August 2016 - Anders CPA

August 23, 2016

Businesses Benefit from Hiring with the Missouri Works Program

The Missouri Works Program was created to assist in establishing quality jobs through targeted business projects. The program allows businesses to save on state withholding tax for new jobs and/or receive state tax credits, based on a percentage of payroll of the new jobs. There are five different programs that applicants may apply for under the Missouri Works Program: Zone Works, Rural Works, Statewide Works, Mega Works 120, and Mega Works 140.  Each program varies by the criteria required to participate.

Eligibility Requirements

The benefits of the program are not provided until the minimum new job threshold is met, and the company meets the average wage and health insurance requirements.  To be considered a new job, the position must be full-time (35 or more hours per week) and for whom the company offers/pays 50% of health insurance.  New jobs are based on the increase from the “base employment”.  “Base employment” is the greater of (a) the number of full-time employees on the date of the Notice of Intent, or (b) the average number of full-time employees for the 12 month period prior to the date of the Notice of Intent.  If the company reduces jobs at another facility in Missouri with related operations, the new jobs at the project facility would be reduced accordingly.

Below is a chart with the benefit eligibility requirements for each program.

Capture

 

“WH” means the retention of state withholding tax of the new jobs.
Note 1:  Project facility must be located in an Enhanced Enterprise Zone.
Note 2:  Project facility must be located in a “rural” county, which would NOT include Boone, Buchanan, Clay, Greene, Jackson, St. Charles, and St. Louis City and County.
Note 3:  Benefit period is 5 years, or 6 years for existing Missouri Companies (those that have been operational in Missouri for at least 10 years).

Discretionary Benefits

In addition to the automatic benefits listed above, the Statewide Works or Mega Works projects may be considered for discretionary benefits, limited to the net state fiscal benefit.  Eligibility depends upon:

  • The least amount necessary to obtain the company’s commitment;
  • The overall size (number of jobs, payroll, new capital investment) and quality (average wages, growth potential of the company, multiplier effect of the industry) of the project;
  • The financial stability and creditworthiness of the company;
  • The level of economic distress of the project area;
  • The competitiveness of alternative locations; and
  • The percent of local incentives committed to the project.

Prior to the receipt of a Department of Economic Development (DED) proposal or approval of Notice of Intent (NOI), none of the following can have occurred:

  • Significant, project-specific site work at the project facility.
  • Purchased machinery or equipment related to the project.
  • Publicly announced its intention to make new capital investment at the project facility.

For more information on the Missouri Works program and to find out if you qualify, contact an Anders advisor.

All Insights

August 16, 2016

Cost Segregation Studies Reduce Tax Liability by Accelerating Depreciation Deductions

Whether you have built, remodeled or purchased real estate in the past few years, there may be a way to significantly reduce your federal and state tax liability through a qualified cost segregation study. By accelerating the timing of the depreciation deductions, taxpayers see an immediate increase in cash flow.  In addition, since bonus depreciation will begin phasing out in 2018 and expire completely after 2019, now is the time to take advantage of the new PATH Act provisions and act on this important tax saving tool.

Here are a few different client examples of cost segregation study success:

Office Building
An office building was constructed from the ground up at a total cost of $3.3 million.  As a result of a cost segregation study, nearly $731,000 of costs were re-categorized from 39-year property to 5, 7 and 15 year property.  This resulted in an additional first year depreciation deduction of over $400,000!

Auto Dealer
Our client, an auto dealer, purchased a commercial building for $1.6 million and incurred $1.5 million in renovation costs in 2014. After a qualified cost segregation study was completed, over $1.4 million of assets were broken down into 5-, 7- and 15-year MACRS property.  The net present value (the cumulative value of accelerated tax savings) of completing the cost segregation study was over $273,000!

Commercial Building
After purchasing a commercial building and incurring renovation costs totaling $7.6 million during 2008 and 2009, our client decided to do a look back cost segregation study and “catch-up” on depreciation deductions the 2015 tax return. Over $3.6 million of assets were broken down into shorter lived assets. The net present value of the study was nearly $355,000!

