September 22, 2020

179D Tax Deduction Extended Through 2020 for Energy Efficient Building Improvements

Commercial building owners can now take advantage of the 179D tax deduction for energy efficient building upgrades through 2020. This deduction, which had been expired since the end of 2017, is for property placed in service between 1/1/2018 – 12/31/2020.  

Background on 179D

The 179D deduction helps incentivize energy efficient construction projects. This deduction was originally created as a temporary measure under the Energy Police Act of 2005 and was extended every year until it expired in 2017. A tax deduction of $1.80 per square foot that reduced the building’s total energy and power cost by 50% or more is available to owners of new or existing buildings who install the following:

  • Interior Lighting
  • Building Envelope
  • Heating/Cooling Ventilation
  • Hot Water Systems

Deductions of $0.60 per square foot are available for situations where expenditures partially qualify by meeting certain target levels or through an interim lighting rule issued by the IRS. For government-owned buildings, this deduction is transferable to the person or company responsible for the energy efficient design. Therefore, architecture and engineering firms that design government owned buildings may also claim this deduction when completing additional requirements.

New Legislation on 179D

Under the extender bill of 2019, the deduction is retroactively extended for tax years 2018, 2019 and available for 2020. Qualified buildings placed in service in 2018 and 2019 may be eligible to claim the 179D deduction.

Claiming 179D

Eligible building owners can claim the 179D deduction for up to $1.80 per square foot of the entire building for the installation of energy efficient systems into new or existing buildings. Taxpayers can now amend their 2018 tax return and apply the 179D deduction to their 2018 tax year.

The Anders Real Estate and Construction Group can help determine if your construction project would qualify for the 179D deduction as well as other tax credits and incentives. Contact an Anders advisor below to learn more.

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August 13, 2020

My Employee Tested Positive for Coronavirus, What Should I Do?

As the pandemic continues, employers are asking a lot of questions around what they need to do when an employee tests positive or is unable to work due to COVID-19. Is the employer required to pay the employee? Is there assistance available to businesses paying for sick leave when an employee tests positive? While some of the nuances should be advised by a lawyer or HR representative, below we dive into what types of relief are available for employers from an accounting perspective.

Are employers required to pay sick leave for COVID-19?

The answer is yes. The Families First Coronavirus Response Act (FFCRA) requires certain employers to provide employees with paid sick leave or expanded family and medical leave for specified reasons related to COVID-19. Learn more about employee paid leave rights.

Is there assistance available for employers?

Yes. To help employers pay employees who are unable to work due to COVID-19, the FFCRA tax credit and disaster relief payments are available.

Families First Coronavirus Response Act (FFCRA)

When an employee is unable to work (including telework) due to COVID-19, the FFCRA provides a 100% credit against the company’s payroll tax liability. Companies and not-for-profits with less than 500 employees are eligible for FFCRA.

The credit is limited to the maximum amount that needs to be paid based on the sick leave cap of $511 per day for up to 10 days, or $5,110 per employee.

How does FFCRA work?

Employers pay the employee up front and take a dollar-for-dollar tax credit by reporting their total qualified leave wages and the related credits for each quarter on their federal employment tax returns.

The payroll taxes that are available for retention include withheld federal income taxes, the employee share of Social Security and Medicare taxes, and the employer share of Social Security and Medicare taxes with respect to all employees.

FFCRA Example

An eligible employer paid $5,000 in sick leave for a quarantined employee and is otherwise required to deposit $8,000 in payroll taxes. The employer would only be required to deposit $3,000 on its next regular deposit date.

For more information about the FFCRA, refer to the U.S. Department of Labor or IRS.

Disaster Relief Payments

With COVID-19 being declared a national emergency by President Trump, employers can now take advantage of the Robert T. Stafford Disaster Relief and Emergency Assistance Act. The Act, also known as Section 139 of the Internal Revenue Code, allows employers to provide tax-free payments or reimbursements to affected employees as “qualified disaster payments”.

How do the disaster relief payments work?

Disaster relief payments must be to pay or reimburse an employee for reasonable and necessary personal, family, living or funeral expenses. This does NOT include payments that would be covered by insurance or other reimbursements and income replacement payments. Since this assistance Act has never been used during a global pandemic, it’s still open to interpretation on what expenses are qualified, but Section 139 “reasonably suggests” these expenses would qualify:

  • Over-the-counter medications, co-pays, deductibles and other medical expenses not covered by insurance
  • Funeral costs of an employee or family member of employee
  • Costs associated with enabling employees to work-from-home
  • Cost of employee’s childcare or tutoring for family members
  • Commuting expenses
  • Caregiver and domestic services
  • Legal and accounting expenses

Payments are tax-free to employees, but fully deductible to the employer. Employers may provide assistance directly to the employee or through a non-exempt fund established to receive contributions from the employer as well as employees.

What should employers document?

Documentation for payment is not required as long as it’s considered “reasonable and necessary”, but Section 139 recommends employers document:

  • Their intention for making the payments
  • The amounts paid and to whom
  • Start and end date of any Section 139 assistance
  • Listing of expenses paid or reimbursed
  • Any maximum amount per-employee or total combined amount employer will pay

Learn more about Section 139.

