There is a color that has been steadily gaining prominence in our society over the past few years.  If you read the paper, listen to the radio, watch TV or let’s face it, if you interact with almost anyone, you will notice this color being mentioned more now than at any time in our history.

You have probably guessed that I am referring to the color Green.  Green Products, Green Jobs, Green Rated  and the all encompassing “Going Green” are phrases that we hear almost every day. We have even heard our President tell us that Green Jobs will play a part in our economic recovery.

Why has Going Green been propelled into the spotlight?  You can speak with multiple well informed people and come away with multiple answers, but one thing has become clear to me, Green, in one form or another, is here to stay.

As a CPA in the Fort Myers, Florida office of Hill Barth & King, I am charged with having a deep understanding of the industries that effect Southwest Florida and specifically Lee County.   Those industries are tourism, healthcare and construction.  Out of these three industries the Green agenda seems to have the greatest effect on the construction industry.  Through my involvement with the Lee County Builders Industry Association (BIA) and the Cape Coral Construction Industry Association (CCCIA) I am updated frequently concerning the Green initiatives that are already in place, as well as those that may be coming in the near future.  We are at a time in the Green movement that requires us all to learn as much as we can about how Going Green will affect our professions and our lives.

I am writing this series of articles in an effort to contribute to that educational process, and as a CPA I will limit my contribution to the area that I specialize in: tax planning.

As many of you know, when our government gets involved in something, you can be sure our system of taxation will be affected.  When the government is attempting to create jobs and promote an industry, the tax implications are almost always good for those businesses and individuals associated with, or doing business with, that industry.  In an effort to facilitate the creating of Green jobs the federal and state governments have offered a wide range of energy tax credit incentives that need to be explored.  Early planning is essential to maximizing many of the available energy tax incentives.

In the first installment of my Going Green series I am highlighting the energy-efficient commercial business deduction (Section 179D).  This new deduction allows businesses to deduct up to $1.80 per square foot of space in new or existing buildings where they install interior lighting, HVAC systems, or building envelope property that reduces power use to 50 percent compared to a reference building.

In order to utilize the full $1.80 per square foot deduction, all three phases of the property must be implemented.  This deduction must be certified using qualified individuals and specific types of software mandated by the government.   However, up to a $0.60 per square foot deduction is available for certain lesser reductions involving implementation of the building phases separately.

The most common of the three phases of the deduction is for energy efficient lighting.  There are currently special rules for lighting that make meeting the standards for up to $0.60 per square foot deduction easier to obtain.  In addition, if energy efficient commercial building property is installed on or in property owned by a tax exempt entity, the IRS may issue a regulation allowing the deduction to be allocated to the person primarily responsible for designing the property instead of the owner of the property. For purposes of taking the energy efficient commercial building property deduction, the person primarily responsible for designing the property is treated as the taxpayer. The provision expires for property placed in service after 2013.  What does this mean for a business who builds a 20,000 square foot building that qualifies for this deduction?  It means an additional tax deduction of up to $36,000.

To find out more about this opportunity please contact one of the CPAs in our Fort Myers, Florida office.  We are fully equipped to assist in both the tax implications and the certification process.

In the next “Going Green” article, I will highlight some of the energy tax credit incentives that are available to individual taxpayers.

Keith A. Veres, CPA is a Principal with Hill, Barth & King LLC in the Fort Myers, Florida office.   Keith has worked as a CPA helping clients in Fort Myers, Cape Coral and other Southwest Florida communities for the last 8 years.  He has been with Hill, Barth & King LLC, a top 75 accounting firm, since 1991.  Keith can be contacted by phone at 239-482-5522 or email at kveres@hbkcpa.com.

As a follow up to my “Hiring Incentives to Restore Employment Act (HIRE)” post on March 25, 2010, I am sharing the Q&A’s from the IRS website on the HIRE Act.  Additionally, the IRS released a draft of the new IRS Form W-11 (416), the affidavit individuals must complete to confirm that they are qualified employees under the new law that provides tax incentives for businesses hiring new workers.  You can find a PDF version of the new Form W-11 in the RESOURCES section of our site.  The HIRE Act affects many of our clients in Fort Myers, Cape Coral and the surrounding Southwest Florida communities, and I would encourage all employers to become familiar with this new act.

These are Q&A’s from the IRS website on the HIRE Act:

Q: Who are qualified employees?
A: Qualified employees are individuals who begin employment with a qualified employer after February 3, 2010, and before January 1, 2011, who have been unemployed or employed for less than 40 hours during the 60-day period ending on the date such employment begins, and who are not family members of or related in certain other ways to the employer.
Q: Do the qualified employees need to do anything to make it possible for their employer to claim the payroll tax exemption?
A: Yes, qualified employees must certify by a signed affidavit, under penalties of perjury, that they have not been employed for more than 40 hours during the 60-day period ending on the date they started employment. The IRS plans to issue a model affidavit that can be used for this purpose.

