South Carolina Manufacturers May Be Eligible for Property Tax Savings

Jack Schmoll, CPA

Many South Carolina manufacturers have until July 1, 2010 to take advantage of significant property tax savings. The potential savings are the result of the state amending the assessment ratio for certain real property from 10.5 percent to 6 percent.

In the past, the 10.5 percent property tax ratio applied to warehouse and distribution facilities that were on the same site as manufacturing facilities. However, if the warehouse and wholesale distribution
facilities were located at separate locations, the warehouse and wholesale distribution facilities qualified for a 6 percent ratio.

The ratio change results from Senate Bill 1171, Section 2.J (Act No. 313), which was passed in 2008 and effective for the 2009 reassessment and forward. It allows warehouse and wholesale distribution facilities on the same site as the manufacturing facility to qualify for the 6 percent ratio so long as the facilities meet specific requirements. This amendment applies to property owned or leased by a manufacturer used exclusively for warehousing and wholesale distribution regardless of location.

Elliott Davis Shareholder, Senior Manager Discuss Tax Issues in Greater Charlotte Biz

The June issue of Greater Charlotte Biz magazine featured tax articles by Dan Warren, Charlotte office managing shareholder, and Jack Schmoll, senior manager. Warren’s article “How Long Should You Keep Your Business Records” provided guidance to businesses on the length of time that specific records should be retained. Schmoll’s article, “Are Accommodations Taxes Due on Your Summer Rental?” focused on the collection of sales and accommodation taxes for property owners renting to tenants in the summer months.

FBAR Reminder and Update

The due date for form TD F 90.22-1 is rapidly approaching. The form (Report of Foreign Bank and Financial Accounts) – or FBAR – reports interests in financial accounts exceeding $10,000 (in aggregate) at any point in the year.

Deadline
The due date for 2009 form TD F 90.22-1 is June 30, 2010.

Considerations
Please consider the following issues and clarifications for 2009 filings:

• The FBAR is to be RECEIVED by the IRS no later than June 30 each year. Postmark date is not applicable.
• Foreign accounts include: banking, checking, savings, debit/prepaid credit cards, securities accounts, securities derivatives, other financial accounts (co-mingled funds, but not private funds)
• The Office of Professional Responsibility of the United States Justice Department takes the position a CPA is expected to complete an FBAR if they become aware of a client’s interest in a foreign financial account. The expectation is rooted in the due diligence requirement under Circular 230.

Definitions
IRS Announcement 2010-16 and Notice 2010-23 provide additional interim definitional guidance on FBAR filings in the absence of final regulations.

• Entities not organized under the laws of a U.S. possession or state would not be required to report, even if they could be considered to “be in or doing business in” the U.S.
• Reportable accounts include interests in foreign mutual funds that issue shares available to the general public with a regular NAV determination and regular redemptions. The treatment of other foreign investment funds is reserved, but Notice 2010-23 provides that for 2010 and prior years, only interests in foreign mutual funds need to be reported. Therefore, interests in foreign hedge funds or foreign private equity funds are not required to be reported under the notice.
• Interests in foreign annuity contracts and cash-value insurance policies would constitute reportable “other financial accounts.”
• Participants and beneficiaries in qualified retirement plans and owners and beneficiaries of IRAs and Roth IRAs would not be required to file reports with respect to foreign financial accounts held by or on behalf of the plan/IRA.
• Notice 2010-23 further extends the deadline for filings for 2010 and prior years with respect to signatory authority to June 30, 2011.

FBAR “HIRE Act”
The Hiring Incentive to Restore Employment Act of 2010 added new reporting rules for U.S. owners of foreign financial assets in addition to the existing FBAR rules. The act adds two penalty provisions: Section 6038D and Section 6662(j). New Section 1471(d) (2) expands the definition of foreign financial accounts. New Section 1471 (d) (4) expands the definition of a foreign financial institution. The provisions apply to tax years beginning after March 18, 2010.

