Dave Cain: Welcome to unsuitable on Rea Radio, the award winning financial services and business advisory podcast that challenges your old school business practices and their traditional business suit culture. Our guests are industry professionals and experts who will challenge you to think beyond the suit and tie while offering you meaningful, modern solutions to help enhance your company’s growth. I’m your host, Dave Cain.
We are now officially into the 2017 tax season, which means there are a lot of people out there asking and looking for ideas to save a few tax dollars to increase their disposable income. Today on unsuitable we are joined by state and local tax expert, Chad Bice, a principal in our Zanesville office. Actually, Chad is the regional managing partner for the Zanesville/Cambridge/Marietta Office. That’s a lot of responsibility there, big boy.
Chad Bice: You forgot Mount Vernon, Dave.
Dave: And Mount Vernon. Wow. You must be important. Chad will be sharing the current tax credit and incentive information with us that you may need help with over the next several months. Welcome to Unsuitable, Chad.
Chad: Well, thank you, Dave. I’ve waited a long time for this. I thought I was going to escape your wrath, but I’ve always wanted to do this. My first time on camera, my first podcast. I first want to take a step back and thank God for allowing me to be here. I want to thank my family for all they’ve done for me and all the support. I want to thank my teammates for allowing me to be here, and I want to thank you, Dave. I’ve seen the athletes do that on TV. This is my first chance to be on camera.
Dave: You get to do it.
Chad: I just wanted to get all the shout outs out there.
Dave: Good. Thank you.
Chad: Also, today’s my daughter’s 13th birthday. Shout out to Ava for her 13th birthday. We’re going to have a nice dinner tonight. I guess I’ll turn it back over to you now.
Dave: You’ve got a lot of information to share. Before we get into the topic I want to talk about your high school yearbook.
Chad: Sure.
Dave: Obviously you were a graduate of Tri-Valley High School in Dresden. Occasionally you got to take out those high school yearbooks, but if we had that high school year book here today, and I pulled that out, and we read some of the items that people wrote about you, what would I see? Would I see stuff that said most likely to succeed, very popular student athlete, or a lot of maybe your female friends that wanted to be best friends forever, which I guess was kind of code for let’s hook up later in life? What would I see?
Chad: Well, I’ll tell you what, I don’t know if this was a Southeast Ohio hilljack thing or not, but I think you would see, “Stay the way you are, and you’ll go far.” Do you remember that saying in your yearbook, or do they just say that to me?
Dave: No. Probably just to you. Now, did your wife sign your high school yearbook?
Chad: She would not have signed it. She was two years older than me, and I didn’t meet her until after high school, but we did go to the same high school though.
Dave: Hey. Here’s something to do for our listeners. We’re a full service podcast. This weekend pull out those old yearbooks and have a laugh. There’s a lot of interesting information in those yearbooks. Thanks for sharing that information. Chad, in a lot of the professional literature, regarding your bio, I see the term SALT, which I imagine stands for state and local taxation.
Chad: You’re correct, sate and local taxation, Dave. The word you’ll hear the most in state and local taxation is, “It depends.” Your fellow colleagues will come and ask you state and local tax questions. Your clients will ask you questions. The first thing I will say, “It depends.” It depends on the facts. It depends on the state. It depends on the local jurisdiction. You could say SALT stands for it depends.
Dave: Well, good. That’s a pretty common answer whenever you’re doing some tax planning. It depends on a lot of different factors, but today we specifically want to dive into credits and incentives. I think a lot of our listeners would agree that when you start talking about credits and incentives that’s usually a term reserved for very large companies, companies on the move, but that’s not necessarily the case after talking to you.
Chad: Sure. Yup. You nailed it, Dave. What allows the smaller companies to benefit from state and local taxation is many state and local governments look at an expansion in people, and in fixed assets, and in training over a three year period. If you can hit certain hurdles over a three year period, you can often receive those benefits, as little as $500,000 in growth in pay roll a year in some states, as little as five employees. Again, it depends. It depends what state. It depends what county. It depends what local jurisdiction, but it’s not just for the monster mega corporations that we hear about on TV.
Dave: If I have a company with 5 employees, 10 employees, 20 employees, there may be some credits and incentives for my business?
Chad: Yes. Absolutely. Before we get too far down the path we need to break this out into statutory credits versus negotiated incentives. Statutory credits you can think of as taken on your tax return. If you invest in machinery and equipment, furniture and fixtures, if you invest in hiring people, R&D and the like, those types of credits can often be secured after the facts, and they’re governed by statute. You take those on your tax return, versus negotiated incentives, your grants, training grants, hiring grants, jobs credits, real estate abatements, tax increment financing, those are not statutory credits. Those are negotiated often, and we can talk about the negotiation process and how to maximize that benefit later, but I kind of wanted to break those two things out for you.
Dave: Two separate discussions.
Chad: Yes. Absolutely.
