The Business License Tax in Los Angeles  is 1% of gross receipts.   You may be owed a reduction or even a refund, especially if you can demonstrate that portions of your company income were earned in adjoining cities (Hollywood, Santa Monica) or in different cities where your company has other offices (ex. many law firms have offices in San Francisco, Washington D.C. from which billings can ultimately be apportioned) or production plants.

The statute of limitations for non-filing taxpayers is 8 years so even if you want no refund of your business license tax, you may have exposure that should be addressed preemptively – before your friendly city auditor shows up.

Business License tax in Los Angeles and other cities with a high gross receipts tax is most accurately addressed and reduced using a methodology that covers all aspects of the Business License Tax, including, but not limited to:

- case law

- municipal code

- ruling challenges

- multiple apportionment methods

- constitutionality

You should also pick analysts that will be able to provide full representation through all three levels of the administrative process since it is very frightening to be abandoned half way through an appeal.

Whichever company you choose, make sure services include:

• Determination of the proper classification and rate
• Review of gross receipts tax base
• Determine whether any income can be deemed to be passive and thus excluded from tax base.
• Review of apportionment and City Clerk ruling to potentially reduce presumed percentages.
• Review of statute of limitations and confirmation of waivers.
• Apply several apportionment methodologies and substantiate the chosen method.
• Formulate penalty waiver and interest reduction strategies
• Review of Constitutionality and other legal issues.
• Representation throughout the Administrative Appeals Process.
• Representat with auditors and supervisors during Examination.
• Represent at the Appeals Conference with the Treasury Department
• Submit settlement offers, when needed, with the city.

Ideally, you want representation that can point to results, such as:

- Reduce assessment of Business License Tax from $1.2 million to $300,000

- Reduce assessment of $212,000 to $30,000

- Reduce an assessment of $76,000 to a refund of $5,000.

- Obtain a $200,000 refund on City Business License tax.

For guaranteed savings contact us online.

Factor #1 Objectivity:
All your company’s employees – including you- lost something the day they were hired – objectivity. Because a food manufacturer in San Diego County had such a good freight rates it delayed an objective review that would have exposed inconsistencies in the freight invoicing caused by off-tariff shipments at one of its plants. In this company, like others, there are costly habits, procedures, and personal priorities that conflict and compete with the goal of objective cost analysis. Any data that reaches those motivated to cut costs is varnished, filtered, and/or rationed. Fully informed and completely effective cost reduction is thus impeded to a standstill.

Astonishing speed requires that the echelon most motivated to cut costs get the perspective of people with absolutely nothing to gain from inefficiencies and overpricing that may be contained in the status quo. You should hope to minimize the filtering and varnishing in your organization, but can you eliminate all of it? If not, consider by-passing it using outside perspective?

Factor #2 Interpretation:
Who can interpret your Fed ex contract better, the person in your company who has negotiated 5 FedEx agreements, or the FedEx rep who has negotiated 500? The only match for a Fed Ex rep is a former Fed Ex rep – who sees things within a context the 5-timer does not have. Likewise, an expert in utility tariffs will interpret a utility bill differently than someone simply responsible for paying the utility bills. The payer of bills looks at the bill to make sure the bill is about the same as previous bills. The expert analyst will question the rate schedule in light of the building’s load profile and opportunities for alternative rate schedules in addition to anomalies that might appear within your incremental demand report.

Like a base runner studying up on the tendencies of opposing pitchers, astonishing speed requires someone who makes a living studying and interpreting the vendor’s pricing strategies and price points. Do you negotiate without ample, well-interpreted data? Getting access to interpretable data produces astonishing speed in cost reduction.

Factor #3 System:
Optimizing sales tax refunds from the Board of Equalization or income tax refunds with the Franchise Tax board requires a system proven to maximize refunds with minimal pushback. Negotiating with any provider requires a system that uses techniques, insights and specialized RFPs not easily duplicated or match by your internal resources. Systems are intentionally developed with practice and are designed to maximize speed by minimizing unnecessary time investments.

Are you systems for cost reduction as good as your systems for revenue enhancement? Bolting on a ready-made cost reduction system is like putting a turbo charger on your existing engine. Or like putting Jackie Robinson* in as a pinch runner on 3rd.

Factor #4 Don’t Change Vendors:
Although it is advisable sometimes, changing a vendor is complicated and often unnecessary. Speed in cost reduction results from keeping your vendor but discontinuing services you pay for and don’t use. Speed in cost reduction and obtaining discounts your vendor is already giving your competition! Speed sometimes comes from obtaining benefits promised but never delivered. Like a $100,000 tenant improvement allowance that sat on the landlord’s books for 7 years, and was then recovered a few days after the tenant authorized an outside lease review by DCI.

