MEREDA’s Annual Spring Networking Social

MEREDA’s Annual Spring Networking Social

Thinking Spring?  Think MEREDA on March 24!  At this time of year, who isn’t already thinking about Spring?  Why not make plans now to join us at Ri Ra Irish Pub & Restaurant for MEREDA’s Annual Spring Social!

MEREDA’s networking events attract key players in Maine’s real estate industry offering excellent opportunities to interact with the experts.  Join us on Portland’s waterfront on March 24 from 5 – 7 pm for Hors d’ oeuvres, Spirits, and Great Conversation as we welcome Spring back to Maine!

Join us for a cocktail or two, and reconnect with colleagues and friends, both old and new!  This “can’t miss” event sells out every year, so sign up early!

Register for this event

About the Event:

MEREDA’s Annual Spring Networking Social

March 24, 2016 – 5:00PM to 7:00PM

Ri Ra Irish Pub & Restaurant
72 Commercial St., Portland, ME

Registering for this Event:

MEREDA Member: $45 each, Non – Member: $60 each
Register After March 17: Member: $55 each – Non-Member $70 each

Payment is expected at the time of registration. No refunds will be granted to anyone who registers, but fails to attend or who cancels after March 17, 2016.

This MEREDA event is sponsored by Bernstein Shur, PC Construction and Katahdin Trust Company.

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Five real estate luminaries presented with awards

DSC_3265At a recent conference, the Maine Real Estate & Development Association (MEREDA) presented awards to five individuals, each selected for their contributions to MEREDA and, more generally, to the health of the Maine real estate market over the last several years.

“This year, as always, we have a slate of very deserving, skilled and hardworking recipients,” said MEREDA president Michael O’Reilly in presenting the awards. “MEREDA and the Maine real estate community are very fortunate to have these individuals as colleagues and in their communities.”

Watch a video of MEREDA’s 2016 award winners.

William Shanahan, a MEREDA board member and president of the Northern New England Housing Investment Fund, won the 2016 Robert B. Patterson, Jr. Founders’ Award, a career recognition to acknowledge significant contributions to the industry over many years. Shanahan was praised for his “diligent counsel and valuable expertise time and again” and his ability to “connect finance issues to the mission, and anticipate conditions and advances solutions that help meet long term goals.”

Jason Favreau, a CPA and principal with BerryDunn, was chosen by fellow MEREDA board members as 2016 Volunteer of the Year. Favreau spearheaded an initiative to assess MEREDA’s mission and goals including a review of membership and sponsorship opportunities, the outcome of which was a new structure that offers four levels of membership with added benefits at increasing levels. Even just a few months into implementation, MEREDA’s financial sustainability has increased, and many members have benefited from increased visibility and value.

The 2016 Public Policy Award went to Andrea Cianchette Maker, an attorney and partner at Pierce Atwood, for her advocacy for responsible real estate development in Maine.  The organization’s long-standing public policy counsel, Andrea is a driving force for MEREDA’s policy agenda. She was praised for her ability to “make and maintain relationships with key stakeholders and collaborate with others on issues of mutual interest.” Of particular note is her recent leadership on a bill which proposes to expedite the appeals process of land use decisions.

And, in an unprecedented move, MEREDA president Michael O’Reilly selected two individuals for the 2016 President’s AwardBruce Jones, business development manager at Creative Office Pavilion, and Brian Curley, partner with PDT Architects. They were recognized together for their collaboration on MEREDA’s spring conference, where, over the last several years, they have invested hours and expertise to bring renowned national speakers and topics to the forefront of discussion for Maine real estate professionals. O’Reilly says the two have “breathed in new life and new ideas and, as a result, increased enthusiasm and attendance.”

Next, MEREDA will recognize notable projects from the last year in Maine commercial real estate. That awards ceremony is scheduled as part of the organization’s spring conference, on May 17, 2016. Find more details about that event here.

