Pub. 4 2015-2016 Issue 3

Winter 2016 15 In the auto industry, competition is real—but so is partnership. Join financial leaders from other auto, truck, RV, and heavy equipment dealerships nationwide to share best practices, learn about vital accounting and tax issues, and more. Space is limited, so reserve a spot soon. June 23–24 | Vdara Las Vegas Register at www.regonline.com/2016DSWorkshop Fuel for Growth 2016 WORKSHOP FOR CFOS AND CONTROLLERS WWW.MOSSADAMS.COM/AUTOMOT I VE Certified Public Accountants | Business Consultants Work Opportunity Tax Credit For dealerships that hire members of certain target groups, this has been extended through 2019. The PATH Act also expands the credit beginning in 2016 to apply to employers that hire qualified individuals who have been unemployed for 27 weeks or more. The amount of the tax credit depends on the target group of the individual hired, the wages paid, and the number of hours they worked during the first year of employment. The maximum tax credit earned for each member of a target group is generally $2,400 per adult employee, but the credit can be as high as $9,600 per qualified veteran. Employers aren’t subject to a limit on the number of eligible individuals they can hire. In other words, if 10 individuals qualify, the credit can be 10 times the amount listed. Bear in mind that you must obtain certification that an employee is a member of a target group from the appropriate state workforce agency before you can claim the credit. S Corporation Recognition Period for Built-In Gains Tax S corporation income generally is passed through to shareholders, who pay tax on their pro-rata shares. If a C corporation elects to become an S corporation, the newly created S corporation is taxed at the highest corporate rate (currently 35 percent) on all gains that were built in at the time of the election and recognized during the recognition period. With careful planning this tax exposure can be greatlyminimized or eliminated. The recognition period was generally 10 years, but it’s now five years under the PATH Act, beginning on the first day of the first tax year for which the corporation was an S corporation. ACA Delays The new tax legislation has also gained attention for delaying some divisive provisions in the ACA. For example, it puts off the start of the so-called Cadillac tax on high-cost, employer-provided health insurance from2018 to 2020.The 40 percent taxwould be applied to health coverage that costs more than $10,200 for individuals or $27,500 for families, with annual threshold increases based on inflation. The tax would be assessed on the difference between the total cost of health benefits for an employee in a year and the applicable threshold amount. Plan Ahead The PATH Act’s temporary and permanent extensions of valuable business tax breaks provide significant tax planning opportunities. We’ve touched on only some of themost popular here, but the new law includes other extensions and enhancements that may benefit your business as well. This is the time to identify opportunities to reduce your liability for 2015 and future years. Sid Tobiason, Tax Partner, has practiced dealership accounting since 1978. He advises clients on federal income tax, estate tax, entity structure, the purchase and sale of businesses, ownership transition, and succession planning. He can be reached at (858) 627-1448 or sid.tobiason@mossadams.com . Amy Stillwell, Tax SeniorManager, workswithdealershipowners on federal income and estate planning. You can reach her at (858) 627-1410 or amy.stillwell@mossadams.com .