Table of Contents 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36

Pub. 4 2022 Issue 2

OFF I C I AL PUBL I CAT I ON OF THE NEBRASKA SOC I ETY OF CPAs ISSUE 2, 2022 NEBRASKA PAGE 6 PAGE 10 SPRING: A TIME OF RENEWAL FAQS FOR NEBRASKA CPAS: THE ROLE OF THE STATE BOARD IN CIVIL LITIGATION

thinking ahead With one of the largest teams of attorneys in the region dedicated exclusively to estate and succession planning, Koley Jessen has years of experience with the most complex and technical aspects of estate planning and tax law. We know how to communicate those aspects in a way our clients understand to ensure their objectives are being met. If you are looking for a multi-discipline group of forward-thinking legal counselors, contact us. uuEstate Planning uuEstate & Trust Administration uuEstate & Trust Disputes uuCharitable Planning & Nonprofit Organizations uuBusiness Succession Planning 402.390.9500 | koleyjessen.com/services-estate-planning-and-administration In estate and succession planning, you should always be...

3 nebraska society of cpas W W W . N E S C P A . O R G BOARD OF DIRECTORS ERICA R. PARKS NESCPA CHAIRMAN (402) 431-9805 BKD LLP Omaha LORRAINE A. EGGER NESCPA CHAIRMAN-ELECT (402) 965-0328 CyncHealth La Vista NEAL D. LYONS NESCPA SECRETARY (402) 434-7203 UNICO Group Inc. Lincoln DAVID E. SWAN NESCPA TREASURER (402) 420-7758 SP Group, PC Lincoln RYAN L. BURGER NESCPA PAST CHAIRMAN (402) 643-4557 Gabriel, Burger & Else, CPA, PC Seward JODI M. ECKHOUT NESCPA DIRECTOR (308) 995-6151 Woods & Durham, CPA Holdrege MEGAN C. HOLT NESCPA DIRECTOR (402) 342-7600 Mutual of Omaha Insurance Co. Omaha PATRICK A. MEYER PAST CHAIRMAN & AICPA ELECTED REPRESENTATIVE (402) 261-9622 HBE LLP Lincoln SHARI A. MUNRO PAST CHAIRMAN & AICPA ELECTED REPRESENTATIVE (402) 963-4316 Frankel Zacharia LLC Omaha DR. THOMAS J. PURCELL III NESCPA DIRECTOR (402) 280-2062 Creighton University Omaha LINDA M. SCHOLTING NESCPA DIRECTOR (402) 826-6777 Doane University Crete JESSICA L. WATTS NESCPA DIRECTOR (402) 330-2660 Seim Johnson LLP Elkhorn DANA J. WEBER WEST NEBRASKA CHAPTER PRESIDENT (308) 635-3008 Dana J. Weber, CPA Scottsbluff 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 EXECUTIVE ASSISTANT lori@nescpa.org OFFICERS BOARD MEMBERS NESCPA STAFF IPE 1031 | 888.226.0400 | WWW.IPE1031.COM | INFO@IPE1031.COM EXPERTISE From a Respected Industry Leader THE PREMIER SPECIALIST FOR SECTION 1031 EXCHANGES SECTION 1031 EXCHANGE

I S S U E 2 , 2 0 2 2 4 nebraska cpas 23 20 C O N T E N T S 14 ©2022 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 2, 2022 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. 6 PRESIDENT’S MESSAGE: SPRING: A TIME OF RENEWAL BY JONI SUNDQUIST, NEBRASKA SOCIETY OF CPAS 9 MARK YOUR CALENDARS! 10 STATE BOARD REPORT: FAQS FOR NEBRASKA CPAS: THE ROLE OF THE STATE BOARD IN CIVIL LITIGATION BY DAN SWEETWOOD, NEBRASKA BOARD OF PUBLIC ACCOUNTANCY 12 COUNSELOR’S CORNER: IS THE DOCUMENT VALID? BY MINJA HERIAN & JAMES TEWS, KOLEY JESSEN 14 STATE TAX BRIEFING: RECENT NEBRASKA TAX AUDIT & APPEAL ISSUES BY NICK NIEMANN & MATT OTTEMANN, MCGRATH NORTH LAW FIRM 16 2022 NESCPA COURSE CALENDAR 20 S CORPORATION INVERSION USING AN “F” REORGANIZATION BY HANNAH FISCHER FREY & JESSE SITZ, BAIRD HOLM LLP 23 CONGRATULATIONS TO THE TOP CPA CANDIDATES IN NEBRASKA! 24 CPA EVOLUTION WILL IMPACT TODAY’S INTERNS HOW CAN YOUR FIRM PREPARE? BY CARL MAYES, CPA, ASSOCIATION OF INTERNATIONAL CERTIFIED PROFESSIONAL ACCOUNTANTS 26 MEMBERS IN THE NEWS 29 TALENT MANAGEMENT LIVE WEBCAST SERIES 32 IN REMEMBRANCE OF ARNOLD MAGNUSON 33 IN MEMORIAM 34 WELCOME NEW SOCIETY MEMBERS!

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 McGrath North First National Tower, Suite 3700 1601 Dodge Street  Omaha, NE 68102 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 Nick Niemann, JD State & Local Tax & Incentives Attorney Partner, McGrath North 402-633-1489 nniemann@mcgrathnorth.com For over 60 years we have been working with our nation’s food companies, restaurants, farmers and ranchers to feed people better. We have been working with contractors and companies to build better and more affordable homes and new business facilities. We have been working with technology companies to develop new ideas that improve lives. We have been working with inventors, startup companies and health care providers to develop patented medical devices, leadership teams and joint ventures that save lives. We have been working with energy companies to help fuel our homes and the businesses we all rely on. We have been working with bankers, key partners, manufacturers, distributors, retailers and transportation companies to finance, produce and deliver better products and services to communities around the world. We have been working with family business pioneers and their other trusted advisors to transform, grow, carry on and transition the family business dream, the backbone of our great country. We have been working with our community leaders to improve our cities and our schools. We have been working with our elected leaders to improve the business climate to create and attract new and better jobs for families. For over 60 years, this has been the McGrath North Law Firm. Working quietly behind the scenes closely with the talented leaders of great organizations around the world to make lives better. Working together. Working stronger. Working faster. Working better. Overcoming Roadblocks. Avoiding Train Wrecks. Inspired by Excellence. Committed to your Success. Our diverse team isn’t waiting for the future. We are helping to produce new, incredible, sustainable results right now. We invite you to join us as we move quickly ahead towards the next 60 years.

