29 minute read
2022 Colorado Tax Legislation Update
BY BRUCE M. NELSON, CPA
This update is drawn from the 2022 legislation passed by the Colorado General Assembly, fiscal notes, and legislative summaries. It is limited to income tax and sales and use tax changes. Other taxes such as property and fuel taxes are not covered.
Colorado received $3.8 billion in federal COVID relief. Last year, the state spent about $1 billion and set aside roughly another billion, leaving about $1.8 billion to spend this year. Not surprisingly then, the Colorado General Assembly passed a record number of bills in 2022 - specifically 507 - exceeding the record 504 bills enacted in 2021. Depending upon how broadly one defines taxes, roughly 40 bills involved specific tax issues. The primary objective of tax law is to raise revenue to pay for traditional governmental functions such as roads, schools, sanitation, and police and fire protection. Taxes also are commonly used to encourage economic development and tackle social issues, all of which are pursued within a political environment. This legislative session was no different.
ECONOMIC DEVELOPMENT HB22-1149, Advanced Industry Investment
Tax Credit. This bill extended the current advanced industry investment tax credit through 2026, expanded the allowable annual maximum amount of credit from $750,000 to $4 million; increased the total amount for each credit from $50,000 to $100,000; and upped the credit from 30 to 35 percent for investments in rural or economically distressed areas of the state. The program, started in 2014 by HB141012, provides state income tax credits to investors that invest in advanced industry businesses such as bioscience, electronics, aerospace, energy and natural resources, infrastructure engineering, and information technology industries. The credit is available to individuals, S corporations, and partnerships, but not C corporations. The business must have either its headquarters in Colorado or at least 50 percent of its employees based in the state, having been in existence fewer than five years, with annual revenues of less than $5 million. HB22-1418, Enterprise Zone Credits. Recognizing the impact of the pandemic, this bill extends the carry-forward period of enterprise zone and other incentive credits that were going to expire between 2012 and 2025 for another five years. The credits impacted include the job growth incentive tax credit, investment tax credit, renewable energy credit, enterprise zone business employee credit, and the rehabilitation credit for vacant buildings.
ENVIRONMENTAL ISSUES
SB22-051, Emission Reduction. In 2021, the legislature enacted the Buy Clean Colorado Act (HB21-1303) that required the establishment of maximum acceptable global warming standards for various building materials. To that end, SB22-051 provides that beginning Jan. 1, 2023, purchases of air-source heat pumps, ground-source heat pumps, heat pump water heaters, and residential energy storage systems will be exempt from sales and use tax until Jan. 1, 2033. For tax years 2023 and 2024, the bill also creates refundable income tax credits for the purchase of these heat pumps, necessary electrical panel upgrades, and residential energy storage systems. The bill also exempts purchases of decarbonizing building materials from sales and use tax from July 1, 2024 through July 1, 2034.
HB22-1026, Alternative Transportation
Credit. This bill replaces a largely unused corporate income tax deduction for alternative means of transportation. Beginning in 2023, this new refundable tax credit equals 50 percent of expenditures incurred by
The primary objective of tax law is to raise revenue to pay for traditional governmental functions.
employers to provide alternative transportation options to their employees. A single employer is limited to an annual tax credit of $250,000, and the maximum amount that an employer can claim for a single employee is $2,000. Private, non-profit, and local government employers may claim the credit. The tax credit is set to expire at the end of 2024.
So what’s included in alternative transportation? It includes free or partially subsidized mass transit; free or partially subsidized ride sharing arrangements - including bike sharing and electric scooter sharing programs; provision of ridesharing van;, and guaranteed ride home programs. Qualifying expenses as part of a ridesharing arrangement include providing vehicles for ridesharing arrangements; cash incentives to employees to participate in ridesharing arrangements; and administrative costs borne by the employer associated with those ridesharing arrangements.
SOCIAL LEGISLATION (EDUCATION, HEALTHCARE, AND POVERTY) HB22-1024, Sales and Use Tax Exemption
for Public School Construction. The state of Colorado and state-collected jurisdictions have provided a sales and use tax exemption for school construction and building materials since 1979. This bill extends that exemption to home rule cities. The law is being challenged by some home rule jurisdictions as an unconstitutional infringement on their autonomy under the Colorado constitution.
