2025 ISSUE 1 OFFICIAL PUBLICATION OF THE NEBRASKA SOCIETY OF CPAS CELEBRATING A LEGACY OF DEDICATION HONORING OUR LONGSTANDING MEMBERS JOIN US FOR THE NESCPA BUSINESS, INDUSTRY & INNOVATION CONFERENCE APRIL 29, 2025
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■ Corporate Taxation ■ Partnership/LLC/Sub-S Entities ■ Estate & Gift Taxation ■ State & Local Taxation ■ Mergers & Acquisitions ■ Bankruptcy, Reorganizations & Restructuring ■ Tax Protests, Disputes & Litigation ■ Real Estate ■ Individual Taxation ■ Charitable Planning ■ Nonprofit Organizations ■ Employee Benefits & Executive Compensation A partnership that gets everyone where they want to go. You help your clients plot out prudent tax decisions. We can help them navigate the potential pitfalls and opportunities of today’s complex tax environments. Together, we can map out their routes to success. Contact Us Today. 402.390.9500 | koleyjessen.com/services-tax Helping CPAs statewide, Koley Jessen can be your tax law navigator.
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. 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 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
26 18 C O N T E N T S 11 ©2025 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 1, 2025 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 Embrace a Year of Purpose By Joni Sundquist, Nebraska Society of CPAs STATE BOARD REPORT 10 Nebraska Leads Nation in CPA Exam Performance By Dan Sweetwood and Kristen VanWinkle, Nebraska Board of Public Accountancy STATE TAX BRIEFING 11 Navigating the Complexities of State Residency Critical Steps to Avoid Disputes By Nick Niemann and Matt Ottemann, McGrath North Law Firm COUNSELOR’S CORNER 14 The Death Tax Repeal Act of 2025 What You Need to Know By Kate Hughes and Haley Faust Leise, Koley Jessen 15 Updates to Nebraska’s Convenience of the Employer Rule By Hannah Fischer Frey, Morgan Kreiser and Carrie Schwab, Baird Holm Law Firm 18 Having Your Cake & Eating It Too Why Keeping Clients May Be Bad By Accounting Practice Sales 20 Bridging Generations By the Omaha Community Foundation 21 Getting Picked for PE By the National Association of State Boards of Accountancy (NASBA) 26 Celebrating a Legacy of Dedication Honoring Our Longstanding Members 29 Welcome New Society Members 30 Members in the News 32 Firms in the News 33 In Memoriam 33 Join Us for the Nebraska Society of CPAs Business, Industry & Innovation Conference April 29, 2025 34 2025 NESCPA Advertiser Index
EMBRACE A YEAR OF PURPOSE BY JONI SUNDQUIST, NEBRASKA SOCIETY OF CPAs AS WE EMBARK ON A NEW YEAR, I WANT to take a moment to thank each of you for your commitment to the accounting profession and the Nebraska Society of CPAs. Your hard work, dedication, and integrity continue to strengthen not only the profession but also the businesses, organizations, and communities you serve. The start of a new year brings a natural opportunity for reflection and renewal. It is a time to set new goals, reaffirm our values, and define our purpose. For CPAs, this means striving for excellence in your chosen career, advocating for policies that enhance the profession, and fostering a sense of community among your peers. This year, I encourage each of you to embrace a “Year of Purpose”—both personally and professionally. Being intentional about how you spend your time is a worthwhile commitment—whether it’s developing new skills, striving for big goals, or finding opportunities for personal and professional growth. It’s easy to get lost in the day-to-day grind and daily deadlines, losing sight of what truly makes an impact over time. By focusing on purpose, you can cut through distractions and gain clarity on what aligns with your values. It’s about identifying what matters most to you and making a conscious choice to invest your time in pursuing it. As you reflect on what will bring you purpose in 2025, know that the Society is here to support you and help you achieve your goals. SUPPORTING YOUR PROFESSIONAL GROWTH Education has long been a pillar of the profession, ensuring that you stay ahead of evolving regulations, technological advancements, and best practices. The Nebraska Society of CPAs is committed to offering top-tier continuing professional education opportunities that meet your needs. Through our extensive online catalog of conferences, in-person CPE, webcasts, and on-demand learning options, we provide resources designed to sharpen your skills and keep you informed. Whether you are looking to gain expertise in tax law, auditing, financial management, or emerging areas like artificial intelligence and data analytics, we have courses tailored to your needs. In addition, we recognize that learning is not limited to technical knowledge. Leadership development is equally important, and we are proud to offer programs that help CPAs grow as business leaders, strategic thinkers, and mentors in their organizations. Our latest offering includes the CPA Firm Regional Leadership Network. This multistate virtual network provides facilitated discussions for similar-sized public accounting firm leaders offering a forum for you to explore trends impacting your firm and to learn from the experiences of colleagues. Learn more at nescpa.org/cpe/firm-network. ADVOCATING FOR THE CPA PROFESSION The Society is also dedicated to ensuring that the profession is well represented in legislative and regulatory discussions. Advocacy is a crucial part of protecting and enhancing the CPA designation, and we work diligently to monitor legislative developments that impact the profession and support sound fiscal policy. Stay up to date at nescpa.org/advocacy/news. Working alongside our lobbyists Korby Gilbertson and Justin Brady, we actively engage with lawmakers at both the state and national levels, voicing the concerns of CPAs and working to shape policies that support the profession. Whether it’s advocating for fair and effective tax policies, reasonable regulatory requirements, or workforce development initiatives, we are actively involved in representing your interests. PRESIDENT’S MESSAGE CONTINUED ON PAGE 8 7 nescpa.org
