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IRS Concedes Research Tax Credit Tooling Case
  
TSK of America Inc. (a manufacturer of automotive parts) included tooling costs for metal stamping and plastic injection molding in the calculation of its 2013 Research Tax Credit. The tools were purchased from a third party with the intent of being used in production processes.

TSK's customers usually require TSK to sell any unique tools to them. However, in this case TSK kept the tools due to an extensive trial and error process involved in refining the effectiveness and efficiency of the tools. Despite being purchased from a third party, the tools did not immediately perform at optimal effectiveness and efficiency and had to be altered.

In 2013, TSK included $9.3 million in supplies and materials as part of its qualified research expenses. The IRS initially only allowed approximately $1.2 million of expenses, which would have reduced the Research Credit by $500,000. The IRS's ultimate concession in this case strengthens the arguments of manufacturers with similar fact patterns, but does not provide any precedential value as it never went to court .

For more information on the case or Research Credits in general, click here or contact John Rittichier, CPA at 800.880.7800 ext. 8484 or at jrittichier@hsccpa.com.
401(k) Contributions and Student Loans
  
A recently issued IRS private letter ruling gives new hope to former students working to pay off their student loan debts. Student loan debts have been on a rapid rise, nearly tripling over the last decade. Former students are looking for help from whatever corner possible, and may now have a tangible solution by collaborating with their employer .

Private Letter Ruling 201833012 affirmed that employers can substitute qualifying student loan repayments made by employees in place of employee matching contributions for company 401(k) plans. Under the typical 401(k) structure, employees must contribute a portion of their earnings to their 401(k) in order for the employer to contribute an employer match. This alternative system under the letter ruling gives employees the option to both pay off their student loans and receive retirement benefits at the same time. This change in employer match should have a net zero impact to the employer's bottom line.

Employers who wish to provide the benefits described above will need to amend their existing 401(k) plan documents to account for the change. Having the ability to assist employees in paying off their student loans can make a potential employer very attractive in the competitive hiring marketplace. 

To learn more about 401(k) student loan benefits from MarketWatch, click here or contract Aaron Wilzbacher, CPA at 800.880.7800 ext. 1322, awilzbacher@hsccpa.com.
Global Economic Risks to the Middle Market
   
Developing markets face growing risks that present a clear and present danger to middle market firms in emerging economies. In RSM's estimation, the developing economies most at risk include Indonesia, India, Iran, South Africa, Russia, Mexico, Argentina, Brazil, Turkey, and Venezuela. The policies pursued by the United States may force emerging market countries to undergo a self-induced bout of fiscal austerity or suffer through what is looking like a classic emerging market financial and banking crisis.

To download the Real Economy Vol. 45, click here or contact Scott Olinger, CPA, CPIM, CGMA at 800.880.7800 ext. 8466, solinger@hsccpa.com .
New Lease Accounting Standard
 
Effective January 1, 2020, non-public companies (January 1, 2019 for public companies) are required to comply with ASC 842 - Leases. Under ASC 842, companies will need to re-evaluate each of their existing leases, old and new contracts to see how the new definition of a lease will affect their current arrangements.
 
Key decision points include:
  • Companies generally may not understand the resource requirement necessary to implement the new standard. Is your company properly equipped with "technology solutions" to help organize and analyze leases to make adequate financial and business decisions? Software solutions to help deal with leases may be cost prohibitive, and it is important to find a vendor that understands your company's needs and can keep costs within budget.
  • While the primary focus regarding ASC 842 has been on compliance and financial accounting, companies must additionally consider tax implications the new standard presents.
  • Has your company considered naming someone to lead the transition so the company can effectively overcome early challenges and concerns regarding the implementation?
 
For more information on the new lease accounting standard, click here or contact Scott Olinger, CPA, CPIM, CGMA at 800.880.7800 ext. 8466 or at solinger@hsccpa.com.
ABOUT OUR MANUFACTURING & WHOLESALE DISTRIBUTION INDUSTRY TEAM
  
From increased competition and continuous quality improvement demands to rising employee benefit costs and declining margins, manufacturers and wholesale distributors are facing greater challenges than ever before. In addition to the services you would expect from an
accounting firm, we have a dedicated team ready to assist you with the unique challenges and issues facing your industry.
 
A number of our staff members belong to The Association for Operations Management (APICS) with some having achieved the CPIM and CIRM certifications. We understand your key issues and possess the drive and determination to help you manage your company on a proactive basis. This commitment positions us at the cutting edge of the industry and enables us to spot trends and deal quickly with the issues your company may be facing.


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