Author: Alexis Long

Categories
Financial Institutions and Banking

Managing Transition Risk

8 tips for a successful succession plan

One of the biggest challenges community banks face today is a shortage of banking talent. So, it’s critical for banks to develop a solid succession plan to manage transition risk. When key management personnel retire or leave unexpectedly, a succession plan helps ensure that the bank is prepared for the change and proactively addresses the vacancy.

Tailor your plan

Keep in mind that your succession plan must be tailored to your bank’s size, complexity, location, culture, risk profile, product and service mix, management “bench strength,” and other characteristics. With that in mind, here are eight tips to get you started:

  • Look within. There are many advantages to identifying internal candidates to succeed the CEO and other key management personnel. They’re already immersed in your bank’s culture and are familiar with its operations, goals, and strategies. Another big advantage of promoting from within is that your board of directors is likely already familiar with internal candidates’ work and personalities.

 

  • Have a leadership development program. A formal program for developing potential successors improves your chances of identifying internal successors. By providing training, mentoring, and coaching, you help candidates develop the skills they need to succeed in a management role — and you have an opportunity to evaluate their performance over time. In addition, your investment in employees may help with retention.

 

  • Consider external candidates. Although promoting from within has significant advantages, in some cases considering external candidates may be necessary or desirable. For example, if a CEO or other executive departs unexpectedly, you might not have a suitable internal candidate. Or perhaps the board feels that your bank would benefit from an outsider’s fresh perspective or experience at other types of institutions.

 

  • Look beyond the CEO. Many banks’ succession plans are limited to the top role. But it can be equally important to plan for the departure of other key positions — such as the CFO, chief risk officer or chief technology officer — as well as division or department heads who are critical to the bank’s operations and success. As you review your bank’s organizational chart, examine each position, consider the potential impact of a sudden vacancy and plan accordingly.

 

  • Think both short- and long-term. It’s important to have a short-term plan in the event someone leaves unexpectedly. This may involve designating interim successors who can fill in until a permanent replacement is found (which, in some cases, may be the interim successor). To minimize disruptions, a bank can use cross-training to ensure the availability of backup staff who can assume management responsibilities on an interim basis.

 

  • Make implementation part of your plan. Outlining your succession goals and strategies isn’t enough. Your plan should also include a “playbook” that sets forth processes for implementing the plan. For example, if you plan to hire from outside the bank, the playbook should specify where you’ll look for candidates, where you’ll post job listings and how you’ll identify the right people for the job. It might include checklists or other tools for evaluating candidates.

 

  • Communicate your plan. Transparency is key. It’s important to communicate your plans to all involved and manage candidates’ expectations to avoid losing people when one person is selected as successor. Make sure participants view the process as a career development opportunity, not a competition, and that you have a clear career path for those who aren’t chosen.

 

  • Revisit your plan regularly. A succession plan isn’t something you can put on a shelf and forget about until it’s time to implement it. To ensure that your plan continues to make sense for your institution, review it periodically and update it if necessary to reflect changes in your bank’s strategies, size, product and service offerings, regulatory environment, or other circumstances. Suppose, for example, that three years after developing a succession plan, a bank implements mobile banking applications and other digital technologies and hires a CTO. Unless the plan is updated, the bank’s operations could be disrupted if the CTO leaves.

 

Start early

Ideally, succession planning should start several years before potential succession events. You’ll need to give yourself plenty of time to define the qualifications you’re looking for, draft job descriptions, and evaluate internal and external candidates. You’ll also need backup plans for unexpected departures. By planning for management transitions, you’ll head off transition problems before they have a chance to derail your bank.

 

Sidebar: Regulatory expectations regarding succession planning

Federal banking agencies view succession planning as a key governance and risk management tool. In a recently published Q&A on succession planning, Federal Reserve representatives note that “management capabilities and succession prospects are considered throughout the examination process” and that these factors influence the “assessment of the bank’s viability.”

The Q&A also says that “given the importance of maintaining qualified bank leadership, any significant disruption in the bank’s operations can have far-reaching, negative ramifications for a bank’s safety and soundness. Hence, an effective succession plan is nimble enough to respond to changes in bank leadership in a timely fashion.”

