By Peter J. Scalise, B.S., M.S.

Introduction

On April 30 of 2013, the Internal Revenue Service (hereinafter “the Service”) issued Rev. Proc. 2013-24, providing guidance pursuant to the Industry Issue Resolution Program (hereinafter “IIR Program”) for taxpayers that have a depreciable interest in steam or electric power generation property primarily used in the trade or business of generating or selling steam (e.g., or steam in the form of heat) or electricity.

Rev. Proc. 2013-24, Appendix A also provides safe harbor definitions of “units of property” and “major components” that may be used by taxpayers to determine whether expenditures to maintain, replace, or improve steam or electric power generation property must be capitalized under I.R.C. § 263(a).

Rev. Proc. 2013-24 further encompasses:

• Procedures for obtaining automatic consent to change to a method of accounting that uses all, or some of, the safe harbor definitions of “units of property” provided within Appendix A; and
• An extrapolation methodology within Appendix B outlines that an eligible taxpayer may use in connection with a change in method of accounting for determining the amount of an I.R.C. § 481(a) adjustment.

The scope and application of Rev. Proc. 2013-24 is effective for tax years ending on or after December 31, 2012.

Scope and Application of New Administrative Authority

Rev. Proc. 2013-24 applies to a taxpayer that has a depreciable interest in steam or electric power generation property primarily used in the trade or business of generating or selling steam (e.g., or steam in the form of heat) or electricity. The subsequent attributes should be duly noted and strictly adhered to:

• It only applies for property defined in Appendix A of Rev. Proc. 2013-24;
• It does not apply to property used to produce electricity from alternative energy sources such as wind; or
• A determination of whether a taxpayer is within the scope of this revenue procedure is made by each member of a consolidated group, by a partnership, or by an S corporation.

Practically speaking, the Service issued Rev. Proc. 2013-24 to reduce the number of disputes regarding the deductibility or capitalization of expenditures to maintain, replace, or improve generation property. If a taxpayer uses the safe harbor definitions of “unit of property” and “major component” provided by Rev. Proc. 2013-24, this treatment will not be challenged by the Service.

Rev. Proc. 2013-24 describes and includes examples of “generation property” (i.e., as well as units of property and major components of generation property) and power stations.

Accounting Method Change Alert

Rev. Proc. 2013-24 provides that a change by a taxpayer to use the “units of property” and “major components” definitions is a change in method of accounting, and that a taxpayer seeking such a change must use the automatic change in method of accounting provisions in Rev. Proc. 2011-14 (e.g., or successor guidance).

In connection to the extrapolation methodology, Rev. Proc. 2013-24 explains that taxpayers may extrapolate their results to determine the I.R.C. § 481(a) adjustment amount for certain years by following the process provided in Appendix B.

Rev. Proc. 2013-24 also includes specific rules concerning changes in the method of accounting for taxpayers in the business of generating steam or electric power, by adding new section 3.20 to the appendix of Rev. Proc. 2011-14. The new automatic procedure provides, among other things, that the scope limitations in section 4.02 are waived for a taxpayer that changes to the method of accounting provided in Rev. Proc. 2013-24 for its first, second, or third tax year ending after December 30, 2012, and that a taxpayer must take the entire net I.R.C. § 481(a) adjustment into account (e.g., whether positive or negative) in computing taxable income in the year of change.

Conclusion

Rev. Proc. 2013-24, which was issued pursuant to the Service’s IIR Program, reflects a focused effort on the part of the Service and affected taxpayers in the electric utility industry to resolve subjective issues arising under I.R.C. § 263(a). As with other IIR safe harbor guidance, although Rev. Proc. 2013-24 provides safe harbors that affected taxpayers are not required to use, the Service anticipates that taxpayers will follow Rev. Proc. 2013-24 to minimize tax controversy issues described in this new administrative authority.

