Laying Odds on Obama's Tax Proposals
2010-02-13

We recently came across this article on Forbes.com.  President Obama has floated many ideas out over the last few months, and now his 2011 budget proposal has been released.  Dean Zerbe, former senior tax counsel to Sen. Charles Grassley, cuts through the media hype to give his perspective on the chances of these proposals seeing the light of day.  The likely survivors: Estate tax resurrection, jobs credits, AMT relief, tax hikes.  Barely breathing: Limits on Family Limited Partnerships, Cap and Trade.

 Click here for the full text of the article.

Take Credit Where Credit is Due
2010-01-27

If you have less than 20 employees, and have hired new full-time employees after January 1, 2009, you may qualify for a $3000 tax credit from the state of California. But you need to act fast - there is a limit of $400 million on the funds to be paid by the state, and credit dollars will be doled out on a first come, first-served basis.

 As you would expect from a “gift” from the government, the credit has a number of requirements including a net increase over the number of full-time employees from the prior year. Please contact us for help in determining your eligibility or visit the Franchise Tax Board website for full details. 

First-Time Homebuyer Tax Credit Extended and Expanded
2009-11-06

On Nov. 6, the President signed the “Worker, Homeownership, and Business Assistance Act of 2009”, which extends and generally liberalizes the first time homebuyer tax credit (FTHTC).  Here are the highlights of the changes to the credit:

The purchase of the personal residence of the first-time homebuyer must be completed by April 30, 2010 (formerly November 30, 2009).  The credit also applies to purchases before June 30, 2010 if a written binding contract was in effect on or before April 30, 2010.

• The credit phases out for individual taxpayers with modified adjusted gross income (AGI) between $125,000 and $145,000 ($225,000 and $245,000 for joint filers) for the year of purchase.
• The credit is expanded to include taxpayers who have maintained the same principal residence for any 5-consecutive year period during the 8-year period ending on the date of the purchase of a subsequent principal residence purchase after the enactment date. The maximum allowable credit for such taxpayers is $6,500 ($3,250 for a married individual filing separately).
• A taxpayer may elect to treat a qualifying home purchase after 2008 as made on December 31 of the calendar year preceding the purchase for purposes of claiming the credit on the prior year's tax return.
• In order to claim the credit, the taxpayer must attach to the tax return a properly executed copy of the settlement statement used to complete the purchase.

There are other rules affecting sales of homes between related parties and purchases by members of the Armed Forces.  Please contact us if you have any questions.

Lender Survey shows Higher Costs, Tighter Standards
2009-11-05

How has the economic downturn affected the cost of capital in private markets?  Based on a recent survey of more than 50,000 lenders, investment banker Rob Slee, in conjunction with Pepperdine University, uncovered these findings, as published in the July 10, 2009 edition of the Charlotte Business Journal:

• Banks.  Instead of lending 5 or 6 times EBITDA during peak times, banks are funding only 2.5 times EBITDA, and are quickly moving to lending based on asset (not cash-flow) values. They are still a cheap source of private capital, averaging 6% to 8% for loans of $1 million to $5 million.
• Asset-based lenders. Expected returns from Tier I loans (> $10 million) range from 8% to 10%; for Tier II ($2 million to $10 million) the range is 10% to 15%; and for Tier III (> $2 million) the expected return is well above 18%.  Asset-based lenders require few loan covenants and offer limited personal guarantees.
• Mezzanine lenders. Because this debt is subordinated, often lacking personal guaranties (but with equity participation through warrants), these lenders demand higher rates—12% to 13%—for loans of $2 million to $10 million, a couple of points higher than a year ago. If you qualify for mezzanine financing, you can have total debt of about 3.5 times EBITDA.
• Private equity. This lending is at an all-time low; PE groups want to see a 25% return on future funding, but expect only 10% on current investments.
• Venture capital. VCs still expect to earn 40% to 45% on their minority positions, with higher returns for early-stage investments.

Read the Latest Blog Post from Marty Fox
2009-11-04

Believe it or not, find out what Washington D.C. can teach you about customer service?