What Another Trump Presidency Means for Tax Policy in 2025 and Beyond

Key Takeaways:

Potential 2025 tax changes may lower corporate rates and extend key business deductions, affecting planning and cash-flow strategies.

Trump’s policies may reduce clean energy incentives while maintaining fossil fuel preferences, impacting energy investments.

Estate tax exemption increases from the TCJA could be made permanent, with long-term implications for estate planning.

With President-elect Donald Trump winning a second term in the November 5 election, we have a clearer picture of what tax policies will be at the forefront of discussions as we head into 2025 and the scheduled expiration of many Tax Cuts and Jobs Act (TCJA) provisions. While Trump has not released a detailed tax plan, he has commented on several areas of tax law and policy, making it possible to get a good idea of the direction tax policy may take next year.

Republicans also gained control of the Senate and will have a small majority in the chamber in 2025. As of the date of publication of this article, control of the House has yet to be called. Even if Republicans retain control of the House, passing tax legislation may still be challenging. Unless the legislative filibuster is eliminated from Senate rules, any tax law changes will likely still have to be passed through the budget reconciliation process. If the Democrats manage to gain control of the House, passing tax legislation to advance Trump’s policies would become much more difficult and will require much more bipartisan negotiating.

Although it remains to be seen what specific legislative proposals will emerge, businesses and individuals should pay close attention to how Trump’s proposed policy preferences could alter their total tax liabilities.

The tables below outline current tax law and policy, as well as expected potential future tax policies under a Trump administration. Four separate tables cover provisions for business tax, international tax, individual tax, and estate, gift, and generation-skipping transfer (GST) tax. All data is based on information released or discussed by Trump as of November 8, 2024.

Business tax provisions

International tax

Individual tax

Estate, gift, and GST tax

How MGO can help:

MGO delivers comprehensive tax advisory and compliance services to guide you through an increasingly complex and evolving tax landscape. Leveraging deep industry insights and a proactive approach, we assist your business in managing tax liabilities efficiently while uncovering opportunities for growth.

Our team works diligently to provide tailored solutions that address unique challenges, from navigating shifting regulations to optimizing your overall tax strategy. Even in times of regulatory uncertainty, we are committed to helping your organization remain agile and well-positioned for long-term success.

Have questions? Reach out to our tax team today.

Navigating the Future of Tax Policy: A Guide for Corporate Boards

Key Takeaways:

The upcoming election cycle has introduced uncertainty in U.S. tax policy, so corporate boards should be ready for potential changes — namely the expiration of the 2017 TCJA provisions.
Boards should stay flexible in their tax planning. Divergent tax policies from both parties mean the election outcome could yield drastic differences in tax rates, capital gains treatment, and deductions.
Boards should regularly review tax strategies for alignment with corporate goals and regulatory standards, maintaining oversight of the corporate tax posture.
Stakeholders expect companies to be transparent and socially responsible in tax. Boards should prioritize this.

The upcoming U.S. election cycle gives rise to ambiguity in business tax planning. Companies must prepare for a shifting tax landscape while considering differing priorities of Republicans and Democrats regarding U.S. tax policies, such as the approaching expiration of some components of the 2017 Tax Cuts and Jobs Act (TCJA). This environment emphasizes the importance of the board’s oversight role and its understanding of a company’s total tax strategy, emerging compliance complexities, the impact of potential election results and associated tax planning scenarios, and the need for a broad perspective on total tax posture and associated social responsibility of the company.

The TCJA

The TCJA brought significant changes to the U.S. tax code, but many of its provisions are set to expire in 2025. Notably, the corporate tax rate will remain at 21%, but other aspects of the act will sunset, potentially leading to increased tax liabilities for businesses and individuals. Future tax policies will be shaped by the House of Representatives, the Senate, and the White House, and a resulting mix of political power within these bodies will necessitate compromises to pass proposed legislation.

Political Corporate Tax Priority Outlines

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Boards should have a clear understanding of their company’s current tax strategy, which takes into consideration the total tax liability – the composite total of all taxes owed by a taxpayer for the year. Next, consideration of the impact of and response to various tax scenarios and business operations, while ensuring compliance with existing tax law and regulations, should inform oversight of the company’s tax strategy.

