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6th Annual Tax Update

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Insero & Co. CPAs presents an overview of New York State and U.S. Tax reform, the economy and current trends, and what they mean for you. Whether you represent a large corporation or a small business, this update will help you get up to speed on current rules and regulations and plan for changes that may be on the horizon.

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6th Annual Tax Update

  1. 1. 6th Annual Tax Update Steven M. Mills, CPA
  2. 2. Steven M. Mills, CPA Steve is a Tax Partner with over 30 years of experience in public accounting. As our Tax Services leader, Steve is responsible for all tax services our firm delivers. His experience includes domestic, international, and state and local taxes with a focus on planning, transactional analysis and research. Steve is a hands-on leader who will ensure his department exceeds your expectations for all recurring compliance as well as the development, design, and implementation of tax strategies. www.inserocpa.com | 2Insero & Co. CPAs
  3. 3. TOPICS FOR TODAY 1. The Real Economy: The Long Quiet before the Fiscal Storm 2. Tax Reform 3. Federal Tax Update 4. NYS Tax Update 5. Current Events Insero & Co. CPAs www.inserocpa.com | 3
  4. 4. THE REAL ECONOMY: THE LONG QUIET BEFORE THE FISCAL STORM Insero & Co. CPAs www.inserocpa.com | 4 Used with permission as a McGladrey Alliance member
  5. 5. Fiscal Matters Insero & Co. CPAs www.inserocpa.com | 5 • Medium to Long Term Fiscal Outlook • The purpose of this presentation is to inform our clients and contacts of the necessary information to prepare for the medium and longer-term challenges ahead with respect to tax reform or lack thereof. • Current Trends • Growth in tax revenues and restraint in outlays (the “sequester”) have yielded a federal deficit at about 2.8 percent of GDP in 2014 with a small decline to 2.7 percent forecast for fiscal year 2015 both below the 30-year average of 3.1 percent. • Those improvements driven by a modest increase in economic activity mask the coming demographic and growth challenges that if left unchecked will drive up the costs of policy changes necessary to prevent a budget crisis over the next decade.
  6. 6. Fiscal Matters Insero & Co. CPAs www.inserocpa.com | 6 • The Policy Challenge • Paying for Social Security, Medicaid and Medicare. • Preserving the social contract under rapidly changing demographics and economics. • What “social contract” do we want to create? • Tax Reform and Revenues • A number of different alternatives that involve lowering marginal rates and broadening the base. • Reduce the cost of labor via tax reform • New revenue sources
  7. 7. Middle Market Implications • Why This is Important for our Client Base: • Expectations on taxes shape capital investment decisions over the medium to long-term that provide the foundation of rising productivity and living standards in the economy. • Should these firms notice a drift in the fiscal direction of the U.S. towards no reform and additional layers of taxation on top of an already inefficient tax code, they will pull back on capital investment and expansion plans in a way that bodes ill for growth, productivity and living standards. • This can already be seen in the cash hoards of various large companies • All lines of business and across industry areas will be impacted • Energy, coal, oil, manufacturing and transportation firms are particularly at risk Insero & Co. CPAs www.inserocpa.com | 7
  8. 8. Quiet Before the Fiscal Storm Insero & Co. CPAs www.inserocpa.com | 8 14 15 16 17 18 19 20 21 22 23 24 25 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 PercentageofGDP Revenues Outlays Average Revenues, 1965 to 2014 Average Outlays, 1965 to 2014 Source: McGladrey, CBO
  9. 9. Why Tax Reform Insero & Co. CPAs www.inserocpa.com | 9 • Budget on an Unsustainable Path: • If no tax and entitlement reform is put into place that reduces costs, broadens the base and brings in more revenues over the next few years additional layers of taxes via a value-added tax or a carbon tax are likely to be imposed on firms and the public. • Broadening the base: making sure more people pay taxes than currently is the case via the elimination of subsidies, tax expenditures and special interest carve outs in the tax code. • Should a mix of tax and entitlement policies not be put into place that stimulates faster rates of productivity and growth, the U.S. is heading toward another searing period of adjustment that will likely fall on the broad shoulders of middle market firms that comprise the bulk of the real economy. • Either way substantial change to the U.S. tax code is coming despite the temporary improvement in the fiscal condition of the economy.