But advocacy is not just the work of the Society—it is the work of all of us. I encourage you to get involved in our advocacy efforts. Whether by participating in our Political Education Committee, attending legislative events like our State Senators Reception & Dinner, or simply staying informed and engaging with policymakers, your voice matters. BUILDING A STRONGER CPA COMMUNITY A profession is only as strong as the network that supports it, and one of the greatest benefits of being a member of the Nebraska Society of CPAs is the sense of camaraderie and connection that it fosters. This year, I challenge you to be intentional about building relationships within our CPA community. Attend Society events, participate in committees, and reach out to fellow members. The strength of our profession lies in the willingness of CPAs to support one another, share insights, and mentor the next generation. Speaking of the next generation, workforce development remains a key focus for the Society. We are committed to attracting, developing, and retaining top accounting talent. This includes engaging students early in their academic careers, promoting the value of the CPA designation, and providing resources to help young professionals succeed. Your Society will soon be releasing a new microsite, video, and digital ad campaign aimed at attracting high schoolers, and their parents, to a career in accounting. In addition, we recently partnered with Accounting+ to help showcase the limitless possibilities a career in accounting holds. If you have the opportunity, mentor an aspiring CPA, join our Accounting Careers Committee, donate to the Society’s highly successful Foundation, or participate in other initiatives aimed at strengthening our profession’s future. LOOKING AHEAD The year ahead will bring both challenges and opportunities, but I have no doubt that we are prepared to meet them with resilience and purpose. I encourage you to take full advantage of the resources and support offered by the Society. Whether it’s through continuing education, advocacy efforts, networking events, or leadership opportunities, we are here to help you thrive. As we move forward together, let’s make 2025 a year of purpose. Thank you for your dedication and engagement—and congratulations to those celebrating membership milestones in 2025 (see pages 26-28). I look forward to working alongside you in the coming year to continue strengthening the Nebraska Society of CPAs and the profession we all hold dear. Wishing you a year of success, fulfillment, and purpose! 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
1700 Farnam Street, Suite 1500 Omaha, NE 68102 www.bairdholm.com BH BairdHolm attorneys at law llp HANNAH FISCHER FREY, J.D., LL.M. 402.636.8345 hfrey@bairdholm.com JESSE D. SITZ, J.D. 402.636.8250 jsitz@bairdholm.com PARTNERS YOU CAN COUNT ON Business succession and exit planning Tax planning in mergers, acquisitions, and reorganizations Partnership taxation structuring and compliance Tax credits, tax incentives, and alternative financing Section 1031 exchanges Wealth transfer planning, including estate and gift taxation Nonprofit exemption applications and compliance Audit response and representation before the IRS, state, and local authorities
NEBRASKA’S CPA CANDIDATES HAVE ONCE again proven their excellence on the national stage. According to the latest National Association of State Board of Accountancy (NASBA) Quarterly CPA Examination Report, the Cornhusker State ranks No. 1 in the nation in three key categories and No. 2 in the country in one key category for the fourth quarter of 2024: No. 1 in overall CPA Exam pass rate No. 1 in average CPA Exam scores across all sections No. 1 in core CPA Exam pass rates (AUD, FAR, REG) No. 2 in discipline CPA Exam pass rates (BAR, ISC, TCP) These outstanding rankings reflect the strength of Nebraska’s accounting education programs, the dedication of accounting educators and CPA candidates, and the support of firms and mentors who prepare future CPAs for success. A breakdown of key exam performance metrics includes: The overall pass rate stood at 62.5%. The pass rate among first-time candidates was 67.5%. The average score across all exam sections was 74.9. Candidates had an average age of 26.3 years. Those with bachelor’s degrees made up 57.4% of the exam takers, while 16.9% held advanced degrees. These results highlight the commitment of Nebraska’s accounting community in preparing candidates for the evolving CPA Exam, which introduced a new structure in 2024. The state’s high rankings demonstrate the effectiveness of education programs and training initiatives designed to help CPA candidates succeed. MODERNIZING CPA LICENSING WITH NEW ONLINE PORTALS To streamline the CPA licensing and the renewal process, the Nebraska Board of Public Accountancy has launched new online portals in collaboration with its IT partner, Certemy. These portals are designed to improve efficiency for initial permits, renewals, and Continuing Professional Education (CPE) reporting. The goal of the State Board is to continue enhancing these portals throughout this year as they are developed and released. To begin with, initial applications have been released. The new applications will provide for a seamless experience where CPAs can manage their accounts, track applications, and fulfill reporting requirements with ease. The State Board’s new Certemy platform will eventually allow CPAs to: Submit applications for initial CPA certificates and permits online. (Now available!) Track the status of renewals in real-time. Manage CPE reporting efficiently. The Nebraska Board of Public Accountancy administers public accountancy law in Nebraska. If you have questions or concerns regarding the State Board or CPA licensing, visit nbpa.nebraska.gov or contact State Board Executive Director Dan Sweetwood or State Board Administrator Kristen VanWinkle at (402) 471-3595 or dan.sweetwood@nebraska.gov or kristen.vanwinkle@nebraska.gov, respectively. STATE BOARD REPORT NEBRASKA LEADS NATION IN CPA EXAM PERFORMANCE BY DAN SWEETWOOD AND KRISTEN VANWINKLE, NEBRASKA BOARD OF PUBLIC ACCOUNTANCY 10 Nebraska CPA
