FEDERAL INVESTMENT TAX CREDITS

Since the federal government also has a vested interest in promoting environmentally friendly business practices, it has created a variety of tax incentives for companies that implement renewable and energy efficiency improvements at their facilities.

Solar: This credit is equal to 30 percent of expenditures (with no ceiling) on new equipment that uses solar energy to generate electricity, heat or cool a structure, or provide solar process heat. Hybrid solar systems, which use solar energy to illuminate the inside of a structure using fiber-optic distributed sunlight, are eligible for the credit, but passive solar and solar pool-heating systems aren’t.

Fuel cells: You can also claim a 30 percent credit for expenditures on fuel cells. This credit is capped at $1,500 per 0.5 kilowatt (kW) of capacity. Eligible property includes fuel cells with a minimum capacity of 0.5 kW that have an electricity-only generation efficiency of 30 percent or higher.
Small wind turbines: The same 30 percent credit applies to wind turbines with up to 100 kW in capacity, with no maximum credit.

Geothermal systems: This credit is equal to 10 percent of expenditures on geothermal heat pumps and equipment used to produce, distribute or use energy derived from a geothermal deposit, with no maximum credit.

Microturbines: This credit is equal to 10 percent of expenditures on microturbines with up to two megawatts (MW) in capacity that have an electricity-only generation efficiency of 26 percent or higher.

CHP systems: The same 10 percent credit applies to CHP systems up to 50 MW in capacity that exceed 60 percent energy efficiency, subject to certain limitations and reductions for large systems, with no maximum credit.

The original use of the renewable energy equipment generally must begin with the business that installed it, or the system must be constructed by this business. Also, the equipment must meet any performance and quality standards in effect at the time it is acquired, and must be operational in the year in which the credit is taken.

TAX DEDUCTIONS

In addition to these tax credits for renewable and energy efficiency improvements at your place of business, tax deductions are available for expenditures incurred to increase energy efficiency in commercial buildings. These expenditures include the installation of:

• High-efficiency insulation in walls, ceilings and floors
• Programmable thermostats and automatic lighting controls
• Energy-efficient doors, windows, light bulbs and fixtures
• Ultra-efficient air conditioners and furnaces
• High-performance glazing and other energy-efficient materials on a building’s exterior

This Commercial Building Tax Deduction can be significant: up to $1.80 per square foot of the building’s floor area if the building achieves at least a 50 percent reduction in energy and power costs. The deduction falls to $0.60 per square foot if the energy and power cost reduction is at least 16.66 percent. In order to receive the deduction, you must obtain certification that the upgrades meet the federal government’s specific energy efficiency requirements.

To learn more about federal tax incentives available for business energy efficiency improvements, please contact us here.



These are very important attributes of a successful contractor.
Another very important and sometimes overlooked attribute of a good contracting company is its leadership and management.  Leaders and mangers (generally owners) hold themselves out as “ethical” and will strive for good customer satisfaction.  To accomplish this, they work to develop good working relationships with their subs/generals and also with owners.  This a valuable asset that takes a good deal of time to develop.  These relationships and the strength of these people is your most valuable asset and it needs to be protected.

If you owned a $1,000,000 Yacht, you would have it insured, you would likely have security on both land and sea, and you would maintain it regularly to protect the value and usefulness of your asset.  Likewise, the asset, which is your people, needs to be protected, insured and maintained with as much or more diligence.

There are many questions you should ask yourself to make sure that you most valuable resource is protected.

1. Do you have a contingency plan?
   1. People get injured or sick.  Do you know what you are going to do if a key person is missing for a day? a week? six weeks? Six months? a year? forever?
   2. Do you have a buy sell agreement, or does your operating agreement talk to that effect?
   3. Do you know what you are going to do upon the remove of a key employee?  How fast can you replace them?  What will it cost you, in outflows (recruiting) or in lost production?
2. Have you properly insured your people?
   1. Health insurance
   2. Life insurance
   3. Short-term disability insurance?
   4. Long-term disability insurance?
   5. Key-man insurance?
3. Does your organization promote a healthy life-style?
   1. Do you have a wellness program?
   2. How is your safety record?  Do you need to look at it again?
   3. Does your organization promote a work –life balance?
4. Have you made an honest evaluation of your employee/owner satisfaction?
   1. Do you know what goals your key people have?
   2. Do they think they have the ability to reach them with your organization?
   3. Have you provided them with all the tools needed?
   4. Do you have a reasonable review process?
   5. Are the fringe benefits of your organization appropriate to your industry, in order to keep important employees satisfied?
   6. Do your key employees feel that they will be able to achieve retirement with your organization?
   7. Is the “right” tone set at the top?

