Orland Park Tax Accountant

IRS Going After Golf Courses for Tax Deduction

Golf Course Easement2It’s getting much tougher to successfully claim a charitable deduction for a conservation easement. Unfortunately, this will further erode the construction of new golf course projects in 2016 and beyond.

Typically, a new golf course project will make consideration plans to conserve and protect the natural habitat of fish, wildlife, and natural ecosystem by preserving open space for the scenic enjoyment of the general public. These easements often amount to sizeable charitable deductions which help offset the investment.

Although the IRS has lost several conservation easement cases regarding golf courses, they turned the tide in 2003 and 2005 and have become more aggressive fighting these situations. In 2003 and 2005, the IRS went to Tax Court over two North Carolina golf course easements. In both instances, the IRS disagreed with the taxpayers over charitable deductions. The court, the IRS stated that “fairways, tee boxes and greens … are sodded or planted with 419 Bermuda and Tidwarf, which are nonnative grasses and consequently do not provide a relatively natural habitat for the Golf Course Easementpitcher plants and Venus flytraps.” Additionally, the court found that the use of pesticides, insecticides, fungicides, herbicides and fertilizers not only does not preserve the natural habitat, but actually “injures or destroys” the habitat. And, being part of a gated community that is not open to the general public does not provide scenic enjoyment for the general public. In both cases, the IRS won.

In 2009, a coastal Alabama golf course project, Kiva Dunes, won a three year court battle which vindicated their $28.7M tax break in exchange for leaving 141 acres of land undeveloped. This setback created a round of legislative changes aimed at banning golf course easements altogether. Fortunately, this effort was blunted by the golf industry.

Since the beginning of 2014, there have been 19 cases heard in US Tax or federal district court regarding conservation easements for golf courses.

If you are seeking to lower your tax obligations legally and would like assistance, call Michael Kimmey & Associates at 708-687-2917 or 630-581-7007.

 

 

Net Operating Losses Provide Tax Benefits

Net Operating LossFor many businesses, profits vary from year to year. However, with proper planning, even a bad year can be helpful from a tax perspective. Where business deductions exceed gross income, a taxpayer may have a net operating loss (NOL) that can be used to offset income in another tax year, potentially generating a refund of previously paid taxes.

Who May Use an NOL?

NOLs are available to individual business owners, corporations, estates, and trusts. Partnerships and S corporations do not take NOL deductions, though their partners and shareholders may use “passed through” losses on their own returns.

How Is an NOL Applied?

The general rule is that a taxpayer may carry an NOL back two years and forward 20 years, though certain limited exceptions may apply. For example, an individual with an NOL that was caused by a casualty, theft, or disaster may use a three-year carryback period.

In general, the taxpayer will carry back an NOL to the earliest year it can be used and then carry it forward, year by year, until it is used up. The taxpayer may also elect to forego the two-year carryback and carry the loss forward for the 20-year period. However, the general preference is to use an NOL sooner rather than later because a dollar of tax saved today is generally worth more than a dollar saved in the future.

How Is an NOL Calculated?

Calculations of NOLs can be complicated. For example, a noncorporate taxpayer’s NOL is calculated without regard to any personal exemptions or NOLs from other years, and certain deductions for capital losses and nonbusiness items are limited.

If you are tired of overpaying taxes and need a partner, call us and ask for Michael Kimmey.  Our initial consultation is free.

 

What are Tax Extenders for Small Businesses

Tax BreaksTax extenders are a group of fifty tax breaks that apply not only to small businesses but teachers and individuals as well. What you need to be concerned with are those that apply directly to small businesses. While these tax breaks are temporary in nature, they can have a serious impact on how you conduct your business for the next year.

In 2013, these tax breaks actually expired on December 31st, but the United States Congress retroactively extended the tax breaks into 2014. They typically do this at the last moment of the year, or right after the first of the new year, making it difficult for small businesses to plan ahead. These tax breaks are also only renewed for one year meaning they will have need to extend them again before the end of 2014, so they can carry over into 2015.

Currently, the tax extenders for small businesses include such items as a work opportunity tax credit of $1,375, a 15-year straight line cost recovery for qualified leasehold improvements for restaurant and retail establishments of $2,382, and bonus depreciation of $1,492.

Additional tax extenders include:

  • Exclusion of 100% of gain on certain types of small business stocks
  • A reduction in the S Corporation recognition period for built-in gains tax
  • Qualified zone academy bonds
  • An employer wage credit for activated military reservists
  • A new market tax credit

While not all tax extenders are good policy for the government or businesses, some of the tax breaks do help level the playing field and provide companies a way to define actual business expenses with less effort.

If you are tired of overpaying taxes, call 630-581-7007 or 708-687-2917 and ask for Michael Kimmey.

 

Michael Kimmey & Associates is a Tax and Accounting Firm operating for over 35 years.  Our firm services small businesses and individuals throughout Chicago.  Our offices are located in Oak Brook and Orland Park.