Saving the highest amount without changing vendors is like scoring from 3rd without being batted in. The sudden savings will astonish your board and make you feel like you just scored the game winning run.

DCI can give you that astonishing, run-scoring, game-winning speed – want it?

Call us at (888) 395-0809 or contact us online

*Jackie Robinson (19 home steals) lead the post WW II era, but the top four slots of all time are held by……

Honus Wagner (27), George Burns (28), Max Carey (33) and Ty Cobb (54).
Ty Cobb
Max Carey
George Burns
Honus Wagner

The past couple years have been tough on every bank’s profitability. In response, major banks are trying to make up for lost revenue by coming up with new fees to charge clients. In fact, some of the biggest banks have already begun to do so. Yet from a client perspective, there is something amiss with this strategy.

Many of these banks justify the new fees by playing up their weakened balance sheets.Your bank might be wonderful but it is not perfect. Since bank fees vary greatly by customers within the same industry it is important that the charges you pay to your bank are not higher than your competitors pay.

Here’s the problem. Most CFOs will admit that their bank summary statements are not very clear. Even if the service is great, the CFO has little idea of what he is actually paying for.

Many times the charges are very competitive, but highly redundant. Other times the charges are low… on services that should be provided free.

Here’s a simple question: How much are your wire fees? How much should they be? If you are a retailer, how much do you pay to deposit your currency, checks and coins? How much should you pay?

With some banks there are over 120 specific lines that can be included in a given bank summary statement. Knowing which are accurate and which are less than competitive is not a job you want to take to yourself, unless you have lots of spare time on your hands.

Reducing bank fees does not require a change of banks. Reducing bank fees does not require a change in service levels. Getting the most savings with the least hassle or embarrassment does require the use of experts that do this all the time and can help you in more ways than you know.

An expert analysis takes into account the entire banking relationship to determine the best approach.

Also, lending covenants might limit the moving of account balances to other institutions so even in the minority of cases where you might want to switch banks, your hands might be tied.

Sometimes fees associated with the deposit side of the business cannot be changed but other costs with your bank can be, such as the costs for loans or covenant violation penalties.

Your banker knows that you know there is a price to be paid for switching banks so is best not to negotiate reduced bank fees with merely the threat of changing banks alone. Data and benchmarks are critical to getting the most concessions without either you or your banker losing face.

A lender who values your relationship will respond to a well written analysis in a way that keeps the bank from offering lower fees to your competition and not to you.

Maybe you are overpaying your bank – why not get in contact with us? For certain inquiries we can do a free forecast of bank fee savings.

(888) 395-0809 or contact us online 

Want to see more examples of DCI’s cost reduction?

Cut Health Care Costs!

This goal is reachable and there are 8 ways to get there without cutting benefits – just like there are 8 ways to get to first in baseball without getting a base hit. Do you know all eight? Let’s review and then check the answer key at the bottom if you want the answers to your baseball quiz as well.

1. Tax Credits: The Patient Protection and Affordable Care Act (2010) provides tax credits for small employers (fewer than 25 FTE’s…full time equivalents), whose average wage (you can exclude owners and family members) is less than $50,000, and who pay at least 50% of the cost of the employee portion of the health insurance. The credits can be as much as 35% of the cost of the employer’s contribution and for smaller businesses cut health care costs significantly.
2. Section 125 POP (Premium Only Plan): if your employees are contributing to the cost of their own, or their dependents’ cost of the insurance, the deductions can be taken on a pre-tax basis, thereby reducing the net cost to the employees and reducing payroll and related expenses for the employer (payroll tax, FICA match, worker’s comp premium).
3. Defined Contribution Approach: Nearly all carriers provide for a choice of plans for businesses. The employer can and should define the company contribution (rather than the plan: Defined Benefit), allowing the employees a choice of plans that may work best for each individual. This locks in the cost for the employer and can get you healthcare cost savings.
4. Narrow Networks: Most carriers have developed narrow network options for their HMO ( and sometimes PPO) plans. These narrower networks can often cut health care costs savings by 10-12% with no real change in benefits. If the providers your employees use are in the narrow networks already, this is a no brainer.
5. Health Savings Accounts (HSA’s): HSA’s have been around since 2004, and are still a secret to many employers. The concept is simple: it is like an IRA for health related expenses. You purchase a high deductible (HSA compatible) health plan, and fund an HSA, allowing you and your employees to pay for out of pocket expenses with tax free money. Any unused funds in the HSA accumulate and grow tax free.
6. Value Based Benefits: VBB’s compensate the employees and covered family members for doing certain no cost preventive care activities (annual physicals, bio-metric blood screenings, health risk assessments) with improved benefits or cash funds in a Health Reimbursement Account (HRA).
7. Voluntary Benefits: Sure to be the fastest growing trend, employers can enhance their benefit package with Voluntary Benefits, improving the benefits offerings to employees and possibly lowering payroll related expenses for the employer as well.
8. Get Help: For larger companies over 100 employees, there are literally hundreds of different offerings which can cut health care costs, many premiums are negotiable in certain circumstances. This can produce savings of 10% or more on your benefits costs! These benefits savings are very likely when outside help is used but the odds of the average broker knowing each way to save you money are about the same as the average baseball fan knowing that the eight ways to reach first base without getting a hit are: 1. Base on balls, 2. Hit by pitch, 3. Reach on an error, 4. Fielder’s choice, 5. Dropped third strike, 6. Catcher’s interference, 7. Runner’s interference, and…8. Pinch Runner.
- Special Thanks to Brian Sullivan of Martin J. Wolff

