Unique Approach to the 2018 Tax Cuts and Jobs Act Results in Major Tax Benefits for Local Manufacturing Business

Unique Approach to the 2018 Tax Cuts and Jobs Act Results in Major Tax Benefits for Local Manufacturing Business

MANSFIELD, OH.  Ohio Valley Manufacturing, Inc. (OVM) and The Shealy Group partnered to create significant tax savings for OVM by maximizing the benefits found in the Tax Cuts and Jobs Act (TCJA).

In 2018, OVM reached out to The Shealy Group, a CPA and business consulting firm with extensive experience in the manufacturing industry, upon learning of their reputation for generating significant tax savings for select clients by taking advantage of specific regulations enacted by the TCJA.

After a thorough investigation with OVM, The Shealy Group concluded that:

  1. updating OVM’s entity type would provide the opportunity for significant savings for 2019 and subsequent years.
  2. a cost segregation study and an evaluation of research and development (R&D) credits would be beneficial and could provide tax advantages for 2018.

The Shealy Group and OVM leadership worked closely together throughout the project to ensure thorough understanding and confidence across the board, even when complexities and challenges arose. According to Steven Fanello, OVM’s Vice President of Sales, The Shealy Group explained the process in detail, and ensured leadership was on board prior to implementing any changes. “Dave and Brenda [of the Shealy Group] made sure we were comfortable,” he said. “They explained thoroughly the overall process, and they worked well with us throughout.“

Restructuring OVM’s Entity for Maximum Tax Savings
The Shealy Group found that the existing structure of OVM was overall very solid. However, through the TCJA, Congress intended to provide very specific benefits to certain businesses, particularly in the manufacturing industry. The Shealy Group is experienced at applying the regulations unique to TCJA so that manufacturing businesses can maximize tax benefits for 2019 and beyond. And these benefits are not minor; in fact, The Shealy Group helped OVM reduce its tax rate by a whopping 16 percent for 2019 and subsequent years. OVM’s new entity structure will benefit them for many years to come.

OVM’s leadership has been pleased with the engagement: “The project was managed very well,” Mr. John Fanello, President of OVM, said. “The Shealy Group was knowledgeable about our business and what they were there to do.”

Cost segregation study and R&D Tax credits
While analyzing OVM’s financial documents, The Shealy Group and OVM agreed OVM would also benefit from a cost segregation study, as well as a review of R&D tax credits.

The Shealy Group is an alliance member with BDO—a world-renowned and international assurance, tax, and financial advisory firm— and they asked BDO to assist with both the cost segregation and the R&D review. The Shealy Group and OVM trusted BDO, and another one of its alliance members (GBQ) to tackle the large and complex cost segregation analysis. As a result of the combined savings from these two initiatives, OVM saved a considerable amount in taxes for 2018. Again, OVM was happy with the final result: “The process between the three groups was managed very well,” said Mr. John Fanello. “And in fact, we have now put a process in place to record all automation projects for future use of credits.”

Combined, the entity restructuring, cost segregation study, and R&D credit review resulted in very considerable tax savings for OVM. According to Dave Shealy, President of The Shealy Group, his firm enjoyed working with OVM and appreciated their confidence in the overall strategy, as well as The Shealy Group’s ability to guide them through the process.

“We appreciate John, Jeff, and Steve’s trust in our firm. Together, we were able to achieve very significant goals through this project. We look forward to working with OVM going forward and appreciated the opportunity to help them recognize significant savings that truly have a substantial impact on OVM’s business, both immediately and in the future.” Mr. Shealy said.

If you would like to speak with someone at The Shealy Group regarding the 2018 TCJA, or any other tax or accounting matters, please feel free to contact Dave Shealy, CPA, President, at: 419-524-2875.