ISSUE 1, 2024 OFFICIAL PUBLICATION OF THE NEBRASKA SOCIETY OF CPAS ADVANCING THE PROFESSION THROUGH Advocacy & Innovative Solutions
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BOARD OF DIRECTORS KELLY J. MARTINSON CHAIRMAN (402) 827-2054 Lutz Omaha BRIAN M. KLINTWORTH CHAIRMAN-ELECT (402) 423-4343 HBE LLP Lincoln HEATHER E. BARR DIRECTOR (402) 729-4129 Endicott Clay Products Co. Fairbury LAURIE ANN J. BUHLKE DIRECTOR (308) 382-5720 Contryman Associates PC Grand Island LORRAINE A. EGGER IMMEDIATE PAST CHAIRMAN (402) 965-0328 CyncHealth La Vista MEGAN C. HOLT DIRECTOR (402) 342-7600 Mutual of Omaha Insurance Co. Omaha JUSTIN M. HOPE DIRECTOR (402) 691-5538 Eide Bailly LLP Elkhorn SHARI A. MUNRO AICPA ELECTED REPRESENTATIVE (402) 963-4316 Frankel LLC Omaha DR. THOMAS J. PURCELL, III DIRECTOR (402) 280-2062 Creighton University Omaha 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 MEMBERSHIP & CPE ASSISTANT lori@nescpa.org OFFICERS BOARD MEMBERS NESCPA STAFF JODI M. ECKHOUT SECRETARY (308) 995-6151 Woods & Durham Chartered CPAs Holdrege GRANT H. BUCKLEY TREASURER (402) 444-1872 Buckley & Sitzman LLP Lincoln 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. 4 Nebraska CPA
22 16 C O N T E N T S 10 ©2024 Nebraska Society of Certified Public Accountants | The newsLINK Group, LLC. All rights reserved. The Nebraska CPA is published six times each year by The newsLINK Group, LLC for the Nebraska Society of Certified Public Accountants and is the official publication for this society. The information contained in this publication is intended to provide general information for review, consideration and education. The contents do not constitute legal advice and should not be relied on as such. If you need legal advice or assistance, it is strongly recommended that you contact an attorney as to your circumstances. The statements and opinions expressed in this publication are those of the individual authors and do not necessarily represent the views of the Nebraska Society of Certified Public Accountants, its board of directors, or the publisher. Likewise, the appearance of advertisements within this publication does not constitute an endorsement or recommendation of any product or service advertised. Nebraska CPA is a collective work and as such some articles are submitted by authors who are independent of the Nebraska Society of Certified Public Accountants. While the Nebraska CPA encourages a first-print policy, in cases where this is not possible, every effort has been made to comply with any known reprint guidelines or restrictions. Content may not be reproduced or reprinted without prior written permission. For further information, please contact the publisher at: 855.747.4003. ISSUE 1, 2024 EDITORIAL: The Nebraska Society of CPAs seeks to reflect news and relevant information to Nebraska and other news and information of direct interest to members of the Nebraska Society of CPAs. Statement of fact and opinion are made on the responsibility of the authors alone and do not represent the opinion or endorsement of the Nebraska Society of CPAs. Articles may be reproduced with written permission only. ADVERTISEMENTS: The publication of advertisements does not necessarily represent endorsement of those products or services by the Nebraska Society of CPAs. The editor reserves the right to refuse any advertisement. SUBSCRIPTION: Subscription to the magazine, a bi-monthly publication, is included in membership fees to the Nebraska Society of CPAs. PRESIDENT’S MESSAGE 6 Advancing the Profession Through Advocacy & Innovative Solutions By Joni Sundquist, Nebraska Society of CPAs 8 Charitable Giving What Financial Advisors Should Know in 2024 By the Omaha Community Foundation 10 It Takes Two Making the Transition Work By Accounting Practice Sales 12 IRS Announces Settlement Programs for ERC Consider Your Audit Risk By Jesse D. Sitz & Morgan L. Kreiser, Baird Holm LLP STATE TAX BRIEFING 16 The Good Life Transformational Projects Act Nebraska’s New Incentive Driving Economic Development in the State By Nick Niemann & Matt Ottemann, McGrath North Law Firm 19 2024 Conferences & Special Events Mark Your Calendars for These Outstanding Opportunities! COUNSELOR’S CORNER 20 Corporate Transparency Act Reporting Required for Certain Nonprofit Organizations By Nicholas W. O’Brien & Kate C. Hughes, Koley Jessen 22 Why Working at a CPA Firm Is Phenomenal, and Why Students Should Major in Accounting By Marc Rosenberg, CPA 24 Members in the News 26 Firms in the News 28 Welcome New Society Members 30 In Memoriam 31 2024 NESCPA Advertiser Index Cover photo: "Cameron the Capitol Cat" poses on the steps of the Nebraska Capitol building in Lincoln. He has his own Facebook page and was recently featured in USA Today. 5 www.nescpa.org
PRESIDENT’S MESSAGE THE NEBRASKA SOCIETY OF CPAS PLAYS A CRITICAL ROLE IN ADVOCACY, helping to shape the future of the profession and the laws that affect you as CPAs. We are dedicated to building relationships and forging strong bonds with legislators, nurturing our ties with the Nebraska Department of Revenue, collaborating with the Nebraska Board of Public Accountancy, and engaging with leaders of like-minded organizations. Moreover, we open doors for you to cultivate meaningful relationships with your state legislators, recognizing that such connections are the cornerstone of our profession’s legislative and political effectiveness. For decades now, the Nebraska Society has coordinated the annual State Senators’ Reception and Dinner, setting the stage before the Nebraska Legislature springs into action. This year’s gathering, held Jan. 2 at The Cornhusker Marriott Renaissance Room in Lincoln, saw an impressive assembly of nearly 70 CPAs and state senators. This long-standing tradition not only facilitates valuable connections between CPAs and state senators but also reignites camaraderie among senators themselves prior to the start of the legislative session. You will see a few photos of the event on page 7. Jan. 3 marked the launch of the 108th Legislature’s 60-day second session, with bill introductions wrapping