Our advisors are closely following COVID-19 relief efforts and will continue to publish insights to keep you informed about potential impacts and benefits. Visit our COVID-19 Resource Center for more resources. To discuss your situation and recovery options, contact an Anders advisor below.

Agnes M. Rybak, Associate + Outsourced Accounting and Ryan T. Knudsen, Senior Accountant + Outsourced Accounting were contributors to this post.

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July 27, 2020

Stock Up on School Supplies During Missouri’s Back to School Sales Tax-Free Weekend August 7-9

While “going back to school” may look different this year, the Missouri Back to School Sales Tax Holiday is a great time to stock up on supplies needed for remote or in-school learning. In Missouri, the tax-free holiday starts at 12:01 a.m. on Friday, August 7th and lasts through 11:59 p.m. on Sunday, August 9th. During this period, qualified purchases are exempt from sales tax. Be aware not all cities and counties in Missouri observe this holiday.

What items are exempt from sales tax?

In Missouri, items such as clothing, personal computers and school supplies are exempt from sales tax. Below is a list of popular items that normally qualify as fitting into one of these categories.

Clothing – any article having a taxable value of $100 or less:

  • Belts
  • Coats
  • Dresses
  • Gloves
  • Hats
  • Jackets
  • Leggings
  • Pants
  • Shirts
  • Shorts
  • Shoes or Boots
  • Socks
  • Tights

Personal Computers – not to exceed $1,500:

  • Desktop computers
  • Laptop computers
  • Tower computer systems
  • Keyboards
  • Motherboards
  • Mouses
  • Multimedia Speakers
  • Storage Drives
  • Tablet Computers
  • iPads
  • Monitors
  • Computer peripheral devices

School Supplies – not to exceed $50 per purchase:

  • Art supplies
  • Backpacks
  • Crayons
  • Calculators
  • Glue
  • Lunch boxes
  • Notebooks
  • Textbooks
  • Paper
  • Rulers
  • Scissors
  • Staplers and staples
  • Tape
  • USB flash drives
  • Writing instruments
  • Graphing calculators (not to exceed $150)

What items do not qualify?

  • Batteries
  • Facial tissues
  • Umbrellas
  • CD players
  • Furniture
  • Copiers/office equipment
  • Headphones
  • Watches
  • Sporting equipment
  • Fixtures
  • Envelopes
  • Power strips
  • Watchbands
  • Telephones

Which states does this apply to?

This holiday is recognized in Missouri, Arkansas, Florida, Iowa, New Mexico, Ohio, Oklahoma, South Carolina, Virginia and Wisconsin. However, you do not have to be a resident of one of these states to benefit from the sales tax holiday.  Other states listed above may be on different dates and may include other items and not include some items listed above for Missouri.  Be sure to check each state’s date and qualifications.

Do items purchased online qualify for the sales tax exemption?

Yes, if the purchase is made of the qualifying items during the holiday then online purchases qualify. Delivery can occur after the holiday if the purchaser pays in full during the sales tax holiday.

The Back to School Sales Tax Holiday is a great way for people to stock up on school supplies while avoiding to pay sales tax. For more information on this holiday visit the DOR’s website.

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June 25, 2020

Is My Business Eligible to Claim the Employee Retention Tax Credit?

Qualified businesses can now take advantage of the employee retention tax credit as a COVID-19 relief option. For business operations that have been impacted by the pandemic, or simply experienced a significant decline in gross receipts compared to prior year, this credit is a great option. Below is a summary of the legislation updated June 15th, 2020.

Employee Retention Tax Credit Benefits

Qualified employers are allowed a credit against employment taxes equal to 50% of qualified wages (up to $10,000 in wages) for each employee.

Eligible Employers

  • All employers are eligible for the employee retention credit, including tax-exempt organizations.  However, if an employer receives a Small Business Interruption Loan under the Paycheck Protection Program authorized under the CARES Act, then the employer is not eligible for the Employee Retention Credit.
  • To qualify for the tax credit, eligible employers must be either:
    • An employer whose business is fully or partially suspended by a government order related to COVID-19; or
    • An employer with gross receipts that are less than 50% for the same quarter in the prior year.

Qualifying Wages

  • Qualifying wages are based on the average number of employees in 2019.
    • All wages paid qualify for the credit for employers with 100 or fewer employees.
    • Restrictions apply for employers with more than 100 employees.

Limitations

  • Qualified wages, including health care costs, are capped at $10,000 per employee regardless of the number of employees.
  • Qualifying wages cannot include wages that the employer received a credit for paid sick leave or paid family leaver under the Families First Coronavirus Reponses Act (FFCRA).
  • An employer must repay its PPP loan by the safe harbor deadline to be eligible.

Effective Date

Qualified employers can claim this refundable payroll tax credit for qualified wages paid to employees after March 12, 2020, and before Jan. 1, 2021.

This is a brief summary of the employee retention credit. Contact an Anders advisor for more details on how to claim the credit.  Our advisors are closely following COVID-19 relief efforts and will continue to publish insights to keep you informed about potential business impacts and benefits. Visit our COVID-19 Resource Center for more news, tools and insights you need to know in these uncertain times.

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