Assisted Living Facility
A new assisted living facility was built at a total cost near $5.8 million.  After our client engaged us to complete a cost segregation study, roughly 40% of the costs ($2.4 million) were eligible for bonus depreciation and accelerated depreciation.  The net present value over the life of the project was over $432,000!

Golf Course
Our client purchased a golf course for $6.7 million in 2013.  Due to complex depreciation rules surrounding golf courses, and to ensure they weren’t leaving deductions on the table, our client decided to perform a cost segregation study on the purchase. During the study, it was determined that the tees and greens were up to USGA standards and therefore we could treat what otherwise would be non-depreciable land as depreciation property. The net present value of the study was over $309,000!

Will a cost segregation study work for me?
First, we at Anders will want to have a meeting to discuss if a cost segregation study will work for you, your investors and your entity.  Often times, the most recent tax return and depreciation schedule will get us started on that path.

Second, after qualifying that a cost segregation may work in your situation, we will want to gather the following information:

  • Current set of architectural plans (if available)
  • Cost of Building (Schedule of Values, project budget or purchase price)
  • Square feet of building, number of floors and site size (in acres)
  • Details on usage of building (i.e. office space, warehouse, etc.)

After that information is gathered, we will analyze the information and come up with an approximate net present value of the tax benefits derived from the cost segregation study, as well as the cost. We want to work with you to make sure that you are comfortable with the cost benefit analysis of moving forward with the study.

Cost segregation studies have helped many of our clients reduce their current tax liabilities through the timing of the depreciation deduction on what is often their largest asset. If you have any questions on how your real estate or construction investments can benefit from a qualified cost segregation study, contact Anders.

All Insights

August 9, 2016

Using a Community Improvement District (CID) to Finance Long-Term Improvement Projects

If you’re a commercial real estate developer or investor looking for a financing strategy to fund a large scale development or property improvements, establishing a Community Improvement District could be a great option.  A Community Improvement District (CID) is a political subdivision with the power to impose special assessments and/or real estate taxes to pay for public improvements.  CIDs can be used for a wide variety of projects and improvements as long as the projects are for public use in blighted areas.

The Missouri Department of Economic Development defines a blighted area as a portion of a city that legislative authority determines by reason of age, obsolescence, inadequate or outmoded design or physical deterioration, an economic and social liability conducive to ill health, transmission of disease, crime or inability to pay reasonable taxes.

In recent years, the number of Community Improvement Districts being established has significantly increased, providing additional means of financing for large scale projects in St. Louis and other areas in Missouri.  A CID encompasses the area where improvements are to be constructed and can include areas such as shopping centers, plazas, parks, convention/meeting centers and parking lots.

CIDs can impose additional sales and real estate taxes to finance the districts’ improvements over a long-term period.  For example, a shopping center owner could establish a CID that imposes special assessments to charge an additional 1% sales tax on all purchases made within that district (shopping center) to finance improvements at that shopping center over an extended period of time.

Establishing a Community Improvement District is often a political process, with the need to convince local municipal authorities that the real estate is indeed blighted. This process can require a lot of assistance, and Anders works with a network of advisors that can help. Contact Anders to learn more about how a CID might work for you.

All Insights

August 4, 2016

INSIDE Public Accounting Ranks Anders #112 on 2016 Top 200 Firms List

Anders is ranked #112 on the 2016 Top 200 Accounting Firms list by INSIDE Public Accounting (IPA) for the second year in a row. IPA 200 firms are ranked by U.S. net revenues and are compiled by analyzing more than 540 responses to IPA’s Survey and Analysis of Firms. This is IPA’s 26th annual ranking of the largest accounting firms in the nation.

In the seventh annual ranking of Beyond the IPA 100, this list picks up where the IPA 100 left off, and identifies the largest firms in the nation ranking from No. 101 to No. 200. For the most recent fiscal year, IPA 200 firms range in size from $15.7 million to $34.2 million.