up after Day 10 and hearings on each newly introduced bill starting Jan. 22. Among the first bills to receive a hearing was LB 854, introduced by Sen. Mike Jacobson from North Platte. This bill, proposed by the Society, would allow candidates to sit for the CPA exam with 120 semester hours or 180 quarter hours of qualifying college credit and a bachelor’s degree. (Under current law, candidates may not sit for the exam until 120 days before reaching their 150 hours of college credit.) Pictured in photo 1 on page 7, NESCPA Chairman Kelly Martinson of Lutz testified on behalf of the Society in support of the bill, which has now been placed on Final Reading. With the strategic assistance of our lobbyists at Radcliffe, Gilbertson & Brady, the Society diligently monitors proposed legislation, ensuring that the significance of the CPA license and the profession’s interests are well understood by key legislators. Prior to the start of hearings, Society lobbyist Korby Gilbertson spearheaded a review of legislation that is of particular ADVANCING THE PROFESSION THROUGH ADVOCACY & INNOVATIVE SOLUTIONS BY JONI SUNDQUIST, NEBRASKA SOCIETY OF CPAs interest to the profession. Members of the Society Board, Political Education Committee, Legislation Committee, and Taxation Committee participated in the discussion to recommend the Society’s stance on bills of interest. During this State Legislation Update, the group voted to support LB 1059 and to seek further modifications to the bill to benefit Nebraska taxpayers. LB 1059 would provide technical changes to legislation enacted last year that allows a partnership to pay income tax directly to the state rather than pass through tax liability to its partners. Thanks to Taxation Committee Chairman Erica Parks of FORVIS for drafting changes to the Pass-Through Entity Tax (PTET) legislation. Additional members taking a lead on PTET issues and educational efforts include Society Board Secretary Jodi Eckhout of Woods & Durham CPAs in Holdrege, Society Chairman-Elect Brian Klintworth of HBE LLP in Lincoln, and Legislation Committee Chairman Shawn Melotz of Melotz Group LLC in Omaha, as well as the dedicated members of the PTET Working Group, found at nescpa.org/committees. Be sure to explore our new “Hot Topics” webpage at nescpa.org/news/updates/hot-topics for the latest information on Nebraska PTET, the new Beneficial Ownership Information (BOI) reporting requirements, the Employee Retention Credit (ERC), and more. We are committed to keeping you informed and ahead of the curve. In addition, attendees at the State Legislation Update voted to oppose LB 1308, which would eliminate the sales tax exemption on business-to-business accounting services. Stacy Watson from Lutz (pictured in photo 2 on page 7) and Brian Klintworth from HBE LLP (pictured in photo 3 on page 7) testified on behalf of the Nebraska Society in opposition to LB 1308 before the Legislature’s Revenue Committee. Without the guidance and wisdom of our members who so freely volunteer their time and talents, we couldn’t do what we do in the legislative and political arena. Thank you! Tackling the CPA Pipeline Challenge Addressing the CPA pipeline shortage remains a priority—both at the state and national levels. In our continuous search for innovation solutions, the Nebraska Society of CPAs announced Miles Education as a new Business Solution Provider. Through the Nebraska Society of CPAs’ Member Benefits Program, the Society endorses trusted organizations, known as Business Solution Providers, that are service-oriented and have a proven track record of success. 6 Nebraska CPA
For Nebraska public accounting firms, this collaboration with Miles Education unlocks access to a pool of experienced international CPA candidates eager to bring their talents to the United States, without outsourcing or offshoring. To accomplish this, Miles collaborates with leading universities to convert their accounting programs to STEM; this process is already underway at the University of Nebraska-Lincoln. This facilitates Indian accountants’ eligibility to work in the U.S. for three years under student F1 visas, followed by the possibility of an additional six years with an H1B visa. With an average of 4.3 years of experience in accounting, audit, and tax, more than 100 STEM CPA candidates are waiting to be interviewed for positions in the United States. These CPA candidates from India have been placed with large, medium, and small firms nationwide, including in Nebraska. Learn more about Miles Education and the Society’s other Business Solution Providers at nescpa.org/about/benefits. We are not going to solve CPA pipeline challenges overnight, but our commitment to exploring unique solutions and advancing the profession is unwavering. As we embark on a new year, we extend our gratitude for your membership and involvement in the Nebraska Society of CPAs. Together, we will forge a brighter future for the CPA profession! 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. Photo 1 Photo 2 Photo 3 7 www.nescpa.org
CHARITABLE GIVING WHAT FINANCIAL ADVISORS SHOULD KNOW IN 2024 AS WE START 2024, YOU’RE NO DOUBT inundated with information about the various IRS thresholds that are subject to adjustment. Here are a few pointers to keep handy as you inform your clients about changes and also help them tee up their charitable giving plans for the coming year. Social Security COLA Increases The Social Security Administration announced a cost-of-living adjustment (COLA) increase of 3.2% that took effect in January. Connection to charitable giving: Remember that retirees are a unique group when it comes to tools and techniques related to charitable giving—72% of Baby Boomers and 88% of the Silent Generation give to charity every year. When you talk about the Social Security increase, it’s a logical time to bring up charitable giving plans for 2024. Consider beginning a relationship between your client and the Omaha Community Foundation to keep their giving streamlined. Standard Deduction Increases The standard deduction increased in 2024 by approximately 5.5% to $14,600 for single tax filers and $29,200 for married couples filing jointly. Connection to charitable giving: The standard deduction is an important factor in charitable giving. Your clients whose gifts to charity, plus other deductions, total more than the standard deduction are eligible to itemize deductions. It is worth talking with your clients about their 2024 charitable giving plans to evaluate whether a “bunching” strategy could be helpful to maximize a client’s intended support of favorite charities over the next few years. Tax Brackets Though tax rates in each tax bracket, ranging from 10% to 37%, didn’t change, the income levels that define each bracket did increase. Generally, your clients can earn up to about 5% more in 2024 and remain in their 2023 tax bracket. Connection to charitable giving: Reviewing tax brackets with your clients is a good time to bring up pending legislation known as the Charitable Act, which would create a “universal deduction” even for taxpayers who do not itemize. Qualified Charitable Distributions (QCD) Each taxpayer aged 70½ and older may direct up to $105,000 in distributions from an IRA to a qualified charity in 2024. Note that your clients can make a once-ina-lifetime QCD to a charitable remainder trust or charitable gift annuity in the amount of $53,000 in 2024. Connection to charitable giving: With the ability to give more in 2024, your clients can further avoid income tax via QCDs and satisfy a greater portion of their Required Minimum Distributions (RMDs). Field of interest funds and designated funds at a community foundation are very effective recipients of QCDs. BY THE OMAHA COMMUNITY FOUNDATION Your clients rely on your guidance to make important financial decisions. When it comes to charitable giving, we can partner with you to simplify their giving and amplify their impact. Your Partner in Philanthropy » omahafoundation.org/advisors 8 Nebraska CPA
LET OUR EXPERIENCE WORK FOR YOU 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 1700 Farnam Street, Suite 1500 Omaha, NE 68102 www.bairdholm.com BH BairdHolm
In the purchase of any business, rarely is there any guarantee that the customers or clients will continue to come. If you buy a McDonald’s franchise today, you will not get a warranty from McDonald’s that customers will be there eating hamburgers tomorrow. So why then does anyone buy a business knowing the risk that exists in keeping the customers? THE ANSWER IS SIMPLE. BUSINESSES ARE BOUGHT BECAUSE the buyer believes the present owner has been successful and that the same or better income can result with the buyer in control. That can and does happen in any kind of business, and it happens in professional practices all the time. However, buyers and sellers need to be aware that the process does not happen by magic. Several matters must be considered for a successful transition. 1. A good name or “goodwill” is certainly important in client retention but that only goes so far. The buyer must provide the goods or services the customer wants—and the buyer is the only one who can keep the clients happy in the long run. A big mistake buyers sometimes make is that they get in over their heads because they lack either the competence or the experience to run a public practice. 2. People do not like change. In any professional practice sale (assuming the owner is halfway good at what he/she does), the clients will not like the fact that there’s been a change in ownership. They may even complain to the owner; however, most people understand the world never stays the same so, in the end, they will adapt. (If the owner is 55 years of age or older, the clients are already aware the owner will be gone at some point.) But what that means for the buyer is that the more you can keep things the same, the better, at least for a while. Insensitive buyers who immediately change the location, the software, the rates, the employees, etc. are setting themselves up for failure. Patience is the keystone although the temptation to “do it my way” is strong. 3. When a buyer once asked us how he would retain the clients, we answered, “The same way any business keeps customers—treat them right and provide solutions to their problems.” Clients don’t pay the present owner out of charity; they do so because the practice can help fulfill their needs. That said, clients want to feel important and new buyers must work overtime to stroke their feelings. Over and over, studies have shown that the No. 1 reason clients leave any professional is because they feel they weren’t treated right. We were once involved in a sale where the buyer was not very nice to the clients and then later complained to us about losing them! 4. It takes both the buyer and the seller to make a successful transition. The biggest reason transitions fail is because of either a “bad” buyer or a “bad” seller. It is important for the seller to work with the buyer in notifying the clients, and probably more than once. More importantly, the seller must make sure the clients understand he/she is no longer in business. In addition, the seller must repeatedly talk up the buyer and encourage the clients to give the buyer a try. Sellers have a stake not only because they might be financing the deal but also because they have an ethical responsibility to the clients and to the buyer. Sellers who speak poorly of the buyer or are indifferent about the buyer can kill the transition. These are the foundations for a good transition. If the buyer is competent and treats the clients well and the seller is positive and supports the buyer, then there is every reason to believe that the change of ownership will be positive for everyone. Such successes happen all the time. If you’re searching for assistance in valuation, negotiations, and finding the right buyer, Accounting Practice Sales is a global leader in marketing tax and accounting firms. Contact Trent Holmes at Accounting Practice Sales at (800) 397-0249 or trent@aps.net. IT TAKES TWO MAKING THE TRANSITION WORK BY ACCOUNTING PRACTICE SALES 10 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!
