Business Owners Should Understand the Importance of: The Empowerment Zone, Renewal Community and Enterprise Community Enhancement Act of 2009

In essence this is a bill that would amend the Internal Revenue Code of 1986, to extend and expand the benefits for businesses operating in Empowerment Zones, Enterprise or Renewal Communities.

This particular bill has been proposed in each of the last two sessions of Congress, but never got voted upon. Sessions of Congress last two years, and at the end of each session all proposed bills and resolutions that did not pass are cleared from the books. Members often reintroduce bills that did not come up for debate under a new number in the next session. In the 110th Congress, this bill was known as HR 2578 and in the 109th Congress, HR 5660. Now, in the 111th Congress, HR 1677 has been referred to the House Committee for Ways and Means and that is where it currently awaits further action.

This bill will allow for the extension of tax credits for those who create jobs and that’s a good thing for our prospective and existing clients and franchisees. In the broader sense, anyone in business should keep a close watch on what goes on at the Capitol. How better to protect and preserve one’s ability to stay in business? That's one of the reasons why I love the IFA so much. The mission of IFA’s Government Relations Department is exactly that; to preserve and enhance the legislative and regulatory climate for the growth of franchising. They do so by providing services and representation to IFA members nationwide, by monitoring legislative and regulatory activity, conducting lobbying and grassroots campaigns, participating in national and local coalitions, creating forums and educational tools for experts in the franchising community, and promoting positive relations between franchisors, franchisees, and elected and appointed government officials and employees. Most business owners don't have the resources required to manage these vital activities without belonging to an organization like IFA.

As for RetroTax, passage of HR 1677 will be good news for existing and future RetroTax clients and franchisees. In essence it would extend the scope and benefit of these Federal wage-based tax credit programs through December 31, 2015.

Also, bills such as this one, are signs that tax credits will continue to evolve in the years to come. Just as the Hearltand Disaster Relief Credit was legislated in 2008, extending benefits to the mid-western states for flood relief and the GO Zone credits (Gulf Opportunity) were legislated following Katrina, look for future legislation to include Work Opportunity Tax Credits for jobs created during during recession, helping to reduce and reverse dependency on unemployment insurance. Green credits too, continue to evolve as conservation and global warming continue to weave their way into the fabric of our lives.

Be sure to return to my blog often, to monitor the public’s opinion of HR 1677, in the tool bar to your right. More importantly, contact your Members of Congress and tell them that you are counting on their support of HR 1677.

Administration of Tax Credits Takes Time; How RetroTax Makes It Easier

When I am asked, “how much time and energy goes into administering a tax credit?” I return that question with this one: “How much time goes into closing a mortgage loan?” Of course, in either case, the answer depends on who is doing the work. Even for those that sell a house on their own, minus the help of a professional realtor, who knows of anyone that actually gets a mortgage loan closed the same way? Answer… NONE! The reason is that even if you do navigate your way through the real estate process and transaction alone, virtually NOBODY closes the loan by themselves, without the help of professionals. Same can be said for the process of administering tax credits and incentives. It is onerous. The good news though, is that when you retain us to do the heavy lifting, WE do the work, and YOU get the credit.

The timeline from when we are retained, until the time when credits are redeemed, depends on whether we are administering demographic or geographic credits. The process and client involvement is a bit different too, depending upon which types of credits we are administering.

Today’s economic climate has definitely created something of a “stimulus” for us as a business model. What we do makes sense in ANY economy, but it becomes far more compelling in times like these. With so many business owners struggling to make ends meet and wrestling with issues like tightening credit to keep their boats afloat, payroll can become something of a challenge. In reality, sometimes the credits that we administer, can make the difference between keeping, vs. laying off personnel.

As our business continues to grow, perhaps RetroTax itself is providing a stimulus for the economy. From my vantage point it’s really impossible though to know how the money that we save a company is allocated. Is it saved, or is it spent? I just don’t know. What I DO know is that because of us, many business owners at least have the option of deciding that for themselves, as opposed to scrambling to make ends meet. They have the choice. They have options… and options, like credits are GOOD things!

Two Weeks Until Tax Day – For Many Businesses Though, It’s Still Not Too Late to Benefit From Tax Credits

While the media is certainly hot on the topic of taxes as we approach April 15th, the topic of “tax credits” is one that our clients talk with us about all year long. In fact, our rush began around January 1 and ran through the deadline for the first quarterly filing date for corporations, which was March 15.