Regular reviews of the company’s current tax strategy is a fundamental component of the board’s oversight responsibility. Key questions for management and tax advisors include:

What is the company’s current tax strategy? Do they support the company’s corporate strategy?
Is the tax department evaluating how potential tax scenarios may impact the company?
Is management developing alternative action plans in response?

Tax Considerations and Questions the Board Should be Asking: Big Picture

Election-related risk factors, such as potential tax code changes, are top of mind in boardrooms. Directors know changes may be coming, and proactive management will facilitate a timely response. An effective tax strategy can positively impact the company’s bottom line, help to mitigate risks, and drive growth. Boards play a pivotal role in overseeing these efforts, ensuring management remains vigilant in weighing tax impacts in making informed and responsible strategic decisions. Read on for key tax considerations for boards and the questions they should be asking of management.

Total Tax Posture

Understanding the company’s total tax posture is essential. This includes not only corporate income tax liability but also other tax responsibilities such as payroll, real estate, sales, and value-added taxes (VAT). For example, a company with large net operating losses (NOLs) may not pay corporate income taxes but may still have other tax obligations to consider.

Has risk oversight responsibility for total tax posture been allocated to the full board or a committee of the board? If so, has the company disclosed this at the board or appropriate committee level?
Who is responsible for managing and reporting total tax posture? Does the company have adequate resources to fulfill this responsibility?
What KPIs are being used to track the company’s total tax posture?
How do company KPIs compare to those of competitors?

Global Tax Compliance

Global tax compliance is a complex undertaking, involving issues such as the U.S. global intangible low-taxed income (GILTI) and the base erosion and anti-abuse tax (BEAT). Global tax compliance requires a deep understanding and active monitoring of current and evolving international tax laws and regulations in multiple jurisdictions. Boards need to be proactive in overseeing how management is addressing these complexities to ensure compliance and avoid potential legal and financial risks.

Who is responsible for and how is the company monitoring global tax compliance?
Does the company have adequate resources dedicated to tax compliance?
Have there been instances of noncompliance? How were they resolved?
How does the company monitor evolving domestic and international regulations and legislation impacting compliance?

Tax Transparency and Social Responsibility

Tax transparency and social responsibility are increasingly important in today’s business environment. Companies should strive to be transparent about their tax practices within financial reporting and demonstrate their contributions to society through tax postures. Boards should consider how stakeholders, including investors and the community, see the company’s contribution to social responsibility through taxes. This includes evaluating the company’s tax practices and their alignment within the context of broader social goals.

Who is responsible for drafting and monitoring all tax disclosure?
Is the company conducting any stakeholder engagement around tax transparency and social responsibility?
How is the company using information obtained from stakeholders to adjust its tax planning strategy?
How do the company’s tax contributions align with competitors and stakeholder expectations?

Engineering Value Chain Efficiencies

Proactive tax structuring and value-chain planning are crucial for optimizing tax efficiency. Boards need to consider how much engineering for tax efficiency is acceptable and what might be perceived negatively by the tax authorities or the public. While manipulating the value chain for tax mitigation is generally acceptable, significant legal structuring and non-arm’s-length transactions, such as the use of shell companies or intercompany transfers, may raise speculation and scrutiny.

What options are available for value chain efficiencies?
Does the company have policies regarding tax structuring and value-chain planning?
Were any structuring and planning policies considered and rejected? If so, why did we decide not to adopt them?

Conclusion

As the expiration of the 2017 TCJA approaches and pending November 2024 U.S. election results clarify which political priorities may evolve into legislation, companies must stay informed and prepare for potential changes in tax policy. By understanding their current tax strategy, planning for various domestic and international taxation scenarios, and emphasizing tax transparency and social responsibility, businesses can better navigate the complexities of the tax landscape and ensure compliance. Boards have the responsibility to play a critical oversight role in guiding these efforts and ensuring that the company management remains proactive and responsible in formulating its tax practices and executing its tax strategy.

