UPCOMING SEMINAR: Combating Tenant Fraud in Today's Real Estate Market

April 12, 2017 – Illegal sublets, AirBNB hostings, delinquencies – tenant fraud takes many forms. If a landlord suspects illegal occupation or short-term leasing is taking place, when and how is it advisable to initiate legal action? How can landlords prevent tenant fraud in the first place?

Raich Ende Malter & Co. LLP (REM) is hosting a seminar for landlords, attorneys, accounting professionals, and real estate professionals on tenant fraud, a serious issue for commercial real estate owners in the New York City metropolitan area. In this seminar, you will learn the basics of landlords' rights, the scope of tenant fraud, mitigating risk, and options for gathering evidence when legal steps are necessary. Speakers include attorney Michelle Maratto Itkowitz (owner, Itkowitz PLLC) and Mark Fogel, Chief Investigator for Forensic Private Investigations. Talks will be moderated by Larry Wilk, CPA, Partner-in-Charge of REM’s Real Estate practice.

Breakfast will be provided by REM. Registration is available online at                                   
https://www.rem-co.com/upcoming-events/2017/5/15/tenant-fraud.

Seminar Title:    “Combating Tenant Fraud in Today’s Real Estate Market”

Event Date:        Monday, May 15, 2017

Location:            Conference Center, 175 Broadhollow Road, Melville, New York

Registration:       https://www.rem-co.com/upcoming-events/2017/5/15/tenant-fraud

Price:                   $20 per person

Contact:               Amy Frushour Kelly, Communications Manager
                             akelly@rem-co.com – 516-228-9000 Ext. 3252

About Raich Ende & Malter Co. LLP (rem-co.com)

Raich Ende Malter (REM) is a regional accounting firm of distinction.  Headquartered in New York City, it is consistently ranked by independent industry surveys as one of the top 25 accounting firms in New York, one of the top 20 in the mid-Atlantic region, and one of the top 100 in the country.  REM provides forward-thinking audit, tax, and business advisory services to over a dozen industry sectors.  It serves businesses ranging from multi-generational family-run enterprises to publicly-traded companies, to organizations that serve the public good as not-for-profit organizations. REM has specialized practices in industries that are key to the economic makeup of New York City and its metropolitan region. These include real estate, financial services, manufacturing and distribution, and to those high-net-worth individuals residing in New York who help fuel and drive the local economy.  Through its affiliation with PrimeGlobal, REM maintains an international reach in 90 foreign countries.

How to score a home run with your board meeting minutes

Minutes of your board’s meetings may seem like a mere formality, but they’re much more than that. Board meeting minutes reflect on your board of directors and your organization’s actions. Savvy nonprofits don’t bunt their way through creating these documents — they try to hit them “out of the park.”

Here are some best practices for developing minutes that will document your meetings clearly and accurately.

Covering the basics

Meeting minutes should cover such fundamentals as the date and time, whether it was a special or regular meeting, and the names of directors attending as well as names of directors who didn’t attend. The minutes should record any board actions (such as motions, votes for and against and resolutions). They also should note whether a quorum was reached, whether any board members left and re-entered the meeting — say, in the case of a possible conflict of interest — and whether there were any abstentions from voting or discussions.

Additionally, minutes should include summaries of key points from reports to the board and of alternatives considered for important decisions. For instance, describe how the board evaluated bids for outsourcing IT work or chose a particular venue for a fundraising event. Another important component: The minutes should record action items — that is, follow-up work that will be needed — and who’ll be responsible. Last, all information in the minutes should be presented clearly and succinctly.

There’s no particular requirement about how much detail should be recorded in your minutes. But attorneys often advise their clients to include enough information so that they can be offered as evidence that an action was properly taken and that directors fulfilled their fiduciary duties. When in doubt about the depth of detail to include in your minutes, consult your attorney.

Meeting privately

At times, your board likely will meet “behind closed doors” to discuss particularly sensitive or confidential issues, such as a staff dismissal or key person salaries. Details of these sessions shouldn’t be included in the board meeting minutes, although a notation should be made that the board moved to an executive session; the notation should provide the general topic of the conversation. Also be aware of your state’s Sunshine Laws that may require open meetings and outline exactly what must be documented.

Details of an executive session can be communicated confidentially in some other form. Nonprofit attorneys sometimes advise their clients not to label this communication as “minutes.” 

Generally, your minutes should be ready for inspection by the next board meeting or within 60 days of the date of the original meeting, whichever comes first. IRS Form 990 asks whether there is “contemporaneous,” or timely, documentation of the board and board committee meetings in minutes or written actions.

Understanding multiple uses

If your organization is ever audited by the IRS, your meeting minutes likely are among the first documents the agency will request to see. Keep in mind that any attachments, exhibits and reports can be considered part of the minutes.

Meeting minutes also can serve as evidence in court. For example, if someone alleges that the board made a hasty decision in cutting a program, board meeting minutes can be used to present the data that was considered when making that decision.

Considering readability

Many not-for-profits today strive for transparency. But your board isn’t being open about its transactions if its meeting minutes are so abbreviated that only the keenest insider can understand the full meaning.

The person assigned to take minutes at your organization’s board meetings should produce minutes that are a straightforward and complete report of all actions taken and the basis for any decisions. Simple and unambiguous wording works best.

With that goal in mind, it’s a good idea to have a second person review the meeting minutes. That person (as well as the original writer) should ask, “Would this report make sense if I hadn’t been at the meeting, and had been unfamiliar with the issues addressed? Would I be able to see at a glance the information provided and decisions made?”

Holding up under inspection

Always keep in mind that the minutes of your board’s meetings can be viewed by many sets of eyes. Make sure that they show the real score.

If you have any questions, email Barry Wechsler at bwechsler@rem-co.com or call him at (212) 944-4433, extension 2408.

© 2017

REM ranked in top 100 accounting firms by Accounting Today

Raich Ende Malter & Co. LLP is pleased to announce our ranking among the top 100 accounting firms in America, as calculated by Accounting Today. REM also placed in the top 20 firms in the Mid-Atlantic region (New Jersey, New York, and Pennsylvania). REM has been firmly anchored in the top 100 for the better part of a decade.

Accounting Today ranks firms by revenue, both nationwide and in specific regions. Hundreds of accounting firms participate in this survey annually, providing in-depth financial and operational data for inclusion. The resulting lists provide a benchmark for gauging industry growth and operational trends.

