Weaver: Beyond the Numbers

On the latest episode of Beyond the Numbers by Weaver, host James Mihills, partner, Risk Advisory Services at Weaver engages in a comprehensive discussion. The conversation centers around Financial institutions, the tax issues they face, and how to maximize tax savings with Shane Stewart, partner-in-charge, State and Local Tax Services at Weaver, and Blake Fuqua, partner, State and Local Tax Services at Weaver.

Key Points:

• Property taxes can be a major expense for banks, especially with the increasing use of technology and the obsolescence of certain real property assets.
• Financial institutions should consider new construction-related exemptions for sales tax when expanding their operations or building new locations. Conversely, they should also ensure that contractors are charging sales tax for remodeling services, as these are often considered taxable.
• Partnering with a state and local tax practice like Weaver's can help banks effectively manage compliance, reduce overpayment risk, handle complex filings, ensure timely payments, and provide peace of mind through compliance evaluations and other specialized services.

What do financial institutions need to know about state and local taxes issues, and where are they potentially leaving money on the table?

Many financial institutions don’t think they need to register or review purchase invoices for sales tax, but improper payment of sales tax can have a detrimental impact on these organizations. Property taxes are another significant expense for entities, but there are several ways to cut the costs of this expense and maximize tax savings if done correctly.

This conversation also touches on:

• Revelations that many financial institutions are overpaying sales tax on IT-related and professional services as technology investments grow
• The significance of property taxes, the value attached to brick-and-mortar bank locations, and the potential tax savings through correct valuations
• The administrative burden of ensuring tax compliance, the risks of overpayment and underpayment, and the idea of potentially outsourcing these complexities

Fuqua explained, “A lot of banks are overpaying sales tax on a lot of IT-related services, data processing, and professional services. There are some recent court cases in the state of Texas and a few other states that really sets some good opportunities available for these financial institutions and banks to take advantage of. So, it’s definitely something financial institutions and banks should consider as they increase their operational footprint and spend.”

Stewart later added, “One rendition that you’re reporting property on could be associated with five different property tax bills, right? And so, just managing the compliance around meeting those requirements each year is a huge task administratively, and it’s quite a burden. So you think of the expense — the amount of time and resources it takes to handle this…”

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On the latest episode of Beyond the Numbers by Weaver, host Vince Houk, Partner-in-Charge, International Tax Services at Weaver, delves deep into the world of strategic transfer pricing and how businesses can use it to their advantage. Joining him is Josh Finfrock, Director, Transfer Pricing Services at Weaver, an expert with a wealth of knowledge in the field.

Key Points:

• One overlooked opportunity in utilizing FDII is to analyze the expense allocation with GNA expenses and allocate accordingly based on genuine benefit, which can help derive a better benefit.
• Other opportunities include looking at services provided by the U.S. company that may qualify for the FDII benefit and reviewing the IP structure to potentially move IP into the U.S.
• The U.S. provides a jurisdiction with substance, a good treaty network, and potentially lower tax rates compared to other countries, making it an attractive option for IP ownership and maintaining key operations.

How can firms shift their perception and utilize transfer pricing as an asset rather than a burden? And what lies beyond the surface of transfer pricing, and how can businesses harness its potential to enhance their global operations?

Clients often overlook how strategic transfer pricing can be and how it can be a tax saver and assist in cash management efficiency. For example, there is cash repatriation leakage that can be planned around with transfer pricing. Rate differentials between countries can be another challenge that transfer pricing adjustments can help save.

Finfrock stated, “If we can do a strategic transfer pricing review with the company, we’re going to come in and be able to look at, get a holistic view of the company, the global structure, understand where all the moving pieces are. That way, then we really know where those levers are, what our range of outcomes can be in different places, and then we can find those opportunities for savings.”

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©2023

In this episode of Weaver's Beyond the Numbers, Brandon Hayes, a senior manager in Sales and Use Tax Practice, leads a crucial discussion about sales tax issues and sales tax compliance strategies. Joining him are Stephen Scarborough, partner in the State and Local Tax Compliance Group, and Shane Stewart, the partner in charge of the overall State and Local Tax Practice. These experts shed light on the unpredictability of sales tax issues and share solutions for handling them efficiently.

Key Points:

• Sales tax issues can emerge from business changes, product shifts, audits, or laws like the Wayfair ruling on economic nexus.

• Address sales tax issues by identifying affected states, determining taxability, quantifying exposure, and specifying the issue's duration

• Resolve tax issues by conducting a nexus study, analyzing taxability, using voluntary state disclosures to potentially waive penalties, and ensuring proper registration.

