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ARDMORE, Pa. — The so-called “fiscal cliff” tax package recently signed into law renewed more than 50 temporary tax breaks through 2013, saving individuals and businesses an estimated $76 billion. For the owners and operators of small- and medium-sized laundry businesses, there is good news and bad news contained in the fiscal cliff tax laws.

First, the good news: greater certainty in taxes. The owners and operators of laundry businesses have grown used to many longstanding tax breaks but they also have had to get used to the uncertainty of whether they will be renewed each year.

On the downside, in addition to a 3.8% Net Investment Income (NII) tax and a 0.9% Additional Medicare tax that, thanks to the Health Care and Education Reconciliation Act of 2010, began in 2013, many laundry owners discovered they are subject to new taxes. Single individuals with incomes above the $400,000 level and married couples with income higher than $450,000 will pay more in taxes in 2013.

EQUIPMENT WRITE-OFFS FOR PROFITABLE OPERATIONS

The American Taxpayer Relief Act extended through 2013 the Tax Code’s Section 179 first-year expensing write-off for equipment and business property purchases. Now, the higher expensing limits in effect in 2011 have been reinstated for 2012 and extended for expenditures made before Dec. 31, 2013. Thus, a laundry business can expense or immediately deduct up to $500,000 of expenditures in 2012 and 2013, subject to a phase-out if total capital expenditures exceed $2 million.

The tax break that allows profitable laundry businesses to write off large capital expenditures immediately—rather than over time—has long been used as an economic stimulus by our lawmakers. While 100% “bonus” depreciation expired at the end of 2011, today the new law allows 50% bonus depreciation for property placed in service through 2013.

Some transportation and longer-lived property are even eligible for bonus depreciation through 2014. If bonus depreciation had not been extended, the 2012 tax year would have been the final year in which substantial first-year write-offs for buyers of business automobiles and light trucks were available.

To be eligible for bonus depreciation, property must be depreciable under the standard MACRS (Modified Accelerated Cost Recovery System) and have a recovery period of less than 20 years. Section 179 first-year expensing remains a viable alternative, especially for small businesses. Property qualifying for the Section 179 write-off may be either used or new, in contrast to the bonus depreciation requirement that the taxpayer be the “first to use.”

Leasehold improvements and building improvements generally must be depreciated over 39 years. The tax law provides a special 15-year, straight-line depreciation break for qualified leasehold improvements, restaurant property, and retail improvements. Naturally, there are quite a few restrictions, such as the lease must between unrelated parties.

Qualified leasehold improvements also qualify for the 50% bonus depreciation. In fact, qualified leasehold improvements, restaurant property, and retail improvements up to $250,000 may qualify for Section 179 expensing. And, best of all, these provisions have been extended for property placed in service before Jan. 1, 2014.

MORE, MORE AND MORE

The Work Opportunity Tax Credit (WOTC), which rewards employers that hire individuals from certain target groups, has extended to Dec. 31, 2013, and applies to individuals who begin work for the employer after Dec. 31, 2011. Under the revised WOTC, laundry businesses hiring an individual from within a target group are eligible for a credit generally equal to 40% of first-year wages up to $6,000.

An S corporation is a pass-through entity and not usually subject to income taxes. It is, however, liable for the tax imposed on built-in gains or capital gains. The tax on built-in gains is a corporate-level tax on S corporations that dispose of assets that appreciated in value during the years when the operation was a regular C corporation.

The new law extends a relaxed version of the provision limiting the “recognition period” to five years, but only for “built-in gains” recognized in 2012 and 2013. Thus, if a laundry business elected S corporation status beginning Jan. 1, 2007, it will be able to sell appreciated assets it held on that date without begin subject to a hefty tax bill.

Check back Wednesday for the conclusion!

Information in this article is provided for educational and reference purposes only. It is not intended to provide specific advice or individual recommendations. Consult a financial adviser for advice regarding your particular situation.

NEW YORK — Superstorm Sandy flooded and crippled numerous hospital and hotel laundry operations when it struck the Northeast in late October.