CONTINUED FROM PAGE 27
HB22-1005, Health Care Preceptors Tax
Credit. This credit was created by House Bill 16-1142 and was extended through tax year 2022 by House Bill 19-0188. In brief, it provided a $1,000 income tax credit for health care preceptors working in designated rural counties. In addition to extending the credit through 2032, this bill also expands from 200 to 300 the number of preceptors that can qualify for the credit and expands the definition of a qualifying preceptor to include a broader range of health care professionals.
HB22-1010, Early Childhood Educator
Income Tax Credit. This bill creates a refundable income tax credit for early childhood educators who have an adjusted gross income of less than or equal to $75,000 for a single return or $150,000 for a joint return, have held an early childhood professional credential for at least part of the income tax year, and are the licensee of an eligible early childcare program or employed by an eligible program for at least six months. The credit can be claimed from Jan. 1, 2022, through Jan. 1, 2026. The credit amounts vary by certification: • $750 for an Early Childcare Professional I; • $1,000 for an Early Childcare Professional
II; and • $1,500 for an Early Childcare Professional
III, IV, V, and VI
HB22-1055, Sales Tax Exemption for
Essential Hygiene Products. Beginning Jan. 1, 2023, the sales of period products and incontinence products are exempt from state sales and use tax. State collected taxing jurisdictions may choose to adopt either or both exemptions.
HB22-1310, 529 Account Apprenticeship
Expenses. The federal "Setting Every Community Up for Retirement Enhancement Act of 2019" expanded qualified distributions from a qualified state tuition program (529 account) to include expenses for fees, books, supplies, and equipment required for the participation of a designated beneficiary in certain apprenticeship programs. In light of these changes to federal law, this bill amends Colorado law to align with the federal definition of qualifying expenses in certain apprenticeship programs, thereby clarifying what qualifies as a qualified distribution from a 529 account for the purpose of determining state taxable income. The act allows expenses for fees, books, supplies, and equipment required for the participation of a designated beneficiary in certain apprenticeship programs to be treated as such a qualified distribution.
HB22-1320, ABLE Savings Accounts.
Individuals who were declared disabled, as defined under federal law, before reaching 26 years of age are eligible to open an Achieving a Better Life Experience (ABLE) savings account. ABLE savings accounts are modeled after IRC § 529 college savings accounts. But, unlike those accounts, ABLE savings accounts may be used to save for many expenses related to an individual's disability without disqualifying the individual for certain federal benefits. The act modifies the administration and operation of these accounts in two ways. First, the bill allows a person other than the individual with a disability to open an ABLE savings account for the individual and to have signature authority over that account. Second, the bill prohibits the state from filing a claim against the ABLE savings account upon the account owner's death for outstanding payments due for qualified disability expenses. The act also modifies the tax benefits associated with an ABLE savings account for the 2023, 2024, and 2025 tax years. Under the act, a taxpayer may deduct from federal taxable income for purposes of calculating state taxable income certain contributions made to an ABLE savings account. Further, the act ensures that a taxpayer does not encounter tax recapture of any deductions claimed for these contributions when distributions are made from an ABLE savings account for qualified disability expenses.
HB22-1016, Voluntary Contribution Check-
off - Feeding Colorado. This bill adds another voluntary income tax checkoff to the individual income tax return to benefit the Feeding Colorado Fund. The money in the fund is used to support food banks in Colorado.
HB22-1083, Colorado Homeless Contribu-
tion Income Tax Credit. This bill repeals an existing income tax credit available to taxpayers who make contributions to enterprise zone administrators to promote temporary, emergency, or transitional housing programs for persons experiencing homelessness (repealed credit) and replaces the repealed credit with a credit that is available in the entire state (new credit). Instead of having enterprise zone administrators and the office of economic development administer the new credit, as was how the old credit was administered, the act moves that responsibility to the division of housing in the department of local affairs. A taxpayer may claim the new credit when permissible contributions are made not only to an approved project but also to an approved nonprofit organization providing certain qualifying activities. The amount of the new credit remains the same as the amount of the repealed credit for each contribution. Except, for contributions made in an underserved, rural county, the amount is 30% rather than 25%.