I S S U E 2 , 2 0 2 2 6 nebraska cpas PRESIDENT’S MESSAGE BY JONI SUNDQUIST, NEBRASKA SOCIETY OF CPAS SPRING: A TIME OF RENEWAL With spring comes warmer weather, blossoming f lowers, the start of golf season, and the end of another tax season. It’s a time of growth and renewal! Spring also brings the start of our new fiscal year and the annual renewal of your Nebraska Society of CPAs’ membership. We hope you continue to look to the Society as your No. 1 resource for education, information, and legislative representation—and that you encourage your co-workers and peers to do the same. Paying your membership dues may be completed in just a few clicks at www.nescpa.org/my-cpa/dues. Watch Your Mail! Spring is a time for planning at the Society, and we’ve been busy scheduling this year’s Cont i nu i ng Profe s s iona l Education (CPE) programs. The 17t h ed i t ion of t he Society’s 2022 CPE Catalog & Member Guide wi l l be ar r iv ing in your mai lbox soon. The catalog includes a listing of more than 120 CPE courses and conferences offered through the Society fromApril throughDecember 2022, along with details about CPE pricing, locations, and registration. I am pleased to report that in-person courses are returning in 2022! All society coursesmay be found on thewebsite at www.nescpa.org/ cpe—along with more than 5,000 partner webcasts to satisfy your CPE requirements and educational needs. In the guide, you will also find a listing of the Society Board of Directors, past chairmen, committee members, and award recipients as well as updates on the Society’s scholarship program, member benefits, and more. Legislative Update The Nebraska Legislature adjourned April 20. Here’s an update on just a couple items of interest to the profession: • CPA Firm Ownership Bill Approved by Governor. LB707 was passed by the Nebraska Legislature on April 12 and approved by the Governor on April 18. The bill is a “Christmas tree” bill that includes the provisions of LB894, as introduced by Sen. Matt Williams (Gothenburg) for Sen. John Stinner (Gering) on behalf of the Nebraska Society of CPAs. (A “Christmas tree” bill is a political term referring to a bill that attracts many, often unrelated, amendments.) Among other things, LB707 amends the Nebraska Public Accountancy Act (PAA) to remove certain CPA firm ownership provisions so that a CPA firmmay be owned by at least one CPA and one or more non-CPAs as long as the CPA or group of CPAs hold at least 51% equity ownership of the CPA firm. In short, LB707 removes the physical “head count” requirement of CPA firm ownership in Nebraska. Most bills passed and approved by the Governor become law three calendar months after the Legislature adjourns. However, LB707 includes an Emergency Clause and will take effect immediately.

7 nebraska society of cpas W W W . N E S C P A . O R G Your Society will continue to advocate on behalf of members alongside the AICPA, members of Congress, and many other organizations to urge relief and help improve IRS performance. Thank you to Rep. Bacon for his support of our efforts. The legislation was the direct result of a Society member reaching out to express concerns with Nebraska law during succession planning for his firm. Following discussions with both the Society Board of Directors and the Nebraska Board of Public Accountancy, a joint Society/State Board CPA Ownership Task Force was formed to examine limitations on non-CPAownership of CPA firms found in theNebraska Public AccountancyAct. Task Forcemembers representing the Society included Ryan Burger of GBE, CPA, PC in Seward and Dana Weber of Dana J. Weber, CPA in Scottsbluff. Representing the State Board on the Task Force wereMarcy Luth of AMGL, PC inGrand Island andDr. TomPurcell of CreightonUniversity in Omaha. After research, review, and several meetings, the Task Force recommended, upon identifying no harm to the public, that CPA firm ownership provisions be amended within the PAA to remove barriers to succession planning for small firms in the state and to align Nebraska law more closely with the laws of our neighboring states. This legislative effort was yet another great example of how the Society and State Board are working together to remove barriers within the profession while protecting the public. • Occupational Licensing Bill Fails to Pass. LB709, as introduced by Sen. John McCollister (Omaha), did not reach the finish line this session. This bill would amend the Occupational Board Reform Act to provide specific factors be considered by occupational boards, including the State Board of Public Accountancy, when reviewing a preliminary application for an occupational license. Under the bill, to be disqualifying, a felony conviction would have had to be directly related to the nature of the occupational field and for a crime that would make credentialing that applicant a “direct and substantial risk to public safety.” McCollister said the proposal would provide a “fair chance” for individuals with criminal histories to enter occupations if their offenses were unrelated to the field they seek to enter. Under a Government, Mi l itary, and Veterans Af fai rs Committee amendment, LB263 was one of two measures added to LB709. Introduced by Sen. Tom Briese (Albion), the bill would have created a framework for issuance of Nebraska occupational licenses and certifications based on credentials and work experience from other states. The good news about the bill was that credentials issued pursuant to the Nebraska Public Accountancy Act were among those exempted—thanks to meetings last summer between Sen. McCollister, the State Board, the Society, and our lobbyists. However, since the bill(s) did not move forward this session, we will likely have to address these issues again in 2023. Visit the Society at www.nescpa.org/advocacy/news for more information and links to valuable resources. Update on IRS Issues In March, the Society reached out to the Nebraska congressional delegation, as part of a nationwide concerted effort, to push for meaningful relief for taxpayers and practitioners from the IRS. As a result, 42 U.S. Senators and 65 U.S. Representatives, including Rep. Don Bacon (NE-2), signed a letter to IRS Commissioner Chuck Ret t ig urging the IRS and Treasury to implement recommendations from the AICPA and state societies that would ease the burden of this tax season. Through this effort, the IRS acknowledged the challenges and frustrations of this tax season and took steps to ease some of the burden. As of March 31, the IRS had 2.7 million returns filed in 2021 that still await processing and 2.3 million returns filed in 2022 that also remain unprocessed. Many of those returns were filed on paper, which requires IRS employees to manually type the return information into their systems. As National Taxpayer Advocate Erin M. Collins has said, “Paper is the IRS’ Kryptonite, and the IRS is buried in it.” On April 7, Rettig updated members of the Senate Finance Committee on the IRS’ performance and longer-term efforts. Rettig’s goal is to “get healthy,” with normal processing inventories, by the end of the 2022 calendar year. He noted that upgrading the IRS’ vintage computer system remains a challenge, due to a lack of consistent, timely, multiyear funding. However, staffing at the IRS is reportedly improving, thanks to the agency’s direct-hire authority and goal of hiring 5,000 workers before year-end. Your Society will continue to advocate on behalf of members alongside the AICPA, members of Congress, and many other