Emergency preparedness planning made all the difference for the Hospital Central Services Cooperative (HCSC) Laundry, which consists of five plants and processes approximately 110 million pounds of linen for some 350 healthcare facilities in New York, New Jersey, Pennsylvania, Delaware and Maryland. The town of Asbury Park, N.J., where the laundry has its headquarters, was evacuated before the storm struck. The laundry lost power for a week.

“This was an unprecedented situation for us,” says Bill Moyer, vice president of Marketing Services for HCSC. “We had never had a plant out of service for a week. It was a worst-case scenario.”

HCSC management put its emergency preparedness plan into effect days before the storm struck, says Moyer. Linen conservation alerts were sent out to all healthcare linen customers, as they share a common linen inventory. Linen orders were escalated and prepared a day ahead of time. Linen volume was shared and produced by the laundry’s sister plants in Camden, N.J., Allentown, Pa., and Baltimore, Md. The laundry’s service suffered only “minimal” disruption, according to Moyer.

“The storm presented a logistical nightmare,” he says. “This was as bad as it gets. Fortunately, our other plants stepped up and picked up the slack. It took a tremendous amount of planning, a high level of teamwork and cooperation, and a good deal of patience by everyone concerned.”

He continues, “I can’t say enough about the importance of having backup capability in your system during a storm. I don’t know what we would’ve done without it. During the storm, our hospitals absorbed more patients who were evacuated from nursing homes. Their censuses were up.”

In the aftermath of the storm, some manufacturers and distributors of laundry machinery announced programs aimed at helping laundries replace equipment destroyed by Sandy.

Alliance Laundry Systems, Laundrylux and Dexter Laundry were among the companies that announced programs offering deferred payments and interest and no fees on equipment purchases made by qualified on-premise laundries. American Dryer Corp. stepped up its production to make certain enough laundry equipment would be readily available to customers during the recovery.

Alliance’s Hurricane Sandy Disaster Relief program allows owners to replace their damaged washers and dryers with no payments or interest for up to four months, no loan fees, and a cash allowance to assist with installation costs. Additionally, there is no prepayment penalty if customers choose to pay off their loan in full with reimbursement eventually received from FEMA or their insurer.

Alliance has made the program available to qualifying laundries in New York and New Jersey, but will review other situations and offer the finance program to other affected laundries on a case-by-case basis.

“The purpose of the program is to help laundries get back on their feet and start operating again, while they are sorting out their insurance claims,” says Bill Brooks, North American sales manager for UniMac, an Alliance company.

Under Laundrylux’s Disaster Recovery Program, qualified laundries purchasing Electrolux or Wascomat equipment can make no payments for up to six months and pay no interest for up to 12 months. All associated fees will be waived. The program is available in New York, New Jersey, Connecticut, Delaware, District of Columbia, Maryland, Massachusetts, North Carolina, Pennsylvania, Rhode Island, Virginia and West Virginia.

Dexter’s program offers qualifying laundry owners in the Hurricane Sandy-affected areas of New York and New Jersey the ability to purchase equipment for up to six months of no payments, with no origination or documentation fees, along with a special allowance for installation and start-up costs. Customers wishing to pay off their loan after recovery from their insurer or other agency will face no prepayment penalties.

Launderers in healthcare find their workloads growing faster than textile services operations focused on other aspects of the economy. Processing this increased volume cost-effectively requires keeping current on clinical trends and laundry technology. TRSA’s Healthcare Conference is renowned for providing general and breakout sessions focused on an array of specialized topics aimed at virtually every aspect of healthcare laundering.
At the same time this meeting is the best networking opportunity of its kind in the industry, filled with textile services professionals from around the world most interested and invested in this type of work. You won’t find another conference with so many participants with such a deep financial stake in the healthcare laundry market.
Register: http://www.trsa.org/calendarevent/healthcare-conference-0

ERIE, Pa. — Following the installation of a new washer-extractor from Maytag® Commercial Laundry, a Shriners Hospitals for Children® site here is experiencing improved energy and water efficiency and increased staff productivity, the hospital’s manager of environmental services reports.

