May/June, 2010 Newsletter
MINNESOTA’S NEW “ANGEL TAX CREDIT”
Written by Mike Bromelkamp, CPA, MBA, CIA on June 28, 2010
Minnesota’s new Angel Tax Credit was signed into law on April 1, 2010. It is intended to stimulate private equity investment in emerging businesses and encourage job creation. It provides a 25% tax credit to qualified investors or funds for their investments in qualified small emerging high technology businesses, particularly those using new proprietary technology.
Businesses, investors, workers and the Minnesota economy all benefit from this program:
- Businesses get access to the capital they need to grow;
- Investors can manage the risk associated with investing in a new business; and
- Minnesota workers and the Minnesota economy benefit because the tax credit “kick-starts” emerging businesses and creates jobs.
At current funding levels, the program could create $236 million in new investment over the next five years. Can it work for you? Eligibility depends on your field of business, stage of development, and other factors which are extensive, complicated and not intuitive.
Key features -
- A 25% individual tax credit for qualified investors.
- The credit is refundable and non-transferable.
- Maximum credit is $125,000 per year per individual or up to $250,000 for those who are married and filing jointly.
- Program limit for calendar 2010 is $11 million.
- Program limit for calendar 2011 through 2014 is $12 million per year.
Investors, funds and businesses must be certified by the Minnesota Department of Employment and Economic Development (DEED) in order to participate in the program. The minimum qualifying investment is $10,000 for investors, or $30,000 for funds. The maximum credit per business is $1 million.
Three types of businesses will qualify for angel investments:
- Those using proprietary technology to add value to a product, process or service in a qualified high-technology field.
- Those researching or developing a proprietary product, process or service in a qualified high-technology field.
- Those researching, developing or producing a new proprietary technology for use in agri-culture, tourism, forestry, mining, manufacturing or transportation.
Qualifying businesses must be headquartered in Minnesota and have fewer than 25 employees, with at least 51 percent of the workers and total payroll based in the state. Businesses must have been operating for no more than 10 years and cannot have received previous equity investments exceeding $2 million.
Certification applications will be available in the Summer of 2010 from DEED.
For more details about the program (including progress on implementation), attend our seminar on June 22 at the Olsen Thielen offices in Roseville. Check out the DEED website at www.PositivelyMinnesota.com/angelcredit, or contact Mike Bromelkamp at (651) 483-4521 or mbromelkamp@otcpas.com.
MINNESOTA 2010 INCOME TAX CHANGES
Written by Allison Boyd, CPA. MBT on June 28, 2010
Refundable historic structure rehabilitation credit
Starting in 2010, taxpayers who are eligible for the federal historic rehabilitation credit for improving a certified historic structure located in Minnesota are also eligible for a Minnesota historic rehabilitation credit. The credit is equal to 100% of the federal credit and is taken in the year the project is placed in service. Unlike the federal credit, the Minnesota credit is refundable and can also be transferred.
The credit is set to sunset after fiscal year 2015, although projects certified prior to that date will be allowed to claim the credit in the year in which the project is placed in service.
To qualify for the Minnesota credit, the project developer must apply for certification to the State Historic Preservation Office (SHPO) of the Minnesota Historical Society before any rehabilitation of the historic structure begins.
Additional information about the application process for the Minnesota credit is available at the SHPO website, www.mnhs.org/shpo/.
Credit for increasing research activities expanded
The following three changes were made to the Minnesota research and development credit, starting with tax year 2010:
- Individual partners of partnerships and shareholders of
S corporations are now allowed to claim the credit against their individual income tax for qualified research activities of the entity - The amount of the credit for the first $2 million of qualified expenses was increased from 5% of the qualifying expenses to 10% of the qualifying expenses.
- The credit is refundable.
Lower income motor fuels tax credit repealed
The $25 lower income motor fuels tax credit for tax year 2009 was repealed beginning with tax year 2010.
For more information on these tax changes, please contact Allison Boyd, CPA, MBT, at (651) 483-4521.
SEVERANCE PAYMENTS – FICA TAX RELIEF
Written by Ryan Kelly, CPA on June 28, 2010
The IRS lost a recent court case relating to severance payments made to certain involuntarily terminated employees. Based on the Quality Stores, Inc. case decided by a U.S. District Court on February 23, 2010, severance payments to involuntarily terminated employees were ruled as exempt from FICA taxes. The IRS is expected to appeal the decision and at this time the final determination relating to this issue is uncertain.
Companies should consider filing a protective refund claim by amending the quarterly payroll tax reports, IRS Form 941-X, for the quarters in which the FICA tax was paid (in general, a protective refund claim is filed to allow for any refunds that could expire due to the statute of limitations). Employers can file a refund claim for both the employer and employee share of the FICA tax. The employer must secure the employee’s consent if filing a claim for their portion, and reimburse them for their share of the tax if the refund is granted.