  10. 10. Why Tax Reform Insero & Co. CPAs www.inserocpa.com | 10 • Policy Goal: Balancing the Primary Budget • Over the next few years policy makers should bring the primary budget deficit (the deficit excluding interest owed on past debt, which should be equal to roughly 2.2 percent of GDP on average over the next decade) to balance or to surplus. • That would provide the necessary space to respond to any economic shock or earlier-than-anticipated test of the political system’s capacity to produce significant budget and taxation reform. • Implementing policies that foster growth along with substantial tax and entitlement reform remains the key to putting the fiscal path on a sustainable footing.
  11. 11. Quiet Before the Fiscal Storm Insero & Co. CPAs www.inserocpa.com | 11 -6.0 -5.0 -4.0 -3.0 -2.0 -1.0 0.0 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Budget Deficit as a Percentage of GDP Alternative Baseline Source: CBO
  12. 12. Why Tax Reform and Economic Growth Matter Insero & Co. CPAs www.inserocpa.com | 12 • Policy Goal: Balancing the Primary Budget • From 1950 to 2007, the U.S. averaged 3.5 percent annual real growth. Since the end of the recession in 2009, it’s been 2.3 percent. • The Federal Reserve has reduced it’s long-run real growth projection to 2.15 percent, which is in line with the CBO’s 2.3 percent projection over the next decade. Such a slow pace significantly challenges the support of entitlement obligations to future retirees. • Impact • The one percentage point lost in growth translates to around $1 trillion in output lost by 2025 and more than $3 trillion lost 20 years later. Assuming an average federal tax rate of about 21.7 percent (average 1990-2010) during the next decade indicates a net loss of about $230 billion in tax revenue to support demand for medical and retirement services.
  13. 13. Demographic Realities Insero & Co. CPAs www.inserocpa.com | 13 • Pressure Starts in 2016 • 2016-17: CBO estimates the Social Security Disability Insurance facility—comprised of the Old-Age and Survivors Insurance and Disability Insurance Fund—will exhaust its trust fund. • At that point the government will start shifting funds from the old age and survivors benefits-the other leg of social security-bringing forward the day it will exhaust its fund. • 10 Years Out • The next and most serious test will begin in 2024 when the ratio of the population aged 65 and older to that aged 20-64 rises to 31 percent from 14 percent. • During the succeeding 15 years, the tidal wave of retirees will increase, sending that ratio to 39 percent. During that time spending on Social Security will increase to 6.3 percent of GDP in 2039 from 4.9 percent.
  14. 14. Alternative Paths Insero & Co. CPAs www.inserocpa.com | 14 • Value Added Tax • A value added tax is a form of a consumption tax that is placed on a good or service wherever value is added at each stage of production and again at the final sale. • Carbon Tax • A carbon tax is a tariff on fossil fuels such as coal, oil and natural gas and on biofuels. • Like a value added tax, a carbon tax would not be evenly distributed. Producers of energy, coal, oil, transportation firms and producers of goods and services that resulted in large amounts of C02 would bear a disproportionate share of the burden of the cost of adjustment to such a new tax. • The impact on households would be regressive and hit lower income households, small and medium enterprises in a way that is less than how it would hit wealthy households or larger firms.