HB22-1205, Senior Housing Income Tax
Credit. The act creates a refundable income tax credit available beginning Jan. 1, 2022, for a qualifying senior, which means a resident individual who:
• Is 65 years of age or older at the end of 2022; • Has federal adjusted gross income (AGI) that is less than or equal to $75,000; and • Has not claimed a homestead property tax exemption for the 2022 property tax year. The amount of the credit is $1,000 for a qualifying senior with federal adjusted gross income (AGI) that is $25,000 or less. For every $500 of AGI above $25,000, the amount of the credit is reduced by $10. In the case of two taxpayers who share the same primary residence and who may legally file a joint return but actually file separate returns, both taxpayers may claim the credit, but the maximum credit for each taxpayer is $500. And, for every $500 of adjusted gross income above $25,000, the amount of the credit is reduced by $5.
STATE AND LOCAL TAX (SALT) PARITY ACT
SB22-124, SALT Parity Act. This bill supersedes and replaces the original Colorado SALT Parity Act enacted in 2021. Let’s begin with some background. The federal Tax Cuts and Jobs Act of 2017 placed a $10,000 annual cap on the federal income tax deduction for state and local
taxes (SALT) deductible by individuals on Schedule A. There is no comparable cap on the SALT deduction for C corporations. In 2021, the state legislature enacted HB211327 which created a “work around” to the federal cap (legislators traditionally calling these things “loopholes”). That bill allowed pass-through entities (PTE’s) such as partnerships, S corporations, and LLC’s taxed as partnerships, to pay their state income tax at the entity level, rather than at the individual level. The electing passthrough entity was allowed a credit for taxes paid to other states (by itself or its owners) on income attributable to states other than Colorado. The owners of such electing entities were allowed to exclude from their taxable income their distributive share of the entity’s income subject to the elective passthrough entity tax. HB21-1327 was to become effective for tax years beginning on or after Jan. 1, 2022. However, SB322-124 supersedes and replaces the 2021 legislation. The key differences between the former legislation and SB22-124 is that first, the exclusion from Colorado taxable income for the PTE owner’s share of income taxed at the entity level is replaced with a refundable tax credit at the owner level for each electing owner’s distributive share of state income tax imposed on the PTE. Second, this new legislation allows PTE’s to make the election retroactively for tax each year starting with 2021 back to 2018. According to the bill sponsors, the legislation is estimated to generate anywhere from $315 million to $1.75 billion in tax reductions for small businesses. (I suspect that given that estimate range, no one knows what the impact will be.) Finally, the retroactive elections must be made after Sept. 1, 2023, and before July 1, 2024 and will be filed using a composite return for the affected years. (A retroactive election is not needed for the 2022 return since that return isn’t due until 2023.) One thing that remains unchanged from the 2021 legislation is that individual taxpayers making the PTE election must add back any IRC § 199A twenty-percent deduction. Many uncertainties remain. For example, how are estimated tax payments made prior to passage of the bill by partners or shareholders in an electing PTE to be treated? Can the PTE election be made by partnerships in a tiered partnership? More importantly, the IRS gave its stamp of approval to PTE’s in Notice 2020-75. it is not clear that approval extends to retroactive elections back to 2018.
ADMINISTRATIVE CHANGES, RELIEF, AND DELETIONS SB22-006, Sales Tax Assistance for Small
Business. This bill increases the state vendor fee from 4.0 percent to 5.3 percent starting Jan. 1, 2023, but only for one calendar year and only for retailers with less than $100,000 in taxable sales per filing period. [Emphasis added.]
SB22-032, Simplification of Local Sales and
Use Tax Compliance. Beginning July 1, 2023, local taxing jurisdictions (think home-rule cities) can no longer require retailers without physical presence or with only incidental physical presence in a local jurisdiction to separately apply and pay for a sales tax license. Many retailers complained that the state's new sales and use tax simplification system (SUTS) goals were being undermined by the fact that retailers had to separately register and pay for licenses in numerous home-rule cities.
The bill requires that the Department of Revenue collect sufficient information from relevant retailers that use the sales and use tax simplification system (SUTS) and make that information available to local taxing jurisdictions to ensure the concerns of local jurisdictions related to efficiency, compliance, and revenue collection are addressed. The Department must make the changes by July 1, 2023, and consult with local taxing jurisdictions and retailers in making system modifications. On or after July 1, 2022, a local taxing jurisdiction may not charge a fee for a general business license to relevant retailers within the jurisdiction, and on or after July 1, 2023, a local taxing jurisdiction may not require a relevant retailer to apply separately for a general business license.