How MGO Can Help

Our tax team is here to help your board navigate today’s complex tax landscape with tailored strategies that directly address shifting policies and compliance challenges as they arise. From strategic planning and global compliance support to enhancing overall tax transparency and optimizing value chain efficiencies, we provide proactive solutions that align with your company’s goals — as well as your shareholders’.

Be prepared for whatever changes come your way, all while maintaining robust tax oversight and committing to social responsibility and long-term success. Reach out to our team today.

Navigating Pillar Two and Supply Chain Challenges for Your Global Business

Key Takeaways:

The OECD’s Pillar Two rules are pushing large multinational enterprises to restructure and rethink location strategies to navigate the 15% global minimum tax more effectively.

AI and digital tools are revolutionizing supply chain operations, enabling you to make faster decisions and drive your efficiency while meeting ESG reporting requirements.

An increasing number of multinational enterprises are planning major business model overhauls in response to Pillar Two’s growing influence on tax, operational, and geographical strategies.

If you act early to integrate Pillar Two considerations into your strategic planning, you could avoid unforeseen costs and position your business for long-term success in what will continue to be a complex global landscape.

Throughout the last few years, the global business landscape has been rocked by a series of unprecedented disruptions affecting supply chains and operating models. From natural disasters like the Fukushima earthquake to geopolitical tensions and the COVID-19 pandemic, businesses like yours have no doubt been forced to reevaluate and adapt strategies to maintain efficiency and meet evolving customer expectations. 

It is likely that these disruptions have prompted you to diversify your sourcing, move your manufacturing closer to markets, and adopt a more regionalized supply chain model with an increased reliance on artificial intelligence (AI) and digital tools for more rapid supply chain decision-making and environmental, social, and governance (ESG) reporting.

While Pillar Two considerations were not the primary driver of these types of transformations, they have started to influence corporate strategies — including business model revisions, supply chain alterations, and legal entity restructuring as companies assess the tax implications and integrate them into business cases.

How You Can Respond to the Disruption

In response to these supply chain challenges, businesses have taken to adopting other strategies to stay nimble. Here are some things you can do:

Diversify your supply sources: Companies are moving their sourcing and manufacturing closer to their markets to increase supply chain diversity and provide greater market responsiveness.

Reduce your dependence on China: There has already been a noticeable shift away from the country as the primary manufacturing base.

Look at nearshoring and onshoring: This can bring your manufacturing closer to end markets and decrease your transportation costs.

Consider digitalization: Using AI and digital technologies can accelerate your decision-making, as well as enhance supply chain efficiencies.

Transform your supply chain: Companies are revising their supply chains to mitigate tariffs, optimize green credits, and meet ESG reporting requirements.

The Role Pillar Two Plays in Your Business

The Pillar Two model rules, also referred to as the Global Anti-Base Erosion (GloBE) rules, were released on December 20, 2021, and are part of the Organisation for Economic Co-operation and Development‘s (OECD’s) two-pillar solution to address the tax challenges of the digitalization of the economy that was agreed to by 137 jurisdictions and endorsed by the G20 finance ministers in October 2021. They were designed to ensure that large multinational enterprises (MNEs) are subject to a minimum effective tax rate of 15% on the income arising in each jurisdiction where they operate.

The OECD’s global minimum tax rules apply to MNEs with revenue of at least EUR 750 million and are not self-implementing. Each jurisdiction must enact them into their domestic legislation. Some jurisdictions have already issued legislation to enact the global minimum tax, but others are still enacting legislation. You can track the status of this implementation here.

You are most likely navigating a complex landscape of challenges that include the green transition, digital transformation, geopolitical tensions, talent shortages, and supply chain disruptions. The Pillar Two tax reforms intersect with these issues, meaning you need to take a comprehensive approach to guard your strategies and operations across your people, processes, and technology. You can respond to these disruptions in a myriad of ways, from adjusting your supply chains to overhauling your recruitment strategies to even making fundamental shifts in your business models.

