Although the deadline to file personal income tax returns has come and gone, business owners know they have various options when it comes to sending their stacks of paperwork to the IRS, based largely on their fiscal years.
So, while April 15 (this year, April 18, thanks to the traditional day falling on a weekend and D.C. holiday Emancipation Day on April 17) was a big deal for people to send in their tax returns, it’s not necessarily one that’s circled on the calendars of most CEOs.
USAV Group founder and CFO Chris Whitley—a CPA by trade who’s no longer practicing—says approaching tax returns every year is a lot like preparing for a project.
“If you do some planning, you can get some additional benefits,” he says.
Most USAV members have their own tax preparation experts in the fold, so there’s not a lot of focus on tax-related issues in meetings or even one-on-one conversations with members, says Whitley. But with a range of companies from about $3 million to around $125 million in annual revenue, there are myriad issues that affect the members in different ways.
“Many of them are concerned about tax rates from year to year and how that’s going to affect them,” says Whitley. Most USAV members are S-corporations or LLCs, which means they file taxes as individuals rather than as corporations.
“The larger integration firms can take more advantage of some of these things,” says Whitley.
Whitley says investment tax credits focused on developing staff or things such as Section 179, which gives companies the ability to take 100 percent of depreciation on a capital expense in the first year (up to about $2.4 million) are among the areas where AV companies can cut what they have to pay in taxes.
Rental and staging companies are more likely to be able to benefit from Section 179, he says, since they generally own the equipment as opposed to AV integrators, who are installing equipment in a project.
Tracy Lustyan, managing director at alliantgroup, says the tax consultancy company has helped more than 20,000 clients realize more than $5 billion in tax credits since launching in 2002. That includes about $22 million in tax credits and incentives for 52 NSCA members.
“Because of the technical nature of their work, many audiovisual integrators are eligible to take advantage of the Research and Development (R&D) Tax Credit, a federal incentive that has been part of the tax code for over three decades,” says Lustyan. “Despite what the name may imply, the R&D Tax Credit is not just for scientists in lab coats. The credit can be claimed by companies that are making technical improvements to processes or products, and AV integrators are some of the best candidates for the credit.”
Some of the activities performed by audiovisual integrators on a daily basis – such as the development of custom controls or automated applications or the integration of multiple audio visual components – can be considered qualifying activities that might allow an AV integrator to claim the credit, says Lustyan.
The R&D credit was created “to stimulate innovation in the United States and support the growth of technical jobs,” says Lustyan. “In my years consulting around this tax credit, I have found that AV integrators are already performing the everyday activities that qualify for this generous incentive.”
The Secret Sauce
Whitley says USAV members aren’t always as willing to talk about their income tax filings as they are about many other issues related to their businesses. USAV has a Dealer Advisory Council meeting every year, where they talk about financial planning practices.
“This is a protected area,” he says. “It’s sort of an intimate topic. It’s one area they don’t share or talk about maybe as much as they should.”
Whitley expects President Donald Trump’s election to create a “favorable tax environment for the next three years” since “Trump is more geared toward businesses.” Then again, in politics, you never know.
“There are usually some pretty dramatic swings from one administration to another,” says Whitley. “And every tax bill comes with so many earmarks.”