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Smart Phones and iPads and Video Conferencing, Oh My! It’s no secret that our personal and professional lives have changed dramatically in recent years, driven by technology. The accounting industry is no exception. There’s been a significant shift in the way we serve our clients at Gilmore Jasion Mahler, LTD. For many of the Firm’s business and individual clients, paper tax returns are but a memory. The documents are now often sent digitally, provided via email or on a flash drive.  

Another major shift has come for some of our clients including physician offices and other healthcare entities that rely on us for their accounting and bookkeeping needs. Gilmore Jasion Mahler’s cloud-based client portal GJM Connect saves them time and headaches.

“They are able to connect with us in real time 24 hours a day, 7 days a week. It’s helping improve efficiencies on their end and is as easy as banking or shopping online,” says GJM Partner Linda Hillstrom.

It’s also secure and convenient. GJM Connect offers clients round-the-clock access from any internet connection in the world.  The online portal allows for file sharing and accounting/bookkeeping work. Encryption, secure password protection and other measures bring heightened security.

Technology has also created a shift in the way Gilmore Jasion Mahler staff members do their work. Working from home and remote locations has never been easier. Video conferencing allows for more face to face time between GJM’s Maumee and Findlay offices. Cloud-based document storage has done away with the need for large filing cabinets, allowing access to archived documents with a click of the mouse.

Online communication helps clients and the public stay informed on tax law changes and other timely information that may affect their businesses. Digital newsletters, email alerts and social media messaging from GJM bring industry-specific information to those in manufacturing & distribution, construction, real estate & utilities and healthcare. Additional digital newsletters are specific to litigation and valuation and general tax information.

It truly is a whole new Technicolor world. We’re definitely not in Kansas, anymore, and that’s a good thing for the staff and clients of Gilmore Jasion Mahler, LTD.

Learn more about GJM Connect and our cloud-based accounting services or sign up for one of our industry-specific newsletters.

The Small Business Administration (SBA) has released the application for Paycheck Protection Program (PPP) loan forgiveness. The 11-page application includes instructions and worksheets to guide businesses through the process. The application and instructions also clarify some requirements and options for businesses requesting forgiveness of their PPP loans, including:

• The FTE (full time equivalent) calculation is based on a 40-hour work week.  No person can be considered greater than a 1.0 FTE.  For those employees working less than 40 hours per week, the calculation can be based on a 40-hour week rounded to the nearest 0.1 or they can all be considered as .5 FTE’s. 
• Businesses can calculate their payroll costs through an “alternative payroll covered period” that aligns with their own payroll schedule. This “alternative” period is only available to borrowers with a bi-weekly (or more frequent pay period like weekly), not semi-monthly or monthly pay periods. 
• There’s a new exception from the loan forgiveness reduction for businesses that have made a (1) written offer to rehire workers which was rejected by the employee and (2) any employees who during the covered period (a) were fired for cause, (b) voluntarily resigned, or (c) voluntarily requested and received a reduction of their hours.   
• FTE Reduction Safe Harbor if FTE employee levels are restored to February 15^th staffing levels by no later than June 30, 2020.

Further guidance is expected soon to help businesses and their lenders navigate the application for loan forgiveness. You can access the SBA PPP loan forgiveness application here. We will be sure to communicate further updates as more guidance becomes available.

Established in 1996, Gilmore Jasion Mahler, LTD (GJM) is the largest public accounting firm in Northwest Ohio, with offices in Maumee and Findlay. Locally owned, GJM offers cloud-based accounting and provides comprehensive services including assurance, business advisory, tax, risk advisory, healthcare management and outsourced accounting. The Firm’s professionals specialize in industries including construction & real estate, healthcare, manufacturing & distribution and utilities.

With the Internal Revenue Code stretching to more than 70-thousand pages, everyone agrees that tax reform is an attractive idea, right? Economists generally believe that simplifying the code encourages growth in the overall economy by reducing the costs of compliance with the law. Both President Trump and leadership in the 115^th Congress have said that this is a priority. What would a modern tax reform look like, and why is the affordable housing industry so nervous about it?  Are they right to be?

Tax reform generally refers to some combination of reducing tax rates and simplifying the code. Usually this takes the form of eliminating certain deductions and credits, which have been added to the code over the years in various attempts to incentivize actions that are helpful to the economy or to aid a disadvantaged group. As a result, tax reform is always a heavier lift politically than expected. While everyone will benefit from the lower rates, some groups will find that valuable deductions they relied on for prior decisions are being discussed for removal from the code – and some will find that the lost deductions are a bigger financial hit than the lower rates provided in savings. With 70-thousand pages of code, there are a lot of groups that fall into this category.

The last time we saw significant tax reform at the federal level was the Tax Reform Act of 1986 that was signed by President Ronald Reagan. So although the code is long and complex and it would be great if it were simpler, a lot of inertia exists behind the status quo.

