting Americans from Tax Hikes (PATH) Act of 2015 leveled the playing field among companies, irrespective of size, allowing start-ups and small corporations alike to mitigate alternative minimum tax (AMT) limitations against the R&D tax credit.

How Does the R&D Tax Credit’s “Startup Provision” Work?

Start-ups and small businesses may qualify for up to $1.25 million (or $250,000 each year for up to five years) of the federal R&D tax credit to offset the Federal Insurance Contributions Act (FICA) portion of their annual payroll taxes.

To be eligible, a company must:

  • Have less than $5 million in gross receipts for the credit year; and
  • Have no more than five years of gross receipts.

How Did Tax Reform Affect the R&D Tax Credit?

While the TCJA implemented several sweeping reforms to the tax code in 2017, the R&D tax credit remains in place as one of the most valuable incentives available for the benefit of U.S. businesses.

Since its creation in the 1980s, the R&D tax credit incentive (section 41 of the US TAX Code) has become the most significant tax credit available in the country. From elections to tax reform to shifts in the global economy, more and more businesses have readjusted their respective industry strategies to leverage this tax credit and remain competitive.

In 2021 alone, we delivered over $2.3 Billion in credits and incentives to over 14,000 Businesses. We don’t want to stop there. alliantgroup has assembled teams of talented industry experts to research and provide information that you need to understand how Section 41 can genuinely benefit your business fully.

Download our whitepaper to understand the tax saving benefit of the R&D tax credit.

What is 179D tax deduction?

Section 179D tax deduction is a popular incentive that allows building owners to claim $1.80 per square feet for energy-efficient buildings or installing systems to that effect. To qualify, buildings either newly constructed or improved ones must meet or exceed some key energy reduction requirements and ASHRAE standards. It is a step towards incentivizing contractors, architects, designers and engineers for environmentally sound government buildings.

Who can claim 179D tax deduction? Engineers, architects, designers who are responsible for energy-efficient designs or renovation of government building. Contractors and builders who have increased the energy-efficiency of the government building under lighting, HVAC installations also qualify for the 179D tax deduction.

Who Qualifies for 179D

Engineers, architects, designers who are responsible for energy-efficient designs or renovation of government building.

Contractors and builders who have increased the energy-efficiency of the government building under lighting, HVAC installations also qualify for the 179D tax deduction.

  • K-12 Schools
  • Military Bases
  • Prisons
  • Courthouses
  • Universities
  • Libraries
  • City Parks

Taxpayers who invest in constructing new buildings or improving their existing buildings are eligible for 179D deduction. These investments must be aimed at reducing energy use. The improvements eligible under ASHRAE standards include:

  • Building envelope like improvements to walls, doors, floors, fenestrations, and roof.
  • HVAC improvements for energy efficiency
  • Interior lighting solutions for energy efficiency

What are the benefits of the 179D tax deduction?

You get anywhere between $90K and $540K depending on the commercial building size, lighting, HVAC, and envelope.

Allocation Process

In addition to the building owners and lessees who make the energy-efficient improvements to their commercial buildings, designers of government-owned buildings can also qualify for 179D under a special rule for public property. Under this rule, eligible businesses include architects, engineers, contractors or energy service companies that have performed energy-efficient work on new government buildings or renovations/retrofits of existing government buildings.

For companies to receive this deduction however, they must secure an allocation letter that allows the government entity to transfer the benefit to the taxpayer. The IRS has specific guidance regarding the information required in the allocation letter, so it is highly recommended that this process be facilitated by a qualified consultant.

At alliantgroup, we have on staff a Government Relations Department dedicated to securing allocation letters on behalf of our clients. alliantgroup has secured signed allocation letters from government entities in all 50 states.

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Working with CPA Firms

alliantgroup is proud to serve more than 4,000 CPA firms nationwide. Our deep bench of policy and industry experts work alongside firms to help them identify and maximize the incentives available to clients in a wide variety of industries. Together, we have helped our partner firms deliver more than $13 Billion in tax savings to their clients.