I S S U E 2 , 2 0 2 2 8 nebraska cpas 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. Please let me know if you have an interest in helping to advance the profession while growing your professional skills through committee service. organizations to urge relief and help improve IRS performance. Thank you to Rep. Bacon for his support of our efforts. AICPA Meet & Greet In February, Society Chairman Erica Parks and I had the opportunity to attend a virtual “Meet & Greet” session with AICPA Vice Chairman Anoop Mehta and AICPA President & CEO Barry Melancon—see photo. In May, Society officers and chief staff executives from across the nation will be meeting in person once again to explore priorities and determine how best to work together to meet the needs of members and the profession. Committees, Society Board Gathering on May 4 Following two years of mostly online meetings, we are eager to gather in person for our Committee Organizational Meeting & Luncheon on Wednesday, May 4, at Quarry Oaks Golf Club in Ashland. Nearly all the Society’s committees will be present. You will find updated rosters for the 2022-2023 committees at www.nescpa.org/committees. It’s not too late to join a Society committee! Please let me know if you have an interest in helping to advance the profession while growing your professional skills through committee service. The next Society Board of Directors meeting will also take place May 4. As always, please contact me or any member of the Society Board with suggestions or comments prior to the meeting. MAP Group Announces Schedule One of the Society’s longest running discussion groups, the Lincoln MAP Roundtable, has announced its 2022 meetings schedule. The group, which is open to all Society members but is aimed at members involved in the Management of an Accounting Practice (MAP), will meet monthly at Good Evans restaurant at 6891 A Street in Lincoln from 7:30 a.m. until 9:00 a.m. for a no-host breakfast meeting. Meeting organizer Phil Waldron of Lincoln said that the after-tax season organizational meeting will be held on Friday, May 20. Additional meetings this year are tentatively scheduled for June 17, July 22, Aug. 19, Sept. 16, Oct. 21, Nov. 18, and Dec. 16. Please feel free to contact the Society for more information or to be added to the Lincoln MAP group email list. Registration is not required to attend these informal meetings. Remembering Arnold Magnuson Arnold Magnuson, the Society’s first executive director, died March 17 at the age of 98. Magnuson was an outstanding leader for this organization for more than three decades. There is no doubt his leadership laid the foundation for moving the CPA profession forward in Nebraska. We extend our condolences to theMagnuson family and hope you will take a moment to read our tribute to him on page 32. What are you doing today to make a difference? Truly, “to every thing there is a season . . .” Each day holds great potential and opportunity. As we move into spring, the season of new beginning, take time to make plans, create change, and use your gifts to reach new levels in your personal and professional lives.

9 nebraska society of cpas W W W . N E S C P A . O R G MARK YOUR CALENDARS! 4TH ANNUAL BUSINESS & INDUSTRY CONFERENCE April 20 | 8 CPE Hillcrest Country Club, Lincoln 26TH ANNUAL NOT-FOR-PROFIT CONFERENCE June 7 | 8 CPE (1.5 Ethics) Hillcrest Country Club, Lincoln 41ST ANNUAL NEBRASKA GOVERNMENTAL ACCOUNTING & AUDITING CONFERENCE June 8-9 | 16 CPE (2 Ethics) Hillcrest Country Club, Lincoln INSURANCE INDUSTRY CONFERENCE June 28 | 7 CPE Multi-State Webcast AGRICULTURE CONFERENCE August 23 | 8 CPE Multi-State Webcast WOMEN IN ACCOUNTING SUMMIT August 31 | 6 CPE Crete Carrier Riverview Lodge, Mahoney State Park, Ashland 22ND ANNUAL FALL CPE CONFERENCE & ANNUAL MEETING October 27-28 | 16 CPE (2 Ethics) Embassy Suites, La Vista TAX CONFERENCE December 1-2 | 16 CPE Embassy Suites, La Vista Position yourself and your organization for success by attending one or more of the following Nebraska Society of CPAs’ conferences. Learn more and register today! Click on Conferences at nescpa.org/cpe.

