Income levels:

Your tax audit probabilities increase dramatically with increasing income levels.  Overall an income tax return’s audit probability is about 1.1%.  If your income level is $ 200,000 or higher the probability increases to nearly 4%.  Income levels of $ 1 million or greater produce tax audit rates of nearly one in eight (over 12%).   This is a surprising way to reward success?

Unreported income:

Many forms of income are reported on 1099 forms which are sent to both to the taxpayer and the IRS.  When your return is filed, the IRS compares your reported income with their received 1099 forms.  If there’s a disconnect, you will hear from them.  This can often be the impetus for a more fulsome tax audit too.

Large claimed charitable deductions:

Charitable deductions have come under substantially greater IRS scrutiny.  Inadequate substantiation for cash contributions, not reporting non-cash contributions on form 8283 or failing to secure appraisals on property contributions over $ 5,000 can attract undesired IRS attention.  As with many tax issues proper records, proper records and proper records are the three (3) most important defenses.

Home office deductions:

IRS has identified home office deductions as an area with great tax deficiency potential.  If you’re claiming such a deduction it’s wise to work with your H&M tax advisor to avoid unpleasant IRS encounters.

Employee/independent contractor Issues:

The magnitude of employment taxes on “common law employees” spawned serious tension over service provider classifications (i.e. employee versus independent contractor). 

Many businesses err, and continue to err, on the side of independent contractor classification hoping to avoid a plethora of administrative and benefit costs and tax burdens.  In 1978, the battle had raged to such a degree that Congress stepped into the fray with “Section 530” which limited the IRS’ ability to reclassify service providers as employees rather than independent contractors.  Subject to satisfying a series of compliance hurdles, this area has been somewhat subdued.  Recently the IRS announced the “voluntary classification settlement program” (aka the VCSP).  Usually such IRS overtures are in essence a “fair-warning” that increased/intensified enforcement is commencing. 

If you have long-term 1099 service providers who generally work exclusively with your business you should contact your H&M tax advisor for a determination of your business’ risk level.

Rental losses:

Rental losses are generally deductible only against passive income, unless you meet either the small rental exception or the real estate professional exception. 

The former exception is limited to $ 25,000 in losses and generally phases-out at income levels between $ 100,000 and $ 150,000. 

The latter exception pertains to folks like developers, brokers, professional landlords etc.  This exception requires “material participation” (or 750 hours per year) which makes proper aggregation of properties critical. 

These “passive activity” byzantine rules make IRS audits of such activities particularly fruitful from the IRS’ perspective. 

If you don’t meet either of the above exceptions, let us discuss with you the limitations that exist when you rent property to your own company.  You can’t use the self-charged rent as “passive income” to deduct your other leasing losses.

Meals and entertainment expenses:

Besides the critical correlation between these expenses and your business, expense substantiation is frequently lacking and proper application of the statutory limits make the IRS think audits in this area are almost too easy.  Records and good contemporaneous diaries are critical for success in these examinations.

Claiming 100% business use on a vehicle:

Insofar as commuting, driving to lunch or a doctor’s appointment are seldom a “business use” of a vehicle, claiming 100% business use on any vehicle except one which is unsuitable for personal use is like waiving a red flag at an IRS bull.   Moreover, since employer-provided vehicles most frequently require income inclusion by the person using the vehicle, ignoring personal use reporting requirements just increase the probabilities of penalty assessments.

Hobby loss activities:

Many high income earners engage in pseudo businesses that combine a “recreational” interest with an activity masquerading as a business.  The tax court is littered with the bodies of hobbies hiding behind facades that were easily detected at the audit level.  If you find yourself in these waters, maintain great books and records, secure outside consultants to assist with generating profits and be willing to abandon the project when several unsuccessful years have elapsed.