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MEREDA’s Morning Menu: The Changing Office Landscape – a look at Coworking

Breakfast Logo for Press Releases & Social MediaAs demand for commercial real estate increases, how can property owners, brokers and developers meet the evolving expectations of modern businesses?  What are the emerging trends in real estate, design and marketing as they pertain to today’s mobile workforce?  Specifically, what can property owners do to attract new tenants and buyers as well as stabilize and future-proof their properties? As this open-concept trend continues to evolve, how can commercial property owners retrofit their existing properties and/or design new spaces to better accommodate the lean practices of today’s virtual business paradigm?

Join MEREDA for breakfast on February 25th from 7:30 – 9:00 AM at the Clarion Hotel in Portland to learn how the coworking model has grown at a near exponential rate in the past ten years, highlighting the various types and structures that exist world-wide.  As an example, WeWork, the largest global coworking franchise, was recently valued at $10 Billion.  How is this possible and what lessons can we learn by looking at this bold new paradigm?

About our Presenters:


Patrick Roche is the President and owner of Think Tank Coworking, based in Portland Maine with locations in Yarmouth, Biddeford and now Boston.  Think Tank is Northern New England’s largest network of coworking facilities, providing nearly 300 members with access to professional, creative and collaborative workspace.

Think Tank’s coworking model has evolved over the years, adapting to today’s remote workforce needs, offering a variety of membership options; private offices, dedicated desks and floating access.  Members have 24 hour coded access to the space, replete with lounge areas, phone booths, conference rooms, kitchen and internet.  Think Tank’s also host to networking events, documentary screenings and arts programming.

Ezekiel (Zeke) Callanan is the founder and managing member of Opticliff Law, a boutique law firm focusing on startups and trademark law. Callanan’s primary practice areas are company formation, growth strategy, securities law compliance, and creative problem solving. Opticliff Law serves as general counsel to hundreds of Maine companies, including Think Tank LLC (and a few Think Tank members!).

Callanan and Opticliff Law have been members of Think Tank since the firm’s inception in 2012, fully embracing and endorsing the coworking model. Presently, the firm is outgrowing Think Tank and has plans underway to open and manage a new coworking office space on Cumberland Ave. as the value proposition of coworking to both the owner and the member makes the creation of more, diversified coworking space in Portland desirable.

About the Event:

MEREDA’s Morning Menu
The Changing Office Landscape – A look at Coworking

February 25, 2016
7:30AM to 9:00AM

Clarion Hotel
1230 Congress Street, Portland, ME
Buffet Breakfast: 7:30-8:00 am
Program: 8:00-9:00 am

Registering for this Event

Ticket Prices: 

Member:  $45 pp  |  Non-Member:  $55 pp
Prices increase by $10 after February 18th

Payment is expected at the time of registration.
No refunds will be granted to anyone who registers, but fails to attend or who cancels after February 18, 2016.

Visit www.mereda.org for more information and to register.

This MEREDA “Morning Menu” Breakfast Event is Sponsored by Norway Savings Bank.

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Experts, numbers show optimism for Maine real estate in 2016

DSC_3184MAINE — The Maine Real Estate & Development Association (MEREDA) hosted a record-breaking 800 attendees earlier this month for the group’s annual Forecast Conference, where about a dozen experts reviewed Maine real estate trends from 2015, and predicted what is in store for 2016. The event, which also included a robust business showcase and was sponsored by TDBank, proved to be a veritable who’s who of development in Maine. Attendees listened with rapt attention and celebrated the market’s return to pre-recession, 2006 levels.

“It was a great turnout for our signature event, with a great outlook for the Maine commercial real estate market,” celebrated Michael O’Reilly, MEREDA board president and senior vice president with Bangor Savings Bank.

Justin Lamontagne of NAI The Dunham Group, along with other experts in the southern Maine office, industrial and retail markets, called for more inventory, noting that businesses seeking prime locations in have found nowhere to go. Lamontagne predicts this situation will likely to persist until new development occurs. For instance, increasingly, industrial space is being used for brewery operations. And, Class A office space in downtown Portland, which saw two record value transactions in the first part of 2015, is scarce due to high desirability; as a result, the market for nice Class B office space is tightening.

