51. Rick Lazio and Tyler Noesser – alliantgroup – Does Your Business Qualify for Tax Incentives?

Aaron Ackerman:        

Hello, and thank you for listening to this episode of the How That Happened podcast. I'm excited about the content today. I think it's very timely. We're going to talk about several things kind of related to corporate tax, partnership tax. For a lot of us, business tax may be about as interesting as watching grass grow. But it's not about knowing all the ins and outs of taxes, it's about knowing smart people that know all the ins and outs of the taxes. Today I'm going to introduce you to two really smart people that you'll want to know. One, first I want to welcome Mr. Rick Lazio. You may recognize that name. Rick was a four term Congressman in the State of New York, was a gubernatorial candidate, I think in 2010, and currently serves as senior VP with Alliantgroup. We'll talk just a little bit more about what Alliantgroup does. Also, Tyler Noesser is a director at Alliantgroup.

Tyler graduated from Texas A&M with a degree in aerospace, aeronautical and astronautical engineering, and has spent the last six years of his career at Alliantgroup helping businesses take advantage of federal and state tax deductions and incentives to put money back into businesses to fuel growth and really to help businesses be more competitive, not only in the US but around the world as well. I don't want to say I'm just totally intimidated, but I've got a politician, a New York governor candidate, a four term congressmen and a rocket scientist with me today. I'm going to try not to embarrass myself. But Rick and Tyler, thank you guys, both for making time to be on the podcast today.

Tyler Noesser:             

Yeah. Thanks, Aaron. Very excited to be here. Very excited to talk with you guys, and really appreciate the partnership we've had with HoganTaylor through the years.

Aaron Ackerman:        

Yeah, absolutely. We'll hopefully get into some of that, but quickly just tell our listeners a little bit about Alliantgroup. That you guys are a specialty tax firm, what does that mean and how do you work with your clients?

Tyler Noesser:             

Yeah, absolutely. Guys, very excited to speak with everyone today. My name is Tyler Noesser. Like Aaron said we at Alliantgroup, we are a specialty tax consulting firm. We are not a CPA firm, so we actually partner with about 5,000 firms across the country. HoganTaylor is obviously one of the most proactive firms across the entire US in helping make sure that their clients know about specialty tax incentives. Our firm, we are a combination of engineers, like myself, biologists, software developers, PhDs. Folks who have technical backgrounds to make sure that when we work with businesses, we can understand what their company's doing, how their businesses operate and ultimately understand what incentives may be applicable. We also are very fortunate to have folks like Rick on staff. Rick, as well as four former IRS commissioners, a number of different congressional leaders, people from the Senate finance committee, like Dean Zerbe, Dawn Levy.

We've really brought this idea of, we want to take a three-pronged approach to take care of our clients. We have not only the technical folks who can speak peer to peer with businesses, not only the people who came from Congress to understand the intent of the various incentives that are put in place, but then also from the enforcement side, we wanted to make sure we understood what the IRS was looking for in how to appropriately document support and defend this type of work. Because at the end of the day, when you work with small to midsized businesses, taking a tax incentive or taking a tax position, they're not really wanting to do anything that's out of left field. The idea is you want to make sure you feel very comfortable about what you put on your tax return. We really structured our practice around making sure that businesses get what they're entitled to, not a dollar more, not a dollar less. We've had great success with that. We've actually been able to, at this point complete over 60,000 projects and help businesses claim right around $13 billion in tax savings.

When we look at the majority of the clients, these are small to midsized businesses, like what I would imagine most folks listening to this are, and it's dollars back in your pocket. These are real tax dollars that are put back into Tulsa, Oklahoma, and to Oklahoma City, into Fayetteville. It's dollars back into businesses' pockets to re-invest, to hire more folks, to create more good, high paying technical jobs that are ultimately going to strengthen the economy. Yeah.

Rick Lazio:                   

Aaron, it's Rick. I just want to add something here if I can. A lot of the listeners, they may glaze over when they start hearing about tax credits and incentives and deductions, and what does that all mean? What does that translate into ordinary life? I was on the phone last year during the COVID crisis with over 1,000 business owners and operators, helping them think through how they're going to stay in business. How they were going to pay their employees, keep them on board and bridge the huge challenge that they faced as a result of the economic dislocation. What it comes down to is sort of thinking about how they ... When I say they, I mean, a lot of times these are small and midsized businesses. How they can take advantage of the same tax strategies that the America's largest companies and corporations do every single day. Part of that is reducing your tax liability so that you free up, as Tyler was saying, free up more money to reinvest, expand in markets, pay your people more, keep people on, expand your plan, buy some new equipment.

Do all the things that we want companies to do in order to enlarge the pie so that Americans can enjoy a higher quality of life. When we talk about the difference between deductions and tax credits, a deduction is a reduction in your taxable income. Then you pay a tax rate based on that, and your liability is some combination of those two. A tax credit is more valuable to a taxpayer because it is a one for one dollar reduction in your tax liability. These are ways that basically, as Tyler was saying, in which a small or medium-sized, or even a large public company can free up more capital, pay what they were expected to pay through the tax code, and not any more than that. Then again, take that money and rechannel it in ways that provide greater productivity, greater expansion of the pie for all Americans.

Aaron Ackerman:        

Yeah. Thanks for that. That's a great point too. I love the concept of sort of bringing something that earlier in the life cycle of some of these strategies and credits or whatever would have only been available to the GEs of the world, the big pharmas of the world. But you're bringing this kind of enterprise level tax expertise to the small and medium-sized business. As you said, that's probably a lot of our listeners. That is the biggest part of HoganTaylor's client base. Anytime we can really level the playing field for our clients, that is a big win for sure. I appreciate you making that point.