I S S U E 2 , 2 0 2 2 10 nebraska cpas S TAT E B O A R D R E P O R T It is never a good time to hear you and/or your firm are the subject of civil l itigation af ter providing professional services to clients; however, you should understand what you need to do should you find yourself in this undesirable situation. The first course of action is to notify your insurance carrier and/or attorney to assist you in addressing the matter. You also must eventually notify the Nebraska Board of Public Accountancy (State Board) on your annual and/or f irm renewals. I f complet ing on l ine renewa l s, you will be directed to provide a written summary and any current BY DAN SWEETWOOD, NEBRASKA BOARD OF PUBLIC ACCOUNTANCY FAQS FOR NEBRASKA CPAS: THE ROLE OF THE STATE BOARD IN CIVIL LITIGATION pleadings in the matter to the State Board office. Why is the State Board interested in your civil suit? Below are several frequently asked questions to assist you and/or your firm in understanding the State Board’s position when it comes to civil litigation. Questions & Answers Q: I have been named in a civil lawsuit by a former client regarding my profess iona l prac t ice and am working with my attorney on the matter. What are my obligations to the State Board? A: First, make sure you properly comp l e t e you r nex t r e newa l appl icat ion for your permit to practice. One of the application questions will ask if you and/ or your firm has been named in a civil lawsuit since your last application. Make sure you check the box “yes” and provide a summary explanation of the matter. This could include the status of the lawsuit, where the l it igat ion was f i led, any pleadings filed with the court, and other pertinent information. Q: Why is the State Board involved in civil litigation? A: The State Board’s main responsibi l it y i s to ensure regulations within the Rules of Professional Conduct (found within the Nebraska Adm i n i s t r a t i ve Cod e (NAC) Title 288, Chapter 5) have not been violated in the matter. In the vast majority of cases the State Board will remain an interested third party and will offer you and/or the firm a Litigation Monitoring Consent Order (LMCO) so the State Board can move to the sidelines and let you and your attorney focus on the litigation. You will also receive a telephone call from State Board staff overviewing any initial comments from the Board’s Enforcement Committee (EC) and to answer any questions regarding the LMCO or other concerns. Q: I have agreed to settle the matter through my attorney. What now? A: Normal ly, the EC wi l l request the settlement for review. Under State Board regulat ions, the set t lement remains confidential during the investigation. The settlement is reviewed by the State Board’s attorney and the EC to determine if any further information will be required from you and/or the firm. This might include any actions you and/or the firm has taken since the settlement to defer future problems. Q: The court dismissed the matter for lack of evidence or ruled in my and/or the firm’s favor. What now? A: In most cases, the State Board will then close the matter. Q: The court and/or jury ruled in favor of the plaintiff. What now? A: As agreed within the LMCO, it is your and/or the firm’s responsibility to keep the State Board office apprised of the actions of the court. Telephone or email the State Board office with the results of the matter. Normally, the pleadings in the case will be reviewed by the State Board’s attorney and the EC to determine if any further actions should be taken. This could include

11 nebraska society of cpas W W W . N E S C P A . O R G The Nebraska Board of Public Accountancy administers public accountancy law in Nebraska. Never hesitate to contact the State Board office with any questions regarding enforcement and/or disciplinary proceedings. For more information, visit www.nbpa.ne.gov. Dan Sweetwood is executive director of the State Board. You may contact him at (402) 471-3595 or dan.sweetwood@nebraska.gov. • Business succession and exit planning • Tax credits and alternative financing • Tax qualified retirement benefits • Wealth transfer planning • Charitable and non-profit organization and compliance • Trust and estate taxation and administration • Representation before the IRS, local taxing authorities and the courts on tax matters LET OUR EXPERIENCE WORK FOR YOU 1700 Farnam Street, Suite 1500 • Omaha, NE 68102 www.bairdholm.com Need health insurance? I know health insurance and can help you evaluate your options. Give me a call today to discuss your health insurance needs! Melissa Wheeler 249 Cherry Hill Blvd, Ste 2 Lincoln, NE 402.484.0303 agentmelissawheeler.com/ Securities & services offered through FBL Marketing Services, LLC, 5400 University Ave, West Des Moines, IA 50266, 877/860-2904, Member SIPC, Affiliate Farm Bureau Financial Services. PR-H-F (4-21) a further response to the EC by you and/or the firm to clarify any matters that could be considered a possible violation of the Rules of Professional Conduct as noted within the pleadings. Q: Should I prepare for disciplinary proceedings before the State Board? A: Normally no; however, you may need to prepare for disciplinary proceedings before the State Board if you and/or the firm: • Do not cooperate with the State Board’s requests for information. • There is direct evidence in the pleadings and/or judgement of the court involving potential violations of the Rules of Professional Conduct. If any disciplinary proceedings are taken, you and/or the firm will have every opportunity to defend your actions before the State Board as outlined within the regulations in NAC Title 288, Chapter 4.