  15. 15. Prognosis? • This path of unsustainability, along with currency factors, led, over time, to the current Greek situation. • Low growth • Aging populace • High unemployment • High government spending • Massive tax evasion • And lack of independent national currency • Obviously, the U.S. has some huge advantages that Greece does not have, but it is a sobering thought. Insero & Co. CPAs www.inserocpa.com | 15
  16. 16. Form 1040-GR Name: Address: Note: this will not effect your refund Income: (check all that apply) Tax on Income: (Estimate if necessary) Amount already paid: Amount due: (check all that apply) Joe Taxpayeropoulos Athens, Greece  Please give 3 Euros to the nice people at the European Union Bank  No, do not give 3 Euros to those thieves  I have no idea  You have no idea  ________  ZERO  Check is in the mail  Come and get it Insero & Co. CPAs www.inserocpa.com | 16
  17. 17. TAX REFORM Insero & Co. CPAs www.inserocpa.com | 17 Used with permission as a McGladrey Alliance member
  18. 18. Tax reform (cont.) 2012 tax revenue Insero & Co. CPAs www.inserocpa.com | 18 Individual Income Tax 46% Other Taxes (Customs, Estate, etc.) 5% Corporate Income Tax 10% Corporate FICA Tax 18% Excise Taxes 3% Individual FICA Tax 18%
  19. 19. Tax reform (cont.) Insero & Co. CPAs www.inserocpa.com | 19 1. Economy and job growth 2. Business taxes 3. International tax structure 4. Complexity 5. Permanency 6. Legacy 1. Deficit down 2. Unwillingness to compromise 3. Philosophy • Revenue-neutral • Revenue-raising Key InhibitorsKey Drivers
  20. 20. Tax reform (cont.) 1. Economy and Job Growth • Economic improvement has been slow but seems to be accelerating • Wage growth has been uneven • Job growth has been slow • Participation rate is lowest since the 1970s • Average length of economic expansion post-WWII: 7 years, and we are in the 6th year of a “recovery” • “It’s the economy, stupid!” Insero & Co. CPAs www.inserocpa.com | 20 Key Drivers
  21. 21. Tax reform (cont.) Insero & Co. CPAs www.inserocpa.com | 21 Key Drivers 2. Business Taxes Corporate Tax Rates Top 10 1 USA 39.0% 2 Japan 38.0% 3 France 36.1% 4 Argentina 35.0% 5 Pakistan 35.0% 6 Brazil 34.0% 7 Venezuela 34.0% 8 Belgium 34.0% 9 Germany 33.0% 10 Colombia 33.0% Others (selected) 15 Mexico 30.0% 22 Canada 26.2% 23 China 25.0% 35 UK 24.0% 38 Russia 20.0% 41 Greece 20.0% 46 Singapore 17.0% 49 Ireland 12.0% 50 United Arab Emirates 0.0%
  22. 22. Tax reform (cont.) Insero & Co. CPAs www.inserocpa.com | 22 Key Drivers 2. Business taxes Corporate Tax Rates Cutting tax expenditures to lower the rate • Roughly, a 1%-point reduction in the U.S. corporate tax rate costs $110 billion/10 years • Thus, reducing the statutory corporate rate from 35% to 25% requires “base broadening” of up to $1.2 trillion/10 years Top corporate expenditures 1. Deferral offshore 2. Tax-exempt bond interest 3. Manufacturing activities deduction 4. Credit for low-income housing 5. Deferral of gain on non-dealer installment sales
  23. 23. Tax reform (cont.) Insero & Co. CPAs www.inserocpa.com | 23 Key Drivers 2. Business Taxes — Flow-through Businesses Business Rate Structure If Only Corporate Taxes Reduced Rates Top Corporate Rate 25% Top Individual Rate 39.6% Does a rate differential of that size make sense? Note: This corporate rate achieves virtual parity with flow throughs (40% v. 39.6%) when corporate plus capital gain/dividend rates are combined. Coincidence?