Pleased with the performance of a Maytag 55-pound multi-load washer-extractor installed seven years ago, the hospital opted to replace an older 135-pound washer with a 55-pound Energy Advantage™ soft-mount, high-speed multi-load washer-extractor, to help rightsize its laundry operation.

Recently transitioning from a 30-bed acute-care hospital to outpatient care, Erie Ambulatory Surgery Center and Outpatient Specialty Care Center has a four-day-a-week laundry operation, which cleans about 3,400 pounds of laundry. The 135-pound machine coupled with the existing 55-pound washer was more than it needed. For guidance in its equipment choice, the hospital connected with Maytag distributor Equipment Marketers, Cherry Hill, N.J.

“We strive to be as energy- and water-efficient as possible, and running correct load sizes for our needs is a natural way to accomplish that,” says Laurie Bowe, CHESP, manager of environmental services for Shriners Hospitals for Children®. “We were pleased with our first Maytag washer, as well as the company’s customer service. … Equipment Marketers was versed in the product and our specific application—they were the perfect partner for us.”

“Being environmentally conscious and finding new ways to operate more efficiently and within budget is crucial in the laundry rooms of today’s healthcare facilities,” says Bob English, general manager of global commercial laundry at Whirlpool Corp. “Upgrading to new multi-load, high-speed washer-extractors can significantly reduce energy and water consumption, leading to lower utility bills and more efficient operations for the facility.”

“Our laundry facility is now optimally sized, and we’ve also become more efficient from a staff perspective, completing more loads of laundry in less time,” Bowe says. “Everything has turned out wonderfully.”

BLOOMINGTON, Minn. — Safety and textile services industry leaders addressed representatives from many of the nation’s commercial textile services facilities regarding the importance of continuous safety improvement “in our plants and on our roads” during TRSA’s recent Safety Summit.

“The objectives of this first TRSA Safety Summit were to increase safety awareness and generate initiatives for continuous safety improvements,” says TRSA President/CEO Joseph Ricci. “We must continue to move the industry from compliance and benchmarking against ourselves to a culture of safety measured against the best companies.”

More than 30 textile services companies—national and regional chains as well as independent local operators—participated in the “Safer Together” Summit, with more than half of participating companies sending multiple representatives.

“I’m inspired to be here; I’m inspired to talk to people. Hopefully, when we leave here, we reach out to each other,” says Michael Anderson, assistant general manager, Paris Healthcare Linen Services, DuBois, Pa. “Whether we’re in similar markets or not, when it comes to safety, we all should be involved in making it better for our plants.”

Rick Pollock, the incoming President of the American Society for Safety Engineers (ASSE), kicked off the event by providing a framework for establishing a safety culture. He was followed by facilitated breakout sessions of 12-15 participants focused on sharing best management practices and developing “next steps” for TRSA’s pursuit of continuous safety improvement, including sessions on ergonomics, injury prevention, fleet safety and management support.

The highlight of the Summit was a panel of the industry’s highest-ranking executives discussing their companies’ safety challenges and their integration of safety into daily operations.

The group included Bill Evans, AmeriPride Services, Minnetonka, Minn.; Scott Farmer, Cintas Corp., Cincinnati; Karl Filip, Alliance Laundry & Textile Services, Atlanta; and Jeff Wright, G&K Services, Minneapolis, Minn.

The panel called for shifting industry-wide improvement efforts from an OSHA-compliance-focused agenda to a risk-based, zero-tolerance approach.

“When measuring against ourselves, the textile services industry has made impressive gains in the reduction of illness and injury,” says Farmer, CEO of Cintas. “For continuous improvement, we must begin measuring ourselves against the safest companies regardless of their industry.”

As a result of the Safety Summit breakouts, TRSA will increase its commitment to developing and disseminating safety training and awareness resources, as well as establishing a safety advocate for the industry.