I S S U E 2 , 2 0 2 2 12 nebraska cpas C O U N S E L O R ’ S C O R N E R

13 nebraska society of cpas W W W . N E S C P A . O R G Minja Herian is a shareholder in Koley Jessen’s Litigation Department. Her practice focuses on trust and estate litigation and commercial litigation (both in state and federal court), and includes cases involving business torts, contract disputes, negligence actions, construction and real estate disputes, and director and officer defense. James Tews is a shareholder in Koley Jessen’s Estate, Succession, and Tax Department. His practice focuses primarily on comprehensive estate planning, assisting fiduciaries in the execution of estate plans upon the incapacity or death of clients, and assisting clients in complex trust and estate litigation. While each works in a different department, Herian and Tews collaborate often in the context of trust and estate litigation to provide clients with the comprehensive expertise required to successfully navigate contentious matters. They may be contacted at minja.herian@koleyjessen.com or james.tews@koleyjessen.com, respectively. As CPAs, you are often privy to confidential information not only about the “numbers” but also about the dynamics of a business or family. IS THE DOCUMENT VALID? BY MINJA HERIAN & JAMES TEWS, KOLEY JESSEN In most cases, estate plan documents (e.g., wills, trusts, and powers of attorneys) are prepared and executed under inconspicuous circumstances. Sometimes the circumstances under which these types of documents are executed beg questions about their validity, and legal disputes can arise. The most common bases on which to challenge the validity of estate plan documents include (i) “undue inf luence” of the person executing the documents by a third party, (ii) a lack of capacity to execute such documents, and (iii) fraud. In any event, challenging the validity of estate plan documents requires an in-depth and fact-specific analysis. Challenging the validity of a document on the grounds that it was the result of “undue inf luence” may be the most common basis for objection. Note that mere “inf luence” exerted on a person does not result in a document being invalid—the inf luence must be “undue.” Undue inf luence occurs when a party exerts power over another in order to manipulate the terms of an estate plan document to ref lect the will of such party, and not that of the one executing the document. To invalidate a will or trust under Nebraska law for “undue inf luence,” it must be proven that (i) the signer was subject to such inf luence, (ii) there was an opportunity for a bad actor to exert such inf luence, (iii) there was intent to exert such inf luence for an improper purpose, and (iv) the resulting document was clearly a product of such inf luence. The party challenging the document must prove these elements by “clear and convincing evidence”—a hefty hurdle. Another common objection used in challenging the validity of a document is that the signer lacked the requisite mental capacity to execute it. The capacity required to validly execute a document depends on the nature of the document. For example, to validly execute a will or trust under Nebraska law, one must possess “testamentary capacity” at the time of executing the document. This requires that the one executing the document (i) understands the nature of the act of executing the document, (ii) knows the nature and extent of his or her property, (iii) knows the proposed disposition of his or her property, and (iv) knows the “natural objects of his or her bounty,” meaning those to whom the individual most likely would bequeath his/her estate (e.g., a spouse or children). A different capacity is required to effectively execute other documents, such as a deed, power of attorney, or beneficiary designation form for a financial account. Yet another basis for objecting to the validity of a document, though less common, is that it was the result of fraud. In the context of challenging the validity of a will or trust under Nebraska law, an aggrieved party must show that (i) a lie was made to the signer of the document, and (ii) the document was made (or modified) as a result of that lie. Successfully objecting on the basis of fraud can be difficult because often the bad actor is the only witness to the lie (keep in mind that in almost all cases the signer of the document is deceased and therefore cannot be a witness in a later dispute). As CPAs, you are often privy to confidential information not only about the “numbers” but also about the dynamics of a business or family. Thus, you may be uniquely positioned to observe signs of capacity issues or undue inf luence, such as: (i) questionable gifts or expenditures in favor of someone, such as an adult child or other family member, caregiver, or “trusted advisor”; (ii) the frequent and domineering presence of a supposedly helpful figure; and/or (iii) isolation of the client by one person from others who are normally present in the client’s life. If you observe any of these signs, it may be best to guide clients to appropriate assistance and document the situation in the event of a future legal dispute.

I S S U E 2 , 2 0 2 2 14 nebraska cpas RECENT NEBRASKA TAX AUDIT & APPEAL ISSUES S TAT E TA X B R I E F I N G BY NICK NIEMANN & MATT OTTEMANN, MCGRATH NORTH LAW FIRM Nebraska companies and individuals must confront a number of tax defense issues with the Nebraska Department of Revenue. Below is a selection of the issues we are seeing recently in audits and appeals. Business Buyers & Sellers The purchase or sale of a business is often a whirlwind for participants, as they must address a myriad of issues and make many decisions in a short period. The following are some of the Nebraska tax issues being addressed in audits and appeals when not handled in the planning stage: • Tax Exemption on Sale/Purchase: If the assets of a business are purchased, advisors should ensure the purchase is structured to take advantage of potential sales tax exemptions on the sale of business assets. • Incentive Transfers: Many businesses have Nebraska incentive projects. If not properly transferred, the buyer and/ or seller can lose a significant part of the expected incentives. • Capital Gain Exclusion Requirements: Nebraska has a capital gain exclusion for sales of stock by Nebraska resident shareholders, but that exclusion has several requirements that must be strictly adhered to in order to qualify. Companies Expanding in Nebraska Nebraska offers a number of meaningful incentives for companies that are expanding in Nebraska. This includes companies that are building a new facility, adding a new business or product line, or moving an existing business into Nebraska. Here are some of the audit and appeal issues we are seeing: • Qualified Business: Imagine Nebraska Act incentives are available for businesses engaged in qualifying business activities. It is critical that an incentive application properly

