Expanded Form 1099 Reporting Requirements Repealed
Many business and property owners are breathing a sigh of relief, thankful they will not have to deal with expanded 1099 reporting requirements.
On April 14, 2011, President Obama signed the Comprehensive 1099 Taxpayer Protection and Repayment of Exchange Subsidy Overpayments Act of 2011, which repealed the expansion of Form 1099 reporting under 2010’s Patient Protection and Affordable Care Act and Small Business Jobs Act.
The Patient Protection and Affordable Care Act included a provision that broadly expanded the mandatory filing of Form 1099, beginning for payments made after Dec. 31, 2011. The provision generally would have required businesses to report any payments to vendors that exceeded $600 in a calendar year.
The Small Business Jobs Act introduced another expansion of Form 1099 reporting that took effect for payments made after Dec. 31, 2010. This expansion would have affected taxpayers who receive rental income from a “passive” real estate investment, such as a vacation home. Previously, only taxpayers in the trade or business of rental properties were required to file Form 1099, but, under this law, the IRS considered taxpayers who own one or more rental properties to be a “business” for Form 1099 purposes.
These expanded requirements likely would have created significant burdens for businesses and many property owners by dramatically increasing the number of necessary filings. In addition, affected businesses and property owners would have been responsible for obtaining taxpayer identification numbers from every payee that required a Form 1099. If a business was unable to obtain this information, it would have been required to withhold federal income taxes from payments to that payee and forward them to the government.
The repeal of the expanded Form 1099 reporting requirements reduces the burden on taxpayers, specifically business and property owners, who were facing increased paperwork or risking IRS penalties for failing to file a newly required Form 1099. If you have any questions, you should contact your tax advisor.
“Going Green” Can Yield Tax Savings
Many businesses are “going green” in response to increased energy costs and the United States’ dependence on foreign oil. This act of corporate citizenship can help reduce a company’s energy consumption and open the door for favorable tax incentives and credits designed by the government to promote energy sustainability.
Below is a brief sampling of the green incentives that have been made available by the federal government and the state of North Carolina.
Federal Credits and Incentives
Energy Efficient Commercial Building Deduction—Taxpayers can deduct up to $1.80 per square foot of building space in new or existing structures in which interior lighting, HVAC or hot water systems, or building envelope property has been installed that reduces the total energy and power costs by at least 50 percent. If the energy efficient property is installed in property owned by a governmental entity, the deduction can be allocated to the person primarily responsible for the design, such as an architect or engineer.
Business Energy Investment Tax Credit—A credit of 10 percent or 30 percent of the cost of purchasing alternative energy property is available in the form of a cash grant for certain purchases. A 30 percent credit/grant is available for qualified fuel cell property, solar property and small wind turbines. A 10 percent credit/grant is available for equipment producing geothermal energy, combined heat and power systems and microturbines.
Alternative Refueling Property Credit—A 30 percent credit, up to $30,000, is available for installing clean fuel vehicle refueling property that will be used in a trade or business. To qualify, the fuel must be composed of at least 85 percent ethanol, natural gas, compressed natural gas, liquefied natural gas, or a mixture of biodiesel and diesel fuel containing at least 20 percent biodiesel.
Plug-In Electric Vehicle Credits—A tax credit of up to $7,500 is available for new plug-in electric vehicles. The amount of the credit varies based on a number of factors.
North Carolina Credits and Incentives
Renewable Energy Corporate Tax Credit—North Carolina offers an income tax credit up to 35 percent of the cost of eligible renewable energy property that is constructed, purchased or leased by the taxpayer in North Carolina. The maximum incentive is $2.5 million per installation and must be taken in five annual installments.
Renewable Energy Equipment Manufacturer Tax Credit—North Carolina provides an income tax credit for 25 percent of the costs incurred in the construction of a facility to manufacture renewable energy property. Costs that qualify for the credit include construction and equipment costs. As is the case with the Renewable Energy Credit discussed above, the credit must be taken in five annual installments.
As previously mentioned, this is only a sampling of the green incentives that are available. All of these programs have specific requirements that need to be closely reviewed to determine if a particular business or circumstance qualifies for an incentive. Due to the complexity and volume of potential incentives, we strongly advise businesses to contact their tax advisor to determine what incentives are available to them and what requirements must be met.
Content contributed by the Charlotte office of Elliott Davis, PLLC, an accounting, tax and consulting services firm providing clients the solutions needed to achieve their objectives in 10 offices throughout the Southeast. For more information, contact Dan Warren at firstname.lastname@example.org or Jack Schmoll at email@example.com, or visit www.elliottdavis.com.