Reporting
Any U.S. individual who holds an interest in a “specified foreign financial asset” is required to report on the individual’s tax return certain information about the asset if the aggregate value of the assets exceeds $50,000. The IRS has authority to issue regulations extending this rule to any U.S. domestic entity that is formed or used to hold specific foreign financial assets.

Specified foreign financial assets include: depository or custodial accounts with foreign financial institutions, and any of the following, to the extent that they are not held in either an account with a U.S. financial institution or an account with a foreign financial institution that itself has been subject to reporting;

• Stocks and bonds issued by foreign persons
• Financial instruments or contracts held for investment issued by a non-U.S. person or having a non-U.S. counterparty
• “Any interest in a foreign entity”

The information to be reported regarding each specified foreign financial asset includes the following:

• For accounts, the account number and the name and address of the financial institution
• For securities, the account number and the name and address of the issuer and other issue information
• For other instruments, any information necessary to identify it and names and addresses of all issuers and counterparties
• The maximum value of the assets by year

Penalties
The penalty for failure to disclose this information is $10,000 unless reasonable cause applies. An individual has a 90-day period after notification from the IRS to correct a failure to disclose, after this 90-day period, a $10,000 penalty for each additional 30-day period of failure to disclose applies, up to a maximum of $50,000.

A 40% penalty is imposed on any portion of an underpayment of tax attributable to any foreign financial asset that was required to be, but was not, disclosed by the taxpayer under either the new rules regarding foreign financial assets or existing law.

Statute of limitations
The statute of limitations is extended from three to six years for omissions of gross income of $5,000 or more attributable to foreign financial assets.

If there is a failure to report information about foreign financial accounts, passive foreign investment companies (PFICs), or interests in or transfers to foreign entities that must be reported on Forms 926, 5471, or 8865 under current law, the statute of limitations with respect to the entire return will not begin to run until the missing information is provided (limited technical correction for inadvertent overlooked filings or omitted information).

Every U.S. shareholder of a PFIC must file a report with respect to the PFIC each year unless otherwise provided by the IRS.

Contact
For more information on FBAR rules and reporting, please contact Elliott Davis International Tax Services Chair Kay Biscopink at 864.250.3941 or .(JavaScript must be enabled to view this email address).

Tax Savings for Investments in Renewable Energy

Matthew Madden, CPA

In an effort to stimulate the economy and encourage investment in renewable energy, Congress has included several energy incentive packages in recent tax legislations. Credits, deductions, and grants have been made available for the production of or investment in renewable energy. The following article explains the Business Energy Investment Tax Credit which is one of the more attainable and lucrative incentives available for businesses.

Energy Efficient Property Owners More Likely Than Ever to Benefit From Tax Deduction

Cory Ouellette, CPA

Energy efficiency isn’t merely a feel good initiative; it can also mean immediate tax savings. The deduction for energy efficient commercial buildings, for up to $1.80 per square foot of newly constructed or improved space, is now becoming more practical. To qualify for the deduction, the energy efficient property must be placed in service between January 1, 2006 and December 31, 2013. If you have missed the deduction for property already placed in service, you may be eligible to amend your prior year returns and capture the deduction. Even if you aren’t the owner of an energy efficient building, this deduction may still benefit you.

Elliott Davis Dental Services Practice: Financial Check-Up Newsletter June 2010

This month we take a look at how recent legislation will affect you and your dental practice. The Health Care Reform bill will create a massive overhaul to health insurance and health care delivery. In addition to changing the way insurers are allowed to operate (such as doing away with lifetime limits and requiring coverage for preexisting conditions) the bill includes incentives for employers to provide health insurance to employees and imposes new taxes on those defined as high income. It is complicated and no one has all the answers yet, but feel free to call us if you want to discuss the bill further. We also have information about how to streamline your banking process and better protect yourself against fraud, written by a banker with BB&T. Enjoy this issue and have a great summer!

Deadline Approaching for South Carolina Small Businesses to Comply with Illegal Immigration Law

Beginning July 1, 2010, private employers with fewer than 100 workers will need to comply with the employment verification requirements of the South Carolina Illegal Immigration Reform Act.