Rick Lazio:                   

One other thing I can see having dealt with a lot of big public companies ... I mean, I was the executive vice president of JP Morgan, 300,000 employees in 60 countries. They have in-house resources that make it possible for them to analyze and understand every potential tax benefit that they might be entitled to. God bless them, they should be doing that. What HoganTaylor does, is effectively becomes that in-house tax advisor and expert. We love working with them because we plug in and together, we try and provide the same level of guidance for perhaps smaller businesses who don't have the resources to have lots of in-house CPAs, accountants, tax advisors, tax lawyers. We can wrap around and provide that for companies so that they get a fair shot. That there's a level playing field and they get the same benefits or access to the same benefits that America's largest companies do.

Aaron Ackerman:        

Yeah, absolutely. Well, let's back out just a little bit kind of high level, watching the news, kind of seeing what's going on in real time, there's a budget proposal at the federal level that's getting a lot of press. Especially the infrastructure bill is being talked about a lot being negotiated between the Democrats and the Republicans. I think this thing started out at almost close to $3 trillion, now it's down to one, and they're still trying to negotiate. No real crystal balls here, I guess, but this is such a big deal right now. Maybe, Rick, if you could give a quick overview on what is in this proposal that business owners need to really be looking at and watching closely. If possible, what do you think would kind of end up being the core legislation that's passed out of this thing?

Rick Lazio:                   

Right. Aaron, when we think about the infrastructure bill, what President Biden has proposed is something called the American Jobs Plan. As you mentioned, at one point when it was initially proposed, it was a $2.3 trillion plan. So by a factor of several times larger than any infrastructure plus plan in history. President Biden, one of the inquiries when there was disagreement between Republicans and Democrats was the scope of what he defined as infrastructure. At some point included things like expansion of Medicaid for seniors and a number of other services that Republicans pushed back on and said, "No, when we think about infrastructure, we think about bricks and mortar. We think about broadband access." But they basically think about traditional modes of transportation in an infrastructure bill. The disagreement was about the scope of how you define infrastructure. It was about the overall dollar size of the bill. The Republicans originally came up with about a half a trillion dollar proposal, and have since increased that to a little shy of a trillion dollars.

The offsets are a big issue here. The Biden proposal was to raise the corporate tax rate from 21% to 28%, a very significant increase. Then there was a number of other tax hikes that were meant to help pay for this additional spending. Republicans thought that the hike was a non-starter on the corporate side and said the country's still healing, business is still healing, this is the wrong time to be increasing taxes. Their proposal was really to repurpose some of the unspent money from the COVID relief packages and to impose user fees, like the gasoline tax, for example, for highways so that the people who were using the infrastructure were paying for the infrastructure. What things have boiled down and had some productive discussions over the last two weeks, the bipartisan discussions, they've closed the gap somewhat. Actually to a large extent, but there are still some very tough issues outstanding. President Biden wants to pay for the new proposal in part with something called ... It's basically a 15% alternative minimum tax or a minimum tax on American corporations having over 100 million dollars in book income.

Book income is just is usually, this is a way of reporting income that's generally for investors as opposed for tax purposes. The negotiation goes on right now. What President Biden is trying to do is to harmonize tax rates among the developed countries around the world. What Republicans and Democrats do agree on now, are an expansion in spending on roads, bridges, tunnels, some rail transit. Democrats want more spending on urban mass transit, but both agree on expansion in rail, both agree on about 65 billion dollars in additional spending for broadband. They're narrowing their differences but there's also a lot of green spending in this potentially, which is another area of controversy. President Biden wants to spend a whole lot more on green energy than Republicans want to. But there will be an agreement that will address more energy efficiency. Including what I believe will be some new incentives for building owners, including publicly owned buildings to make their buildings more energy efficient. This is something that we do a lot of work on, and Tyler and others who have engineering backgrounds have spent time working in these areas.

There's a lot to like in this bill, a lot that will be meaningful to businesses over the next 10 years of spending. But there are still key differences in how much deficit finance spending that will take place and what the tax hikes will be that will pay for it.

Aaron Ackerman:        

Yeah. That's a great explanation. I may be oversimplifying, but kind of from what I've been following, I mean, I think it's reasonable to expect that business taxes are going to go up. I mean, we've heard about the global minimum corporate tax rate of 15%. We've heard about capital gains going up. You mentioned just the regular rate going from 21 to 28. Assuming that some taxes for businesses are going to go up, what does that mean in terms of incentives? Can business owners expect incentives to change or to be reduced as a way of increasing taxes, or maybe would we see new incentives introduced to offset some of the new taxes? I mean, is there anything kind of on the horizon that we need to be looking out for in that regard?

Rick Lazio:                   

Sure. Yeah. As you mentioned right now, it looks like taxes may well be going up. I think if I was planning or advising somebody, a business owner, operator, I would say, "This is probably the low watermark in terms of taxes for the next several years." Look for good likelihood marginal individual rates will go up, corporation rates will go up and maybe limitations in many deductions. In this environment where businesses are looking under every corner of the carpet to come up with ways in which they can improve their liquidity and solvency, and they're anticipating their taxes going up, you have to be vigilant about the tax credits and deductions that are on the book that will help them again, manage their tax liability. The most important one of those, the most powerful one of those, and one in which we helped businesses last year work on to again, improve their solvency, is a tax credit called the research and development tax credit. The research and development tax credit was enacted in the 1980s.

It was originally a federal tax credit that was put in place, signed into law by then President Reagan, passed by a Democratic Congress. It had bipartisan support. It was intended to help support America's technological sort of, I hate to say infrastructure again, but their capacity. Automakers were under threat, if you remember, in the '70s by the Japanese that were kind of eating our lunch in terms of automobile sales and innovation. We were concerned about losing our technological superiority. This as put in place to help really mostly the largest companies that were involved in research that was new to the world. Over the next 30 years or so, including the time when I was in Congress and the issues that I worked on when I was in Congress, it was amended and extended about 15 times. Each time it was liberalized, Aaron, it was made more user-friendly, it was made more accessible for smaller and midsized businesses. It became a tool for competitiveness.