15 nebraska society of cpas W W W . N E S C P A . O R G Nebraska offers a number of meaningful incentives for companies that are expanding in Nebraska. This includes companies that are building a new facility, adding a new business or product line, or moving an existing business into Nebraska. 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. See their websites at www.NebraskaStateTax.com and www.NebraskaIncentives.com for more information. For a copy of their publication, The Anatomy of Resolving State Tax Matters, or their Nebraska Business Expansion Decision Guide, please visit their websites or contact them at (402) 341-3070 or at nniemann@mcgrathnorth.com or mottemann@mcgrathnorth.com, respectively. defines the qualifying business activities from the outset or be challenged later. • Base-Year Employment&Investment: If the base-year employment and qualifying types of investment at a project are not addressed at the outset, this can result in audit uncertainty in the future. • Manufacturing Equipment Sales Tax Exemption: This is a different result depending on whether an Option 1, 2, or 3 installation contractor is used. • ConstructionContracts: Construction cont racts general ly need to have certain tax and incentive provisions in order to help a company qualify for the full amount of expected project incentives. Former Residents Keeping a Home in Nebraska The Department of Revenue has been focusing on the tax residency of persons who moved out of Nebraska but kept a house or condominium here. In the past year, a couple of new cases have been decided by Nebraska courts on this issue. Continued focus by the Department of Revenue on this issue is expected. Some issues include: • Documenting Location: A number of cases have turned on the number of days that taxpayers are in—and out of—Nebraska. Documenting these, particularly when tax assessments can go back several years, is an issue. Clients who plan to have multiple homes need to keep good records. • Domicile Consistency: A person’s “domici le” is dependent on many factors. The Department of Revenue has been looking beyond just those factors listed in its published guidance. • Mea s u r i ng Days I n & Out of Nebraska: At issue in recent cases has been the methodology for counting the number of days a person is in Nebraska. The Department of Revenue (incorrectly, we believe) wants to treat a travel day, in which a person travels into or out of Nebraska, as being in Nebraska for a full day. Depending upon a person’s travel schedule, this can have a significant impact on the question of residency. Companies Owning Foreign Subsidiaries Companies have been going global at an ever-increasing rate. The passage of the Federal Tax Cuts and Jobs Act of 2017 created two new types of income for companies with foreign subsidiaries: Section 965 Income (taxed under Internal Revenue Code Section 965) and GILTI (Global Intangible Low-Taxed Income). Nebraska companies and advisors should be aware of what’s occurring now: • Department of Revenue Wants to Include This Income in Nebraska Taxable Income: As conf i rmed i n r ecent pronouncement s , t he Department of Revenue proposes that Section 965 Income and GILTI—even though gained from foreign sources— must be included in a corporation’s Nebraska Taxable Income. Thi s can have a signif icant tax impact for international companies doing business in Nebraska. This position is being challenged. • Appor t ionment Fac tor s: The Department of Revenue has proposed that companies with Sect ion 965 Income andGILTI should use a special apportionment formula that does not allow companies to include the sales that generated this foreign income in the denominator of the apportionment formula. This position is also being challenged. • Overr iding Defenses: Based on the unusual way the Depar tment of Revenue i ssued t he Ba l ance Due Notices regarding Section 965 Income and GILTI, we have raised two other over r iding defenses to t he Depa r tment ’s proposed t ax assessments. I f successf ul , these create a full line of defense against the Department’s Section 965 Income and GILTI tax assessments. The Nebraska Department of Revenue continues to aggressively audit and assess Nebraska taxpayers. This ar t icle has brief ly highlighted a few of the areas we are seeing. Our guides, the Anatomy of Resolving State Tax Matters and the Nebraska Business Expansion Decision Guide, contain other examples.

I S S U E 2 , 2 0 2 2 16 nebraska cpas 2022 NESCPA COURSE CALENDAR DATE TYPE CONFERENCE/COURSE TITLE VENDOR LOCATION CPE/ ETHICS HOURS APRIL 4/20 MA 4th Annual Business & Industry Conference Nebraska Society of CPAs Hillcrest Country Club, Lincoln 8 MAY 5/95/12 MA AHI Staff Training - Level 2 - Semi-Senior AHI Associates Live Webcast 24 5/9 IT Advanced Excel K2 Enterprises Live Webcast 8 5/9 AA Accounting & Auditing of NPOs - New Guide Paul Koehler Live Webcast 8 5/10 AA Accounting & Auditing of State & Local Governments Paul Koehler Live Webcast 8 5/10 IT Budgeting & Forecasting Tools & Techniques K2 Enterprises Live Webcast 8 5/11 AA An Overview of the New Audit Quality Management Standard in Plain English Real World Seminars Live Webcast 1.5 5/11 IT Business Continuity: Best Practices for Managing the Risks K2 Enterprises Live Webcast 8 5/165/19 MA AHI Staff Training - Level 3 - Beginning In-Charge AHI Associates Live Webcast 24 5/18 AA Annual Accounting & Auditing Update Surgent Live Webcast 8 5/19 AA A Complete Guide to the Yellow Book Surgent Live Webcast 8 5/19 IT 2022’s Biggest Security & Privacy Concerns K2 Enterprises Live Webcast 4 5/19 IT Advanced QuickBooks Tips & Techniques K2 Enterprises Live Webcast 4 5/20 IT An Accountant’s Guide to Blockchain & Cryptocurrency K2 Enterprises Live Webcast 4 5/20 IT Artificial Intelligence for Accounting & Financial Professionals K2 Enterprises Live Webcast 4 5/235/26 MA AHI Staff Training - Level 4 - Management & Leadership Essentials AHI Associates Live Webcast 24 5/25 AA Financial Reporting Update for Tax Practitioners Surgent Live Webcast 8 JUNE 6/2 MA Management & Leadership Essentials AHI Associates Live Webcast 8 6/9 MA AHI Staff Training - Level 5 - Advanced Management & Leadership Essentials AHI Associates Live Webcast 16 6/7 AA 26th Annual Not-For-Profit Conference Nebraska Society of CPAs Hillcrest Country Club, Lincoln 8 6/8-6/9 AA 41st Annual Governmental Accounting & Auditing Conference Nebraska Society of CPAs Hillcrest Country Club, Lincoln 16 6/13 IT Business Intelligence, Featuring Microsoft’s Power BI Tools K2 Enterprises Live Webcast 8 6/14 AA Ethics Update 2022, Part 1 Real World Seminars Live Webcast 2/2 6/14 IT Case Studies in Fraud & Technology Controls K2 Enterprises Live Webcast 8 6/15 IT Excel Best Practices K2 Enterprises Live Webcast 8 6/20 TX Creative Strategies for Buying, Selling, or Gifting a Business Werner Rocca - Art Werner Live Webcast 8 6/22 IT K2’s Excel Essentials for Staff Accountants K2 Enterprises Live Webcast 8 6/22 AA Accounting & Auditing Update for Small Businesses AICPA UNO Thompson Alumni Center, Omaha 8 6/23 AA Breaking Down the Auditor's Report for Non-ERISA Plan Private Entities - NEW! AICPA UNO Thompson Alumni Center, Omaha 8