IRS ANNOUNCES SETTLEMENT PROGRAMS FOR ERC CONSIDER YOUR AUDIT RISK IN LATE DECEMBER 2023, THE IRS ANNOUNCED its Voluntary Disclosure Program for employers that claimed and received an Employee Retention Credit (ERC) refund but later determined they were not eligible. The Voluntary Disclosure Program follows the IRS’ announcement in October 2023 that it would allow employers with submitted—but not yet paid—ERC claims to withdraw their filings without penalty. The ERC & IRS Enforcement Sometimes called the Employee Retention Tax Credit (ERTC), the ERC is a complex, refundable tax credit intended for employers that continued paying employees during the COVID-19 pandemic when either (a) their operations were fully or partially suspended due to governmental orders, or (b) they experienced a significant decline in gross receipts as compared to 2019. The credit is available for both 2020 and 2021, but the credit limit is calculated differently each year, as follows: For 2020, the credit is equal to 50% of up to $10,000 of qualified wages (including health plan expenses) paid to employees from March 12, 2020, through Dec. 31, 2020 (the maximum credit being $5,000 per employee in 2020). For 2021, the credit is equal to 70% of up to $10,000 of qualified wages (including health plan expenses) paid to employees in any quarter from Jan. 1, 2021, through Sept. 30, 20211 (the maximum credit being $7,000 per employee per quarter). Aggressive ERC promoters published false and misleading advertisements regarding the eligibility requirements for the ERC, leading many employers to believe they were eligible when they were not. (In fact, some ERC firms alleged that all employers were eligible. This is not the case.) As a result, the IRS has announced its intention to “step up” its enforcement actions involving ERC claims. For example, in early December, the IRS mailed 20,000 disallowance letters and has already begun other audit and enforcement actions. In the absence of the IRS’ withdrawal program or Voluntary Disclosure Program, employers that have received ERC refunds but are not, in fact, eligible, could face enforcement action from the IRS for recovery of the full amount of the ERC refund, plus interest and a myriad of penalties. We anticipate the IRS will take a hardline approach on its enforcement action for these claims, especially in light of its announcement of these programs. Withdrawal Program Under the withdrawal program, the IRS will accept an employer’s request to withdraw its ERC claim under certain circumstances. The withdrawal program is for employers with an ERC claim that has been filed but not yet paid by the IRS (or those that have received a check but have not yet cashed or deposited it). If an employer requests to withdraw its claim, it will be treated as though it were never filed, and the IRS will not impose penalties or interest. BY JESSE D. SITZ & MORGAN L. KREISER, BAIRD HOLM LLP 12 Nebraska CPA
Voluntary Disclosure Program The IRS’ Voluntary Disclosure Program is available to employers that have already received an ERC credit or refund if: 1. The employer is not under criminal investigation and has not been notified that the IRS intends to commence a criminal investigation; 2. The IRS has not received information from a third party alerting the IRS to the employer’s noncompliance; 3. The employer is not under an employment tax examination by the IRS for any tax periods for which the taxpayer is applying for the Voluntary Disclosure Program; and 4. The employer has not previously received notice and demand for repayment of all or any part of the claimed ERC. Under the Voluntary Disclosure Program, eligible employers must pay back only 80% of the claimed ERC. If the IRS paid interest on the amount of the ERC received, the employer is not required to repay any interest. The IRS will issue a closing letter, upon which the employer will generally avoid penalties and interest on the entire ERC claimed or refunded. Finally, the IRS will not audit the periods for which the employer filed under the Voluntary Disclosure Program. Learn more about the program at the IRS’ frequently asked questions page at www.irs.gov/coronavirus/ frequently-asked-questions-about-the-employee-retention-creditvoluntary-disclosure-program. To participate in the Voluntary Disclosure Program, taxpayers must complete and submit an application on the IRS Form 15434 by March 22, 2024. Learn more at www.irs.gov/forms-pubs/ about-form-15434. Employers questioning whether they were, in fact, eligible for the ERC should consider applying for the IRS’ withdrawal program or Voluntary Disclosure Program. Employers that participate in the Voluntary Disclosure Program should work with their tax advisors to amend their income tax returns for prior years, to adjust any deductions claimed (or not claimed) for the applicable wage expenses in the years in which the employer had received the ERC refunds. Audit Risk & Preparation Upon the expiration of these programs on March 22, we expect the IRS to closely review the following ERC eligibility standards in an audit: 1. Qualification. This is an important “all or nothing” issue. If the IRS is able to determine that an employer was not qualified for the ERC, no ERCs would be available to claim, and an employer would be required to return all of its received refunds, plus interest and penalties. The IRS may analyze the following eligibility factors, among others: » The number of full-time employees of the employer and any related employers. The ERC allows “large employers” to only treat certain wages as “qualified” for purposes of the ERC: wages paid for the time employees were not