THE QUESTION OF WHETHER A TAXPAYER IS SUBJECT TO TAX in a state is complex. The answer for a company, and the facts needed to reach that answer, differs from those for an individual. In this article, we’ll review whether an individual is subject to tax as a resident. In our recent experience, this topic has generated significant controversy with the Nebraska Department of Revenue. This is particularly true when long-time residents choose to spend part of their time in the state they are moving from. We have written on this topic before and are revisiting this for two reasons. First, the question of tax residency has led, and we believe it will continue to lead, to numerous disputes between taxpayers and the Department of Revenue. Second, since there have been a number of new cases on this topic, we can identify additional factors that those courts have highlighted as important in the determination of tax residency. Understanding those additional factors could make the difference in results for you or your client. While this question applies to all states with an income tax, we are limiting our discussion here to just Nebraska. This question applies whether you are leaving Nebraska or leaving another state to come to Nebraska. NEBRASKA’S RULES ON TAX RESIDENCY As long-time Nebraskans, we never like to see people leave our great state. However, we know that many choose to leave Nebraska for a variety of reasons. Often, those people retain certain connections to Nebraska, including a second home, an ownership or leadership position with their company, or other personal or family ties. This presents a combination of facts that often confuses the question of which state is their true state of residency. Nebraska tax law establishes that a person will be deemed to be a Nebraska resident if either of two tests apply. We have called these two tests the Presence Test and the Domicile Test. Presence Test A person remains a Nebraska resident if that person maintains a permanent place of abode in Nebraska (meaning a house, apartment, etc.) and spends, in the aggregate, more than six months of the year in Nebraska. This test is the most clear-cut of the two. Either a person factually meets both conditions or they do not. Of note with this test, motivation for a person’s presence is irrelevant. Whether here for family, medical or business purposes, if a person meets both factual conditions, then they are a Nebraska resident for income tax purposes. Domicile Test A person is also deemed to remain a Nebraska resident if that person is domiciled in Nebraska. Our Nebraska Supreme Court has stated: “The question of domicile is a question of fact rather than law, frequently depending upon a variety of circumstances. The NAVIGATING THE COMPLEXITIES OF STATE RESIDENCY CRITICAL STEPS TO AVOID DISPUTES STATE TAX BRIEFING BY NICK NIEMANN AND MATT OTTEMANN, MCGRATH NORTH LAW FIRM CONTINUED ON PAGE 12 11 nescpa.org
term domicile shall mean the place where an individual has his or her true, fixed, and permanent home and principal establishment, and to which whenever he or she is absent he or she has the intention of returning. Actual residence is not necessarily domicile.” The Nebraska Supreme Court has further stated: “The requirements to establish and change a domicile are settled. To acquire a domicile by choice, there must be both (1) residence through bodily presence in the new locality and (2) an intention to remain there. All of the surrounding circumstances and the conduct of the person must be taken into consideration to determine his or her domicile. To change domicile, there must be an intention to abandon the old domicile. To establish a new domicile, the present intention must be to remain indefinitely at a location or site or to make a location or site the person’s permanent or fixed home.” Unfortunately, this legal standard—based on intention—leaves a lot of wiggle room for Nebraska to tax you as a Nebraska resident. Courts cannot read a person’s mind, so intent is determined based on the review of a number of facts regarding the person’s location. Domicile Factors Established by the Department Itself In its information guide titled “Determining Residency Status for Nebraska Individual Income Tax Filing,” the Department has identified a number of factors that it will examine to determine domicile. These include the following: Purchasing a home in another state for use as a principal residence; Paying taxes as a resident of another state; Obtaining a driver’s license as a resident of another state; Registering a motor vehicle as a resident of another state; Voting in another state; The number of days a person is present in Nebraska; The size, value, and nature of a person’s Nebraska residence compared to his or her out-of-state residence; The location of a person’s employment, business connections, and professional licenses; The physical location of items that have significant sentimental value; A person’s social, community, and family ties in both locations; Where a person’s minor children attend school or daycare; and Where a person’s doctors, dentists, accountants, attorneys, bankers, and other professionals are located. Additional Domicile Factors Cited by Nebraska’s Courts In addition