As always, we find our inclusion here to be a source of pride, and we look forward to 2018.

Raich Ende Malter launches unique accounting firm website

New York, NY (March 21, 2017) – Regional accounting and consulting firm Raich Ende Malter & Co. LLP (REM) announced today the launching of its new website (www.rem-co.com).  “The site, while certainly not unique to website designers working in such industries as consumer products, retail, or hospitality, is unique for a full-service accounting firm,” said John Kmetz, Marketing and Business Development Consultant to REM.  “First of all, we wanted our homepage to set the stage. And we wanted that page to have a ‘wow’ factor that highlights only one message, not many, as our competitors do.  We wanted the site to be clean, crisp, and uncluttered—in a word, elegant.” 

Communications Manager Amy Frushour Kelly agrees.  “Accessibility is key.  There’s no point in having a site that’s difficult to use.  Following the lead of the homepage, we’ve featured content that’s to the point, an attractive, even breathtaking design, and most importantly, made it simple to navigate on a laptop or any hand-held device. We also wanted to personalize the site, and did so by featuring The Ende Collection, one of the largest repositories of vintage business machines in the New York metropolitan area.”  The Ende Collection is housed in REM’s Long Island office, and comprises well over 100 antique adding machines, typewriters, and other business machines, many of which are more than a century old.

Ellis Ende, Managing Partner, encouraged and supported the redesign from the start.  “We are not like any other accounting firm, so why should we look like any other firm?  Our partners and staff think straight, talk straight, and are always quick to respond to any client request.  This new website reflects that totally.” 

About Raich Ende & Malter Co. LLP (rem-co.com)

Raich Ende Malter (REM) is a regional accounting firm of distinction.  Headquartered in New York City, it is consistently ranked by independent industry surveys as one of the top 25 accounting firms in New York, one of the top 20 in the mid-Atlantic region, and one of the top 100 in the country.  REM provides forward-thinking audit, tax, and business advisory services to over a dozen industry sectors.  It serves businesses ranging from multi-generational family-run enterprises to publicly-traded companies, to organizations that serve the public good as not-for-profit organizations. REM has specialized practices in industries that are key to the economic makeup of New York City and its metropolitan region. These include real estate, financial services, manufacturing and distribution, and to those high-net-worth individuals residing in New York who help fuel and drive the local economy.  Through its affiliation with PrimeGlobal, REM maintains an international reach in 90 foreign countries.

Discriminatory plans that meet statutory requirements

The IRS issued a warning to plan sponsors whose plan designs satisfy numeric antidiscrimination tests, yet still have the effect of steering a disproportionate amount of benefits to highly compensated employees (HCEs). The IRS’s message: Simply satisfying numeric tests doesn’t guarantee that you’re complying with antidiscrimination regulations.

IRS findings and examples

In a recent announcement, the IRS reported seeing an uptick in plan designs that provide significant benefits to HCEs. Specifically, it noticed plans benefiting a group of non-highly compensated employees (NHCEs) who work few hours and receive little compensation. These plans tend to exclude other NHCEs from plan participation.

The IRS provided some examples of such designs. In one, the plan bases participation eligibility on job classification, and the classification formula covers a small group of low-pay or short-tenure employees. In another, coverage is available to only NHCEs who work on an as-needed basis and earn a meager salary each year.

Another example: Plans that require 1,000 hours to earn a year of service for vesting purposes, but not for allocation purposes. “In these plans,” the IRS explains, “the low paid or short service NHCEs receive an accrual or allocation, but don’t vest because they never complete a year of vesting service.” A variation on that theme is requiring 12 consecutive months of employment to satisfy a vesting requirement, allowing the NHCEs to vest, but only “in the very small plan benefit.”

The IRS also provides an extreme example in which a participant who earns only $200 in annual compensation receives a $200 profit sharing allocation — 100% of compensation. To allow the plan to clear the antidiscrimination test, an HCE earning $200,000 would receive a $50,000 benefit, or 25% of compensation.

IRS warning              

The IRS warns that these plan designs don’t pass muster. The relevant regulations require that all antidiscrimination rules be reasonably interpreted to prevent discrimination in favor of HCEs.

If you have any questions, contact Elaine Fazzari at efazzari@rem-co.com or (973) 267-4200, extension 5124.

© 2017

REM hosts mentoring meet-and-greet

Michelle Greco demonstrates software for Margaret Daniel and Mercedes Sanchez

Michelle Greco demonstrates software for Margaret Daniel and Mercedes Sanchez

Earlier this month, Raich Ende Malter & Co. LLP hosted a meet-and-greet with some of the young women who are being mentored through the Moxxie Mentoring Foundation.

Over the course of the evening, Mercedes Sanchez and Margaret Daniel, both accounting students at SUNY Old Westbury, listened to professional and personal experiences from the perspectives of women in the business world by REM partners Gigi Boudreaux and Christina Labita and matrimonial attorney Andrea B. Friedman. The young women also had the opportunity to tour REM's Long Island office, hosted by tax professionals Monica Lala and Michelle Greco. This was followed by a roundtable discussion over dinner.

Left to right: Michelle Greco, Margaret Daniel, Mercedes Sanchez, Monica Lala, Andrea B. Friedman, Christina Labita, Gigi Boudreaux

Left to right: Michelle Greco, Margaret Daniel, Mercedes Sanchez, Monica Lala, Andrea B. Friedman, Christina Labita, Gigi Boudreaux

Ms. Sanchez, a mother of four, juggles parenting with work and school. Ms. Daniel works a full-time bookkeeping job while studying for her master’s degree. Their roundtable conversation ranged from technical questions about taking CPA exams to concerns about balancing work and family.

"It’s a rewarding experience to be able to share our own personal experiences with these talented young women who have bright futures ahead of them," said Ms. Labita. "Accounting will provide them with many opportunities to explore."

REM is pleased to be able to facilitate these discussions in partnership with Moxxie as part of our continuing outreach to young women in accounting.

New addition to the Ende Collection

A new addition to the Ende Collection has us enthralled. The 1931 Remington Portable 3 is a special machine for many reasons, not the least of which is it keyboard action.

"It's an ingenious feature," says Bryan Kravitz of PhillyTypewriters.com. "Each key has a clockwork gear on it, kinda like a winged corkscrew for wine bottles. This translates the linear motion of the keys directly into rotational motion for the typebars, so they can rotate a full 180 degrees and lie totally flat when not in use." The result is a lighter machine that stands half the height of its peers. "It was the MacBook Air of its day."