In addition to helping your clients mitigate tax liability, alliantgroup boasts an impressive Strategic Advisory Board comprised of former IRS Commissioners, policy leaders and professional service firm executives that provide our partner firms with valuable insight on everything from tax legislation to practice management.

Putting your firm and your clients in the best possible position is our number one priority, and we would welcome the opportunity to serve you and your firm. Explore the resources below to learn more about partnering with alliantgroup.

We’ve developed a quick checklist to help you identify the tax-savings opportunities available to your clients. Click here to download our exclusive Checklist for CPAs

Export Incentives

To encourage a better balance of trade and help keep U.S. products competitive in the world market, the government offers certain tax incentives for exporters. Specifically, these include the Extraterritorial Income Exclusion (EIE) and Interest-Charge Domestic International Sales Corporations (IC-DISC).

While the EIE has been phased out for current and future tax years, it is still accessible for prior years.

The IC-DISC is more attractive than ever due to the lowered rate of tax dividends created by the Job and Growth Tax Relief Reconciliation Act of 2003. An IC-DISC is a separate domestic corporation which must formally elect to be treated as an IC-DISC and is required to maintain a separate bank account and set of accounting books. The IC-DISC must also file an annual U.S. income tax return, even though it pays no U.S. income taxes. alliantgroup’s export incentive specialists help clients remain competitive globally by taking advantage of government export incentives, such as the IC-DISC (and EIE if accessible).

For more information on export incentives, please complete the form below to contact alliantgroup. For immediate assistance, contact David Ji.

IC-DISC | Interest Charge – Domestic International Sales Corporation

In the wake of changes to the Extraterritorial Income Exclusion (EIE) created by the American Jobs Creation Act of 2004, the EIE has been repealed from the Internal Revenue Code beginning in 2005. The phase-out period lasted for 2 years (2005 – 2006) and the EIE officially disappeared after 2006. Unfortunately, the EIE has gone the way of other export incentives for U.S. companies due to the imposition of economic sanctions by the World Trade Organization (WTO).

However, there is one export incentive that remains intact and is now more attractive than ever due to the lowered rate of tax dividends created by the Job and Growth Tax Relief Reconciliation Act of 2003. The Interest-Charge Domestic International Sales Corporation (IC-DISC) has survived the repeals of U.S. export incentives since 1984 and has never been targeted by the WTO.

Deriving tax benefits through an IC-DISC is slightly more complicated than the EIE because the latter simply required the completion of Form 8873 to calculate the exclusion. By contrast, an IC-DISC is a separate domestic corporation which must formally elect to be treated as an IC-DISC and is required to maintain a separate bank account and set of accounting books. The IC-DISC must also file an annual U.S. income tax return even though it pays no U.S. income taxes.

Who Qualifies for the IC-DISC?

Exporters that are good candidates for the IC-DISC include, but are not limited to, the following:

  • Manufacturers that directly export their products
  • Manufacturers that sell products that are destined for use overseas
  • Architectural and engineering firms who work on projects that will be constructed abroad (even though the work is performed in the United States.)
  • Pass-through entities and privately held corporations

Hiring Credits and Incentives

As the world economy has evolved and shifted over the decades, the United States Congress and nearly every state legislature has enacted job creation and employment related tax credits and incentive programs to encourage American businesses to create new jobs or retain or retrain existing employees.

The Work Opportunity Tax Credit

The Work Opportunity Tax Credit (WOTC) is a federal tax credit designed to benefit employers that hire individuals from target groups facing significant barriers to employment. Employers claim an estimated $1 billion each year from the WOTC, a program that has helped put Americans back to work while at the same time stimulating productivity and economic growth.

In late 2015, the WOTC was given a five-year extension with the passage of the Protecting American from Tax Hikes (PATH) Act, ensuring that the credit will be part of the tax code for the foreseeable future.