to the domicile factors cited by the Department, Nebraska courts have also identified the following additional factors they will consider in determining domicile: Addresses used for mailing and official purposes; Medical reasons for presence in a jurisdiction; Direct evidence of intent; Jurisdictions in which the person paid taxes as a resident; Jurisdictions in which a person operated a business; If a person leaves the country, the nature of their visa in the new country (and whether it is permanent); If a person travels outside of Nebraska, the location where they generally start and stop their travels; Statements on a person’s estate planning documents; and Location of burial plots or other funeral arrangements. MAIN STEPS TO END STATE TAX RESIDENCY Given all of these, how can a person end their state residency for tax purposes? As documented previously, the strict legal test of domicile is extremely fact sensitive. Precise recommendations on steps for a person to take to change their domicile depend on the particular fact situation of that person. However, several critical steps that should commonly be taken include the following: Spend Time in Your New State. The Department looks carefully at the location where a person spends their time. We suggest spending as much time as possible in your new state (and no more than six months in your old state). Vote in Your New State. The Nebraska Supreme Court has established that voting is a factor of particular significance in determining domicile. A person should register to vote, and vote, in their intended state of domicile. The person should also keep a copy of his or her voter registration and a log of elections voted. Sentimental Items. Move these to your new home (and keep a list of the sentimental items). Driver’s License. Change your driver’s license to your new state. Travel Records and Credit Card Statements. Keep a log of your time in Nebraska and elsewhere. Travel records and credit card statements are very helpful to establish the location of a person throughout the year. In addition, people can download apps to their phone that help keep track of a person’s location. Estate Planning Documents. Execute new wills, financial powers of attorney, and health care powers of attorney that designate your new state of residency. Community Involvement. Become involved in the community and recreational organizations in your new state. Consider whether to terminate your memberships to such organizations in Nebraska (as the Department of Revenue may use these against you). In general, as with most tax questions, the best way to realize the results you or your clients want is to address the question before your clients move. CONTINUED FROM PAGE 11 12 Nebraska CPA
CONTINUED ON PAGE 14 Support Charities in Your New State. The Department of Revenue will try to use your charitable gifts and support to determine residency. So, consider supporting charities in your new state. Consistent Statements of Residency. Be consistent with your change of residency. For example, don’t try to qualify for a benefit by claiming Nebraska residency. Assume that all of your statements on residency, in whatever form, will become facts in a potential tax case. Business Owner Planning. A variety of special, specific actions are needed for business owners. These can include how the business is owned and managed, among other factors. DECLARATION OF ABANDONMENT As noted by the Nebraska Supreme Court, to change domicile, there must be an intention to abandon the old domicile. The same is true of other states. To help document this intention, we have developed a Declaration of Abandonment that we utilize with our clients to help them document both the date they intended to change their domicile as well as the steps they took to do so. This Declaration is an action that can be taken at the time a person wants to establish new tax residency that could potentially help establish to the Department of Revenue that the person did, in fact, abandon their previous domicile. RECOMMENDATION In general, as with most tax questions, the best way to realize the results you or your clients want is to address the question before your clients move. If, however, your clients find themselves on the receiving end of a review notice or questionnaire from the Department of Revenue, be sure the legal standards and precise facts are thoroughly considered before responding. Assume the responses will be Exhibit A in a tax case. The reply to the Department of Revenue should never be done hastily or taken lightly. Nick Niemann and Matt Ottemann are partners with McGrath North Law Firm. As state and local tax and incentives attorneys, they collaborate with CPAs to help clients and companies evaluate, defend, and resolve tax matters and obtain various business expansion incentives. For more information, visit their websites at www.NebraskaStateTax.com and www.NebraskaIncentives.com. For a copy of their publications, The Anatomy of Resolving State Tax Matters and the Nebraska Business Expansion Decision Guide, visit their websites, call them at (402) 341-3070, or email them at nniemann@mcgrathnorth.com or mottemann@mcgrathnorth.com, respectively. 13 nescpa.org
