ISSUE 5, 2024 OFFICIAL PUBLICATION OF THE NEBRASKA SOCIETY OF CPAS
Together, we’re the sophisticated navigators they need. Helping CPAs statewide, Koley Jessen can be your estate and succession law partner. Your financial expertise helps your clients make vital estate-planning decisions. Our legal prowess can help plot out thoughtful transition plans in the most tax-efficient way. When we work as partners, we offer your clients tailor-made routes to success. ■ Estate Planning ■ Estate & Trust Administration ■ Estate & Trust Disputes ■ Business Succession Planning ■ Charitable Planning & Nonprofit Organizations ■ Wealth Transfer Planning Contact Us Today. 402.390.9500 | koleyjessen.com/services-estate-planning
BOARD OF DIRECTORS JONI SUNDQUIST NESCPA PRESIDENT & EXECUTIVE DIRECTOR joni@nescpa.org KELLY EBERT VICE PRESIDENT kelly@nescpa.org MICHELLE LYONS STAFF ACCOUNTANT & OFFICE MANAGER michelle@nescpa.org LORI VODICKA MEMBERSHIP & CPE ASSISTANT lori@nescpa.org OFFICERS BOARD MEMBERS NESCPA STAFF BRIAN M. KLINTWORTH CHAIRMAN HBE LLP Lincoln JODI M. ECKHOUT CHAIRMAN-ELECT Woods & Durham Chartered CPAs Holdrege HEATHER E. BARR SECRETARY Endicott Clay Products Co. Fairbury GRANT H. BUCKLEY TREASURER Buckley & Sitzman LLP Lincoln KELLY J. MARTINSON IMMEDIATE PAST CHAIRMAN Lutz Omaha SHARI A. MUNRO AICPA ELECTED REPRESENTATIVE Frankel LLC Omaha LORRAINE A. EGGER AICPA ELECTED REPRESENTATIVE NOMINEE CyncHealth La Vista KELLY A. MANN AICPA AT-LARGE REPRESENTATIVE AuditMiner Gretna DERRICK J. BLUM DIRECTOR Iron Horse CPAs & Advisors PC Norfolk LAUREN E. BOND DIRECTOR Deloitte & Touche LLP Omaha LAURIE ANN J. BUHLKE DIRECTOR Contryman Associates PC Grand Island NICOLE L. COOPER DIRECTOR Project Harmony Omaha JUSTIN M. HOPE DIRECTOR Eide Bailly LLP Elkhorn JILL R. TRUCKE DIRECTOR University of Nebraska-Lincoln Lincoln DANA J. WEBER WEST NEBRASKA CHAPTER PRESIDENT Dana J. Weber, CPA Scottsbluff CLASSIFIED AD Nebraska Practices for Sale: Gross Shown: NEW $195K Bellevue, NE EA Tax Practice. NEW $185K North Central NE CPA Practice. For more information Call (800) 397-0249 or visit www.APS.net THINKING OF SELLING? Accounting Practice Sales is the leading marketer of accounting and tax practices in North America. To learn more about our risk-free & confidential services, call Trent Holmes at (800) 397-0249 or email trent@apsholmesgroup.com. 4 Nebraska CPA
Once again, The Best Lawyers in America® has recognized 46 McGrath North attorneys in the full range of specialty practice areas key to supporting businesses of all sizes across a broad range of industries, and 27 attorneys have been recognized for 10 years or more! McGrath North invests time, energy and resources to build a culture of professional excellence and integrity that produces results for our clients to make lives better. INSPIRED BY EXCELLENCE. COMMITTED TO SUCCESS. SEE THINGS DIFFERENTLY. Collaborating with companies and CPA firms on: State Tax Audits • State Tax Appeals • State Tax Planning • State Tax Incentives State Business Incentives • Site Development Incentives • Property Tax Appeals Nick Niemann, JD State & Local Tax & Incentives Attorney Partner, McGrath North (402) 633-1489 nniemann@mcgrathnorth.com www.mcgrathnorth.com | www.nebraskastatetax.com | www.nebraskaincentives.com Matt Ottemann, JD, LLM State & Local Tax & Incentives Attorney Partner, McGrath North (402) 633-9571 mottemann@mcgrathnorth.com
25 18 C O N T E N T S 13 ©2024 Nebraska Society of Certified Public Accountants | The newsLINK Group LLC. All rights reserved. The Nebraska CPA is published six times each year by The newsLINK Group LLC for the Nebraska Society of Certified Public Accountants and is the official publication for this society. The information contained in this publication is intended to provide general information for review, consideration and education. The contents do not constitute legal advice and should not be relied on as such. If you need legal advice or assistance, it is strongly recommended that you contact an attorney as to your circumstances. The statements and opinions expressed in this publication are those of the individual authors and do not necessarily represent the views of the Nebraska Society of Certified Public Accountants, its board of directors, or the publisher. Likewise, the appearance of advertisements within this publication does not constitute an endorsement or recommendation of any product or service advertised. Nebraska CPA is a collective work and as such some articles are submitted by authors who are independent of the Nebraska Society of Certified Public Accountants. While the Nebraska CPA encourages a first-print policy, in cases where this is not possible, every effort has been made to comply with any known reprint guidelines or restrictions. Content may not be reproduced or reprinted without prior written permission. For further information, please contact the publisher at (855) 747-4003. ISSUE 5, 2024 EDITORIAL: The Nebraska Society of CPAs seeks to reflect news and relevant information to Nebraska and other news and information of direct interest to members of the Nebraska Society of CPAs. Statement of fact and opinion are made on the responsibility of the authors alone and do not represent the opinion or endorsement of the Nebraska Society of CPAs. Articles may be reproduced with written permission only. ADVERTISEMENTS: The publication of advertisements does not necessarily represent endorsement of those products or services by the Nebraska Society of CPAs. The editor reserves the right to refuse any advertisement. SUBSCRIPTION: Subscription to the magazine, a bi-monthly publication, is included in membership fees to the Nebraska Society of CPAs. PRESIDENT’S MESSAGE 7 Celebrate & Elevate By Joni Sundquist, Nebraska Society of CPAs 10 CPA Firm Regional Leadership Network 11 State Senators Reception & Dinner 12 2025 Conferences & Special Events Mark Your Calendars