Higher than average deductions:

The IRS spent decades statistically measuring tax aspects of filed returns.  They’ve created correlations between income levels and certain customary tax deductions.  If your deductions are decidedly outside their “standard deviation” expect to receive a visit.  Expect high document production requests so if you’re on the “bubble” speak with your H&M tax advisor to aid in improving your deduction record keeping.

Cash intensive businesses:

Cash-flow audits have become very commonplace.  Agents report that businesses where receipts are mostly cash frequently have unreported or underreported income as well as questionable deductions.  If your business’ receipts are largely in the form of cash remember that the IRS will not only look at your business accounts but any other financial account over which you or your spouse have signature authority.

These examinations are no joking matter as they can move rapidly from a typical “civil tax” matter to one where Miranda rights are involved. 

Moreover, using bank accounts to “wash” out cash transactions are subject to IRS notification.  The $ 10,000 transaction limit isn’t the protection it once was as banks must report suspicious transactions, like a series of $ 9,500 transactions, the principal purpose of which was to avoid the $ 10,000 transactional limit.

Foreign bank and financial accounts:

The previous topic is a good lead-in for these subjects.  Many US persons have, or have been convinced to have, funds outside the US.  Disclosure of foreign bank account interests has been with us for some time, but compliance lagged which led to an “amnesty program”.  The penalties were on some occasions quite high, but generally full disclosure prevented “criminal” issues.    When disclosure wasn’t made, people had UBS-type experiences. 

While the amnesty programs were successful, the IRS has vigorously pursued information exchange demands with banks in many “bank secrecy” nations.  While disclosure isn’t that pleasant, imagine your prospects if the IRS discovers your accounts before you disclose!  

This can be a particularly tough issue for US persons who have been long-term foreign residents. 

In 2011 this scope of inquiry expanded to financial accounts, brokerage or not, and foreign issued securities.  If you have any such accounts/investments you should speak to your H&M advisor to keep a target off your  back.

For most new or used non-real property assets purchased, the Section 179 deduction limit for 2010 and 2011 is $500,000 with the limit reduced dollar for dollar (but not below zero) by the cost of qualifying property over $2 million.  The deduction for qualified real property is limited to $250,000.  Deductible Section 179 is also limited to the taxpayer’s business taxable income.  Vehicles are generally limited to $8,000 in addition to regularly allowed first year depreciation.

Qualified real property includes the following:

• Qualified Leasehold Improvement Property – generally improvements to nonresidential building’s interior made pursuant to a lease.
• Qualified Restaurant Property – generally buildings and improvements if over 50% of the building’s square footage is devoted to the preparation and consumption of meals.
• Qualified Retail Improvement Property – generally improvements to a nonresidential building’s interior areas that are open to the general public for a building used in a retail business selling tangible personal property to the general public.

100% Bonus Depreciation Rules for 2010 & 2011

Most qualifying new assets that are acquired and placed in service after 9/8/2010 and before 2012 (2013 for certain long-production property and aircraft) can be written off 100%.  Vehicles are generally limited to $8,000 in addition to regularly allowed first year depreciation.

Which is Better?

If both the Section 179 deduction and 100% bonus depreciation are available there are some considerations to keep in mind:

• Assets expensed under Section 179 are not counted toward determination of whether nor not the mid-quarter convention applies but basis deducted as bonus depreciation is.
• Neither bonus depreciation nor Section 179 requires an alternative minimum tax adjustment.
• Section 179 applies to new or used assets while only new assets qualify for bonus.
• Qualified leasehold improvement property, but not the other two types, qualifies for bonus unless they also meet the requirements for qualified leasehold improvements.
• Bonus depreciation must be claimed or elected out of by class.  Section 179 is elected on an asset by asset basis and can be used to expense less than the full amount of the asset’s basis.
• Bonus depreciation is not limited by taxable income and can be used to create an NOL that can be carried back and perhaps used immediately.
• Although most Section 179 taken in excess of taxable income can be carried forward indefinitely, Section 179 claimed on qualified real property cannot be carried past the 2011 tax year.
• The asset must be used over 50% of the time for business to qualify for Section 179.  If the usage later falls below 50% business usage the Section 179 must be recaptured.  Except in the case of listed property the 50% business usage is not a requirement for bonus depreciation.
• For Ohio taxpayers, Section 179 over $25,000 and all bonus depreciation must be taken over 6 years.  Many other states have similar limitations.