HB22-1027, Sales Tax Destination Sourcing
Exception for Small Retailers. Under House Bill 19-1240, small retailers - those with less than $100,000 in annual sales - were allowed to source sales to their Colorado business location until an online sales tax rate lookup tool developed by the state was available. Senate Bill 21-282 extended this deadline until Feb. 1, 2022. This bill extended the deadline further to Oct. 1, 2022.
HB22-1039, Sales and Use Tax Exemption
Form Simplification. For some of the exemptions from state and state-collected local sales and use taxes, a taxpayer who wishes to claim the exemption is either explicitly required by the relevant statute, or required by the Department of Revenue, to complete a form created by the Department, which, depending on which exemption is sought, may be described as an affidavit, application, certificate, certification, declaration, or statement. This bill requires the Department of Revenue to review the various exemption forms with the goal of simplifying the exemptions to a single form. Some of the different exemptions forms include:
• Contractors (DR 0172) • Machinery used in manufacturing (DR 1191 and DR 1192) • Nonresident and on-demand aircraft used out of state (Affidavit) • Trailers and trucks purchased in Colorado but removed from and used out-of-state (Affidavit) • Purchases of farm equipment (DR 0511) • Purchases of wood products (DR 1240)
HB22-1406, Qualified Retailer Retain Sales
Tax. In December 2020, Governor Polis signed HB 20B-1004. The bill allowed qualifying retailers, which included restaurants, bars, and mobile food service providers, to deduct up to $70,000 monthly from state net taxable sales for up to five sites for a fourmonth period from Nov. 2020 to Feb. 2021. In June 2021, the Governor signed HB 21-1265 that renewed the provisions of HB 20B-1004 for three months from June to Aug. 2021 and expanded eligibility to caterers, food service contractors, and hotel food and drinking services. This bill allows those qualifying retailers to take a temporary deduction from state net taxable sales for sales made from July to Sept. 2022 and keep the sales tax collected. The bill renews the existing deduction for businesses in the food services sector, including hotel food and drinking services. HB22-1118, Sales and Use Tax Refunds. The state legislature, at the prompting of the
CONTINUED FROM PAGE 29
Colorado Department of Revenue, made several substantive and procedural changes to sales and use tax refund claims. First, interest will be paid only from the time the refund claim was filed rather than the purchase date of the transaction upon which the claim is made. Second, the bill imposes civil penalties equal to five or ten percent of the refund claimed for filing frivolous, unreasonable, or duplicative claims of $5,000 or more. Lastly, the bill establishes criteria for determining frivolous claims, procedures for penalty notices and corrections to a claim, and the circumstances under which the Department may waive the penalty. The legislature classified this as a damage award and not subject to TABOR.
HB22-1025, Repeal of Infrequently Used Tax
Exemptions, Exclusions, and Credits. The Office of the State Auditor (OSA) has been conducting a study of state tax expenditures (known to most of us as exemptions, exclusions, and credits) and making evaluations of the same. The evaluations found the following exemptions, deductions, and credits were rarely used and often ineffective. Therefore, the following have been eliminated • Exemption from the insurance premium tax for educational and scientific institution life insurance effective upon passage of the bill; • Alternative minimum income tax based on annual gross receipts from sales in or into the state beginning Jan. 1, 2023; • Income tax credit for investment in technologies for recycling plastics beginning Jan. 1, 2023; • Income tax credit for crop or livestock contributions to a charitable organization beginning Jan. 1, 2023; • Income tax deduction for income or gain for a C corporation that was taxed prior to 1965 beginning Jan. 1, 2023; • Income tax credits for qualifying investments beginning Jan. 1, 2023; • Sales and use tax exemption for the transfer of complimentary promotional materials to an out-of-state vendee beginning Jan. 1, 2023; and • Requirement that a portion of a state-employed chaplain’s salary is designated as a rental allowance effective upon passage of the bill.
Bruce M. Nelson, CPA, Fort Collins, Colo., is a frequent COCPA author/instructor with more than 35 years’ experience in state and local tax.
MEMBERSHIP PROGRAM
Support Your Team. Support the Profession.