Juxtapose that with a prediction that a dearth of construction workers could potentially drive up costs of new construction, and Maine’s real estate insiders are expecting values and demand to stay high through the coming year.

Portland’s lifestyle accolades are driving high occupancy levels and rates, and not just for hotels, which have been popping up all over the waterfront and city center. Multi-family developments and single family sales in southern Maine are “very hot,” according to experts. In particular, David Marsden, realtor with Bean Group, noted that the luxury home trend is waning for both millennials and baby boomers, while the demand for smaller footprint, urban, more conscientiously built properties is on the rise.

Vin Veroneau, president of J.B. Brown & Sons, recently announced a five-story market-rate development in Portland at the former El Rayo location, which will include street-level commercial space and 63 apartments above. Veroneau, who also led development of downtown Portland’s relateively new Courtyard Marriott, was part of a video at the conference, during which he ticked off another four or five urban projects planned by fellow developers.

Tanya Emery, director of economic development for the City of Bangor, said that “the sure bet” in her city is medical office facilities. This sentiment was also echoed by an expert from the Central Maine market, where a Chinese medical tourism facility is planned for a former Auburn shoe shop, and more traditional medical facilities are in the works as well.

Emery even hinted that there’s an exciting new tenant on tap for the space being vacated by L.L.Bean’s call center later this year.

Beyond medical, experts outside Portland also see growth opportunities in senior housing, as well as entertainment and industrial space located in close proximity to the state’s turnpike and Route 95.

Lamontagne announced that FedEx is taking over the full 250,000 square feet in Biddeford formerly occupied by Hostess’ bakery operations, and Karen Rich of Cardente Real Estate announced many new retail locations in the works, including a new Reny’s in Windham.

Individual presentations from each expert can be found on the MEREDA website at:https://www.mereda.org/pasteventmaterials.php.

“We are optimistic about commercial real estate in Maine for the coming year. Many of the promising accomplishments of 2015 continue to trend upward as we enter 2016,” said O’Reilly.

Next, MEREDA travels from Portland to Bangor to host a conversation about preserving shorefront value. The event takes place over breakfast on February 10 at the Hollywood Casino. Tickets are available athttps://www.mereda.org/eventdetail.php?ID=667.

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Check out MEREDA in the News

After its Annual Real Estate Forecast Conference held in front of nearly 800 attendees on January 21, 2016, MEREDA is in the News…

Portland Press Herald – 01/21/16
Maine real estate index shows positive trend

Portland Press Herald – 01/21/16
As office space fills up, pressure to build in downtown Portland rises

Bangor Daily News – 01/21/16
‘Caution and optimism’ advised as real estate index dips

Portland Press Herald – 01/21/16
More jobs plus low interest and unemployment rates bode well for real estate in 2016

Portland Press Herald – 01/21/16
Office, industrial and retail space all tight, tight, tight in Portland

Portland Press Herald – 01/21/16
Brunswick Landing poised for continued growth

Portland Press Herald – 01/21/16
Prices, volume of Portland multi-family unit sales rebound to 2005 levels

Portland Press Herald – 01/21/16
Downtown Portland hotels report robust year

WCSH – 01/21/16
2016 MEREDA Forecast Conference

Sun Journal – 01/22/16
Holden Forecast: Slow, steady for L-A in 2016

WGME – 01/22/16
Real Estate Report: Industry outlook for 2016

Mainebiz – 01/22/16
Warehouse shortage fueled by nontraditional uses

Mainebiz – 01/22/16
Hoteliers brace for impact of Airbnb

Portland Press Herald – 01/24/16
Week in review: Oil prices down, pot sales up, plus good economic signals

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Greenleaf and the Legislative Response To It.

By Christopher Devlin, Shareholder, Bernstein Shur

This article will discuss the Law Court’s 2014 decision in Bank of America, N.A. v. Greenleaf, 2014 ME 89, and the legislative response to it in 2015.  The discussion should interest anyone who is involved in loan sales or foreclosures of mortgages by non-portfolio lenders.