The Deduction also provides tangential benefits in the form of rebates from utility providers such as American Electric Power and low interest financing sponsored by the Ohio Department of Development.

Regrettably, this deduction is used by only about ten percent (10%) of otherwise qualifying projects. And, it is probably even less frequently considered in the cost/benefit analyses of most renovation projects. Don’t have regrets; save money and taxes!

How Does the Deduction Work?

The Deduction can reward companies and building owners who make qualifying improvements to a building’s envelope (the “Envelope”), the HVAC/hot water systems (collectively, the “HVAC”), and the interior lighting systems (“Lighting”). You should bear in mind that this Deduction is a source of ordinary income for recapture purposes on the disposition of depreciable personal and real property.

The technical standards for the Deduction are beyond the scope of this piece. However, in general terms, if these building system improvements result in a fifty percent (50%) reduction in the building’s energy/power costs (when compared to a “reference building”) this Federal tax deduction can equal as much as the product of $1.80 per square foot (or $ 0.60 per square foot for each system {i.e. the Envelope, HVAC and the Lighting}) and the building’s floor area.

Analysis suggests that this makes energy improvements made in building with areas of 20,000 square feet or more quite attractive. Although, both larger and smaller building do qualify, and therefore the Deduction should be seriously considered wherever renovations touch on the Deduction’s areas of interest.

Each system has its system specific energy targets (at least until regulations are promulgated).

As for Lighting, the lighting power density must be reduced forty percent (40%) (or fifty percent (50%) in the case of warehouses). Also, if the new Lighting reduces its power density by twenty-five percent (25%) the Deduction is equal to $ 0.30 per square foot with the rate prorated for power density reductions between 25% and 40%.

The Deduction is allowed for both new construction and remodeling and these improvements must be placed in service between 2006 through 2013.

Note that this Federal tax incentive is a “deduction” rather than a “tax credit”, meaning that the cash benefit is calculated by multiplying the deduction times the tax rate. We can assist you to compute your estimate your tax savings.

Examples of Energy-Efficient Building Materials and Systems:

• Envelope – High-efficiency insulation in walls, ceilings and floors
• HVAC – Automatic thermostats and other monitoring equipment
• Lighting – Energy-efficient fixtures, controls and monitoring equipment
• HVAC – Ultra-efficient air conditioners and furnaces
• Envelope – High-performance glazing and other energy-efficient materials on the building envelope
• HVAC- Natural ventilation
• Lighting – Day-lighting
• HVAC – Improved fan efficiency

Claiming the Deduction:

• The building must meet energy and power costs reduction standards as detailed in ASHRAE Standard 90.1-2001; Energy Standard for Buildings Except Low-Rise Residential Buildings (effective April 2, 2003).
• An independent, qualified individual must verify and certify that the property installed satisfies specific energy efficiency requirements using IRS-approved software.

How Can H&M Help?

As with most governmental incentive programs, this Deduction provides many obstacles that frustrate taxpayers’ full utilization of it. H&M can assist you through:

• We can calculate the amount of the Deduction;
• We can effectively claim the Deduction on your federal income tax return; We can secure necessary government agency assignment where/if necessary;
• We can file amended tax returns to claim the Deduction;
• We can request necessary accounting method changes to permit claiming the Deduction;
• We provide necessary energy efficiency certifications through a network of technical specialists—
  • Review construction documents;
  • Make site visits; and
  • Hold discussions with building designers, project managers and related personnel.

To learn more about the Energy Efficient Commercial Building Deduction and how it could be applied to your business, contact Stephen C. Smith or your Holbrook & Manter representative. e have facilitated tax savings for a number of growth-minded clients.