providing services for the employer (i.e., furloughed employees who were still paid).2 All employees of any related entities must be aggregated for this purpose. » The COVID-19-related governmental orders that caused the employer’s full or partial suspension of operations. For this purpose, only formal orders, proclamations, or decrees from a governmental entity may be considered, and the order must relate to the suspension of the employer’s business. » Whether the employer’s partial suspension of operations was more than “nominal.” For this purpose, a portion of an employer’s business operations will be deemed to constitute more than a nominal portion of its business operations if either (a) the gross receipts from that portion of the business operations is not less than 10% of the total gross receipts (using the gross receipts from the same quarter in 2019), or (b) the hours of service performed by employees in that portion of the business is not less than 10% of the total number of hours of service performed by all employees (determined using the number of hours performed by employees in the same quarter in 2019). 2. Quantifying the amount of ERCs. The amount of the ERCs claimed, and the veracity of each category of ERCs claimed, will also be important. We anticipate the IRS may review, among others, the following eligibility factors: » The amount and calculation of the qualified wages and health care expenses paid to employees. » Confirmation that the qualified wages were paid to employees, and not independent contractors. » Whether the wages were paid to impermissible “related individuals.” Importantly, wages paid to “related individuals” may not be taken into account in determining the qualified wages for the ERC. For this purpose, “related individuals” include individuals who bear a relationship to an individual who owns, directly or indirectly, more than 50% of the outstanding equity of the company. Relevant relationships include: children, siblings, parents, and individuals with the same principal place of abode as the taxpayer (excluding spouses). The IRS clarified that an individual’s ownership is determined with application of the attribution rules of Code Section 267(c). Under Code Section 267(c), an individual has “constructive ownership” of (i.e., is deemed to own) a company’s equity that is owned by the individual’s family member (including his siblings, spouse, ancestors, and lineal descendants). » Whether the employer claimed the same wages for other tax credit programs. For example, an employer that received a forgivable loan under the Paycheck Protection Program (PPP) is not permitted to earn ERCs on the same dollars as wages paid under the PPP. CONTINUED ON PAGE 14 13 www.nescpa.org
ENDNOTES 1 IRS Notice 2021-65 terminated the credit for Q4 of 2021, except for certain “recovery startup businesses.” 2 For purposes of the ERC for 2020, “large employer” means an employer with more than 100 full-time employees in 2019. For purposes of the ERC for 2021, “large employer” means an employer with more than 500 full-time employees in 2019. Proposed Federal Legislation Impacting ERC Claims At the time of writing, The Tax Relief for American Families and Workers Act of 2024 had passed in the U.S. House of Representatives and was headed to the U.S. Senate. If passed by the Senate and signed into law, the bill would significantly impact an employer’s ability to claim the ERC going forward. Specifically, the legislation would: Retroactively accelerate the deadline for amended returns to Jan. 31, 2024. Under current law, taxpayers have until April 15, 2024, to file amended 2020 returns and April 15, 2025, to file amended 2021 returns. Extend the IRS’ statute of limitations for assessment of ERC claims to six years. Increase the penalty for aiding and abetting the understatement of a tax liability by a COVID-related “promoter.” Currently, there is no clear timeline for the Senate to take up consideration of the bill, and many Senators have indicated a desire to make changes to the bill. Certainly, this proposed legislation warrants tracking and greater consideration of the withdrawal program and Voluntary Disclosure Program for clients. Jesse D. Sitz and Morgan L. Kreiser are partners at Baird Holm law firm. Sitz represents clients with respect to general corporate matters, estate planning and probate matters, federal and state tax planning issues, and tax-exempt matters. Kreiser represents clients with respect to all aspects of ERISA compliance and employee benefit programs, including qualified retirement plans, deferred compensation arrangements, equity compensation incentives, and health and welfare benefits. For more information, contact Sitz at (402) 636-8250 or jsitz@bairdholm.com or Kreiser at (402) 636-8206 or mkreiser@bairdholm.com. CONTINUED FROM PAGE 13 Experts in Accounting, Tax, Consulting, and Business Advisory Services. Family First Rooted in Omaha All Together Navigating with Integrity Knowledgable Embracing Leaders www.frankel.cpa | frankel@frankel.cpa | 402.496.9100 Celebrating 65 Years WE ARE 14 Nebraska CPA
The Nation’s Trusted Tax Advisor alliantgroup.com | 844.898.3280 Bridgette Brashear I Senior Director bridgette.brashear@alliantgroup.com • 346.554.1624 Contact: Our team is your best shot at compliance. Having doubts about your clients’ ERC claims? The IRS is urging businesses to have their filings reviewed by a reliable provider. alliantgroup just added a 5th former IRS Deputy Commissioner to our full-time team of experts. Darren Guillot, who specialized in detecting and deterring tax fraud, is now committed to safeguarding our clients and CPA partners who claim ERC.