Not just for the biggest companies like the Intel's or the AT&Ts or the Ciscos of the world, but it became very accessible for companies that were simply innovating in ways that were new to them, to that particular company. It might be I'm introducing a change in my automated assembly line. It may be that I am expanding my ability to contain certain things with packaging. It might be that you would provide more durability for a particular product, or you'd test it for heat, for temperature, all kinds of different reasons. Which Tyler can jump in here, I think, and help us with. But basically what I want to emphasize is that it is probably the most important and most powerful tax credit for small and midsized businesses. My greatest angst as somebody who has served as a senior person in the private sector and in the public sector, is that so many small and midsized businesses miss this, or self-censor, or don't speak up and tell their CPA firm what they're doing. They qualify for this, they be getting money, but they're leaving money on the table that they could be using to reinvest in their business.

Tyler Noesser:             

Yeah, I think touching on the R&D credit here, I think it's an incredibly important discussion because like Rick said the context behind it and the name behind it, it's a little bit scary. You kind of think R&D, most people go back to the traditional sense of R&D. They think the patentable pieces. But really kind of to kind of key off of what Rick said, the idea here was when you had patents in place, GE, Pfizer, Merck, Boeing, these companies got great benefits. But Aaron, for HoganTaylor, for your clients, and for the people that you guys work with, these guys they're not filing for patents every single year, nor do they need to, to run a successful business. That's just not ... For the small to midsized businesses across the country, filing for patents every year, isn't a typical part of practice. But finding ways to improve their operation and be more competitive, absolutely is.

Trying to find a way to do better for their customers to create a better mouse trap, or to be more efficient in doing that. These are things that small to midsized businesses need to do to compete. Quite frankly, when you think about trying to create good high paying technical jobs, small to midsized businesses are the job growth sector of the economy. If you really want to have an impact on reshaping or enhancing the economy with good high paying technical jobs that are going to continue to grow and improve the economy, getting into the hands of small to midsized businesses was absolutely crucial. The legislative pieces that Rick was talking about and had an impact on for small to midsized businesses, I mean, those changes of making it towards no longer patents, making it new to the business, is incredibly important. Because when you think about industries, beforehand, sure, Fortune 500 is across the board are filing for patents. Great. But outside of that, you're thinking software and technology, tech startups, the dotcom folks. You're talking about pharmaceuticals and true research.

Now, though, with the major changes that have come, engineers, architects, software developers, construction companies, building automation folks, all these different businesses. It really has expanded to such a plethora of industries, because the idea is across the board, these companies, they're doing very good things and they're creating good high paying jobs. Really this is now about creating and helping to expand good high paying jobs in the US. The patent side, although it obviously still does qualify, but the patent side or the patent piece of this is just a substantially smaller focus now. It's really more about creating these good high paying jobs and helping businesses that have created those with US based employees, it's really an incentive or an encouragement for those folks to continue down that path.

Aaron Ackerman:        

Yeah. I want to highlight something. It's kind of amazing the words you chose Rick to say, I think you said, this is the most powerful and lucrative tax credit available. Or something along those lines. It's been around for decades yet I know in our practice, we talk to clients and business owners all the time when you bring this up, and they've never heard of it. Is that because in the beginning, you were disqualified from this 30 years ago if you didn't have people in your company that wore goggles and white lab coats and were filing for patents? As this thing has been sort of expanded and broadened, that news has just not filtered out. Why is that? Is that a failure of service providers? I mean, obviously business owners aren't going to spend their weekends probably reading updated tax legislation. I guess this is ... Tyler, we work with your team a lot. We see this all the time where we help a client that could have qualified for this years and years and years ago, but just didn't know it was available. Where's the missing connection there?

Tyler Noesser:             

I will say-

Rick Lazio:                   

 

It's just [crosstalk]-

Tyler Noesser:             

Go ahead, Rick.

Rick Lazio:                   

Yeah. This is a couple of things, I would say. The name research, I mean, if you were a business with 50 employees and let's say you're in sheet metal fabrication or you're in plastic injection and you're doing various iterations of molds, you're not thinking that you're doing research. When you hear research and development, as I think Tyler references, it just doesn't seem like it applies to them. They think about it as being what the government does or what NASA does or what big, big business does. That's the first issue. The second issue is, the government itself spends zero time and money really educating small and midsized businesses about the benefit. If they did anything near what they did for PPP loans in terms of getting the word out, then you would have hundreds of thousands of more small and midsized businesses that would be taking advantage of it. In the UK, that's exactly what they do. The government actually goes out there and it promotes their research and development tax credit. That's the second thing.

The third thing is, it has changed so many times, and Aaron, you referenced this, from what it originally was when it was originally enacted. That a lot of their information is obsolete. It is a tragedy that basically only statistically two or three out of 10 small businesses that qualify for the research and development tax credit take advantage of it because they largely self-censor. That's why, again, HoganTaylor plays such a critical, critical role in bringing this knowledge and information to its business clients to allow them to level the playing field and take advantage of this credit. Which I will tell you as somebody who was there in Congress and supporting these efforts, these businesses were exactly the businesses that we primarily were thinking of and were interested in. We knew that the big businesses could take care of themselves largely. They could use the credit. We wanted them to use the credit from a competitive standpoint, but we really were thinking more about small and midsized businesses and making sure that they were getting the support for their innovation and creativity.

So that, again, ultimately we're expanding the pie and that's helping workers. It's a technical jobs credit. One of the things, I think Tyler referenced this, that's great about this, is that it promotes jobs here in the US. If you're an employer and you're outsourcing overseas, this credit is not for you. It's really to help businesses that have employees here in the US that are technical in nature.