The Deduction also provides tangential benefits in the form of rebates from utility providers such as American Electric Power and low interest financing sponsored by the Ohio Department of Development.

Regrettably, this deduction is used by only about ten percent (10%) of otherwise qualifying projects.  And, it is probably even less frequently considered in the cost/benefit analyses of most renovation projects.  Don’t have regrets; save money and taxes!

How Does the Deduction Work?

The Deduction can reward companies and building owners who make qualifying improvements to a building’s envelope (the “Envelope”), the HVAC/hot water systems (collectively, the “HVAC”), and the interior lighting systems (“Lighting”).  You should bear in mind that this Deduction is a source of ordinary income for recapture purposes on the disposition of depreciable personal and real property.

The technical standards for the Deduction are beyond the scope of this piece.   However, in general terms, if these building system improvements result in a fifty percent (50%) reduction in the building’s energy/power costs (when compared to a “reference building”) this Federal tax deduction can equal as much as the product of $1.80 per square foot (or $ 0.60 per square foot for each system {i.e. the Envelope, HVAC and the Lighting}) and the building’s floor area.

Analysis suggests that this makes energy improvements made in building with areas of 20,000 square feet or more quite attractive.   Although, both larger and smaller building do qualify, and therefore the Deduction should be seriously considered wherever renovations touch on the Deduction’s areas of interest.

Each system has its system specific energy targets (at least until regulations are promulgated).

As for Lighting, the lighting power density must be reduced forty percent (40%) (or fifty percent (50%) in the case of warehouses).  Also, if the new Lighting reduces its power density by twenty-five percent (25%) the Deduction is equal to $ 0.30 per square foot with the rate prorated for power density reductions between 25% and 40%.

The Deduction is allowed for both new construction and remodeling and these improvements must be placed in service between 2006 through 2013.

Note that this Federal tax incentive is a “deduction” rather than a “tax credit”, meaning that the cash benefit is calculated by multiplying the deduction times the tax rate.  We can assist you to compute your estimate your tax savings.

Examples of Energy-Efficient Building Materials and Systems:

• Envelope – High-efficiency insulation in walls, ceilings and floors
• HVAC – Automatic thermostats and other monitoring equipment
• Lighting – Energy-efficient fixtures, controls and monitoring equipment
• HVAC – Ultra-efficient air conditioners and furnaces
• Envelope – High-performance glazing and other energy-efficient materials on the building envelope
• HVAC- Natural ventilation
• Lighting – Day-lighting
• HVAC – Improved fan efficiency

Claiming the Deduction:

• The building must meet energy and power costs reduction standards as detailed in ASHRAE Standard 90.1-2001; Energy Standard for Buildings Except Low-Rise Residential Buildings (effective April 2, 2003).
• An independent, qualified individual must verify and certify that the property installed satisfies specific energy efficiency requirements using IRS-approved software.

How Can H&M Help?

As with most governmental incentive programs, this Deduction provides many obstacles that frustrate taxpayers’ full utilization of it.  H&M can assist you through:

• We can calculate the amount of the Deduction;
• We can effectively claim the Deduction on your federal income tax return; We can secure necessary government agency assignment where/if necessary;
• We can file amended tax returns to claim the Deduction;
• We can request necessary accounting method changes to permit claiming the Deduction;
• We provide necessary energy efficiency certifications through a network of technical specialists—
  • Review construction documents;
  • Make site visits; and
  • Hold discussions with building designers, project managers and related personnel.

To learn more about the Energy Efficient Commercial Building Deduction and how it could be applied to your business, contact Stephen C. Smith or your Holbrook & Manter representative.  We have facilitated tax savings for a number of growth-minded clients.

Currently, IC-DISCs can provide up to a 20 percent tax advantage on qualifying  export income.  And, IC-DISCs are not very difficult to set up and maintain.  If you export U.S.-made products, you should give an IC-DISC serious consideration.

