How the Cannabis Industry is Earning Big in Tax Credits

Growing Your Business with the R&D Tax Credit

The development and selling of recreational and medicinal marijuana has dramatically increased as states across the country continue to pass legislation legalizing marijuana. Research and development is critically important for the cannabis industry’s current and future growth. Cannabis growers and other related businesses are already performing qualifying research activities in their day-to-day operations that qualify them to take advantage of the research and development tax credit.

The R&D tax credit was created as an incentive for businesses across different industries to take innovative measures when developing or improving their products, processes, or software. Companies within the cannabis industry are constantly working to expand the various strains and consumption options in order to meet the demand and growth of the industry, and are performing qualifying research and development activities in the process.

Medical and recreational marijuana sales are expected to climb to $22 Billion by 2022, according to the 2018 edition of the Marijuana Business Daily.

With the growing legalization of recreational and medicinal marijuana comes the increase in the demand for marijuana farms, pharmaceutical companies, and dispensaries. These companies are regularly coming up with more efficient methods of creating the products, and these innovations can often result in qualifying for the R&D tax credit.

Qualifying cannabis-industry related research activities include

  • Enhancing the efficiency of the growing and harvesting process
  • Developing new strains of cannabis through the use of genetic and cross-breeding techniques
  • Developing new systems for indoor growth
  • Performing testing to improve or speed up a harvest cycle
  • Developing improved technologies for delivery of cannabis-derived substances
  • Creating new ways to prevent mold or plant loss
  • Developing unique software analytical tools for strand identification

Don’t Miss Out On R&D

Leaders in the cannabis industry often miss out on the lucrative savings made available through the R&D tax credit simply because they’re unaware that they can qualify for it. Our tax experts at National Tax Group will perform a free assessment of your benefits and determine the credits you can earn. This industry is only going to continue to gain momentum, as is the amount of current and future businesses that are able to reap significant savings through the research and development tax credit.  Contact us today to get started. 

 

PATH Act Creates Permanent Expansion of the R&D Tax Credit

Permanent Tax Relief to Reward Business Innovation

Companies across various industries are able to take advantage of the R&D Tax Credit by offsetting their earned credits against costs their company spent performing research activities to develop or improve their products, processes, and software. Even though the R&D credit was created to boost innovation within United States business and is an extremely lucrative credit, it has not always been a reliable tax break and has only recently become a permanent credit.

The Protecting Americans from Tax Hikes Act of 2015, also known as the PATH Act, has made the credit permanent for the first time in its 34 years, providing stable tax relief to business owners. Before R&D was permanent, companies would anxiously wait to see if the R&D Tax Credit would still be around the following year.  

Offset As Much As $250,000 Against Payroll Tax Liabilities

Besides making the Research and Development Tax Credit permanent, the PATH Act has also paved the way for startups and small businesses to take advantage of the credit. These companies can offset the R&D Tax Credit against their payroll tax liabilities. Traditionally, these companies weren’t able to apply for the credit because they would often remain in losses during their early years of business, before they began generating a profit.

Now, these companies that have been shutout in the past can offset as much as $250,000, and reward their innovative initiatives.

Qualifications for Startups and Small Businesses to Claim R&D

  • Business must have gross receipts of less than $5 Million within the tax year in question
  • Business cannot have any gross receipts dating further back than 5 years
  • Startups cannot be a tax-exempt organization under section 501

Now that the R&D Tax Credit has been made permanent thanks to the PATH Act, businesses can plan to benefit from the lucrative credit for the research and development activities they are performing, and know that their efforts are going to be rewarded on their tax returns.

Tax Relief Available for Architects

Earn Tax Credits for your everyday work activities

Architects and designers are able to take advantage of the R&D tax credit, which rewards significant credits to companies that perform qualifying research activities in order to develop or improve their products, processes, or software. Many companies within the architectural industry fail to take advantage of the credit simply because they are unaware that they can qualify. Architects are frequently working on projects that seek to advance the science or technology of their designs.

Reward Daily Efforts with Money Saving Credits

Architectural firms typically spend around 60-75% of their time working on the conception and design of the projects they’re working on. It is during these processes that qualifying research and development activities typically take place. Activities that may seem like standard practice can actually be the means of claiming R&D Tax Credits.

Eligible Daily Activities Include

  • Developing conceptual ideas and designs
  • Engaging in engineering activities
  • Developing and designing site features and orientations
  • Developing construction documents
  • Developing and designing master plans
  • Developing new or innovative designs to meet LEED certifications or energy efficient specifications
  • Computer-aided design (CAD) and building information modeling (BIM) activities
  • Developing new or improved designs
  • Evaluating alternative designs to meet or overcome complex client requirements, site conditions or building codes

Passing the 4-Part Test

Architectural firms that are performing research activities must pass the R&D 4-Part Test, created by the Internal Revenue Service in order to claim the tax credit. The 4-Part test takes an in-depth look into the Purpose, process, uncertainty, and nature of the research activities. Learn more about the 4-Part Test here.