Aaron Ackerman:        

Yeah. Awesome. Okay. Let's drill down a little bit. I want to talk about some specifics, and our listeners can start to think about their business and the activities they're engaged in. What are, maybe if there's a handful of industries that are sort of typically you see this as just a home run of an industry for qualifying for the tax credit? Then kind of the followup on that is, maybe for someone who's not in one of the sort of home run industries, what other activities do people need to think about that may qualify them for tax credit? Because I know, Tyler, we've seen our mutual clients companies that initially thought this isn't for me, but as we kept asking questions, we find, "No, you developed this software, you did this activity that qualifies." We end up with a pretty significant benefit for a client. Maybe talk about sort of just from a high level industry level and then drill down on some specific activities that could cross into some unexpected industries.

Tyler Noesser:             

Yeah, absolutely. Aaron, to take a step back of what you said, we've seen a lot together through the years. I think now, we've partnered with your firm for about 15 years. I think overall we've helped HoganTaylor clients with over $18 million in tax savings. I know that number is basically going up every day. We've seen a lot together here. But kind of to allude or to key in on what you said, it's actually interesting because what applies now from an industry's perspective is actually different than probably five or six years ago. That's even different from 10 years before that. One thing I always want to say is, when we talk about industries, when we talk about folks that qualify, it's not static. It's very, very dynamic. Because as changes occur, really what we've seen is that pretty much every change over the past 20 years here, the 15 plus changes that have occurred, they've almost all been taxpayer friendly and they've all been promoting more and more folks getting involved with this as business has continued to evolve with the evolving landscape here.

But if we want to kind of key in on primary or core industries, I'd say, if you want to go with kind of your bread and butter ones, engineering, architecture, life sciences, manufacturing. Obviously you have software and tech and construction companies, like I mentioned before. But another one that you want to look into, and I know for folks in Oklahoma and Arkansas, oil and gas is absolutely a prevalent piece. Whether it be upstream, midstream, or downstream there's opportunities across all of those areas. Agriculture, agribusinesses are folks that have tremendous opportunities because the changes that they're having to make on a year in year out basis. Farmers and agribusinesses are really some of the backbone of the US economy. The opportunities are tremendous for them. One area, and this is kind of what I was alluding to about changes, that I would say is actually a very, very interesting one is distribution businesses. If you think about a typical distributor, I would say that industry has evolved almost more than anything else over the past decade. It's interesting because of Google and Amazon.

Think about 10 years ago, you have a typical distributor that if someone needed one part or one component, they'd call distributor, they'd buy that one part and they move on. Nowadays, if you know exactly what you need, you're not going to call someone. You're just going to get on Google or Amazon and you're going to buy that one part. Then 24 to 48 hours, it's at your front door. Now, when people call a distribution business, in most cases, they're not looking for a one-off type part. They're calling with, "Here's my situation. Here's where I'm at. Here's the facts, or here's what I'm trying to get this connected in with." They're calling about a solution. They're calling about a problem. These distribution businesses now have folks that are understanding the backgrounds, they're understanding what's going on, and then trying to help create a customized tailored solution for that individual component. That type of consultative sales process or that evaluative area, that's exactly where this is now.

It's that idea of, if you're trying to create site-specific or custom solutions for a project by project or for a customer by customer application, that's exactly where this comes in. Aaron, to your point, I think you'd mentioned, let's say someone is not in this area. Someone's in a completely different thing. Let's say they're in real estate, they're a real estate company. But to try and be more efficient and try and make their operation more effective, they've started to bring in different types of technology. They've started to try and find new ways to evaluate their individual performance. They're trying to find new ways of tracking markets and trying to find ways to ultimately improve their market share. To try and expand their company. These investments in technology, these investments in people, in how you're trying to improve, expand, and enhance your operational efficiencies, these are all areas that this is really designed to encourage. Because as Rick and I have alluded to, this is really about technical jobs. The folks that are going to be the ones who are evaluating what software do we want to bring in?

How do we want to evaluate? What are the metrics that are important to us? How do we use that information to enhance our business? Then operationally, how do we implement those changes to make sure that we're maximizing the results? Any of those technical evaluations along the way, the folks that are doing that are generally good, high paying jobs, and that's where this continues to snowball. You continue to bring in more people, you continue to try and expand your operations, and you continue to get dollars back with this incentive. It's a tremendous opportunity and it's actually permanent now. As of 2016, Congress made this permanent. For a number of years, this incentive was on the extenders package. Every couple years, Congress had to re-up it, reaffirmed that they wanted to keep this around for businesses. That's no longer the case. This is actually something that businesses can continue to use and expect to have around for years to come now.

Aaron Ackerman:        

Yeah, that's great. One thing I think and I know you'll echo this, but I really want to just emphasize, companies, business owners should not disqualify themselves. [crosstalk]-

Tyler Noesser:             

Agreed.

Aaron Ackerman:        

... you've mentioned sort of self-censoring or whatever, and that happens a lot. Not everybody is going to qualify for an R&D tax credit or for one that is a big enough benefit to go through the cost of getting the study completed. But man, I would just encourage companies to not disqualify yourself. We've seen a lot of companies that, like I said earlier, you keep asking question after question, and you finally find that activity that qualifies. It's really important to not disqualify yourself. Let me ask [crosstalk]-

Tyler Noesser:             

Yeah. Aaron, if I could jump in there real quick, I think that's probably one of the biggest things. Because for example, a very simple example here is, we had a client very recently that they were claiming the R&D credit internally. What they were claiming was for their internal product development. They were actually trying to create new products to bring the marketplace. Their general business though, was a custom fabrication business. They actually took in orders, they developed fabricated components for their businesses, and it was very custom, very site-specific. They didn't have a whole lot of repeats. Most of what they did was a one off or two off type order. What they had been claiming was the internal product development, because a number of years back, they had been told and when they looked into this, that because they were getting paid for their work, they couldn't qualify. Kind of going to what you said about self-censoring, even if you've been told something in the past, legislatively, this incentive is so much different today than it was a decade ago. That, that company, they were claiming probably 15 to $20,000 per year.