The upshot is that the new legislation leaves undisturbed the rule of Greenleaf that a civil action foreclosure can be brought only by a person who shows both that it has the right to enforce the note and has ownership of the mortgage.

By way of background, the average mortgage loan is papered by at least a note and a mortgage.  During the recent real estate bust, academics and courts recognized that a promissory note includes two sets of rights:  ownership (i.e., who gets the money) and entitlement to enforce.  These can be held by different people, as when a servicer enforces loan documents and then pays the proceeds over to the note holder.

Usually, the right to enforce the mortgage by foreclosure automatically follows the right to enforce the note, so that whoever can demand payment of the note can also proceed against collateral for it.  The contrary Maine rule evolved in a line of cases culminating in Greenleaf.  InGreenleaf, the Law Court held that a lender that had the right to enforce the note could only enforce the mortgage securing that note if it could show that it was the original mortgage holder or had been assigned the mortgage.  The assignment of the mortgage that was attempted in Greenleaf was ineffective, since it came from the Mortgage Electronic Registration Systems, Inc. (“MERS”), which, under the loan documents, had only the power to record the mortgage as nominee for the lender, not the right to actually transfer ownership of it.

Whether Maine is the only state rejecting the idea that the right of mortgage enforcement follows the right of note enforcement, or whether this is just a matter of the Law Court following the procedural requirements of the civil action foreclosure statute isn’t totally clear.   Whichever is the case, the result is the same:  the lender has to show both the right to enforce the note and ownership of the mortgage.

The legislature has responded to Greenleaf mainly by leaving its holding alone.  The Act to Create Transparency in the Mortgage Foreclosure Process, H.P. 267 – L.D. 401, Ch. 229, which is now worked into 14 M.R.S.A. Section 6321, imposes a requirement that any civil action foreclosure complaint “contain a certification of proof of ownership of the mortgage note,” explaining that court decisions had required proof of note ownership, but hadn’t specified when the proof was supposed to be provided.  This, by itself, does nothing to change the part of the holding that requires the foreclosing note enforcer to show that it is also the mortgage holder.

The other main responsive statute is the Act to Protect Consumers against Residential Real Estate Title Defects, H.P. 215-L.D. 321, Ch. 289 (enacted as 33 M.R.S.A. Section 508), which seems aimed at the problem of Greenleaf’s ineffective MERS assignment.  In Greenleaf, the court held that MERS had been named only as nominee with authority to record the mortgage, leaving it unable to effectuate an assignment of ownership.  The new legislation fixes this problem by providing that a nominee holding a mortgage for another person is presumed, absent contrary language, to have the power to make assignments, partial releases or discharges of the mortgage.  Some title companies have issued underwriting standards that follow the new statute.

The Greenleaf decision may have made Maine an outlier in its mortgage laws.  From the looks of the legislation coming out of last year’s session, it seems that we won’t be joining the mainstream any time soon.

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MEREDA’s Morning Menu: Our Lakes, Our Future: Preserving Shorefront Value – Bangor Edition

BreakfastLogoMaine lakes are not only beautiful, they are a surprisingly powerful economic engine — generating more than $3.5 billion in annual spending, providing more jobs than any single Maine employer, fueling countless local businesses, supplying drinking water to half our residents, and contributing to the municipal tax revenues that fund essential services in many Maine towns.  Our clean, clear lakes support a cornucopia of goods, from limitless four-season recreation to vital wildlife habitat, aesthetic enjoyment, and a quality of life most other states can only envy.

We have long depended on them, but our lakes are not immune from the serious water quality problems plaguing people around the world today. Here at home we have seen nuisance algae blooms and murky depths on some lakes ruin the fun for everyone, and we’ve learned that it’s both costly and very difficult to undo this kind of damage.

The good news is that we have in hand a proven way to help prevent these dreaded outcomes on developed lakes: it’s a program called LakeSmart.  Under the direction of the Maine Lakes Society, LakeSmart’s non-regulatory, user-friendly approach delivers individually designed, site-specific landscaping recommendations to lakefront property owners to keep lake waters clean and healthy.   In this way, it enables lake communities to take the future of lakes into their own hands. Maine businesses, most particularly the realtors, developers, landscapers and nurserymen who deal with homeowners and their plans every day, have a big role to play in this groundbreaking effort.