for These Outstanding Opportunities! STATE BOARD REPORT 13 Driving Progress New Rules & State Board Leadership at the National Level By Dan Sweetwood, Nebraska Board of Public Accountancy 15 Updates to Investment & Production Tax Credits Including Final Regulations on Transferability and Direct Pay, and Proposed Energy Property Regulations By Hannah Fischer Frey, Carrie E. Schwab & Jack Suter, Baird Holm LLP COUNSELOR’S CORNER 18 Adapting Irrevocable Trusts to Changing Circumstances Four Trust Modification Tools By Beau Morgan & Austin Hoffman, Koley Jessen 20 Who Are the Best Buyers When Selling an Accounting Practice? By Accounting Practice Sales 22 Open a Donor Advised Fund Before Year-End for Tax Benefits & Community Impact By Katie Vogel, Director of Donor Services, Omaha Community Foundation 23 In Memoriam 25 From Humble Beginnings to the Big Four Transforming the Future of the Accounting Profession By Larry Bradley, Global Head of Audit, KPMG International 28 Members in the News 30 Welcome New Society Members 31 2024 NESCPA Advertiser Index
PRESIDENT’S MESSAGE BY JONI SUNDQUIST, NEBRASKA SOCIETY OF CPAs AS ANOTHER REMARKABLE YEAR COMES TO A CLOSE, I FIND myself reflecting on how fortunate I am to work alongside such talented members, outstanding volunteer leaders, and dedicated Society staff. Your contributions inspire me every day. The theme of this year’s Annual Meeting, Celebrate & Elevate, sums up where we’ve been and where we’re going. As we review our accomplishments over the past year, we also set our sights on elevating the CPA profession in the year ahead. CELEBRATING OUR PROGRESS Growing Membership With nearly 2,700 members—the largest total since 2014—the Nebraska Society of CPAs continues to thrive. High retention rates and the steady influx of new members highlight the commitment of Nebraska CPAs to the Society and the profession. Expanding Education This year, more than 2,600 professionals participated in our CPE offerings—a remarkable 42% increase over last year! By embracing digital transformation, with nearly 10,000 webcasts and more than 100 OnDemand courses, we’ve expanded access to professional development while continuing to host outstanding in-person conferences. New free webcasts have further boosted engagement, solidifying the Society’s role as a leader in CPA education. Connecting In-Person Our in-person events shined this year. From the tour of Memorial Stadium during the Business, Industry & Innovation Conference to the rooftop Happy Hour at the Not-for-Profit & Governmental Accounting Conference, from the strong turnout of 40 and under CPAs at the Women in Accounting Summit to the near-capacity attendance at the Annual Meeting during the Fall Conference— we’ve celebrated connection and learning all year long. These events showcase how vibrant our CPA community is when we come together. Broadening Benefits Through our partnership with AMBA and a newly minted relationship with Apollo Health Insurance, we are expanding the Society’s insurance offerings. Coming soon will be customizable health insurance plans for individuals, as well as large and small companies. We continue to add vendors to our Member Benefits Program, providing valuable savings and solutions to members. Awarding Scholarships Through the Society’s Foundation, we awarded 97 scholarships totaling $128,950 to accounting students across 14 universities—a 35% increase in scholarship funding and a 31% growth in scholarship recipients over the previous year. This investment celebrates the next generation, ensuring a strong pipeline of future CPAs to elevate our profession. Watch for more details in the next issue of Nebraska CPA, where we will feature our scholarship winners and those contributing to our Foundation. Recruiting Future Accountants The Society and our Foundation, in collaboration with Lincoln, Neb.,-based redthread, are jointly developing a digital Accounting CONTINUED ON PAGE 8 7 nescpa.org
Recruitment Campaign to inspire high school students and their parents to explore accounting careers. This exciting campaign, featuring a video, digital ads, and a microsite, is now underway— stay tuned for updates! Seeking New Pathways to CPA We’ve also been actively involved in national discussions involving a proposed additional pathway to CPA licensure. The AICPA, NASBA, and State Societies have been working to develop and provide input on model legislative language that seeks to add flexibility to CPA licensure while maintaining rigor and preserving mobility. Read more at http://conta.cc/4ePLCnn. Advocating for the Profession At the state level, our advocacy efforts have been pivotal. Thanks to joint efforts by the Nebraska Society and the Nebraska Board of Public Accountancy, LB 854 was signed into law in March 2024, allowing candidates to sit for the CPA exam with 120 hours of qualifying college credit and a bachelor’s degree beginning in January 2025. Our PTET Working Group took the lead on Pass-Through Entity Tax (PTET) legislation and education efforts this year. LB 1059 provided technical changes—drafted by our members—to legislation enacted in 2023 that allows flow-through entities to pay state income tax directly on behalf of their owners, for a federal tax benefit. We successfully opposed the taxation of accounting and professional services, which was part of Governor Pillen’s property tax relief plan. In addition, the Society joined the No New Taxes Nebraska coalition, which helped defeat the EPIC Tax Option ballot initiative this year. We continue to address the inequities of LB 34 and advocate for fair outcomes for all Nebraskans. Passed during the Special Session this fall, LB 34’s “missing year” of property tax relief penalizes some Nebraskans by retroactively eliminating the property tax credits for 2023 assessed taxes. Your Society will continue to fight for the CPA profession and the protection of the public. Although