Contact one of our experts with any questions about managing transition risk.

Categories
News Press Releases

ALEXANDER THOMPSON ARNOLD NAMES NEW PARTNER

FOR IMMEDIATE RELEASE

For more information contact:

Alexis Long, Marketing Director

731-427-8571

along@atacpa.net 

Jackson, Tenn., September 22, 2022 – Alexander Thompson Arnold PLLC (ATA), a business advisory and CPA firm, is pleased to announce Lori Warden, CPA, CGMA will be joining the firm as an assurance partner.

Warden has a wealth of knowledge with more than 30 years of experience in the assurance field including a background in peer review. She will be the Assurance Practice Leader in her new role with ATA. Warden is a Certified Public Accountant as well as a Chartered Global Management Accountant. She received her undergraduate degree in accounting from Marshall University.

“Adding Lori to the ATA team will strengthen our bench of expertise in the assurance area,” says Managing Partner, John Whybrew. “With her extensive background, Lori is well positioned to play an integral role in growing and expanding the Assurance Services offered within ATA.”

Lori previously held positions on the Kentucky Board of Accountancy as secretary, treasurer, and president. She is also a former Kentucky Society of CPA’s Board Member, chair of the Kentucky Society Education Foundation, and AICPA Peer Review Board Member.

“I am excited to become a partner at such an outstanding firm. I look forward to the hard work and am excited to assume more responsibility through the advancement of the practice,” said Warden.

Lori and her family live in Kentucky just outside of Cincinnati, Ohio. Warden is currently treasurer for South West Ohio Residences, a local non-profit. She is also married and has a daughter, who is a nurse in the ICU.

###

About Alexander Thompson Arnold PLLC (ATA)

ATA is a long-term business advisor to its clients and provides other services that are not traditionally associated with accounting. For example, Revolution Partners, ATA’s wealth management entity provides financial planning expertise; ATA Technologies provides trustworthy IT solutions; Sodium Halogen focuses on growth through the design and development of marketing and digital products; Adelsberger Marketing offers video, social media, and digital content for small businesses; and ATAES a comprehensive human resource management agency.

ATA has 15 office locations in Tennessee, Arkansas, Kentucky and Mississippi. Recognized as an IPA Top 200 regional accounting firm, it provides a wide array of accounting, auditing, tax and consulting services for clients ranging from small family-owned businesses to publicly traded companies and international corporations. ATA is also an alliance member of BDO USA LLP, a top five global accounting firm, which provides additional resources and expertise for clients.

Categories
Tax

Time is Running Out for the October 17th Deadline

If you requested an extension from the IRS to file your 2021 tax return, the Oct. 17 deadline is coming up soon. Taxpayers who asked for an extension should file on or before the deadline to avoid a late-filing penalty. Although Oct. 17 is the last day for most people to file, certain taxpayers may have more time; including military members and others serving in a combat zone. They typically have 180 days after they leave the combat zone to file returns and pay any taxes due. Also, taxpayers in federally declared disaster areas who already had valid extensions are given more time. Contact us right away to prepare your return to avoid penalties and claim any refund due.

Categories
General

4 Steps for Building Resilience in Your Organization

To expand or contract a business as market conditions change requires flexibility, agility, and foresight. For companies who want to be positioned as well as possible at the forefront of a recession, taking concrete steps now can ease the pain of an economic downturn or other unforeseen challenges.

 

How can companies navigate economic uncertainty and build resilience in their organizations?

 

1. Contain costs. When met with financial constraints—or the need to rapidly invest in growth areas—it will be critical to contain unnecessary expenses. Consider what costs can be pared back:

 

  • Can you pause certain projects and initiatives and reallocate funds where there is the greatest opportunity for growth?
  • Do you need to maintain your physical workplace, or can you trim the overhead?
  • Can you consider alternative staffing models to reduce costs?

