So, we closed out 2017 with massive tax reform, the most comprehensive change in the tax system that we have seen since 1986. Many taxpayers will be looking at a lower effective tax rate moving forward and are searching for all available legitimate means of reducing their higher 2017 tax liabilities. Often businesses miss out on potential savings from tax credit and incentive opportunities. Is your business taking advantage of the following items?
- Research Credits – The research and development (R&D) tax credit provides a dollar-for-dollar reduction in tax liability. Yet many businesses think of R&D as only for very large companies or for scientists in lab coats. This perception is incorrect. The reality is that many businesses can qualify for the credit for everyday activities such as developing or improving manufacturing processes, implementing lean activities, or developing tooling, to name a few.
- Property Tax – If your business activity meets the requirements for a manufacturing classification, your machinery and equipment should be exempt from personal property tax in the state of Wisconsin. To obtain the machinery and equipment property tax exemption, your business must be classified as manufacturing by the Wisconsin Department of Revenue’s Manufacturing & Utility Bureau.
- Manufacturing and Agriculture Credit – The manufacturing and agriculture credit is available to claimants that derive qualified production activities income from property located in Wisconsin which is assessed as either manufacturing or agricultural for real estate tax purposes. This is a powerful income tax credit that encourages and strengthens manufacturing and agriculture in Wisconsin.
- Cost Segregation Study – Significant components of your building likely serve certain processes or equipment and should be depreciated quicker than the general building structure. A cost segregation study can properly identify those costs to accelerate depreciation, increase current tax deductions, and increase cash flow.
- International Incentive – The interest-charge domestic international sales corporation (IC-DISC) is one of the last remaining opportunities providing tax incentives for exporters. Utilize an IC-DISC to lower your effective tax rate related to your export sales. Also, if you have international operations, be sure to prepare yourself for the repatriation tax on deferred foreign income.
Written by Brian Lightfield, CPA, Senior Manager, Wipfli LLP – CPAs and Consultants