these efforts and achievements are undoubtedly worth celebrating, Celebrate & Elevate inspires us to aim higher. While we remember our successes, we must also push forward—advancing the profession, expanding our impact, and shaping a bold vision for the future. ELEVATING THE PROFESSION Embracing Change In a rapidly evolving profession, adaptability is key. Emerging technologies like Generative AI are already reshaping the landscape. The profession and the Society must continue to embrace flexibility and seek out innovations. Past Chairman Kelly Martinson encouraged members at the Annual Meeting to “stay curious, think big, and step outside of your comfort zone.” Building Networks Are you looking for insights on your most challenging issues or seeking meaningful connections with other firm leaders? New in 2025, the Nebraska Society of CPAs is excited to introduce the CPA Firm Regional Leadership Network. This multistate virtual network will offer facilitated discussions for similar-sized public accounting firm leaders, providing a forum for you to explore trends impacting your firm and to learn from the experiences of colleagues. Each virtual cohort will include up to 15 individuals from firms across Iowa, Illinois, Indiana, Michigan, Minnesota, Missouri, Nebraska, North Dakota, South Dakota, and Wyoming. Learn more about the CPA Firm Regional Leadership Network on page 10. Exploring Ways to Engage The Society’s success relies on active member involvement. Here are ways you can get involved: Volunteer for a Society committee. Take advantage of the Society’s outstanding educational conferences and courses. Support the Foundation and its scholarship program with your dollars. Share your voice through surveys and requests for feedback. Participate in the legislative process by contacting your State Senator when an issue of concern arises and attend the annual State Senators Reception & Dinner on Jan. 7. Donate to our Political Education Committee, which strengthens the Society’s advocacy efforts and gives us greater access to State Senators. As Society Chairman Brian Klintworth of HBE LLP reminded us at the Society’s Annual Meeting, “Your willingness to get involved, share insights, and advocate for the profession has been the driving force behind our success. To continue thriving, we must all remain engaged and committed to our shared mission.” CHEERS TO 2025 Let’s celebrate our accomplishments and elevate our vision as we step into the new year. Together, we can drive meaningful change and create a future full of progress and innovation. Here’s to 2025—a year of opportunity and growth for the CPA profession and your Society! Joni Sundquist is president and executive director of the Nebraska Society of CPAs. You may contact her at (402) 476-8482 or joni@nescpa.org. CONTINUED FROM PAGE 7 8 Nebraska CPA
Scan the QR code or visit alliantgroup.com to learn more. alliantgroup specializes in helping CPAs leverage niche tax credits & incentives for their clients, as well as solutions to the ongoing talent shortage. We have partnered with 4,600+ CPA firms in our 20+ year history, providing them with a comprehensive suite of services to bolster their operations. Our industry experts have helped CPA firms take advantage of powerful incentives, including the R&D Tax Credit and Section 179D. In addition, our remote talent solution alliantTALENT provides firms with remote teams of professionals, helping CPAs to best serve their clients. Contact: Sonny Grover, Executive Vice President 844.898.3280 • sonnygrover@alliantgroupinfo.com The Nation’s Premier Consulting & Management Engineering Firm
Are you looking for insights on some of your most challenging issues or simply seeking to develop more meaningful connections with other firm leaders? The new CPA Firm Regional Leadership Network is your solution. This multistate virtual network provides facilitated discussions for similarsized public accounting firm leaders providing a forum for you to explore trends impacting your firm and to learn from the experiences of colleagues. More Information: Joni Sundquist President/Executive Director, Nebraska Society of CPAs joni@nescpa.org | 402.476.8482 Who it’s for: • Firms that have between 2-20 accounting and finance professionals. • Enrollment in the program is limited to one participant, ideally at a leadership level, per firm and the subscription belongs to the firm. Benefits: • Provides a confidential and open forum for leaders across the Midwest to discuss what’s working and what isn’t. • Topics will be driven by cohort participants and determined at the kickoff meeting for the balance of the subscription year. Examples include: - What’s keeping you up at night? - Leadership, firm management, operational challenges - Client management - Technology - Private equity and succession planning - Other trends and emerging hot topics • Serves as an avenue for firms to learn from one another and develop long-term relationships. How it works: • Participants will be assigned to a virtual cohort which includes up to 15 individuals from firms across all participating states (IA, IL, IN, MI, MN, MO, NE, ND, SD, WY). • Participants will remain in the same cohort throughout the year and in subsequent years with the goal of establishing long-term valued relationships. • Quarterly meetings will be facilitated by a CPA State Society representative and will last 120 minutes, with one hour dedicated to content and one hour to open forum discussion. • Discussion shared during cohort meetings will be considered confidential to encourage open dialogue and will not be recorded. • The subscription year begins with an initial meet and greet launch meeting in February 2025 followed by quarterly meetings for the balance of the subscription year as determined by the group. Fee: • The fee is $1,000 per firm per year and is non-refundable. • The fee allows for one representative per firm.