What makes this machine truly special is the legend directly under the Remington logo:

FABRIQUEE AUX ETATS UNIS D'AMERIQUE

This American-made French typewriter is the first in the Collection. "It's the only one," says Ellis Ende, Managing Partner of REM and founder of the Collection. "This is a treasure. I didn't even know this model existed."

Click the images below to take a closer look.

6 Classic techniques for protecting your assets

If your professional, business, or other activities expose you to potential financial liability, asset protection should be a key component of your wealth planning efforts. After all, no matter how successful you are at building wealth, if you don’t protect your assets a large portion could be lost to a lawsuit or an unreasonable creditor’s claim.

Good defense

Everyone’s situation is different, but the following are six asset protection techniques that have benefited many higher-net-worth individuals:

  1. Outright gifts. Giving assets to your spouse, children or other family members is one of the simplest and most effective ways to protect those assets from your creditors. The downside is that you’ll lose control over the assets and any economic benefits associated with them.
     
  2. Tenancy by the entirety. If it’s authorized in your state, you and your spouse should hold title to your principal residence or other eligible property as tenants by the entirety (a special type of joint tenancy). This form of ownership insulates assets against your or your spouse’s individual creditors. It doesn’t, however, protect you from joint liabilities.
     
  3. Retirement plans. Qualified retirement plans — such as pension, profit-sharing or 401(k) plans — are surprisingly effective asset protection vehicles. Qualified plans generally are protected against creditors’ claims, both inside and outside bankruptcy. IRAs offer more limited protection. In bankruptcy, they’re exempt from creditors’ claims up to a specified threshold: currently, $1,283,025. (However, this limit doesn’t apply to rollovers from qualified plans to an IRA.) Outside bankruptcy, the level of creditor protection varies from state to state.
     
  4. Irrevocable trusts. By including “spendthrift” provisions in a trust, you can protect the assets against claims by your beneficiaries’creditors. These provisions prohibit beneficiaries from selling or assigning their interests in the trust (either voluntarily or involuntarily). You can also place the trust beyond the reach of yourcreditors, so long as you relinquish any interest in the assets. If, on the other hand, the trust is “self-settled” — that is, if you name yourself as a beneficiary — then the assets generally aren’t protected against your creditors, except as described below.
     
  5. Domestic asset protection trusts (DAPTs). Permitted in several states, these are self-settled, irrevocable spendthrift trusts that provide protection against your creditors even if you’re a discretionary beneficiary. To use a DAPT, you don’t necessarily have to live in a state with a DAPT law. But you’ll need to locate some or all of the trust assets in one of those states and use a local financial institution to administer the trust. The level of creditor protection varies by state. The main disadvantage of DAPTs is uncertainty over whether they’re enforceable in court, particularly when the grantor is a nonresident.

    A potentially less risky option is a “hybrid DAPT,” which is initially established for the benefit of your children or other third parties. Hybrid DAPTs enable your trustee to add you as a discretionary beneficiary later.
     
  6. Offshore trusts. If you want an even higher level of protection, consider offshore trusts, which are similar to DAPTs but are established in foreign countries with favorable asset protection laws. Typically, they’re irrevocable for a specified term, enabling you to retrieve the assets down the road when your risk may be lower. An ideal jurisdiction for an offshore trust is one that doesn’t recognize judgments from U.S. courts and whose laws place various administrative obstacles in the way of U.S. creditors attempting to collect debts there.

    Offshore trusts have a shady reputation as vehicles designed to hide assets or evade taxes. But when used correctly, they offer legitimate protection against unreasonable or excessive claims. If you establish an offshore trust or foreign account, you’ll need to file information returns. 

A legitimate tool

It’s important to note that asset protection planning is meant to protect you against unanticipated future claims. It provides you with legitimate methods of setting aside wealth for your heirs, deterring litigants and providing creditors with an incentive to settle.

Asset protection planning is not a tool for evading taxes or other obligations, hiding assets, or defrauding creditors. Indeed, fraudulent conveyance laws prohibit you from transferring assets with the intent to hinder, delay or defraud existing creditors or foreseeable future creditors. To ensure you don’t step over any lines, always work with reputable financial and legal advisors.

The sooner, the better

These six tips are only a few of the techniques available to protect and preserve wealth. Whichever strategies you choose, it’s critical to implement them as early as possible. If you wait until creditor claims are imminent, it’ll likely be too late.

If you have any questions, contact Roberto Viceconte at rviceconte@rem-co.com or (212) 944-4433, extension 2480.

© 2017

New legislation eliminates IRS penalty on employer reimbursements

Earlier this week, the Senate passed legislation that will eliminate a significant tax penalty on employers who bypass Affordable Care Act rules by reimbursing their employees for the cost of health insurance premiums. Previously, employers found in violation of the rule were subject to fines of up to $100 per day, per employee, maxing out at $36,500 a year.

The new legislation, endorsed by President Obama, will permit business owners to reimburse employees for the cost of individual health insurance premiums or medical visits.

For more in-depth information, please contact your Raich Ende Malter & Co. LLP tax professional.

2016 Post-election tax update

Any change in Presidential Administration brings the possibility, indeed the likelihood, of tax law changes and the election of Donald Trump as the 45th President of the United States is no exception. During the campaign, President-Elect Trump outlined a number of tax proposals for individuals and businesses. This update highlights some of the President-elect’s tax proposals. Keep in mind that a candidate’s proposals can, and often do, change over the course of a campaign and also after taking office. This update is based on general tax proposals made by the President-elect during the campaign and is intended to give a broad-brush snapshot of those proposals.  

At the same time, the end of the year may bring some tax law changes before President Obama leaves office. This update also highlights some of those possible changes with an eye on how late tax legislation could impact your year-end tax planning.

