Important Updates for Certain Business Entities in the Silver State
Nevada does not impose a corporate or personal income tax, which has made it an attractive state for many businesses. However, on June 10, 2015 a bill was signed enacting the new Nevada Commerce Tax, which is effective July 1, 2015. The first Commerce Tax Return is due 45 days after the tax year end, or August 15, 2016, for fiscal year July 1, 2015 through June 30, 2016.
The Commerce Tax is an annual gross receipts tax imposed on business entities engaged in business in Nevada that have more than $4,000,0000 of Nevada gross revenue. Business entities subject to the new commerce tax include, but are not limited to:
- Sole proprietorships
- Limited liability companies
- Joint ventures
- Any other person engaged in business
Certain business entities are specifically exempt from the commerce tax, including IRC section 501 (c) non-profit organizations. Business entities not organized or incorporated in Nevada will need to complete a nexus questionnaire to determine if the Commerce Tax applies.
The Commerce Tax is based on gross receipts apportioned to Nevada, less certain exclusions and deductions. There are no deductions for cost of goods sold or other expenses. However, there is a $4,000,000 allowable standard deduction from gross receipts to arrive at Nevada taxable revenue. The Nevada taxable revenue is then multiplied by the applicable tax rate. The tax rate for each business is based on its NAICS code (North American Industry Classification System) and the rates vary from 0.051% to 0.31% depending on the industry.
In addition, the tax is imposed on a separate entity basis. It is important to note that the $4,000,0000 standard deduction can reduce business revenues subject to tax but does not exempt a business from the filing requirement. However, a business entity with Nevada gross receipts of under $4,000,000 during the taxable year can utilize a simplified reporting method.
The complexities involved with this new tax include sourcing of receipts, determining whether a business entity is subject to Commerce Tax, and the administrative aspects associated with the fiscal year and due date.
Various Tax Credits Available to Industries
Author: Jeff Zawada, CPA
Most of the energy used in the United States comes from Fossil Fuels; petroleum, coal, and natural gas, with crude oil products currently used as the dominant source of energy.
According to the EIA (the United States Energy Information Administration) and OPEC, market fundamentals and expectations strengthened in January 2013; forecasting growth from 110,000 bpd to 1.05 million bpd over the course of the next 22 years. While only a 12% growth rate, compared to the 26% growth from 2004-2012, EIA projections are conservative and likely to increase.
What credits are available?
The IRS has specified tax credits for the oil and gas industry; at the state level legislation varies. “Fracking” — more formally known as high volume hydraulic fracturing — involves injecting large amounts of sand, water and chemicals deep underground at high pressures to extract natural gas from rock formations. The drilling is concentrated in the Marcellus Shale formation, a deep repository that runs through West Virginia, Ohio, Pennsylvania and New York. Natural gas drilling, while maintaining certain growth expectations, is still hitting barriers in New York State.
Permit applications for conventional vertical gas well, which are still allowed in NYS, have dropped from roughly 600 in 2008 to below 200 in 2012.
Site specific special assessment reviews have to be done on an individual basis.
Currently Governor Cuomo is expected to announce a formal decision after the Geisinger Health System study, launched in Pennsylvania by Degenstein Foundation, is finished.
State by State Analysis: Quick snapshot
Pennsylvania has created over 140,000 jobs in the last few years in the drilling industry. With the launch of the Geisinger Health study, PA will provide deeper insight into drilling impact and incentives across the board.
Ohio’s Knox and Stark Counties saw the most drilling activity since 2010, at 43 wells drilled. In total Ohio currently has 11 counties reporting drilling. The state of Ohio also maintains a cost recovery assessment, as per law 1509.50. All money collected, pursuant to section C of this law, shall be deposited in Ohio state treasury to the credit of the oil and gas well fund.
In New York State, the NYS Energy Research and Development Authority (NYSERDA) has recently provided incentives for alternative fuel trucks. Credits such as: vouchers of up to $40,000 for the purchase of compressed natural gas, hybrid electric and all-electric Class 3 through 8 trucks operating in New York City, and vouchers that cover up to 80% of the cost of purchasing and installing emission reduction equipment for medium- and heavy-duty diesel vehicles operating primarily in New York City; requests for pre-qualification are now being accepted- currently there is a wait list. E85, compressed natural gas, and hydrogen fuel that is used exclusively to operate a motor vehicle engine is exempt from state sales and use taxes. Additionally, NY cities and counties may reduce the sales and use tax imposed on 20% biodiesel blends (B20) to 80% of the diesel fuel tax rate. The exemption and rate reduction are in effect until September 1, 2014 (Reference from: New York Tax Law 1111 and 1115).
What credits are available to your business? Have you maximized your IDC planning? Learn more HERE.
Freed Maxick understands the growing complexity and nature of the oil and gas industry. We can navigate industry tax filing requirements, locate tax credits, and help with financial statement audits, reviews and compilations. Still have questions? Contact us to connect with our experts, or call us at 716-847-2651.