| Organization: A $100M European-owned manufacturing company. | Need: Strategies to reduce a higher tax liability due to significant growth. | Outcome: $1.5M in funding and $3.1 million in accelerated tax deductions. |
Understanding the situation
The COVID-19 pandemic was challenging for many businesses, including this $100 million European-owned manufacturing company. Though it had a factory in the Midwest, company officials didn’t know if they qualified for government funding or tax credits.
After learning about Paycheck Protection Program funding and Employee Retention Credits from a CLA webinar, company officials reached out for assistance. CLA discovered the company qualified for a combined $1.5 million in benefits.
Impressed by CLA’s knowledge and results, the company decided to switch all its tax work to the firm. The manufacturer was undergoing significant growth, and in turn, a higher tax liability. Officials were very interested in exploring strategies to save money.
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Exploring the challenge
Analyzing the company’s financial records, CLA uncovered several opportunities to use proactive tax strategies to reduce taxable income:
- CLA undertook two different accounting method studies. Many companies overlook the power of evaluating their accounting methods regularly. Business needs often change over time or are affected by the economic climate. Due to this, evaluating methods regularly can often assist with unlocking tax savings. For this manufacturer, changing methods allowed for $1 million in new tax deductions.
- A cost segregation study allows taxpayers to possibly reduce their taxes and increase cash flow by accelerating the depreciation on certain building components. CLA’s study found the company could accelerate $500,000 of additional depreciation deductions by examining a building and its four additions.
- CLA also evaluated the company’s prepaids and found it was eligible to use the 12-month rule to accelerate the deduction of certain prepaid expenses to the year of payment. This resulted in $1.6 million in accelerated deductions.
Achieving results
Between the pandemic funding and the new tax strategies, CLA helped the manufacturer save $1.5 million and generate $3.1 million in accelerated deductions. CLA continues to work with the company on additional tax strategies and credits to unlock more savings.
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