STATE TAX BRIEFING THE GOOD LIFE TRANSFORMATIONAL PROJECTS ACT NEBRASKA’S NEW INCENTIVE DRIVING ECONOMIC DEVELOPMENT IN THE STATE BY NICK NIEMANN & MATT OTTEMANN, MCGRATH NORTH LAW FIRM COMPANIES HAVE A LIMITED LIFE. THEY are created, they prevail for some period of time, and then they decline and fail. Sometimes this is over a very short timeframe. Sometimes it is over an extended timeframe. Some merge with another. Some find new life in a new or revised business model. Many factors drive this. A state’s policy towards business climate is critical to providing the environment to nourish or replenish the limited life of companies. The state’s business climate is key to being in a position to reload when companies fail (and jobs and opportunities are lost). A state’s incentive programs are one of the 22 main business climate features that create the opportunity to be a great place for companies to locate and grow. Most states know this and have created a variety of incentive programs to spur growth and attract and retain cuttingedge businesses. The Council for Community and Economic Research has identified 2,412 state business incentives programs enacted by states throughout the United States. Of these 2,412 programs, 37 are located in Nebraska. To be successful, every state needs to design its business climate to not just attract jobs. Today, more than in the past, states are designing their overall entertainment, retail, and quality of life climate to help address the workforce shortages that are occurring around the country. In 2023, the Nebraska Legislature took a next step in this direction with the passage of the Good Life Transformational Projects Act (the Act). This Act is intended to provide support for unique Nebraska projects that will attract new industries and employment opportunities and further grow and strengthen Nebraska’s retail, entertainment, and tourism industries, as well as help to develop new, great places to work and live. The Act will do this by encouraging transformational development projects within the state that create and grow companies, destinations, infrastructure, and other attractions to help keep Nebraska residents here and attract others to come. We are beginning to see a few significant projects throughout the state begin to take shape using the new incentive. For example, public reports highlight a $500 million development project being discussed in Grand Island that would feature more than 2,000 housing units and a tournament-style sports complex. The city of Bellevue has publicly stated that it intends to use the Act to build a 100,000-square-foot indoor water park as part of an entertainment district. In addition, a developer has applied for a project under the Act near Gretna to build a project with estimated building costs of $3.2 billion that would also create nearly 30,000 jobs. Given this activity, and the importance of the Act, we wanted to summarize the Act’s key features and how a developer can utilize the Act’s incentives to support the development of a project under the Act. Basics of the Act If a project is approved, the state will reduce the state’s sales and use tax rate at the project location from 5.5% to 2.75% for transactions occurring within the Project District for a 25-year period. 16 Nebraska CPA
CONTINUED ON PAGE 18 Eligibility begins with a very detailed application to the Nebraska Department of Economic Development. To qualify for an eligible project under the Good Life Transformational Projects Act, an applicant must propose a Project District for which the Act will apply and demonstrate the following: 1. The project will have total development costs of more than $1 billion for a project in Omaha, more than $750 million for a project in Lincoln, more than $500 million for a project in a county of over 100,000 people, or more than $100 million in a county of less than 100,000 people. 2. The project will, directly or indirectly, result in the creation of 1,000 new jobs for a project in Omaha, 500 new jobs for a project in Lincoln, 250 new jobs for a project in a county of more than 100,000 people, or 50 new jobs in a county of less than 100,000 people. 3. If the project is located in a county of more than 100,000 people, at least 20% of sales at the project will be made to persons residing outside Nebraska or the project will generate a minimum of 600,000 visitors per year who reside outside the state. In addition, the project must attract new-to-market retail to the state and generate a minimum of 3 million visitors per year. 4. If the project is located in a county of less than 100,000 people, at least 20% of sales at the project will be made to persons residing outside Nebraska. 5. Any anticipated diversion of state sales tax revenue will be offset or exceeded by sales tax paid on anticipated development costs, including construction to real property, during the same 25-year period comprising the term of the District. How Can a Developer Utilize the Act? As currently structured, the Act simply reduces the state’s sales and use tax on transactions occurring within the Project District. That leaves it up to the developer to determine how best to use that incentive. We believe there are four most likely options that a developer could use. First, a developer might just promote the Project District due to the lower sales tax. Nebraska’s 37 Business Incentive Programs (as identified by the Council for Community and Economic Research) Beginning Farmer Tax Credit Act Beginning Farmer/Rancher Loan Program Business Retention & Expansion Program Capital Gains and Extraordinary Dividend Exclusion Community Development Assistance Act (CDAA) Community Impact Grant Program Customized Job Training Program Developing Youth Talent Initiative Dollar and Energy Saving Loans Economic Opportunity Program Enterprise Zones Express Loans ImagiNE Nebraska InternNE Grant Program Invest Nebraska Loans Local Option Municipal Economic Development (LB840) Manufacturing Machinery and Equipment Sales Tax Exemption Nebraska Academic Research and Development Grant Program Nebraska Advantage Microenterprise Tax Credit Act Nebraska Advantage Research and Development Credit Nebraska Advantage Rural Development Act Nebraska Development Financing (Industrial Development) Nebraska Historic Tax Credit Nebraska Innovation Fund Prototype Grants Nebraska Seed Fund Nebraska Tourism Marketing Grant Program New Markets Job Growth Investment Tax Credit Recovery Loans Renewable Chemical Production Tax Credit Rural Workforce Housing Fund Site and Building Development Fund Small Business Innovation Research/Small Business Tech Transfer (SBIR/STTR) Grant Small Business Loans State Trade Expansion Program Tax Increment Financing Venture Debt Fund Worker Training Grants 17 www.nescpa.org