Join the Maine Real Estate & Development Association (MEREDA) for its “Morning Menu” breakfast series on February 10 from 7:30 AM – 9:00 AM at the Hollywood Casino Bangor for a thought provoking conversation led by Maggie Shannon (Belgrade Regional Conservation Alliance and Belgrade Lakes Association) and Gail Rizzo (Designated Broker with Lakepoint Real Estate), and learn about trends in Maine lake health, new cross-sector initiatives to protect our lakes, and how a program called LakeSmart can help communities safeguard their freshwater resources.

About the Event:

February 10, 2016 – 7:30AM to 9:00AM
Hollywood Casino Hotel, Bangor
500 Main Street
Bangor, ME

Buffet Breakfast:  7:30 – 8:00 AM
Program:  8:00 – 9:00 AM

Registering for this Event:

Member:  $25 pp  |  Non-Member:  $35 pp

Prices increase by $10 after February 4, 2016.

Payment is expected at the time of registration.
No refunds will be granted to anyone who registers, but fails to attend or who cancels after February 4, 2016.

Visit www.mereda.org for more information and to register.

This MEREDA “Morning Menu” Breakfast Event is Sponsored by Bangor Savings Bank & Rudman Winchell.

 

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START MAKING DENSE: When it comes down to it, housing affordability’s ‘guy behind the tree’ is you and me

by George Casey, CEO of Stockbridge Associates, LLC

When talking about taxes and tax policy, the venerable Louisiana Senator, Russell B. Long, is quoted saying: “Don’t tax you; don’t tax me; tax the guy behind the tree.”

The ubiquitous “other guy” would be the one who bore the brunt of the burden and you and I would go scot-free.

Of course the man behind the tree is often the common man or woman who’s political leverage and knowledge is minimal and ends up being the worse off for it.

Returning from a week at PCBC in San Diego, my head spins with both the issues and opportunities ahead for those whose mission and passion is to provide shelter: the simple roof over one’s head. Some of the issues are short-term and some are longer term.

I would like to focus on one of the longer-term issues: affordability.

Whether it is not enough rental apartments or homes priced to meet the incomes of those who want or need to rent, or not enough single family homes priced for those who want to purchase, the disparity between what shelter costs and what incomes can afford was in nearly every conversation in San Diego.

The reasons were many:

Read more >>>

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Are you Planning for a Highly Collaborative Office Workforce?

By Ted Kern, President /Owner of TKTeleservices, LLC

9-15-Idexx1_lgMost business professionals have witnessed business telecommunication services shifting rapidly in recent years from traditional fixed (landline) services to mobile-centric services.  Professional office planners, architects and commercial building contractors need to ensure they are planning carefully for a highly mobile, distributed workforce.

I recently had the pleasure of meeting with Mr. Dale Shaw, Global Telecommunications Manager with IDEXX Laboratories for an onsite tour of IDEXX’s new building, the Synergy Center, located on their World Campus in Westbrook, ME.  I had the opportunity to learn how a fast-growing, highly innovative company successfully changed its traditional workspace to a mobile-centric, collaborative work environment.

While touring the facility, the most significant change is a visible shift from traditional private offices and walled cubicles to a new, open air layout that focuses on smaller personal workstations and a variety of collaborative group work area.  Meeting rooms are abundant, adding to the standard conference rooms are now flex and chat meeting spaces, mobile touchdown and community meeting tables.  As far as the eye could see, people were visible and engaged in individual work or group discussions.

IDEXX employees, fondly known as “IDEXXers” have adjustable stand/sit work stations and ergonomic chairs. Cubicles have been replaced by streamlined, low profile workstations promoting greater employee interactions. Their technology of choice is Wi-Fi enabled laptops, smart phones and IP Softphones enabling employees be more mobile, and flexible with where and how they work. The smart phones are twinned to IDEXX DID phone numbers via AVAYA EC 500 software to ensure employee call work flow can be agile.  Additionally, Unified technologies are supported over the Microsoft Lync platform.