Call (888) 395-0809 or contact us online.

Head back to our main page www.dcisolutions.net

For many large energy users the sales tax overpaid can exceed $100,000 per year.  Remember that both natural gas and electricity are in your energy bill and should be evaluated by an expert in sales tax reverse audits.  Your AP staff do the best they can in this category but you should expect that for every $1,000,000 in payables they process, anywhere from $500 to $2,000 is paid out in error.

Case in point, a large company did a nationwide promotion sending millions of postcards to every home in the United States.  During the course of this promotion the incurred a charge from their printer for “ad prep”.  Unbeknownst to everyone, the printer, the marketing agency, the client and the client’s tax department, ad prep is supposed to be tax exempt.  Although much of the refund opportunity was permanently lost, the amount recovered was in the seven figures.

Post-bankruptcy Enron had a separate issue.  The amount of photocopied legal documents was enough to fill several rooms and the sales tax on the print was corresponding large.  DCI pointed out that in the states of Texas and elsewhere, photocopied legal documents are exempt from much of the sales tax charged in the state.  The creditors of Enron were able to recover a very large sales tax refund as a result of DCI’s help.

Are you in a sales tax audit currently? Before you sign off on the final assessment (even if it’s zero or a negative number) you should know your rights to gain additional concessions.

The complexity of sales tax laws drives the creation of errors but you cannot afford to sit back and marvel.  You might be losing money that DCI can recover for you.

Call (888) 395-0809 or contact us online

In a recent survey just 6% of companies outsourcing to ADP, Ceridian, and Paychex were actually paying a price which was unimprovable.   The rest were incurring line item charges and service fees that could be reduced up to 40%.  How certain can you be that ADP, Ceridian, Paychex or whoever you have for payroll processing is charging you the right fees?  Paying perfect fees to ADP would put you in the top 6%.  DCI can do that for you.  We reduce ADP costs for a living.  We also reduce Ceridian and Paychex charges for our clients.

Most of payroll fee negotiation is left to the H.R. department which has no database from which to negotiate or no knowledge of how best to reduce ADP costs.  To reduce payroll processing costs to their best levels, it might help to have someone who has seen ADP pricing at many other companies in addition to yours.  There’s no need for you to guess in your analysis of ADP’s rates. Why not use the professionals who reduce ADP fees and keep you with ADP (or whomever you already enjoy using).  Our negotiations are precise and non-adversarial.  The difference you get from using DCI’s expertise in overhead improvement lets you reduce save on payroll processing fees 94% of the time.

Call us at (888) 395-0809 to discuss how our comprehensive cost reduction can save you money in many categories like payroll processing fees or download a censored savings report done for another company.  We want you to be aware of all the money your company is missing.  And we want to recover it for you.

Call (888) 395-0809 or contact us online.

New lighting retrofits do NOT qualify for bonus depreciation, are you at risk?

Many companies take their new lighting retrofits as bonus depreciation; in 2011 that meant taking the entire cost as one year’s depreciation. However doing so is a mistake and a misinterpretation of the rules.

The rules for “bonus depreciation” applied ONLY to assets with a life of 20 years or less.  Lighting is a 1250 category asset by IRS definition and as such has a life of 39 years.

The Audit Techniques Guide of the IRS clearly breaks lighting into two categories.