IC-DISCs are essentially a “special purpose corporation” whose principal purpose avails exporters a statutorily mandated tax incentive by (1) not taxing the IC-DISC (2) allowing the related exporter to deduct its IC-DISC payments and (3) taxing IC-DISC owners at a 15% rate on distributions.

The tax savings/incentive can equal 20% if the exporter pays federal income taxes at the 35% and its deductible payments to the IC-DISC are distributed to its owners who are taxed at a 15%.  Obviously if tax changes affect the relationship between corporate rates and individual dividend rates this incentive may reduce or disappear.

 IC-DISC Requirements:

An IC-DISC is not required to (a) perform services, (b) hire employees or (c) have any tangible assets.   But IC-DISCs must maintain their own financial and accounting records, and must file a federal tax return.

The export company can be a C Corporation, S Corporation, LLC or partnership, and the IC-DISC shareholders can be individuals, corporations, trusts or a combination.  However, IC-DISCs can only be C Corporations.

At least 95 percent of the IC-DISC’s income and assets must be related to export activity, and the exported product must be comprised of at least 50 percent U.S. content.  However, there is an exception for architects and engineers who work on projects that will be constructed outside the U.S.

The other IC-DISC requirements include:

• It must be approved by the Internal Revenue Service.  The paperwork must be filed within 90 days of the start of the tax year.
• It must be incorporated in one of the 50 states or the District of Columbia, which means the IC-DISC, might have to pay state income tax on the commissions it receives from the export company.
• It must have only one class of stock with a par value of at least $2,500.

Operating as an IC-DISC:

Once the IC-DISC has been created and IRS approved, the export company can begin to see financial benefits, but not before.

The export company pays a commission to the IC-DISC equal to no more than the greatest of: (i) 4 percent of the gross receipts from all qualified export sales, (ii) 50 percent of net income from all qualified export sales or (iii) a commission acceptable under traditional related party pricing rules.

Other considerations:

It is worth noting that the shareholders of the IC-DISC do not need to match the shareholders of the parent company.  In certain estate-planning circumstances, it can be helpful to structure ownership of the IC-DISC different from the parent company.

IC-DISC shareholders are able to defer tax on commissions by paying a small interest charge at the T-bill rate, which recently has been less than 1 percent.

As with any tax incentive, there are complex regulations that you must always be aware of.  However at its core, an IC-DISC is a valuable boost for American companies that wish to compete on a global stage.

To learn more about IC-DISC and how it could be applied to your business, contact Stephen C. Smith or your Holbrook & Manter representative. We have facilitated tax savings for a number of growth-minded clients.

The President is lobbying to both expand and extend the “research and experimentation tax credit” (the “R&D Credit”).  A noble effort, but the irony is many qualified small businesses aren’t availing themselves of it.  Manufacturers, contractors, architects, engineers, software developers and other innovators are leaving millions, perhaps more than a billion, dollars on the table annually.  Similarly, use of the “research and development” deduction has been avoided due to its status as a tax preference under the alternative minimum tax, subject to elections beyond the scope of this piece.

Historical overview – The R&D Credit was a Reagan Administration initiative encouraging private sector innovation and keeping pace with foreign competitors.  The Bush Administration expanded the R&D Credit’s application to a wider range of businesses, and the Obama Administration has proposed both making it permanent as well as expanding its application.  The R&D Credit, although couched as a “temporary tax feature,” has been extended 14 times.  It expired at 2011’s end.

Even with this underutilization, $9 billion in R&D Credits were claimed in 2008 (the most recent tax year for which data is available).  Did your business participate? 

In 2008, agricultural companies claimed more than $5 million, real estate companies claimed more than $7 million, management companies claimed more than $60 million, wholesale and retail companies claimed $430 million, and transportation equipment manufacturers claimed more than $1 billion. 