Eligible Target Groups

The credit is available to employers that hire the following individuals:

  • Veterans
  • Temporary Assistance for Needy Family (TANF) Recipients
  • Supplemental Nutrition Assistance Program (SNAP) Recipients
  • Designated Community Residents
    • Residents of Empowerment Zones or Rural Renewal Counties
  • Vocational Rehabilitation Referrals
  • Ex-Felons
  • Supplemental Security Income (SSI) Recipients
  • Summer Youth Employees
  • Long-Term Unemployed

Employer Benefits

  • Depending upon the target group the new hire belongs to, an employer can reduce their federal income tax liability by up to $9,600 per each eligible employee hired
  • The credit offsets an employer’s cost for recruiting, onboarding and training of new employees
  • There is no cap on the number of eligible people an employer can hire or the amount of tax credits that can be claimed each year
  • Private companies, C Corporations, S Corporations, LLC’s and even Non-Profit 501(c)’s can qualify

Benefits for American Workers

  • Aides workers who have consistently faced significant barriers to employment
  • Incentivizes workplace diversity and facilities access to good jobs for American workers
  • Helps workers move from economic dependency into self-sufficiency as they earn a steady income and become contributing taxpayers

How We Can Help

Whether your company is currently experiencing rapid growth, anticipating future growth, or just has frequent new hires, alliantgroup can assist your human resources professionals in developing a process that can provide a significant advantage to your bottom line each year. With nearly 1 in 10 new employees potentially eligible for this employment tax credit, it is important for businesses to implement a reliable and effective WOTC identification and qualification program now.

While the WOTC is a federal tax credit, the screening and certification processes are administered at the state level with varying policies, documentation, deadlines and submission requirements. alliantgroup’s convenient web portal provides a simple tool to assemble all of the required information and forms for employee certification and compliance with all federal and state policies, including the 28 Day Rule. Coupled with our team of tax experts, this approach makes claiming the WOTC nearly effortless by managing the entire process for you, including prescreening, certification, filing, calculations and reporting.

For immediate assistance, please contact Rizwan Virani.

State Hiring Tax Credits

A number of states offer various hiring credits that are similar to federal incentives such as the Work Opportunity Tax Credit and the Empowerment Zone Tax Credit that focus on job creation and making American businesses more competitive.

The tax credit amounts and the type of tax the credits offset vary by state, but here are a few examples from around the country:

California

Businesses in certain designated geographic areas can claim up to $73,500 in tax credits per eligible employee over a five-year period to offset income tax liability.

New York

Companies located in the state, or planning to move to the state, that will create or retain jobs in specific industries can claim a tax credit of 6.85% of wages per net new job for up to a 10-year period.

Georgia

Businesses in the state of George can take advantage of multiple job creation tax credits that provide as much as $5,000 in annual tax savings per job for up to five years. After offsetting corporate income tax liability, excess tax credits can also offset a company’s payroll withholding as well.

Tennessee

Businesses located in certain areas of the state can claim a tax credit of $2,500 for each new job created to offset franchise and excise tax liability.

Alaska

Businesses employing qualified veterans can claim a tax credit up to $3,000 per individual against the state’s corporate income tax.

Washington

Companies that hire unemployed veterans in a permanent full-time position can claim up to $1,500 in tax credits.

Many states offer similar employment and hiring tax credit incentives that can provide a significant advantage to your company’s bottom line. alliantgroup’s team of tax experts can evaluate your company’s qualifications for any available tax incentives and help you traverse the sometimes complex process of identifying, documenting and quantifying the benefits for your eligible employees.

For immediate assistance, please contact Rizwan Virani.

Federal Empowerment Zone Tax Credits

Congress established federal Empowerment Zones (EZ) across the United States to assist economically distressed urban and rural communities. To stimulate economic development and create jobs within these designated areas, the federal government offers a tax credit for businesses hiring employees that live and work in these communities.

Benefits of Empowerment Zone Tax Credits

  • Employers can claim an annual federal tax credit of up to $3,000 for each employee that lives and works in a designated Empowerment Zone
  • Subject to the statute of limitations, employers can retroactively claim the credit if they have not taken it previously to reduce their federal income tax

How We Can Help

alliantgroup performs the entire process of identifying, calculating, applying for and managing the process of claiming these EZ credits. Our team will work with you to review and evaluate your information and records, draft and submit the necessary forms and applications, and prepare the required calculations and filing documentation for you to claim the tax credit.