• Electrical – Light Fixtures – Interior   1250 Includes lighting such as recessed and lay-in lighting, night lighting, and exit lighting, as well as decorative lighting fixtures that provide substantially all the artificial illumination in the building or along building walkways.  For emergency and exit lighting, see Fire Protection & Alarm Systems.  Building or Building Component – 39 Years Electrical –
• Light Fixtures – Interior   1245 Light fixtures, such as neon, track lighting, or grow lights which are decorative in nature and not necessary for the operation or maintenance of the building.  If the decorative lighting were turned off, the other sources of lighting would provide sufficient light for operation or maintenance of the building.  If the decorative lighting is the primary source of lighting, then it is section 1250 property.  Personal Property With No Class Life – 7 Years

Bonus Depreciation has the following rules: (Please note the underlined requirement)

The federal Economic Stimulus Act of 2008, enacted in February 2008, included a 50% first-year bonus depreciation (26 USC § 168(k)) provision for eligible renewable-energy systems acquired and placed in service in 2008. This provision was extended (retroactively for the entire 2009 tax year) under the same terms by The American Recovery and Reinvestment Act of 2009, enacted in February 2009. Bonus depreciation was renewed again in September 2010 (retroactively for the entire 2010 tax year) by the Small Business Jobs Act of 2010 (H.R. 5297).

In December 2010 the provision for bonus depreciation was amended and extended yet again by The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (H.R. 4853). Under these amendments, eligible property placed in service after September 8, 2010 and before January 1, 2012 qualifies for 100% first-year bonus depreciation. For 2012, bonus depreciation is still available, but the allowable deduction reverts from 100% to 50% of the eligible basis.

To qualify for bonus depreciation, a project must satisfy these criteria:

the property must have a recovery period of 20 years or less under normal federal tax depreciation rules;

• the original use of the property must commence with the taxpayer claiming the deduction;
• the property generally must have been acquired during the period from 2008 – 2012; and
• the property must have been placed in service during the period from 2008 – 2012.
• If property meets these requirements, the owner is entitled to deduct a significant portion of the adjusted basis of the property during the tax year the property is first placed in service. As noted above, for property acquired and placed in service after September 8, 2010 and before January 1, 2012, the allowable first year deduction is 100% of the adjusted basis. For property placed in service from 2008 – 2012, for which the placed in service date does not fall within this window, the allowable first-year deduction is 50% of the adjusted basis. In the case of a 50% first year deduction, the remaining 50% of the adjusted basis of the property is depreciated over the ordinary MACRS depreciation schedule. The bonus depreciation rules do not override the depreciation limit applicable to projects qualifying for the federal business energy tax credit. Before calculating depreciation for such a project, including any bonus depreciation, the adjusted basis of the project must be reduced by one-half of the amount of the energy credit for which the project qualifies.

Bottom Line: You cannot take your primary lighting for “bonus depreciation”, if you are a property owner and you did so your CPA will require you to undo this process.  If you are a CPA and you allow the depreciation to be taken you open yourself to  Circ 230 liabilities.

EPAct done by Professional Engineers is the solution:

A property owner may take a tax deduction of up to $1.80 on both new construction or a renovation if it meets certain energy saving criteria.

Additionally a property owner can take this deduction for any qualifying property back to 2006 by way of a 3115 change of accounting declaration.

To maximize this credit (and potentially maximize your Cost segregation credit) you should use a professional engineer.  Doing this without a PE is almost certainly going to mitigate the full financial gain of the credit.

If you add in abandonment and other tax components  sometimes the total deduction can offset most costs of a retrofit.

-Don McDougal is an expert on EPAct and the corresponding 179D tax deductions.

Call (888) 395-0809 or contact us online.

Ocean Freight Reduced!  Ocean freight expense has risen dramatically since 2011, DCI can help reduce it if you import/export more than 20 containers per year and want to save money without having to change providers.  If we find ways to improve your freight service as well, we will do that for you too so you get the maximum benefit of our analysis.  This Director of Operations had his ocean freight costs reduced by more than 20% using the expertise of DCI.

In one case a client was charged a “pier pass” which is the equivalent of a congestion charge, at the ports of Long Beach and Los Angeles.  Although the pier pass of $100 was a reasonable amount the client was being told that he was being charged a pier pass for the shipments that were coming in during the evening when pier pass charges would not apply.  The carrier had buried a charge behind a plausible excuse that only an indepth audit would detect.

The BAF, which is the charge for fuel, is also driving up the cost of ocean freight considerable. Third, the General Rate Increase, GRI, which usually is rebuffed, has been maintained and is now being followed by a second GRI from the carriers in the Spring of 2012.  This puts companies importing from China in a position of higher expenses.

