Tax Breaks for Charitable Giving: Maximize Your Impact and Your Savings
Category: Business
Last week, one of the largest federal infrastructure packages in United States history became law after months of debate and negotiation.
The sweeping bill called the Bipartisan Infrastructure Investment and Jobs Act, allocates $1.2 trillion in funding for roads and bridges, public transit, electric energy, broadband internet, clean drinking water, and more.
Furthermore, the landmark legislation aims to ease inflationary economic pressures, strengthen supply chains, and drive job creation. Lastly, some tax provisions will impact businesses and investors (especially cryptocurrency investors).
The bill’s full text runs to 2,702 pages, so unless you find legislative language much more fascinating than the average person, you probably aren’t eager to read it in its entirety. Nevertheless, you may be wondering what this consequential new law will mean for you.
According to the American Society for Civil Engineers (ASCE), the current state of American infrastructure is not good. In their 2021 Infrastructure Report Card, the ASCE gave the U.S. a C-, citing 43% of public roadways in poor or mediocre condition and that a water main breaks every two minutes on average. So, in a broad sense, many people will benefit from things like improved roadways and more reliable drinking water.
But how will the bill impact you on a more personal level … especially at tax time?
This blog post will summarize key highlights of the Bipartisan Infrastructure Investment and Jobs Act and examine the tax implications for business owners and investors.
To understand what the $1.2 trillion infrastructure bill means for you, read on.
Of the total $1.2 trillion, $550 billion represents new spending, which will go towards what’s called “hard infrastructure.” This refers to physical or built infrastructure, such as roads, bridges, tunnels, railways, airports, seaports, power networks, water management, etc.
(“Soft infrastructure,” refers to the services, systems, and institutions required to maintain quality of life. This encompasses government, health, education, financial and legal systems, law enforcement, emergency services, and more.)
The remaining funding included in the bill, approximately $650 billion, covers spending which Congress has previously authorized, such as federal highway, transit, and safety programs, rail programs, and public transit over the next five years.
So how does the new spending break down?
Let’s start with the big-ticket item:
The bill allocates this money to the nation’s roads and bridges. It increases funding for major project grant programs and construction, repair, and research.
Further, this section contains the Surface Transportation Reauthorization Act, which provides $303.5 billion over five years for federal highway programs, a 35% increase.
At the same time, it preserves The Highway Funding Formula, which apportions 90% of federal highway assistance to states based on performance and equity-related metrics.
The second largest investment included in the bill is:
By modernizing the electricity grid and adding miles of new transmission lines, this section of the bill will allow the grid to carry more renewable energy.
Also included are investments into clean-energy projects, electric vehicle charging stations across the country, and funds to create a new federal entity within the Energy Department called the Grid Deployment Authority, which will develop high-voltage transmission lines.
Taken together, this section represents the most significant investment into power transmission in the history of the U.S. federal government.
The legislation also represents the largest investment into passenger rail by earmarking:
This significant investment will fund high-speed rail, safety improvements, $22 billion in grants to offset Amtrak’s maintenance backlog, and $24 billion towards the modernization of the Northeast Corridor rail route, which connects Washington, D.C., to Boston.
Additionally, the new law will expand internet access for hard-to-reach populations by investing:
This spending will build new broadband infrastructure across the country and provide grants, low-cost plans, and subsidies to help low-income households and rural and tribal communities access the internet.
In addition to the above, the new law also includes the following:
As mentioned, this new law is sweeping and complex, and these summaries only scratch the surface of the impacts it will have. Nevertheless, let’s turn now to another important question.
Let’s start with the good news: the infrastructure bill does not raise taxes. That said, however, there are some tax provisions included in the bill that you may want to be aware of.
Introduced as part of the Coronavirus Aid, Relief, and Economic Security Act (CARES) in March of 2020, the Employee Retention Credit (ERC) was a refundable credit that businesses could claim on qualified wages paid to employees. The intention was to provide relief to business owners by helping them retain their workforces. The tax credit was available quarterly, with the American Rescue Plan (signed in March of 2021) extending into the third and fourth quarters of 2021.
However, to help pay for the infrastructure bill, the fourth quarter extension is now repealed, and the ERC has been retroactively terminated, effective October 1st, 2021. That means wages paid after that date are ineligible for the Employee Retention Tax Credit, except for wages paid by an eligible recovery startup business.