7 JANUARY STATE SENATORS RECEPTION & DINNER THE CORNHUSKER MARRIOTT Renaissance Room 333 South 13th Street, Lincoln 5:30 pm-9:00 pm REGISTER society@nescpa.org | 402-476-8482 nescpa.org/senators-dinner
2025 Conferences & Special Events MARK YOUR CALENDARS FOR THESE OUTSTANDING OPPORTUNITIES! State Senators Reception & Dinner Tuesday, January 7 The Cornhusker Marriott, Renaissance Room, Lincoln Business, Industry & Innovation Conference with Duncan Aviation Tour Tuesday, April 29 | 6 CPE Duncan Aviation, Lincoln Not-For-Profit & Governmental Accounting Conference Wednesday-Thursday, June 25-26 | 16 CPE Nebraska Innovation Campus Conference Center, Lincoln ABCs of Business Happy Hour Wednesday, June 25 The Barred Owl, The Scarlet Hotel, Lincoln Women in Accounting Summit Wednesday, August 27 | 6 CPE Riverview Lodge, Mahoney State Park, Ashland Fall Conference & Annual Meeting Wednesday-Thursday, November 5-6 | 16 CPE Riverview Lodge, Mahoney State Park, Ashland Two-Day Tax Update for Individuals & Business Monday-Tuesday, December 8-9 | 16 CPE To Be Determined 12 Nebraska CPA
STATE BOARD REPORT DRIVING PROGRESS NEW RULES & STATE BOARD LEADERSHIP AT THE NATIONAL LEVEL BY DAN SWEETWOOD, NEBRASKA BOARD OF PUBLIC ACCOUNTANCY IN THIS EDITION OF THE STATE BOARD REPORT, WE SPOTLIGHT the Nebraska Board of Public Accountancy’s recent efforts to advance new education rules aimed at enhancing flexibility for CPA candidates, as well as the remarkable contributions of its members who play vital roles on the national stage. From shaping future regulations to actively engaging with the National Association of State Boards of Accountancy (NASBA), State Board members exemplify leadership and dedication to the profession. NEW EDUCATION RULES At its meeting on Nov. 21, the State Board advanced proposed regulations to complement the recent amendments to the Nebraska Public Accountancy Act. The amendments, approved earlier this year, allow candidates planning to sit for the CPA examination to begin the process after completing 120 credit hours of education with a bachelor’s degree, effective Jan. 1, 2025. Previously, candidates were required to have 150 credit hours to begin the examination. The State Board aims to provide greater flexibility by reducing the semester hour requirements, while leaving the responsibility for determining the best approach to accounting education to educators. For more information on the proposed regulations, go to https://bit.ly/NERuleChanges. These regulations will be submitted to the Nebraska Attorney General’s Office and the Governor’s Policy Research Office for review and final approval. If you have any questions regarding the proposed regulations, please contact the State Board office at (402) 471-3595 or email dan.sweetwood@nebraska.gov or kristen.vanwinkle@nebraska.gov. STATE BOARD MEMBERS ACTIVE NATIONALLY State Board members play a crucial role when they join the Board, taking on a range of important responsibilities. These duties include serving on various committees, attending disciplinary hearings, and making decisions that can significantly impact individuals’ careers. Board members also participate in six meetings each year, where they receive updates, ask questions, and provide valuable feedback. Their decisions not only help protect the public but also shape and refine the regulatory framework for the CPA profession. In short, they dedicate their time and expertise, volunteering to support the profession. CONTINUED ON PAGE 14 13 nescpa.org
With more than 50 years of experience in the intricacies of Estate Planning, the team at Endacott Timmer knows the importance of getting the details right. endacotttimmer.com 402-817-1000 If you fail to plan, you plan to fail. Call the Estate Planning professionals. Another valuable opportunity for involvement is through active participation on the national stage with the National Association of State Boards of Accountancy (NASBA). This engagement allows State Board members to stay abreast of emerging trends shaping the profession and offers them a platform to provide meaningful feedback to key leaders, standard setters, and federal representatives from NASBA, the AICPA, and other influential organizations. Current Nebraska member participation includes: State Board Chair Melissa Ruff, CPA – Ruff, an audit managing director at Deloitte, was recently appointed to the NASBA Board of Directors as the Central Regional Director. In addition, Ruff serves as the 2024-2025 chair of the NASBA Enforcement Resources Committee, which is charged with promoting effective, efficient, and, where appropriate, uniform enforcement of professional standards by Boards of Accountancy. State Board Secretary Christi Olsen, CPA – Olsen, owner and partner in charge of Circle CPA, serves as a member of the 2024-2025 NASBA CPA Examination Review Board (ERB), which is charged with evaluating and reporting on significant adherence with the policies and procedures used in the preparation, grading, and administration of the Uniform CPA Examination and the International Qualifications Examination used by Boards of Accountancy for the licensing of CPAs. State Board Member Andrew Blossom, CPA – Blossom, a former office managing partner at KPMG, is a member of the 2024-2025 NASBA Regulatory Response Committee, which is charged with providing timely proposed responses on professional practice developments. In addition, former State Board members Lori Druse, CPA, an audit and assurance managing director at Deloitte, serves on NASBA’s Administration and Finance Committee, which oversees and monitors the fiscal operations and investments of NASBA, as well as on NASBA’s Nominating Committee for the Central Region. Douglas Skiles, CPA, a shareholder with Skiles Loop Bremer & White, CPAs, PC, remains active on NASBA’s Education Committee, which represents NASBA in the academic community and serves as an advisory resource on education matters related to the accounting profession. I cannot emphasize enough the significance of their contributions at the national level. Chair Ruff’s appointment to the NASBA Board of Directors marks Nebraska’s first representative on the NASBA Board in several years. Meanwhile, Secretary Olsen’s role on the ERB is crucial in overseeing the Uniform CPA Examination on behalf of state boards. As part of the Regulatory Response Committee, State Board member Blossom plays a key role in drafting and providing feedback on NASBA’s behalf regarding exposure drafts from various stakeholders. Please take a moment to recognize both current and former State Board members for their dedicated service to the citizens of Nebraska and your profession whenever you can! The Nebraska Board of Public Accountancy administers public accountancy law in Nebraska. Six of the eight board members are CPAs with active permits to practice and two are members of the public. If you have questions or concerns regarding the State Board or CPA licensing, contact State Board Executive Director Dan Sweetwood at (402) 471-3595 or go to nbpa.nebraska.gov. Please take a moment to recognize both current and former State Board members for their dedicated service to the citizens of Nebraska and your profession whenever you can! CONTINUED FROM PAGE 13 14 Nebraska CPA