About the Author

Peter J. Scalise serves as the National Partner-in-Charge and the Federal Tax Practice Leader for Engineered Tax Services. Peter is a highly distinguished BIG 6 Alumni Tax Practice Leader and a noted thought leader in the accounting profession. Peter serves on both the Board of Directors and Board of Editors for The American Society of Tax Professionals (“ASTP”). Peter is also the Founding President and Chairman of The Northeastern Region Tax Roundtable, an Operating Division of ASTP. Peter is a volunteer member of the iShade Tax Faculty and a frequent keynote speaker for the AICPA, ABA, ASTP, NAREIT, NATP, TEI & AIA on specialty tax incentives, tax controversy matters and legislative updates from Capitol Hill.

To meet up with ETS’ Managing Director Michael F. D’Onofrio at the event to learn about updates to Federal, State and Local Utility Energy Tax Incentives and related Green Design Strategies … My ETS presentation is approx 10-12pm.

Congratulations to the ETS team for completing the Mercedes Benz Corporate Run!

We are so proud of everyone who participated in this great, fund-raising event.

“First   Step   Towards   Fitness”

This year the Mercedes-Benz Corporate Run will celebrate the 28th year! We look forward to once again being the “first step toward fitness” or an office tradition for employees and their company. The benefits and enjoyment of adding fitness to your life are numerous and well known and TeamFootWorks is proud to be involved in that process.

2013 Mercedes-Benz Corporate Run 5K – West Palm Beach

Date: April 17, 2013, Time: 06:45 PM
Location: Meyer Amphitheater

“First   Step   Towards   Fitness”

This year the Mercedes-Benz Corporate Run will celebrate the 28th year! We look forward to once again being the “first step toward fitness” or an office tradition for employees and their company. The benefits and enjoyment of adding fitness to your life are numerous and well known and TeamFootWorks is proud to be involved in that process.

http://www.mercedesbenzcorporaterun.com/wpb-main.php

Written by: Jennifer V. Hughes for National Real Estate Investor

It’s been a requirement for all New York City buildings larger than 50,000 sq. ft. since 2011.

Philadelphia and Washington, D.C. are making similar requirements of their commercial buildings this year. Chicago is on the cusp of issuing its own law. And thousands of owners and managers across the U.S. are doing it at their buildings even without the threat of regulation.

Credit: EPA

Benchmarking is being embraced by American cities and commercial property owners and managers one by one. Benchmarking is an umbrella term for the process by which a building owner or manager submits energy usage data into a computer program to track their energy and/or water use. The building can then be compared to similar buildings to see how green it is.

“It’s going to answer four questions,” says Dustin Gellman, CEO of Chicago-based energy consultant Green Per Square Foot. “How am I doing? Am I getting better or worse? Did the things I just did to improve my performance pay off? And where are my opportunities to improve?”

The point of benchmarking is that once the data is made public—as most benchmarking laws require—it can nudge building owners to do something to make their buildings more efficient.

The numbers are staggering: There are an estimated 4.9 million commercial buildings in the United States and they consumed almost 20 percent of all of the country’s energy in 2011. Energy use in commercial buildings accounts for 17 percent of greenhouse gas emissions.                                 

The most widely-used benchmarking tool, the Environmental Protection Agency’s Portfolio Manager, has been running since 2011. If your energy use nets you a score of 75 or higher (out of a 100-point scale) you can apply to have your building as Energy Star certified. There are 260,000 buildings benchmarking in Portfolio Manager and 20,000 of them are certified as Energy Star, says Cook.

So what do buildings do with all that benchmarking data? An Energy Star survey showed that buildings that consistently participated in Portfolio Manager used 7 percent less energy over a three-year period ending in 2011.

Energy Star does not track which of its participating buildings undertake which energy-efficiency retrofits after learning of their benchmarking scores, but Cook says the numbers make it clear that owners and managers are taking action.