CONTINUED FROM PAGE 17 Second, if a developer can finance the project through private financing, the developer could simply charge a sales fee on retail transactions occurring within the Project District essentially equal to the lowered sales tax rate. In that way, customers will pay the same total price on a taxable transaction than they would pay elsewhere in the state. The developer could use the extra funds from that fee to help pay the project costs. Third, a developer could work with the locality to impose an occupation tax on transactions occurring within the district that would again make up for that lowered sales tax rate. The locality would then facilitate the issuance of bonds, used for project financing, that would be paid for using such tax revenue. Nebraska’s existing Community Development Law may facilitate such an option through the use of an Enhanced Employment Area. Fourth, the 2024 Nebraska Legislature is currently considering the adoption of LB 1374. This bill would allow localities to impose either an additional sales and use tax, or an occupation tax, on transactions occurring within the District. Such taxes would need to be approved by voters. If the taxes were approved by voters, a locality could adopt a Good Life District Economic Development Program that would allow the locality to issue bonds, to be paid off by the additional tax revenue, that would be used for project financing. Since a Project District can include areas not owned by the applicant, other property owners in the District also need to understand the business and legal implications of a Good Life District on them. Conclusion Based on the interest so far, it is beginning to look like the Act could encourage significant economic activity in the state—activity that appears unlikely to have happened without the Act. The Act is scheduled to close to new applications after 2024, so we continue to expect more potential projects under the Act could be proposed this year. The Act may also become a new illustration that the right tax incentive, which is significant enough to drive decisions, is a powerful tool that can help a state and its citizens grow and prosper. 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 publications, The Anatomy of Resolving State Tax Matters or the Nebraska Business Expansion Decision Guide, visit their websites or contact them at (402) 341-3070 or at nniemann@mcgrathnorth.com or mottemann@mcgrathnorth.com. WE TAKE THE STRESS OUT OF YOUR JOB SEARCH ^ Pre-Screening Interview ^ Reference Checks ^ Facilitate Interview(s) with Potential Employers ^ Ensure Long-Term + Culture Fit ^ Guaranteed Confidentiality LEARN MORE TODAY AT WWW.LUTZ.US/TALENT 18 Nebraska CPA
Business & Industry Conference, with Memorial Stadium Tour* WEDNESDAY, APRIL 24 | 6 CPE Champions Club, Lincoln Financial Institutions Conference TUESDAY, MAY 21 | 8 CPE Live Webcast Not-For-Profit & Governmental Accounting Conference* MONDAY-TUESDAY, JUNE 17-18 | 16 CPE Nebraska Innovation Campus Conference Center, Lincoln ABCs of Business Happy Hour MONDAY, JUNE 17 The Scarlett Hotel, Lincoln Insurance Industry Conference THURSDAY, JUNE 20 | 8 CPE Live Webcast Audits of School Districts Course WEDNESDAY, JULY 10 | 8 CPE TBD, Grand Island Agriculture Tax & Accounting Conference WEDNESDAY, AUGUST 14 | 8 CPE Live Webcast Women in Accounting Summit WEDNESDAY, AUGUST 28 | 6 CPE Crete Carrier Riverview Lodge, Mahoney State Park, Ashland Fall Conference & Annual Meeting TUESDAY-WEDNESDAY, OCTOBER 29-30 | 16 CPE Crete Carrier Riverview Lodge, Mahoney State Park, Ashland Two-Day Tax Update for Individuals & Businesses MONDAY-TUESDAY, DECEMBER 9-10 | 16 CPE Round the Bend Ballroom, Ashland *Registration is now open for these events. 2024 CONFeRENCES & SPECiAL EvENTS MARK YOUR CALENDARS FOR THESE OUTSTANDING OPPORTUNITIES! 19 www.nescpa.org
CORPORATE TRANSPARENCY ACT REPORTING REQUIRED FOR CERTAIN NONPROFIT ORGANIZATIONS COUNSELOR’S CORNER THE CORPORATE TRANSPARENCY ACT (CTA) REQUIRES most businesses to provide information regarding their ownership through an e-filing service provided by the U.S. Department of Treasury’s Financial Crimes Enforcement Network (FinCEN). The CTA was enacted as an attempt to combat illicit activity by individuals and foreign organizations that have been able to capitalize on the anonymity available to entities in the United States. The disclosures required under the CTA include information such as the owners’ names, addresses, dates of birth, and additional identification numbers (e.g., driver’s license, FinCEN identifier, etc.). Established nonprofit organizations may have learned that 501(c) organizations are exempt from reporting under the CTA. However, the exception for 501(c) organizations may not apply to all organizations that consider themselves “nonprofits.” As a result, professional advisors working with nonprofits should ensure leadership of those organizations are made aware of what the CTA is and how they may be required to make reports to FinCEN in certain cases. Under 31 CFR 1010 of the CTA, nonprofit organizations, and entities related to them, are exempt from the CTA reporting requirements if the entity qualifies as one of the following types: 1. The entity is described in section 501(c) of the Internal Revenue Code of 1986 (determined without regard to section 508(a) of the Code) and exempt from tax under section 501(a) of the Code; 2. The entity is a political organization, as defined in section 527(e)(1) of the Code, that is exempt from tax under section 527(a) of the Code; 3. The entity is a section 4947(a) charitable trust; 4. The entity is a wholly owned subsidiary of one of the entity types listed above; or 5. The entity operates exclusively for the benefit of one of the entity types listed above by providing financial assistance to, or holding governance rights, over any such entity. Notably, the regulations require organizations to be recognized as tax-exempt under Section 501(a) and described in section 501(c) to meet the CTA exemption for 501(c) organizations. Many 501(c) organizations, including most 501(c)(3) organizations, are not recognized by the IRS as tax-exempt until they have filed an application with the IRS for a formal determination of tax-exempt status. FinCEN has publicly confirmed that they have