We actually ended up getting them almost a million dollars across the entire study because their work, now, the way the legislation works, it was incredibly customized. And we were able to capture a lot of their projects for this incentive. The idea of self-censoring and making sure that you're not preventing yourself from looking at today's current legislation. Or even if you've been doing this for a number of years, if you haven't updated your program recently, if you haven't looked at the current aspects of this, it's incredibly important to go back and reevaluate. Make sure that you're looking at this and look at it with the help of a trusted partner. For people who are working with HoganTaylor, talk to HoganTaylor. Ask if they've seen other businesses get more value than what they're getting. Talk to our firm.

We do gratis assessments with people every single day to see one, if there's a potential program in place, are there expansions or enhancements? Two, if there aren't, if there isn't a program in place, should there be one? If so, what would that look like? Because I think that right now with the COVID landscape and people coming through recovery, trying to get cash back to businesses, especially in today's landscape is incredibly important.

Aaron Ackerman:        

Yeah. I'm sure somebody just perked up when you said they went from $15,000 credit to a million dollar credit. I think that's such an important point that you maybe didn't really qualify five years ago. You've gone through this process with somebody like Alliantgroup and either you didn't qualify or it wasn't a big enough credit to really mess with. But just because that was the case then, it doesn't mean that's the case now. The other thing I'll just mention, and we've talked to a lot of our clients about really looking at just the last year and a half. Businesses across the country, across the world, have had to make innovations during the pandemic in order to continue serving their customers.

Whether it's building an app or a website for online ordering that wasn't a big part of their business model before. Or just all kinds of innovations that people have made so that they can try to stay in business to keep serving their customer base. Things that they had to do through this kind of acute time in history because of the pandemic, maybe now opened up an opportunity for them to qualify for an R&D tax credit.

Tyler Noesser:             

Yeah, absolutely. Because when you kind of look at Congress and this incentive it doesn't put any type of discouragements on forced change. I mean, I think everyone can say that over the past year and a half now, or I guess just going over a year, there have been required changes. People have had to make adjustments to comply with state, local and federal regulations or else their business would be dramatically impacted. Folks were doing everything they could to try and innovate, stay on top of things, find new business processes and trying to find ways to be successful. That type of innovation or that type of evaluation of how to continue to conduct your business, I think it's incredibly well said, Aaron. Now is a great time to go back and look at it because even though a lot of those things were forced, they still can qualify you for value. I think that's an incredibly important point.

Rick Lazio:                   

I just want to ... On this point, it might not just be because ... You might not have a situation where I had to build a new app. Maybe that I needed to keep my workers safe and so I had to erect barriers on the assembly line or on production. Or I had to change my process on the manufacturing side to adapt to this new reality so that my workers would come in and feel confident and safe. There are lots of different ways in which a business adapts to a situation. It might be through iterations of a product or a service to get closest to the goal of meeting the customer's needs. But it might also be internally to make sure that your production is efficient, is reliable, durable, and that your workers are safe. In that context, things that you did during this COVID period could well qualify for the research and development tax credit.

Aaron Ackerman:        

Yeah. Awesome. That's a great point. Let's talk mechanics just a little bit. One of the things I love about the way you all work with clients is, there's not a big risk of kicking the tires on this. It's not like someone's going to end up spending 15, 20, $25,000 in fees and then not get a benefit. Maybe just talk a little bit about the mechanics of why this is sort of no risk, low risk for a business to go down the path. Then whether they end up qualifying or not, sort of how that works.

Tyler Noesser:             

 

Yeah, absolutely. I think one of the things that Rick said earlier is incredibly important to that comment. Because Rick said from the legislative side, when this was put in place and the changes were made, the focus was small to midsized businesses. Our firm has kept that mentality in mind all the way through. Our primary customers and our primary clients are exactly that, small to midsized businesses. We've developed a process and we've developed a way to evaluate companies with the idea of, look, a lot of companies don't have, as you alluded to 15, 20 grand to just shell out to check on something. I mean, a lot of our companies are trying to make ends meet, particularly right now just to get through the next day. What we do is, with the help of HoganTaylor or other firms or different folks, when we meet a business, we start out with an initial assessment. Myself or someone like me, someone who's technically trained has worked in this incentive for almost a decade now, will talk with the company, understand the facts. What's the operation? What's the work you guys do? How do you guys conduct your business?

What changes have occurred through the years? What employees do you have on staff? Very, very basic high-level questions. Understanding what the company does, what its focus is, what its primary endeavors are. Then from there, we go back and do trending and benchmarking. Because at the end of the day, every business that we work with, and Aaron, I'm sure every one of your clients that has ever spoken to us has basically come back, and the evaluation is very simple. They want to know three things. What's the time? What's the value? What's the cost? Once you know those three things, you can very clearly put together, does this ROI makes sense for me? Is this something worth putting time into? Our company, we do a gratis assessment to figure out whether or not we think the project is worthwhile. We present all that information back.

Even then though, even let's say that we start a project and everything sounds good, everything looks good, even if we do continue down the path and we look at starting a project, we're completely success-based. If we ever realized that there is something that prevents a company from capturing credits or we understand that we can't help them down the road, there's never a fee for any of the work we do. The only way that we ever charge for our work, is if we actually agree that it makes sense to investigate, and then we find value for the business that's meaningful. Otherwise, there's never a time where someone would get charged for an assessment that doesn't pan out and there's no credits that are identifiable for their business.

Aaron Ackerman:         Yeah. That's great. The other thing that's important to think about with this is, and I've seen this with clients many times, once you see that there is an opportunity, that there is an ROI and it's worthwhile, you can complete the study on all open tax years. Which usually means you can go back to up to three tax returns and amend those, take the credit, which will carry forward. If you have a year without taxable income, or that isn't enough to offset the credit, you can carry that forward. There's some immediate opportunities potential there.

