3 midyear tax planning strategies
Tax reform has been a major topic of discussion in Washington, but it’s still unclear exactly what such legislation will include and whether it will be signed into law this year.
News & Tech Tips
Factors to Consider in Selling a Restaurant
Selling a restaurant is a serious undertaking. As a hardworking owner/operator, the decision to sell your business is your opportunity to cash in on all of the time, money, effort and improvements you’ve put into the restaurant over the years. Selling a restaurant is your final payday for that location, so make it count!
Long-term planning is key to any successful business sale. The more you prepare, the more successful the outcome is likely to be. While every transfer of business is unique, owner/operators should consider these items in planning for a sale:
- Review your P&L Opportunity Report. There is no better way to increase the selling price of your restaurant than to run an optimal P&L. If you can better manage the restaurant costs, you will add to the restaurant’s cash flow. A prospective buyer is going to purchase your restaurant based on the future cash flows of the restaurant. The higher the cash flow, the higher the selling price. You should also get the cost controls in place and have P&L reports that support this position for at least one to two years. Taking these steps will give you a better opportunity to realize a higher selling price.
- How many years do you have remaining on your franchise term? If it is less than 10 years, a corporation may give the prospective buyer a new 20-year franchise term. If it is more than 10 years, the prospective buyer usually takes over your remaining franchise term. A term of 20 years would typically offer more security to the prospective buyer than a term of closer to 10 years and could result in a higher selling price. So time your sale accordingly.
- Money is cheap right now and the brand is strong. You should have no shortage of prospective buyers. There is also a long list of banks that make loans to franchisees at near record-low interest rates. So when you combine the low cost of borrowing money, the availability of banks willing to make loans, and the number of strong operators looking for growth opportunities, you have the recipe for maximizing your selling price.
In our next newsletter, learn about considerations for making a “quick sale,” when your planning horizon is limited.
If you have questions about any of these suggestions or would like additional information, contact Bruce Berry, Director. Bruce works closely with franchise restaurant owner/operators.
Be prepared for the health care act’s “play or pay” provision
The Patient Protection and Affordable Care Act of 2010’s shared responsibility provision, commonly referred to as “play or pay,” is scheduled to take effect Jan. 1, 2014. It doesn’t require employers to provide health care coverage, but it in some cases imposes penalties on larger employers that don’t offer coverage or that provide coverage that is “unaffordable” or that doesn’t provide “minimum value.”
A large employer is one with at least 50 full-time employees, or a combination of full-time and part-time employees that’s “equivalent” to at least 50 full-time employees. The nondeductible penalties generally are $2,000 per full-time employee.
Although the shared responsibility provisions don’t take effect until 2014, employers will use information about the workers they employ in 2013 to determine whether they’re subject to the provisions and face the potential for penalties in 2014. The rules are complex, so contact us today to learn how they may affect your business and what steps you can take to avoid, or at least minimize penalties.
Hearings Taking Place on Legislation to Simplify Ohio’s Municipal Income Tax System
Proponents Emphasize the Goal Is to Reduce the Cost Burden on Small Businesses
Proponents and opponents of legislation seeking to establish a uniform, cost-effective set of rules and regulations governing the municipal income tax system are expressing their views before Ways and Means Committee members of the Ohio House. Hearings are continuing during the week of May 6.
House Bill 5, the latest legislative effort to simplify the state municipal income tax system, was introduced in January. It has support from business groups, including the Ohio Society of CPAs, a coalition of organizations and individual taxpayers. They contend that the administrative burden and costs for many Ohio businesses impedes them from creating more jobs across Ohio.
Ohio is just one of a few states in which municipalities impose an income tax on individuals and businesses. Those businesses must track and comply with as many as 600 different sets of tax ordinances, depending on where they conduct business.
The proposed legislation would establish a more uniform municipal tax code that all municipalities assessing a tax on businesses or individuals would follow, including a uniform definition of income, withholding, penalties and interest, and all related rules and regulations other than tax rate and reciprocity rate.
The bill creates the Municipal Tax Policy Board charged with creating a uniform form. It may also recommend rules. The board will be comprised solely of seven city representatives with no business or taxpayer representatives.
Five of the seven members are required to be local tax administrators. Of the two remaining members, one must be an employee of the Regional Income Tax Authority (RITA) and one must be an employee of the Central Collection Agency (CCA). Both RITA and CCA are agencies that currently collect municipal taxes for a number of cities and villages throughout Ohio.
In addition to unifying some of the definitions for income and deductions, the bill also requires not counting anything less than a half-day as a workday for income tax purposes. It also would expand the number of days that someone must work in a community before he or she is liable for any income tax there. Currently, the threshold is 12 days per year. The proposal would expand that to 20 days.
Opponents, largely from cities, insist that the cost of compliance with the current municipal tax laws is overstated. Proponents contend that Ohio’s current municipal tax system presents compliance problems for individual and business taxpayers, costs existing employers resources that could be redirected to growing their businesses and creating more jobs, and puts Ohio at an economic disadvantage for attracting new employers.
The proposed legislation does not call for a centralized collection system, nor is it looking to reduce the amount of tax that individuals and businesses must pay.
BWC, Governor Propose $1 Billion Rebate to Employers
Proposal Includes Tripling Safety Grants and Lower Rates from Modernizing Operations
The Ohio Bureau of Workers’ Compensation (BWC) and Governor John Kasich have proposed that the BWC give back $1 billion to private employers and local governments in the form of rebates. The proposal also triples investments in worker safety grants and lowers all rates by modernizing workers’ comp operations. The $1.9 billion proposal is made possible by larger-than-expected fund balances at BWC generated by strong investment management.
The $1 billion in rebates equals about 56 percent of the most recent annual premium of the approximately 210,000 private and public sector employers. The BWC would send the rebates to employers by check.
The rebate proposal is expected to be submitted to the BWC Board of Directors for approval at its meeting in late May. The proposed rebates will apply to employers who are in discount programs as well as those who are not.
According to the proposal, companies and government employers that pay premiums into the state fund for injured workers and have up-to-date policies are eligible for a rebate of 56 percent of what they were billed for their last policy year. In addition to the rebates, the bureau wants to require employers to pay premiums upfront instead of after a coverage period.
The proposed switch to prospective premium payments requires legislative approval, which the bureau hopes to gain this year. The switch would not go into effect until 2014 at the earliest.
The bureau wants to give employers a credit equal to their previous six months’ premium as part of the transition to a new payment system. To do so, the BWC would issue a credit to employers totaling $900 million to help offset the costs associated with the transition. The switch would lead to rate reductions of two percent for private employers and four percent for public employers.
Along with the request for rebates, the proposal also increases the Ohio’s Safety and Wellness Grant Program from $5 million to $15 million. The state’s program has proven effective. In companies receiving grants, claims frequency has decreased 66 percent and claims costs per full time employee has decreased 86 percent.
Furthermore, the proposal lowers rates 2 percent for private employers and 4 percent for public employers by modernizing BWC’s payment system.
Details on the proposal are still being finalized. All three elements would be funded from BWC’s net assets, which have grown to $8.3 billion and are far in excess of the target funding ratio of assets to liabilities established by the BWC board in 2008.