Campaign proposals

During the campaign, President-Elect Trump called for reducing the number of individual income tax rates, lowering the individual income tax rates for most taxpayers, lowering the corporate tax rate, creating new tax incentives, and repealing the Affordable Care Act (“ACA”) (presumably including the ACA’s tax-related provisions). The President-Elect, in his campaign materials, highlighted several goals of tax reform:

  • Tax relief for middle class Americans
  • Simplify the Tax Code
  • Grow the American economy
  • Do not add to the debt or deficit

President-Elect Trump also identified during the campaign a number of tax-related proposals that he intends to pursue during his first 100 days in office:

  • The Middle Class Tax Relief and Simplification Act: According to Trump, the legislation would provide middle class families with two children a 35% tax cut and lower the “business tax rate” from 35% to 15%.
  • Affordable Childcare and Eldercare Act:  A proposal described by Trump during the campaign that would allow individuals to deduct childcare and eldercare from their taxes, incentivize employers to provide on-site childcare, and create tax-free savings accounts for children and elderly dependents.
  • Repeal and Replace Obamacare Act: A proposal made by Trump during the campaign to fully repeal the ACA.
  • American Energy & Infrastructure Act: A proposal described by Trump during the campaign that “leverages public-private partnerships and private investments through tax incentives, to spur $1 trillion in infrastructure investment over 10 years.”

Individual income taxes

The last change to the individual income tax rates was in the American Taxpayer Relief Act of 2012 (“ATRA”), which raised the top individual income tax rate. Under ATRA, the current individual income tax rates are 10, 15, 25, 28, 33, 35, and 39.6%. During the campaign, President-Elect Trump proposed a new rate structure of 12, 25 and 33%:

  • Current rates of 10% and 15% = 12% under new rate structure.
  • Current rates of 25% and 28% = 25% under new rate structure.
  • Current rates of 33%, 35% and 39.6% = 33% under new rate structure.

This rate structure mirrors one proposed by House Republicans earlier this year. During the campaign, President-Elect Trump did not detail the precise income levels within which each bracket percentage would fall, instead generally estimating for joint returns a 12% rate on income up to $75,000; a 25% rate for income between $75,000 and $225,000; and 33% on income more than $225,000 (brackets for single filers will be half those dollar amounts) and “low-income Americans” would have a 0% rate. As further details emerge, our office will keep you posted.

Closely related to the individual income tax rates are the capital gains and dividend tax rates. The current capital gains rate structure, imposed based upon income tax brackets, would presumably be realigned to fit within President-Elect Trump’s proposed percent income tax bracket levels.

AMT and more

President-Elect Trump proposed during the campaign to repeal the alternative minimum tax (“AMT”). The last time that Congress visited the AMT lawmakers voted to retain the tax but to provide for inflation-adjusted exemption amounts.

During the campaign, Trump proposed to repeal the federal estate and gift tax. The unified federal estate and gift tax currently starts for estates valued at $5.49 million for 2017 (essentially double, at $10.98 million, for married individuals). Trump, however, also proposed a “carryover basis” rule for inherited stock and other assets from estates of more than $10 million. This additional proposal has already been criticized by some Republican members of Congress, while some Democrats have raised repeal of the federal estate tax as a nonstarter.  

Other proposals made by President-Elect Trump during the campaign would limit itemized deductions, eliminate the head-of-household filing status and eliminate all personal exemptions. President-Elect Trump also has called for increasing the standard deduction. Under Trump's plan, the standard deduction would increase to $15,000 for single individuals and to $30,000 for married couples filing jointly. In contrast, the 2017 standard deduction amounts under current law are $6,350 and $12,700, respectively, as adjusted for inflation.

Possible new family-oriented tax breaks were discussed by President-Elect Trump during the campaign. These include the creation of dependent care savings accounts, changes to the earned income tax credit, and enhanced deductions for child care and eldercare.

Health care

The Affordable Care Act (“ACA”) created a number of new taxes that impact individuals and businesses. These taxes range from an excise tax on medical devices to taxes on high-dollar health insurance plans. The ACA also created the net investment income (“NII”) tax and the Additional Medicare Tax, both of which generally impact higher income taxpayers. The ACA also made significant changes to the medical expense deduction and other rules that affect individuals. For individuals and employers, the ACA created new mandates to carry or offer insurance, or otherwise pay a penalty.

President-Elect Trump made repeal of the ACA one of the centerpieces of his campaign. During the campaign, the President-elect said he would call a special session of Congress to repeal the ACA. At this time, how such a repeal may move through Congress remains to be seen. Lawmakers could vote to repeal the entire ACA or just parts. Our office will keep you posted of developments as they unfold.

Business tax proposals

On the business front, President-Elect Trump highlighted small businesses, the corporate tax rate, and some international proposals during his campaign. This goes along with simplification, and the reduction, of taxes for small business.

Particularly for small businesses, Trump has proposed a doubling of the Code Sec. 179 small business expensing election to $1 million.  Trump has also proposed the immediate deduction of all new investments in a business, which has also been endorsed by Congressional tax reform/simplification advocates.

The current corporate tax rate is 35%. President-Elect Trump called during the campaign for a reduction in the corporate tax rate to 15%. He also proposed sharing that rate with owners of “pass-through” entities (sole proprietorships, partnerships, and S corporations), but only for profits that are put back into the business.  

Based on campaign materials, a one-time reduced rate would also be available to encourage companies to repatriate earnings of foreign subsidiaries that are held offshore. Many more details about these corporate and international tax proposals are expected.

Year end 2016

More immediately, the calendar is quickly turning to 2017. Congress will meet for a “lame duck” session and is expected to take up tax legislation. Exactly what tax legislation Congress will consider before year end remains to be seen. Every lawmaker has his or her “key” legislation to advance before the year end. They include:

  • Legislation to renew some expiring tax extenders, especially energy extenders.
  • Legislation to fund the federal government, including the IRS, through the end of the 2017 fiscal year.
  • Legislation to enhance retirement savings for individuals.
  • Legislation to help citrus farmers, small businesses and more.

Some of these bills, if passed and signed into law, could impact year-end tax planning. The expiring extenders include the popular higher tuition and fees deduction along with some targeted business incentives.  If these extenders are renewed, or made permanent, our office can assist you in maximizing their potential value in year-end tax planning.

Another facet of year-end tax planning is looking ahead. President-Elect Trump has proposed some significant changes to the Tax Code for individuals and businesses. If these proposals become law, especially any reduction in income tax rates, and are made retroactive to January 1, 2017, your tax planning definitely needs to be reviewed. Our office will work with you to maximize any potential tax savings.

