Q2 Tax Update for Technology, Clean Technology, Life Sciences, and Communications and Media Companies

In this second quarter update, we cover some of the most important tax issues for companies in the technology, clean technology, life sciences, and communications and media industries, and touch on what your organization can do to stay ahead of them.

Balance Sheet Classification of Deferred Taxes

As part of the Financial Accounting Standards Board’s (FASB) initiative to reduce complexity in accounting standards, it proposed that all deferred tax assets and liabilities be classified as noncurrent on the balance sheet. Currently, they can be presented as a net current asset or liability and a net noncurrent asset or liability under United States Generally Accepted Accounting Principles.

The result of the proposal would be that each jurisdiction has one net noncurrent deferred tax asset or liability. The comment period for the draft ended May 29, 2015, and the FASB plans to determine next steps later this year after considering comments received. Under the proposal, standards would be effective for annual and interim periods beginning after December 15, 2016, for public business entities, and after December 15, 2017, for all other entities. Early adoption for all other entities would be permitted, but not before the effective date for public business entities

–Kunaal Patel, Manager

Update on Foreign Bank Accounts

Improving Report of Bank and Financial Accounts (FBAR) compliance is a top priority for the Department of Treasury, and monitoring foreign bank accounts now is a part of the IRS review process. The FBAR rules focus on US persons with foreign accounts. If the aggregate value of such accounts at any point in a calendar year exceeds $10,000, then a FBAR must be filed. Failure to file can lead to penalties.

The June 30, 2015, due date is around the corner, and there’s no extension available for filing the form. If you haven’t filed FBARs for the past years, now is a great time to give this matter some attention.

–Robena Banth-Jafari, Senior Manager

State Taxes Applicable to Software

States continue to develop their approach to taxing software that’s delivered electronically or accesses remotely. We continue to see potential exposures at companies of all sizes. What should a company do? An Insight titled Map Your Company’s State Sales and Use Tax Obligations highlights the approach that certain states are taking as well as detailed steps for how your company can manage your state tax exposure.

–Richard Croghan, Partner

California Sales and Use Tax Partial Exemption

This is a reminder to take advantage of the California sales and use tax partial exemption. The exemption is available to businesses classified under NAICS codes 3111–3399 (manufacturing), 541711 (biotech R&D), and 541712 (physical, engineering, and life sciences R&D). To claim the exemption, a business needs to complete BOE 230-M and present it to the seller. The form can be used for a specific purchase or a series of purchases under a purchase order.

–Ken Huang, Senior Manager, and Kelly Bluth, Manager

Federal Reporting of Uncertain Tax Positions

As a reminder, Federal Schedule Uncertain Tax Positions (UTP) is now required to be filed with corporate returns for companies that are audited and have $10 million or more of assets. This filing requirement now affects many more companies because the asset threshold dropped from $50 million, which was applicable through 2013. The UTP is used to disclose uncertain tax positions/FIN 48 items to the IRS. Frequent positions that generate UTP include the R&D credit and transfer pricing arrangements, though any federal tax position could be a UTP.

–Richard Croghan, Partner

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Moss Adams continuously reviews the regulatory and tax landscape for technology, clean technology, life sciences, and communications and media companies. For more information about any of the issues discussed above, or for insight on how they may impact your business, contact your Moss Adams professional.