Employees can file for their half of the FICA tax using IRS Form 843. It is necessary for the employee to inquire with the employer as to whether they have also filed a refund claim. The employee must document and include any correspondence with the employer when submitting their refund claim to the IRS.
There are a few prerequisites that must be satisfied in order to file for relief:
- Reduction in the workforce must be involuntary;
- More than one employee must be laid off; and
- Employees cannot have the option to accept a buyout.
For more information contact Ryan Kelly, CPA at (651) 483-4521 or email rkelly@otcpas.com.
SALES TAX – JUNE ACCELERATED PAYMENT
Written by Gerri Hoff, CPA on June 28, 2010
If you have a sales and use tax liability of $120,000 or more in the state’s fiscal year (July 1, 2008 to June 30, 2009) you must make an accelerated payment in June 2010. The following accelerated tax payment provisions apply to the June payment only. You must pay one of these amounts:
- 90 percent of your actual June 2010 liability, or
- 90 percent of your May 2010 liability, or
- 90 percent of your average monthly liability for the previous calendar year.
The June accelerated payment is due two business days before June 30 (June 28, 2010), and the remaining payment and return for June will be due August 20, 2010. If you do not make an accelerated payment by June 28, you will be subject to a penalty. You are also subject to a penalty if you underpay your accelerated tax.
If you were required to make an accelerated payment in the past but your tax liability is now below $120,000 for the prior fiscal year, you are not required to make a June accelerated payment. You must file your June return and pay your June tax by July 20, 2010.
To avoid possible penalties and interest, it is important to review your account to ensure that you are filing and paying properly. Contact Gerri Hoff, CPA at (651) 483-4521 with any questions.
HEALTH CARE LAW’S MASSIVE, HIDDEN TAX CHANGE
Written by Cheryl Ellefson, CPA, MBT, CFP on June 28, 2010
Section 9006 of the health care bill mandates that beginning in 2012 all companies will have to issue 1099 tax forms not just to contract workers, but to any self-employeds or corporation from which they buy more than $600 in goods or services in a tax year. The change means businesses will have to issue millions of new tax documents each year.
The bill makes two key changes to how 1099s are used. First, it expands their scope by using them to track payments not only for services, but also for tangible goods. Second, it requires at 1099s be issued not just to individuals and partnerships, but also to corporations.
DEPENDENT HEALTH INSURANCE COVERAGE FOR CHILDREN UNDER AGE 27
Written by Alan Holz, Human Resources Manager on June 28, 2010
The Departments of Health and Human Services, Treasury and Labor recently announced an interim final rule, implementing a provision of the Patient Protection and Affordable Care Act impacting individual and group health plans. Health plans that already provide coverage to dependents must extend eligibility to dependents under age 27, including allowing those who already have lost coverage to re-enroll.
The requirement to cover those under age 27 takes effect for plan years beginning on or after September 23, 2010, and applies regardless of factors such as a dependent’s marital status, student status, financial dependence, or eligibility for other coverage. If a dependent is not currently enrolled in the health plan, insurer’s will offer special enrollment periods for them on or after September 23.
Special note: Blue Cross Blue Shield Minnesota announced the week of May 17 they will begin covering dependents under age 27, effective June 1, 2010.
Contact Alan Holz at (651) 483-4521 with questions about these new dependent health insurance coverage provisions.
CAFETERIA PLAN CHANGES FOR CHILDREN UNDER AGE 27
Written by Alan Holz, Human Resources Manager on June 28, 2010
IRS has provided guidance on different aspects of favorable tax treatment now extended to health coverage of an employee’s child under age 27.
To be excluded from income, reimbursement and coverage must be for someone who has not attained age 27 at any time during the tax year.
In situations involving cafeteria plans, IRS intends to amend current regulations so that the definition of “change in status event” (which permits the employee to make a new election) will include having a nondependent child under age 27. IRS has stated that employers may permit employees to immediately make pre-tax salary reduction contributions for children under age 27, even if the plan has not yet been amended.
FOR ALL YOU LEXOPHILES (Lovers of Words)
Written by Newsletter Editor on June 28, 2010
– A bicycle can’t stand alone; it is two tired.
– A will is a dead giveaway.
– A backward poet writes inverse.
– A chicken crossing the road: poultry in motion.
– When a clock is hungry it goes back four seconds.
– A boiled egg is hard to beat.
– He had a photographic memory which was never developed.
– If you jump off a Paris bridge, you are in Seine.
– The short fortune teller who escaped from prison: a small medium at large.
– A lot of money is tainted. ‘Taint yours and ‘taint mine.
– When you’ve seen one shopping center you’ve seen a mall.
– Santa’s helpers are subordinate clauses.
– Acupuncture: a jab well done.
– Marathon runners with bad shoes suffer the agony of defeat.
– No matter how much you push the envelope, it’ll still be stationery.
– Two silk worms had a race. They ended up in a tie.
– He broke into song because he couldn’t find the key.
– Bakers trade bread recipes on a knead to know basis.
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May/June, 2010 Newsletter