Approximately 20 different states, cities and municipalities have benchmarking laws with different requirements on reporting. California’s law, set to go into effect in July 2013, requires benchmarking before a non-residential building can be sold, refinanced or leased. Several states have benchmarking laws for state-owned or leased buildings and a 2007 law requires annual benchmarking at certain federal government buildings.                    

New York City has been requiring annual benchmarking since 2011. Most benchmarking laws don’t require buildings to act upon the information they learn in the process. New York does have a companion law that requires periodic energy audits and retrocomissioning to bring a building up to certain standards.

“It does put some teeth in the benchmarking law,” says Phil Vos, business development manager for Bright Power, an energy consultant that focuses primarily in the multifamily sector.

“Some people see the laws as a government intrusion and a scam to collect fines from buildings that fail to benchmark,” Vos says. “What we try to tell them is that this information is telling you your costs are too high.”

As with many sustainability issues, the U.S. lags behind most European countries, many of which have had national benchmarking laws in place since 2008 or 2009. The reasons for this are simple, says Nils Kok, an internationally known benchmarking expert.

“Traditionally, building codes have been at the state and local level,” says Kok, who is currently a visiting scholar at University of California, Berkeley. “There just is not the political will to do it at the federal level.”

Kok has extensively researched the value of energy efficiency beyond the bottom-line savings achieved from using less energy.

“An investor wants a building that will lease out well,” he says. “The value of a building is the willingness of a tenant to be in the building, and to pay. If the building is more efficient and you can better attract tenants to the building, it’s more valuable. Investors would also be more willing to pay more for a building that is more efficient.”

Green buildings collect higher rents, Kok has found. For LEED buildings that’s 5 percent higher rents compared to otherwise identical buildings; for Energy Star-certified properties it’s 3 percent. Selling prices of green buildings are 11 percent higher (Energy Star) and 19 percent higher (LEED) compared to traditional counterparts.

Benchmarking is good for investors, agrees Gellman, of Green Per Square Foot. His company uses Portfolio Manager, along with its own benchmarking tool. He works with REITs and institutional owners who want to know how their portfolios are doing.

“These companies want to raise another round of money to buy another bucket of buildings,” he says. “In order to do that, they need to say ‘These are good assets, but how do we prove it?’ Well, that’s [done through] high occupancy, cash flow and now, increasingly, energy efficiency.”

Gellman recalls the recent example of meeting with “a big REIT” that had not yet done anything with benchmarking, but knew the time was nigh.

“They wanted to try to attract European and Asian investors and they knew they needed something to show for it. They didn’t want to do it, but their peers were doing it, and that’s where I think benchmarking plays a role,” he says.

“The best thing we get out of benchmarking is that it plays to the competitive nature of the commercial real estate industry,” Gelman adds.

Read this article in it’s entirety here: www.nreionline.com

Julio Gonzalez, CEO of Engineered Tax Services, and Roland Roth working with some of the students of Roosevelt Elementary

Engineered Tax Services (ETS) had another successful reading workshop with the students of Roosevelt Elementary School. After the Newtown tragedy, ETS developed a long-term relationship with Roosevelt Elementary School in West Palm Beach, FL.  This relationship allows us to give on a local level to a school with children in great need!  ETS has been working with the kids as reading buddies while donating items such as socks, shirts, pencils, paper, crayons, and notebooks.

By Peter J. Scalise, B.S., M.S.

Introduction

On Friday, March 22nd the Internal Revenue Service (hereinafter the “Service”) issued an updated Large Business & Industry (hereinafter “LB&I”) Directive for field examinations on the repair vs. capitalization subject that further extends the suspension of examinations. The effective date of the tangible property temporary regulations, in amendments published December 17, 2012, in T.D. 9564, has been extended to taxable years beginning on or after January 1, 2014. Accordingly, this memorandum provides modified examination instructions for taxable years beginning on or after January 1, 2012, and before January 1, 2014, and restates prior examination instructions for taxable years beginning before January 1, 2012, and on or after January 1, 2014. For tax years beginning after Dec. 31, 2013, examiners must follow the regulations in effect and follow normal procedures.

