As the soccer World Cup began this week, attracting the attention of the United States (and of course, the rest of the world), I reflected on my own childhood – watching soccer with my family. Not just any soccer, but German “Bundesliga” soccer. We cheered for FC Kaiserslautern and I also grew up following the German National Team in their quest for World Cups (3 so far). Of course, now that the United States team is also a contender, I watched with pride as both Germany and the US won their opening matches. I thought…World Cup soccer and CA tax policies have some commonalities. That might make an interesting blog.
Upsets occur…Some winners, some losers
An upset can certainly happen in soccer. Sometimes in the blink of an eye – there’s a lucky bounce or well directed header; sometimes a bad call by the referee, or sometimes just a crazy upset when you least expect it. On the World Cup stage, players are representing their whole country and there is a great deal of passion in both a win and a loss.
In California tax policy, we too have winners and losers, and passion on various sides of an issue. If you follow this blog, you know that our clients (and clients across the state) were dealt a huge blow last year when the Governor and state legislature decided to end the 20+ year enterprise zone program – literally in a vote that happened overnight. Almost a year later, people still ask me every day – “Why did they do away with a program that helped companies that were hiring people?” The answer, of course, is complicated – like that call in soccer as to whether the referee should pull out that red card on the player or not!
In place of the enterprise zone benefits, some new benefits have taken shape. There is the California Competes Tax Credit and the California Manufacturers’ Exemption for sales tax. The California Competes Tax Credit is for companies entering or expanding within California. A certain amount of money is allocated annually. There are myriad selection criteria and companies will have to prove their worthiness to even be considered. There will be winners…and losers. (Click here for more) The California Manufacturers’ Exemption for sales tax is an exemption for a portion of the state sales tax for companies in specific NAICS codes, placing into service qualifying machinery and equipment. It sounds straightforward, but there are nuances that will play out better for some companies than others. Not all industries qualify (some losers) and not all assets for even a qualified industry qualify (more losers), and it sunsets in 2021 (hurry up if you want to be a winner!). However, overall, we trust that it will be a good program that helps to put California on par with other states that have similar exemptions (a winner). (Click here for more)
Must be able to back up bravado
In all sports, there are favorites and there are underdogs – certainly true in soccer too. And some of the players are definite characters on that national stage. If you talk the talk, you’d better be able to walk the walk. There will be some classy winners, and there will be sore losers. But the true winners in the World Cup will be those that are steady, classy and can back up their bravado and truly lead their team to victory.
In the tax world, the correlation is to maintain good supporting documentation and recordkeeping. (Not as much fun as kicking a soccer ball, but necessary just the same.) For all tax credits, incentives, deductions claimed, companies should maintain contemporaneous documentation in case of future audit. For instance, clients that may receive benefits under the California Competes Tax Credit will be required to track various metrics in order to fully utilize those credits. Recordkeeping will be key. For the California Manufacturers’ Exemption for sales tax, clients will need to be able to substantiate under audit that they qualify, that machinery qualifies, and that all paperwork is correctly in place. That’s how we help our clients maintain peace of mind – we encourage and assist with the documentation to support the benefits claimed.
Need a Good Team
From the coach to the goalie to the other men on the field (and the substitution players, of course) in soccer, everyone must play their part, or the team will not be successful in its quest to become the best in the world.
For California tax issues (and federal and multistate too), clients need to know that they have a good team of both internal and external resources to understand the complex tax laws in both income/franchise and sales/use tax. We’ve spent years being a team player with our clients – sometimes as a coach (providing guidance on technical issues), sometimes as goalie (alerting clients to a potentially risky position and diverting that ball before it becomes detrimental), and sometimes simply as a defender (representing clients under audit, for instance.)
In staying with the theme, Miles Consulting is honored to be on a team with our client One World Futbol Project – a company that provides virtually indestructible soccer balls to children in developing and war torn nations. What could be better than that?
Miles Consulting Group, Inc. is a professional service firm in San Jose, California specializing in multi-state tax solutions. Our firm addresses state and local tax issues for our clients, including general state tax consulting, nexus reviews, credits and incentives maximization, income tax and sales/use tax planning and other special projects, including the new California Competes Tax Credit and California Manufacturers’ Exemption. To learn more, contact us today at www.Milesconsultinggroup.com