  24. 24. Tax reform (cont.) Insero & Co. CPAs www.inserocpa.com | 24 Key Drivers 2. Business Taxes • Areas of previous agreement • Corporate tax changes should be revenue-neutral within the corporate community (Note: no similar agreement for individuals) • Lower rate • Broader base
  25. 25. Tax reform (cont.) Insero & Co. CPAs www.inserocpa.com | 25 Key Drivers 3. International Tax Structure • United States is only developed country with: • Rate > 30 percent and • Worldwide tax system • 65 percent of top 20 economies have a territorial system
  26. 26. Tax reform (cont.) Insero & Co. CPAs www.inserocpa.com | 26 Key Drivers 3. International Tax Structure • Major areas of focus • Territorial-like system versus existing “worldwide” system • Base erosion rules • Recent proposals • Patents • Repatriation incentives
  27. 27. Tax reform (cont.) Insero & Co. CPAs www.inserocpa.com | 27 Key Drivers 4. Complexity • Facts • Code: 4 million words • Regulations: 5+ million words • Small businesses: 90 percent use a tax return preparer • Individuals: • 60 percent use a tax return preparer • 31 percent use software • 9 percent of returns are wrong!!! • Hours: 6.1 billion hours/year to fill out tax forms • Cost of compliance: $168 billion annually
  28. 28. Tax reform (cont.) Insero & Co. CPAs www.inserocpa.com | 28 Key Drivers 4. Complexity War and Peace 562,579 788,000 928,913 2,279,492 928,913 788,000 562,579 3,980,000
  29. 29. Tax reform (cont.) Insero & Co. CPAs www.inserocpa.com | 29 Key Drivers 5. Permanency • Major portions of the Internal Revenue Code expire every year, leading to increased complexity
  30. 30. Tax reform (cont.) Insero & Co. CPAs www.inserocpa.com | 30 Key Drivers 6. Legacy • Believe it or not, members of Congress are concerned about their legacy……. and their image
  31. 31. Insero & Co. CPAs www.inserocpa.com | 31 Tax reform (cont.) Three main areas of focus Corporate • General consensus is that many tax expenditures should be eliminated in favor of lower rate • Republicans target 25% • Democrats aim for 28% International • Republicans pushing for territorial system • Democrats skeptical of territorial over base erosion concerns • Republicans also favor anti-base erosion provisions – making international tax reform revenue- neutral Individual • Republicans propose lowering top individual rate to 25%; one other bracket of 10% plus surtax and eliminating tax expenditures  Republicans: revenue-neutral  Democrats: revenue increase
  32. 32. Tax reform - Corporate Key issues Insero & Co. CPAs www.inserocpa.com | 32 • Can corporate rate be lowered enough to make losing tax expenditures “worth it”? • Will deductibility of interest be limited? • What is the rate? • What tax expenditures get eliminated • Impact on pass-through entities if expenditures eliminated, only corporate rate lowered? • Will large pass-through entities be taxed as corporations?
  33. 33. Top 10 corporate tax expenditures FY2013 - 17 Insero & Co. CPAs www.inserocpa.com | 33 0 25 50 75 100 125 150 175 200 225 250 275 300 Deferral of active income of controlled foreign corporations Tax exempt bond interest Production/manufacturing activities deductions Credit for low-income housing Deferral of gain on non-dealer installment sales Expensing of R&E expenditures Deferral of gain on like-kind exchanges Inventory methods and valuation R&E credit Inventory property sales source rule exception $b Source: Joint Committee On Taxation (JCS-1-13) .
  34. 34. Tax reform - Flow-throughs Key issues Insero & Co. CPAs www.inserocpa.com | 34 • Do I get a rate cut? • What is the rate? • What tax expenditures get eliminated? • Is lowering the rate “worth it”? • Interest deductibility • Accounting methods • Cash ($10 million) • Expensing of fixed asset acquisitions (AKA Bonus depreciation and Section 179) • FICA Coordination among S Corps and LLCs
  35. 35. Tax reform - International Key issues Insero & Co. CPAs www.inserocpa.com | 35 • Territorial versus worldwide • Minimum tax on foreign earnings • Base erosion • Intangibles
  36. 36. Tax reform - Business Political trade-offs Insero & Co. CPAs www.inserocpa.com | 36 • Corporate interests versus pass-throughs • Corporate-only base broadeners versus comprehensive base broadeners • Multinational interests versus domestic-only interests • Capital-intensive entities versus labor-intensive entities • Industry versus industry • Historic versus new entities within the same industry • Specific tax incentives versus rate reduction as a better economic growth driver • Transition rule design
  37. 37. Tax reform - Individuals Key Questions For Individuals To Ask Insero & Co. CPAs www.inserocpa.com | 37 1. Will my taxes go up or down? 2. Is my life simpler or more complex? 3. Will the tax law become stable? 4. Will there be two Levels of tax? 5. Do I feel I am treated fairly?