Tyler Noesser:             

I would say for particularly, let's take oil and gas, is a great case study for this. 2020, for most oil and gas businesses, was quite possibly the worst year. I mean, outside of let's call it 2013 or 2014, when it hit, what, $20 a barrel? But on top of COVID, you had the Saudi, Russia trade war going on. Let's say an oil and gas company last year had just an incredibly bad year. They had a very challenging year. They didn't pay any tax because of it. The great part about this incentive is, as you alluded to, you can actually go back and recoup dollars from before then. That could actually end up creating a cash injection, because these dollars, if you've already paid them, you can get them back. You can get them back in the form of cash refunds.

These are dollars that are coming back to businesses and business owners right now to help get them through whatever challenges they may face. Even if there is a tough year or even if COVID was challenging or right now, 2021 may be a tough year, even if that's the case, now is still a great time to revisit. Because to your point, if there's been any taxes paid over the past three, four years here, there may be a way to put some cash back in your pocket.

Aaron Ackerman:        

Yeah. One other thing I want to touch on, Rick, earlier, you mentioned, I think the concept of part of the service that Alliantgroup does is defending the tax credit. I know occasionally I talk to clients about this and they say, "Gee, yeah, that sounds great, but I don't really want to raise my risk profile for an audit." Right now, even this morning, I was listening to a report on the way into work that part of this new Biden plan is going to be IRS enforcement and there's going to be a proposal for thousands of new IRS agents. Maybe speak to how risky or unrisky this is to have an R&D tax credit on your tax return from the standpoint of, is it likely to get audited? If they do get audited, how often did these things get challenged, et cetera?

Rick Lazio:                   

Right. Let's start with the point, Aaron, that again, Congress, and this is on a bipartisan basis, intends for small and medium-sized businesses to take advantage of the research and development tax credit. It was intended for businesses just like your clients. That's number one. Number two is, because our compliance area in Alliant aligned is headed up by a former IRS commissioner, Mark Everson, who was the IRS commissioner under former President Bush from 2003 to 2007 ... As well, we have a former acting commissioner of the IRS who headed up their legal department, Steve Miller under President Obama. We have people that served and headed up the IRS during both Republican and Democratic administrations. We have dozens of lawyers that are focused on quality control and compliance. We are extremely cautious and conservative about our approach. That's exactly what HoganTaylor demands of us to make sure that we are absolutely confident every number and every study. Keep in mind, we do more of these research and development studies than any other firm in the nation, including the big four in terms of pure volume.

We're very, very good at this. In the unlikely event, and it is unlikely, people are no more likely to be audited, for example, because they claim a research and development tax credit than if they did not. The same basic audit rates. You're not increasing your odds of being audited simply because you're taking advantage of a section of the law that Congress intended you to take advantage of. That's the first thing. In those situations, we provide full audit defense. We are there standing behind all the work that we do, all the way through to the bitter end. In these situations, where things actually do get settled, the rate is 98 or 99 cents on the dollar is retained for the taxpayer. In those situations where we end up with anything less than that, it is almost always because the taxpayer says, "I don't want to fight this anymore. I just want to take whatever money I have and I want to move on." But in those other cases where we are permitted to be able to protect the taxpayer, we're getting enormously positive results. We've got all these layers of compliance quality control.

We're protecting the taxpayer throughout. We're providing audit defense at no additional cost to the taxpayer. In this situation, we're wrapping everything together. We're saying, if we do the work for you with HoganTaylor, and if for some reason you're challenged with an audit, we are going to be there for you, and it's not going to cost you any more money. We're going to stand behind our work because we're so confident of the quality of the work that we do, and the fact that we are going to prevail, and you're going to have your full deduction protected.

Tyler Noesser:             

 

Yeah, that's awesome. I think a really funny anecdote to that point, when Mark Everson ran the service, he told a funny story. He said, "When he was in office there, basically when a Fortune 500 filed a tax return, that was their opening offer." He actually expected that the initial return they filed was what was going to be ultimately approved. It was their opening offer. Our clients and your clients are not that way. Our clients are focused on, when they file something, they want it to be correct. We have made sure that we set up processes. We've made sure we brought in folks to understand not only the intent, but also how it's enforced. To Rick's, point to make sure that at the end of the day, when you file this, when you take these incentives and you use them the way that they're intended to, you're getting the dollars you're entitled to. not a dollar more, not a dollar less.

Aaron Ackerman:         Yep. Kind of wrapping up here, I know we've spent most of our time on R&D and as it should be, that is probably one of the biggest opportunities out there. But as a specialty tax firm, that's not the only thing you guys focus on. Tyler or Rick, is there anything else you want to just sort of, at least make mention of that people need to be thinking about as far as tax opportunities in their business.

Tyler Noesser:             

Yeah.

Rick Lazio:                   

It's ... Go ahead, Tyler.

Tyler Noesser:             

Yeah. I would say that right now, one of the biggest things to look at is, as part of the CARES Act last year, there was the employee retention credit was put out in conjunction with the PPP. One of the biggest things and one of the biggest misconceptions about that is, at the time when it was put out, it was an either/or. If you took the PPP, then you could not take the employee retention credit. As of late December of last year, that's actually been amended. It's actually been further expanded to where now sitting here in 2021, you have the opportunity to claim a potential payroll tax credit. A different type of tax, but still tax credits for a business for the employee retention credit. With this one, Aaron, I think you and I have talked about this as well, it's a very powerful incentive. It's one that rivals the R&D tax credit in terms of potential value for taxpayers. It's absolutely something that folks should take a look at and take an evaluation of, because quite frankly the dollars are there for businesses.