 

2. Build a safety net of liquidity. Whether your business needs a capital reserve to invest in areas of growth, or to pay the bills while waiting out the storm, conserving liquidity will help fortify the financial health of your company. Investigate all potential funding sources available, as well as the terms attached to potential loans and grants.

 

3. Cultivate a nimble workforce. An adaptable workforce is key to scaling your business up or down. Be prepared to: reskill and upskill your existing workers to fill new roles; staff for agility so workers can serve as pinch hitters to serve areas with spikes in demand; and consider hiring contractors and freelancers in roles with a lot of variance of demand.

 

4. Outsource infrastructural needs. One way to minimize fixed costs and ensure best-in-class operational agility is by hiring external experts for non-core business functions, such as technology, finance & accounting, and human capital resources. Business operations are critical to maximizing workforce productivity and financially navigating a challenging climate. External experts working with companies across industries to scale during a recession can offer tried and true best practices to chart what would otherwise be uncharted territory.

 

While it’s impossible to know precisely what lies ahead, companies that take these four steps will be better poised to contend with whatever comes their way—whether it be a recession or an unprecedented growth opportunity. Visit our Value Creation page to speak with our team to discuss best practices on applying these steps.

 

Categories
Helpful Articles

The Inflation Reduction Act: what’s in it for you?

You may have heard that the Inflation Reduction Act (IRA) was signed into law recently. While experts have varying opinions about whether it will reduce inflation in the near future, it contains, extends, and modifies many climate and energy-related tax credits that may be of interest to individuals. 

 

Nonbusiness energy property

Before the IRA was enacted, you were allowed a personal tax credit for certain nonbusiness energy property expenses. The credit applied only to property placed in service before January 1, 2022. The credit is now extended for energy-efficient property placed in service before January 1, 2033. The new law also increases the credit for a tax year to an amount equal to 30% of the amount paid or incurred by you for qualified energy efficiency improvements installed during the year, and the amount of the residential energy property expenditures paid or incurred during that year. The credit is further increased for amounts spent for a home energy audit (up to $150). In addition, the IRA repeals the lifetime credit limitation and instead limits the credit to $1,200 per taxpayer, per year. There are also annual limits of $600 for credits with respect to residential energy property expenditures, windows, and skylights, and $250 for any exterior door ($500 total for all exterior doors). A $2,000 annual limit applies with respect to amounts paid or incurred for specified heat pumps, heat pump water heaters, and biomass stoves/boilers.

 

The residential clean-energy credit

Prior to the IRA being enacted, you were allowed a personal tax credit, known as the Residential Energy Efficient Property (REEP) Credit, for solar electric, solar hot water, fuel cell, small wind energy, geothermal heat pump, and biomass fuel property installed in homes before 2024. The new law makes the credit available for property installed before 2035. It also makes the credit available for qualified battery storage technology expenses. 

 

New Clean Vehicle Credit

Before the enactment of the law, you could claim a credit for each new qualified plug-in electric drive motor vehicle placed in service during the tax year. The law renames the credit the Clean Vehicle Credit and eliminates the limitation on the number of vehicles eligible for the credit. Also, final assembly of the vehicle must now take place in North America. Beginning in 2023, there will be income limitations. No Clean Vehicle Credit is allowed if your modified adjusted gross income (MAGI) for the year of purchase or the preceding year exceeds $300,000 for a married couple filing jointly, $225,000 for a head of household, or $150,000 for others. In addition, no credit is allowed if the manufacturer’s suggested retail price for the vehicle is more than $55,000 ($80,000 for pickups, vans, or SUVs). Finally, the way the credit is calculated is changing. The rules are complicated, but they place more emphasis on where the battery components (and critical minerals used in the battery) are sourced. The IRS provides more information about the Clean Vehicle Credit here: https://www.irs.gov/businesses/plug-in-electric-vehicle-credit-irc-30-and-irc-30d 

 

Credit for used clean vehicles

A qualified buyer who acquires and places in service a previously owned clean vehicle after 2022 is allowed a tax credit equal to the lesser of $4,000 or 30% of the vehicle’s sale price. No credit is allowed if your MAGI for the year of purchase or the preceding year exceeds $150,000 for married couples filing jointly, $112,500 for a head of household, or $75,000 for others. In addition, the maximum price per vehicle is $25,000.