You’ve probably seen firsthand how the rise of digitization has driven more commerce online, fostering new platforms and subscription-based models. In that same vein, the increasing emphasis on sustainability and ESG factors is prompting organizations to reevaluate their core objectives and metrics of success. From this angle, Pillar Two is emerging as a significant consideration factor in your transformation.

While it is not quite a catalyst yet, it is gaining influence around operational restructuring and relocation, with an increasing percentage of MNEs planning major structural changes due to Pillar Two. Because of this new tax landscape, you will have to reassess the optimal locations for their people, functions, assets, and risks, as you may no longer see a strong business case to centralize in one location to obtain very low tax rates via incentives.

Pillar Two is becoming more prominent as a cost factor due to its potential to increase costs and impact strategic plans. MNEs anticipate a significant rise in effective tax rates due to it, which can add to the already existing cost pressures. If you fail to incorporate Pillar Two considerations into your strategic planning, you’ll likely be impacted by unforeseen costs and erode your profitability. That is why it is key to take early action on implementation — you’ll be setting yourself up for a competitive advantage.

How MGO Can Help

The supply chain landscape and operating model disruption are complex and will continue to evolve. MGO can help you take an integrated approach to adapt to these changes. Our experienced team will consider the location of your people, functions, assets, and risks to diversify your supply sources, leverage digital technologies, and adapt your overall strategies in response to the environmental, social, and regulatory changes.

As the shift towards decentralized, regional hub models continue to gain traction, we can assist you in moving away from the traditional centralized models to enhance your flexibility and resilience. Let us tackle the additional layer of complexity Pillar Two adds as we reassess your operations and strategies holistically. As you move forward, your success will hinge on your ability to adapt and innovate in the face of these disruptions, and we can help set you up for long-term success and sustainability.

To learn how we can help you address supply chain challenges and Pillar Two tax implications, reach our to our International Tax team today.

Managing Personal Property Taxes: A Guide for Vineyards and Wineries

Key Takeaways:

Vineyards and wineries must report all fixed asset changes, including obsolete or abandoned property, for accurate tax assessments.

Properly classifying assets as either personal property or real estate impacts tax obligations.

Investing in fixed asset management software can help you track and report assets to minimize your vineyard or winery’s personal property tax liability.

Vineyards and wineries are unique in their operations — combining agriculture, manufacturing, and hospitality. This complexity brings specific challenges in managing personal property taxes.

Common Personal Property Tax Challenges for Vineyards and Wineries

Let’s look at a few specific aspects of vineyards and wineries that make personal property tax compliance unique:

Obsolescence and Abandonment

Continued taxation of obsolete or abandoned property is one of the most common issues for vineyards and wineries. It’s not unusual to see old tractors, farm equipment, or other machinery sitting unused on vineyard land — sometimes for decades.

Although these assets are no longer functional and are not being depreciated on the books, they continue to appear on the personal property tax rolls and are subject to tax. Vineyard owners must take action to remove obsolete items from both their property and property tax renditions (personal property returns).

Asset Classification

Another challenge in managing personal property taxes for vineyards and wineries is correctly identifying and classifying the property type. The classification determines whether the asset is considered depreciable or real property, as each has different tax implications.

For example, mobile equipment — such as tractors used in the field and carts for transporting grapes to the processing center — is classified as personal property and assessed immediately upon being placed in service. On the other hand, in California, vines planted in the ground are not assessed until three years after the season of planting in vineyard form, giving them time to become productive.

Storing wine or grape juice in large vats adds another layer of complexity. Whether these vats are classified as real estate or personal property depends on whether they are affixed to the ground or movable.

In a tasting room, there may be tables, racks, and stools, all of which are depreciable property. However, if the room has a built-in bar, it is considered part of the building, having a much longer depreciable life.

It takes a deep understanding of the multitude of tax rules and the various types of property used in vineyard and winery operations to optimize the company’s tax position.

Technology

Modern wineries might also have high-tech equipment, such as computers and specialized machinery, that should be listed separately on tax renditions. These assets often have shorter depreciation lives, and accurate tracking helps avoid overpaying taxes.

Exemptions

The wine industry benefits from many specialized tax rules and exemptions.