COUNSELOR’S CORNER THE DEATH TAX REPEAL ACT OF 2025 WHAT YOU NEED TO KNOW BY KATE HUGHES AND HALEY FAUST LEISE, KOLEY JESSEN ON FEB. 13, 2025, REPUBLICAN LAWMAKERS IN THE U.S. House of Representatives and the Senate introduced the Death Tax Repeal Act. The legislation aims to permanently eliminate the federal estate tax, often referred to as the “death tax,” and would significantly alter the future landscape of estate taxation. Variations of the Act have been introduced in Congress each year since 2015 but have failed to become law each time. With each reintroduction, however, support of such legislation has consistently increased year over year. BACKGROUND The Internal Revenue Code (IRC) currently imposes tax on an individual’s right to transfer property to others—both during life and at death. For transfers of property during life, the federal gift tax is imposed at a rate of 40%. For transfers of property at death, the federal estate tax is also imposed at a rate of 40%. However, the Code provides each individual with what is known as the “unified credit,” allowing each individual to transfer a certain value of assets tax-free during their lifetime or at their death. In 2025, the unified credit is $13.99 million. Any amounts transferred in excess of this $13.99 million figure, either during life or at death, are subject to the 40% tax. The IRC imposes an additional tax, known as the federal generation-skipping transfer tax (GST Tax), on transfers to individuals who are in a generation two or more below the transferor, whether those transfers are made during life or at death. However, the Code also provides each individual with an “exemption,” or tax-free amount, before the 40% GST Tax applies. That exemption is currently equal to the unified credit amount of $13.99 million. Currently, the unified credit and exemption are at an all-time high. Under the first Trump administration, the unified credit and exemption were doubled as a result of the 2017 Tax Cuts and Jobs Act (TCJA). The TCJA has a sunset date of Jan. 1, 2026. This means if no action is taken to extend the TCJA, the unified credit and exemption will return to their pre-TCJA level on Jan. 1, 2026, effectively cutting the current unified credit and exemption in half. If the TCJA does sunset, the unified credit and exemption available to individuals in 2026 will be approximately $7 million. KEY PROVISIONS OF THE DEATH TAX REPEAL ACT 1. Permanent Repeal of the Estate Tax and GST Tax: The Act would permanently eliminate the federal estate tax and GST Tax, allowing individuals passing away after adoption of the Act to transfer an unlimited amount of property at death free of tax. 2. Permanent Gift Tax Exemption and Reduced Gift Tax Rate: The Act would impose a permanent lifetime gift tax exemption of $10 million, as adjusted for inflation (adjusted to $13.99 million in 2025). Effectively, the current unified credit for gift tax would become permanent and would only be used for transfers made during life, as transfers at death would be free of tax as outlined above. Transfers made during life in excess of this exemption would be subject to a reduced 35% tax rate. 3. Retention of the Step-Up in Basis: The Act would maintain the current “basis adjustment” that occurs at death. In other words, if an individual dies owning appreciated assets, those assets would receive a full “stepup” in basis to the date of death fair market value. This would allow beneficiaries to minimize capital gains taxes upon the subsequent sale of any inherited asset. Passage of the Act could have a significant impact on estate and wealth transfer planning efforts. Our team of estate planning attorneys and tax professionals will be closely monitoring developments. Kate Hughes and Haley Faust Leise are attorneys in Koley Jessen’s Estate, Succession, and Tax Department, where they assist clients with estate planning, wealth transfer, and business succession strategies. For questions regarding your estate planning objectives or further discussion related to the progression of the Death Tax Repeal Act through Congress, contact Hughes or Faust Leise at kate.hughes@koleyjessen.com or haley.leise@koleyjessen.com, respectively. 14 Nebraska CPA
MOST STATES IMPOSE INCOME TAX ON THE INCOME OF THEIR residents, regardless of where such income is earned. A handful of states, including Nebraska, also impose income tax on income that is derived from sources within the taxing state, regardless of where the employee performs their services (commonly referred to as the “Convenience of the Employer Rule”).1 When multiple states impose income tax on the same income, relief from “double taxation” is typically provided to individual taxpayers by their states of residency in the form of a tax credit. While individual taxpayers are eligible to receive such relief, their take-home pay can be negatively affected because employers— in some cases—must withhold state income taxes in both the employee’s resident state and the state to which the employee is directing their services. In the 2024 legislative session, the Nebraska Legislature amended its Convenience of the Employer Rule, loosening the sourcing rules for employees and bringing welcome relief to Nebraska-based employers (and their employees) in connection with their withholding obligations for remote workers. BACKGROUND ON NEBRASKA’S CONVENIENCE OF THE EMPLOYER RULE In addition to imposing tax on all income of Nebraska residents, the Nebraska Income Tax Act imposes tax on the income of every nonresident individual if such income is derived from sources within Nebraska. Specifically, if a nonresident employee’s services are performed outside of Nebraska for their convenience (i.e., such services are directly related to a business carried on in Nebraska and, except for the nonresident’s convenience, the services could have been performed in Nebraska), then compensation for such services is Nebraska-source income taxable in Nebraska.2 NATIONWIDE CHALLENGES AND ATTEMPTED SOLUTIONS TO CONVENIENCE OF THE EMPLOYER RULES While Nebraska’s Convenience of the Employer Rule has not been the direct subject of litigation, New York’s similar convenience of the employer rule has been subject to—and survived—constitutional challenge.3 Further, while the United States Supreme Court has had an opportunity to rule on state convenience of the employer rules, it has (so far) declined to do so. Specifically, in June 2021, the Supreme Court denied New Hampshire’s writ of certiorari to address the constitutionality of Massachusetts’ temporary income tax rules (due to COVID-19), which would have directly challenged Massachusetts’ convenience of the employer rule.4 There has also been interest on a federal legislative level to address these issues. Congress has introduced the following bills to limit state taxation of telecommuters: the Remote and Mobile Worker Relief Act of 2021 and the Multi-State Worker Tax Fairness Act of 2021, both of which would tie a state’s ability to tax nonresidents to their physical presence in such state. Neither such bill has made it out of committee. UPDATES TO NEBRASKA’S CONVENIENCE OF THE EMPLOYER RULE CONTINUED ON PAGE 16 BY HANNAH FISCHER FREY, MORGAN KREISER AND CARRIE SCHWAB, BAIRD HOLM LAW FIRM 15 nescpa.org