17 nebraska society of cpas W W W . N E S C P A . O R G 6/23 IT Excel PivotTables for Accountants K2 Enterprises Live Webcast 8 6/24 IT Excel Tips, Tricks & Techniques for Accountants K2 Enterprises Live Webcast 8 6/27 IT Best Word, Outlook & PowerPoint Features K2 Enterprises Live Webcast 4 6/27 IT Building a Cutting Edge Online Office K2 Enterprises Live Webcast 4 6/28 CONF Insurance Industry Conference Co-sponsoring with Iowa Society of CPAs Live Webcast 7 6/28 IT Case Studies in Fraud & Technology Controls K2 Enterprises Live Webcast 4 6/28 IT Emerging Technologies, Including Blockchain & Cryptocurrencies K2 Enterprises Live Webcast 4 6/29 ET Ethics & Technology K2 Enterprises Live Webcast 4 6/29 IT Everything Google! Their Most Effective Tools, Apps & Services K2 Enterprises Live Webcast 4 JULY 7/6 AA Audits of Nebraska School Districts Nebraska Society of CPAs Ramada Midtown Conference Center, Grand Island 8 7/7 TX Mergers & Acquisitions: A Complete Guide to Relevant Issues Werner Rocca, Art Werner Live Webcast 4 7/11 TX A Practical Guide to Trust Werner Rocca, Art Werner Live Webcast 8 7/117/14 MA AHI Staff Training - Level 1 - Basic Staff Training AHI Associates Live Webcast 24 7/13 AA Ethics Update 2022, Part 2 Real World Seminars Live Webcast 2/2 7/14 AA Advanced Audits of 401(k) Plans: Best Practices & Current Developments Surgent Live Webcast 8 7/15 AA Audits of 401(k) Plans: New Developments & Critical Issues Surgent Live Webcast 8 7/18 IT Microsoft Office 365: All the Things You Need to Know K2 Enterprises Live Webcast 8 7/19 AA Next Generation Excel Reporting K2 Enterprises Live Webcast 8 7/19 TX S Corporation Preparation, Basis Calculations & Distributions - Form 1120S Schedule K & K-1 Analysis The Tax U, The Garvs LLC Live Webcast 8 7/20 TX Partnership Preparation, Basis Calculations & Distributions - Form 1065 Schedule K & K-1 The Tax U, The Garvs LLC Live Webcast 8 7/26 TX Social Security & Medicare: Planning for You & Your Clients Surgent Hampton Inn & Suites, Scottsbluff 8 7/27 TX Securing a Comfortable Retirement Surgent Hampton Inn & Suites, Scottsbluff 4 7/27 ET Ethical Considerations for CPAs Surgent Hampton Inn & Suites, Scottsbluff 4/4 7/27 IT Excel Charting & Visualizations K2 Enterprises Live Webcast 4 7/27 IT Hands-On With QuickBooks Online Accountant for Public Accounting K2 Enterprises Live Webcast 4 7/28 AA Implementing Internal Controls in QuickBooks Environments K2 Enterprises Live Webcast 4 7/28 IT Improving Productivity With Office 365 Cloud Applications K2 Enterprises Live Webcast 4 7/29 IT Integrating Data for Improved Efficiency & Control K2 Enterprises Live Webcast 4 7/29 IT Introduction to Excel Macros K2 Enterprises Live Webcast 4

I S S U E 2 , 2 0 2 2 18 nebraska cpas 9/6- 9/9 MA AHI Staff Training - Level 1 - Basic Staff Training AHI Associates Live Webcast 24 9/14 AA SAS 142 Audit Evidence Real World Seminars Live Webcast 1.5 9/16 TX Estate Planning for 2022 & Beyond Werner Rocca, Art Werner Live Webcast 8 9/199/22 MA AHI Staff Training - Level 2 - Semi-Senior AHI Associates Live Webcast 24 9/19 TX Basis Calculations & Distributions for Pass-Through Entity Owners - Schedule K-1 Analysis The Tax U, The Garvs LLC Live Webcast 8 9/20 TX Passive Activities & Rental Real Estate Income Tax Issues The Tax U, The Garvs LLC Live Webcast 8 9/21 Tax Estate Tax Planning Options for Farmers CLA Live Webcast 4 9/28 FN Current Developments & Best Practices for Today's CFOs & Controllers Surgent Live Webcast 8 9/29 TX Traps & Pitfalls in Estate Planning Werner Rocca, Art Werner Live Webcast 8 AUGUST 10/2 MA Management & Leadership Essentials AHI Associates Live Webcast 8 10/4 MA Advanced Controller & CFO Skills AICPA UNO Thompson Alumni Center,Omaha 8 10/5 MA Controller's Update: Today's Latest Trends AICPA UNO Thompson Alumni Center, Omaha 4 SEPTEMBER OCTOBER 8/4 AA How Accountants Create Value via ESG Intraprise TechKnowlogies LLC Live Webcast 4 8/9 AA Conquering the New Lease Standard Real World Seminars, Co-sponsoring with Iowa Society of CPAs Live Webcast 4 8/10 AA A&A Update for the Local Firm - Lightning Round Real World Seminars Live Webcast 1.5 8/15 AA Revenue Recognition: Mastering the New FASB Requirements AICPA Quarry Oaks, Ashland 8 8/16 AA Leases: Mastering the New FASB Requirements AICPA Quarry Oaks, Ashland 8 8/17 Tax Partnership Essentials & Reporting Basis Van Der Aa Tax Ed LLC Mahoney State Park, Ashland 8 8/18 Tax S Corporation Essentials: Reporting Shareholder Basis and More Van Der Aa Tax Ed LLC Mahoney State Park, Ashland 8 8/19 Tax Fiduciary Accounting and Tax Preparation for Estates Van Der Aa Tax Ed LLC Mahoney State Park, Ashland 8 8/23 CONF Agriculture Conference Iowa Society of CPAs Live Webcast 8 8/29 Tax Employee Stock Options Surgent, Co-sponsoring with Iowa Society of CPAs Live Webcast 2 8/29 MA Annual Update for Controllers AICPA UNO Thompson Alumni Center, Omaha 8 8/30 AA Governmental Accounting & Auditing Update AICPA UNO Thompson Alumni Center, Omaha 8 8/31 AA 1st Annual Women in Accounting Summit Nebraska Society of CPAs Crete Carrier Riverview Lodge at Mahoney State Park, Ashland 8

