The Potts Report

Good News, Bad News

Follow this link to read an interesting and informative opinion piece published yesterday’s Wall Street Journal: The Economy Has Hit Bottom

The City Wire

Although The City Wire is read by many people in the greater Fort Smith region, I find there are still those who haven’t yet learned this most excellent online “newspaper” exists. That’s a shame. Therefore do yourself a favor and click this link. But before you do let me point out one thing I think readers of The Potts Report will be interested. Every two weeks I write an article about a topic concerning small business issues or income taxes in The City Wire’s Guest Commentary section. Today’s article, Cash is King, will give you tips on how to increase your business’ cash flow. After you have read my commentary take time to explore the rest of The City Wire. It has become the prime source for business news in the greater Fort Smith region. And it has much more content than business news. It’s worth your time. Check it out.

If you would like to read my past articles published in The City Wire, find the search box in the upper left corner of The City Wire’s home page and type “Potts commentary”. This search will return a list of links to my past commentary articles in The City Wire.

Nonbusiness Energy Property Tax Credit

The American Recovery and Reinvestment Act of 2009 reinstated and amended the non-business energy property tax credit. The credit is for people who spend money on their principal residence for new improvements or certain new equipment that increase the energy efficiency of their home. The credit equals 30% of the amount spent on qualified improvements in 2009 and 2010, but the credit cannot exceed $1,500 over both years.

What type of expenditures qualify?  Expenditures for insulation materials, exterior windows, exterior doors, asphalt or metal roofs, natural gas furnaces, propane furnaces, oil furnaces, natural gas hot water boilers, propane hot water boilers, oil hot water boilers, advance main air circulating fans, central air conditioners, electric heat pumps, and stoves  that burn biomass fuels qualify IF they meet certain specifications. How do you know if they meet specifications? You can consult the Internal Revenue Code and the 2000 International Energy Conservation Code or you can ask the person selling you the equipment or materials. The manufacturers will have told the distributors whether or not their product qualifies for the credit. But therein lies a problem.

Your salesman can tell you whether the equipment or materials will qualify for the credit based on energy efficiency, but that doesn’t guarantee you can take the full amount of the credit on your tax return. Why? You may not have $1,500 worth of tax liability for the credit to offset. The non-business energy property tax credit is not a “refundable credit”. I.e., you must have a tax liability to benefit.

The bottom line: Many people will make a decision to buy a more energy efficient central air conditioning unit if they believe they will get $1,500 back on their income taxes at the end of the year. For money people, this $1,500 might not materialize. It depends on your particular tax situation. Ask your CPA.

Change is Coming. Get Ready!

2009 is just past its midpoint. The long 4th of July weekend allowed me the time to consider the course of action Potts & Company should take over the next six months. Then that sleight feeling of anxiety arrived. The magnitude and impact of the changes our government are attempting to pass into law this year creates a level of uncertainty that hasn’t existed in my lifetime. Well, that last statement isn’t totally true. The government is certain to cause change, change that affects small businesses and their owners. Will the impact of this change be good or bad? I don’t know. (I do believe the government is certain to raise taxes in the near future on everybody and not just the rich).

The government is spending and committing to future spending in the trillions of dollars. The speed at which they are trying to pass new laws is worrisome. Economic stimulus packages, health care reform, educational reform, and environmental regulations are being pushed so fast that I doubt that anybody except lobbyist really now the details. Nobody can reliably predict the impact of of these changes on your finances or your company’s economic future. Inflation? Higher interest rates? Who knows. But change is coming. Get ready.

If you own a business, you have more demands on your time than most people.When was the last time you hid from everybody just to think about your business. Do you have a plan to manage the impact of health care reform on your business? What is the government implements an eight percent payroll tax on wages to finance health care? What impact will new “green” laws and regulation have on the cost of energy?

Creating plan “A” may not be enough. You may need a plan “B” and “C” too. Do yourself a favor. Find a quiet place and take time to think.