Unfortunately, as a Bloomberg Government study concludes, large companies claim a disproportionate share R&D Credits because many small businesses either find it too difficult to file the IRS required information or are unaware they qualify for R&D Credits.

According to Bloomberg’s study, small businesses account for 40 percent of private-industry research but received only 23 percent of R&D Credits in recent years.  Bloomberg’s study found a few common reasons for businesses not taking full advantage of R&D Credits:

• They do not know they qualify for a R&D Credit;
• The R&D Credit formula is too complex and the required documentation is too difficult to obtain;
• They are worried about making a long-term R&D investment when the R&D Credit could expire.

Tax credits usually mean more to profitable companies, but as R&D Credits can be claimed for all open tax years (generally meaning the current year and the past open tax years) and those credits carry forward for up to 20 years, R&D Credits may be valuable even to companies currently operating at a loss.

Defining ‘R & D’

Time, money and other resources devoted to improving a product or process could result in a R&D Credit for your business.  If you devoted resources are directed at:

• Research which is technological in nature;
• The activity and your devoted resources are directed at a new or improved product or process;
• The activity and your devoted resources are directed at the discovery of information that is currently unknown;
• The activity and your devoted resources must evaluate alternatives.

Hence, developing a lighter or more flexible tool, designing a unique electrical system for a new building, testing new materials, applying for a patent or streamlining an internal process can deliver an R&D Credit to your business.

R&D Credits cover employee wages directly contributing to R&D, supplies and software used in R&D activity, and contracted R&D services. There are two alternative measures of the R&D Credits:

• 20 percent of R&D expenses above a “base amount” (based on a fixed base percentage and the company’s average annual gross receipts of the preceding 4 taxable year), or
• 14 percent of R&D expenses above 50% of the company’s average R&D expenditures over its previous three years (aka the simple measurement).

Frequently, small businesses find it challenging to segregate normal business expenses from those that result in R&D Credits.  R&D specialists can assist in that segregation process and often return R&D Credits far in excess of the specialist’s fees.

Proposed simplification to R& D Credits

The Obama Administration has proposed two revisions that (a) raises the simple R&D Credit measurement to 17 percent and (b) makes the R&D Credit permanent.

Regardless of the Obama Administration initiatives success, there are short-term savings and long-term implications which make current pursuit of R&D Credits for forward looking companies desirable.

To learn more about R&D Credits and how they may favorably impact your business, contact Stephen C. Smith, or your Holbrook & Manter representative before attempting to take full advantage of R&D Credits.  We facilitate R&D Credits for growth-minded clients.

Tight and weak economies slim-down profit margins, tighten credit markets, and restrict investment capital.  Under these conditions, prudent business owners look for unconventional capital sources.  One such unconventional source begins with a Cost Segregation Study (a “Cost Seg”).  A Cost Seg can free cash for capital expenditures or normal operations.

Manufacturers can save when upgrading or adding onto their production infastructure.  The possibilities seem limitless.  Interestingly, Cost Segs can enhance a business with no expansion/updating objectives too.

Cost Segs are technical tax componentizations applied to commercial buildings constructed, remodeled, expanded or purchased since 1987.  Cost Segs can result in sizeable tax savings by accelerating depreciation allowances.  Even the U.S. Treasury Department advised in the Wall Street Journal that Cost Segs “should be considered in almost every real estate purchase.”

Whether or not you’re considering a real estate purchase – or recently made one – multiple reasons exist for considering a Cost Seg.

A Cost Seg segregates the costs of various building parts/components.  This permits classifying certain parts/components as “personal property” or “land improvements” rather than “real property.”  This classification reduces the tax bill by accelerating available depreciation deductions.

Real property depreciation is figured over extended lives (as long as 39 years).  Long lives mean small annual depreciation deductions.  Personal property depreciation routinely entails substantially shorter depreciation lives such as 5, 7 and even 15 years.  Shorter lives mean larger depreciation deductions.  “A dollar in your pocket today is worth more than a dollar in your pocket in the future.” 

