November December 2010 Newsletter
What's New at Feld Hyde?
Bill Bryant was recognized in the Birmingham News as a guest of the Clinton Global Initiative at its 2010 Annual Meeting held recently in New York. The Clinton Global Initiative’s Annual Meeting brings together heads of state, government and business leaders, scholars and NGO representatives. Participants analyze pressing global challenges, discuss the most effective solutions, and build lasting partnerships that enable them to create positive social change. Click HERE for more information.
Kay Wilburn has recently become a member of the Birmingham Business Alliance’s Finance and Taxation Committee, which addresses issues relating to tax reform, appropriate funding sources for transit and other public service issues that relate to economic development.
Josh Watkins’ and Ashley Neese’s article titled “Enable Our Angels: It’s High Time for an Alabama Angel Tax Investor Credit” was featured in Business Alabama. Click HERE for a full copy of the article.
Alert – Birmingham Angel Network will host its Company Presentation meeting on January 27, 2011
The Birmingham Angel Network, LLC ("BAN") is an active angel investment club and Birmingham, Alabama's only Angel Capital Association (ACA) chapter, and it is comprised of executives, professionals and accredited investors who are interested in investing their time and money into new, cutting edge, startup companies. BAN members have founded and run some of the leading companies in our area and have been senior executives at many of the others. Feld Hyde’s own Josh Watkins is currently serving as the Executive Director of BAN.
BAN meets quarterly to formally consider up to three startup businesses selected from more than 50 that are screened by the initial process. Entrepreneurs can expect a thorough examination and, occasionally, an investment from some of Birmingham's most accomplished entrepreneurs.
On January 27, 2011, BAN will host a Company Presentation meeting, during which Companies that have passed the initial business plan screening will present their products, and potential investors will have the opportunity to interact with the startup companies during a “question and answer” session.
If you are more interested in attending the BAN meetings or would like to become involved in BAN, please visit www.birminghamangels.com or contact Josh Watkins at (205) 802-7575 or jwatkins@feldhyde.com.
Alert – Small Business Jobs Act benefits more than just small businesses
The Small Business Jobs Act of 2010 (SBJA) has just been passed by Congress, and it benefits more than just small businesses. It also provides tax-saving opportunities for larger businesses and individuals — including small-business investors, the self-employed and employees saving for retirement.
Changes affecting businesses
Section 179 expensing. SBJA helps small-business owners invest in their own businesses by increasing the Internal Revenue Code Section 179 expensing election limit. For tax years beginning in 2010 and 2011, the limit will now be $500,000, with a dollar-for-dollar phaseout starting when purchases for the year exceed $2 million.
SBJA also temporarily expands the definition of eligible property to include qualified leasehold-improvement, restaurant and retail-improvement property. The maximum amount of such property that can be expensed is $250,000.
Bonus depreciation. Another depreciation-related provision extends the special allowance for certain property, generally if acquired in calendar year 2010. Businesses can recover the costs of qualifying depreciable property more quickly by immediately deducting 50% of the cost. Bonus depreciation isn’t subject to any asset purchase limits, so businesses ineligible for Sec. 179 expensing can take advantage of it.
Property that qualifies for bonus depreciation includes tangible property with a recovery period of 20 years or less, computer software purchased by the business, water utility property, and qualified leasehold improvement property.
Other key changes. Here are some additional changes businesses should be aware of:
- New five-year carryback of the general business credit,
- Increase in the start-up expenditures deduction,
- Shortening of the S corporation built-in gains period, and
- Removal of cell phones from the definition of “listed property” that’s subject to tighter substantiation requirements and special depreciation rules.
Changes affecting individuals
Exclusion on small business stock gains. To make investing in certain small businesses more attractive, SBJA temporarily increases the qualified small business (QSB) stock gain exclusion. The exclusion will be 100% for stock acquired after SBJA’s enactment date (that is, the date the president signs it into law) and before Jan. 1, 2011, that is held for at least five years. Additionally, the act eliminates the alternative minimum tax (AMT) preference item on such gain, making it tax free for AMT purposes as well.
Self-employment tax. If you are self-employed, SBJA permits you to deduct for 2010 self-employment tax purposes any costs incurred in 2010 for health insurance for you and your spouse, dependents and children age 26 or under.
Roth 457(b) plans. If you are a government employee who participates in a 457(b) plan, be aware that SBJA may allow your employer to start providing you the option to designate some or all of your contributions as Roth contributions. The contributions won’t reduce your taxable income, but you won’t have to pay any tax on qualified distributions.
401(k), 403(b) or 457(b) rollovers to Roth accounts. Under SBJA, your 401(k), 403(b) or 457(b) plan may allow (but is not required to allow) you to roll any portion of your pretax account balance into a Roth account. The amount of the rollover would be includible in your taxable gross income — except to the extent it is the return of any after-tax contributions. If the rollover is made in 2010, you can elect to pay the tax over a two-year period in 2011 and 2012.
How you can benefit
Whether or not you are a small-business owner, you may be able to reap significant tax savings by taking advantage of the opportunities SBJA offers. We would be pleased to help you determine exactly how you can benefit.
Business-owned life insurance: Handle with care
Business-owned life insurance serves a number of legitimate purposes, including succession and estate planning. A big advantage of using life insurance is that the proceeds typically are tax free. But there have been abuses, particularly by large companies that purchased insurance on the lives of lower-level employees, often without their knowledge. Indignation over these so-called “janitor policies” led Congress to add Section 101(j) to the Internal Revenue Code (IRC) as part of the Pension Protection Act of 2006 (PPA). This article explains that, even though this provision is intended to prevent abusive employment practices, it is broad enough to encompass life insurance used to fund a buy-sell agreement or for other estate planning purposes.
Estate Planning Red Flag — You are leaving your IRA to a child
Many people designate a child or other young person as beneficiary of an IRA. But there is a downside to doing so: Unless the child is a minor, he or she obtains full control over the IRA, so there is nothing to stop him or her from taking larger distributions or even cashing out the entire account. One solution that preserves the IRA for as long as possible is to name a trust as its beneficiary and then name the child as the trust’s beneficiary. This short article explains why designating a minor as the beneficiary of an IRA is not advisable.
Less is more - Do not give too much too soon
Mixing business with family can create unique challenges for family business owners. Some are day-to-day while others play out over time, such as preparing your children for adulthood and to one day take over the company. Word to the wise: Giving your successors too much too soon — for instance, access to money, perks and preferential treatment — could spoil them and impair their ability to effectively run the company. This article looks at how passing along sound business skills and experience, important values, tools to manage their wealth and lots of support will be more beneficial to your heirs.
This publication is distributed with the understanding that the author, publisher and distributor are not rendering legal, accounting or other professional advice or opinions on specific facts or matters, and accordingly assume no liability whatsoever in connection with its use. ©2010