For example, changes to the California property tax rules in 2017 allowed vineyards to write off certain planting costs, such as fertilizer, stakes, and wires, rather than capitalizing and depreciating them. Additionally, some counties offer exemptions for startup vineyards, which can provide significant tax savings.

If you (or your tax advisor) aren’t familiar with these exemptions, they are easy to overlook.

Multiple Entities or Locations

It’s not uncommon for larger operations to have separate entities for growing grapes and producing wines. An operator might also owe tax to multiple jurisdictions because the property is located in different towns and counties. Staying on top of property tax obligations for various entities and locations can be confusing and time-consuming.

Resources for Personal Property Tax Compliance

Your annual business property tax affidavit — California form BOE-571-L or BOE-571-A, operation dependent) — is typically due to the county on January 1. Once submitted, the county uses the property tax affidavit to calculate the business property tax liability.

Many companies remember to add new property purchased during the year and remove sold property but neglect to report obsolete and abandoned property. It’s the property owner’s responsibility to document and report obsolete items to prevent unnecessary tax payments. Neglecting this aspect of property tax reporting leads to overpaying taxes and issues during audits.

Investing in fixed asset software can help ensure accuracy. These tools help track acquisitions, disposals, and other changes in the asset base, making certain you report up-to-date and accurate information to the county.

Given the specialized nature of personal property tax issues in the wine industry, you can benefit from working with a firm that has experience and expertise in this area. This knowledge can be invaluable for understanding the various personal property tax exemptions available to vineyards and wineries.

How MGO Can Help

MGO offers comprehensive tax services — including income taxes, property taxes, and sales and use taxes — tailored to the unique needs of vineyards and wineries.

Reach out to our Vineyards and Wineries team for help reconciling your internal records with the county’s asset lists to identify and correct discrepancies. We can also recommend fixed asset software to help you maintain accurate records going forward. Then, you can focus on what you do best: producing exceptional wines.

Case Study: How MGO Helped a Healthcare Company Navigate Turnover and Enhance Financial Reporting

Background:

Timely and accurate financial reporting is essential for making informed decisions, complying with regulations, and maintaining investor confidence.

MGO provides comprehensive client accounting solutions (CAS) to help businesses maintain financial clarity, compliance, and strategic foresight. By offering tailored solutions that meet each organization’s unique needs, MGO empowers companies to focus on growth while maintaining strong financial foundations.

Challenge:

An online pharmacy with approximately $57 million in annual net revenue faced serious weaknesses in its accounting process. The sudden departure of a senior executive created a critical gap in financial reporting. The board of directors and other stakeholders lacked visibility into the company’s financial operations and were unaware of the severity of the underlying problems. Executives hadn’t received accurate financial reports in months, and the company struggled to complete its annual audit requirement.

The situation was further exacerbated by an understaffed accounting team — with only one accounts payable clerk, one accounts receivable clerk, an assistant controller, and a controller managing an overwhelming volume of transactions and deliverables.

The company’s leadership knew they needed help but were unsure of the exact nature of the problem or how to solve it.

Approach:

MGO stepped in with a swift and strategic approach, providing “boots on the ground” support during this critical period. Leveraging our deep experience in financial reporting, we immediately assessed the company’s entire financial cycle — identifying the root causes of the delays and inefficiencies.

Understanding the client needed not just temporary relief but a long-term solution, MGO provided a technical director to advise on complex accounting matters as well as junior-level support to manage day-to-day tasks like bank reconciliations and cash management. This allowed the controller to spend more time on areas of highest impact to the company, such as providing timely financial reporting to the board of directors and executives.

MGO’s team worked closely with the client for over eight years, becoming a constant and reliable presence through multiple CFO and controller changes. By understanding the company’s unique needs, we implemented processes for financial reporting, reduced the time required for the monthly close, and provided audit readiness services. Our continuous involvement helped keep the company’s financial operations stable and compliant during periods of leadership transition, preserving institutional knowledge throughout the process.

In addition, MGO played a crucial role in rebuilding the company’s internal accounting and finance department. We not only provided technical support but also helped with identifying and interviewing candidates, and training new hires to preserve and pass on institutional knowledge.

