This is a message for entrepreneurs:
Your cleverness is worth something. That time you spend tinkering with slogans for your business, or actually applying slogans to your business, could be worth tax credits.
Baseballism, a company headquartered in Portland, Oregon, is built on catch phrases around the national pastime. The original slogans and quips having to do with baseball are printed on hats, tee-shirts, and other merchandise.
Here is one:
6+4+3=2. It is a riff on the double play. The shortstop (labeled 6 in baseball terms) fields a ground ball, and tosses it to the second baseman (4) for one force out. The second baseman throws to first base (3) for a double play. Hence 6-4-3= 2 outs.
Here is one other Baseballism:
The company has designed a blue tee shirt with a white map of the U.S, printed on the front of the shirt. The map has the familiar red stitches of a baseball overlaid vertically on the map. It is the red, white, and blue of America’s pastime.
The designs are considered research and development and eligible for a tax credit.
“It was a really big win for us to find out about the tax credits,” said Jon Loomis, the Chief Financial Officer for Baseballism. “We were able to deflect quite a bit of state and federal taxes associated with research and development credits. We were spending time, effort, and money to develop better product and innovative product. We are pushing the envelope of intellectual property and goods and improving quality.
“We had been engaging in qualifying work. The tax credits weren’t something that were really well known or talked about in the general public. It took an expert in that field to identify that and bring it to light. We deflected over $25,000 just in that Line Item.”
Baseballism will design merchandise that relates to the city, or state, where its store is located. For instance, a shirt at the Baseballism store near Sun Trust Park where the Atlanta Braves play has a baseball with a peach in the middle as its core. Georgia is nicknamed “The Peach State” This new concept is considered qualifying work for the R&D credit.
Baseballism will spend time and money and collecting feedback on these ideas, which makes it further eligible for the R&D credit.
“Being a CFO, I am focused on the corporate finance side a lot of the financial planning, the budgeting, the forecasting, and the corporate accounting, but the tax rules are changing so quickly and are so dynamic I couldn’t stay on top of it,” Loomis said. “We needed a partner in that field to help us navigate.”
Here is the real benefit for the growing company: tax savings can be reinvested.
“This is a prime example of how lower tax rates, or tax savings, really benefits the company because what we are doing is reinvesting every free dollar. Every residual earning that we can pull out of the company goes back into the company,” Loomis said. “We are building four more stores this year and every dollar we can find will go to expanding, hiring, and improving our product and building better services. This money goes back into the pockets of the ownership and community. It allowed us to grow. It’s a real thing.”
Loomis also said tax experts helped Baseballism understand they could defer income from gift cards two years, not one year. Generally, the revenue from selling gift cards must be included in gross income in the taxable year of receipt. For tax benefit, Baseballism can defer that income for two years.
The company is new to the game, in a manner of speaking, and still expanding, but it is never too early to have an exit strategy. For instance, how does one partner get out of a business when other partners might want to stay? A consultant like Aprio can help with those questions.
For the time being, the Baseballism mantra is not getting out, it is “Play Ball.”
Image credit: Pexels – photographer: Tim Gouw