With a potential recession on the horizon, we know you want resources to help your business master the moment. We've put together our Agility & Excellence Resource Center to bring you strategies and solutions with a finger on the pulse of what's ahead.

In today's economic climate, businesses are facing a range of challenges, including the threat of recession and the rising costs of inflation. To overcome these hurdles, it's essential to be proactive in finding ways to reduce costs and increase efficiency. One way to achieve this is by taking advantage of the various tax breaks available to businesses.

Significant cost savings may be available whether you're renovating or newly constructing your office space, seeking to improve your products or processes, or simply looking for ways to relieve the burn from the pandemic. In this article, we'll delve into three tax incentives that are particularly well-suited to this moment: the 179D deduction, the Research & Development (R&D) credit and the Employee Retention Tax Credit (ERTC). By taking a closer look at these credits, you can better understand how they can benefit your business and help drive success, even in the face of economic uncertainty.

Meet Your ESG Goals With 179D

During a recession, prioritizing environmental, social and governance (ESG) frameworks is more important than ever. Pursuing ESG goals is not only in line with looking toward a more sustainable future, it can also help to position your business for long-term success. And if you're planning to construct a building or renovate a current one, the enhanced 179D tax incentive can help you achieve these goals with significant cost-savings attached. The tax incentive offers a chance for your company to prepare its real estate for the future, meet your ESG goals and save money in a way that will make your stakeholders sit up and take notice.

As one of numerous clean energy tax incentives signed into the Inflation Reduction Act (IRA) last year, enhancements to the Commercial Buildings Energy-Efficiency Tax Deduction (Section 179D) encourages builders and building designers to create energy-efficient commercial buildings. The modifications increase the maximum tax deduction from $1.88 (in 2022) to $5.36 (in 2023) per square foot and lower the required minimum savings in total annual energy and power costs from 50% to a 25% reduction. Also, notably, it removes the lifetime limit, allowing the 179D deduction to be taken every three tax years, or four in some situations; previously, the deduction was permitted only once over the life of the building.

In addition to the significant tax savings available through the 179D tax incentive, another benefit is often overlooked: the opportunity to build relationships with contractors. Many contractors may not be familiar with this tax incentive, so taking advantage of it can help establish yourself as a forward-thinking and innovative partner.

With the bolstered 179D applicable for projects beginning in 2023, now is the perfect time to consider energy efficiency retrofits and renewable energy installations and see where the incentive can be applied.

Build Efficiency With R&D

Another strategic move that can help you weather economic turbulence is the R&D tax credit. By utilizing the R&D credit when many companies are cutting back on these initiatives, you can gain a competitive edge and set yourself up for future success.

When many people think of R&D, they picture companies creating cutting-edge products or groundbreaking technologies. However, the R&D tax credit applies to activities much broader in scope. By taking advantage of this valuable credit, you can establish processes that create greater efficiencies, streamline your business and add value to your company's future — all of which can be particularly beneficial during a recession.

Another compelling aspect of the R&D tax credit is that many companies may already qualify for it without even realizing it. To qualify for the tax credit, a project must involve some level of risk and uncertainty and result in a new or improved product or process. Suppose your organization has installed new equipment or incorporated new technology recently and had to make changes uniquely to your operation. In that case, it may be worth exploring if you qualify for the R&D tax credit.

See if You Qualify for the ERTC

The ERTC has gone from being one of the most overlooked tax credits to one of the most popular, with companies across a wide range of industries taking advantage of its benefits in just a few short years. However, despite the widespread advertising and recent controversy, as well as IRS skepticism surrounding the ERTC, many companies still have questions regarding the credit and who is eligible for it.

Introduced as part of the CARES Act in March 2020, the ERTC aimed to help businesses retain their employees during the COVID-19 pandemic. Initially, companies that received a loan forgiven under the paycheck protection program (PPP) were ineligible to claim the ERTC. However, this prohibition was lifted, and the tax credit became popular.

The ERTC is a payroll tax credit based on quarterly wages paid during 2020 and 2021, and eligibility is determined in two ways: a decline in gross receipts and whether an organization experienced a full or partial suspension during the pandemic.

Despite being a valuable tool, navigating ERTC eligibility requirements and tax credit calculations can be complex due to more than two years of changes and updates. Incorrect filings or taking risky positions can result in severe consequences from the IRS. This makes it critical for companies to work with experienced professionals who can help them understand the nuances of the credit and ensure that their filings are accurate and compliant. With the proper support and guidance, businesses can take advantage of the ERTC to stay afloat during a recession and maintain a defensible stance during an IRS audit.

It's important to note that the credit starts to expire on April 15, 2024, so companies still have time to claim the credit but should not delay. And unlike many consulting firms, professionals engaged in the practice of public accounting will never charge fees that are contingent on the success or amount of the claim, allowing businesses to keep more of their hard earned dollars.

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