These are just a few items to consider.  A consultant can help you with the finer details of a contingency plan.  There are also tax beneficial ways to structure benefits and activities that a tax professional can help you.  You plan for your people needs to be carefully thought out in advance, and revisited regularly as the organization, the economy and the industry changes.  IF you have any questions please do not hesitate to contact me at 602-776-6344 or by email at rdietrich@pkcpa.com 

G. Ross Dietrich, CPA, CIT
Senior Audit Manager
Price, Kong, & Co. CPA’s P.A.


SIMPLE, EFFECTIVE REWARDS

While generous bonuses and extensive time off may not be feasible right now, there are other cost-effective ways to relieve stress and let your core employees know they are valued:

• Provide additional training and skills development. Younger employees are particularly motivated by such opportunities, and often welcome the chance to be trained in new skills and activities within the company and your industry.
• Give proven performers more input into the decision-making aspects of their work processes. The experience they gain will make them even more valuable when the business cycle turns positive again.
• Reward employees for extra efforts. For example, after your team has met a particularly difficult challenge, consider hosting an impromptu lunch followed by a surprise half-day off. Make it clear the reward is a specific expression of your appreciation for the way they rose to the challenge. The surprise factor not only makes it more memorable, but it also helps avoid creating the impression that this is an entitlement that must be repeated every time there’s a success story.
• Offer impromptu gifts. These are often the most appreciated. Small but spontaneous incentives, such as movie tickets or a complimentary dinner for the employee and spouse, can make an impression that goes far beyond their modest monetary value.
• Take time to celebrate what everyone is doing together. An occasional company barbecue or family fun day does not have to be expensive, but it helps employees maintain a healthy work-life balance so they remain productive. What’s more, the employees themselves are often willing to help organize it.
• Make sure that employees are thanked in a meaningful way on a daily basis. Make it a point to thank employees for specific and concrete contributions, rather than just giving routine pats on the back and “atta boys.”

Finally, remember that a successful recognition program requires time and commitment on your part. Establish a process to ensure that employees are rewarded consistently, not just when you think about it. If necessary, put a trusted manager in charge of implementing and monitoring your rewards and recognition program to be sure it’s achieving your goals and supporting your long-term strategy.  

Keeping your workforce motivated is a special challenge during a tough economy. Contact us to discuss how we can help.

LOOKING FOR GREENER PASTURES? Get the Facts Before You Commit

WORKERS, WEATHER AND OTHER ISSUES

When entering a new market, you often must take on laborers, craftsmen and administrative personnel who have no training in the methods you use. You can expect to incur higher training and labor costs than you normally encounter in your home market. On the other hand, if you bring many of your own people with you, you will need to consider temporary housing costs and other relocation expenses. This additional overhead will need to be covered when bidding jobs in the new market.  If the new market is some distance from your home turf, you might also encounter different weather patterns, which could affect your ability to schedule and manage jobs efficiently. Even if you manage to avoid incurring direct contract penalties for missed deadlines, the indirect costs of crew downtime and weather-related scheduling problems can erode your profit.

Every market has its own unique administrative climate as well. Expect to encounter some new permitting and inspection issues, and remember that you will not have the benefit of those familiar faces at the local building department who can help you cut through the red tape. Even something as simple as scheduling an inspection might involve unfamiliar and cumbersome procedures.

Each of these challenges is further exacerbated by your reduced ability to directly monitor project management. One company recently won a contract in a new market and hired a local project manager to handle the job. By the time the owner realized the project manager was not up to the task, the modest profit he had projected for the job was all but wiped out.
Such a problem would have been caught much earlier if it had occurred in the company’s home market, where the owner could directly observe how jobs were being managed.

MAKING THE CALL

Before taking on a job in a new market, especially if it’s out-of-state, take time to think through all the angles. Here are some key questions to consider:

• Do you have a solid rationale for pursuing work in the new market?
• What do you bring to the market that local contractors don’t?
• Is there a connection to the new region that makes sense for you to pursue or a market niche you can fill?
• Have you formed a plan to enter the market?
• Do you have the personnel and processes in place to handle work in multiple markets?
• Have you researched the local subcontractor market?
• Would it be advisable to involve a local joint venture partner who knows the ropes and has local connections?
• Can your company survive unforeseen risks you will almost certainly encounter?
• Can you build enough profit margin and contingency into your bid to cover the mistakes you could make on your first couple of jobs?
• Have you considered the tax consequences? (See the accompanying sidebar.)

A PLAN FOR EXPANSION

After considering the risks, if you determine that the potential reward of a new market outweighs the possible downside, work out a careful and methodical expansion plan. Begin by making sure you have a strong infrastructure in place, including project management depth. At the very least, expect to upgrade your internal accounting controls. Then take it slowly. Don’t expand into more than one new region at a time, and stick to what you know. Limit your project scope in new markets to those skills that are within your core competency. If possible, integrate your project team to include some long-standing employees you bring with you, along with newly hired employees from the new market. In the same way, use a blend of some of your existing subcontractor relationships with the newer firms you will encounter. Ideally, you will be working with a repeat client who has expanded to the new market. If not, be sure to check out all new clients or project owners to assure yourself they are fair and equitable, with proven credit and a good reputation for prompt payment.

Our firm can help you evaluate new opportunities and plan your strategy for pursuing them. Give us a call to discuss the possibilities -  contact us here.