Trust National Tax Group for Your Tax Needs

Our team is comprised of tax experts and engineers with over 50 years of experience working across various tax saving industries, and helping our clients acquire the most out of their tax savings. Don’t overlook this lucrative credit. Contact us for a free assessment and start the process of obtaining R&D.

Reallocate 30% of Total Hotel Property Assets Through a Cost Segregation Study

Accelerate Depreciation, Improve Cash Flow

Hotel owners are able to qualify for accelerated depreciation through a Cost Segregation Study. This lucrative engineering-based study can reallocate up to 30% of total assets to 5,7,15, or 39-year life classes. Hotels that have been purchased or constructed since January 1st, 1987 qualify for accelerated depreciation. Any updates or renovations since the hotel’s purchase or construction can also qualify for depreciation.

Components that are examined during the study include the hotel’s walls, roof, foundation, lighting, doors, beams, windows, and fire protection. Through a cost segregation study, real and personal property are categorized into acquisition or construction costs.

Personal Property Hotel Assets Can Include

Flooring Choices - Flooring can include hardwood, engineered wood, laminate, cork, or linoleum

Decorative Lighting - Decorative lighting can include hanging light fixtures, chandeliers and pendants, wall sconces and wall lights, and accent lighting

Electrical Systems - Electrical systems can include circuit breaker panels, transformers, branch circuits, and meters

Plumbing Systems - Plumbing systems can include plumbing drainage venting, fuel gas piping, potable cold and hot water supply, and hydronics. 

Power Generators - Power generators can include thermal generating plants, cogeneration, nuclear plants, fossil-fueled, combined-cycle and Biomass Plants. 

Our team of engineers and tax experts perform cost segregation studies that utilize the Modified Accelerated Cost Recovery System (MACRS), which is the method of depreciation that is mandated by the IRS. The MACRS is applied to short-life assets, which accelerates depreciation and reduces the tax burden of the hotel owner.

Running a hotel is no easy task and comes with various expected and unexpected expenses. Our tax professionals work with hotel owners and industry professionals to reap the maximum amount of tax savings. Contact us today for a free assessment of benefits.

Cash in on R&D Tax Credits for Work Your Company is Already Doing

You Don't Have to Work in the Science Field to Claim R&D

When the average person thinks of the Research and Development Tax Credit, they likely imagine scientists in lab coats, working in a lab with test tubes to perfect their latest experiment. However, that’s simply not the case anymore, and companies within various industries are able to take advantage of the R&D tax credit.

R&D Tax Credits were created by the United States Government as an incentive for businesses to take innovative steps to develop or improve their products, processes, and software. While some companies are aware that they can qualify and benefit from the credit, there are many companies that are not taking advantage of their earned credits, simply because they are unaware that they qualify. Read about the R&D Tax Credit, and the different industries that are able to take advantage.

FAQ's Regarding R&D Tax Credits

Q. How can startup companies take advantage of R&D?
A. 
Startup companies can apply the credit against their payroll tax liabilities, even before they begin to generate a profit on their products, processes, or software.

Q. How do I know if my company qualifies?
A. More companies than ever are able to qualify for R&D tax credits. Since the credit is designed to promote innovation and creativity, if you are performing any type of project that is different, it is highly likely you can qualify.

Q. Why hasn’t my CPA brought this up before?
A. It is a common misconception that only specific, “White Coat” companies within the science and research fields are able to qualify for the credit. However, companies across various industries can, but many aren’t aware of this.

Q. Does my company have to be in a specific industry to qualify?
A. No. Numerous industries are able to qualify for the research and development they’re performing. Qualifying industries include software development, cosmetic, food sciences, oil and gas, web development, construction, and agriculture. 

Q. Can R&D credits be claimed for a prior year?
A. Yes. R&D Credits can be claimed for a prior tax year as long as the amended return is filed within three years of the original filing date.

Q. Is it worth my time to claim the R&D credit?
A. Definitely. The R&D Tax Credit remains one of the most valuable incentives offered by the U.S. Government for businesses to remain competitive.

Q. What is the 4-Part Test?
A. The 4-part test, created by the IRS, is the main qualifier that all research activities must pass in order to reap the benefits of this lucrative credit. The 4-part test examines the Nature, Purpose, Process, and uncertainty of the research activities being performed. Learn more about the R&D Tax Credits 4-part test here.

Companies performing unique research activities can qualify for the R&D tax credit. Contact us for a free assessment today.