NEBRASKA WITHHOLDING REQUIREMENTS Although the Nebraska Convenience of the Employer Rule is an income-sourcing rule imposed on the individual taxpayer, employers must also be cognizant of its application due to the close connection between income-sourcing rules and withholding rules. Nebraska law generally requires an employer to withhold from wages an amount equal to the tax “reasonably estimated to be due,” arguably incorporating the Convenience of the Employer Rule.5 With that said, Nebraska Regulation 21-006.01 provides an exception to withholding for a nonresident employee who performs no work while physically in Nebraska, thus providing limited relief for employers who can confirm their employee did not perform any services while physically in Nebraska in the year. Except in limited circumstances, the obligation to withhold Nebraska income tax would not impact a Nebraska employer’s obligation to also withhold in its remote employee’s resident state, which could leave the employer in a position of double withholding if an employee’s resident state requires withholding on the full wages of its residents. While most states provide a credit against an employee’s resident state tax for Nebraska income tax paid, the withholding statutes of the various states do not always call for such credit to be taken into account when calculating withholding. In such a situation, double withholding could substantially reduce the affected employees’ take-home pay, which could cause employee friction and pose challenges to communicating the withholding rules (while remaining tax neutral as an employer). NEW NEBRASKA LEGISLATION CLARIFYING CONVENIENCE RULE On April 23, 2024, Governor Pillen signed into law LB1023, which, among other things, amends Nebraska’s Convenience of the Employer Rule to provide certain exceptions to income sourcing (and thereby extending to an employer’s Nebraska withholding obligations). The revised rule provides that compensation paid constitutes income derived from sources within Nebraska if, among other things:6 The individual is a nonresident and the individual’s service is performed without this state for his or her convenience, but the service is directly related to a business, trade, or profession carried on within this state and, except for the individual’s convenience, the service could have been performed within this state, provided that such individual must be present, in connection with such business, trade, or profession, within this state for more than seven days during the taxable year in which the compensation is earned. In other words, the new law creates a minimum seven-day physical presence requirement before such individual’s income is considered Nebraska-source income. For this purpose, an individual is considered “present” in Nebraska for a day if the individual performs “employment duties” in Nebraska. “Employment duty days” are specifically defined and certain exceptions exist for, among other things, (a) days “in transit”; (b) days spent at a “conference” or “training,” if certain requirements are met; and (c) time spent serving on a board of directors or similar governing body. Recent guidance from the Nebraska Department of Revenue clarifies that the exception for “conference” and “training” days does not apply if the seven-day physical presence requirement is otherwise met; i.e., if an employee attends five days of “training” in Nebraska and works 10 “employment duty days” in the state, the employer must withhold Nebraska state income taxes on the employee’s wages for all days in which they are physically present in Nebraska.7 Finally, the revised rule includes a safe harbor for employers, which provides that the Nebraska Department of Revenue will not impose penalties or interest for an employer’s failure to deduct and withhold income taxes if, when determining whether withholding was required, the employer either (a) maintains a “time and attendance system” that allocates employee wages among taxing jurisdictions; or (b) if no such system exists, the employer relies on (i) its own records regarding the individual’s location, (ii) the individual’s own allocation of time spent in the state, barring any actual knowledge of fraud or tax evasion, (iii) travel records, (iv) travel expense reimbursement records, or (v) a written statement from the individual attesting to the number of days spent performing services in the state. The Nebraska Form 9N, Nebraska Nonresident Employee Certificate, may assist employers and employees in meeting this safe harbor. As of the date of publication, at the request of Governor Jim Pillen, State Senator R. Brad von Gillern introduced legislation (LB650) to further revise Nebraska’s Convenience of the Employer Rule by removing the seven-day minimum physical presence requirement. LB650 was referred to the Revenue Committee for further consideration. CONTINUED FROM PAGE 16 16 Nebraska CPA