declined to change the regulations to give nonprofits exemption when their tax-exempt status is pending or when their tax-exempt status has been revoked.1 As a result, many organizations may be nonprofits but still have obligations to file FinCEN reports because their status as a 501(c) organization is not yet recognized. The reporting requirements for an organization may also change if the organization’s tax-exempt status changes. Existing Nonprofit Organizations & Organizations Automatically Having 501(c) Status If the nonprofit organization is already in existence, has not received a revocation of its tax-exempt status, and has been granted recognition as a 501(c) entity prior to Jan. 1, 2024, the organization is currently exempt from the reporting requirements under the CTA. However, if the IRS revokes the organization’s tax-exempt status for any reason, the directors and officers should be aware the organization must satisfy the BY NICHOLAS W. O’BRIEN & KATE C. HUGHES, KOLEY JESSEN 20 Nebraska CPA
reporting requirements under the CTA within 180 days of the revocation. It is essential the nonprofit’s leadership keep an eye on this 180-day deadline as it may arrive prior to the IRS’ reinstatement of the organization’s tax-exempt status. Nonprofit Organizations Formed Before Jan. 1, 2024, That Have Not Yet Received Recognition as 501(c) Organizations If an organization is required to apply for recognition of tax-exempt status and the IRS has not yet issued a determination letter recognizing the organization’s status under 501(c), the organization is not exempt from the reporting requirements under the CTA. However, for nonprofit organizations formed prior to Jan. 1, 2024, there is a one-year grace period to comply with the CTA. Directors and officers of these organizations should be monitoring when they expect a determination letter from the IRS regarding tax-exempt status and the requirement to report under the CTA by Jan. 1, 2025, if tax-exempt status has not yet been granted. New Nonprofit Organizations Formed in 2024 or Later That Are Required to File for Recognition of Tax-Exempt Status For nonprofit organizations formed after Jan. 1, 2024, the organization is required to report under the CTA within 90 days of formation. Because it is very unlikely that the IRS would grant a determination of a new organization’s tax-exempt status within 90 days, advisers to new nonprofit organizations should discuss reporting responsibilities under the CTA during the time that the organization may be waiting to obtain tax-exempt status. Nick O’Brien and Kate Hughes, attorneys at Koley Jessen, are integral members of the firm’s Estate, Succession, and Tax Department. Their expertise spans a spectrum within this specialized area, covering estate and wealth transfer planning, charitable planning, nonprofit formation and compliance, and tax. With their extensive knowledge and experience, they serve as dependable guides for CPAs navigating the nuanced impact of the Corporate Transparency Act on charities. For additional information or assistance, please contact O’Brien at nick.obrien@koleyjessen.com and Hughes at kate.hughes@koleyjessen.com, respectively. ENDNOTES 1 See 87 FR 59498 (2023) (including official comments by FinCEN regarding public comments and final regulations). CLASSIFIED AD Nebraska Practices for Sale: Gross Shown: $635K Southwest, Nebraska $311K Lincoln, Nebraska For more information Call 1-800-397-0249 or visit www.APS.net THINKING OF SELLING? Accounting Practice Sales is the leading marketer of accounting and tax practices in North America. To learn more about our risk-free & confidential services, call Trent Holmes 1-800-397-0249 or email Trent@apsholmesgroup.com REACH OUT TODAY TO LEARN MORE! Determining the worth of your business is an intricate task. There are many factors involved. Results Business Advisors 12020 Shamrock Plaza #200 Omaha, NE 68154 402.913.9080 www.resultsba.com Scan QR code to watch the EBITDA vs. SDE video. https://www.resultsba.com/ebitda-vs-sde/ 21 www.nescpa.org
WHY WORKING AT A CPA FIRM IS PHENOMENAL, AND WHY STUDENTS SHOULD MAJOR IN ACCOUNTING BY MARC ROSENBERG, CPA WE’VE WRITTEN OVER 500 BLOGS IN THE PAST 15 years. Our material is pitched mostly to partners and managers. We would love it if this blog was read by entry-level hires, staff at CPA firms senior or below, and interns. Partners, you should forward a copy of this blog to your firm’s young people. We really hope that partners also read this. Why? To answer that question, we need to understand the genesis of this blog. For over a decade, partners across the country have told us how disappointed they are that some of their most talented staff don’t want to be a partner. This has always puzzled me. Given the tremendous benefits of being a partner (cited below), this lack of ambition makes no sense. I have always thought that staff have this attitude because they don’t know what it means to be a partner. They are blissfully unaware of the great reasons why being a partner is a fabulous job. Why don’t they know? Amazingly, it’s because the partners haven’t told them! When partners tell me about their staff’s exasperating lack of ambition, I flip the conversation back to them. I ask what they have done to mentor and groom their staff. What have they done to educate their staff on why it’s great to work at a CPA firm and how wonderful it is to be a partner? When partners are honest, many admit that, sadly, they have not addressed these issues directly and clearly with staff. When I started my first job out of college with Ernst & Young, my goal was to be a partner. I had absolutely no clue what it took to be a partner or even what it meant to be a partner. I just knew I wanted to be a partner because that was the pinnacle of success. Today’s young people aren’t like my fellow baby boomers who started their careers when I did. Baby boomers share many personality traits. One is this: When our bosses said, “Jump,” we asked, "How high?" Today’s young people say, “Why should I jump?” or “I’ve got a better way.” Plain and simple, they don’t want to be a partner until someone explains what it means. Why do I want partners to read this? Because I hope this blog causes them to ask themselves if they are doing everything they can possibly think of to mentor staff, especially those with partner potential. Partners should share with their staff how fantastic it is to work at a CPA firm and eventually become a partner. 22 Nebraska CPA
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