Scope of this New Directive

This new directive applies to the exam activity relating to positions taken on original returns relating to the following issues (hereinafter, “Issues”):

• Whether costs incurred to maintain, replace, or improve tangible property must be capitalized under I.R.C. § 263(a) (see, e.g., Rev. Proc. 2011-14, Appendix section 3.06, Repair and maintenance costs (designated change number 144)); and,
• Any correlative Issues involving the disposition of structural components of a building or dispositions of tangible depreciable assets (other than a building or its structural components) (see, e.g., Rev. Proc. 2011-14, Appendix sections 6.24 and 6.25 (designated change numbers 146 and 147, respectively)).

This new directive does not apply to current examination activity relating to (1) costs for which the IRS provides specific guidance, separate from the temporary regulations, for determining whether expenditures incurred to maintain, replace or improve tangible property must be capitalized under I.R.C. § 263(a), or (2) issues that do not pertain to whether costs incurred to maintain, replace, or improve tangible property must be capitalized under I.R.C. § 263(a). See, for example:

• Rev. Proc. 2001-46 and Rev. Proc. 2002-65, Track maintenance allowance for certain railroads;
• Rev. Proc. 2011-14, Appendix section 3.07, Wireline network asset maintenance allowance and units of property methods of accounting under Rev. Proc. 2011-27 (designated change number 158);
• Rev. Proc. 2011-14, Appendix section 3.08, Wireless network asset maintenance allowance and units of property methods of accounting under Rev. Proc. 2011-28 (designated change number 159);
• Rev. Proc. 2011-14, Appendix section 3.09, Method of accounting under Rev. Proc. 2011-43 for taxpayers in the business of transporting, delivering, or selling electricity (designated change number 160);
• Rev. Proc. 2011-14, Appendix section 6.01, A change from an impermissible to a permissible method of accounting for depreciation or amortization (depreciation) (designated change number 7); or
• Rev. Proc. 2011-14, Appendix section 3.05, Materials and Supplies (designated change number 143).

Best Practice Recommendations

The Service explains that, for tax years beginning on or after Jan. 1, 2012, and before Jan. 1, 2014, if a taxpayer has changed its method of accounting under the repair regulations, with or without filing a Form 3115, Application for Change in Accounting Method, the examiner must perform a risk assessment regarding the method change. If the taxpayer has not changed its accounting method, the “option period” (i.e., the period before the applicability dates of the forthcoming final regulations, during which a taxpayer may choose to apply the temporary regulations) is still open and the examiner is instructed not to examine the issue.

Furthermore, for tax years beginning before Jan. 1, 2012, the IRS reiterated its earlier instructions, telling examiners to:

• Withdraw the portions of Forms 4564, Information Document Request, that relate to the development of these Issues;
• Withdraw all Forms 5701, Notice of Proposed Adjustment, related to these Issues;
• Issue a revised Form 5701 with a Form 886-A, Explanation of Adjustments, with language specified in the directive. A copy of this form signed by the taxpayer must be uploaded into the Service’s Information Management System (hereinafter “IMS”);
• Retain work papers on these issues in the IMS; and
• Complete Form 5346, Examination Information Report.

About the Author

Peter J. Scalise serves as the National Partner-in-Charge and the Federal Tax Practice Leader for Engineered Tax Services. Peter is a highly distinguished and long-standing member of both the Board of Directors and Board of Editors for The Ameri­can Society of Tax Professionals (“ASTP”). Peter is also the Founding President and Chairman of The Northeastern Region Tax Roundtable, an Operating Division of ASTP. Peter is a volunteer member of the iShade Tax Faculty and a frequent keynote speaker for the AICPA, ABA, ASTP, NAREIT, NATP, TEI & AIA on specialty tax incentives and legislative updates from Capitol Hill.