When it comes to business vs. individual tax returns, the biggest myth of all, is that April 15 is tax day. While true for individuals, corporations are on quarterly cycles, with March 15 ending the busiest time of all, for those in the corporate tax world. Many companies have other quarterly filing dates, but March 15 is the grand dad of them all. Can you claim tax credits year round? Certainly, if you are eligible for geographic, wage based credits. (FEZ/RC) But, that said, retroactivity only extends three years from the open tax year. So, once 2008 returns are filed, we would only be able to look back as far as 2006 for any credits that might have been available in those tax years. If the 2008 return has yet to be filed, we could go back as far as 2005, retroactively.

A year from now, tax credits will change, but it’s still too soon to tell what impact the stimulus package will have on jobs creation. If however, those shovel-ready jobs begin gaining traction, there will be many opportunities to generate credits, as a result of the jobs that will be created. More immediately though, there are two new categories for demographic credits (WOTC) that were born out of the stimulus bill and these WILL make a big difference. These categories are: unemployed veterans and disconnected youth. In general, an employer can earn from $2,400-$9,000 in tax credits for hiring a qualified unemployed veteran or disconnected youth who begins work for the employer during 2009 or 2010.

An unemployed veteran is any veteran who is certified as having been discharged from active duty at any time during the 5-year period ending on the hiring date; and being in receipt of unemployment compensation for not less than 4 weeks during the 1-year period ending on the hiring date.

A disconnected youth is any individual who is certified as 16 – 24 years old, not regularly attending any secondary, technical, or post-secondary school during the 6-month period preceding the hiring.

The bottom line is many businesses have tax credits available, but never claim them. That is why our business is so attractive to both potential clients and franchisees as well. Our tax credit administration process is second to none. While we cannot predict future tax credit trends, we definitely know how to maximize their potential, once we identify them and let our clients know that they are available.

Recession Friendly Concept Continues Growth, Signs Franchisee No. 4

With incredible pride and pleasure, I announce that yet another long-time friend of the company and/or its principals has joined the RetroTax family. Please join me in welcoming John Hess, who has signed on as our fourth franchisee and the first in Chicago Land. (BREAKING NEWS… yet another Chicago announcement coming soon) John has been on the RetroTax “fast track” for quite some time, as he has had a relationship with our affiliated company for a great many years and , more recently, became an independent contractor for RetroTax, before we began offering franchises. Now, John has decided to jump in with both feet and become a fully dedicated franchisee.

John is a graduate of the University of Wisconsin-Madison with a degree in Economics. Prior to his involvement with RetroTax, he was President of CC Development Strategies, Inc. (CCDS) a consulting firm specializing in workforce development, employment solutions to non-profits and government agencies and tax credit consulting to organizations hiring low income individuals. Before starting CCDS, John held the position of Vice President and Director of Sales and marketing for over 9 years, with a national staffing and employment services company involved in the syndication of wage based tax credits. In addition to his experience in the employment services industry, he spent 13 years in the investment industry as a portfolio manager and analyst with a Chicago based investment advisor. John is also currently on the Board of Directors of the Social Enterprise Alliance - Chicago Chapter; Bright Endeavors, a social enterprise committed to helping inner city, homeless and at-risk young women; and Asset Builders, LLC an organization dedicated to helping low wage individuals build wealth.

John’s strength as a business owner and as a person make him the perfect fit for us. The market opportunity in Chicago too, is truly unique, as it is home to not either a Federal Renewal Community or Federal Empowerment Zone, but both. Given its size, density of population and the fact that it houses both types of zones, Chicago should be an outstanding market for RetroTax.

More news to come, keeping an eye toward the West Coast, Ohio, Pennsylvania and DC.

Atlanta-Franchisor Focused on Customer Service In Tough Times

Last week I was treated to a multi-tiered experience at an Atlanta-based franchisor’s “company store.” While this may seem to stray a bit from those things that I usually write about, I think that this experience is definitely worth sharing. Let me preface by telling you that the focus of this post is not so much about the retail experience itself, (which was remarkable) but more about the culture that I was exposed to, on a number of fronts. The concept is called Clix Portrait Studios and it’s headed by CEO, David Asarnow.

This all started with my need to update my publicity headshots. When I saw David at the IFA Convention, I mentioned that to him and he suggested that I come to Clix. I did and I not only came away with some outstanding composites, but add to that, a dose of franchising at its very best.