19 nebraska society of cpas W W W . N E S C P A . O R G 11/1 Tax The Complete Trust Workshop Surgent, Co-sponsoring with Iowa Society of CPAs “Live Webcast” 8 11/1 AA 2022 Accounting & Auditing Update for the Real World Real World Seminars Quarry Oaks, Ashland 8 11/2 AA 2022 Preparation, Compilation & Review (SSARS) Update for the Local Firm Real World Seminars Quarry Oaks, Ashland 8 11/7 Tax Key Tax Issues Facing Business & Industry Van Der Aa Tax Ed LLC Quarry Oaks, Ashland 8 11/8 Tax It's Personal! Individual Tax Update 2022 Van Der Aa Tax Ed LLC Quarry Oaks, Ashland 8 11/9 Tax Year-End Tax Planning: Thinking Outside the Box Van Der Aa Tax Ed LLC Quarry Oaks, Ashland 8 11/9 AA 2022 SSARS Update - Lightning Round Real World Seminars Live Webcast 1.5 11/11 TX Federal Tax Update - Individual & Business - ONE DAY! TaxSpeaker, Co-sponsoring with Iowa Society of CPAs Live Webcast 8 11/1411/17 MA AHI Staff Training - Level 4 - Management & Leadership Essentials AHI Associates Live Webcast 24 11/17 TX This Year's Best Income Tax, Estate Tax & Financial-Planning Ideas Surgent Live Webcast 8 11/18 TX Estate & Life Planning Issues for the Middle-Income Client Surgent Live Webcast 8 12/112/2 TX 2022-2023 Two-Day Federal Tax Update - Individuals & Businesses The Tax U, The Garvs, LLC Embassy Suites, La Vista, NE 16 12/7 Tax Getting Ready for Busy Season: Key Changes Every Tax Practitioner Should Know Surgent, Co-sponsoring with Iowa Society of CPAs Live Webcast 4 12/12 Tax Preparing Individual Tax Returns for New Staff & Para-Professionals Surgent, Co-sponsoring with Iowa Society of CPAs Live Webcast 8 12/1212/15 MA AHI Staff Training - Level 5 - Advanced Management & Leadership Essentials AHI Associates Live Webcast 16 10/5 MA Finance Business Partnering: The Changing Finance Function & Technology Impacts - NEW! AICPA UNO Thompson Alumni Center, Omaha 4 10/12 AA Avoiding Auditor Bias Real World Seminars Live Webcast 1.5 10/12 TX Maximizing Your Social Security Benefits Surgent Live Webcast 4 10/12 ET Ethical Considerations for CPAs Surgent Live Webcast 4/4 10/13 AA Accounting, Audit & Attest Update for Practitioners With wSmall-Business Clients Surgent Live Webcast 8 10/18 TX 2022 Guide to Real Estate Tax Strategies Larry Stein Mahoney State Park, Ashland 8 10/19 TX Pass-Through Entity Immersion Workshop Larry Stein Mahoney State Park, Ashland 8 10/20 TX 2022 Guide to Retirement, Income Tax & Estate Planning Strategies (Giving Your 60-Plus Client a Planning Check-up) Larry Stein Mahoney State Park, Ashland 8 10/2410/27 MA AHI Staff Training - Level 1 - Basic Staff Training AHI Associates Live Webcast 24 10/26 AA Conquering the New Lease Standard Real World Seminars, Co-sponsoring with Iowa Society of CPAs Live Webcast 8 10/2710/28 AA 22nd Annual Fall Conference & Annual Meeting Nebraska Society of CPAs Embassy Suites, La Vista 16 10/31 Tax Social Security & Medicare: Planning for You & Your Clients Surgent, Co-sponsoring with Iowa Society of CPAs Live Webcast 8 10/3111/3 MA AHI Staff Training - Level 3 - Beginning In-Charge AHI Associates Live Webcast 24 NOVEMBER DECEMBER

I S S U E 2 , 2 0 2 2 20 nebraska cpas S CORPORATION INVERSION USING AN “F” REORGANIZATION BY HANNAH FISCHER FREY & JESSE SITZ, BAIRD HOLM LLP Many new business owners are excited by the f low-through treatment of income and loss as well as the selfemployment tax savings that can be available to entities that elect to be taxed under Subchapter S of the Internal Revenue Code of 1986, as amended (the “Code”). Such savings, which stem from the bifurcation of salary versus distributions, can be reason enough to make such an election, from an economic perspective. There are several downsides, however, to making an “S” election that business owners should consider prior to making such an election. Restrictions on the types of owners, classes of stock, and numbers of owners, among other things, can limit a business that wishes to sell or take on investors in the future. This can be particularly problematic to a business that is being acquired by a larger venture. Such acquisition entities, potential investors, or private equity firms are almost always organized as entities. The S corporation rules generally do not allow entities (except for very limited types) to own S corporation stock. Fortunately, there is an IRS-approved method by which an S corporation can reorganize itself to allow for an investment or acquisition of less than all of the stock by an entity. An “F” reorganization effectively allows the entity to admit an entity investor without jeopardizing the S election of the S corporation.1 This kind of reorganization is commonly referred to as an “S corporation inversion” or “F” reorganization, gaining its name from the Code Section from which it arises—Section 368(a)(1) (F). Lastly, this article provides a summary overview of the steps and rules regarding an “F” reorganization. There are many traps for the unwary. We recommend that careful diligence, documentat ion of the steps sat i sf ying the requi rement s summarized below, and coordination between the attorney and accountant all occur prior to undertaking such a reorganization. A. Steps for “F” Reorganization For purposes of this explanation, we will use the following terms: • Operating Entity – This refers to the original entity, which is taxed as an S corporation. • NewCo – This is the new entity, which will become the holding company of the Operating Entity. • QSub – This refers to a “qualified subchapter ‘S’ subsidiary” as defined in Section 1361 of the Code.

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