Consequently, reclassifying $100,000 worth of lighting, plumbing, HVAC and other such assets as five-year personal property (as opposed to real property) creates roughly $16,000 in net-present-value tax savings (assuming a 5% discount rate and a 35% marginal tax rate).

Newly constructed improvements may qualify for either bonus depreciation or expensing under IRC §179.  In any event, profitable manufacturers moving to new (or at least new to them) facilities may find a Cost Seg results in partially funding the costs of buying and renovating the facility.  A business with a net operating loss (aka NOL) may be able to carry back the Cost Seg-generated depreciation losses and secure cash refunds of prior year taxes.

A peripheral benefit of reclassifying building components as personal property may permit real property value reductions for “property tax” purposes.  And Cost Seg componentization simplifies writing off the lighting, plumbing, HVAC or other such assets when they are replaced or become obsolete.

Be Proactive!

The IRS requires thorough and detailed records for Cost Segs to achieve their desired results.  Hence, a Cost Seg specialist becomes indispensable.  In new construction, early specialist involvement assures more suitable documentation respecting personal property’s use and cost.  Specialists also assist your architects or engineers with creating necessary information and documentation.  This is particularly valuable in constructing complex and highly detailed buildings.

Cost Segs are both possible and valuable after construction is complete.  Success in this setting depends on recognizing, documenting and valuing all building components so the reclassification is approved by the IRS.  In this setting, the IRS approval is necessary.  Here is where our specialists really prove his/her worth.

Cost Segs can be applied to most types of commercial buildings, but conventionally Cost Segs are most valuable regarding specialized buildings such as manufacturing, or special purpose buildings.

A Cost Seg may be just the cash flow boost you business has been seeking.

To learn more about Cost Segs and how they may favorably impact your business, contact Stephen C. Smith or your Holbrook & Manter representative before attempting any Cost Seg.  We facilitate Cost Segs for growth-minded clients.

Most taxpayers know that only fifty percent (50%) of most meal and entertainment expenses are tax deductible.  Routinely, return preparers see all such expenses “lumped together” and apply the 50% limit without a second thought.  However, several situations exist where all (or a greater portion than 50%) of such expenses are tax deductible.  To find this benefit you must understand those exceptions.

Exceptions?  What exceptions?

While the breadth of the 50% rule is quite pervasive, several meaningful exceptions exist; such as:

• Meal and/or entertainment includable in a nonemployee’s income where included in form 1099:
• Meal and/or entertainment attendant with company picnics and holiday parties as respects employees but not independent contractors; 
• Expenses for items made available to the general public (e.g. promotional popcorn, snacks) so long as it isn’t a “by invitation only setting”; 
• Meals and entertainment sold for adequate compensation (e.g. company cafeterias, restaurants and daycare providers); 
• De minimis amounts (unreasonable or impractical to account); 
• Charitable sporting events where—(a) benefiting a “public charity”, (b) 100% of net proceeds are contributed to the charity, and (c) substantially all the event’s workers are volunteers; and 
• Meal expenses during a job-related move which are reimbursed and reported as income to such employee.

 Sometimes the 50% exclusion can be shifted to the employee/independent contractor:

Meal and entertainment expenses paid to employee under a non-accountable plan which is treated as compensation shifts the 50% exclusion to that employee.

The “take-away”

What can be gleamed from the above?  You must be aware of the above exceptions and track them so your tax preparer can separate the above expenses from general, meal/entertainment expenses.  If you engage in any of the listed exceptions or think you might move in that direction, please call your H&M contact to help maximize the tax deductible nature on your meal and entertainment expenses.

According to the Columbus Dispatch, there are several ways to measure the success of the Grandview Yard, the development rising from land once home to a huge Big Bear warehouse. 

Please read more in the Columbus Dispatch at:

http://www.dispatch.com/content/stories/business/2012/01/27/successful-launch.html