Footnotes 1 Delaware, New York, and Pennsylvania also apply convenience of the employer rules. Arkansas had historically applied such a rule but overturned such rule in April 2021. See Ark. Code § 26-51-202(c). Connecticut, Massachusetts, and New Jersey each apply a version of a convenience of the employer rule, either on a temporary or situational basis, such as when another state applies it (Connecticut and New Jersey) or when the remote work is a result of the COVID-19 pandemic (Massachusetts). 2 See Neb. Rev. Stat. § 77-2715(1); 316 Neb. Admin. Code § 22-003.01C(1). 3 Zelinsky v. Tax Appeals Tribunal of State, 1 N.Y.3d 85, 801 N.E.2d 840 (2003). 4 https://www.supremecourt.gov/docket/docketfiles/ html/public/22o154.html 5 Neb. Rev. Stat. § 77-2753. 6 Neb. Rev. Stat. § 77-2733(8)(c) (emphasis added). 7 Neb. Dept. of Rev., 2025 Neb. Circular EN, 6 (Nov. 2024) https://revenue.nebraska.gov/sites/default/ files/doc/business/Cir_En_2024/2025cir_en_ whole.pdf. This bill provides welcome relief to Nebraska employers who have been grappling with the Convenience of the Employer Rule’s broad application, particularly in light of the increase in popularity of remote work since the COVID-19 pandemic. Not only does this impact an employer’s withholding obligation, but it encourages businesses to make Nebraska their home. Practitioners should become familiar with both the historical and current application of Nebraska’s Convenience of the Employer Rule, as well as how it interacts with other states’ laws, to ensure their employer clients withhold properly. 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. Morgan Kreiser is also a partner at Baird Holm, representing employers in all aspects of employee benefits and executive compensation compliance matters, including ERISA compliance, qualified retirement plans, nonqualified deferred compensation arrangements, equity compensation incentives, public employer retirement systems, and health and welfare benefits. 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. For more information, call (402) 344-0500 or email hfrey@bairdholm.com, mkreiser@bairdholm.com, or cschwab@bairdholm.com. 17 nescpa.org
PRACTICE OWNERS WANTING TO SELL SOMETIMES express a desire to keep some clients in order to continue an income stream. Be aware that making this decision can have undesired consequences for the sale. First, almost all buyers will be suspicious that the owner is cherry-picking the clients. That is a very real concern because, in our experience, we have never seen an owner keep deadbeats and low-paying clients. Second, continuing to do work for some clients means the owner is still in business and will be viewed by many buyers as a potential competitor. Remember that one of the biggest concerns of buyers is retaining clients, and an owner still in business makes that harder to do. At the very least, some of the purchased clients will wonder why the owner is doing work for some people but not for them, which can cause problems for the buyers. Third, keeping clients is sometimes an indicator that the owner is not really a seller. In other words, the owner may think he or she wants to sell but emotionally has not let go. That can come up later in the sales process or even in the transition. Fourth, retaining a portion of the practice will most likely reduce its value. Imagine a firm that grosses $200,000 and nets $80,000. The owner wants to keep a few family members and that old buddy from high school. The work from these clients totals $20,000. The gross income of the practice has now been reduced by 10% but the cash flow is down by 25%! In the end, cash flow is the key to value. Finally, keeping clients can lower a seller’s chance of getting the best terms. Banks often will not lend if the owner is not selling the entire practice. And, as noted, cash flow is harmed, and bankers love cash flow. Can a practice sell if the owner wants to keep doing some of the work? It is possible but generally it is not a good idea. If an owner does want to keep clients, then this needs to be disclosed up front and the relevant amounts clearly noted on any financial statements. More often than one might imagine, an owner will pop up after an offer has been made or even accepted and say, “Oh, by the way, I am keeping these clients.” That can be a real shock to the process. Is it ever acceptable to keep clients? In some cases, the answer is yes. For example, the owner may be doing services for some clients that the buyer is not qualified to do. Or, perhaps the owner has some clients from a home state that are not likely to transfer to a new local buyer. Another instance might involve family members who have been receiving steep discounts for services. Overall, however, owners should carefully consider the decision to keep any clients. It almost always will decrease the value and likely will affect how easily or quickly the practice sells. The experts at Accounting Practice Sales are here to help with all aspects of buying and selling accounting practices. To learn more, contact Trent Holmes at Accounting Practice Sales at (800) 397-0249 or trent@aps.net. HAVING YOUR CAKE & EATING IT TOO WHY KEEPING CLIENTS MAY BE BAD BY ACCOUNTING PRACTICE SALES 18 Nebraska CPA
Delivering Results - One Practice At a time 800-397-0249 www.APS.net Trent Holmes Trent@APS.net Experiencing: •Stress? • Lack of Sleep? • IRS induced Nausea? Tax Season Cessation Program Ready To Sell Your Practice? WE CAN HELP YOU! Scan Here