South Carolina Illegal Immigration Reform Act
The Act, signed into law by Governor Sanford in 2008, requires employers to verify the legal status of new employees. It also prohibits the employment of any worker who is not legally in this country and authorized to work.

Verification Requirements
Employers have two options when it comes to Act compliance. They can:

• Complete and maintain an I-9 Form on newly hired employees and verify their work status through the federal E-Verify program.
• Complete and maintain an I-9 Form on the new employee and verify that the employee possesses either a S.C. driver’s license or identification card; is qualified to obtain one; or has an out-of-state driver’s license from a state having qualification requirements as strict as those in this state (click here for a list of states).

Penalties
The S.C. Department of Labor, Licensing and Regulation will be investigating complaints and conducting random audits of private employers to assure compliance. A private employer who violates the verification procedures can be assessed a civil penalty of $100-$1000 per violation. An employer who knowingly or intentionally hires an unauthorized alien faces suspension or revocation of the employer’s license.

Enroll in E-Verify
Click here to enroll in the Department of Homeland Security’s E-Verify Program.

Contact Us
Please contact us if you have questions relating to Act compliance and its impact on your business.

COBRA Subsidy Extended Through May 31, 2010

Employers may need to take action following the latest extension for COBRA subsidies.

Extension
Under the American Recovery and Reinvestment Act of 2009, employees who were involuntarily terminated from their jobs between Sept. 1, 2008 and Dec. 31, 2009 were eligible for a COBRA subsidy. The Dec. 31, 2009 date previously was extended to Feb. 28, 2010, and then to March 31, 2010. It has now been extended again to May 31, 2010.

Current Law
Employees who are involuntarily terminated or who experience a significant reduction in hours between Sept. 1, 2008 and May 31, 2010 are eligible for a COBRA subsidy from their employers for up to 15 months.

Tax Credit
Affected employees can elect COBRA coverage under their employers’ health plan and pay 35 percent of the cost. The employer is then eligible for a credit on line 12 of Form 941 for the remaining 65 percent. Note: The credit is not required to be claimed in the same quarter that the COBRA premiums were paid and can be claimed in a later quarter in the same calendar year.

Actions
Employers should work with their COBRA administrators to implement the new extension and issue the required notices. They should also work with their payroll advisors to ensure they are properly completing Form 941 to obtain all credits for which they are eligible.

What’s next?
Other bills are still pending in the House and the Senate that would extend eligibility for the COBRA subsidy to June 30, 2010 or Dec. 31, 2010. Elliott Davis will continue to keep you updated on the latest developments. If you have questions or need assistance, please contact us.

Elliott Davis Real Estate Advisor May-June 2010

Are you familiar with the latest federal guidance regarding workouts for troubled commercial real estate loans? And are you aware of simple property management strategies to help maintain or even increase property value?

Elliott Davis is pleased to present the May-June 2010 issue of Real Estate Advisor. In it, we discuss:

• A guidance statement released by federal bank regulatory agencies which encourages “prudent” workouts,
• Cost reduction, vacancy management and tenant retention strategies,
• Using a cost segregation study to accelerate deductions, and
• How to hold on to overleveraged properties until the market picks up.

The ideas we discuss in Real Estate Advisor are relevant to your success, and we would welcome your questions or comments.

Step-by-Step Instructions for Filing Form 5500 Electronically

Do you have questions about filing your Form 5500 electronically? Elliott Davis has created step-by-step instructions to make this process as easy as possible for you.

Effective January 1, 2010, all Form 5500 Annual Returns/Reports of Employee Benefit Plan and all Form 5500-SF Short Form Annual Returns/Reports of Small Employee Benefit Plan for 2009 and 2010 plan years, and any required schedules and attachments, must be completed and filed electronically using EFAST2-approved third-party software or using iFile.

The Elliott Davis team is here to assist you with Form 5500 preparation as well as submitting your e-filing. Please contact us if you need assistance.