Jacob Russell Kaleb & Associates, Inc
Taxation, Finance & Corporation
LATEST CHANGES The Internal Revenue Service today released a draft version of the form that small businesses and tax-exempt organizations will use to calculate the small business health care tax credit when they file income tax returns next year. The IRS also announced how eligible tax-exempt organizations –– which do not generally file income tax returns –– will claim the credit during the 2011 filing season. The IRS has posted a draft of Form 8941 to this website. Both small businesses and tax-exempt organizations will use the form to calculate the credit. A small business will then include the amount of the credit as part of the general business credit on its income tax return. Tax-exempt organizations will instead claim the small business health care tax credit on a revised Form 990-T. The Form 990-T is currently used by tax-exempt organizations to report and pay the tax on unrelated business income. Form 990-T will be revised for the 2011 filing season to enable eligible tax-exempt organizations –– even those that owe no tax on unrelated business income –– also to claim the small business health care tax credit. The final version of Form 8941 and its instructions will be available later this year. The small business health care tax credit was included in the Affordable Care Act signed by the President in March and is effective this year. The credit is designed to encourage small employers to offer health insurance coverage for the first time or maintain coverage they already have. In 2010, the credit is generally available to small employers that contribute an amount equivalent to at least half the cost of single coverage towards buying health insurance for their employees. The credit is specifically targeted to help small businesses and tax-exempt organizations that primarily employ moderate- and lower-income workers. For tax years 2010 to 2013, the maximum credit is 35 percent of premiums paid by eligible small business employers and 25 percent of premiums paid by eligible employers that are tax-exempt organizations. Beginning in 2014, the maximum tax credit will go up to 50 percent of premiums paid by eligible small business employers and 35 percent of premiums paid by eligible, tax-exempt organizations for two years. The maximum credit goes to smaller employers –– those with 10 or fewer full-time equivalent (FTE) employees –– paying annual average wages of $25,000 or less. The credit is completely phased out for employers that have 25 FTEs or more or that pay average wages of $50,000 per year or more. Because the eligibility rules are based in part on the number of FTEs, and not simply the number of employees, businesses that use part-time help may qualify even if they employ more than 25 individuals. 5-Year Carryback of 2008 Net Operating Losses (NOLs) for Eligible Small Businesses (ESBs)
For 2008, you can choose a 3, 4, or 5-year carryback period for the part of your 2008 NOL that is an ESB loss. An ESB is a small business as defined in Internal Revenue Code section 172(b)(1)(F)(iii), except that an ESB's 3-year average annual gross receipts can be up to $15 million (instead of $5 million). An ESB loss is the smaller of: 1.The amount that would be the 2008 NOL if only income, gains, losses, and deductions attributable to ESBs were taken into account, or 2. The 2008 NOL. For more information, see the Instructions for Form 1139 (corporations) or the Instructions for Form 1045 (individuals, estates, and trusts). Agricultural Chemicals Security Credit The Food, Conservation, and Energy Act of 2008 added the agricultural chemicals security credit as part of the general business credit. Use Form 8931, Agricultural Chemicals Security Credit, to claim the credit for qualified agricultural chemicals security costs. Only qualified agricultural chemicals security costs paid or incurred after May 22, 2008, and before 2013 can be used to figure the credit. The credit is only available to eligible agricultural businesses. The credit is 30% of the qualified agricultural chemicals security costs paid or incurred during the tax year Facility limit. The amount of the credit for any facility for a tax year cannot be more than $100,000 minus the total of the credits figured for the facility for the 5 prior tax years. Annual limit. The amount of the credit figured for any tax year cannot be more than $2 million. Eligible agricultural business. An eligible agricultural business is any person in either of the following trades or businesses. Selling agricultural products, including specified agricultural chemicals, at retail to farmers and ranchers. Manufacturing, formulating, distributing, or aerially applying specified agricultural chemicals. Specified agricultural chemical. A specified agricultural chemical is either of the following. 1. Fertilizer commonly used in agricultural operations that is listed under any of the following. * Section 302(a)(2) of the Emergency Planning and Community Right-to-Know Act of 1986. * Section 101 of part 172 of title 49, Code of Federal Regulations. * Part 126, 127, or 154 of title 33, Code of Federal Regulations. 2. Any pesticide (as defined in section 2(u) of the Federal Insecticide, Fungicide, and Rodenticide Act), including all active and inert ingredients, that is customarily used on crops grown for food, feed, or fiber. Qualified agricultural chemicals security costs. Qualified agricultural chemicals security costs are any of the following costs paid or incurred by an eligible agricultural business during the tax year to protect specified agricultural chemicals. * Employee security training and background checks. * Limitation and prevention of access to controls of specified agricultural chemicals stored at the facility. * Tagging, locking tank valves, and chemical additives to prevent theft of specified agricultural chemicals or to make the chemicals unfit for illegal use. * Perimeter protection of specified agricultural chemicals. * Installation of security lighting, cameras, recording equipment, and intrusion detection sensors. * Implementation of measures to increase computer or computer network security. * Conducting a security vulnerability assessment. * Implementing a site security plan. * Other measures for protection of specified agricultural chemicals to be identified in future regulations. Alcohol and Cellulosic Biofuel Fuels Credit
2008 Changes For credits claimed on returns filed after May 14, 2008, you cannot claim the alcohol and cellulosic biofuel fuels credit for alcohol produced outside the United States for use as a fuel outside the United States. For this purpose, the term ''United States'' includes any U.S. possession. For more information, see Form 6478, Alcohol and Cellulosic Biofuel Fuels Credit. 2009 Changes The following changes apply to the alcohol and cellulosic biofuel fuels credit.
For ethanol sold or used after 2008, the credit rate is lowered.
For fuel produced, and sold or used, after 2008, the credit is expanded to include the cellulosic biofuel producer credit. * For fuel sold or used after 2008, the percentage of denaturants included in the volume of alcohol used to figure the credit is lowered.
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