The focus is once again, helping to have businesses keep their employees on staff, helping to make sure that they're getting the cash needed or whatever COVID impacts they may have experienced. Whether it be state, local, federal shutdowns. Whether it be impacts to supply chain. Whether it be clients of theirs that had to postpone or delay, or potentially even cancel projects because of some type of COVID related experience. There's now a way for businesses to recoup dollars for that, and it could actually be thousands of dollars per employee. Kind of following the same vein of R&D, the 2020 version was something that when it was put in place, there was a limitation of 100 people. That's actually been expanded now for 2021. It's now to 500 people.

They've also said, even if you are past those thresholds, there's still ways for you to get dollars back. I think along with the R&D tax credit, which is more industry specific for technical jobs, the employee retention credit for every business owner is something that they absolutely should look into. It's something we'd be more than happy to evaluate and see whether or not that's another way that they can potentially put cash back in their company quickly.

Rick Lazio:                   

Tyler, one other thing I would say, because this gets back to self-censoring again, because the original research employee retention credit was part of the CARES Act, as you mentioned, back in March of 2020 and there was a fairly strict interpretation of how a business would qualify for that, you had to demonstrate a particular reduction in revenue. People may have remembered that earlier version and may not be aware that not only has that you have to demonstrate a far more flexible or less reduction in revenue in order to qualify for the newest employee retention credit, but, and more importantly in a way, there's a whole different pathway to qualify that has nothing to do with having to demonstrate a set reduction in revenue. That's where we're finding most small and medium-sized businesses are qualifying that we're helping right now. Don't just say, "I didn't see a 50% reduction in revenue." Or,             "I didn't see a 20% reduction in revenue, and so therefore I didn't qualify." Really try and get a tax professional like HoganTaylor and have a conversation.

As Tyler mentioned, there may be a number of different ways, your sales force couldn't get on a plane and fly. You weren't able to make a plan. Even though your revenue didn't drop dramatically, you weren't able to take advantage of your business plan because of COVID and that handicapped you. Or as I think Tyler mentioned also, your suppliers or your customers had extreme difficulty because they was shut down as a result of a government directive, and they couldn't buy from you. We're finding lots of companies qualifying for reasons other than the fact that their revenue dropped by a particular percentage.

Aaron Ackerman:        

Yeah. That's great and really important. I think maybe if I had to say, there's one big takeaway here with whether it's R&D or the ERC, or even other things, is to get help, don't disqualify yourself because there's benefits absolutely out there and they're fairly complex. Alliantgroup or somebody like that can help qualify you and you may have thought, "This isn't for me."" I think that can't be underscored enough, really.

Tyler Noesser:             

I completely agree. I completely agree. It's a gratis assessment, it's a gratis evaluation, but at the end of the day, if there is something that qualifies at the end of the day, these are dollars that should be in your pocket. They're currently sitting in D.C. I think we can all agree that dollars back to an Oklahoma city or a Tulsa or a Fayetteville business are better than, no offense, Rick, dollars sitting in D.C.

Rick Lazio:                   

I completely agree.

Tyler Noesser:             

Yeah.

Aaron Ackerman:        

Well, thank you guys so much. How can people listening, if they want to reach out, get in contact with Alliantgroup, what's the best way for them to do that?

Tyler Noesser:             

Yeah. On our website, there's a contact me form that you can fill out where it'll ask a little bit of information about your business. It'll ask where you heard about us, some industries, total number of employees, things of that nature. Then someone will reach out very quickly. Or if you want to reach out to me directly, my email address is Tyler T-Y-L-E-R period, Noesser N-O-E-S-S-E-R@alliantegroup, A-L-L-I-A-N-T-G-R-O-U-P.com. They can reach out to me directly and we can set up a conversation to see whether or not there's anything there. But would love to speak to anyone about this and see whether or not there's any type of opportunities to continue to put dollars back in businesses' pockets.

Rick Lazio:                   

Again, no risk, no cost for the initial evaluation.

Aaron Ackerman:        

Yeah, that's right. Well, thank you guys so much for that information. I think that's really valuable and timely kind of given where the tax landscape is right now. Really, really appreciate it.

Rick Lazio:                   

Thank you, Aaron. really appreciate [crosstalk]-

Tyler Noesser:             

Yeah, and we appreciate the opportunity.

Aaron Ackerman:        

Yeah. Great. As we talked about, one thing we do with our guests is we have sort of some fun questions to wrap up with, kind of the final five. We kind of drew straws beforehand, so I'm going to fire those that you guys now if you're ready. [crosstalk]-

Rick Lazio:                   

We're ready.

Aaron Ackerman:        

... the first one we'll start with Rick, but this one goes for both of you, what is the first way you ever made money?

Rick Lazio:                   

My gosh. My dad had a little auto parts store, and if I wanted to buy a new [inaudible] or whatever, I had no allowance, he didn't believe in allowances, so I had to work there. But really my first outside job was working on mosquito control, which was just a distinctly unpleasant experience that I think my dad privately loved because he wanted me to know the value of work and that all work is not always totally rewarding and fun and pleasurable. Sometimes you do things because you need to put food on the table and you need to pay bills.

Aaron Ackerman:        

Yeah. Mosquito control, I'm assuming that included some chemicals or something that wasn't necessarily fun to smell all day. Is that right?

Rick Lazio:                   

Right, exactly. Nasty.

Aaron Ackerman:        

Yeah. Rick, are you a born and bred New York? Was this at New York growing up?

Rick Lazio:                   

Yeah. I was born and bred here in the suburbs of New York, again, in a little town. We grew up a little Cape Cod house. My dad was one of those people that work six and a half days a week. He owned a little auto parts store with four employees.

Aaron Ackerman:        

All right. Tyler, first way you ever made money?