The COCPA 100% Membership Program helps save your team time and money. At the same time, it demonstrates your organization’s commitment to the profession. Together, we are 100% strong. Benefits include:
CONCIERGE-STYLE attention from COCPA’s membership team RECOGNITION of your firm and team (both online and in print) DISCOUNTS towards training that helps make your team smarter STREAMLINED dues processing So much MORE!
THANK YOU to our 100% Member Firms
Causey Demgen & Moore, PC Cherry, Ogle & Quinn, PC Eide Bailly FORVIS, LLP Grant Thornton LLP Haynie & Company Johnson and Associates, CPAs, PC Kundinger, Corder & Montoya, PC Marrs Sevier & Company LLC MGPM, PC Moss Adams LLP Plante Moran LLP Reese Henry & Company, Inc. Rubin Brown, LLP Soukup Bush & Associates CPAs, PC WhippleWood CPAs, PC
Responsibilities to Clients
When a CPA Firm Is Merging or Acquired
BY ARTHUR J. (KIP) DELLINGER, JR., CPA
It is not news to CPAs and their firms that the profession began undergoing an enormous consolidation a few years ago, which is expected to accelerate over the next several years. This is a result of many factors - retirement planning, monetizing of client values, staggering advances in technology, market share, and services expansion, among many other reasons.
The consolidation typically takes the form of mergers and acquisitions and sometimes a combination of both. And it involves not only very large firms merging - or bringing in firms of significant size in a local or regional market - but also includes local firms and even sole practitioners combining or acquiring practices of retiring practitioners. When a proposed merger or acquisition transaction is undertaken, questions arise about the professional obligations and responsibilities of the target firm, including any required communication pertaining to its clients' confidential information and the transfer of client files to the successor entity.
PROFESSIONAL STANDARDS — AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS (AICPA)
Two provisions of the AICPA’s Code of Professional Conduct address merger and acquisition issues. The first and most significant provision is ET § 1.400.205 – Transfer of Files and Return of Client Records in Sale, Transfer, Discontinuance, or Acquisition of a Practice1 — and additionally interpreted in
Frequently Asked Questions: General Ethics (updated March 18, 2022).
ET § 1.400.205 provides that when a CPA's practice is sold or transferred to another firm and the seller/transferor will no longer retain an ownership in the successor practice, each client must receive a written request for consent to transfer its files to the successor firm. The notification may state if a negative response is not provided within 90 days, permission will be assumed by the successor to transfer the files. Moreover, the files should not be transferred until client permission is obtained or the 90 days period expires. Additionally, the acquiring firm is equally responsible for compliance with these requirements. However, there are conflicting requirements discussed below when tax information will be transferred in a sale of a practice.
CONTINUED FROM PAGE 31
Equity vs. Non-Equity Transferors
The Frequently Asked Questions addressing "Transfer of client files in a merger" clarify that if a target CPA firm’s owner(s) become equity partners, the client notice requirements do not apply - regardless of the percentage of ownership. Alternatively, if the target CPA firm’s owner(s) are admitted as non-equity partner(s), the client written notice requirements discussed earlier will apply. There also may be hybrid situations - for example, when the target CPA firm’s partner, equity or non-equity, "owns" clients. In that event, each client situation must be evaluated and treated in a manner consistent with these rules pertaining to equity and non-equity owners in the successor entity.
Conflict of Interest Considerations (ET § 1.700.010)
In some circumstances, the parties must consider possible conflicts of interest. For example, when two CPA firms are combining and each represents industry competitors, or when a practice being acquired includes a competitor of a client of the acquiring firm (where one or both clients would prefer not to share the same CPA firm), a conflict-of-interest issue can arise. How such matters are handled should be specified in the agreement to the contemplated merger or acquisition.
ACCOUNTANCY LAWS
CPAs and CPA firms are regulated by Boards of Accountancy in the states and other geographical locations where they practice. When one or both firms are pursuing an acquisition or merger, the parties should ascertain which state boards have jurisdiction and determine the applicable jurisdictional rules that apply to the contemplated transaction. Fortunately, the overwhelming number of jurisdictions adopt (specifically or impliedly) the ethics rules of the AICPA (for example, Colorado State Board of Accountancy Rule 1.12, Rules of Professional Conduct).