  38. 38. Tax reform - Individuals (cont.) How do you broaden the tax base? Itemized deductions and exclusions • Dollar cap • Percentage of AGI cap • Limit tax benefit, e.g., 28 percent • Reduce or eliminate specific exclusions and deductions Insero & Co. CPAs www.inserocpa.com | 38
  39. 39. BREAK Insero & Co. CPAs www.inserocpa.com | 39
  40. 40. Tax reform - Individuals Insero & Co. CPAs www.inserocpa.com | 40 Distribution of Income, Excise and Employment Tax (2011) Combined Income, Social Insurance, and Excise Taxes Under Present Law Income Category Number of Returns (000s) Share of Returns Share of Income $ Billions Percent Share Average Tax Rate Less than $10,000 20,429 13.1% 0.8% 4.4 0.2% 5.3% $10,000 to $20,000 16,910 10.8% 2.4% 1.6 0.1% 0.6% $20,000 to $30,000 18,400 11.8% 4.2% 23.9 1.3% 5.2% $30,000 to $40,000 15,387 9.8% 5.0% 46.2 2.5% 8.6% $40,000 to $50,000 13,602 8.7% 5.7% 64.3 3.5% 10.5% $50,000 to $75,000 26,719 17.1% 15.3% 212.1 11.7% 12.8% $75,000 to $100,000 16,955 10.8% 13.6% 218.6 12.1% 14.9% $100,000 to $200,000 22,128 14.1% 27.6% 574.1 31.7% 19.3% $200,000 to $500,000 4,945 3.2% 12.6% 327.2 18.1% 24.1% $500,000 to $1,000,000 631 0.4% 3.9% 113.3 6.2% 26.8% $1,000,000 and over 330 0.2% 8.9% 226.9 12.5% 23.6% Total, All Taxpayers 156,435 100.0% 100.0% 1,812.4 100.0% 16.8% Source: IRS
  41. 41. Tax reform - Individuals (cont.) Insero & Co. CPAs www.inserocpa.com | 41
  42. 42. Tax reform - Individuals (cont.) Insero & Co. CPAs www.inserocpa.com | 42 Source: Putting a Face on America’s Tax Returns: A Chartbook (First Edition), Tax Foundation (2012), ISSN 2169-9534
  43. 43. Tax reform - Individuals (cont.) Insero & Co. CPAs www.inserocpa.com | 43 Source: Putting a Face on America’s Tax Returns: A Chartbook (First Edition), Tax Foundation (2012), ISSN 2169-9534
  44. 44. Tax reform - Individuals (cont.) Insero & Co. CPAs www.inserocpa.com | 44 Source: Putting a Face on America’s Tax Returns: A Chartbook (First Edition), Tax Foundation (2012), ISSN 2169-9534
  45. 45. Tax reform - Individuals (cont.) Insero & Co. CPAs www.inserocpa.com | 45 Source: Putting a Face on America’s Tax Returns: A Chartbook (First Edition), Tax Foundation (2012), ISSN 2169-9534
  46. 46. Tax reform - Individuals (cont.) Insero & Co. CPAs www.inserocpa.com | 46 Source: Putting a Face on America’s Tax Returns: A Chartbook (First Edition), Tax Foundation (2012), ISSN 2169-9534
  47. 47. Tax reform - Individuals (cont.) Top 10 individual tax expenditures Insero & Co. CPAs www.inserocpa.com | 47 All amounts in billions
  48. 48. Insero & Co. CPAs www.inserocpa.com | 48 President’s previous Framework For Business Tax Reform: At a glance Cut corporate rate • 28% corporate rate • No comprehensive list of provisions to be cut, but some highlighted: • LIFO, oil/gas, carried interest, jet depreciation • Depreciation, deductibility of interest expense should also be considered Manufacturing incentives • Cut effective rate for manufacturers to 25% by refocusing section 199 manufacturing deduction • Increased to 10.7% • Permanent R&D credit • Energy incentives International tax • Comes out against pure territorial system • U.S.-based companies to pay an unspecified minimum tax on foreign earnings Small business • Make tax filing simpler • Allow expensing up to $1 million in investments • Allow cash accounting on businesses with up to $10 million in gross receipts
  49. 49. Senator Hatch’s seven principles for “comprehensive tax Reform for 2015 and beyond” 1. Promote economic growth 2. Fairness 3. Simplicity 4. Permanence 5. Enhance competitiveness 6. Promote saving and investment 7. Revenue-neutral Insero & Co. CPAs www.inserocpa.com | 49
  50. 50. Senator Hatch’s seven principles for “comprehensive tax Reform for 2015 and beyond” (cont.) 1. Promote economic growth • Reduce high marginal tax rates 2. Fairness • Broaden the base and lower tax rates 3. Simplicity • Eliminate exclusions, exemptions, deductions and credits 4. Permanence • Enact or eliminate temporary provisions 5. Enhance competitiveness • Reduce high business tax rates • Eliminate worldwide taxation Insero & Co. CPAs www.inserocpa.com | 50