Dave: You mentioned growth. If a company is looking to add machinery, add employees, add a product line, I guess those are key buzz words, if you will. Sometimes I might not know. Maybe the next 12 months that’s not going to happen. How far out should I look when I’m trying to plan some credits and incentives.
Chad: What we try to do annually is get a three year picture from the client, a three year picture of payroll increases, head count increases, a three year projection on fixed asset spend, three year projection on training spend. That will then help us identify the opportunity two, three years in advance and often combine that three year period into one project.
Dave: The key in that discussion, my takeaway, is there has to be some thought up front. You cannot wait until the last minute, the 11th hour, because a lot of these credits and incentives are gone, or are not available, or not enough time.
Chad: Yup. You nailed it. You can never start too early, but you can start too late. The shovel hits the ground. We’re talking about negotiating credits and incentives now. The shovel hits the dirt. The machinery is ordered. You’ve hired the employee. It’s too late. We have to get out in front of the curve and start the negotiation process sooner rather than later. Obviously no one’s going to offer you a credit or some type of incentive if you’ve already committed to making that investment.
Dave: Good. I want to take just a short break from the credits and incentives and maybe do a little recruiting. I know you, as in charge of a very large region and also have passion for the state and local taxation, my understanding is that Ray and Associates is looking for talent in the state and local taxation. Can you talk about some positions that are available?
Chad: Yup. Absolutely. I’m glad you’ve given me that opportunity, Dave. We’re having a hard time finding what we’re looking for in the state and local realm in terms of talent. We’re looking for two three to six year people, technical talent, famous people, to come to us that are currently in public accounting preferably or have recently been there that are looking to move their talents over to Ray and help us grow our state and local practice and add some value to our clients.
Dave: Good. If there’s a listener out there that has some interest in pursuing, would they simply jump on our website at Ray CPA and look for you, and that gets the ball rolling?
Chad: Yup. You can go onto our website, look me up, Chad Bice. Click on the email. Send me an email. You can also contact our HR Department, and they’d be more than happy to help you.
Dave: You know, at the close of the 2016 golf season what was your handicap? What did you end up with?
Chad: Well, I went from around 11.1 index, I ended up about 13.7. I got my handicap back up where I can finally compete with you. And I don’t have to give you so many strokes.
Dave: You’re doing a little handicap management. Now, as a CPA working in many different industries with these credits and incentives, are these credits and incentives just for manufacturers, or will they go into other various industries?
Chad: Great. There are some targeted industries. This country seems to like manufacturing, so certainly there’s manufacturing industry specific credits and incentives. We also like to incentivize high tech companies, so there’s industry specific high tech credits and incentives. In general, outside of that, if you can produce head count growth, new payroll, new tax dollars to the state, new investment in fixed assets, and train your employees, there’s something there for everyone. I don’t think there’s any industry that I can think of that’s excluded.
Dave: A lot of it is tied to job creation and investment. Earlier you mentioned the term grant. I want to make sure I understand that. A grant is a grant is a grant. It’s not a loan.
Chad: Nope. It’s pure cash. You’re going to do some training in a particular state, hire some employees and do some training. Often the state will have you outline what training programs that you’re going to institute, provide some high level information about the training programs, and then at the end of doing the training you who these folks, the state and local governments, the money you spent on training, and they will reimburse you, give you a grant for those training dollars spent.
Dave: You know, one of the things that I know you and I have talked off record is that Ray and Associates is 12 offices throughout the state of Ohio, and one of the things that we work really hard on, or the firm works really hard on is to get the CPAs in our various communities to get to know the economic development directors, not only in the state, but also in the city and the county.
Chad: Yup. You bring up a good point. Not only are there relationships, but when you do negotiated credits and incentives it often involves three parties, maybe even four. It could involve the city tax relationship. It could involve the county. It could involve the township. It could involve the state development authority. Those four parties actually work with Ray and with our clients as a team of four to provide the negotiated incentive package to the business.
Dave: A lot of times these credits and incentives, we think about a company moving from one state to the next, but also there’s credit and incentives, I would think, for a company who maybe moves from one city to another, one county to another, or decides they want to build a plant in an adjacent county.
Chad: Sure. You mentioned those moves, which often trigger opportunities for credits and negotiated incentives, but you left out one. What about a company that’s wanting to expand at their existing location? Often the development authority will entice that business to expand locally rather than relocate. Just because you’re not not moving doesn’t mean there’s not an opportunity. Expansions of existing locations could create opportunities as well.
Dave: You’ve take this discussion maybe a whole different direction. Credits and incentives really has to be tied into a company’s strategic plan.
Chad: Yup. Absolutely. Part of the strategic plan, planned well in advance. Some companies grow on accident. The most successful ones grow strategically, and part of that strategic plan would be working on a return on investment. That’s a term we haven’t used here, but through credits and incentives, return on investment, whether it be a head count, training, or fixed assets, that return on investment is often blown out of the water by doing this appropriately and planning for it strategically.
Dave: If I’m a business owner and you were advising me as we were talking, where do we start? Is it you start talking about job creation, or is it equipment financing? It there one that raises about the other when we start talking about credits and incentives?