Some high call volume workstations are still supported with more traditional IP based desk phones and desktop computers, though they both can physically move to any other office location without the need for IT support.  Conference and flex spaces can be reserved on the fly using a new interactive room scheduling system located at the entrance of each meeting space.  Also, each is enabled with state of the art teleconferencing monitors for U.S. and global employee collaboration, while others are designed for smaller, more intimate, face-to-face discussions.

“Can you hear me now?” Absolutely.  ATT Wireless installed an in-building cellular repeater on the campus to ensure optimum cell coverage inside and out. IDEXX has also installed a very robust Aruba WI Fi system covering the A, B, N &AC bands over both 2.4GHZ and 5GHZ frequencies for maximum WI FI coverage and data speeds ensuring widespread connectivity for its more than 2,400 employees. The building is also serviced by via two large dedicated fiber optic pipes to ensure maximum broadband connectivity maximum broadband data and voice connectivity for employees and visitors.

IDEXX’s new world campus also incorporates outdoor work spaces highlighted by several styles of seating, from cafeteria-style seating for 8, to brightly colored umbrella patio tables for 4  and Adirondack and chaise lounge chairs scattered across the green space and abundant walkways.

Its new, highly collaborative workplace was designed to connect people in an effort to drive greater creativity and innovation and positive employee experience. A win-win, and from what I have seen, it seems to be IDEXX’s perfect formula for continued success!

Ted Kern is President /Owner of TKTeleservices, LLC – A Telecommunication Project Consultant based in Cumberland, Maine. Ted can be reached at tedkern@tkteleservices.com.

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Year End Planning for Businesses

By Michael C. Royer, MST, CPA, President and Managing Partner, Berry Talbot Royer

Is your business ready?

Businesses seeking to maximize tax benefits through 2015 year-end tax planning may want to consider several general strategies, such as use of traditional timing techniques for income and deductions and the role of the tax extenders (if renewed and in the event they are not renewed), as well as strategies targeted to their particular business. As in past years, planning is uncertain because of the expiration of many popular but temporary tax breaks. Also added to the mix is the far-reaching Affordable Care Act (ACA).

Expensing and Bonus Depreciation

Many businesses have utilized enhanced Code Sec. 179 expensing as a key component of year-end tax planning. Code Sec. 179 property is generally defined as new or used depreciable tangible Code Sec. 1245 property that is purchased for use in the active conduct of a trade or business. In 2014, off-the-shelf computer software was also included as was qualified real property (qualified leasehold improvement property, qualified restaurant property, and qualified retail improvement property). At the time this letter was prepared, the enhancements to Code Sec. 179 expensing had not been renewed by Congress for 2015 but the likelihood is very high that they will be renewed. Year-end planning should reflect both the likely extension, and the possibility of no extension. Similarly, bonus depreciation has been a valuable incentive for many businesses. Fifty percent bonus depreciation generally expired after 2014 (with limited exceptions for certain types of property). Qualified property for bonus depreciation purposes must be depreciable under the Modified Accelerated Cost Recovery System (MACRS) and have a recovery period of 20 years or less. These requirements encompass a wide variety of assets. Year-end placed-in-service strategies therefore can provide an almost immediate “cash discount” for qualifying purchases.  Although a bonus-depreciation election should be factored into a year-end strategy, a final decision on making it is not required until a return is filed. Further, bonus depreciation is not mandatory. Certain taxpayers should consider electing out of bonus depreciation to spread depreciation deductions more evenly over future years.

Returning to Code Sec. 179 expensing, one potentially useful strategy is to maximize benefits under Code Sec. 179 by expensing property that does not qualify for bonus depreciation (such as used property) and property with a long MACRS depreciation period. For example, given the choice between expensing an item of MACRS five-year property and an item of MACRS 15-year property, the 15-year property should generally be expensed since it takes 10 additional tax years to recover its cost through annual depreciation deductions as opposed to recovery of the cost of the five-year property.