As businesses continually evolve, so do their challenges. For sales and use tax, unforeseen issues can arise, causing panic and confusion. Such issues, whether emerging from legislative changes, product modifications, or laws like the Wayfair ruling, can disrupt a smooth business flow. This episode investigates these challenges, shedding light on their origins and offering strategies to navigate them seamlessly.

Scarborough comments, “There's quite a few reasons why either a tax professional or, let's say, an accounting director, CFO, might find themselves with a sales tax issue.” His insights are further enriched by Stewart's observations on the Wayfair ruling, stating, “It affects everybody just about.” Their combined expertise provides an invaluable roadmap to sales tax compliance.

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©2023

Welcome to the latest episode of Beyond the Numbers by Weaver, hosted by Vince Houk, the Partner-in-Charge of International Tax Services at Weaver. Joining him is the adept Josh Finfrock, Director of Transfer Pricing Services at Weaver, ready to decode the intricate relationship between the IC Disc regime and transfer pricing.

Key Points:

• Transfer pricing is not just a compliance aspect, but can be strategic and provide opportunities for tax savings and efficient cash management.
• A strategic review of a company's global structure can help identify transfer pricing opportunities and range of outcomes in different locations.
• Weaver can assist companies in identifying transfer pricing opportunities and operating their business more efficiently, while also mitigating risks through a holistic view of the company's operations.

At the heart of this discussion is the Intercompany Pricing Agreement, commonly referred to as the IC Disc regime, which promises significant tax savings for exporters. But how can one optimize these benefits? And where does transfer pricing fit into this puzzle?

IC discs are export incentives that provider for permanent tax savings and can benefit all entities from corporations to partnerships. However, the way most companies have IC discs set up, transfer pricing is often not required and utilized, but companies can benefit tremendously when they do decide to use transfer pricing.

"We can take segment by segment, different expenses, and find categories that we think may be over allocating expense to that segment, which is increasing the benefit of the disc when you can find those opportunities," Finfrock explained.

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©2023

Now, however, those brokers want wires to come from fund entities.

Relocating a business is a complex move but something that can be very beneficial to a company. One state where they are flocking is Texas, named the “Best State for Business” by Chief Executive Magazine. What are the implications, tax-wise, for such a move?

On this episode of Weaver: Beyond The Numbers, Host Adam Jones discussed grant compliance with Brandon Tanous, Partner Risk Advisory Services, and Travis Casner, Managing Director of Forensics and Litigation Services. Specifically, they covered the increased availability of grant money from the federal and state level, and more importantly, avoiding fraud in the grant management cycle.

The best way to avoid fraud and adhere to grant compliance is by having a good system of internal controls. Whether it’s higher education, state or local municipalities, or not-for-profits, the question is always where to start. Each organization is going to have a different level of maturity when it comes to these internal controls.

“Most of recipients learn very quickly that every grant has strings attached,” explained Tanous, whose focus is state and local government and has 13 years of experience building internal controls around grant compliance. “An internal control that we always want to see is, first and foremost, is an understanding the grant criteria, with documented policies and procedures, and segregation of duty.”

Tanous elaborated that too often, you see people trying to do too many things. Having those internal controls, and not having the same person initiating and executing and approving all transactions, and making sure there is a healthy number of people working on the project.

The first place to start is by working on policies and procedures, so people know what they’re supposed to do and how the protocols should be performed. Those policies and procedures should also reflect the current environment.

“The common deficiencies we see are that people don’t have those [policies and procedures] established,” Tanous said.

A primary concern is how quickly fraud can occur when proper controls are not in place. This becomes a bigger challenge when working with a decentralized organization that needs a centralized process.

“We are now able to use analytics to benchmark spending and identify abnormalities,” said Casner who has managed numerous financial forensics investigations involving allegations of fraud. “Why might an organization be paying more than their peers for a good or services? Is there a legitimate reason or something nefarious going on?”

Casner went on to say that some of the most common fraud happens in the procurement processes. From kick-backs to bribery, not having proper controls around purchasing can open your entity up for fraudulent activity.

Taking a proactive approach to combating fraud by utilizing analytics can help identify red flags and schemes before they occur, especially as it relates to grant management.

Listen to the full episode to hear all of Tanous and Casner’s insights.

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Weaver’s professionals are known for helping government clients address problems, achieve compliance, and prevent fraud or loss. Visit weaver.com for more thought leadership.