  51. 51. Senator Hatch’s seven principles for “comprehensive tax Reform for 2015 and beyond” (cont.) Insero & Co. CPAs www.inserocpa.com | 51 6. Promote saving and investment • Savings incentives for individuals AND 7. REVENUE NEUTRALITY “Tax reform should not be used as an excuse to raise taxes on the American people or on U.S. businesses”
  52. 52. Tax reform - A key issue Insero & Co. CPAs www.inserocpa.com | 52 DYNAMIC REVENUE SCORING In the House of Representatives
  53. 53. FEDERAL TAX UPDATE Insero & Co. CPAs www.inserocpa.com | 53 Used with permission as a McGladrey Alliance member
  54. 54. Tax extenders Insero & Co. CPAs www.inserocpa.com | 54 • Over 50 tax provisions were extended through Dec. 31, 2014, then expired…again • Major business provisions: • Research and development (R&D) tax credit • Bonus depreciation • Section 179 ($500,000) • S corporations (charitable deductions/built-in gains tax) • Major individual provisions: • State and local sales tax deduction • IRA charitable contributions • Issue: What about 2015? The never ending problem
  55. 55. Government Accountability Office report on partnership compliance and audits Insero & Co. CPAs www.inserocpa.com | 55 • Low IRS audit rate • But much better tax compliance than in corporate sector! • Multiple-tier entities and TEFRA rules delay and deter IRS audits of partnerships and LLCs • But the same factors may make partnerships more conservative–not wanting changes for the investors, even positive changes • Better case selection • Potential change: Who owes tax on audit?
  56. 56. Importance of flow-through businesses in the economy today Insero & Co. CPAs www.inserocpa.com | 56 94% of all businesses 54% of all employees 36% of all business receipts 44% of all business taxes 64% of all new jobs–past 15 years
  57. 57. The rise of flow-throughs Insero & Co. CPAs www.inserocpa.com | 57 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Percent of total business receipts C corporations versus tax partnerships and S corporations Source: IRS Statistics of Income S Corps and Tax Partnerships C Corporations
  58. 58. Flow-through advantages since 1986 Insero & Co. CPAs www.inserocpa.com | 58 • Top individual rate lower than top combined rate on corporations PLUS capital gains (or dividends) • Question: Timing of dividends/capital gains? • Easier access to capital for non-publicly traded entities • Limited liability companies and check-the-box • Greater legal protection and one level of tax What about 2015, “C” versus “S”? • Current pass-through advantage: 7 percent to 8 percent • 39.6 percent versus 48.0 percent (without 3.8 percent tax) • 43.4 percent versus 50.47 percent (with 3.8 percent tax)
  59. 59. Flow-through businesses: Key tax technical issues Insero & Co. CPAs www.inserocpa.com | 59 • C versus S • FICA tax–S corporation “reasonable compensation” • Uncertain Applicability to LLC activities. MAJOR issue for LLCs • Tangible property regulations • IRS deployment of audit resources from large businesses to mid-size businesses (C and S) • Net investment income tax (3.8 percent)
  60. 60. The 3.8 percent tax on net investment income Insero & Co. CPAs www.inserocpa.com | 60 • Planning for the 3.8 percent tax • Sounds small, but equivalent to a large surtax • 9.6 percent surtax on ordinary income • 19 percent surtax on capital gains and dividends • Do you have sufficient “activity” to be exempt? • Challenges: • Dispositions of interests in pass-throughs • Rental and Estate income • Areas of focus: (1) passive activity planning, (2) like-kind exchanges, (3) installment method, (4) retirement planning (including Roth accounts), (5) capital gain planning, (6) municipal bonds
  61. 61. NYS TAX UPDATE Insero & Co. CPAs www.inserocpa.com | 61
  62. 62. Startup NY • Benefits • 100% business tax credit for 10 years • 100% sales tax exemption • 100% property tax exemption (usually) • 100% income tax exemption for net new employees Insero & Co. CPAs www.inserocpa.com | 62
  63. 63. Startup NY (cont.) • Qualifiers • Must be located in certain properties, generally college campuses or property specifically identified by NYS. • Some limitations (square feet, etc.) • Must create jobs immediately • Must be new business to NYS, or expansion of existing (no loss of jobs anywhere else) • Alignment with academic mission of host campus • Must maintain net new jobs • Many prohibited businesses – service, real estate, financial, restaurants, hotels, etc. are prohibited. Insero & Co. CPAs www.inserocpa.com | 63