Contact us if you have questions about taking advantage of these new and revised tax credits. © 2022

Categories
Financial Institutions and Banking

Going Digital: Banking’s Workforce of The Future

The discussion about digital transformation in financial services often focuses on which tools and solutions can best help an organization address challenges and opportunities. However, identifying the right tools is only one component. A successful digital transformation strategy should also address staffing considerations and plans for enablement and adoption.

 

Organizations need support and buy-in from staff who have strong digital literacy and the ability to build on necessary skills. As banks work to fill open positions and retain top talent in a highly competitive labor market, leaders should monitor shifting workforce trends and employee expectations to ensure the organization has the right people to execute its digital strategy.

 

A New Era of Banking

Digital transformation is a top priority for banks looking to meet customer needs, mitigate risk and improve efficiency, with 53% of respondents to BDO’s 2022 CFO Outlook Survey citing digital transformation as their top innovation strategy for this year. While expanded offerings and capabilities can create new opportunities for financial institutions, implementing a robust digital strategy can also expose banks to new threats. Rapid digitalization efforts have coincided with an increase in cyber risks, which can have dire financial and reputational consequences — especially in a heavily regulated industry like financial services. Any transformation plan should incorporate and/or develop thoughtful employee training programs in regard to the institution’s cybersecurity posture. Employees are the first line of defense when mitigating risk.

 

Beyond cyber risks, today’s era of banking has ushered in a new appreciation for digital transformation because CFOs and other financial leaders recognize a data-driven approach may help them spur growth, capture additional market share, and counter disruption from fintech competitors.

 

…And The Staffing Considerations That Come with It.

Financial institutions know that staffing plays a key role in effectively implementing digital transformation — and that not having the right people in the right roles can significantly hamper these efforts. Respondents to BDO’s 2021 Financial Services Digital Transformation Survey indicated a lack of skills or insufficient training (50%) and employee pushback (46%) as two of the top reasons why their digital initiatives underperform.

 

To help ensure success, a robust digital strategy should also address the “people” component before and during implementation. This initiative includes focusing on existing employees by developing a comprehensive change management strategy that’s supported by senior leadership and implementing applicable trainings, as well as identifying and filling any needs for new talent.

 

Meeting Shifting Employee Expectations

As in many other sectors, financial institutions are struggling to overcome a labor shortage caused in part by a wave of employee resignations and early retirements. In order to attract and retain top talent in a shifting labor market, financial institutions should have a clear understanding of what employees are looking for in a new role and where they are finding it.

 

While the financial technology (fintech) sector was already encroaching on investor capital and market share, banks must now also compete with fintech companies for skilled talent. Sustained growth has enabled fintechs to offer greater work/life balance, competitive compensation and greater flexibility than some traditional roles in banking. Part of the digital transformation process involves finding ways to remain competitive in the labor market.

 

Among the tactics CFOs are implementing this year to address these workforce challenges, 42% are developing flexible working arrangements, 40% are increasing compensation and 36% are upskilling their talent, according to BDO’s 2022 CFO Outlook Survey.

 

As CFOs assess flexible working arrangements, banks are evaluating their corporate footprint in multiple markets. As branch footprints are right-sized, banks are also deciding where offices can be consolidated.

 

Gaining A Competitive Edge Through:

 

Digitalization

In addition to meeting elevated customer expectations, digitalization can help attract and retain skilled employees. The innovation introduced by digitalization creates new opportunities for training and upskilling, which enables existing staff to develop their knowledge and experience. Automating previously manual processes can also free up time for employees to focus on higher-value services instead of more menial tasks. In fact, 37% of CFOs cited ‘implementing automation for manual tasks’ as a key consideration to meet shifting employee expectations and address workforce challenges. Above and beyond the employee experience, automation impacts the customer by providing a better experience for them, too.