INCLUDING FINAL REGULATIONS ON TRANSFERABILITY AND DIRECT PAY, AND PROPOSED ENERGY PROPERTY REGULATIONS BY HANNAH FISCHER FREY, CARRIE E. SCHWAB & JACK SUTER, BAIRD HOLM LLP THE INVESTMENT TAX CREDIT (ITC) AND PRODUCTION TAX Credit (PTC) provide substantial financial incentives designed to promote renewable energy investment and production in the United States. Section 38 allows a federal income tax credit equal to the sum of various business credits, including the ITC and PTC. The ITC, embodied in Section 48 of the Internal Revenue Code (Code), encourages potential investors to partake in the installation of renewable and clean energy systems. The PTC, detailed in Section 45 of the Code, provides a per-kilowatt-hour tax credit for electricity generated from qualified renewable resources. Together, these credits drive environmentally sustainable practices and support the growth of clean energy. This article revisits the general ITC and PTC requirements and provides an overview of recently published final and proposed regulations related to such credits. GENERAL ITC & PTC REQUIREMENTS A. General ITC Requirements To qualify for the ITC, eligible energy properties must satisfy three key criteria: (i) the taxpayer must own the property;1 (ii) the property must reach operational status within the year the credit is first claimed; and (iii) the property and project must comply with specific federal and state guidelines.2 The ITC applies primarily to energy properties, including solar, wind, and geothermal energy properties.3 Applicable energy properties include a wide range of equipment and systems, such as solar energy systems, geothermal systems, fuel cells, and small wind turbines. The ITC base rate under the Code stands at 6% for specific energy properties (including solar, fuel cells, waste energy recovery, combined heat and power, and small wind), and 2% for microturbine property. These rates can increase to 30% for specific energy properties and 10% for microturbine property, if the project satisfies the prevailing wage and apprenticeship requirements.4 The energy property must be “placed in service,” meaning it must be ready and available for use, in the year the tax credit is claimed.5 However, for property that satisfies the “beginning of construction” requirement, the ITC UPDATES TO INVESTMENT & PRODUCTION TAX CREDITS CONTINUED ON PAGE 16 15 nescpa.org
can be claimed if the property is placed in service by a specific deadline (usually within four years after the construction began).6 A 30% ITC is available for taxpayers who “began construction” by Dec. 31, 2019, with reduced percentages available for projects begun after this date.7 There are two methods to determine when construction begins: the “Physical Work Test” and the “5% Safe Harbor.”8 Continual progress towards completion is mandatory for both methods, generally requiring the project to be “placed in service” within the fourth calendar year after commencement of construction. B. General PTC Requirements To qualify for the PTC, eligible energy properties must satisfy three criteria: (i) electricity must be produced from a qualified energy resource (including wind, closed-loop biomass, open-loop biomass, geothermal energy, solar energy, small irrigation power, municipal solid waste, qualified hydropower production, and marine and hydrokinetic renewable energy); (ii) the project must be a qualified facility; and (iii) the electricity produced must be sold to an unrelated person.9 A Qualified Facility is an energy property that is: (i) owned by the tax payer; (ii) placed in service after 1992; and (iii) construction of which begins before Jan. 1, 2025.10 The PTC, like the ITC, also uses the “Physical Work Test” or the “5% Safe Harbor” method to determine the beginning of construction date. Lastly, the electricity must be sold to an unrelated person, generally requiring that the energy is not sold to an entity under common control or ownership, such as a parent-subsidiary, brother-sister corporation, or combined groups of corporations.11 The PTC is equal to the product of 0.3 cent multiplied by the kilowatt hours of electricity (a) produced by the taxpayer from qualified energy resources and at a qualified facility during the 10-year period beginning on the date the facility was originally placed in service, and (b) sold by the taxpayer to an unrelated person, increased by an inflation factor.12 If an energy project meets the prevailing wage requirements set forth in the Code, the amount of the credit can increase further.13 FINAL REGULATIONS FOR TRANSFERABILITY AND DIRECT PAY Transferability allows eligible taxpayers to transfer all or a portion of their eligible tax credits to unrelated taxpayers in exchange for cash payments, beginning after Dec. 31, 2022.14 These cash payments are excluded from the gross income of the eligible taxpayers and are not deductible by the transferee.15 Direct pay, also referred to as elective pay, allows “applicable entities,”16 to receive a direct payment from the IRS in lieu of a tax credit.17 On April 25, 2024, the Treasury and the IRS issued final regulations (T.D. 9993) related to the election to transfer certain tax credits. This follows the recent issuance of final regulations (T.D. 9988) on March 6, 2024, concerning the direct pay of certain tax credits. A. Transferability A taxpayer can elect to transfer all or a portion of an eligible credit to an unrelated transferee taxpayer. However, the following requirements, attributes, and impacts apply: Partnerships and entities with tax-exempt partners may qualify as transferors, if the entity has not made a direct pay election for eligible credits; Energy storage technology is eligible credit property; The transfer must be a one-time event, but transferors may transfer to multiple transferees; Bonus credit amounts, additional credits earned from meeting specific requirements such as prevailing wage and apprenticeship requirements, cannot be transferred separately from the base credit amounts; Grantor trusts can make transfer elections for eligible tax credits; There is an automatic six-month extension from the original due date