Value to Client:

MGO’s involvement was transformative for the client. With our guidance, the company overcame the immediate crisis, successfully navigated its annual audit, and implemented processes that laid the groundwork for future growth — including potential public offerings. Timely financial reporting gave the owners the visibility they previously lacked, allowing them to make informed decisions with confidence.

The company now operates with a well-organized and efficient internal accounting team capable of handling its complex financial needs independently. MGO’s ongoing support during staff transitions provided continuity and peace of mind, preventing the loss of critical financial knowledge. By addressing both immediate and long-term needs, MGO helped the company overcome its financial challenges and empowered it to build a sustainable and self-sufficient financial operation.

Your Trusted Cash Flow Management Advisor

MGO’s CAS professionals have decades of experience helping clients improve processes, weather transitions, and boost performance.

Contact MGO today to learn how we can support your financial reporting processes and increase visibility into your organization’s finances.

Transfer Pricing Compliance Checklist for Your Business

Key Takeaways:

Businesses operating internationally should regularly review transfer pricing practices — including documentation, benchmarking, and IRS reporting requirements.

Understanding the classification of inter-company transactions, learning from past audits, and considering Advance Pricing Agreements can improve tax compliance and strategy.

Regular assessment of transfer pricing practices can help maintain compliance, mitigate risks, and potentially reveal cost-saving opportunities.

For today’s global businesses, understanding and managing the complexities of international tax and transfer pricing can be a challenge. That’s why it is important to regularly review your practices against critical standards to maintain compliance and improve tax strategies.

To help you determine if your company is compliant or if consultation may be needed, use this straightforward checklist based on key questions about your operations:

Does your company need transfer pricing documentation? Transfer pricing documentation is essential to show your company’s pricing policies follow local and international arm’s length standards. This documentation should include detailed analyses of inter-company transactions, the methods used to set prices, and how these follow applicable tax laws. Having robust documentation can help you prevent disputes with tax authorities, avoid potential tax penalties, and make audits run smoother.

Do your inter-company transactions need to be benchmarked? Benchmarking is the process of comparing your inter-company transactions with those of similar transactions by unrelated parties to confirm the inter-company pricing is at arm’s length. This process involves gathering data from uncontrolled comparable companies and transactions to justify your pricing strategies. Effective benchmarking helps maintain compliance and supports your transfer pricing documentation.

Do your inter-company transactions need to be reported on an IRS form? Certain inter-company transactions must be reported to the IRS to follow regulations and avoid penalties. For instance, transactions with foreign affiliates often require filling out Form 5472. Regularly reviewing which forms are applicable and accurately reporting transactions can help you stay compliant and avoid fines. In addition, your company may have offshore investments that may require reporting on IRS Forms 5471 and/or 8621.

Are your inter-company transactions “regarded” or “disregarded”? (Consider if some are regarded and others are disregarded.) The tax treatment of inter-company transactions can vary, with some being regarded and others disregarded. Understanding which transactions fall into each category is vital for proper tax planning and compliance as it affects income allocations and taxable earnings calculations.

Have your inter-company transactions come under IRS or state audit in the last five years? If your transactions have been audited, it’s important to review the outcomes and learn from them. An audit history can show potential areas of risk in your transfer pricing practices. Reviewing and adjusting practices based on past audits can help reduce the likelihood of future audits and potential penalties.

Does your company have an Advance Pricing Agreement (APA) in place? An APA is an agreement between a taxpayer and tax authorities that pre-approves transfer pricing methods the taxpayer will apply for future inter-company transactions. Having an APA can reduce uncertainty in tax matters, prevent disputes, and provide clarity on how transactions will be treated. If you don’t have an APA, it might be time to consider whether it could help your operations.

Could your company benefit from a “health check” on its international tax or transfer pricing practices? A tax “health check” involves a comprehensive review of your company’s tax and transfer pricing practices to find areas for improvement and potential risks. This proactive approach can help your company improve its tax strategies, verify compliance, and potentially uncover cost-saving opportunities.

Is Your Business Meeting Transfer Pricing Compliance Standards?

