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Date Created: 12/21/15
10 tax tips for the hospitality industry Hospitality companies face complex 2. Consider repairs and maintenance opportunities. Taxpayers often capitalize costs to repair, refresh and maintain tax issues that can strain resources and store locations. Under Section 162, taxpayers may deduct drain proﬁts. Grant Thornton LLP’s tax certain costs incurred to repair and maintain locations, rather professionals offer 10 tips to help you than capitalizing and recovering costs through depreciation. An accounting method change to deduct repair and maintenance manage your tax burden. costs can accelerate expenses and improve casﬂw. 1. Extend bonus depreciation.Bonus depreciation is available 3. Determine whether your company has unclaimed for qualiﬁed property placed in service in 2008 or 2009. It allproperty. Many states are looking to unclaimed/abandoned taxpayers to expense half the cost of eligible property, while property as a potential source of revenue, so it is important for depreciating the remaining half using normal rules. Forvﬁe-yearcompanies to be in compliance with state reporting requirements. equipment, this will result inrst-year deduction of 60 percent Unclaimed/abandoned property is tangible or intangible property of the asset’s cost. Quaed leasehold improvement property that has not been claimed by the owner, e.g., uncashed vendor, also qualiﬁes for bonus depreciation as long as the property wapayroll or dividend checks; unredeemed gift cards and store placed in service before Jan. 1, 2010. Note that qdrestaurant credits; or accounts receivable credit memos. Your tax adviser property is speccally excluded from the bonus depreciation rules. can help you manage and track your unclaimed property, prepare unclaimed property reports, and identify and report any past liabilities to avoid losing unclaimed property to the state. 4. Review deferred compensation plans. Make certain that any arrangement calling for compensation earned in one year and paid in a later year has been moded to comply with Section 409A of the Internal Revenue Code. Section 409A rules have a far- reaching impact and may even cover annual bonuses, equity and severance arrangements, and employment contracts. It’s not just about making sure your plan document complies with Section 409A. You still must operate consistently with both 409A and your plan document. A new penalty and correction program can help you minimize the effect of unintentional errors, but many organizations are moving away from deferred compensation altogether. Consider the redesign or implementation of annual or long-term incentive plans customized to post-recession strategic planning and new executive compensation programs that provide the appropriate balance between risk and reward. continued> 5. Review your state ﬁ ling requirements.Many states are changing 8. Review your intercompany charges. Many states and their corporate tax laws. In 2009, West Virginia, Wisconsin and foreign jurisdictions are reviewing intercompany transactions Massachusetts moved to unitary combined group reporting, for royalties or management charges. States are becoming more followed by the District of Columbia in 2010. Several states have aggressive with revenue raisers. Some states are specicﬁ ally moved from an apportionment formula based on property, payrolllooking at royalty charges being added back, which could have an and sales factors to a formula that gives more weight to sales. By effect on your stand-alone returns. Having the proper supporting 2011, Utah, Wisconsin and California are scheduled to move to documentation is essential to identifying exceptions to these market-based sourcing of service revenue. Colorado is scheduled addbacks. to move from market-based sourcing to a proportionate cost-of- performance approach. These shifts in methodology may have a 9. Determine if your company can lower its property taxes. signiﬁcant impact on your state tax liability. A property tax review could help ensure that all real and intangible property is excluded from the personal property 6. Check out your meals and entertainment expenses. The tax base. In addition, there may be opportunities to lower the 50 percent limit on deductions for business-related meals and property tax valuations on your real property. The review might entertainment (M&E) expenses is often seen as a normal cost not only generate savings in the ﬁ rst year, but in the future as well. of business; however, there are many exceptions to this limit. An M&E study can ﬁnd these exceptions and increase your 10. Review your accounting methods. Restaurants, hotels deduction. It can also serve as a conﬁrmation of the veracity of and other hospitality-based companies need to be sure they use your expense reporting system. the most appropriate and advantageous accounting methods. An accounting methods review may uncover a variety of 7. Consider donating food instead of throwing it out. opportunities to accelerate deductions and defer revenue Companies can give back to the community by donating food recognition. It may also identify potential risk areas before the that will not be used in restaurants. Even if the food does not IRS does. By ﬁling a voluntary accounting methods change, a meet your high standards, it may be within the federal food- taxpayer may secure “audit protection” and avoid penalties and safety guidelines. Your company is allowed a tax deduction for 50 interest in the case of erroneous accounting methods. percent of the gross margin on donated food. Tax professional standards statement Contact information This document supports the marketing of professional services by Grant Thornton LLP. It is not written tax advice directed Joshua Bushard National Hospitality Practice Leader at the particular facts and circumstances of any person. Persons T 612.677.5259 interested in the subject of this document should contact E Joshua.Bushard@gt.com Grant Thornton or their tax advisor to discuss the potential application of this subject matter to their particular facts Alvin Wade National Managing Partner, and circumstances. Nothing herein shall be construed as Construction, Real Estate and imposing a limitation on any person from disclosing the tax Hospitality practice T 214.561.2340 treatment or tax structure of any matter addressed. To the E Alvin.Wade@gt.com extent this document may be considered written tax advice, in accordance with applicable professional regulations, unless expressly stated otherwise, any written advice contained in, forwarded with, or attached to this document is not intended or written by Grant Thornton LLP to be used, and cannot be www.GrantThornton.com used, by any person for the purpose of avoiding any penalties © Grant Thornton LLP that may be imposed under the Internal Revenue Code. U.S. member ﬁrm of Grant Thornton International Ltd
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