of the tax return, excluding any other extensions, for making a transfer election; The initial transfer election cannot be made on an amended return; however, adjustments to the amount of the credit can be made on an amended return if the election was made timely on the original or superseding return; and Transferees may carry forward any unused credit amounts by applying the rules of Code Section 39(a)(4). B. Direct Pay An eligible business may elect for direct payment in lieu of a tax credit. However, the following requirements, attributes, and impacts apply: “Applicable entities” include all organizations exempt from tax under Section 501(a) of the Code. Federal agencies and state-law non-profits without federal tax‑exempt status are not “applicable entities” for Section 6717. Additionally, partnerships and S corporations are not “applicable entities,” regardless of whether their partners or shareholders are applicable entities; The initial transfer election cannot be made on an amended return; however, adjustments to the amount of the credit can be made on an amended return if the election was made timely on the original or superseding return; There is an automatic six-month extension from the original due date of the tax return, excluding any other extensions, for making a direct pay election; Applicable entities can choose their taxable year based on calendar or fiscal year, if they maintain adequate CONTINUED FROM PAGE 15 16 Nebraska CPA
books and records to support making a direct payment election based on the chosen taxable year; and Regarding the excess benefit rule, the purpose of a tax‑exempt grant is determined at the time of the award, and grants awarded post-acquisition are generally not restricted tax amounts. Additionally, only forgivable loans are treated as tax exempt under the excess benefit rule. ENERGY PROPERTY PROPOSED REGULATIONS Section 48 provides that the ITC is available for “energy property.” On Nov. 17, 2023, the IRS issued proposed regulations for the ITC, specifically addressing what qualifies as energy property. This section highlights some of the major changes and clarifications from the proposed regulations. A. Definition of Energy Property The term “energy property” generally means a “unit of energy property.” A unit of energy property includes all functionally independent components of property owned by the taxpayer that operate together and can function independently from other energy properties within a larger project. B. Qualifying Energy Property The proposed regulations provide much-needed guidance on certain newer technologies including energy storage and qualified biogas property. C. Integral Part of Energy Property Any property that is an “integral part” of the energy property is considered energy property for ITC purposes. To qualify as an integral part, the property must be used directly in the intended function of the energy property and be essential to its completeness. D. Exclusions The proposed regulations specify that the power purchase agreements, goodwill, going concern value, and renewable energy certificates are not energy property. E. The 80/20 Rule Energy property qualifies as “acquired by the taxpayer” if the “original use” of such property commences with the taxpayer.18 The proposed regulations provide that for retrofitted energy property, the 80/20 Rule applies. If the fair market value of the used components is not more than 20% of the total value of the unit of energy property, then the rule is met and the property qualifies as “acquired by the taxpayer.”19 CONCLUSION The ITC and PTC are key financial incentives that boost investment in renewable energy projects. Transferability and direct pay expand access and enhance investment, promoting broader participation in the renewable energy sector. Recent final and proposed regulations aim to clarify the implementation and provide compliance guidance for these credits. Understanding these evolving regulations is crucial for determining eligibility and the extent of benefits under both the ITC and PTC. As every energy project is unique, the specific legal and tax implications can vary. As such, this article should be used as a guide and not as a definitive source of advice. We recommend consulting with a Baird Holm LLP attorney and a qualified accountant for advice regarding the specific tax implications of a project. Hannah Fischer Frey is a partner at Baird Holm law firm, focusing on corporate transactions, federal and state tax planning issues, and tax-exempt matters. Fischer Frey has addressed complex partnership and corporate tax issues, including business reorganizations, private equity fund structuring, business succession planning, and tax planning in mergers and acquisitions. She has been closely involved in numerous federal and state tax examinations and audits. Carrie Schwab is an associate at the firm, focusing on general corporate matters as well as tax law and employee compensation and benefits. She assists businesses of all sizes on a variety of matters, including entity formation, corporate governance, general tax strategy and planning, ERISA compliance and employee benefit programs, and equity compensation incentives. Jack Suter was a summer associate at the firm. For more information, call (402) 344-0500 or email hfrey@bairdholm.com or cschwab@bairdholm.com. 1 I.R.C. § 48(a)(5)(D); See also I.R.S. Notice 2013-29; Treas. Reg. § 1.46-3(d)(4). 2 I.R.C. § 48. 3 I.R.C. § 48(a)(3). 4 I.R.S. Notice 2022-61. 5 I.R.S. Notice 2013-29; I.R.C. § 48(a)(5). 6 I.R.S. Notice 2018-59. 7 I.R.S. Notice 2018-59. 8 I.R.S. Notice 2018-59. 9 I.R.C. § 45. 10 I.R.C. § 45(c)(1). 11 I.R.C. § 45(a)(2)(B), § 45(e)(4). 12 I.R.C. § 45(a). 13 I.R.C. § 45(a)(10); I.R.S. Notice 2022-61. 14 I.R.C. § 6418 (a). 15 I.R.C. § 6418 (b). 16 “Applicable entities” include (1) any tax-exempt organization; (2) any state or political subdivision thereof; (3) the Tennessee Valley Authority; (4) any Indian tribal government; (5) any Alaska Native Corporation; and (6) any corporation operating on a cooperative basis that is engaged in furnishing electricity to persons in rural areas and other eligible taxpayers. 17 I.R.C. § 6417. 18 I.R.C. § 48(a)(3)(B)(ii). 19 Prop. Treas. Reg. § 1.48-14(a). 17 nescpa.org
