Contractors: A look at the tax, economic and financial landscape. Presented by: Brian Aumueller Ken Peeples Sean Killgoar

Transcription

1 Contractors: A look at the tax, economic and financial landscape Presented by: Brian Aumueller Ken Peeples Sean Killgoar

2 Brian Aumueller alliantgroup Managing Director National practice leader with alliantgroup s software, manufacturing, architecture, engineering, and contractor practices and has worked with hundreds of small to mid-sized businesses in the area of Research & Development Tax Credits More than 20 years of experience providing management consulting services to hundreds of companies Former COO at a regional consulting firm responsible for the strategic direction of the firm and setting business strategy for its clients

3 Ken Peeples Vice President and North Carolina Surety Manager at BB&T Construction Risk Services Distinguished practice with a focus on the entire design-build industry, including young start-ups to established, multigenerational firms Manages surety programs of many of the ENR 400, ENR top specialty contractors and international construction companies Active in the Association of General Contractors, the Associated Builders and Contractors, the Construction Financial Management Association, the North Carolina Plumbing, Heating & Cooling Contractors Association and the American Subcontractors Association

4 Sean Killgoar Partner at KAF Financial Group More than 16 years of experience working as a trusted advisor to the construction industry, serving companies with revenues ranging from 10 million to 1 billion dollars Designated as a Certified Construction Industry Financial Professional (CCIFP) and is a Board Member of the Construction Financial Management Association (CFMA) Member of American Institute of Certified Public Accountants and the Massachusetts Society of Certified Public Accountants

5 Tax / Political Landscape

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8 Small Business vs. Large Business Effective Tax Rates

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10 Energy Efficient Commercial Building Deduction (179D) IRC Sec. 179D allows an immediate depreciation deduction of up to $1.80/SF for commercial buildings that achieve certain reductions in total energy and power costs with respect to interior lighting, HVAC, hot water systems, and the building envelope. Rewards reductions in power and energy costs Available for commercial buildings, including government owned buildings

11 What Types of Buildings and Construction? Commercial Buildings include: Typical commercial buildings retail, office, industrial Public or Federal, State, or Local Government offices, military bases, courthouses, post offices, prisons, universities, schools, libraries, airports, police, fire, etc. Multi-family structures that are 4 stories or higher Located in the U.S. Construction includes: New construction AND renovations / retrofits of existing buildings

12 THE

13 Case Study Middle School Updated lighting systems for existing building New light fixtures Installed occupancy sensors Installed bi-level switching Qualified for $.60 per sq ft 90,709 square foot building Total Deduction Awarded: $54,425

14 Case Study Early Childhood Center Modeled HVAC & hot water systems, lighting systems, and building envelope Innovative use of insulated concrete foam Qualified for full building deduction Building envelope achieved 16% Qualified for $1.80 per sq ft 49,068 square foot building Total Deduction Awarded: $88,322

15 R&D Tax Credit Immediate source of cash New regulations easier for a broad array of companies to qualify Recent case law (2009) may expand credit for manufacturers Credit is available in ALL OPEN TAX YEARS Among the hottest (and most misunderstood) tax incentives

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17 Wages: Form W-2, Partnership Earnings subject to SE Tax, Schedule C Excludes 401(k) & Benefits Supplies: Cost to fabricate prototypes/items consumed in R&D process 65% of Contract Research: Fees paid to outside consultants/engineers/software developers

18 Mechanical and Electrical Contracting Tend to Qualify Design for LEED/Green Initiatives HVAC design Electrical system design BIM modeling for sub-system coordination System detailing for constructability Value Engineering Tend to Not Qualify Budgeting and costing Project management Installation

19 19 Construction Case Study Electrical Contracting R&D Tax Credit Company Revenue: $22,000,000 Entity Type: LLP Credit Result: $243,200

20 Contractor Case Study Electrical Contractor R&D Tax Credit: federal Annual Revenue: $38MM Credit Result: $450,000

21 Economic / Financial Landscape Fair pricing / bidding practices: Is the industry undervaluing their work? Bidding wars to the point of no profits Bonding strategies: Showing income IRS vs. bonding company Succession planning Updates regarding current tax rates Estate tax

22 Economic / Financial Landscape Strategies for selling a business to a 3 rd party Asset sale vs. stock sale Net Working Assets vs. Net Working Capital Real value of company What type of professionals need to be involved Lease Agreements: Tax advantages and proper wording Ideal terms for rent, property tax, maintenance, and facility improvements. General business strategies: Balancing cash flow, lines of credit, cash discounts for early payment, negotiation of payment terms

23 Thank you. Brian Aumueller Ken Peeples Sean Killgoar