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Tile Manufacturer Uncovers Over $600K in Missed Tax Credits

  • Home Tile Manufacturer Uncovers Over $600K in Missed Tax Credits
    • By PMBA
    December 18, 2020
    Case Studies
    CPAs , R&D Tax Credits , State & Local Tax , State and Local Credit & Incentives

    About the client

    The company is a US-based tile manufacturer whose parent company is a $1B European tile retailer.

    Background

    In 2019, a PMBA Trusted Partner secured a client with complex U.S. tax compliance needs. This partner was also focused on providing his clients with proactive and strategic services beyond traditional compliance. So, shortly after the relationship began, the partner contacted PMBA to help identify possible value-add opportunities.

    During the consultation, PMBA helped the CPA identify several options, including the Federal R&D Tax Credit, which the client’s prior returns failed to include.

    After explaining the additional opportunities with their client, the CPA partner connected them with PMBA to begin a multi-state nexus and credit review.

    Tax credits for tile manufacturer

    The Process

    Clients increasingly lean on their tax advisors to tailor offerings specific to their needs. However, not every accounting firm specializes in services to identify nontraditional tax-saving opportunities. For this CPA partner, communicating the benefits of leveraging an external specialist was essential yet straightforward. The CPA explained to his client that he conducted an internal review of their business and uncovered potential tax-saving areas. He also conveyed that state planning and identifying all possible credits were a complicated matter and recommended that they engage a specialist to assess the potential benefit.

    PMBA consulted with the client to perform a federal and multi-state credit review and billed the company separately from the CPA firm’s tax returns.

    PMBA went to work and, after a few weeks, uncovered three opportunities for the client:

    • Federal & State R&D Tax Credits
    • Unclaimed State Hiring Credits
    • Unclaimed Inventory Tax Credits

    With PMBA’s support, the partner explained the cost-benefit of claiming the credits, and the client subsequently proceeded with all three projects. Again, clear communication of the ROI was essential for buy-in.

    The Results

    PMBA worked on all projects concurrently to have the information available for the 2019 tax filing. The project yielded:

    • A $40,000 Federal R&D tax credit (unfortunately, the client did not qualify for the state tax credit)
    • An $80,000 state inventory tax credit
    • Approval from the state to apply $75,000 of hiring credits on their 2019 tax return. The client untangled a web of challenges regarding site hiring credits earned – but had never previously claimed – over an eight-year period.
    • An amendment of historical tax returns to recover $400,000 in missed tax credits

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