It’s been a while since we used this forum to explain in the most basic terms what we do here at Clocktower Tax Credits. We get a lot of phone calls and emails, especially around tax filing time, from individuals looking to reduce their tax bills. Or calls from individuals who think they own something that they can sell to help someone else reduce their tax bill. Sometimes we can help; other times we cannot.
Most of our work is in helping individuals or small companies raise money for their projects or companies by “selling” or otherwise monetizing certain tax attributes that they earned. Some of our callers don’t really know what “credits” they have. In those cases, we probe enough to discover that they are referring to operating losses that have been carried on the books of their firm. These are not tax credits, and they cannot be transferred except through the acquisition of such losses by a company acquiring the subject firm. This acquisition needs to have a legitimate business purpose and is not being done solely to monetize these losses. This category of calls also includes those situations involving charitable donation deductions. Similarly, the IRS does not allow the sale of interests in an entity solely to benefit from a charitable donation. The history of such transactions is littered with abusive investments involving inflated appraised values of the donated property. Clocktower will not participate in such transactions.
Individuals or groups looking to offset federal tax liabilities in the range of $25,000 to $250,000 cannot ordinarily benefit from tax credits for two reasons. First, all Federal Tax Credit monetizations entail the use of a structured partnership to properly allocate the cash and tax attributes of a project, and the legal and accounting work required for such a transaction precludes these small investments. Second, most individuals, LLCs or S-corporations are restricted in their ability to use the tax benefits by passive loss limitations. Thus, we cannot help most individuals seeking tax relief in this financial range.
Finally, we have much more flexibility in the world of State Tax Credits, which are authorized and issued under unique State rules which do allow for transfers from owners of credits to other state taxpayers. Here, the minimum amount of credits usually sold starts at $10,000 and can rise into the millions. Again, project owners must know that they own these specific tax credits because they applied for them; they are not typically discovered by an owner after the fact.
The experts here at Clocktower Tax Credits can help you determine whether you have something to sell, or whether the government allows you to find someone who has some tax savings to convey to you. Please call President Jeff Jacobson at (978) 823-0200, or email him at JJacobson@ClocktowerTC.com, to start a conversation.