Tax Breaks for Signatory Contractors – FCA Educational Series

FCA International and the alliantgroup hosted an educational series event on the latest on tax breaks and incentives available to signatory contractors on Thursday, July 22.

Read on for a quick recap.

• FCA members have unique businesses that can qualify for multiple tax credits and incentives.
• Two powerful credits and incentives that are available for FCA members: the Employee Retention Credit, and the Research & Development Credit.

Employee Retention Credit

• The Employee Retention Credit (ERC) is a refundable tax credit against certain employment taxes based on a percentage of qualified wages an eligible employer pays to employees.
• Intent of credit is to reward employers for keeping employees on staff during the pandemic.
• Construction contractors’ businesses tend to qualify for this credit more so than other industries.
• How to qualify:
  1. Your company experienced a decline in revenue.
  2. Your company experienced a disruption.
     • Multiple definitions of “disruption.” Many ways a company could qualify.
     • If the pandemic never happened, would you have had to adjust or change your day-to-day business operations?
• Some examples of disruptions:
  • Vendor/supply chain disruptions
  • Full or partial shutdowns
  • Sales reps not being able to visit clients
  • Project delays
  • Social distancing requirements
  • Having to reduce hours
  • Etc.
• Businesses that took advantage of PPP loans can still be eligible for the ERC.
• These qualifications were revised since they were first introduced. It’s worth taking another look at this credit even if you looked at it before.

Research & Development Credit

• The Research & Development (R&D) credit is a “sister credit” to the ERC, because they are both wage-based.
• The R&D credit was expanded in the early 2000’s to reward companies for taking on work or projects that were new to them.
• R&D credit has broad use. Some examples:
  • Keep people on staff during trying times
  • Expand into different market sectors or service lines
  • Go after new business
• Over 40 states and counting also have R&D credits.
• Federal R&D credit was made permanent in 2016.
• For contractors, taking on a project that is new that requires different functionality, performance, specs, etc. may qualify for this R&D credit.
  • No two buildings and projects are the same.
• 3 Buckets of Costs that Qualify for R&D Credit:
  1. Employee Wages
  2. Supplies
  3. 65% of Contract Research (fees paid to outside consultants, subcontractors, software developers, etc.)

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About the Speakers