COMPLIANCE WITH TREASURY REGULATIONS
Internal Revenue Code Section § 7216 ("the Code" or "7216") is a criminal statute regulating tax preparers with regards to their "uses" and "disclosure" of a taxpayer’s return information. The Code is very general and provides that Treasury issue regulations governing the application of Code Section § 6713, which provides civil monetary penalties for similar violations. Its application is governed by 7216 regulations, and the provision is more likely to be asserted by the Internal Revenue Service ("the IRS" or "Treasury") because proving a criminal violation has a much higher bar than meeting a civil violation. Treasury has issued three regulations under Sec. § 7216 - Reg. Sec. 1.301.7216-1, 2, and 3. These regulations should be reviewed annually by firm leadership to ensure continued compliance with the requirements of IRS Section 7216. Regulation 1.301.7216-1 addresses definitions and the respective penalties associated with violations of the Code. The significant portion states that "taxpayer information" is any information pertaining to the taxpayer. For example, the use or disclosure of the taxpayer's name can result in a violation, and the regulation is not limited to financial information or identification numbers. The second regulation, 1.302.7216-2, is key to a firm's practice because it sets forth those "uses and disclosures" that a tax preparer may make or engage in without prior written approval of the taxpayer whose information is to be used or disclosed. One of the uses may be to compile a list for solicitation of tax return preparation business (1.302.7216-2(n)). While the CPA firm, as a compiler of the list, is not generally permitted to transfer it, an exception is made when there is a transfer in combination with the sale or disposition of the firm. The typical due diligence conducted prior to the proposed sale of the CPA's tax preparation business will not represent a transfer of the list if the CPA selling the firm has a written confidentiality agreement with the acquiring firm that expressly prohibits any use or disclosure of information permitted to be on the list for any purpose other than the purchase of the firm's business. If the use or disclosure is not contained in the second regulation, then strict adherence must be made with the third regulation, which sets forth specific, detailed requirements for obtaining the taxpayer's prior written approval. Regulation Section § 301.7216-2(d)(1) permits, without taxpayer approval, the use and disclosure of taxpayer information among preparers and processors of a firm regarding tax return preparation and related-tax advice. Therefore, when a merger takes place between two firms and there is continuity of personnel from the target firm in the successor firm, the IRS can be expected to apply the same principles as the AICPA to the transaction.
When the target firm's owners do not retain an equity interest in the successor firm, an abundance of caution would be to comply with the stricter request for permission requirements set forth in Reg. Sec. 301.7216-3. Unfortunately, the request for consent does not specify the number of days within which the client must respond, which can be problematic for the successor firm. Instead, affirmative consent must be given by the taxpayer before a transfer takes place. The regulations do not provide for an acquirer's quality review of tax returns in connection with a sale or merger of a CPA firm's practice. This is different from the AICPA rules, and consequently the CPA firm whose clients' returns will be the subject of a review must obtain client permission for the use and disclosure of their return information when contemplating a sale or merger. This may present challenges to the two firms, as the acquirer will be limited in identifying particular returns to review (because they cannot have access to any return information in the selection process). Or, the target firm would have to seek permission from every tax return client to enable the acquiring firm to make its selection. The parties must find a satisfactory solution to the quandary - perhaps a random selection from a list identified only by numbers that correspond to an alphabetized master retained by the target firm. It is critically important to remember in merger and acquisition transactions that the requirements under tax laws must be complied with in addition to complying with the CPA profession's ethical standards and those of the governing state boards of accountancy.
Arthur J. (Kip) Dellinger, Jr., CPA, provides services as an expert in the areas of CPA tax practice, regulatory discipline, and malpractice matters.