COUNSELOR’S CORNER ADAPTING IRREVOCABLE TRUSTS TO CHANGING CIRCUMSTANCES FOUR TRUST MODIFICATION TOOLS BY BEAU MORGAN & AUSTIN HOFFMAN, KOLEY JESSEN DESPITE THE BEST OF INTENTIONS, IT IS IMPOSSIBLE FOR A trust settlor, and the practitioners advising them, to predict the future. So what options are available when an irrevocable trust no longer achieves its intended objectives? Fortunately, four primary tools allow practitioners to modify trusts to adapt to changes in family dynamics, financial situations, and tax laws. COURT MODIFICATION Nebraska allows for the modification or termination of a noncharitable irrevocable trust with consent from all beneficiaries and, if available, the settlor. If both the settlor and all beneficiaries consent, a court shall approve changes to the trust or terminate the trust even if they contradict the trust’s material purpose.1 If only the beneficiaries consent, the trust may be modified or terminated if the court finds no conflict with the trust’s material purpose.2 A spendthrift provision generally represents a material purpose. The court may still approve modifications even without the consent of all beneficiaries, provided that such modification wouldn’t violate a material purpose of the trust and the interests of any nonconsenting beneficiaries are adequately safeguarded, as determined by the court.3 Upon termination, trust assets are distributed as agreed upon by the beneficiaries. NONJUDICIAL SETTLEMENT AGREEMENT Individuals with a vested interest in a trust—those who would typically need to consent to court-approved modifications and terminations as discussed above—are allowed to create binding nonjudicial settlement agreements with respect to any matter involving a trust, so long as the agreement is signed by all interested parties.4 If there are minor or unborn children or disabled beneficiaries who may have an interest, they are generally represented by an individual with a substantially identical interest, such as a parent, provided no conflict of interest exists.5 However, these agreements are only valid if they do not violate a material purpose of the trust and incorporate modified terms that would have been approved by a court had the parties petitioned the court to modify the trust.6 Nonjudicial agreements can address various trust matters, such as interpreting trust terms, approving trustee actions, directing trustee conduct, appointing or resigning trustees, changing the trust’s principal place of administration, and assigning liability for trustee actions. Similar to court modifications, consent is needed from the necessary parties, but as the name suggests, it is “nonjudicial,” which can allow for a more timely way to modify the trust outside of the court process. Importantly, any interested party can request that the court review a nonjudicial settlement to confirm adequate representation and ensure the agreement’s terms align with what the court would deem acceptable.7 LIMITED POWER OF APPOINTMENT A power of appointment allows an appointed third party, called a “powerholder,” to act in a nonfiduciary capacity to designate the recipient(s) of a trust’s property.8 While a “general” power of appointment would allow the powerholder to appoint assets to anyone, including themselves, a “limited” power of appointment restricts appointment to a specified class. For example, a powerholder may be granted the power to appoint trust property only among the settlor’s descendants and/or charitable organizations. 18 Nebraska CPA
A power of appointment can be created by the terms of a trust agreement and the settlor can establish the parameters for the exercise of the power. The powerholder could be granted the authority to modify the administrative terms of the trust to account for tax law changes, modify distribution discretion standards, or appoint assets outright or in trust for the specified beneficiaries. If the settlor is comfortable allowing a designated party to make changes, incorporating a limited power of appointment in a trust agreement can offer significant flexibility to modify the terms of a trust. DECANTING Decanting allows a trustee to “pour” the assets of the “first” trust into a “new” trust with modified or improved terms intended to better meet the needs of the parties. Under the Uniform Trust Decanting Act, the trustee’s discretionary authority will impact the extent of a fiduciary’s decanting power. When a trustee’s distribution discretion is limited to an ascertainable standard (e.g., “health, education, maintenance and support”) or a reasonably definite standard, the trustee is considered to have “limited” distributive discretion.9 Under a limited discretion standard, the second trust may be created or administered under the law of any jurisdiction; however, in the aggregate, the beneficiaries must retain substantially the same beneficial interests in the “second” trust as they had in the first trust.10 When a trustee’s distribution discretion is not limited to an ascertainable or reasonably definite standard, the fiduciary is considered to have “expanded” distributive discretion.11 Under an expanded discretion standard, the decanting power can be used to achieve a variety of objectives so long as the decanting power is not used to add certain beneficiaries to the second trust who are not beneficiaries of the first trust nor may the power be used to reduce or eliminate certain vested interests.12 The fiduciary generally may exercise the decanting power without the consent of any person and without obtaining court approval.13 However, the fiduciary is required to provide notice of an intended exercise of the decanting power at least 60 days before the exercise to certain individuals.14 Depending on the distribution standard and the intended changes, trust decanting is another useful tool for practitioners. CONCLUSION Prior to any modification of a trust, it is critical that practitioners consider whether the desired changes could result in adverse gift, estate, and/or generation skipping transfer tax consequences to the trust, its settlor, or its beneficiaries. While it is impossible to predict the future, the modification tools afford the flexibility to make necessary adjustments as circumstances change. Beau Morgan and Austin Hoffman are attorneys at Koley Jessen, focusing their practices on estate planning and business succession planning. They work closely with families, individuals, and business owners, providing a range of services from preparation of basic estate plan documents to the development and implementation of sophisticated wealth transfer techniques and business succession strategies to achieve the client’s personal, financial, and business-based objectives. If you would like to discuss a client matter with Morgan and Hoffman, you can reach them at (402) 390-9500 or beau.morgan@koleyjessen.com and austin.hoffman@koleyjessen.com, respectively. 1 Neb. Rev. Stat. § 30-3837(a). 2 Neb. Rev. Stat. § 30-3837(b). 3 Neb. Rev. Stat. § 30-3837(e). 4 Neb. Rev. Stat. § 30-3811(b). 5 Neb. Rev. Stat. § 30-3824(6), Neb. Rev. Stat. § 30-3825. 6 Neb. Rev. Stat. § 30-3811(c). 7 Neb. Rev. Stat. § 30-3811(e). 8 Neb. Rev. Stat. § 30-4602(13). 9 Neb. Rev. Stat. § 30-4512(a). 10 Neb. Rev. Stat. § 30-4512(c). 11 Neb. Rev. Stat. § 30-4502. 12 Neb. Rev. Stat. § 30-4511. 13 Neb. Rev. Stat. § 30-4507(b). 14 Neb. Rev. Stat. § 30-4507(c). PARTNER WITH US TODAY! Selling your business? Get the best deal possible with our experienced Mergers & Acquisitions professionals. Results Business Advisors 12020 Shamrock Plaza #200 Omaha, NE 68154 402.913.9080 www.resultsba.com Scan the QR code to watch the Mergers & Acquisitions Professional video. https://www.resultsba.com/hire-ama-professional/ 19 nescpa.org
