Due to minimal publicity and software glitches, money may be left on the government's table by businesses who need it for reinvestment
— Plante & Moran, PLLC, the nation’s 12th largest certified public accounting and business advisory firm, says that a little known part of the Worker, Homeownership, and Business Assistance Act of 2009 (WHBAA) is leaving money on the government’s table as business owners overlook a valuable tax ‘bonus’ that may be available to them if their businesses lost money in 2008 or 2009.
When the WHBBA legislation was signed by President Obama on November 6, 2009, a White House press release said the Act “Creates jobs by cutting taxes for struggling businesses...and provides an expanded tax cut to tens of thousands of struggling businesses, providing them with the immediate cash they need to pursue an expansion or avoid contracting or furloughing their workers.” According to Plante & Moran tax partner Mike Monaghan, the IRS code already had existing provisions to allow small businesses who had a loss in 2008 to use that loss to offset income from the previous five years under the American Recovery and Reinvestment Tax Act of 2009 (ARRA). The WHBBA not only expanded the five year loss carryback provision to businesses of all sizes, but to 2009 losses as well. As an added bonus, the WHBBA also removed the usual limitation applied to Alternative Minimum Tax (AMT) losses by allowing these losses to offset 100% of AMT income.
What many business owners may not realize is the removal of the AMT limitation also applies to future years if they still have some of the net operating loss (NOL) left over from the ARRA or the WHBBA carryback rules, says Monaghan.
“The ‘bonus’ effectively reduces taxes by 2% of the current year income when the net operating loss is used. For example, a business with $2,000,000 of income in 2010 that has at least $2,000,000 of net operating losses carrying forward for which the ARRA or WHBBA election was made will receive a $40,000 tax benefit,” explains Monaghan.
Monaghan says taking advantage of this rule is automatic if a taxpayer meets the requirements, but it is easy to miss not only because it has not been publicized as much as other tax incentives but because certain tax software have not been programmed to properly consider the rule.
“This rule is significant and creates an opportunity for business owners of all sizes to reinvest in their companies by purchasing or leasing new equipment and hiring more workers to meet increased demands. CFOs and tax advisors should definitely take full advantage of the tax bonuses offered by the WHBBA and the ARRA,” concludes Monaghan.
About Plante & Moran
Plante & Moran is among the nation’s largest certified public accounting and business advisory firms, providing clients with tax, audit, risk management, financial, technology, business consulting, and wealth management services. Plante & Moran has a staff of more than 1,600 professionals in 21 offices throughout Michigan, Ohio, and Illinois and with international offices in Shanghai, China; Monterrey, Mexico; and Mumbai, India. Plante & Moran has been recognized by a number of organizations, including FORTUNE magazine, as one of the country’s best places to work.