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TAX MATTERS

may provide online portal access to and determine their eligibility and African and Oceanic art at Sotheby’s,
the taxpayer to update the election to qualification for this incentive due to the large international brokerage
claim the R&D tax credit offset against the inherent complexities of the R&D company specializing in art, jewelry,
payroll taxes, the PEO is typically credit and the payroll tax offset rules. and collectibles. He held this position
responsible for filing the appropriate through 2015, becoming proficient in
payroll forms on behalf of the taxpayer. — Pinky Shodhan, CPA, J.D., LL.M., evaluating African art, and worked
These filings would include the amount MBA; Clay Chaberski, CPA; Nick directly with Sotheby’s appraisal de-
of payroll tax credit elected by the Perry, E.A.; Monica Bambury, J.D., partment in providing formal appraisals
taxpayer on its timely filed return that LL.M.; and Kevin Benton, E.A., are for these items.
included Form 6765. The instructions with Grant Thornton LLP. In 2007, Schweizer filed his first U.S.
for Form 8974 provide filing require- income tax return. On the advice of a
ments for PEOs, including specific colleague, he hired a local accounting
instructions where PEO customers firm to prepare it and continued using the
claim the payroll tax credit. firm in the following years. Also in 2007,
Schweizer began to donate African art
FURTHER CONSIDERATIONS from his personal collection to museums.
Taxpayers should be aware that in some He contributed works valued at $60,000
instances it may be more beneficial to in 2007, $100,000 in 2009, and $5,000
compute a gross R&D credit and add in 2010 and took charitable contribution
back the amount to their deductions deductions for the contributions in each
rather than compute a net credit under of those years.
Sec. 280C. This can occur when the net During 2011, Schweizer donated a
credit does not meet or exceed the cap sculpture by the Dogon people of Mali,
in place for the payroll credit. Since West Africa, to the Minneapolis Institute
the maximum will double for tax years of Art. Prior to filing his return for that
beginning after Dec. 31, 2022, more year, his accountant filed a statement of
taxpayers may need to evaluate whether value with the IRS, seeking assurance
forgoing the Sec. 280C election could Taxpayer’s charitable that the Service would accept the value
deduction for artwork
be more advantageous for federal and as claimed (see Rev. Proc. 96-15). The
state tax purposes. donation denied statement of value included a 1½-page
Taxpayers should also consider tax appraisal of the Dogon sculpture by
planning opportunities to claim similar An art dealer and collector an individual who was not a certified
credits and incentives at the state level. lacked reasonable cause for appraiser, along with a “substantially”
For example, taxpayers may be eligible failing to properly document a completed Form 8283, Noncash Charitable
to offset Georgia state payroll with- sculpture’s value, the Tax Court Contributions. The sculpture was valued
holding payments by using a Georgia holds. at $600,000. The requested assurance
research credit. While this is like the was not received from the IRS by the
federal payroll tax offset, taxpayers By John McKinley, CPA, CGMA, J.D., extended due date of the return.
must carefully follow the required state LL.M., and Matthew Geiszler, Ph.D. On his 2011 return, Schweizer
processes and procedures to make a The Tax Court denied an art collector claimed a $600,000 charitable contri-
valid claim. and dealer’s claimed charitable deduc- bution deduction for the sculpture. The
The enhanced payroll tax offset tion for donated artwork because, it return he filed contained a partially
provides a great opportunity for QSBs held, the taxpayer lacked reasonable completed Form 8283. On the form,
that do not have a federal income cause for his failure to properly the donation was listed on Section A,
tax liability to otherwise offset their substantiate the deduction. where donations of property valued
payroll tax and see near-term tax Facts: The taxpayer, Heinrich at $5,000 or less and certain publicly
savings. Given the current economic Schweizer, obtained a law degree and traded securities are reported. In ad-
uncertainties, this opportunity could pursued graduate legal studies in his dition, no description of the donated IMAGE BYLUERATSATICHOB/GETTY IMAGES
provide taxpayers with another cash native Germany. From a young age, he property was provided; instead, the
flow fund for its future research efforts became interested in and began col- words “see attached” were written on
and business operations. However, tax- lecting African art. In 2006, he came the form, but no attachment or qualified
payers should seek advice to evaluate to New York to become the director of appraisal was included with the return.

34 | Journal of Accountancy January 2023