BY ACCOUNTING PRACTICE SALES BELIEVE IT OR NOT, WHEN SELLING AN accounting practice, the best buyer is not a larger firm, it is usually an individual. Most often, it is a current employee of a practice near you, or someone coming out of a large or regional firm who is looking for a platform to build on. This holds true for a couple of reasons. Existing firms often do not have the excess capacity in staff to handle the additional work. In a typical sale, the seller is ready to retire; at close, the buyer must be willing to assume the workload of the exiting practitioner and devote time to the transition. The reason a large firm buys an accounting practice is oftentimes different from an individual buyer’s reasons and, even when they are similar, the reward for the individual buyer is greater. Firms are less motivated and less likely to carry a substantial amount of the risk involved in an acquisition, almost always insisting on a client retention agreement. When the potential buyer is an individual with several years of experience, who has dreamed of owning a practice, that buyer will be willing to bear more of the financial risk and assume greater responsibility for client transition. In our experience, the best buyer for an accounting practice grossing $2 million or less is an individual. They are motivated to pay a fair market price on terms acceptable to the seller and they also have the time and energy to complete a smooth transition. The clients are happier because they go from one owner-operator to another—after all, who wants to talk to a staff member when they are accustomed to dealing with the owner? When you hear about clients leaving en masse after the sale of a practice, it is often because it was sold to a large firm and the clients were shuffled off to an unknown staff person. Ask yourself, “How would you feel?” The purchasing firm isn’t concerned because they will only pay a percentage of gross collected and, when there is no client, there is no gross collected. If you are selling an accounting practice, the very best buyers are experienced individuals who currently work for someone else. They recognize they are being paid X while billing 3X for their employer; they are fed up with being an employee and want to work for themselves. The next best buyer is a small practice owner who wants to “take it to the next level.” They realize it’s much easier to purchase an existing practice than slowly build up the clientele via referrals and marketing. These small practice owners will often step up and compete with individual buyers. Occasionally, a large firm will become sufficiently motivated to step up and compete with individual buyers, but it is a rare occurrence when they are willing to pay the same price, under the same terms, as a buyer who is purchasing a very good job. Contact Accounting Practice Sales today at (800) 397-0249 or trent@aps.net for a free, confidential consultation. To learn more about buying or selling a tax practice, visit accountingpracticesales.com. WHO ARE THE BEST BUYERS WHEN SELLING AN ACCOUNTING PRACTICE? 20 Nebraska CPA
Delivering Results - One Practice At a time Selling Your Practice? Call Today Sell By Year End! Scan Here Trent Holmes Trent@APS.net 800-397-0249 www.APS.net
Donor Advised Funds makes giving easy and meaningful. Support the causes you love — locally and beyond — with a fund at the Omaha Community Foundation. We’re growing good, together. Generosity, Amplified » omahafoundation.org/advisors OPEN A DONOR ADVISED FUND BEFORE YEAR-END FOR TAX BENEFITS & COMMUNITY IMPACT BY KATIE VOGEL, DIRECTOR OF DONOR SERVICES, OMAHA COMMUNITY FOUNDATION OPENING A DONOR ADVISED FUND (DAF) BEFORE THE END OF the year offers unique financial and philanthropic advantages. As the end of the calendar year approaches, it’s an excellent time to reflect on giving goals, tax strategies, and ways to make a meaningful difference in the community. Here are a few key reasons why opening a DAF before year end could be a rewarding move. First, opening a DAF allows for an immediate tax deduction on contributions. By contributing cash, appreciated stock, real estate, or other assets to a DAF before Dec. 31, donors can claim the deduction in the current tax year, even if they don’t plan to distribute the funds until a later date. This flexibility helps maximize the tax benefits of charitable giving and is particularly beneficial for individuals looking to offset a high-income year. Additionally, DAFs allow for more strategic and impactful giving. With a DAF at a community foundation, donors gain access to expert guidance on pressing community needs and opportunities to support local initiatives. Community foundations are deeply rooted in the communities they serve, offering insight and connections that can help donors make a more meaningful difference with their giving. Community foundation staff can also help donors connect with like-minded philanthropists, local nonprofits, and collaborative funding initiatives, enhancing the impact of their contributions. Furthermore, a DAF provides a simple, efficient way to manage charitable giving over time. Instead of dealing with multiple donation receipts or keeping track of various charitable contributions, donors can make a single contribution to their fund and recommend grants to nonprofit organizations over time. This simplifies tax reporting and offers donors the freedom to support causes when they choose, all while knowing their contributions are professionally managed by the foundation. Finally, opening a DAF before the end of the year creates a lasting legacy. Many donors use their funds to involve family members in philanthropy, making it a meaningful way to pass down values and create a culture of giving that endures across generations. By opening a fund at a community foundation, donors support their communities now and far into the future. If you have any questions about Donor Advised Funds, reach out to the team at the Omaha Community Foundation at (402) 342-3458 or giving@omahafoundation.org. 22 Nebraska CPA
www.thenewslinkgroup.orgRkJQdWJsaXNoZXIy MTg3NDExNQ==