R&D Tax Credit for Manufacturer

The Research and Development (R&D) tax credit, first introduced in 1981, is a government-sponsored tax incentive that rewards companies for conducting R&D activities in the United States.  This credit was implemented to incentivize innovation throughout the economy and to keep technical jobs here in the United States.

R&D tax credit is not just for large technology, medical device or drug companies.  It also applies to manufacturers of all sizes.  If a company, in the manufacturing industry, recently introduced new or improved products or manufacturing lines, there may be a good chance that the company would be entitled to the benefit of R&D tax credit.

Some of the R&D credit qualifying activities that relate to manufacturers include, but not limited to, designing and developing cost-effective and innovative operational processes; improving product performance and manufacturing processes; evaluating and determining the efficient flow of material; designing and evaluating process alternatives; developing process to meet regulatory requirements or to reduce labor costs; developing and implementing new or improved safety enhancements; increasing operating and economic efficiencies; designing tools, molds, certification testing, environmental testing and automated manufacturing processes and so on.

The benefit of the R&D tax credit could range from 14% to 20% of qualifying expenditures that could be used to offset the company’s tax liabilities.  In addition, many states have their own means of incentivizing in-state R&D activities.

기회특구에 위치한 미국 부동산에 투자하는 외국인 투자자들

새로운 기회특구(“Qualified Opportunity Zone” or “QOZ”) 세법 제도에 따르면, 투자자산 매도 금액을 180일 이내에 기회특구 비즈니스 또는 주식에 투자하는 경우 2026년까지 투자자산 매도 수익에 대한 세금을 이연 시킬 수 있다. 기회펀드(“Opportunity Fund”)에 대한 투자가 최소 5년간 유지되는 경우, 이연된 수익은 감소된 세율에 적용을 받는다. 추가적으로, 기회펀드에 대한 투자가 최소 10년간 유지되는 경우, 투자금의 가치 상승으로 인한 양도 수익에 대한 세금은 면제가 된다.

일반적으로, 미국 부동산에 투자하는 외국인은 외국인 부동산 투자 세법(“Foreign Investment in Real Property Tax Act” or “FIRPTA”)에 적용을 받는다. FIRPTA는 미국 부동산 또는 소유권을 판매하는 외국인들에게 총 매도액의 10%를 원천징수 하도록 하며, 미국 부동산 또는 소유권의 매도 수익을 미국 세법에 적용받는 관련소득(“Connected Income”) 으로 간주한다.

세법 1400Z-2 조 조항에 새롭게 발표된 규정에 따르면, 기회특구 프로그램의 절세방안은 해당 프로그램에 참여하는 외국인에게도 적용이 가능하다 – 기회특구 비즈니스 또는 주식에 투자한 외국인은 보유기간 요구사항을 충족시 투자금의 가치 상승으로 인한 양도 수익에 대한 세금을 피할 수 있다.

미국 재무부는 지정된 기획특구를 보여주는 지도를 제공한다. 로스엔젤레스 및 샌디에고의 일부분도 해당 구역에 추가 되었으며, 프로그램의 관심이 높아지고 있다. 아래 링크를 클릭하면, 해당 지도를 볼 수 있다. 웹사이트 화면 오른쪽에 있는 메뉴에서 “Layers” 탭을 누른 후 “Opportunity Zone Tract” 박스를 체크하고, “2011-2015 LIC Census Tract” 박스의 체크를 제거하면, 모든 기획특구를 볼 수 있다. 특정지역들은 확대하여 자세히 볼 수 있다. 지정된 기획특구는 파랑색으로 표시된다.

https://www.cims.cdfifund.gov/preparation/?config=config_nmtc.xml

Foreign Investors Investing in U.S. Real Properties in the Opportunity Zone

Under the new Qualified Opportunity Zone (“QOZ”) tax regime, U.S. taxpayers can defer tax on capital gain on disposition of investment until 2026 if the proceeds from the disposition is invested in the qualified opportunity zone businesses or stocks (“Opportunity Fund”) within 180 days. The deferred capital gain will be taxed at a reduced rate if the investment in the Opportunity Fund is held for a minimum of five years.  Additionally, any appreciation in the Opportunity Fund investment is subject to zero tax if the investment is held for at least 10 years.

Generally, foreigners invest in U.S. real properties are subject to the Foreign Investment in Real Property Tax Act (“FIRPTA”).  The FIRPTA subjects foreign sellers of U.S. real properties or interest to a 10% withholding on the amount of gross proceeds from the disposition, and essentially treats a foreign person’s gain from the sale of a U.S. real properties or interest as effectively connected income (income subject to U.S. taxation).

According to the newly released regulations under IRC section 1400Z-2, the benefits of the Opportunity Zone program are also available to foreign persons participating in the Opportunity Zone Program – foreigners invested in the Opportunity Zone businesses or stocks can also avoid tax on any appreciation in the Opportunity Fund investment by meeting the investment holding period requirement.

U.S. Department of the Treasury provides a map showing designated qualified opportunity zones (“QOZs”).  Certain parts of the greater area of Los Angeles and San Diego have been added to the QOZs, and the program has been receiving increasing attention. To access the map, click the link below.  To view all designated QOZs, click on the “Layers” tab on the menu on the right-hand side of the screen. Select “Opportunity Zone Tract” and unselect “2011-2015 LIC Census Tract,” and zoom in to a specific area on the map. Designated QOZs will appear in blue. (Please note that if other layer options are selected, it will change the colors of the tracts.)

https://www.cims.cdfifund.gov/preparation/?config=config_nmtc.xml

The House Ways and Means Committee approved a tax bill which includes extension of various expiring tax provisions.  Under the bill, many of the provisions set to be expiring at the end of 2019 will be extended until the end of 2020.  Some of significant change being proposed are summarized below:

• Work opportunity tax credit
• Section 954(c)(6) Look-through treatment of transactions between CFCs
• New markets tax credit
• Credit for health insurance costs of eligible individuals
• Exclusion from gross income of discharge of qualified principal residence indebtedness
• Treatment of mortgage insurance premiums as qualified residence interest
• Medical expense deduction for expenses in excess of 7.5% of AGI

Additionally, under the 2017 Tax Reform the life-time gift and estate tax exemption amount has been temporary increased to $10 million until 2025 and set to be returned to $5 million.  However, the extender bill would accelerate by three years that expiration of the temporary increase and the exemption amount would revert back to $5 million after 2022.

The extender bill will need to be agreed and approved by the both Senate and House before legislation could be sent to the president.  We will continually monitor and provide updates on any developments.