About Engineered Tax Services

Engineered Tax Services (“ETS”) is the preeminent symbol of excellence in engineering based tax advisory services. ETS is the only nationally licensed engineering firm of choice amongst leading CPA Firms, Fortune 500 Companies and Russell Index 2000 Companies.
Our unique business model of engineers working collaboratively with accountants and attorneys impeccably aligns true subject matter experts with proven methodologies that are pragmatic and sustainable on IRS and multi-state examinations.
Our subject matter experts of engineers, accountants and attorneys have exceptional proficiency in the design, implementation and execution of methodologies for engineering based tax advisory services that make us the firm of choice amongst leading CPA Firms nationally and globally. Our service offerings include, but are not limited to:

• Research Tax Incentives;
• Energy Tax Incentives;
• Energy Audits & Energy Star Benchmarking;
• Premium Cost Segregation Services encompassing Construction Tax Planning & Abandonments;
• The Proper Tax Treatment of Repairs and Maintenance Expenditures; and
• Preservation Tax Credits including Historic Tax Credits and Rehabilitation Tax Credits.

By Peter J. Scalise, B.S., M.S.

In selecting a specialty tax service provider for Cost Segregation, Energy Certification or Research Credits  it is critical to consider a number of criteria to ensure sustainable results upon an IRS examination should one come to fruition along with having a highly rewarding and enduring relationship with the specialty tax service provider.

The subsequent top five criteria need to be properly vetted as part of your due diligence in selecting a specialty tax service provider:

1) Licensed Professional Services Firm & Circular 230 Compliant:

Always ensure that your service provider is a licensed professional services firm and is in full compliance with Circular 230. Most “Tax Advisory” firms that are not affiliated with a CPA Firm are unlicensed. Always be mindful that certain service offerings will require only a licensed engineering firm such as in the case of I.R.C. § 179D for building envelope efficiency.

2) The Credentials of the Firm and Engagement Team:

Always ensure that the licensed firm and Circular 230 compliant firm that you select has properly trained professionals that have a proven track record with the IRS in designing, implementing, and defending sustainable methodologies for specialty tax incentives. Request references and client testimonials to ensure the service provider that you select is not only tax technical, but have the depth and breadth of industry focus required as well.

In addition, always ensure the engagement team that will be assigned is properly staffed by both licensed engineers and accountants to properly collaborate and communicate and ensure a sustainable result upon IRS examination should one come to fruition. As an example, a Cost Segregation Analysis will need both an engineer(s) (i.e., structural engineers, mechanical engineers, electrical engineers based upon the size and complexity of the facility under review) to review the blueprints as well as an accountant to interpret the tax laws in order to opine upon a sustainable tax return filing position.

3) Track Record for Truly Distinctive and Client Centric Services

Always ensure that the licensed and Circular 230 compliant firm that you select has a proven track record of rendering distinctive and client centric services. This will ensure that no incentives (i.e., whether credits or deductions) were missed or overlooked and that you will have a sustainable tax return filing position.

4) The Client Relationship

Always ensure that you are comfortable with both your relationship with the licensed firm and the engagement team assigned to render the services. The relationship needs to be based upon trust, integrity and unbridled ethics to ensure a win-win for your client.

5) Engagement Fee Structures

Always ensure that your engagement fee structures are Circular 230 compliant. Do not accept engagement fee structures that are contingent upon results for engineering based tax advisory services as it’s a blatant Circular 230 violation. As an example, a Research and Development Tax Credit engagement fee structure cannot be contingent upon the results because the IRS will view this as the more the service provider claims then the more that service provider gets paid and the perception of credibility and integrity is greatly impaired. Engagement fees should be based upon time and expense incurred showing a reasonable and estimated range of professional service fees based upon a workplan bifurcated by task with the corresponding rank of the professional rendering these services (i.e., associate, senior associate, manager, senior manager, director, principle/partner).