WEST CONSHOHOCKEN, Pa. — As the commercial laundry industry commits to a more sustainable future, ASTM International is proposing a new standard to identify and define sustainable management practices to help commercial laundries reduce their impact on the environment.

The standard, known as ASTM WK35985 or Practice for Sustainable Laundry Best Management Practices, is being developed by a subcommittee under the jurisdiction of ASTM International Committee D13 on Textiles.

Gary Gramp of the Textile Rental Services Association (TRSA) is chairing the task group developing the new standard. “We are looking to further reduce our carbon footprint and enhance our environmental stewardship by developing ASTM WK35985. Our goal is to encourage the implementation of best management practices for sustainability at all commercial laundry facilities.”

Gramp says the methodology for assessing the best practices will certify that any given laundry process is sustainable and compliant to the standard. The proposed standard hits on such areas as water-reuse technology; heat recovery; environmentally friendly and low-temperature detergents; wastewater treatment; and energy-efficient lighting, among others.

In addition to commercial laundry facilities, Gramp says potential stakeholder groups include users of reusable textiles in the restaurant, hospitality and healthcare industries; government agencies; and environmental organizations.

The next ASTM Committee D13 meeting is set for June 24-27 in San Diego. For more on the proposed standard or to participate in its development, contact Gary Gramp at 703-519-0029, ext. 111; e-mail ggramp@trsa.org.

ASTM International is an international firm focused on standards development and delivery systems. Visit astm.org to learn more about the organization.

DUBOIS, Pa. — ARCO/Murray National Construction Co. reports that it recently completed a facility expansion and equipment installation project for Paris Companies, a regional textile services company servicing the uniform and healthcare markets and led by CEO David Stern.

The project consisted of three expansions, totaling 14,000 square feet, to the DuBois healthcare facility originally built in 2008. Work included a new soil-dock expansion (tailored to Paris’ custom twin-level “super” trailers), finishing-area addition (creating more folding capacity, supplemented by installation of another ironer line), and wash-floor expansion (creating room for a new tunnel washer and dryers, plus additional soil storage rail).

Construction was completed while the plant was operating three shifts, six days a week, and Paris’ quota of 900,000 pounds per week was not affected, ARCO/Murray says. Paris had converted to three shifts earlier this year to cover increased volume. With the third tunnel washer operational in October, the plant was able to return to two shifts.

ARCO/Murray attributes the project’s successful completion to close coordination with Tom Walsh, Paris Cos. director of engineering, and CJ Spencer, the plant’s general manager.

Representing ARCO/Murray were Elliot Mata, project executive, and Anthony Lovero, project manager. The new wash equipment was procured through Frank Constable and distributor PAC Industries, and the material-handling portion was done with Jensen Futurail represented by Simon Nield.

ARDMORE, Pa. — Thanks to the 100% “bonus” depreciation write-offs created by the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010, many laundry and dry cleaning businesses are discovering that capital investments in equipment, machinery and other business assets are more affordable today than ever before. Remember, however, the 100% bonus depreciation write-off is available only for qualifying purchases made by laundry services and businesses in 2011.

Those that have hesitated or postponed making capital investments because of the recent economic downturn might now want to consider how the combined use of incentives and the 100% bonus depreciation can substantially reduce the cost of capital investments. Even funding those new-equipment purchases is easier—at least for a while.

Bonus Write-Off Background

Bonus depreciation was originally created in 2002 as a temporary economic incentive by which companies could immediately deduct 30% of the basis of qualifying assets that were placed in service after Sept. 10, 2001, and before Jan. 1, 2005. An increase in the percentage of the deduction in 2003 to 50% expired in 2005. Reintroduced by lawmakers in 2008, bonus depreciation has subsequently been extended three times.

Although the concept of taking the additional depreciation in the first year is quite simple, changes to the applicable percentage, timeframes during which each is available, and variations related to unique types of assets that qualify have made application of the rules somewhat complex.