By answering the questions above, you can identify areas where your company may need to improve its transfer pricing and international tax practices. Addressing these key areas will help you develop more effective strategies to mitigate your risks.

How MGO Can Help

We are committed to helping you navigate the complex world of international tax and transfer pricing. With our comprehensive approach, we address each area of potential concern — from correct documentation and effective benchmarking to navigating IRS reporting requirements and understanding the tax implications of every transaction.

Whether you are looking to set up an APA or simply need a thorough “health check” of your current practices, our team is here to provide the support and insights necessary to improve your tax strategies and enhance your operational efficiency. Reach out to our team today.

Case Study: How MGO Helped an ISO-Certified Manufacturer Maximize the R&D Credit

Background:

Since Congress created the Research and Development (R&D) credit in the 1980s, it has been an essential tax strategy for companies investing in innovation — providing much-needed support to offset R&D expenses.

Prior to 2022, companies could deduct these expenses in the year paid or elect to amortize them over 60 months. However, a provision included in the Tax Cuts and Jobs Act of 2017 — that didn’t take effect until January 2022 — required businesses to capitalize and amortize these expenses.

This change has been devastating for businesses that invest heavily in innovation. No longer able to write off these expenses immediately, many organizations struggle to maintain cash flow. In some cases, it even threatens business continuity.

While congressional efforts are underway to reverse the requirement to amortize research and experimental expenses, businesses can claim the R&D tax credit to generate tax savings in the meantime.

Challenge:

An International Organization for Standardization (ISO) certified manufacturing company specializes in machining high-tolerance plastics and metals using computer numerical control (CNC) technology. With 96 employees and an annual revenue of $11 million, the company invests heavily in R&D and has incurred roughly $1 million in qualified research expenses.

This manufacturing company had a unique opportunity to claim the R&D tax credit because companies can claim the credit on costs related to implementing ISO to improve processes and quality in their businesses.

Approach:

MGO leveraged its extensive knowledge of R&D tax credits to thoroughly analyze the company’s R&D activities — including implementing continuous improvement and process improvements to streamline quality controls.

By accurately documenting all qualifying expenses and ensuring they align with the four-part test, MGO was able to help the client maximize their R&D credit benefit.

Value to Client:

With MGO’s help, this company successfully claimed the R&D credit — resulting in a net credit benefit of $90,000 in a single year, including federal and state tax credits.

This strengthened the company’s market position by enabling it to reinvest in research, maintain its ISO certification, and improve its ability to fund further innovation, contributing to its long-term competitiveness in the industry.

Your Trusted R&D Tax Credit Advisor

MGO’s tax professionals have more than 30 years of experience helping you document, file, and defend tax credit claims.

Contact MGO today for a complimentary R&D tax credit eligibility analysis to determine if this tax incentive can help fuel innovation and growth in your organization.

Case Study: Global Transfer Pricing for Semiconductor Leader

MGO navigates stringent OECD guidelines to foster client confidence and deliver an industry advantage.

Background:

In the highly competitive semiconductor manufacturing sector, a global leader with annual revenues exceeding $400 million teamed with MGO for an exhaustive global transfer pricing (TP) study. Our task extended beyond the U.S., covering Asia Pacific (APAC) and Europe, Middle East, and Africa (EMEA) countries, thus providing a comprehensive TP analysis that aligns with both domestic and international standards.

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Challenge:

The creation of a global TP study — including master file, local file, and country-by-country-reports — essential under Organization for Economic Co-operation and Development (OECD) guidelines, was pivotal for our client. This document is not merely a formality but a strategic tool that outlines a company’s business operations, supply chain, and global transfer pricing policies. Given the global scrutiny of TP studies, our client required a firm not only to meet the standard but to advocate on their behalf, ensuring the study contained the substantial and relevant information necessary to withstand regulatory examination and protect against penalties.

Approach:

At MGO, we pride ourselves on a bespoke approach to client engagement. We delve deep into understanding our clients’ unique business landscapes, enabling us to manage quality control proactively throughout the project lifecycle. For this semiconductor client, our team crafted a master file that exemplified our commitment to excellence, surpassing OECD’s stringent requirements. The result was a rich, descriptive narrative of the client’s global operations, devoid of numerical data but full of insights that present the company’s practices in the best possible light.