Anders is a proud affiliate of the Leading Edge Alliance (LEA), one of the largest international associations of independent accounting firms, which has 20 firms on this year’s list.  Anders was named LEA’s most innovative firm in 2015.

INSIDE Public Accounting reports and analyzes the news, trends, strategies and politics that affect the nation’s public accounting firms, and provide information and resources to compete and operate more profitably.

View the full report of 2016 IPA 200 Firms.

All Insights

August 3, 2016

Court Case Decides Missouri Sales Tax on Delivery Charges

The state of Missouri released a notice regarding the recent court case decision which dealt with the taxability of delivery charges.  The law remains the same – In general, if parties intend delivery to be part of the sale of tangible personal property, the delivery charge is subject to tax even when the delivery charge is separately stated on the invoice.  For example:  if you provide an option for a customer to pick up the merchandise or arrange their own shipping, then the delivery charge is not taxable.

For some businesses, like concrete companies, delivery charges are a bit tricky because it’s obviously not easy to pick up wet concrete.  If title transfers before delivery, then delivery charges are not subject to sales tax.  The terms of the sale should determine where title passes and each sale could be different.

If you have any questions about the taxability of delivery charges and how it plays into your business, please contact an Anders State and Local Tax Professional.

Dan Mudd, Partner, dmudd@anderscpa.com or 314-655-5507

Brad Dennigmann, State and Local Tax Manager, bdennigmann@anderscpa.com or 314-655-5558

All Insights

August 2, 2016

MACRA, MIPS, and RHC: How Quality-Based Payments Will Affect Health Care Reimbursement

To replace the repealed sustainable growth rate payment methodology, CMS has proposed a new quality-based payment structure called MACRA, the Medicare Access and CHIP Reauthorization Act of 2015. MACRA will take effect in 2019 based on quality data from calendar year 2017, just a few months away. It replaces other quality and reporting programs such as Physician Quality Reporting System, Value-Based Modifier, and Meaningful Use. The proposed rule was released this spring with the final rule expected in the fall.

How MACRA Affects Clinicians

MACRA payments follow one of two models. Most clinicians (MD, DO, PA, NP, CNS, CRNA) would fall under the Merit-based Incentive Payment System (MIPS), while a small minority will be on the Advanced Alternative Payment Model (APM), such as a qualified ACO.

MIPS reimbursement changes include up to a 4% downward payment adjustment or a 4% enhanced payment based on the composite score of the clinician.  The payment adjustments increase yearly reaching 9% in 2022. Since the program is budget neutral, clinicians will be scored and essentially competing to produce quality results in the top half of peers to avoid payment penalties received by those with lower scores.

MACRA and Rural Health Clinic Reimbursements

RHC reimbursement methodology is NOT applicable to the impacts of MACRA at this time.  If a practitioner or group within the RHC also has Part B Physician Fee-For-Service (FFS) reimbursement, MIPS may apply to the Physician FFS.  Clinicians operating solely within RHC all-inclusive rate methodology won’t be impacted by MACRA in 2019.  But, be warned with the focus towards quality and improved outcomes, RHCs won’t dodge these type of mandates forever.  Commercial insurance may follow CMS’ lead. This is an opportunity to focus on quality measures and patient engagement if it isn’t already common practice.

CMS Update

Most recently, CMS Acting Administrator, Andy Slavitt, has testified before the Senate Committee on Finance and acknowledged having a start date of January 1, 2017 when the final rule will not be provided until the fall is a “legitimate concern,” for the clinicians and the comments received on the proposed rule are being considered. More information will be shared as it unfolds.  For help analyzing the impact and preparing your organization for success under MACRA contact the Anders Health Care Group.

 

Key Acronyms
CMS – Centers for Medicare & Medicaid
MACRA – Medicare Access and CHIP Reauthorization Act of 2015
MIPS – Merit-based Incentive Payment System
APM – Alternative Payment Model
ACO – Affordable Care Organization
RHC – Rural Health Clinic
All Insights

Keep up with Anders

Want to keep up with all the latest insights from Anders? Subscribe and receive the information that matters to you.

  • This field is for validation purposes and should be left unchanged.