 

Reevaluating benefits and compensation

Competitive salaries are important, but a competitive compensation strategy should also include nonmonetary benefits, such as wellness perks, that help meet employee needs. The digital strategy can also help financial institutions embrace a hybrid or remote work environment, providing employees with increased flexibility while also expanding the pool of potential applicants.

 

Aligning with ESG values

Employees are increasingly scrutinizing a potential employer’s commitment to environmental, social, and governance (ESG) values and prioritizing purpose-driven work. This is being recognized as a priority, with 38% of respondents to the 2022 CFO Outlook Survey listing “actionable steps on diversity, equity, and inclusion” as an area of investment for 2022. As financial institutions set ESG goals and distance themselves from clients who are not meeting environmentally sustainable criteria, publicizing these efforts can help attract new employees and retain existing staff.

 

Third-party advisor benefits

Partnering with a third-party advisor can provide a financial institution with a bird’s-eye view of opportunities and challenges related to staffing and digital strategy that may not have been identified in-house. The insights gleaned from a third-party analysis can help shape digital and workforce strategies, including areas for hiring, upskilling and retaining top-tier talent that can support a continued move toward digitalization.

 

A third-party consultant can aid in the strategic development of ESG strategies and the adoption of automated technology. They can even provide outsourcing and co-sourcing services for financial and accounting roles as banks and financial servicers reevaluate their employee/departmental needs.

 

Get Onboard for The Future Of Banking

A bank’s workforce is an integral component of their digital strategy and it has become apparent in the past year that there are unique challenges in recruiting and retaining top talent with digital skills. Continued success in this competitive market will depend on a financial institution’s ability to create a robust strategy for adapting to what comes next. Banks should identify the skills, training, and talent they will need to successfully adapt to a digital environment if they want to maintain their edge in a rapidly evolving financial services landscape.

 

Written by Mark Houston. Copyright © 2022 BDO USA, LLP. All rights reserved. www.bdo.com

 

Categories
Tax

Are you aware of the Residential Clean Energy Credit?

The Clean Vehicle Credit is getting some of the attention, but the Inflation Reduction Act (IRA) also includes many new or revised home energy improvement-related tax credits. For example, the credit previously known as the Residential Energy Efficient Property (REEP) Credit is now the Residential Clean Energy Credit. Individuals are allowed a personal tax credit for solar electric, solar hot water, fuel cell, small wind energy, geothermal heat pump, and biomass fuel property installed in homes before 2024. Under the IRA, the credit has been extended for property installed before 2035. The credit is also available for qualified battery storage technology expenditures.

Contact one of our experts for more information.

Categories
Tax

Inflation Reduction Act Of 2022 Includes Numerous Clean Energy Tax Incentives

On July 27, 2022, Sens. Joe Manchin (D-WV) and Chuck Schumer (D-NY) released legislative text for budget reconciliation legislation, also known as the Inflation Reduction Act of 2022. Twelve days later, the U.S. Senate on August 7 approved the bill on a party-line vote, with all 50 Democratic Senators voting for the legislation and all Republicans voting against it. Vice President Kamala Harris cast the decisive 51st vote in favor of the legislation. The House of Representatives then approved the bill on August 12, with all 220 Democrats voting for, and 207 Republicans voting against (with four Republicans not voting) the bill. The House made no changes to the Senate-passed bill, which President Biden signed into law on August 16.

The act includes the largest-ever U.S. investment committed to combat climate change, allocating $369 billion to energy security and clean energy programs over the next 10 years, including provisions incentivizing manufacturing of clean energy equipment and electric vehicles domestically.

Overall, the act modifies many of the current energy-related tax credits and introduces significant new credits and structures intended to facilitate long-term investment in the renewables industry.

 

Base and Bonus Credit Rate Structure

The act introduces a new credit structure whereby the tax incentives are subject to a base rate and a “bonus rate.” To qualify for the bonus rate, projects must satisfy certain wage and apprenticeship requirements implemented to ensure both the payment of prevailing wages and that a certain percentage of total labor hours are performed by qualified apprentices.

Projects under 1MW or that begin construction within 60 days of the date when Treasury publishes guidance regarding the wage and apprenticeship requirements are automatically eligible for the bonus credit.