Value to Client:

The ability to provide comprehensive global transfer pricing services traditionally expected from larger firms is a distinctive advantage. This approach effectively combines personalized service with global knowledge and experience. The continuation of our collaboration in a second year and the establishment of a two-year commitment underscores the client’s confidence in receiving high-quality deliverables.

Your Trusted Global Transfer Pricing Provider

MGO is here to help you navigate the complexities of international transfer pricing. Our track record across industries demonstrates our ability to tailor our solutions to meet your needs — helping you maintain compliance, and get more from your global tax strategy. Leverage our experience for your advantage.

Case Study: Uncovering Hidden Tax Savings for a High-Net-Worth Client

MGO’s attention to detail helps a California couple get back more than $1 million from amended tax returns.

Background:

A high-net-worth couple were going through a divorce. The law firm representing one of the spouses suggested their client retain a separate CPA firm from her husband. They referred the client to MGO.

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Opportunity:

Upon reviewing the client’s tax returns, MGO discovered the previous national CPA firm had made a significant error resulting in the client potentially missing out on a substantial tax refund. Additionally, the previous CPA firm had failed to accurately reflect the client’s family situation.

Approach:

MGO’s team of experienced accountants thoroughly reviewed the client’s tax returns and identified the error made by the previous CPA firm. The team then worked closely with the prior firm to file an amended return, securing the appropriate tax refund for the client.

Value to the Client:

The client recovered a tax refund of 1.7 million, which was split evenly between the ex-spouses. The client was extremely satisfied with MGO’s work — the firm not only identified and corrected the refund error, but also updated the number of dependents listed on her return (the previous tax preparer failed to include her daughter).

Trust Your Taxes to the Right Team:

MGO offers individual and family tax services that include business impact planning, estate tax, real estate analysis, and international tax. Reach out to our team today to learn more.

California Franchise Tax Board Announces One-Time Penalty Abatement Program for Individual Tax Returns

The California Franchise Tax Board (FTB) recently announced a one-time penalty abatement program for California resident and non-resident individual taxpayers.

Here’s what you need to know to claim it:

It’s a one-time abatement of any “timeliness” penalties incurred on individual income tax returns (Form 540, Form 540NR, Form 540 2EZ) for tax years beginning on or after January 1, 2022.
It’s only available to individual taxpayers subject to personal income tax law (so estates, trusts, and fiduciaries aren’t eligible).
It can be requested verbally or in writing starting on April 17, 2023.
For California taxpayers who qualify for an extended 2022 income tax return due date because of the California Winter Storms (i.e., most California taxpayers), the “timeliness” penalties that would be abated through this program should not start being imposed until after the new extended due date for that tax year – October 16, 2023.

Which penalties are eligible?

Both the Failure to File Penalty (i.e., you did not file your tax return by the due date nor did you pay by the due date of your tax return) and the Failure to Pay Penalty (i.e., you did not pay the entire amount due by your payment due date) on California individual income tax returns for tax years beginning on or after January 1, 2022 are eligible for the one-time penalty abatement.

How do I qualify?

How do I request a one-time penalty abatement?

You can mail in a completed Form FTB 2918 or call the FTB at +1 (800) 689-4776 to request penalty abatement.

What if I can provide that I had reasonable cause for late filing or late payment?

If you can demonstrate that you exercised ordinary care and prudence and were nevertheless unable to file your return or pay your taxes on time, then you may qualify for penalty relief due to reasonable cause. Reasonable cause is determined on a case-by-case basis and considers all the facts of your situation.

You may request penalty abatement based on reasonable cause by mailing in a completed Form FTB 2917 or by filling out a reasonable cause request on your MyFTB online account. Penalty abatement based on reasonable cause may – depending on the circumstances – be preferable to using up your one-time penalty abatement request.

How we can help

If you need help with relief for your “timeliness” penalties or if you need help with any other state and local tax matters, please reach out to our experienced State and Local Tax team.