Chad: Normally jobs are king. That’s for sure. Sometimes you will hire people and you really won’t even make that much investment from a fixed asset perspective and there’s still some tremendous opportunity. The federal government and the state right now, they want hiring. Of course they want some infrastructure spend, and they want equipment spend, and that, but the most important thing to them is often head count increases.
Dave: Head count and all the associated payroll taxes, etc?
Chad: Yup. Exactly why they want that. Yes.
Dave: Maybe this is an unfair question, but where does Ohio stand in relation to other states as far as credit and incentive packages?
Chad: Sure. You know, Ohio has in their bag of tricks very similar to the other things. Two things, and I’m going to go off base here just a little bit, but if you look at Ohio’s ranking in terms of the overall tax burden on business, it doesn’t always rank so well. There are other states that are often more favorable. Likewise, even though I may think Ohio has a lot to offer, real estate tax abatement, the jobs credit, some local utility rate reductions, enterprise zone abatement on real estate, we often find that some of our surrounding states, such as Kentucky, is a little more favorable when it comes to expanding and has a little bit more to offer. I can be honest with you. I don’t know where we stack up nationally, but I don’t think it’s in your top 10, 20% to be honest with you.
Dave: One of the things that I had heard recently at a tax conference here in the state of Ohio is the state had a tax training or a tax voucher training grant, and apparently this last round that money went in less than 20 seconds. It was all online, and as soon as they opened up that money was gone. Now, that tells me the big boys, the big players are in line, ready to push the button and push the little guys out of the way. Is that a true statement. Is that a fair statement?
Chad: I think it’s fair that the more complex businesses that have internal accounting departments, have internal tax directors, have sophisticated CPA firms working for them, they know that that incentive, in this case the incumbent workforce training voucher program, they knew it was coming. They had their ducks in a row. One reason why they had their ducks in a row is they have within their internal HR department they have folks that focus full time on training. They have all the data readily available, who they’re going to train, when, what training programs they’re going to offer. They have that all tracked. They’re able to provide it to their CPA firm quickly, and that CPA firm organizes it and gets ready to press the button immediately on the online application in this case. It’s the sophistication of the company and the ability to grab data quickly, I think, that allowed them to react quickly.
Dave: In that case it’s obvious the bigger players had an advantage because of their sophisticated system, over maybe the smaller employers, but that should not certainly discourage the smaller employers to not go for these grants and incentives. They just have to be a little well positioned, and more strategic, forward looking than maybe ever before.
Chad: You know, you make a good point there, and I’d like to take that one step further. Do the multi-billion dollar companies really need these training grants to survive, for example? Maybe the state of Ohio could think about designing credits and incentives programs to suit the smaller companies that actually need these credits and incentives to survive. I just throw that out there. I don’t know if the state’s ever thought about that, but wouldn’t it be wonderful if they disqualified a few of those larger companies and let the smaller companies who really need this money to get that?
Dave: Excellent point. Our guest today has been Chad Bice, regional managing partner for Ray and Associates, covering I would say Southeastern Ohio, a huge area, and again, if our folks out there, our listening folks, need any information about state and local taxation, very, very complicated, going to the forefront even more so than federal taxation, give Chad a call. Reach out to him through our website. If anyone also has any interest in the state and local tax position for the firm, also I would encourage them to reach out to you. Thank you for your time today. You just certainly scratched the surface.
Before we close up, I do have just a quick question for you? You had indicated earlier that you were 13.7 I believe index. You’re a fantastic golfer. You go through a lot of ethics training. Your course management in fantastic. I’ve seen you step away from a ball that might be moving or ask your playing partner for information on a lie, so very ethical on the golf course, on and off the golf course. I do have to ask you a personal golf question, since golf is upon on. This may test your ethics a bit.
Most courses, in fact, every course that you go on, there’s a little sign, whether it’s posted on the course by hole number one of on the score card. It says that you’re not permitted to bring personal cooler or have any alcohol on board. You must purchase that from the clubhouse. Now, do you carry a flask in your golf bag in case you get the yips or a three putt?
Chad: Well, I have to be honest, Dave. Out at Zanesville Country Club the beverage cart runs from let’s say April 1st through October 31st. When they stop running the drink cart on October 31st, I have to be honest, I carry some snake bit medicine with me, just in case when I’m over in the weeds trying to search for my ball, just in case I get bit and need to …
Dave: Or bee sting.
Chad: Yeah. A little bee sting, need to slit it open and pour some potion down in there.
Dave: There you go. I dope you found today’s topic to be valuable. As usually, for more helpful insight, check out Rea’s website reacpa.com. For more great tips and tricks to help you win tax season and put a little more money into your pocket. If this is your fist time listening to unsuitable on Rea Radio, please subscribe to the podcast on iTunes and SoundCloud.
Until next time, I’m Dave Cain, encouraging you to loosen up your tie and think outside the box, and don’t forget to check out that high school yearbook this weekend.