Additional bonus credits may also be available for certain projects that are placed in service after December 31, 2022, and that meet domestic content requirements. For a project to qualify for this 10% bonus credit, taxpayers must ensure that a certain percentage of any steel, iron, or manufactured product that is part of the project at the time of completion was produced in the United States.

Facilities located in energy communities are also eligible for up to a 10% additional credit. Energy communities are defined as a brownfield site, an area with significant fossil fuel employment, or a census tract or any immediately adjacent census tract in which, after December 31, 1999, a coal mine has closed, or, after December 31, 2009, a coal-fired electric generating unit has been retired.

 

Credit Monetization Changes

The act includes two new options for the monetization of the tax credits in the form of direct pay and transferability.  Direct pay allows certain tax-exempt entities including state or local governments and Indian tribal governments to receive tax refunds in the amount of the credits as an overpayment of tax.   Taxpayers not eligible for direct pay can elect a one-time transfer of all or a portion of certain tax credits for cash to unrelated taxpayers. The cash received for the transfer of the credits is not included in the income, nor is the cash paid for the transferred credits deducted from income. The IRS may release registration requirements or other procedures to govern these tax credit transfers.

The act also increases the carryback period for certain credits to three years for credits eligible to be transferred from the current one-year carryback and extends the carryforward period two additional years, from 20 to 22 years.

 

Clean Energy Provisions

A number of additional changes to the energy related tax credits are summarized below:

 

Production Tax Credit (PTC) and Investment Tax Credit (ITC)

The PTC and ITC are extended and enhanced with the restoration to full rates for projects that begin construction prior to January 1, 2025, subject to prevailing wage and apprenticeship requirements. Wind and solar projects are also eligible for bonus credits for projects placed in service in low-income communities. Solar projects have the option to claim the PTC and the ITC is expanded to include energy storage as well as biogas and microgrid property.

 

Clean energy PTC and ITC

New technology-neutral credits will be available for qualified zero-emission facilities that begin construction after December 31, 2024. The credits begin to phase out the earlier of the calendar year when the annual greenhouse gas emissions from the production of electricity are equal to or less than 25% of the annual greenhouse gas emissions from the production of electricity in the U.S. for calendar year 2022 or 2032.

 

Carbon Capture Sequestration Credit

The act extends the “begin construction” date to December 31, 2032, and changes the credit rate and carbon capture requirements for both direct air capture and electricity-generating facilities. Qualification for the bonus rate requires satisfaction of prevailing wage and apprenticeship requirements and there is an option for all taxpayers to elect a direct payment of the credit for the first five years of operation.

 

Clean Hydrogen

A new tax credit is established for facilities that produce clean hydrogen at a qualified facility after December 31, 2022, and that begin construction prior to January 1, 2033. Taxpayers can claim the PTC or ITC with bonus rates subject to their fulfilling prevailing wage and apprenticeship requirements. All taxpayers can elect a direct payment of the credit for the first five years of operation.

 

Advanced Manufacturing Production Credit

A new production tax credit is available beginning in 2023 for each eligible renewable energy component produced by the taxpayer in the U.S. and sold to an unrelated person. Eligible components include any solar or wind component, qualifying inverters and qualifying battery components, and any applicable critical mineral. The credit is fully transferable and there is also an option for direct payment during the first five years of production.

 

Sustainable Aviation Fuel and Clean Fuel

The act includes new credits for sustainable aviation fuel used or sold as part of a qualified mixture between January 1, 2023, and December 31, 2024, and clean transportation fuel produced and sold after December 31, 2024, and before January 1, 2028.

 

Electric Vehicles

The existing $7,500 credit is modified by removing the current provision that begins phasing out the credit once a manufacturer sells 200,000 qualifying vehicles per manufacturer. The act also introduces limitations regarding domestic assembly requirements and for taxpayers with income over certain thresholds. Beginning in 2024, the act provides an option to transfer the credit to qualifying dealers and there is no credit available for purchases after December 31, 2032.