We also work with our clients on a quarterly basis to calculate any available current year Empowerment Zone Tax Credits. These credits can then be used to reduce your quarterly estimated tax payments or your withholding taxes, thus providing cash flow savings in advance of filing your tax returns.

For immediate assistance, please contact Rizwan Virani.

Indian Employment Credit

The Indian Employment Credit is a federal tax credit designed to encourage employers to hire and retain Native Americans who live on or near an Indian reservation. The credit creates economic opportunities and quality jobs for Native Americans and their families, while providing employers with vital tax benefits to stimulate immediate growth and growth in future years.

Tax Benefits

Employers can claim an annual federal tax credit of up to $4,000 per qualifying employee. There is no limit to the total value that can be claimed through the credit.

Qualifying Employees
For an employee to qualify a business for the Indian Employment Credit, they must meet the following requirements:

  • The employee must be an enrolled member of an Indian tribe or the spouse of an enrolled member of an Indian tribe
  • The employee performs substantially all of his or her services for the employer within an Indian reservation
  • While performing said services, the employee’s main home must be on or near that Indian reservation

How We Can Help

Employers can claim an annual federal tax credit of up to $4,000 per qualifying employee. There is no limit to the total value that can be claimed through the credit.

alliantgroup performs the task of identifying, calculating and managing the submissions for claiming these credits. Our team of experts will work with you to review and evaluate your records in order to prepare and submit all necessary calculations, forms and filing documentation. We effectively navigate the process allowing you to claim the maximum amount of available tax credits.

For immediate assistance, please contact Rizwan Virani.

Section 199A Pass-Through Deduction

The Section 199A deduction for pass-through entities was signed into law as part of the Tax Cuts and Jobs Act of 2017. Just as the TCJA benefited C corporations by reducing the corporate tax rate, the new 199A deduction was created to provide similar tax relief for the nation’s small and mid-size businesses by offering an up to 20% deduction to pass-through entities.

Overview

Section 199A allows for an up to 20% deduction from pass-through income for a domestic business that operates as either a:

  • Sole proprietorship
  • Partnership
  • S corporation

The deduction is also allowed for the combined income of qualified real estate investment trust (REIT) dividends and qualified publicly traded partnership (PTP) income.

How it Works

In its simplest form, the deduction is calculated off a specific income threshold for the taxpayer(s). If the taxpayer(s) taxable income for the year is less than the $315,000 threshold ($157,500 for single filers), then the new deduction is calculated simply by the lesser of:

  • 20% of qualified business income (QBI) or
  • 20% of the overall taxable income of the individual

Deduction Limitation

Taxpayers with taxable income below the threshold are not subject to limitations on the deduction and are not prevented from claiming the deduction on SSTB income.

If a taxpayer’s income exceeds the $315,000 ($157,500 for single filers) threshold, then certain limitations apply. If this occurs, the deduction will be limited to the lesser of:

  • 20% of the taxpayer’s qualified business income (QBI) or
  • THE GREATER OF:
    • 50% of W-2 wages with respect to the business, or
    • 25% of W-2 wages with respect to the business, plus 2.5% of the allocable share of unadjusted basis of all qualified property

Excluded Businesses

As a rule, pass-through income from a specified service trade or business (SSTB) is excluded from the deduction – unless the taxpayer’s taxable income is below the aforementioned thresholds for joint and single filers.

In general, an SSTB is defined as any trade or business performing services in one or more of the following fields:

  • Health
  • Law
  • Accounting
  • Actuarial Science
  • Performing Arts
  • Consulting
  • Athletics
  • Financial Services
  • Brokerage Services
  • Investing and Investment Management
  • Trading
  • Dealing in Securities, Partnership Interests, or Commodities
  • Any trade or business where the principle asset of such trade or business is the reputation or skill of one or more of its employees or owners

To Learn More

While the above information provides a general overview of the 199A pass-through deduction, the deduction is subject to a number of further regulatory guidelines and limitations. The 199A deduction is a valuable and worthwhile proposition for any qualifying entity to pursue, but it is a complex provision that requires a deep understanding of the new law.

For more information on the Section 199A pass-through deduction, please click here to download our whitepaper.