Working with Congress

When the 115th Congress convenes in January 2017, it will find the GOP in control of both the House and Senate, therefore allowing Trump to move forward on his proposals more easily. It remains to be seen, however, what compromises will be necessary between Congress and the Trump Administration to find common ground. In particular, compromise will likely be needed to bring onboard both GOP fiscal conservatives, who will want revenue offsets to pay for tax reduction, and Senate Democrats, who have the filibuster rule to prevent passage of tax bills with fewer than 60 votes.  Beyond considering tax proposals one tax bill at a time, it remains to be seen whether proposals can be packaged within a broader mandate for “tax reform” and “tax simplification.”

The information generally available now about President-Elect Trump’s tax proposals is based largely on statements by him during the campaign and campaign materials. President-Elect Trump will take office January 20, 2017. Between now and then, more details about his tax proposals may be available. Please contact our office if you have any questions.

Congratulations to REM's winning basketball team

REM CHAMPIONS 2016.jpg

Last night, the REM Broadway office’s own basketball team, LIFO the Party, won their league championships. We are very proud and happy that we became league champions in our first year as a team, and we look forward to many more championships.

Thanks to Coach Neal Kilbane for allowing/approving the team’s participation in the league. As AJ DaPonte points out, “Neal was there from warmups of the first game through the championship game’s final whistle!” Thanks also to Erica Collins, Selma Yilmaz, and Elizabeth Froemke, as well as the significant others of some of the team members, who showed their support from the stands during the season.

The league was organized through Zog Sports. Regular season games began in October and were played at Xavier High School on West 16th Street every week on Thursday night, through Thanksgiving week, culminating in a one-day playoffs and championship Thursday, December 1. LIFO also won second place in the regular season standings.

Team roster, in order of approximate percentage of games attended: Daniel Perez; Charles Hunter; Andrew Statsky; Raymond Batista; Arthur J. “A.J.” DaPonte; Alicia McGlynn; Victor “Dutch” Dennis; Ross Lorber; Jackie Ammirato; Amanda Rinaldo; Victor Le; Jennifer Burroughs; Monika Andrzejkiewicz; Paul Ciaramella; Carlos Savinon; Brian Glavotsky; Keith deVisser; Daeil Yu.

C corp vs. S corp: is it time for you to make the switch?

The Protecting Americans from Tax Hikes (PATH) Act of 2015 accomplished more than just extending certain tax breaks. It also made some taxpayer-friendly provisions permanent — including the shortened recognition period for companies that convert from C corporation to S corporation status. This change is causing many manufacturers and distributors to re-evaluate their corporate status.

After weighing the pros and cons, many companies are electing Subchapter S status to gain enhanced flexibility in business decisions and to lower taxes. Here are some important issues to consider before you convert.

Tax considerations

C corporations pay taxes twice. First, they’re charged corporate-level income taxes. Shareholders then pay tax personally on C corporation distributions and dividends. But S corporations are flow-through entities for tax purposes. This means that income, gains and losses flow through to the owners’ personal tax returns. S corporations generally aren’t taxed at the corporate level.

However, double taxation of C corporations may become a major issue when the owners decide to sell assets or transfer equity. Historically, if a company elected Subchapter S status and sold assets or transferred equity any time within a 10-year “recognition period,” it was charged corporate-level tax on any built-in gains that occurred while the company was a C corporation. Any gains that occurred after making the S election passed through the owners’ personal tax returns.

Under the PATH Act, the recognition period has been permanently shortened to five years. If a business sells assets or stock within the recognition period, only the appreciation in value from the date of the S corporation election will be exempt from corporate-level tax.

So it’s important to establish the company’s fair market value at the conversion date and to allocate it to the company’s assets. This enables taxpayers to quantify which portion of the gain should be taxed as C corporation gain and which portion should be taxed as a flow-through gain to shareholders.

Subchapter S qualifications

For businesses contemplating a Subchapter S election, there’s no time like the present to start the clock on the five-year recognition period. But not every business qualifies for this election. It’s available to only domestic corporations that use a calendar fiscal year and offer just one class of stock (though differences in voting rights are permitted). Qualifying businesses also must have no more than 100 shareholders — including individuals, certain trusts and estates but excluding partnerships, corporations, foreign individuals and entities, and ineligible corporations.

Beware, too, that Subchapter S status restricts how the company distributes cash and liquidates assets. All payouts must be made to shareholders on a pro rata basis. If these rules aren’t followed or if the company merges with another entity that doesn’t qualify, the company will lose its Subchapter S status.

Potential pitfall

Although S corporations are required to make pro rata distributions to shareholders, they aren’t required to distribute income to shareholders. So shareholders who lack control over making distributions may find themselves required to pay personal-level taxes on S corporation income, regardless of whether the company distributed any cash to cover those tax liabilities.

The annual tax burden can be substantial for highly profitable S corporations — and even more substantial for high-income taxpayers. As a courtesy, most S corporations pay enough distributions to cover shareholders’ tax obligations. But there’s no guarantee of distributions for shareholders who lack control over the business.

A tough choice

Before electing to S status, your business must obtain the approval of all shareholders. Although there are many benefits to making the switch — especially now that the recognition period to avoid corporate-level capital gains tax has been permanently shortened — it’s not a prudent option for every business. Your legal and tax advisors can help determine the right choice for your circumstances.

If you have any questions, contact Thomas Turrin at tturrin@rem-co.com or (212) 944-4433, extension 2404.

© 2016

Barry Wechsler quoted in Long Island Business News

Barry Wechsler, Partner-in-Charge of REM's Not-for-Profit practice, was interviewed in the 9/23-29/2016 edition of the Long Island Business News. Full text of the article below.

To contact any REM partner or principal for an interview or quote, please contact Amy Frushour Kelly at akelly@rem-co.com.

NONPROFITS BRACING FOR MORE DISCLOSURE
New rules give more info to donors; could spark problems

By Claude Solnik

The Financial Accounting Standards Board has issued new financial reporting rules for nonprofits that should provide more information to donors, benefiting some groups and leading to potential problems for others. Lee Klumpp, director of BDO USA's Institute for Nonprofit Excellence, called this the ''biggest change to nonprofit financial reporting in more than 20 years." Manhattan and Melville-based accounting firm Marcum called the changes a "significant development for the industry," which last saw major changes in 1993. The new format for reporting takes effect for nonprofits with fiscal years beginning after Dec. 15, 2017. "They want to make more user-friendly financial statements," said Barry Wechsler, partner in charge of the nonprofit group at Raich Ende Malter & Co. in Melville and Manhattan: "I think it's going to make it more difficult for smaller nonprofits to report." While the Securities and Exchange Commission increased reporting requirements on public companies, nonprofits continued to disclose very little.