Tyler Noesser:             

Well, very similar to Rick, my dad basically said that any chores I did was the cost of living under the roof. When I was 12, I think I was either 12 or 13, I realized that I really wanted to take a couple of girls to go to a movie from time to time. My dad let me borrow his lawnmower and I just went door to door. If anyone would let me mow their yard, I'm not saying I did a great job, but they probably put a little pity on me and gave me some opportunities to mow their yard. When I was 12 or 13 year old, I think I had seven to 10 customers around the neighborhood where I'd show up Saturday. For probably six or seven hours, I was just mowing yards. But when you got to take a girl to the movies, it all seemed worth it.

Rick Lazio:                   

Man, Tyler, 12 and 13 taking girls to the movies, yowza.

Tyler Noesser:             

Yeah, that's right.

Aaron Ackerman:        

That's great. You both kind of mentioned the allowance thing, which is funny. My very favorite thing in life right now is when one of my kids tells me that I owe them money. I'm like, "Okay. We're going to have to have that conversation. Okay."

Tyler Noesser:             

When there was mosquito control.

Aaron Ackerman:        

That's right. Rick, you've done a lot of interesting things, including being in D.C., running for governor. You've been on boards, now you're helping people at Alliantgroup. But if you had followed a completely different career path, if you did something else, what would that be?

Rick Lazio:                   

I had a gig with CNN for a while where I was an analyst. I would say one of the things I really loved doing was hosting shows. If there was another direction that I would have went into, I probably would have went into that direction.

Aaron Ackerman:        

Yeah, that's interesting. I'm sure you've done ... I mean, you'd had the gig at CNN, you've also just in your roles have done tons of media over the years. That's really interesting.

Rick Lazio:                   

Yeah. It's always fun to do what you're doing, to sort of interview people and to try and get at their essence and educate an audience. Of course the media these days is different than it was 10 or 20 years ago, so that's a whole different conversation. But that's probably the direction I would have went into if I went into a different career.

Aaron Ackerman:        

Yeah, very cool. Rick, what would you like to go back and tell your 20 year old self?

Rick Lazio:                   

Well, I would like to tell my 20 year old self to have more confidence when I was in bars at 20 years old.

Aaron Ackerman:        

That's great.

Rick Lazio:                   

I was afraid of approaching the girls.

Aaron Ackerman:        

Yeah.

Tyler Noesser:             

You're saying you weren't taking them to movies when you were 12 and 13?

Rick Lazio:                   

Yeah, [inaudible]. Absolutely not.

Aaron Ackerman:        

Tyler was a prodigy, the rest of us had to wait a little longer.

Rick Lazio:                   

Prodigy, exactly.

Aaron Ackerman:        

Rick, what would you title and why, what would you title your autobiography?

Rick Lazio:                   

If I had an autobiography, I'd tittle it, a purposeful life. That because I think I was sort of raised to have a sense of mission in everything that you do. Like what I'm doing now for Alliantgroup, I have a passion for helping especially small and midsize businesses level the playing field, get their fair share and invest and grow so that they can hire more people. That serves more families and communities. I believe in the mission, as I did when I was in Congress. Again, everything I think I've done, I've thought about what's the mission or the purpose of why I'm here and I'm doing.

Aaron Ackerman:        

Yeah. Man, that is so good. I think about that a lot just in my life. There's a temptation to say yes to everything. I mean, you like to please people. One way to think about it is, when you say yes to something, you're saying no to an infinite number of other possibilities. But every few years, almost like spring cleaning, I like to and I kind of have to, take stock of what am I doing with my time, what am I involved in? Invariably, I find like I'm spending time on things that I'm not passionate about, I don't feel are really moving the needle for me, my family, my clients, my friends. Then just kind of have to make that readjustment to, like you said, live a little more purposeful life to make sure that I'm doing things of significance and impact and not just doing things. I think that's beautiful.

Rick Lazio:                   

Thank you.

Aaron Ackerman:        

Last question for both of you guys. Tyler, we'll start with you. What is the best advice that you've ever received?

Tyler Noesser:             

Sure. I would say it was [inaudible] grandfather. When I was growing up, he lived in a small, small town outside of Hope, Arkansas. If you know, Blevins, Arkansas, a town of 300 people. Very, very small. He was the basketball coach there. A great man, he was recently inducted into the Arkansas Hall of Fame for basketball coaching. But when he told me and it still holds true today, because he had asked me to help him out with something and I said, "I'll get to it." He said, "You're not really working that hard." I said, "Well, I work hard when I want to." He said, "Look, anyone can work hard when they want to. It's easy to work hard when you want to. You want to be the person who always works hard because that's how you set yourself apart."

I think that that's something that from that day forward and really to this day, when you want to put your name on something, when you want to put your stamp on this life and in what you're doing, to Rick's point a purposeful life, if you want to be the person who works hard when they want to, that's fine but you'll fall behind. I love the idea of set yourself apart by always being the person who puts 100% into everything they do. Whether it be your work, whether it be your home life, whether it be your friends or your relationships, do everything with meaning and work hard in everything you choose to do.

Aaron Ackerman:        

Yeah. That's great. Rick, what about you? The best advice. Anything [crosstalk]-

Tyler Noesser:             

Yeah. The best advice was from my dad life advice. He would say to me, "Show me your friends, and I'll tell you who you are." It was a reminder of being thoughtful about who you surround yourself with, the situations you put yourself in, and the values that you collectively shared with this circle of people that you spend your time with. It's been a great lesson for me throughout my life, including in politics and in business in thinking about the quality of the people that I surround myself with. Whether it's a situation where I share those values and that character and in those situations where that might not be the case, I'm quick to edit.

Aaron Ackerman:        

Yeah. That's awesome. Well, guys, I think we're about out of time. Thank you again so much for your time, Tyler and Rick, and for sharing kind of some personal stuff. I love that and that transparency, and more importantly for just helping get the message out about some of the tax credit strategies, which can really make a huge difference to people and their business. Thank you so much for the time and we'll talk to you soon.

Tyler Noesser:             

Thanks again, Aaron. We appreciate it.