About the Author

Peter J. Scalise serves as the National Partner-in-Charge and the Federal Tax Practice Leader for Engineered Tax Services. Peter is a highly distinguished and long-standing member of both the Board of Directors and Board of Editors for The Ameri­can Society of Tax Professionals (“ASTP”). Peter is also the Founding President and Chairman of The Northeastern Region Tax Roundtable, an Operating Division of ASTP. Peter is a frequent keynote speaker for the AICPA, ABA, ASTP, NAREIT, NATP, TEI & AIA on specialty tax incentives and legislative updates from Capitol Hill.

About Engineered Tax Services

Engineered Tax Services (“ETS”) is the preeminent symbol of excellence in engineering based tax advisory services. ETS is the only nationally licensed engineering firm of choice amongst leading CPA Firms, Fortune 500 Companies and Russell Index 2000 Companies.

Our unique business model of engineers working collaboratively with accountants and attorneys impeccably aligns true subject matter experts with proven methodologies that are pragmatic and sustainable on IRS and multi-state examinations.

Our subject matter experts of engineers, accountants and attorneys have exceptional proficiency in the design, implementation and execution of methodologies for engineering based tax advisory services that make us the firm of choice amongst leading CPA Firms nationally and globally. Our service offerings include, but are not limited to:

• Research Tax Incentives;
• Energy Tax Incentives;
• Energy Audits & Energy Star Benchmarking;
• Premium Cost Segregation Services encompassing Construction Tax Planning & Abandonments;
• The Proper Tax Treatment of Repairs and Maintenance Expenditures; and
• Preservation Tax Credits including Historic Tax Credits and Rehabilitation Tax Credits.

Pursuant to recently issued IRS Notice 2013-21, the IRS (hereinafter “the Service”) has postponed until October 15, 2013 the deadline to make an election under I.R.C. § 165(i) to deduct in the preceding tax year losses attributable to Hurricane Sandy sustained in a federally declared disaster area.

In late October 2012, Hurricane Sandy struck the east coast causing extensive damage in approximately a dozen states. President Obama issued major disaster and emergency declarations under the authority of the Robert T. Stafford Disaster Relief and Emergency Assistance Act for certain areas in Connecticut, Delaware, District of Columbia, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, Virginia, and West Virginia. The Federal Emergency Management Agency (FEMA) determined certain areas within those states and the District of Columbia to be eligible for Public Assistance or Public Assistance and Individual Assistance under the Stafford Act.

According to I.R.C. § 165(i), if a taxpayer sustains a loss attributable to a federally declared disaster occurring in a disaster area, the taxpayer may elect to deduct that loss for the tax year immediately preceding the tax year in which the disaster occurred. For this purpose, a federally declared disaster is a disaster determined by President Obama to warrant assistance by the federal government under the Stafford Act (i.e., including a disaster for which President Obama issues a major disaster declaration or an emergency declaration), and a disaster area is the area so determined to be eligible for such assistance.

The I.R.C. § 165(i) election is made by filing a return, an amended return, or a refund claim on or before the later of: (1) the due date of the taxpayer’s income tax return (determined without regard to any extension of time for filing the return) for the tax year in which the disaster actually occurred; or (2) the due date of the taxpayer’s income tax return (determined with regard to any extension of time for filing the return) for the immediately preceding tax year. The election is irrevocable 90 days after the taxpayer makes the election. In addition, pursuant to I.R.C. § 7508A, the Service may postpone the deadline for making the election.

Please reach out to Engineered Tax Services today to discuss how we can potentially assist in reducing your rebuilding costs through energy tax incentives; preservation tax credits; manufacturing deductions for architects, engineers and construction companies; and premium cost segregation services encompassing both construction tax planning and abandonments.