Code Sec. 199 Deduction

Year-end planning benefits from the release of guidance on the Code Sec. 199 domestic production activities deduction. The Code Sec. 199 deduction, in comparison to some other business incentives, has been under-utilized. The guidance provides many examples of what business activities qualify for the deduction. Recent IRS guidance highlights manufacturing, construction, oil related work, film production, agriculture, and many other activities.  Our office can help you ascertain if your business activity may qualify for this potentially valuable incentive.

Work Opportunity Tax Credit

Businesses considering expanding their payrolls before year-end 2015 should take a look at the Work Opportunity Tax Credit (WOTC). Although the WOTC, under current law, expired after 2014, the expectation is that Congress will renew the WOTC for 2015 (and possibly for 2016). Generally, the WOTC rewards employers that hire individuals from targeted groups, including veterans, families receiving certain government benefits, and individuals who receive supplemental Social Security Income or long-term family assistance. The WOTC is generally equal to 40 percent of the qualified worker’s first-year wages up to $6,000 ($3,000 for summer youths and $12,000, $14,000, or $24,000 for certain qualified veterans). For long-term family aid recipients, the credit is equal to 40 percent of the first $10,000 in qualified first year wages and 50 percent of the first $10,000 of qualified second-year wages.

Repair-capitalization rules

Another valuable incentive for year-end planning is the de minimis safe harbor threshold amount under the final “repair regs” for taxpayers. Currently, a de minimis safe harbor under the repair regs allows taxpayers to deduct certain items costing $5,000 or less (per item or invoice) and that are deductible in accordance with the company’s accounting policy reflected on their applicable financial statement (AFS). IRS regulations also provide a $500 de minimis safe harbor threshold for taxpayers without an applicable financial statement.

Routine service contracts

Accrual basis taxpayers also have a new tool to use in year-end planning. The IRS has provided a safe harbor under which accrual-basis taxpayers may treat economic performance as occurring on a ratable basis for ratable service contracts. The IRS also indicated that additional safe harbors may be developed. This new safe harbor may be particularly useful in connection with regular services that extend into 2016. Taxpayers meeting the safe harbor for ratable service contracts may take a full deduction in the current 2015 tax year for certain 2015 payments, even though services may not be performed until 2016.

Affordable Care Act

Businesses large and small continue to work to comply with the ACA. For large businesses (generally known as applicable large employers or ALEs), the ACA imposes a number of new requirements, including the employer shared responsibility provision (also known as the employer mandate). Small businesses, although generally exempt from the employer mandate, need to review how they deliver health insurance (if offered) to their employers.

Many small businesses have traditionally provided a health benefit to their employees through a health reimbursement arrangement (HRA). Following passage of the ACA, the IRS described certain types of HRAs as employer payment plans. Therefore, they are considered to be group health plans subject to the ACA’s market reforms, including the prohibition on annual limits for essential health benefits and the requirement to provide certain preventive care without cost sharing. Failure to comply with the ACA’s market reforms triggers excise taxes under Code Sec. 4980D. This announcement by the IRS has left many small businesses uncertain how to proceed. There is pending legislation in Congress that would allow small employers (employers with less than 50 full-time and full-time equivalent employees) to have stand-alone HRAs and reimburse expenses without violating the ACA’s market reforms. Our office will keep you posted of developments.

Small employers also should review the Code Sec. 45R credit. Small employers with no more than 25 full-time equivalent employees may qualify for a special tax credit to help offset the cost of health insurance for their employees. The employer must pay average annual wages of no more than $50,000 per employee (indexed for inflation) and maintain a qualifying health care insurance arrangement. Generally, health insurance for employees must be obtained through the Small Business Health Options Program (SHOP), which is part of the Health Insurance Marketplace.

These are just some of the considerations that make up year-end tax planning for businesses. Please contact our office at 207-781-3445 so we can discuss your 2015 year-end business tax planning in detail.

Article originally published on November 19, 2015, http://www.btr-cpa.com/blog/year-end-planning-businesses

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