Q: Is the 60-day period continuous, and can it span 2009-2010?
A: The 60-day period must be continuous and can span 2009-2010.

Q: Does the payroll tax exemption apply to wages paid to a qualified employee hired to replace an existing worker whose employment terminated?
A: The payroll tax exemption does not apply to wages paid to an employee who is hired to replace an existing worker, unless the existing worker terminated employment voluntarily or was terminated for cause.

Q: Does the payroll tax exemption apply to wages paid to an employee who was previously laid off and then rehired by the same or a related employer after a 60-day period?
A: Yes, an employer may apply the payroll tax exemption to wages paid to a rehired employee who is otherwise a qualified employee.

Q: If an employer lays an employee off because of lack of work and later, when work picks up, hires a new employee, can the payroll tax exemption apply to wages paid to the new employee?
A: Yes, if the new employee is a qualified employee (i.e., was employed for less than 40 hours during the prior 60 days).

Q: Does the payroll tax exemption apply only if the employer previously laid employees off?
A: No, the payroll tax exemption can apply to wages paid to any qualified employee.

Q: If an employer hires a recent graduate who has been in school for some or all of the 60 days preceding the start of his employment, does the payroll tax exemption apply to wages paid to the employee?
A: Yes, if the employee is a qualified employee.  It is not necessary that the individual was previously employed and has lost his or her job to be a qualified employee.

Q: What is the payroll tax exemption?
A: The payroll tax exemption is an exemption from the employer’s 6.2 percent share of social security tax on all wages paid to qualified employees from March 19, 2010 (the day after the date of enactment of the HIRE Act) through December 31, 2010. The employee’s 6.2 percent share of social security tax and the employer and employee’s shares of Medicare tax still apply to all wages.

Q: Which employers qualify for the payroll tax exemption?
A: Taxable businesses and tax-exempt organizations qualify for the payroll tax exemption. Such employers in U.S. possessions, such as Puerto Rico or the Northern Mariana Islands, that are subject to social security tax also qualify for the payroll tax exemption. Federal, State or local government employers generally do not qualify for the payroll tax exemption. However, public colleges and universities can qualify for the exemption.

Q: Does the payroll tax exemption apply to household employers?
A: No. The payroll tax exemption applies only to wages paid to a qualified employee performing services in the employer’s trade or business or in activities in furtherance of a tax-exempt organization’s exempt purpose.

Q: If an employer starts a new business, does the payroll tax exemption apply to wages paid to employees hired for the new business?
A: Yes, if they are qualified employees.

Q: If an employee laid off in 2009 has been receiving COBRA premium assistance, for which the employer has been taking the COBRA premium assistance credit, and the employer rehires the employee, can the employer take the payroll tax exemption under the HIRE Act for wages paid to the employee?
A: Yes, if the employee is a qualified employee.

Q:  How does the employer claim the payroll tax exemption for wages paid to qualified employees?
A: The payroll tax exemption is claimed on Form 941, Employer’s QUARTERLY Federal Tax Return, beginning with the second quarter of 2010.

Q: How does the employer claim the payroll tax exemption for wages paid to qualified employees during the period March 19 through March 31, 2010 (the first quarter of 2010)?
A: The payroll tax exemption for wages paid during this period will be claimed on the employer’s Form 941 for the second quarter of 2010.

Q: Can an employer claim the COBRA premium assistance credit and the payroll tax exemption for new hires on the same employment tax return?
A: Yes.

Q: How does application of the payroll tax exemption to wages paid to a qualified employee affect the availability of the Work Opportunity Tax Credit with respect to that employee?
A: If an employer applies the payroll tax exemption to wages paid to a qualified employee, such wages paid to the employee during the one-year period beginning with the employee’s hiring date may not be taken into account for purposes of the Work Opportunity Tax Credit. An employer that wishes to claim the Work Opportunity Tax Credit with respect to a qualified employee can elect out of the payroll tax exemption with respect to wages paid to that qualified employee.

We will provide more information on the HIRE Act as well as other legislative changes affecting the tax law as developments occur.  Please contact one of our CPAs in our Fort Myers, FL office if you have any questions regarding the HIRE Act and how it can help your business.

James M. (Jim) Rosa, CPA, PFS is the Principal in charge of the Tax Department at Hill, Barth & King LLC.  Jim has worked as a CPA helping clients in Fort Myers, Cape Coral and other Southwest Florida communities for the last 23 years. He has been with Hill, Barth & King LLC, a top 75 accounting firm, since 1986.