  64. 64. Corporate Tax Reform Insero & Co. CPAs www.inserocpa.com | 64 • Effective 1/1/15, say goodbye to: • Corporate AMT • Investment allocation • Complex NOL rules
  65. 65. Corporate Tax Reform (cont.) • Say “Hello” to • 0% tax rate on income of manufacturers. C Corps only!! • Real property tax credit for manufacturers (unrelated lessor) • New economic nexus rules (for out of state companies) at $1,000,000 to NYS customers Insero & Co. CPAs www.inserocpa.com | 65
  66. 66. Corporate Tax Reform (cont.) • So, you’re an S Corp manufacturer, unable to take advantage of the 0% NYS rates…what do you do? Insero & Co. CPAs www.inserocpa.com | 66
  67. 67. CURRENT EVENTS Insero & Co. CPAs www.inserocpa.com | 67
  68. 68. Current Events • House of Rep 6/20/2015 – Held hearings on examining the taxation of foreign earnings as a potential revenue source for funding Highway Trust Fund. Sen Schumer has said this could be a way of accomplishing significant International Tax Reform • Fed Tax Alert 7/16/15 • Lawmakers to consider Extender package “early” in 2015 • Proposed modification to R&D Credit • WSJ – 7/20/2015 • Hillary Clinton proposes revised Capital gain rates Insero & Co. CPAs www.inserocpa.com | 68
  69. 69. Current Events (cont.) • Temporary Highway Act Signed 8/3/15 • More reporting on home mortgage interest • Adjusts Tax filing due dates • Veterans health care coverage eased • Estate reporting Insero & Co. CPAs www.inserocpa.com | 69
  70. 70. Thank you Thank you for your attendance at today’s program. For more information regarding the topics discussed today, please feel free to contact: Steven M. Mills, CPA Tax Partner steven.mills@inserocpa.com 585.697.9629 Insero & Co. CPAs www.inserocpa.com www.inserocpa.com | 70Insero & Co. CPAs
  71. 71. Insero & Co. CPAs Insero & Co. CPAs www.inserocpa.com | 71 Certified Public Accountants Business & Financial Advisors Rochester | Ithaca | Corning Cortland | Watkins Glen Disclaimer These materials were prepared solely for the purpose of continuing professional education. They are distributed with the understanding that Insero & Company CPAs, P.C. and its employees are not engaged in rendering legal, accounting, or other professional service as part of this CPE presentation. If advice or other expert assistance is required, the services of a competent professional person should be sought. Please contact an Insero team member with any questions. The information contained herein is general in nature and based on authorities that are subject to change. Insero & Company CPAs, P.C. guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omission, or for results obtained by others as a result of reliance upon such information. Insero & Company CPAs, P.C. assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein. This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situation. Any information contained herein, or on any website or email link associated with this document is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer. Insero & Company CPAs, P.C. is an integral part of the McGladrey Alliance, a premiere affiliation of independent accounting and consulting firms in the United States, with more than 83 members in 42 states and Puerto Rico. McGladrey Alliance member firms maintain their name, autonomy and independence and are responsible for their own client fee arrangements, delivery of services and maintenance of client relationships. McGladrey Alliance is a business of McGladrey LLP which operates under the McGladrey brand as the fifth largest U.S. provider of assurance, tax and consulting services. McGladrey, the McGladrey logo and the McGladrey Alliance signatures are used under license by McGladrey LLP. McGladrey, the McGladrey logo, the McGladrey Alliance signatures and The McGladrey Classic logo are used under license by McGladrey LLP. Correspondent of the RSM International network of independent accounting, tax and consulting firms.

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