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AZ Corporate Scholarship Tax Credit Program Changed

Governor Ducey recently signed into law HB 2153 which now allows S-corporations to participate in the State of Arizona Low Income Corporate Tax Credit which supports private schools in Arizona. This corporate tax credit program provides scholarships for thousands of children each year to attend the schools chosen by their parents to best meet their needs.  In the past this corporate program was only available to businesses that are structured as C-corporations, which are typically larger businesses that incur a state income tax liability at the entity level.  HB 2153 now allows businesses, particularly small businesses, structured as S-corporations to participate in Corporate Tax Credit.
 
Under the current program, C-corporations make a donation and receive a tax credit against their Arizona corporate income tax liability. HB 2153 allows the typically smaller S-corporations to make a donation and receive a tax credit that is then passed through to the stockholders of the company in the same way that profits and losses are passed through.
 
Some of the requirements for this program are:

  1. The minimum contribution amount is $5,000 with no maximum.
  2. There is an annual cap of the total corporate funds that can be received by a School Tuition Organization (STO) during the government fiscal year.  $51.6 million for 2015.
  3. Submissions for the program can be made on or after July 1, 2015 until the cap has been met.
  4. The corporation should submit a request to an STO, who in turn has would receive pre-certification from the State of Arizona.
  5. Once the pre-certification has been given to the STO, the corporation has 20 days to make their payment/contribution to the STO.

 
The Arizona Department of Revenue is currently putting together an implementation plan for the bill, therefore their website has not yet been updated to reflect the changes.  We will keep informed of the implementation and are happy to answer any questions you may have.

Doing Business Outside of Arizona

Are you one of many businesses that are selling items or services outside of Arizona?  If so, it is likely you may be required to register in that state to collect and remit sales tax.  Even though your business may not have a physical location outside AZ, in some cases, the business may need to have a license to sell items and/or services and collect and remit sales tax to that state. Businesses selling items occasionally outside of AZ may need register to do business plus collect and remit sales tax.  For instance, businesses that travel outside AZ once a year to sell items at an annual fair or trade show may fall into this requirement.  Unfortunately, every state has its own rules about which businesses are subject to licensing, under what circumstances they are taxable, and what items and services are considered taxable.  While there is legislation in the works that could make the taxation process more uniform across state lines, for now, decisions are made solely on a state by state basis.  As a business owner, if you are faced with this situation, you can find out more information about filing requirements and business licenses through the department of revenue for each state.  There are also options available to assist you with making sure you stay up-to-date with the filing requirements.  Feel free to contact our office for more information.
 

Have you Voted?

Please help us continue our ranking by voting for our firm in the Ranking Arizona poll.  It takes just a few minutes to vote!  The voting process has changed and you can now vote every hour, so please pass this along to your friends, family, and colleagues.
 
To cast your vote:
  1. Click on the Ranking Arizona image above
  2. Click Register/Login and input your email address and password
  3. Click Finance and Professional as the main category on the left side of the page.
  4. Select Accounting Firms as the sub category.
  5. Scroll to Pescatore Cooper, PC and click VOTE.
Thanks in advance for your vote and continued
Bartering Income - The Value of Property or Services
 
Bartering is the trading of one product or service for another. Often there is no exchange of cash. Some businesses barter to get products or services they need. For example, a gardener might trade landscape work with a plumber for plumbing work.  If you barter, you should know that the value of products or services from bartering is taxable income. This is true even if you are not in business.

Here are a few facts about bartering:
  • Bartering income.  Both parties must report the fair market value of the product or service they get as income on their tax return.
  • Barter exchanges.  A barter exchange is an organized marketplace where members barter products or services. Some operate out of an office and others over the Internet. All barter exchanges are required to issue Form 1099-B, Proceeds from Broker and Barter Exchange Transactions. Exchanges must give a copy of the form to its members who barter each year. They must also file a copy with the IRS.
  • Trade Dollars.  Exchanges trade barter or trade dollars as their unit of exchange in most cases. Barter and trade dollars are the same as U.S. currency for tax purposes.  If you earn trade and barter dollars, you must report the amount you earn on your tax return.
  • Tax implications.  Bartering is taxable in the year it occurs. The tax rules may vary based on the type of bartering that takes place. Barterers may owe income taxes, self-employment taxes, employment taxes or excise taxes on their bartering income.
  • Reporting rules.  How you report bartering on a tax return varies. If you are in a trade or business, you normally report the bartering income on the tax return that your business normally files.
If you feel that you may have bartering income, please contact our office to ensure it is captured correctly for tax purposes.
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