Hotel Owners Can Claim Lucrative Tax Deductions Through 179D

Understanding the Deductions Hotel Owners are Eligible for

It’s no secret that hotels are known for racking up electricity and power bills due to the vast amount of people they serve, and the 24-hour operations that corresponds with the business. Hotel owners who have included energy-saving elements into their construction plans, or have renovated their buildings to reduce the energy consumption can take advantage of the 179D Energy Efficient Tax Deduction.

Secure Deductions for Being Energy-Efficient

Utilize the 179D Energy Efficient Tax Deduction

Hotel owners who have installed qualifying energy efficient equipment and technology into newly constructed or renovated buildings that have been placed into service between December 31st 2006, and January 1st, 2018 can qualify for the 179D Energy Efficient Tax Deduction. Qualifying hotel owners are able to deduct $0.60 per square foot in each category, allowing for a deduction up to $1.80 per square foot on each qualifying hotel property. If your property only qualifies for one category, you will still receive a $0.60 deduction.

Qualifying Energy Saving Systems Include

  • Hot water systems - Heat can come from solar, geothermal, hot water generators, tank heaters, or instant tankless hot water heaters.

  • Building envelope systems - A building envelope is the physical separator between the conditioned and unconditioned environment of a building which effects the resistance to air, water, heat, light, and noise transfer.
  • HVAC Systems - The goal of HVAC systems are to provide thermal comfort and acceptable indoor air quality in order to reduce energy consumption.

  • Building Insulation - Insulation, including in ceilings, roofs, flooring, and walls, helps reduce the exchange of heat through surfaces within a building, thus reducing the energy consumption of the building.

The National Tax Group Process

    • Request of a free assessment of benefits
    • Acceptance of proposal
    • An on-site inspection of the qualifying property
    • Allocation letter is provided if applicable
    • Execute IRS complaint building energy models and provide certification
    • Documentation of the process in a final report for submission

45L Energy Efficient Home Credit – $2,000 Tax Credit for Going Green

Earn Big for Taking Energy-Efficient Initiatives

Eligible contractors and home builders can claim up to $2,000 in credits if the residence they’ve worked to construct or renovate meets the energy-efficient threshold. Eligible contractors and builders must own and have a basis in the qualified energy efficient home, and have been in charge at the time of the construction in order to benefit off of the 45L credit.

Thanks to tax provisions set into place by the Tax Cuts and Jobs Act, 45L has been retroactively extended through the 2017 tax year, giving more people the opportunity to claim this lucrative credit. 45L was first made available by the Federal Policy Act of 2005, and has since grown into a lucrative credit. 45L can be claimed by “Eligible Contractors” recognized by the IRS as any Trust, Estate, Partnership, Company, or Corporation that was in charge at the time of construction.

Structures that qualify for the 45L Energy Efficient Home Credit are freestanding single-family homes, townhouses, manufactured homes, condominiums, and apartment units.

FAQs Regarding the 45L Energy Efficient Home Credit

Q. What allows a home to qualify for 45L?
A. The energy consumption of the home must be reduced, meeting the energy-efficiency requirements.

Q. How is it determined if a home qualifies for 45L?
A. An analysis performed by one of our tax-experts will determine if the energy-saving elements installed and incorporated into the home in question qualifies for the credit.

Q. Who can benefit from 45L?
A. Eligible contractors who construct or renovate qualified new energy-efficient homes are able to qualify for the credit.

Q. What form must a builder complete in order to obtain 45L?
A. In order to complete the qualifications for the 45L credit, eligible contractors must complete the IRS form 8908. It can be found on the IRS website: www.irs.gov/pub/irs-pdf/f8908.pdf.

Q. Can a builder certify their own home for the tax credit?
A. No. The IRS rules state that the person who certifies the home must “not be related (within the meaning of 45(e)(4)) to the eligible contractor.” Our tax experts will take care of the certification process for you. Contact us today.

Q. Who can verify homes for the tax credit?
A. The home in question must be inspected and tested by an “eligible certifier”, which National Tax Group is. Contact us today to get inspected.

Q. Can a homeowner apply for 45L?
A. No. Only eligible contractors can apply for the 45L Energy Efficient Home Credit.

Q. The IRS rules state that the tax credit is $2,000 per qualifying dwelling unit. What does the IRS define a dwelling unit as?
A. As defined by the IRS, a dwelling is a “single unit providing complete independent living facilities for one or more persons, including permanent provisions for living, sleeping, eating, cooking and sanitation.”

Residential properties that are currently under construction, or have undergone renovations to cut energy and power costs, and meet the energy efficient threshold can also benefit from the 45L credit. Contact us today for a free assessment, and start the process of obtaining the 45L tax credit.