IT IS NO SECRET THAT AN ESTIMATED $84.4 TRILLION IN wealth will pass primarily from Baby Boomers to younger generations over the next two decades. This seismic shift underscores why legacy planning has become a top priority for many financial advisors and their clients. “We’re seeing more families recognize that philanthropy isn’t just about financial giving, it’s also a way to unify family members across different generations,” said Katie Vogel, director of donor services at the Omaha Community Foundation. Discussing family values and giving back to the community is a great way to start conversations about your clients’ financial plans. Dan Waters, a Chartered Advisor in Philanthropy® (CAP®) and attorney with Lamson Dugan & Murray, has worked with high-net-worth individuals and business owners since 2008. He stresses the importance of including philanthropy in wealth transition conversations. “When you do wealth transition planning, it’s important to discuss setting aside wealth for philanthropic purposes,” Waters said. While he handles estate planning and tax structuring, Waters turns to the Omaha Community Foundation for their deep knowledge of the nonprofit landscape. “I’m not Omaha’s philanthropy expert. That’s what leads me to bring clients to the Community Foundation to meet their philanthropic objectives,” he said. 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 In the evolving landscape of wealth management and philanthropy, involving the next generation is no longer optional—it’s essential. Financial advisors who embrace multigenerational planning can enhance asset retention while ensuring their clients’ charitable goals are carried forward. Whether it’s deciding when to bring younger family members into the conversation or tailoring strategies for different generations, a thoughtful approach helps build lasting legacies. “Seventy percent of wealth transfer happens first to senior women, then to the next generation,” said Abby Arcishewsky, a Chartered Advisor in Philanthropy® and the founder of Archway Consulting. She suggests financial advisors consider these patterns when planning wealth transfers and philanthropic discussions. Getting spouses on the same page first can provide clarity, said Nick Meysenburg, a Chartered Advisor in Philanthropy® and attorney with Dvorak Law. He then advises bringing the next generation into the discussion. “You’re setting them up for success by tutoring them now,” he said. The Omaha Community Foundation has been working with individuals, couples, and multigenerational families to make a lasting impact since 1982. We can help you and your clients create customized plans to ensure their charitable giving continues for generations to come, including Donor Advised Funds that can be passed on to the next generation or Designated Funds that support specific needs in the community. Reach out to giving@omahafoundation.org to learn how we can collaborate with you to serve your clients and their families. BRIDGING GENERATIONS BY THE OMAHA COMMUNITY FOUNDATION 20 Nebraska CPA
GIVEN THE FAMILIAR HORROR STORIES THAT SEEM to follow when private equity converges with business— think: Red Lobster, Payless Shoes, Sears—it’s no surprise that for some, the trend in accountancy firms joining those ranks sounds warning bells. Restaurant and retail chains are one thing, after all, but businesses responsible for the integrity of our financial infrastructure, and in turn our lives, are another. In arenas where professional ethics are as important as profits, is a private equity (PE) presence enhancement or threat? According to Cathy Allen, a former Board of Accountancy member in New York, while there is reason for caution, she notes that outside investment in accountancy firms is not a new phenomenon, although she acknowledges the trend has been accelerating since 2021—and with such notable names as Baker Tilly, Grant Thornton, and Cherry Bekaert included in that upswing. “Accounting as a field is attractive to PE,” explains Allen. “For one, it’s a fragmented industry that lends itself to consolidation and scaling small to large. It’s also a business that has regular and stable sources of revenue. And for firms, the infusion of PE cash allows them to invest in critical technology, as well as to offer better compensation to recruit and retain talent. Plus, with AI reducing the demand for some accounting services, firms with more resources can offset those losses by offering more types of advisory services.” But while the capital advantages to a firm’s bottom line may be clear, how PE impacts these firms’ public protection mandates is less so. In an interview1 with the Institute for New Economic Thinking, federal prosecutor Brendan Ballou, who wrote Plunder: Private Equity’s Plan to Pillage America,2 describes PE’s specialty as finding legal and regulatory holes that allow it to make profits quickly and shift risks and costs to others. Private equity is a simple idea, Ballou says, but it has three basic problems. “One is that PE firms tend to invest in the short term to get a return on their investment in just a few years. The second is that they tend to load up the companies that they buy with a lot of debt and extract a lot of fees from them. The third is that private equity firms tend not to be held legally responsible for the actions of their portfolio companies. All this means you’re on a very short timeline with a very risky leverage model, and you’re not necessarily going to be held responsible if things go bad, leading to business strategies that can be very extractive and hurt consumers and employees.” Ballou adds that PE has increasingly taken on the role that investment banks used to have, but unlike investment banks, “private equity firms are vastly less regulated. What this means is that PE firms are doing a lot of the work that these companies did prior to the financial crisis, but they’re doing it with even less oversight.” He adds that “the basic story here is that private equity firms are able GETTING PICKED FOR PE Private equity’s increasing investment in accounting firms is causing anxiety among regulators, but can PE and proper oversight coexist? BY THE NATIONAL ASSOCIATION OF STATE BOARDS OF ACCOUNTANCY (NASBA) CONTINUED ON PAGE 22 21 nescpa.org
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