“It wasn’t providing the reader with enough meaning about what’s really going on behind the organization,” Barry Sackstein, a director in charge of not-for-profit and healthcare organizations at Marcum, said of nonprofits’ financial statements. “This is supposed to help the clarity of that.”

“It wasn’t providing the reader with enough meaning about what’s really going on behind the organization,” Barry Sackstein, a director in charge of not-for-profit and healthcare organizations at Marcum, said of nonprofits’ financial statements. “This is supposed to help the clarity of that.”

Groups of all sizes will now have to explain what portion of their budget is spent on programs, management and fundraising, much the way healthcare organizations must today.

"I think it will change where donors spend their money," Sackstein said. "It will break it down to a level comprehensible to someone who is an informed reader."

For the first time, donors will have a better sense of who's spending how much where, sending up red lags for some and leading to rewards for others.

Barry Wechsler

Barry Wechsler

"It will basically allow people to determine whether they are giving to a not-for profit spending all its. Money on programs compared to one spending more money on general administrative and fundraising," Wechsler said.

Sackstein said this could be ''helpful and it can be painful for the organization" if it must spend a lot to raise a little more.

Groups also must show how they plan to meet their cash needs for their fiscal year, potentially leading some groups, facing uncertainty, into bigger trouble.

"Some organizations have already had enough information to respond to these," Sackstein said. "For organizations that-don't really know where their next dollar is coming from, it will have an impact. They're going to have to say how they'll survive for the next year."

Groups that can't show where their money will come from could face a "going concern" issue, indicating they may not be able continue past that year.

Nonprofits also must disclose if any of their endowment funds are underwater, defined as having less than the principal that a donor asked the group to maintain.

''We weren't really able to see that in the past," Sackstein said. "This is going to be a required disclosure."

This could lead to additional questions such as whether a group must replenish underwater funds.

''You may have donors saying, 'I contributed $2 million. What's it worth today?'" Sackstein said. "Some things can be helpful for an organization. They can also be hurtful."

Nonprofits sometimes take money from donations to meet emergency or immediate needs after they face unanticipated expenses, potentially leaving some funds under water.

If the state finds money wasn't spent appropriately, it may ask the nonprofit to return funds.

"If they give back that money, where do they get it from?" Sackstein said. ''Most of the time they don't have the arsenal of cash lying around. So they take it from donor-restricted dollars."

He also talked about an organization that derived a great deal of income from invested donations. After the stock market tanked, that stopped flowing in, forcing the group to take funds from other sources.

"They didn't have investments throwing off this income to support the losses," Sackstein said. "That may be the discussion organizations have, that they have to look at these endowments."

While some see more information as better, some nonprofits said it's already possible to get a wide range of information from income tax returns and groups such as GuideStar.

"If you're making large-scale grants, you have the tools you need,"' said Darren Sandow, executive director of the Hagedorn Foundation in Roslyn. 'We have tools, like GuideStar. We can look at anybody's 990s."

And he questioned whether donors who make small gifts would even seek additional information.

"People give because they want to support something they believe in. It's typically connected through their heart," Sandow said. "If somebody wants to give money to a dog shelter because they like dogs and cats, do you think they'll go through the Humane Society's 990s to give a $25 check?"

Although the new regulations have just been approved, accountants said most nonprofits aren't yet dealing with them.

Klumpp said, "Organizations should strongly consider acting early on the new guidance," rather than waiting until the deadline nears.

''This is an education process," Wechsler said. "It's going to be my job to start educating our nonprofits about the changes in these rules."

He plans to sit down .with his clients and make presentations to their boards about what new financial statements should look like.

''The boards have to be involved in understanding what's in the financials," Wechsler said. ''They need to be educated the way the clients need to be."

Klumpp said, "Boards count on financial statements and absolutely need to be a part of the process" of implementing the new reporting.

"It may prove to be a test of how well they can educate readers of their financial statements on what has changed and why," Klumpp said of groups.

Whether the new formats will provide more insight to donors depends, in part, on whether they look for it and use it in making decisions.

''My gut feeling is it's useful information," Wechsler said. "Even the individuals making the contributions have to be educated on this. It's new for everybody."

Sackstein said this is part one of a two-part implementation of changes with the next phase still in the works.

''It's supposed to be simplifying the financials," Sack stein said. "I would like to see them take things out that not-for-profit readers don't understand."

Nonprofits, for instance, must break down investments into various levels, which can be confusing, he added.

- CLAUDE.SOLNIK@LIBN.COM

Prepare for major changes to federal rules on employee pay and benefits

One of your most dreaded tasks is probably managing human resources (HR). The rules are ever-changing and becoming increasingly complex. Here are two major developments related to the federal rules governing employee pay and benefits that employers should be ready for this year.

Complying with new ACA requirements

The Affordable Care Act (ACA) requires applicable large employers (ALEs) to offer their full-time employees and their dependents minimum essential coverage that is affordable and provides minimum value. An ALE is defined as one having 50 or more full-time and full-time equivalent employees.

The ACA requirements are set to gradually unfold over several years to give companies time to ramp up their health care coverage. New reporting requirements that should be on an ALE’s radar for 2016 include two new forms:

Form 1095-C, “Employer-Provided Health Insurance Offer and Coverage.” Employers must send copies of this form (similar to Form W-2, “Wage and Tax Statement”) to both the IRS and full-time employees. It reports the following information, for each full-time employee, broken down by month:

  • Details about the type of coverage offered to each employee,
  • Whether the employee was enrolled in the plan,
  • The employee’s share of the lowest-cost self-only minimum value coverage, and
  • Whether the affordability safe harbor or other transition relief applies.

Form 1094-C, “Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns.” This form is similar to a Form W-3,“Transmittal of Wage and Tax Statements.” To complete an authoritative transmittal on Form 1094-C, employers must report:

  • Whether coverage was offered to at least 70%  of the organization’s full-time employees in 2015 (or 95% of its full-time employees in 2016 and beyond),
  • The total number of 1095-C forms the organization issued,
  • The number of full-time employees and total number of employees by month,
  • Information about members of the aggregated employer group (if applicable), and
  • Whether the organization qualifies for transition relief.

