In the past year there has been significant movement in legislation with the Infrastructure Bill and Inflation Reduction Act to address infrastructure, inflation, climate, taxes, and so much more. Much more so than in past years. These bills will have significant impact on several industries like construction, energy, manufacturing, and telecommunications, but it is safe to estimate that nearly all small businesses will be impacted. How will they affect your business?
There is a lot of information to unpack in these bills and if you have not yet paused to consider how these changes will affect your business, we highly encourage you to do so now. As you start looking at closing 2022 and planning for 2023, schedule time to talk to your tax accountant on how these changes will impact your business.
Here are a few areas to consider and discuss with your tax accountant:
Research and Development:
If your company does any R&D, the changes brought on by the Inflation Reduction Act are significant. The research and development tax credit has been doubled from $250,000 to $500,000 and this credit can be applied towards other expenses, such as payroll taxes and more. The criteria for eligibility for this credit may be broader than you think. In addition to product development, this credit may also apply to new manufacturing processes, software development and product enhancements.
Clean Energy:
The Infrastructure Bill had a major focus on climate change with the largest investment in climate change in history. The bill includes funding for energy efficiency upgrades and grants for workforce training. Is now the time to consider updating your business’ energy sources? If your company has work vehicles, does it make sense to start transitioning your fleet to green vehicles and take advantage of the rebates and incentives?
Big note: Before you invest funds in new vehicles or updated energy sources, talk to your accountant. There are provisions that need to be met to be eligible for the rebates. For example, with electric vehicles, there are requirements for the percentage of car components that are manufactured in the U.S. as well as price caps on car models.
Hiring & Training:
In addition to the industries that will experience primary impact – construction, manufacturing, etc., many other support businesses will see an increase in demand for their services and products. Have you considered what your growth plan might look like, and you may need to hire and train to meet the demand? Will you need to hire designers and engineers if you plan to focus more on Research & Development? Will you need more manufacturing staff?
Tax Changes:
Every year there are changes to tax regulation and everything that we have touched on will likely impact your taxes. Having a solid relationship with your tax accountant will help you stay on top of the changes that will pertain to you and your business. In addition to keeping you informed, your tax accountant should be your ally in creating a financial strategy with these new rebates and credits coming our way.
There are many changes coming our way and a lot of information to be taken in. The bottom line is do your research and talk to you tax accountant. Many of the changes coming were designed to benefit businesses, so make sure you are set up to take advantage of these benefits for the remainder of 2022 and in your 2023 strategy.