About the Author

Peter J. Scalise serves as the National Partner-in-Charge and the Federal Tax Practice Leader for Engineered Tax Services. Peter is a highly distinguished and long-standing member of both the Board of Directors and Board of Editors for The Ameri­can Society of Tax Professionals (“ASTP”). Peter is also the Founding President and Chairman of The Northeastern Region Tax Roundtable, an Operating Division of ASTP. Peter is a frequent keynote speaker for the AICPA, ABA, ASTP, NAREIT, NATP, TEI & AIA on specialty tax incentives and legislative updates from Capitol Hill.

In positive response to the horrific tragedy at Sandy Hook Elementary School the staff and friends of Engineered Tax Services gathered almost a thousand pairs of socks (most requested item), crayon boxes, pencil sharpeners, and notebooks for the children of Roosevelt Elementary School (RES). "Over 95% of our kids are on free or reduced lunch," Dr. Garrett, Principal, said. "Their most basic of needs aren’t being met. Partnering with ETS will greatly help children in this community greatly."

TAKING THE LOVE FURTHER we started a READING BUDDIES program where one Friday a month we’re GOING ALL IN and reading with one or two kids per pre-screened adult. Today, March 15, 2013 was our initial visit! THESE KIDS ARE HUNGRY FOR READING BUDDIES! We hope to gather A DOZEN others for our next visit: Friday, April 5th!

For those of "Team ETS" who are outside of the WPB area feel free to contribute the above goods via gift card or send the actual donation to our corporate office. Consider volunteering in a school near you as well.

Lead Contact: Roland Roth, Exec VP of Customer Service, 561-253-6631

Sincerely,

Roland.

Roland Roth ⎜Executive VP for Customer Service
Office: 561.253.6631
Email: rroth@engineeredtaxservices.com
www.EngineeredTaxServices.com

The State of Florida recently enacted a Research and Development (R&D) tax credit for tax years beginning on or after January 1, 2012 for qualified business enterprises with qualified research expenses in the state of Florida. The state R&D credit is computed based on 10% of qualified research expenses (“QREs”) incurred in Florida.
For Florida credit purposes, for tax years beginning on or after January 1, 2012, a “business enterprise” that is eligible for the federal R&D credit may apply for a credit against Florida income tax. A “business enterprise” is any corporation that is a “target industry business”, which is any business that has the potential for future growth, pays high wages compared to average, market and resource independent, is in an industry which contributes toward expanding or diversifying the economic base, and has positive economic impact. (Partnerships and LLCs taxed as partnerships are specifically excluded from this definition as are businesses that are identified in the retail industry, electrical utility, phosphate or solid mineral severance, mining, or processing operations, oil and gas exploration or production, or any business in the hotel or restaurant industry.)

The credit is equal to 10% of the excess current year’s QRE’s over the base amount, which is the average of the business enterprise’s previous four taxable years’ qualified research expenditures. If the business enterprise has not been in existence for four years, the credit must be reduced by 25% for each taxable year that it was not in existence. The credit cannot exceed 50% of the business enterprise’s remaining net income tax liability for the year after all other credits have been applied. Any unused credit may be carried forward for up to five years.

In order to qualify for the Florida R&D tax credit a business enterprise must submit an on line application on or after March 20 of the following year. There is a yearly  of $9 million and the credit is on a “first-come-first-serve” basis. Consequently, companies wishing to take advantage of the new Florida R&D credit for 2012 should file their application on or very soon after March 20, 2013 in order to be as close to the front of the line of applicants as possible.

About The Author

Peter J. Scalise serves as the National Partner-in-Charge and the Federal Tax Practice Leader for Engineered Tax Services. Peter is also a highly distinguished and long-standing member of both the Board of Directors and Board of Editors for The American Society of Tax Professionals and is the Founding President and Chairman of The Northeastern Region Tax Roundtable, an Operating Division of ASTP. Peter is a frequent keynote speaker for the AICPA, ABA, ASTP, NATP, TEI & AIA on specialty tax incentives and legislative updates from Capitol Hill.