The definition of property that is eligible for bonus depreciation under the 2010 Tax Relief Act is the same as under prior law, but the percentage and placed-in-service dates have changed. The percentage increased from 50% to 100% for qualifying property placed in service after Sept. 8, 2010, and before Jan. 1, 2012. Those laundries investing in qualifying assets will be able to fully deduct the cost during the current tax year. This will reduce taxable income and taxes paid, resulting in an increase in cash flow that can be reinvested in the business.

Expensing Write-Offs

Last fall’s Small Business Jobs Act increased the Section 179, first-year expensing dollar and investment limits to $500,000 and $2 million, respectively, for 2010 and 2011. The Tax Relief Act included a $125,000 dollar limit and a $500,000 investment limit for tax years beginning in 2012 and expiring after Dec. 31, 2012.

Unlike bonus depreciation that applies only to “new” property, a laundry or dry cleaning business may immediately deduct as a Section 179 expense, up to $500,000 of both new and used business property placed in service during the tax year. The Section 179 expensing write-off is reduced, dollar for dollar, by any property acquisitions in excess of the $2 million investment ceiling, limiting the write-off to smaller businesses.

Extending Leased Property and Other Write-Offs

Before passage of the Tax Relief Act, qualified improvements made to leased property, qualified restaurant property and qualified improvements to retail property that was placed in service before 2010 was included in the 15-year MACRS (Modified Accelerated Cost Recovery System) class for depreciation purposes—that is, those expenditures could be depreciated over 15 years under the MACRS standardized depreciation system.

The 2010 Tax Relief Act retroactively extended the inclusion of qualified leasehold improvement property, qualified restaurant property and qualified retail improvement property in the 15-year MACRS class for two years through 2011.

Layering Opportunity

It is not only federal tax write-offs that can help reduce the cost of capital investments. Many laundry and dry cleaning businesses making capital investments during the 2011 tax year can also benefit from state and local credit and incentive programs. In fact, many states offer a tax credit equal to a percentage of an eligible capital investment made in that state.

Eligibility for the credit may depend on industry or particular use of the underlying asset. For example, states like Massachusetts, New Jersey and Oklahoma offer investment tax credits to manufacturing business for assets purchased that will be used exclusively in manufacturing activities. As an alternative formula, Illinois offers businesses predominantly engaged in either manufacturing or retail an investment tax credit for the purchase of all qualified purchases placed in service during the year. Best of all, the assets are not required to be used exclusively for manufacturing or retail activities.

Tomorrow: Opting Out…

CHICAGO — Laundry services held onto the top spot among hospital department contracts in 2009 for the fourth consecutive year, according to the 32nd annual Outsourcing Survey produced by our sister publication, Modern Healthcare.

RIPON, Wis. — With the acquisition of commercial laundry distributor Laundry Tek Services, Super Laundry Equipment has expanded its multi-state UniMac territory to include all of Pennsylvania.

“UniMac is proud to continue its growing partnership with Super Laundry,” says Kim Shady, UniMac national sales manager. “Super Laundry is a well-respected laundry equipment distributor, and its extension covering all of Pennsylvania will provide UniMac customers with service and support from Pittsburgh to Birdsboro.”

BETHLEHEM, Pa. — MacIntosh Services is a large commercial linen rental supply company in the scenic Lehigh Valley area of Northeastern Pennsylvania. From its headquarters here, the company supplies not only table linens and napkins, but also uniforms, chef apparel, aprons and towels to restaurants, hotels and other facilities throughout Pennsylvania and New Jersey.

The company uses more than 90,000 gallons of clean water a day. In fact, MacIntosh Services is the largest single user of municipal water in the Bethlehem metropolitan area.

NEW ORLEANS — Super Laundry of Ambridge, Pa., has expanded its distribution of Guardian Integrated Services’ commercial laundry products, the companies announced here during Clean ’09.

Previously, Laundry City was named Guardian’s distributor for the state of Indiana. The Ohio and Pennsylvania territories are now being serviced by Ohio Laundry, of Columbus, Ohio, and Super Laundry, respectively.