Apps to Track your Miles
BY BRUCE A. GRAY, CPA, CGMA
Acouple of years ago I asked a colleague about technology topics of interest. He immediately responded: An article on mileage tracker apps. I understand. I don’t know about yours, but my clients hate logging their mileage. I remind them that failure to maintain a contemporaneous log generally will result in disallowance of the deduction for mileage. Nonetheless, clients still struggle with this recordkeeping chore. The Good News, after researching the subject, is a number of apps are designed to help with this unpleasant chore. The technology utilizes the GPS feature of your smartphone to track your travel. Most of them will automatically track when you begin and end drives based on the speed at which your phone is moving. While I didn’t feel I could test drive all the apps I discovered, I selected three to evaluate and report upon in some detail: MileIQ, TripLog, and Everlance. Like most of the offerings in the market, all three apps do a good job of sensing the beginning and end of a trip and prompting you to classify it. Each has the option of identifying certain locations where you regularly travel so it doesn’t just identify an address or latitude/longitude coordinates. Each also has a map feature which shows the route traveled and the reimbursable value of the trip using current IRS standard mileage rates. Finally, all of them provide reports to support the miles traveled. Other features that appear to be common to most of the apps available are the ability to take photos of receipts using your phone camera and track other operating expenses for your vehicle. Each app has its own set of rules about the number of vehicles it will track and in some cases will support multiple drivers. As with virtually everything else, the more features you want, the more you will pay. MileIQ (www.mileiq.com) is probably the most well known as the company has invested significant time and presumably dollars on promotion. It also offers tax professionals the opportunity to sign up for free to encourage them to promote the app to their clients. For everyone else, MileIQ offers a free version that allows for 40 trips in a month for free. Considering that each time you start and stop for longer than the allotted time considered a trip, it doesn’t take long to reach your 40 trips. You quickly may find yourself needing to purchase the app in order for it to be useful.
Among its features, you have the option of classifying the trip as personal or business. The app doesn’t appear to offer the ability to provide subcategories under the business or personal categories. The interface is easy. You classify a trip by swiping either left for personal or right for business. The annual cost is $60 for the personal version which buys you unlimited trips and additional features for categorizing and reporting on your trips. Options for teams range from $50/user/year to $100/user/year. The free version allows for notification after each trip, a weekly email summarizing your trips, and a month-end email which is good for expense reports. It also allows you to receive notifications of product updates, news, and other resources you can use to help in your business. I have not purchased the unlimited version but know people who have and they seem to like it. I found the limited tracking and reporting capabilities to be a little restrictive for my taste. Trip Log (www.triplog,ileage.com) offers a variety of options from a free version for a single driver up to an enterprise version for larger organizations tracking multiple vehicles and drivers. One limitation of the free personal version is that it is the app only - no web access. It also has limited reporting. However, when you purchase the app, you can specify a date range for the report which will be emailed to you. The reports on Trip Log conform to the requirements of the IRS for proper documentation. The classification options are more extensive and can be customized for your personal needs. For example, the free version has three “personal” categories – personal, commute, and uncategorized. If you need the detail, you can add subcategories in each of the major categories to track your mileage by activity. In the expense tracking category, it allows details of fuel purchases to include the price per gallon and total gallons purchased. The app supports metric and imperial unit tracking as well. A unique feature is its interface with a Bluetooth OBD-II device, allowing the tracker to interact directly with the vehicle’s computer data. The premium version allows for unlimited trips, automatic start/stop, and up to 10 users for $4.99/month/user or $59.99 annually per user. There is also an add-on app for tracking time and scheduling for $3.33/month/user or $40 per user annually. Enterprise pricing is by quotation only. Everlance (www.everlance.com) is also a bit more flexible than MileIQ in terms of reporting (primarily allowing a date range) and allowing customization of categories and multiple vehicles. Its reports are not quite as robust as Trip Log but provide adequate detail. Everlance provides a unique function which enables you to segregate different business lines. For example, if you have a photography business and also coach on the side, you can track mileage related to each separately by identifying to which business line the work related trips apply. These can be customized to suit your personal situation. Everlance also can track revenue generated should you be an Uber or Lyft driver or have a business that involves fees for services involving driving. These features are all part of the premium version which costs $60.00/year or $8.00/month for an individual user and $118.00/year or $12.00/ month per user for the enterprise version. The premium plus option adds training and premium support for $120.00/year or $12.00/ month per user. The free trial provides the premium version. After the trial period, it reverts to the free version which requires manual start and stop for mileage tracking and limited functionality. These are but three of many options available. I found all three provide good tracking and functionality. Ultimately, the difference for me was a matter of preference for the interface and the reports. And, thanks to my research, I now don’t want to be without a mileage tracker app because it remembers to log my miles even when I don’t.
Bruce A. Gray, CPA, CGMA, Miliken, is a member of the COCPA Technology Users Group. Contact him at bruce@bagcpa.net. For information on and to join the Technology Users Group, contact Stacy Svendsen,