Because I went to their “company store” for my session, the studio that I visited also serves as the Clix Training Center. So all of that said, let me set the stage. I arrived for my 4 p.m. appointment and stepped into the usual mix of chaos one might expect to find at that hour of the day at a retail portrait studio: Families with babies and high energy kids, some well behaved, others not. On this day, though, add to the mix new franchisees in training from Arizona, along with a new member of the corporate team, also in training. So, I stepped back and asked myself, do I really want to do this or should I come back another day? I decided to stick it out and am I glad that I did.

For years, be it in food or any other franchising concept, for that matter, I have always professed that a franchisor’s single greatest strength, resource or assets, are his people. I know that if it’s a food concept, your recipes are important and that no matter what, there’s always your “trade secret” proprietary stuff. Bar none though, in my mind, when you’ve got the right people piece in place, you’ve got a cultural advantage that no competitor can steal. That’s what I experienced at Clix. There was one single, common denominator present that was shared by the experienced, technical help, as well as the newbies in training (staff and franchisees).

There was an absolute alignment of one thing first and foremost… the customer’s experience.

Whether it was having the patience to engage a screaming five year old and replace her tears with a smile, or go back and reset some poses, because they just didn’t hit the high water mark that was desired, every single thing that I could see in this corporate culture screamed “customer-centric.”

You know, living up to expectations used to be the gold standard, but anymore, that’s simply not enough. In fact, in today’s world, that’s no longer even point of entry. Exceeding customer expectations is the new starting line and from there, treating your customer to a WOW experience is where the rubber really meets the road.

It’s no different at RetroTax then it is at Clix or anyplace that subscribes to principle centered leadership. It all starts at the top, with leadership by example. Next, put the right people in management positions and empower them to deliver upon their areas of responsibility. Then, select teammates and franchisees who share the vision, values and ethics of the culture they are joining. Sounds easy, doesn't it? But it’s not, or trust me, everyone would be doing it.

Tax Credits and Tax Credit Administration Popular During Economic Struggle

These days, business owners are instantly excited by the prospect of tax credits being available to their business, as these credits and incentives can improve the bottom line – which is welcomed in any economic climate, but especially now.

The most popular tax credits that RetroTax administers are the empowerment zone and renewal community credits. The reason is that an eligible business owner can not only claim the credit for the open tax year, but can also reclaim, on a retroactive basis, taxes for as many as three years previous to that, for credits that could have been, but were not, claimed.

Once business owners discover that they do indeed have credits awaiting them, they also find out what it takes to claim these credits, is no walk in the park. Business owners cannot administer these credits on their own for the same reason that virtually nobody can close a home loan by themselves. The amount of knowledge, paper and detail makes it virtually impossible for even the most sophisticated businesses to do this on their own, especially when a company like RetroTax will do all the work for them, with no set up or consulting fees, strictly on a contingent fee basis.

Business owners are impressed by the fact that we only get paid if we produce results and therefore understand, that the results that we produce are the best possible.

Some business owners are skeptical when we tell them about the availability of these credits – however, typically anyone that employees people will, on average, find that there are some percentage of those on payroll that qualify for wage-based tax credits. In fact its usually no less than 10 – 15 percent of those that they employ. It really depends, though, on the type of business that they operate, and sometimes, where the business is located. In manufacturing and food service though, as just a couple of examples, these percentages are usually much higher.

More businesses are coming to RetroTax for tax credit administration in this economy. First, because they are hearing about what we do and are wanting to simply learn more. Once we educate business owners to the legitimacy of these opportunities, (as spelled out in IRS Publication 954), it is merely a function of getting the process underway. In any economy, I know of no one that wants to pay more than his fair share in taxes. In times like these though, when we tell a business owner that we can legally mitigate his tax burden, it’s music to his ears.

For more on our tax administration services, visit http://www.retrotax.com/

Franchise Update Story Captures Urban Franchise Development

In the first Franchise Update issue of 2009, I had the honor of being included in Eddy Goldberg’s story: The New ROI: Return on Inclusion, Franchisors Seek Green Pastures in Urban Concrete. In addition to my quotes throughout the article, http://www.franchise-update.com/, I wanted to share with you a few important passages.

