NEW YORK, Nov. 23 /PRNewswire/ -- As companies continue to focus on
controlling costs and preserving cash in the continuing difficult economy,
KPMG LLP, the audit, tax and advisory firm, presents some federal tax
considerations for businesses of all sizes that may help conserve or generate
much-needed cash flow.
"As companies confront a very challenging year, their tax positions could be
affected by decisions they make in order to weather the economic situation,"
said Steven Lainoff, principal-in-charge of KPMG LLP's Washington National Tax
practice. "In addition, Washington extended some lifelines this year via new
tax provisions to help companies, and these tax opportunities should certainly
be explored before year-end.
"A review of tax regulations and positions is always advisable for companies
at this time of year," Lainoff added. "It is especially important in the
current economic environment, where every dollar can count."
KPMG recommends that companies should check with their tax advisors to
determine if the following 2009 tax considerations, among others, may apply as
they prepare for the upcoming tax-filing season and as the cash planning
process for the new year begins.
1) EXPLORE OPPORTUNITIES FOR TAX REFUNDS: Depending on a company's anticipated
tax liability for 2009, it may be able to obtain a refund of all or part of
its estimated federal taxes for 2009 prior to filing its 2009 return.
In addition, if a company's deductions exceed its income in 2008 or 2009, the
possibility of
securing a refund of taxes paid in prior years should be explored, as a tax
provision called the net-operating loss carryback may apply. Recently enacted
legislation allows almost all taxpayers to carry a loss from either 2008 or
2009 (but not both) as far back as five years earlier. This can provide a
quick infusion of cash for qualifying companies that had taxable income in
previous years.
2) CHECK THE PERFORMANCE OF THE COMPANY'S INVESTMENT PORTFOLIO: Companies with
stock or security investments that become worthless in 2009 should investigate
the option of claiming a deduction.
The worthless stock (or security) deduction must be claimed in the year in
which the investment becomes wholly worthless; if certain requirements are
satisfied, this may result in an "ordinary" rather than capital loss. Because
an ordinary loss (as contrasted with a capital loss) can offset ordinary
income, it is generally more advantageous for companies in the current
economic environment to have ordinary rather than capital losses.
In addition, companies may also be able to claim wholly- or
partially-worthless deductions on certain debt instruments. Companies may
have to take certain actions before the end of their tax year (for example,
book charge-off for partially worthless debt) in order to potentially claim
such deductions.
3) CONSIDER DEFERRING INCOME FROM A CORPORATE DEBT REPURCHASE: Companies that
may have repurchased, exchanged or modified their own outstanding debt in 2009
(or intend to do so in 2010), should look into the possibility of deferring
any income resulting from the transaction.
This provision from the American Recovery and Reinvestment Act of 2009 allows
qualifying companies to defer recognition for a limited period of time on all
or a portion of their "cancellation-of-indebtedness" (COD) income when they
reacquire an applicable debt instrument.
4) REVIEW IMPACTS OF ECONOMY ON TRANSFER PRICING AND OTHER COMPLIANCE MATTERS:
For example, companies conducting international trade or manufacturing should
consider undertaking a thorough review of transfer pricing and trade and
custom activities before the end of the year. The substantial changes in
economic conditions, business structures, and transfer pricing regulations
have the potential to leave companies exposed to audits by regulators in these
areas and to create challenges for future development. Companies should
review results of intercompany transactions in relation to tax regulations and
consult with their tax and customs advisors regarding potential needs for
adjustments and / or additional documentation.
5) ENSURE COMPLIANCE WITH THE MANY STATE AND LOCAL TAX CHANGES ENACTED IN
RESPONSE TO THE ONGOING ECONOMIC CRISIS: Some of these items include expanded
nexus standards, more comprehensive provisions restricting deductions for
expenses paid to affiliates, rate increases or the adoption of surtaxes, and
limitations placed on the use of certain business credits and net operating
losses. In addition, taxpayers will need to pay careful attention to the
states' reactions to federal stimulus legislation, specifically, whether
states have decoupled from federal law changes such as bonus depreciation and
net-operating loss carryback provisions.
The information contained herein is of a general nature and based on
authorities that are subject to change. Applicability of the information to
specific situations should be determined through consultation with your tax
adviser.
About KPMG LLP
KPMG LLP, the audit, tax and advisory firm (www.us.kpmg.com), is the U.S.
member firm of KPMG International. KPMG International's member firms have
137,000 professionals, including more than 7,600 partners, in 144 countries.
Contact: Ichiro Kawasaki / Robert Nihen
KPMG LLP
201-307-8640 / 201-307-8296
ikawasaki@kpmg.com / rnihen@kpmg.com
SOURCE KPMG LLP
Ichiro Kawasaki, KPMG LLP, +1-201-307-8640, ikawasaki@kpmg.com; Robert Nihen,
KPMG LLP, +1-201-307-8296, rnihen@kpmg.com
