Federal Contractors and Subcontractors Subject to New Notification Requirements

As of June 21, 2010, federal contractors and subcontractors are now required to inform their employees of their rights under the National Labor Relations Act. Specific actions related to the requirements are described below.

Requirements
Under the rule, federal contractors and subcontracts must: 1) post a notice informing employees of their collective bargaining rights, and 2) include a clause in covered federal contracts, subcontracts and purchase orders requiring their subcontractors to post the employee notice as well.

These new requirements resulted from a final rule issued by the Office of Labor-Management Standards (OLMS) in May that implemented President Obama’s Executive Order 13496.

Exceptions and Exemptions
There are exceptions and exemptions from the compliance obligations. For instance, the posting requirements do not apply to prime contracts under the Simplified Acquisition Threshold, which is currently set at $100,000; to subcontracts below $10,000; or to contracts where work is performed exclusively outside the United States.

Penalties
Failure to comply with the new posting requirements or employee notice clause requirements could result in contract/subcontract termination or suspension. In addition, the federal contractor or subcontractor may be deemed ineligible for future government contracts.

More Information
For more information on the new notification requirements, visit the Department of Labor’s website at http://www.dol.gov/olms/regs/compliance/EO13496.htm.

Elliott Davis Manufacturer Newsletter Summer 2010

We are pleased to present the Summer 2010 issue of Manufacturer. In it, we discuss:

• Building a solid integration plan for a merger or acquisition,
• Planning for a relocation or expansion,
• Funding alternatives for your business, and
• Surviving a product recall.

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

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 Manufacturer Newsletter Spring 2010

Elliott Davis is pleased to present the Spring 2010 issue of Manufacturer. We encourage you to read through it for ideas about ways you can streamline manufacturing processes to increase your company’s bottom line.

In this issue we show how an interest charge–domestic international sales corporation (IC-DISC) may allow a manufacturing company to realize substantial tax savings on export-sales income. We look at the importance of maintaining IT expenditures even during difficult times, and weigh the pluses and minuses of employee stock ownership plans (ESOPs). We also explain why establishing a parts and service outsourcing agreement with an experienced partner can do wonders for a manufacturer’s operations and bottom line. We would welcome your questions or comments about the topics discussed or others related to improving the profitability of your manufacturing company.

Elliott Davis Manufacturer Newsletter Winter 2010

Do you know how benchmarking with financial ratios can allow you to break your operations into individual segments to measure effectiveness? Or that your cargo insurance may not provide as much coverage as you think?

We are pleased to present the Winter 2010 issue of Manufacturer. In it, we discuss:

• Benchmarking with financial ratios,
• Common problems with cargo insurance,
• Steps a manufacturer can take to reduce the chances of fraud, and
• The increasing sophistication of transportation management systems.

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

Individual Year End Planning

April 15. That’s the date most taxpayers think of as their federal tax deadline.

However, the best date for a taxpayer to focus on is December 31. Why? You always can file an extension to avoid the April 15 deadline; but you can’t move the end of your tax year.

Once December 31 passes, your taxable income, deductions, credits and tax liability for the year are all “set in concrete” with little if any opportunity to change the outcome. As a result, year-end tax planning should form an essential part of your financial strategy. Changes brought about during this year, and forecasts for 2010, make that advice even more compelling for year-end 2009.

Effective year-end tax planning for 2009 combines use of traditional techniques of acceleration and deferral of income/deductions with appropriate responses to a constantly changing tax landscape. Below are various topics that you may want to consider for year-end planning.

Business Year End Planning

The economic slowdown has made 2009 one of the most challenging years in recent memory for many businesses. Many employers are struggling to boost profits, retain customers and develop new products in a sluggish market. The Tax Code can provide some relief. Some year-end tax planning strategies may be able to reduce your tax burden as 2009 draws to a close.

Captive Insurance: A Good Strategy for Your Business?

Timothy Moxie, CPA

The concept of insurance has been around for a long time. Over the years, businesses and individuals have used insurance as a form of risk management to hedge against the risk of a contingent loss with the primary intent being to transfer the risk of a loss from one entity to another. The cost of this risk transfer comes in the form of a premium.

Probably the most complicated aspect of insurance is the underwriting. Using a wide assortment of data and actuarial science, insurers predict the likelihood that a claim will be made against their policies and compute premiums accordingly. For a traditional insurance policy, a simplified calculation of profit is measured by taking the difference between the premiums collected plus investment gains minus amounts paid out in claims. Allocations of general overhead expenses will also need to be considered. Any profits and losses generated remain with the insurer.

Introduction to Transfer Pricing: Part 1

Kay Biscopink, CPA

What is “Transfer Pricing?”
The operating units of multinational corporations usually engage in a variety of inter-company transactions. A key issue of international taxation is the problem of “transfer pricing.” The term refers to the pricing of goods and services transferred between related persons not dealing at arm’s length. Prices charged after bargaining between unrelated persons are called “arm’s length” prices.

When unrelated parties deal at arm’s length, the prices at which they transact reflect both prevailing competitive conditions and the specific course of bargaining between them. Among related persons transfer prices answer to no economic pressure. They may reflect a largely unconstrained decision by the parties to adjust accounts among themselves. Transfer prices affect the distribution but not the absolute amount of gain or loss among related persons. If entities within a related group face different tax environments, or different rates of taxation, transfer pricing may bear decisively on tax consequences. Departure from arm’s length prices between affiliates organized in different countries may shift taxable income to low-tax environment and deductible expense to a high-tax one.

From the earliest days, the U.S. tax laws have had provisions designed to strengthen the Treasury’s hand in dealing with artificially priced transactions between related parties. The provisions are embodied in the present Code Section 482. This code section empowers the IRS to reallocate income and expense in transactions between related persons so as to reflect income clearly. Section 482 is aimed at the unilateral advantage related taxpayers could otherwise obtain through unchecked transfer prices. Its goal, broadly stated, is to recast transactions among affiliates.

The Heroes Earnings Assistance and Relief Act of 2008 (the Heart Act)

Michael Twomey, CPA

On June 17, 2008 The Heroes Earnings Assistance and Relief Tax Act of 2008 (the Heart Act) was signed into law to provide tax benefits and incentives for military personnel and assistance to veterans. Section 301 of this act included a revenue raising provision that created a new “exit tax” on expatriating citizens and long-term residents of the U.S. who expatriate after June 16, 2008.