Stan Friedman has for the past two years, chairedf the IFA’s MinorityFran program, launched in February 2006 as part of the Diversity Institute’s efforts to 1) build awareness of franchising within minority communities and 2) increase the number of minority franchisees, franchisors, suppliers, and employees.

“Franchisors are missing the boat if they don’t look at those under-served markets as golden opportunities to create revenues for their business, and at the same time serve the community. There’s a compelling case to be made for coming back to inner cities and to under-served consumers,” says Friedman, who helped lead the Urban Expansion Initiative for Blimpie International in 1998 as vice president of global development.

“There still will be challenges, but real estate is less expensive, the pool of people for jobs greater, and federal wage and tax credits and incentives are available,” says Friedman. “All of the sudden your unit economics and startup costs are much better before you even open the door, compared with suburbia.”

Too many times Murphy’s Law intervenes when franchisees are trying to get new locations opened. Be it a permitting problem, a construction delay or the late delivery of some vital piece of equipment, it seems that there’s always something pushing the projected opening date back. Depending on the timelines and financial strength of the franchisee, this can really cause some painful crimps in one’s style and in many cases put the franchisee under water. A much happier pre-opening scenario might look like this: A franchisee’s new unit is under construction within the boundaries of a Federal Empowerment Zone or Renewal Community. He is at the point where he has begun hiring and because most everyone that will work at his store also lives in the neighborhood, the creation of these local jobs makes him eligible for a personal tax credit of up to $3,000 per year, for each qualifying employee he has hired. With 10-12 locals on his payroll, he could be looking at as much as $36,000 in future tax credits.

“Why aren’t franchisors city bound?” Goldberg writes, “Beyond the downside risks most often cited by reluctant franchisors – security and staffing issues – Friedman says, ‘Maybe it’s just something franchisors haven’t spent enough time thinking through.’”

Many franchisors have not even thought about this process because in many cases, it’s too far outside their box. Take this to the bank… no more can franchisors be reactive in their approach to development and depend on yesteryear’s methods of recruiting new blood to their brands. There are some very viable opportunities for inner city development that can put new faces on old neighborhoods, create jobs that are both wanted and needed and serve consumer needs without their need to travel down the line on the bus to find the services they wished were available to them, a bit closer to home.

In terms of social good, says Friedman, franchising in under-served urban markets 1) will change the landscapes of central cities; 2) provide residents with access to needed goods and services; 3) provide residents with access to needed goods and services; 3) create entrepreneurs in the community; and 4) create jobs for people who live there.

“If you’re serious about your commitment, there are resources available through the IFA to help you plot your course and bring your brand into markets that are under-served, and reach out not only to consumers but to potential franchisees as well,” says Friedman. In the past, he says, it might have been more difficult for a franchisor to make a go of it in a diverse inner city market on their own.

Tax credits and incentives should certainly be considered when considering site selection in the inner city. If a proactive approach to candidate selection makes more sense than just reactively speaking to anyone that wants to talk with you, so does the proactive approach to site selection, as well.

MinorityFran, says Friedman, seeks “to create the playbook and glean the best practices” of franchisors succeeding in expanding into cities, and share that intellectual capital with those who want to try it. That involves relationships with many groups nationwide, including SCORE, local banks, La Raza, the National Urban League, and what he calls “an aggressive outreach initiative” through the U.S. Conference of Mayors.

RetroTax is a proud supporter of the IFA MinorityFran initiative and I am proud to be the Immediate Past Chairman of the IFA Minorities in Franchising Committee and First Vice Chair and a founding member of IFA’s Diversity Institute.

Finally, in the article I talked about National Diversity Solutions (NDS), a Lexington, Ky., based company that works with franchisors and large multi-unit franchisees to help them rework the fabric of their supplier channel to reduce costs and introduce diversity. The NDS mission is a no-brainer. Just as MinorityFran has aspired to make the business case for diversity and inclusion, such is so with NDS as well. Their mission is to simplify supply chain diversification and economic inclusion while reducing costs, increasing service levels and promoting a company's commitment throughout the minority community.

At RetroTax we are in the business of identifying and administering wage-based tax credits for businesses that either don’t even know that these economic incentives exist, or who don’t have the time and resources to administer them correctly, even if they did. Additionally, we are looking for franchise affiliations in each of the markets where such credits and incentives exist. What could be better than finding a minority franchisee to service local businesses in his/her local community and build a business serving neighboring businesses, within the community.