If you are a previously eligible employer and plan on taking advantage of this credit in the fourth quarter or 2021, you will need to make some adjustments. You’ll have to coordinate with your payroll vendors, and you may need to make amendments to Form 941 and make changes to your accrual accounting.
As I discussed in this recent blog entry, another new provision of the infrastructure law helps fund the new spending by increasing tax compliance among cryptocurrency traders.
The new rule expands the definition of the word “broker” to include digital asset traders, thus requiring them to report the names, addresses, and gross proceeds associated with their transactions. That means that cryptocurrency traders will no longer be able to avoid certain tax consequences.
It’s worth noting that this part of the bill does not take effect until January of 2024 and is likely to be contested in Congress and the courts. Nevertheless, transparency is the best policy in the meantime. Crypto investors should keep careful and accurate records of their cost basis (what they originally paid for the asset) and consult a tax professional to ensure you’ve covered the bases.
Finally, the infrastructure bill modifies and extends “pension-smoothing” policies in the American Rescue Plan Act.
Essentially a budgeting gimmick, pension-smoothing has been used in the past to help pay for things like infrastructure. The provision allows companies that sponsor pension plans to delay making pension contributions and reroute the money elsewhere within the company. Yet, because the pension payments would have been tax-deductible, it also generates more tax revenue for the government in the short term.
Ultimately, the company will still owe money to retirees, and therefore Congress does not fundamentally raise any new money with this tactic. When it comes to Congressional budgeting, however, merely creating the brief appearance of a tax increase is enough to fund new projects.
As I mentioned, this isn’t new, and the infrastructure bill does not significantly change existing policy. The new law adjusts the funding stabilization percentages enacted by the American Rescue Plan and extends the interest rate stabilization period from 2029 to 2034.
This legislation is extensive and involved, and it may take years to understand the full impact. Until then, these key highlights and tax implications will help you know what to expect.
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Category: Business
Category: Business
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Jeff Coyle, CPA, Partner of Rosenberg Chesnov, has been with the firm since 2015. He joined the firm after 20 years of business and accounting experience where he learned the value of accurate reporting, using financial information as a basis for good business decisions and the importance of accounting for management.
He is a diligent financial professional, able to manage the details and turn them into relevant business leading information. He has a strong financial background in construction, technology, consulting services and risk management. He also knows what it takes to create organizations having built teams, grown companies and designed processes for financial analysis and reporting.
His business experience includes:
Creating and preparing financial reporting, budgeting and forecasting.
Planning and preparation of GAAP and other basis financial statements.
Providing insight on financial results and providing advice based on those results.
Jeff also has a long history of helping individuals manage their taxes and plan their finances including:
Income tax planning and strategy.
Filing quarterly and annual taxes.
Audit support.
General financial and planning advice.
Prior to joining the firm in 2015, Jeff was in the private sector where he held senior financial and management positions including Controller and Chief Financial Officer. He has experience across industries, including construction, technology and professional services which gives him a deep understanding of business.
Jeff graduated from Montclair State University, he is a CPA and member of the American Institute of Certified Public Accountants, New York State Society of Certified Public Accountants and New Jersey State Society of Public Accountants.
Jody H. Chesnov, CPA, Managing Partner of Rosenberg Chesnov, has been with the firm since 2004. After a career of public accounting and general management, Jody knows the value of good financials. Clarity, decision making, and strategy all start with the facts – Jody has been revealing the facts and turning them into good business results for more than three decades.
He takes a pragmatic approach to accounting, finance and business. His work has supported many companies on their path to growth, including helping them find investors, manage scaling and overcome hurdles. His experience and passion for business reach beyond accounting and he helps businesses focus on what the numbers mean organizationally, operationally and financially.
He has a particular expertise in early-stage growth companies. His strengths lie in cutting through the noise to come up with useful, out of the box, solutions that support clients in building their businesses and realizing their larger visions.
Prior to joining the firm in 2004, Jody was in the private sector where he held senior financial and management positions including General Manager, Chief Financial Officer and Controller. He has experience across industries, which gives him a deep understanding of business.
Jody graduated with a BBA in Accounting from Baruch College, he is a CPA and member of the American Institute of Certified Public Accountants and New York State Society of Certified Public Accountants.
In addition to delivering above and beyond accounting results, Jody is a member of the NYSCPA’s Emerging Tech Entrepreneurial Committee (ETEC), Private Equity and Venture Capital Committee and Family Office Committee.
He is an angel investor through the Westchester Angels, and has served as an advisor for many startup companies and as a mentor through the Founders Institute.