The IRS has published several news releases over the past couple of weeks, summarizing its review of Employee Retention Credit (ERC) claims.
Earlier this year, the Eighth Circuit Court of Appeals upheld a lower tax court decision denying research and development credits on the basis that a taxpayer’s contracts were considered “funded.” The case in question, Meyer, Borgman & Johnson, Inc. v. Comm'r of Internal Revenue, No. 7805-16 (U.S.T.C. Nov. 19, 2020), centered on whether specific contracts contained the necessary risk of financial loss language, where payment would be contingent on the success of Meyer, Borgman & Johnson, Inc.’s (MBJ) research. Having financial risk is a crucial element to claim a research and development tax credit, as noted in Section 41 of the Internal Revenue Code and the associated Treasury Regulations. This tenet has been noted in a number of cases throughout the years.
In the world of employment incentives, there exists an impactful, yet often overlooked tax credit that takes on the spirit of the Olympics by empowering individuals and promoting diversity.
As the markets continue to adjust to a post-pandemic world with high interest rates and inflation, multi-family new construction projects and acquisitions remain an area of growth. As more investors move into this area, maintaining a competitive edge is more important than ever, and taking advantage of cost segregation and its benefits can give investors the boost needed to stay ahead.
The Fourth Circuit of the United States Court of Appeals recently affirmed a decision involving Section 41 of the Internal Revenue Code, which encompasses the Research and Development (R&D) Tax Credit. Specifically, on June 24, 2024, the Fourth Circuit upheld a Tax Court decision in favor of the Internal Revenue Service (IRS).
Last fall, the Internal Revenue Service (“IRS” or the “Service”) published detailed proposed changes to the Form 6765 Credit for Increasing Research Activities, also known as the R&D Tax Credit. The Service asked for comment on the form from stakeholders in advance of the formal draft release process, with the plan for these changes to take effect for tax year 2024. On June 21, 2024, the IRS published IR-2024-171 with an updated Form and details as to how the comments received impacted adjustments to the form and confirming it will go into effect for tax year 2024.
What's the trend entering 2024?
For many, it will be the continuation of technological innovations and upgrades to grow their respective industries. However, which industries are benefiting? On the whole, senior living operators are continuing to spend on technology and plan to further do so this year. The large majority of respondents to this survey plan to increase their tech budgets significantly in 2024.
While investing time and money into the increase in technology, the introduction of the Research & Development (R&D) tax credit may become essential to companies developing and creating new or updated technology for senior living operators.
The US Tax Court (the Court) recently issued a decision, holding that the Petitioners were not entitled to a research and development (R&D) credit under Internal Revenue Code (I.R.C.) § 41. Petitioners in the consolidated cases are shareholders in an S-Corporation, Catalytic Products International, Inc. (“CPI” or “the Company”), that designs and supplies air pollution control systems. CPI claimed a research credit under I.R.C. § 41 in connection with 19 projects, based on both employee wage expenses and supply expenses incurred in connection with the projects and systems the Company supplied. The Internal Revenue Service (IRS) issued a notice of deficiency related to the credit claim, and the Petitioners subsequently filed a timely petition with the Tax Court.
The whole intent of Section 179D is to provide an incentive in the form of a tax deduction to building owners who install energy-efficient lighting, windows & doors, roofing, insulation, and Heating, Ventilation, and Air Conditioning/Hot Water (HVAC/HW) equipment in new buildings or retrofit projects. All buildings in the US are eligible for the 179D deduction, except housing units less than 4 stories above ground. The Inflation Reduction Act of 2022 (IRA) affected section 179D in several ways, and the next three years will present a golden opportunity for the owners and designers of energy-efficient commercial building property (EECBP).
When it comes to commercial real estate investments, one aspect that often goes unnoticed is the potential tax benefit through cost segregation. This powerful tax planning tool allows property owners to accelerate depreciation deductions, resulting in significant savings. In this blog, we will explore the concept of cost segregation, its benefits for companies, and the available guidance provided by the Internal Revenue Service (IRS). We will also delve into why the IRS requires engineers to perform cost segregation studies and its implications for accuracy and compliance.