These forms are due to the IRS by February 29, 2016 (or March 31, 2016, if filing electronically) for the 2015 tax year. Employee statements must be furnished no later than February 1, 2016.

A potential pitfall may occur when employers assume that someone else is handling their ACA compliance. But the responsibility ultimately lies with the company, not its audit firm, benefits provider, insurer, payroll company or tax preparer. If you want outside assistance, you need to specifically ask your advisor for it.

Paying additional overtime

The U.S. Department of Labor (DOL) sets federal labor guidelines that apply to most public and private sector employees. On June 30, 2015, the DOL proposed changes to the overtime rules under the Fair Labor Standards Act (FLSA) that would make an estimated 5 million more workers eligible for overtime pay.

When employees work more than 40 hours per week, they’re entitled to overtime pay equal to 1.5 times the usual pay rate. Under the current rules, white-collar employees are exempt from overtime pay if they meet these three requirements: First, they must be paid a predetermined and fixed salary. Second, they must be paid more than a specific salary threshold, currently $455 a week ($23,660 for a full-year worker). And, third, they must primarily perform executive, administrative, or professional duties, as defined in DOL regulations.

Under the DOL’s proposed revisions, the salary threshold for the white collar exemption would increase to approximately $970 a week ($50,440 for a full-year worker) and would be adjusted annually. 

When the comment period ended on September 4, the DOL had received nearly 150,000 responses from concerned stakeholders. The DOL could take several months to issue a final rule, which may include one-time or gradual increases in the proposed salary thresholds. Or the proposal could be derailed indefinitely, causing significant uncertainty for HR professionals and employees.

Seeking outside help

To simplify matters, some smaller manufacturers and distributors opt to outsource all of their HR functions. Doing so allows management to focus on what they do best — making quality products and delivering them to customers. 

Tatz-Howard

If you have any questions, contact Howard Tatz at htatz@rem-co.com or (516) 228-9000, extension 3204.

Raich Ende Malter & Co. LLP and Stein deVisser & Mintz, P.C. announce merger

Raich Ende Malter & Co. LLP (REM) and Stein deVisser & Mintz, P.C. announced today the merger of the two firms, effective November 1, 2016. The name of the combined firm will be Raich Ende Malter & Co. LLP.

“We are always looking to merge with accounting firms that are not only located in the New York metropolitan area, but also, and more importantly, complement or expand our current service offerings or the industries we serve,” noted Ellis Ende, Managing Partner of REM.  

Cornelius V. Kilbane Jr., the Managing Partner of REM’s New York Office and the one who orchestrated the merger, said, “It is an honor to have Stein deVisser & Mintz join our firm.  With its exemplary tax and consulting practice focused primarily on the needs of those high net worth individuals who fuel and drive our local New York economy, Stein deVisser & Mintz are our idea of a perfect fit.”

Keith J. deVisser, Managing Partner of Stein deVisser & Mintz, concurred.  “Our merger with REM, a firm consistently ranked amongst the top regional accounting firms in the New York metropolitan area, will offer our clients with a larger menu of services and resources. The merger provides our clients with access to more specialized professionals who have a strong national and international reach.  At the same time, it offers more opportunities to our employees.  Indeed, for our clients and for us, the merger is nothing less than win-win.”  

On a combined basis, revenues will exceed $60 million, and the firm will have approximately 50 partners and 200 employees, thereby making REM one of the top ten regional accounting firms in New York. 

About Raich Ende Malter & Co. LLP

Raich Ende Malter (REM) is a regional accounting firm of distinction.  Headquartered in New York City, it is consistently ranked one of the top 25 accounting firms in New York, one of the top 20 in the mid-Atlantic region, and one of the top 100 in the country.  REM provides forward-thinking audit, tax, and business advisory services to over a dozen industry sectors.  It serves businesses ranging from multigenerational family-run enterprises to publicly-traded companies, to organizations that serve the public good as not-for-profit organizations. REM has specialized practices in industries that are key to the economic makeup of New York City and its metropolitan region. These include real estate, financial services, manufacturing and distribution, and wealth management for high-net-worth individuals residing in New York.  REM is an independent member of PrimeGlobal, a worldwide network of independent accounting and business advisory firms in 90 countries, with 13,000 professionals.  The combined worldwide revenue of independent members firms is $2 billion.

About Stein deVisser & Mintz, P.C. 

Founded in 1985, Stein deVisser & Mintz, P.C. is a full service accounting firm located in New York.  Aside from providing assurance, tax, and business advisory services to privately-held businesses and not-for-profit organizations, it offers a full menu of financial, retirement, and estate planning services to high net worth and professional individuals, and to their families.  As a boutique firm, it built its reputation by working closely with its clients to maximize financial goals and minimize liabilities.

IRS revisits discount techniques for estate planning

The Treasury Department has recently issued Proposed Regulations under Internal Revenue Code Section 2704 that, if enacted as written, would impact the use of discount techniques for estate planning purposes in the context of intra-family transfers of family controlled entities. These discounting techniques have been a staple of estate planning for many years and have been on the radar of the Treasury Department just as long. The Regulations affecting the discounts would become effective 30 days after publication.

These new Regulations are proposed, and there is a commentary period for public response. A number of practitioners have raised the issue that these new regulations may exceed the scope of authority of the Treasury, as they go against established case law. As there is a degree of uncertainty as to the final outcome, anyone contemplating estate planning should be aware of this new situation and should consult their team of professionals.

If you have any questions, contact Roberto Viceconte at rviceconte@rem-co.com or (212) 944-4433, extension 2480.

© 2016

REM ranked among top 100 firms

Raich Ende Malter & Co. LLP is pleased to announce our ranking among the top 100 accounting firms in America, according to INSIDE Public Accounting. The firm has maintained a strong presence on IPA lists for the better part of a decade.

The ranking is based on IPA's Survey and Analysis of Firms. Well over 500 accounting firms participate in this annual survey, providing in-depth financial and operational data to be compiled into the annual firm rankings released by IPA during August of every year. The IPA Top 100 is widely considered the gold standard for growth and profitability metrics within the accounting profession.

As always, we find our inclusion here to be a source of pride, and we look forward to 2017.

Craig Kanzel and Barry Sorkin promoted to partner

Craig Kanzel

Craig Kanzel

Regional accounting and consulting firm Raich Ende Malter & Co. LLP (REM) announced today that Craig Kanzel and Barry Sorkin have joined the partnership.

