The New England Accounting Advisor
New high water marks set for billing multiple and profit per hour
CBIZ Tofias is pleased to announce the recent completion and publication of our 2014 Survey of Architectural Firms in Greater Boston providing an overview and analysis of key industry statistics and best practices. We hope that you will use this information for benchmarking your firm’s results against the Survey findings.
The IRS has announced changes in two of its programs related to offshore accounts. The IRS has modified the terms of the Offshore Voluntary Disclosure Program (OVDP), which allows individuals to avoid criminal prosecution if they disclose their foreign accounts and pay a substantial penalty. In addition, the IRS has expanded the streamlined filing compliance process, or "streamlined procedures," which are aimed at U.S. taxpayers who have failed to disclose their foreign accounts but who are not willfully evading their tax obligations. These programs are part of a wider effort to stop offshore tax evasion, which includes enhanced enforcement, criminal prosecutions, and implementation of third-party reporting via the Foreign Account Tax Compliance Act (FATCA).
The Affordable Care Act (ACA) imposes new reporting requirements on health insurers, as well as on certain employers. These reporting requirements are imposed by IRC Sections 6055 and 6056 (see CBIZ Health Reform Bulletin, IRS Final Rules – IRC Sections 6055 and 6056, 3/14/14). These reporting requirements are for the purpose of helping the government discern who might be entitled to premium assistance, as well as discern what employers might be subject to the employer shared responsibility excise tax. This bulletin will focus primarily on the employer’s reporting obligation.
Time is running out for taxpayers to implement the new tangible property regulations. The new rules must be followed beginning in 2014. All taxpayers with tangible business and investment property will need to analyze current accounting practices and potentially institute changes to conform to the new rules. Many taxpayers can leverage the final regulations to increase and accelerate tax deductions. Others may have to defer or recapture deductions as a result of the new rules. And given that many of these rules simply didn't exist a couple of years ago, virtually all taxpayers with tangible property will need to request one or more accounting method changes on their 2014 tax returns to become compliant.
Businesses with annual employee bonus plans have long operated under the assumption that as long as they pay bonuses within 2 ½ months after the end of the year in which the bonuses are earned, the bonuses are deductible in the year earned, rather than in the year paid. While it is true that the "2 ½ month rule" must be satisfied in order to deduct the bonus in the year earned, other requirements must be met as well. The IRS has issued several rulings in the last few years illustrating how many bonus plans may fail these requirements. While these rulings may cast doubt upon the deductibility of many employers' current bonus plans, they also shed light on how to structure a bonus plan to withstand IRS scrutiny.
The Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2014-10 Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation, which eliminates development stage entities from U.S. generally accepted accounting principles (U.S. GAAP).
The economic recovery since the Great Recession has allowed many businesses the flexibility to look for growth opportunities. As a result, many pundits are optimistic that mergers, acquisitions and other business restructurings will increase in 2014 and for the foreseeable future. Although the rewards of acquiring another business can be great, such transactions are complicated due to the various tax, legal, and regulatory issues involved. While both the seller and purchaser may devote significant time to the performance of due diligence procedures, they often overlook sales tax considerations.
Is the Sale of a Business Subject to Tax?
Generally, purchasers can acquire another business through either an asset sale or stock sale. Since sales tax is generally imposed on the sale of tangible personal property, the acquisition of a business enterprise through a stock sale generally will not be subject to sales tax. For other good and valid reasons, however, purchasers may want to structure the acquisition of the business as an asset sale. These asset sales, where all or part of the business's assets are transferred, are commonly referred to as bulk sales for sales tax purposes. Since these asset sales or bulk sales constitute, at least in part, the sale of tangible personal property, they will be subject to sales tax unless a specific exemption applies.
The financial accounting Standards Board (FASB) has been working on a Simplification Initiative. The goal of this initiative is to identify areas of US Generally Accepted Accounting Principles (GAAP) where cost and complexity can be reduced while maintaining or improving the usefulness of information provided in the financial statements. As part of the Simplification Initiative the FASB has proposed a change to the accounting for inventory.
Lower of Cost or Market
Existing GAAP requires that inventory be measured at the lower of cost or market. The measurement of market begins with the cost to replace the inventory. However, in order to use replacement cost as the market measurement of inventory the replacement cost must be between two constraining variables. Replacement cost must not be greater than the estimated selling price in the ordinary course of business, less the reasonably predictable costs of completion, disposal and transportation, known as net realizable value (NRV). In addition, the replacement cost must not be less than NRV less a normal profit.
On August 13, 2014 Massachusetts Governor Deval Patrick signed a $77.8 million economic development bill focused on investments in education, innovation and infrastructure. The new law expands the research and development tax credit, creates multiple initiatives to accelerate job growth and promotes the economic revitalization of the Commonwealth’s Gateway Cities through a $15 million shot in the arm for the Gateway Cities Transformative Development Fund.
In announcing the passage of H.4377, An Act To Promote Economic Growth in the Commonwealth, Patrick said, “In important ways, this legislation improves existing tools and provides a few new ones to continue our strong job growth, and I thank the Legislature for being so responsive. At the same time, we have unfinished business, so I am filing further legislation today to give innovators and municipalities all the tools they need to grow jobs and opportunity.”
The Massachusetts Life Sciences Center has announced that it is now accepting applications for the 2014 Life Sciences Tax Incentive Program from companies engaged in life sciences research and development, commercialization and manufacturing in Massachusetts. The Program, which is part of the state’s Life Sciences Initiative, is authorized to award up to $25 million in tax incentives each year. The primary goal of the program is to incentivize life sciences companies to create new sustained jobs in Massachusetts.
The deadline for applications to be submitted is October 23, 2014 by noon. The Life Sciences Center is hosting information sessions to provide more information and answer any questions from July to October. CBIZ Tofias is co-hosting one of these sessions with law firm Cooley LLP on September 23 from 8:30 – 10:00am at 500 Boylston Street in Back Bay. We encourage you to attend this session with us – to register, click on the following link: http://info.cbiztofias.com/boston-pe/MA-life-sciences-tax-information-session