The act also establishes a new credit for previously owned clean vehicles on the initial transfer. The credit is allowed for vehicles with a sales price of $25,000 or less that have a model year at least two years old.  Similar to the credit for a new EV, this credit is limited for taxpayers with income over certain thresholds.

Immediately following President Biden’s signing of the bill,  the U.S. Department of the Treasury and the Internal Revenue Service published initial information – guidance and FAQs –  on changes to the tax credit for electric vehicles strengthened by the new legislation.

 

Alternative Refueling Property

The credit that expired on December 31, 2021, is extended and modified for property placed in service through December 31, 2032. The eligible expenses are increased and the per location limit is removed. However, beginning in 2023, only property placed in service in low-income or rural census tracts will be eligible for the credit. Prevailing wage and apprenticeship requirements must be satisfied to qualify for the full credit.

 

Commercial Clean Vehicles

Qualified commercial vehicles acquired after December 31, 2022, and before January 1, 2033, are eligible for a credit equal to the lesser of 30% of the cost of the vehicle not powered by a gasoline or diesel internal combustion engine or the incremental cost of the vehicle. The credit cannot exceed $7,500 for vehicles weighing less than 14,000 pounds or $40,000 for all other vehicles and is available only for depreciable property acquired from qualified manufacturers.

Additional clean energy and efficiency incentives for individuals included in the act include:

  • Extension, increase, and modification of nonbusiness energy property credit.
  • Residential clean energy credit.
  • Energy efficient commercial buildings deduction.
  • Extension, increase, and modifications of new energy efficient home credit.

 

Insights

  • Projects placed in service in 2022, including before the act’s date of enactment, may be eligible for the PTC and the ITC at full rates. Additional guidance around the prevailing wage and apprenticeship requirements is forthcoming and is expected to include required administrative procedures and documentation to meet the certification requirement to qualify for the bonus rates.
  • Direct pay, albeit limited in scope, in addition to the ability to transfer credits for cash, provides new flexibility in how certain tax credits may be monetized. Combined with the continuation of traditional tax equity structures, this option will impact capital and financing structures going forward.

Contact one of our experts for more information about the Inflation Reduction Act.

Categories
Tax

IRS Provides Broad Penalty Relief for some 2019, 2020 Returns

The IRS on August 23, 2022, announced it will grant automatic penalty relief for late-file penalties imposed with respect to certain returns required to be filed for the 2019 and 2020 tax years.

Notice 2022-36 provides systemic penalty relief to taxpayers for certain civil penalties related to 2019 and 2020 returns. Penalty relief is automatic so that eligible taxpayers need not apply for it. If penalties have already been paid, the taxpayer will receive a credit or refund. However, the IRS has not yet announced if or when it will notify eligible taxpayers that it has waived their preexisting penalties pursuant to this announcement.

However, it is critical to note that some of these automatic penalty waivers are available only if a taxpayer files their delinquent returns on or before September 30, 2022. As such, there is a very short window for taxpayers with outstanding reporting obligations to file their delinquent 2019 and 2020 returns and receive this automatic penalty relief. Any penalty relief under these procedures will be credited or refunded as appropriate.

This automatic relief does not apply to penalties for fraudulent failure to file or when a taxpayer has already settled its late-file penalties via an offer in compromise, a closing agreement, or a judicial proceeding.

This chart summarizes the list of returns for which automatic penalty relief is now available.

If you have any questions about tax penalties or penalty relief, contact one of our experts.

Categories
Tax

Tax Credit for Higher Education

It’s that time of year when students are starting or returning to college or trade school. Higher education is expensive, but taxpayers who take post-high school coursework in 2022 (or who have dependents taking such coursework) may qualify for one of two tax credits that can reduce their tax bills. The American Opportunity Tax Credit is worth up to $2,500 per eligible student for the first four years at an eligible school. The Lifetime Learning Credit tops out at $2,000 per tax return for any number of years. Income-based limits and additional rules apply.

To find out if you qualify for either credit, use this tool: http://bit.ly/36Vk6Ev , or contact one of our experts.