June/ July 2013 |
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Manufacturing and Wholesale Distributors
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Is today's business environment presenting unique opportunities and issues for your manufacturing operation? How are you addressing the push from your customers for continuous quality improvement? Are you having difficulty finding and retaining quality employees? Add to these issues declining profit margins and strained resources due to rapid growth and you have major challenges facing you day in and day out.
At Harding, Shymanski & Company, P.S.C. we have a dedicated team ready to assist you with those unique challenges and issues facing your industry.
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Manufacturing Renaissance
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Manufacturing has grown faster than the overall economy for several years. As mentioned in the "The Year of the Manufacturing Renaissance?" article written by Stephen Gold in The Competitive Edge, experts point to several reasons: Disappearing cost advantage in China, higher U.S. productivity, a fresh awareness of overseas supply chain risks, and the comparative advantage arising from a shale gas and oil revolution. Nearly 20% of respondents in a recent Manufacturers Alliance for Productivity and Innovation (MAPI) survey indicated that their companies have returned some activity to the U.S. in the past two years. While some of those companies have plans in the works to bring additional operations to the U.S. in 2013. Leading reasons given for the return to U.S. soil include declining labor cost advantage abroad, rising shipping costs, and the desire to reduce supply chain uncertainty.
However, many hurdles have materialized to prevent a U.S. manufacturing boom, including uncertainty over tax rates and policies, a construction market just emerging from recession, continued economic decline in Europe, and mounting concern over new federal regulations. As a result, MAPI is projecting growth of 2% for the sector in 2013 and 3.2% in 2014. Beyond 2014, MAPI is projecting an average growth rate of 3.6% through 2017.
The growth is anticipated to come from aerospace, with projected growth of 16% in 2013 and 17% in 2014, housing starts with projected growth of 28% this year and 32% next year, industrial equipment spending forecast to rise 5.2% in 2013 and 8.6% in 2014, and transportation equipment spending projected to increase 6.2% in 2013 and 4% in 2014. This is why many experts expect resurgence in manufacturing in the U.S. over the next five years.
For additional information, please contact Scott Olinger, CPA, CIRM at (800) 880-7800 ext. 8466 or at solinger@hsccpa.com.
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Preparing for the 2014 Healthcare Play or Pay Provisions
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Beginning January 1, 2014, large employers with at least 50 full-time employees and full-time equivalents must provide health coverage to full-time employees. Full-time employees are defined as employees working 30 or more hours per week or 130 hours per month. If an employer offers a plan that is both "Affordable" and of "Minimum Value," it can avoid the penalties. If an employer does not offer a health plan or the plan does not meet these two criteria, the employer is subject to two different Pay or Play penalties. As noted above, if an employer offers a plan that is both "Affordable" and of "Minimum Value", it can avoid the penalties.
Previous guidance offered a safe harbor method, based on an employee's W-2 pay, of defining affordability for this purpose. The new proposed regulations continue the W-2 safe harbor and offer two additional, alternative safe harbors: the Rate of Pay Safe Harbor and the Federal Poverty Line Safe Harbor. These safe harbors are generally based on the amount of employee contributions to the plan in comparison to several factors. If an employer offers a plan that satisfies the conditions for any of the three affordability safe harbors, then the affordability requirement is met.
Under Health Care Reform, a plan will satisfy the minimum value test if the plan's share of the total allowed cost of benefits provided under the plan is at least 60 percent. The new HHS proposed regulations offer three methods of determining minimum value: the Calculator Method, the Safe Harbor Checklists Method, and the Actuarial Certification Method. If the plan satisfies the 60 percent condition by any of the three calculation methods, then the minimum value requirement is met.
Employers should review their health insurance plans to avoid penalties by not compiling with these new requirements.
Please contact Matt Folz, CPA at (800) 880-7800 ext. 1391 or mfolz@hsccpa.com, or Mike Vogel, CPA at (800) 880-7800 ext. 1358 or mvogel@hsccpa.com for more information.
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Indiana Income Tax Changes
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The state of Indiana recently enacted several income tax law changes that will affect both business and individual taxpayers. The state tax liability of Indiana taxpayers will be affected by changes in the way the state treats various transactions and expenses for income tax purposes, such as those related to:
- Environmental remediation costs
- Charitable distributions from an individual retirement plan
- Tuition and related expenses
- Expenses of elementary and secondary school teachers
- Employer-provided education expenses
- Mine safety equipment
In addition, starting in 2015, the personal income tax rate is reduced from 3.4% to 3.3%, and then to 3.23% starting in 2017.
Several income tax credits have been repealed (military base recovery tax credit, military base investment cost credit, capital investment tax credit, and coal combustion product tax credit); others have been modified (Hoosier Business Investment Credit, industrial recovery tax credit, headquarters relocation tax credit). One notable new credit is available for taxpayers placing natural gas-powered vehicles into service. Planning ahead is the key to avoiding unnecessary taxes as a result of these changes.
Please contact Aaron Wilzbacher, CPA at (800) 880-7800 ext. 1322 or awilzbacher@hsccpa.com, or John Rittichier, CPA at (800) 880-7800 ext. 8484 or jrittichier@hsccpa.com for more information.
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IRS Tangible Asset Regulations Update
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During their May 10th Tax Section meeting, federal government officials from the American Bar Association stated that the final tangible asset and repair regulations are expected to be released in July. Per their statement, the regulations will largely be issued in final form, with notable exceptions related to the asset disposition rules. The asset disposition rules will be issued as re-proposed regulations, and taxpayers are expected to have the option to rely on them despite not being in final form. One government official noted that, as expected, the final regulations will provide relief for small business taxpayers, as well as favorable modifications to the routine maintenance safe harbor, casualty loss rule with respect to restorations, and the de minimis expensing rule.
Although the final regulations will have favorable aspects, panelists at the May 10th meeting voiced a few remaining concerns regarding the technical aspects of adopting the new regulations. The adoption procedures as they currently stand can be complex and could result in a flood of accounting method adoption forms to the IRS National Office, causing a strain on IRS resources. Government officials acknowledged their understanding of these concerns, and noted that they are still considering alternatives to address them.
Please contact John Rittichier, CPA at (800) 880-7800 ext. 8484 or jrittichier@hsccpa.com for more information.
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Disclaimer
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The information contained in this email is for general guidance on matters of interest only. The publication does not, and is not intended to provide legal, tax or accounting advice.
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Harding, Shymanski & Company, P.S.C. provides accounting, tax, and consulting services to our clients from offices in Evansville, Indiana, and Louisville, Kentucky.
Call us today! (800) 880-7800
www.hsccpa.com
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