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Week 5, March Down

While the last week of March 2016 was the week after Easter, in this period of 2015 it was the week leading up to the holiday. Sales reflected the difference with March week five dropping 17.92 percent compared to the same period in 2015. Customer counts were down over 9 percent.

Overall, March sales were down 2.06 percent compared to last year and customer counts were up slightly at 0.25 percent.

Today, the Bureau of Labor Statistics released its March consumer price index report. Food at home prices fell 0.5 percent during the month. Driving the decreases were falling prices in fruits/vegetables (-1.9 percent), cereal/bakery (-0.6 percent), dairy (-0.5 percent), meat/poultry/fish/eggs (-0.3 percent), and nonalcoholic beverages (-0.3 percent). Other was the only category that increased, going up by 0.4 percent.

Food at home prices have now decreased 0.5 percent over the past 12 months. The index for all items increased 0.1 percent in March and has increased 0.9 percent in the past 12 months.

Same Store Sales
% Change from last year

Same Store Sales – Previous Months

BGBC Partners Tax Update: The Controlled Group Rules

In this segment of our Tax Update, we are discussing the Controlled Group rules as they relate to income tax, not health benefits. When you hear the phrase “Controlled Group”, it may elicit thoughts of a large multinational conglomerate of corporations and you may ask yourself, “how can this possibly affect me and my store”? If you have more than one S corporation, or C corporation, you may be in the cross hairs of these rules. The result can be that you must group the two corporations as one for purposes of various limits and popular tax benefits. In general, these provisions only apply to corporations not partnerships or sole proprietorships.

So what is a controlled group? Well, like many things in the tax code, it isn’t easily summarized. Different benefits define a controlled group differently. But we will attempt to discuss a general framework.

A controlled group of corporations is generally one in which five or fewer owners collectively own more than one corporation (either 80% or 50% depending on the benefit). If two or more corporations meet this definition, then the benefit or tax deduction considers the group of corporations as one group in applying the benefit or deduction provision.

What type of benefits are impacted and how?

We have a system of graduated tax rates. When two or more corporations are part of a controlled group, they must share the lower rates as if they were one. Congress wanted to prevent manipulation in which two commonly owned corporations could be established by the same owner to take advantage of two sets of lower rates.

An exemption is provided for the alternative minimum tax of $40,000. A controlled group of corporations must share only one exemption rather than taking advantage of separate exemptions.

The General Business Credit has a $25,000 limit on the dollar-for-dollar reduction of the tax liability. Controlled group members together face one $25,000 limit.

Section 179, the popular expensing deduction has several limitations. These limitations are imposed on the controlled group as a whole which could drastically change the economics of investment decisions when compared to limitations being imposed separately. However, the IRS recently provided a loosening of this rule for S corporations by stating that S corporations can be treated as separate entities for purposes of the limitations.

Members of controlled groups must apportion pension and profit-sharing items. The application of the controlled group rules to this area of the tax law is highly complex.

There are various 5% and 3% surtaxes which must be apportioned among group members.

As you can see, these Controlled Group rules can have a widespread impact. It is very important that you are aware of them, and what types of benefits they impact. Consult your CPA if you believe they might impact you. It’s better to have your CPA educate you, than some pesky IRS auditor.

BGBC Partners, LLP is a full service certified public accounting and business consulting practice.

For more information, contact Brad Bell, CPA or Steve Reed, CPA/ABV/CFF at BGBC Partners, LLP (317-633-4700).

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