Finally, we can analyze Less than Container Loads (LCL) shipments made within days of each other as this might be an opportunity to combine into full container loads (FCL).  This is not always possible when a rush order is necessary but many rush orders can indicate that other tools are needed to improve your supply chain.

Air freight shipments that can be better anticipated can thus be diverted into FCL.  In one case an NVOCC was telling its clients certain things regarding rushed air freight shipments that were less than helpful and costing the client large and unnecessary expense.  DCI was engaged and was able to convince the NVOCC to bring some of the previous charges back to the client.

 What your carrier is telling you about costs and service issues may be true.  Or it might not be.  The only way to know is with an external audit of costs from DCI.

Call (888) 395-0809 or contact us online.

Life Settlement Mistakes abound for companies going through a sale or in a cash crunch. Ending a key person life insurance policy is often wise, but be careful you don’t lose money in the process!

The insurer would love for you to either let the policy lapse (“Life Settlement Mistake #1) or obtain a paltry CSV (“Life Settlement Mistake #2), but there’s a smarter way to go to avoid life settlement mistakes.

Most life insurance policies, including universal and convertible term, qualify as negotiable instruments if the insured is over 65 years old with $500,000 of coverage.

By selling your existing policy from the current owner to an institutional investor for a one time lump-sum payment or Life Settlement, your financial benefit can be much greater than the CSV!

Example: Ronco Bankruptcy. A $15MM term policy on the verge of lapsing was marketed, converted into a universal life policy and sold with the resulting proceeds of approximately $3.3MM delivered to the Trustee which yielded enough to pay off the senior lender, in full.

The process involves a Life Settlement Broker who conducts an auction-like process gathering bids on a contingent basis. This eliminates life settlement mistakes and helps

Doug Himmel of Melville Capital says, “In scenarios where insurance exists, the policy should never be allowed to lapse or be  arbitrarily surrendered without an appraisal of its market value.”

Call (888) 395-0809

or

Contact us online.

Reduce Verizon Costs today with a telecommunications audit.  Telecom audits also find savings with AT&T, Sprint, Qwest, and other telecommunication carriers 80% of the time.  Your IT department is focused on mission critical issues – and taking the time to do a deep-dive audit of the myriad possible telecom overcharges is NOT mission critical for them or for any IT Director worth his salt.  But Verizon Savings are mission critical for us.  DCI’s devoted team of telecom analysts and auditors consistently find substantial savings in Voice, Internet, and Data as well as in mobile telecommunications.

You may have a good Verizon costs with great discounts but telecom companies are notorious from misapplying the discounts they previously agreed to so your Verizon costs might get considerably better.  Expecting your staff to have the time to research and permanently fix all these problems is an unrealistic burden, to say the least.

At your service is DCI Solutions – With the ability to audit Verizon costs and AT&T costs, we consistently find recoverable errors that can be brought back to you in the form of refunds and credits for companies with national and international telecommunications costs.

This will not be the only way we help you. It’s possible that you are being billed correctly and at the best possible price for services you don’t need or once needed but no longer use. In cases like these, it doesn’t matter how good your rate is, you’re always paying 100% too much.

Many companies will never know when they are over-trunked or using only a portion of the services for which they incur a monthly recurring charge (“MRC”).  Sometimes it’s T-1 lines for which there is no economic necessity and other times it’s the lowly POTS line misplaced within a hunt group or a phone number that leads to nowhere.

The DCI telecommunications audit not only exposes the costs no one in your IT or accounting department has the time to find, it also identifies improved savings through competitive rates most companies never obtain on their without outside help.

Does your company get competitive telecom bids without any outside help?  If so, you’re probably losing money.  As strange as that sounds, “competitive bids” using internally created bid documents and processes won’t get you special pricing from any one vendor, just lots of good pricing from many vendors.  Less than one in ten companies negotiating on their own will get the absolute best rates from Verizon, AT&T, Global Crossing, L3, etc. and those who do often expend inordinate staff time that could be best allocated elsewhere.

Unless your company has a team with over 50 years of experience negotiating Verizon costs and auditing AT&T for billing errors, or writing successful telecommunication RFPs for several dozen companies, your team will burn a lot of valuable staff time before and after the contract is signed and spend a great deal more than what you should for years to come.

For every $50,000 you spend monthly in voice, data, and internet, expect $60,000 to $250,000 each year in hard dollar savings in your Verizon costs and other telecom costs should be expected.

Call (888) 395-0809 or contact us online