Kanzel, who joined the firm in 2015 as a Principal of Quality Control, shall now serve as the Partner of the firm’s Quality Control Department, which is responsible for ensuring compliance with all relevant professional standards firmwide as they relate to the attest practice. 

Barry Sorkin

Barry Sorkin

Sorkin, formerly an Audit Principal who joined the firm in 2003 as an intern, will continue to offer assurance and consulting services to his ever-growing client base within the real estate, distribution, logistics, and retail industries.

“Craig and Barry are CPAs of the highest caliber and are an inspiration to us all here at Raich Ende Malter,” said Ellis Ende, Managing Partner of the firm.  “They are both team players whose concern is consistently that of helping our clients succeed, and not just our firm.”

About Raich Ende Malter & Co. LLP (rem-co.com)

Raich Ende Malter (REM) is a regional accounting firm headquartered in New York City.  Consistently ranked by independent industry surveys as one of the top 25 accounting firms in New York, one of the top 20 in the mid-Atlantic region, and one of the top 100 in the country, REM provides forward-thinking audit, tax, and business advisory services to over a dozen industry sectors.  It serves businesses ranging from multigenerational family-run enterprises to publicly-traded companies, to organizations that serve the public good as not-for-profit organizations. REM has specialized practices in industries that are key to the economic makeup of New York City and its metropolitan region. These include real estate, financial services, manufacturing and distribution, and to those high-net-worth individuals residing in New York who help fuel and drive the local economy.  Through its affiliation with PrimeGlobal, REM maintains an international reach in 90 foreign countries.

For further information, please contact Amy Frushour Kelly at akelly@rem-co.com.

Section 1231: the best of both worlds

Most owners and developers know that the sale of a business asset, including real estate, can have significant tax implications. The tax effects generally come down to whether the sale results in a gain or a loss. Ideally, gains would be treated as long-term capital gains, subject to lower tax rates, and losses would be considered ordinary losses, which could be applied to offset ordinary income. Section 1231 of the Internal Revenue Code (IRC) permits just such advantageous treatment — the best of both worlds — for certain types of property in certain circumstances.

Eligible property

Sec. 1231 generally applies to depreciable property used in a trade or business that’s held for more than one year. A sale or exchange of property held mainly for sale to customers isn’t a Sec. 1231 transaction. On the other hand, property used to generate rents is considered to be used in a trade or business.

Notably, the IRS has taken the position that real property purchased or constructed for use in a trade or business qualifies for Sec. 1231 treatment even if it was never placed in service but instead was sold — as long as the property was held for more than a year, running from the purchase date to the sale date. In other words, property doesn’t have to be placed in service to be considered property used in a trade or business.

Treatment of Sec. 1231 gains and losses

To determine the treatment of Sec. 1231 gains and losses, you combine all of your Sec. 1231 gains and losses for the year. If you have a net Sec. 1231 loss, it’s an ordinary loss. Not only can such a loss be used to offset your ordinary income, but you’re also not subject to the normal $3,000 limit per year limitation on how much of the loss can be used against ordinary income. Plus, the loss could give rise to a net operating loss that can be carried back or forward.

If you have a net gain, it’s considered ordinary income up to the amount of your nonrecaptured Sec. 1231 losses from previous years. The remainder, if any, is long-term capital gain that can offset other capital losses from sales of non-Sec. 1231 property.

The recapture issue

As suggested above, the benefits of long-term capital gains treatment might not be available if you had a nonrecaptured Sec. 1231 loss in the prior five years. That means that, for every year in the last five in which you have a net Sec. 1231 gain, you must “look back” to determine whether you had an aggregate net Sec. 1231 loss. You have a nonrecaptured loss if the total net Sec. 1231 losses exceed the total Sec. 1231 gains for the prior five years. Real property may also be subject to depreciation recapture under Sec. 1250.

A complicated matter

While the benefits of Sec. 1231 transactions are straightforward and clear, the applicable rules and their potential interaction with other provisions of the tax code are anything but. Your financial advisor can help you decipher the proper timing and planning to get the best of both worlds.

If you have any questions, contact Jodi Bloom-Piccione at jbloom@rem-co.com or (516) 228-9000, extension 3207.

© 2016

Business owners: is it time for Section 199?

The Section 199 tax deduction was first introduced with the American Jobs Creation Act of 2004. It was intended to primarily benefit America's manufacturing industry. Indeed, sometimes the tax beak is called the "manufacturers' deduction" or the "domestic production activities deduction." But, helpfully, eligibility for the break is broad enough to include many other types of businesses.

Among the primary requirements for the deduction is that your company regularly perform “qualified production activities.” These are generally defined as tasks related to manufacturing, producing, constructing, growing or extracting property “in significant part” within the United States. If any of that sounds familiar, it may be time for you to check out Sec. 199.

Identifying and gathering

To get started, you’ll need to identify and document your qualified production activities, and then determine how much income you’ve derived from them. Doing so will require gathering gross receipts from the lease, rental, exchange or other transfer of qualifying production property minus out-of-pocket expenses, such as materials costs. Eligible items include tangible personal property, computer software and sound recordings used in qualified production activities.

Having done all of this, you may then be able to claim a deduction equal to 9% of the lesser of either your net income derived from your qualified production activities or your entire taxable income for the year. There is, however, an important caveat: The deduction can’t exceed 50% of the W-2 wages paid to employees during the calendar year that are allocable to domestic production gross receipts.

Crunching the numbers

Let’s take a hypothetical look at the Sec. 199 deduction and how it might benefit a business. Say your company nets $800,000 in taxable income on $4 million in gross receipts in 2016, entirely from qualified production activities. Assuming your W-2 wages paid are adequately substantial, the deduction at the 9% rate will be $72,000, for a federal tax savings of over $25,000 based on a 35% rate. That would presumably be a nice cash flow boost.

Perhaps the biggest challenge of the Sec. 199 deduction, and one that many companies underestimate, is the administrative burden that may be associated with claiming it. You’ll need to meticulously track and maintain documentation for your business’s qualifying production activities.

Getting everything in order

If you’re intrigued by the Sec. 199 deduction, please call us. Not only are the administrative requirements challenging, but the calculations involved often get complex as well.

If you have any questions, contact Fred Steinmann at fsteinmann@rem-co.com or (212) 944-4433, extension 2468.

© 2016