President Trump’s proposed tax reform would make a variety of changes to individuals’ income taxes, including trimming the number of tax brackets from seven to three, and reducing the highest rate from 39.6% to 35%. Corporate tax rates would be cut from a maximum of 35% to 15%. It is this proposed reduction in the corporate rate that has some surprising potential to impact the affordable housing industry and development plans that are underway or still being priced by the market. How big of a concern is this in the affordable housing industry? As a CPA and advisor specializing in this area, I speak with decision-makers just about every day who are watching the tax reform discussion very closely.

So, how exactly would reducing the corporate tax rate affect the development of affordable housing projects? Let’s look at a simple example of a project developed under the competitive, 9% low-income housing tax credits (LIHTC) that make up the majority of LIHTC development in Ohio.

• In 2016 the Ohio Housing Finance Agency (OHFA) awarded a total of $32M in annual credits to 42 projects.
• Credits run for 10 years but projects are required to operate as affordable housing for 15 years.
• For simplicity let’s say a typical project receives $720,000 in annual credits, which the investor can claim on its tax return.
• Since it’s a 9% credit, the basis required to produce this amount of credit is about $8M ($8M x 9% = $720,000).
• Assuming the whole $8M is made up of a building that will be depreciated over 27.5 years, the project will deduct depreciation expense of $291,000 per year, which the investor can deduct on its tax return. There would be other deductible losses as well, but this will keep our example simple.

So, the benefit to the investor is made up of two parts: the credits themselves, which are a dollar-for-dollar reduction in the investor’s tax liability, and the ability to deduct depreciation and other expenses, which reduce the investor’s taxable income (not its tax liability).

A lot of factors go into determining the amount an investor is willing to invest in a project, but here’s a simplified look at an $8M project funded with 9% credits, with investors hoping to see a 6% return. The first column is under current tax law, the second one reflects the impact of tax reform reducing rates from 35% to 15%.

Sorry for all the numbers. We accountants love numbers. The highlighted areas above really tell the story here. The total return to the investor drops by almost a million dollars under this scenario and required gap financing increases by $563,000. Gap financing represents additional grants, loans, or deferred developer fees that need to be obtained in order for the project to go forward at all.

So this would present a major challenge to developers of affordable housing if it comes to pass. How likely is this major tax reform?

In 2017? This accountant’s opinion: not going to happen. The 1986 Tax Reform Act took 10 months to get through Congress from the time full legislation was reported out of the House Ways and Means Committee to the time it reached President Reagan’s desk for signature. Even the Affordable Care Act took about 9 months from the initial introduction of legislation to the time it reached President Obama’s desk, despite Democratic supermajorities in both chambers of Congress.

While the Ways and Means Committee has held hearings on the subject of tax reform in May, and there are probably a number of proposals being debated behind the scenes, nothing I’ve heard suggests that anyone is ready to bring what will doubtless be a controversial bill forward any time soon. The Senate is preoccupied with debating the American Health Care Act, the ongoing confirmation of Administration appointees, and (of course) Russia. Until the Senate’s docket clears a bit, the House will not vote on anything controversial that will be months away from being taken up by the Senate, if at all.

What about 2018? That’s tougher to predict. Conventional wisdom says that if the Senate cleared the decks by the end of the year, then pushing through tax reform over the course of 9 or 10 months would have the final votes taking place on the eve of the November 2018 elections, which no one from either party would want to do. In spite of this, a consensus seems to be forming that it’s going to happen. One theory in circulation is that the run up in stock prices we’ve seen since the election represents the market pricing in a high likelihood of major tax reform. In that line of thinking, if it starts to look like reform won’t happen, a major correction to the market would occur, and a recession would become likely. While the two parties have shown little inclination to cooperate with each other on anything so far during President Trump’s Administration, perhaps avoiding a recession would be enough incentive to get the two sides to find some common ground and pull together.

Will this be enough to tip the scales in favor of moving forward with tax reform in the near term? Until the parties begin to show some cooperation and some attempts to find common ground, I’ll remain skeptical of the idea that major tax reform is imminent and will be enacted in what would be an election year. But the political world has made a habit of making conventional wisdom look silly over the past year. For the good of the nation’s economy I hope Congress defies the conventional wisdom one more time and is able to deliver some much-needed major tax reform.

As for affordable housing, in the meantime, pay attention to the House Ways and Means Committee’s Subcommittee on Tax Policy. Representative Pat Tiberi of Ohio’s 12^th District is a key member and is a reliable ally of affordable housing in Ohio. But Representative Tiberi is only one member. The message to all of Congress should be that major tax reform is an idea whose time is come – but it needs to be done carefully so as not to jeopardize the industry’s ability to develop safe, decent and affordable housing.

J Kenneth Saggese is a partner in the Audit Department of Gilmore Jasion Mahler. With the Firm since 2006, Ken is a member of GJM’s Construction and Real Estate Specialist Group. His area of expertise is affordable housing.

“We don’t have data others would want”. I hear that statement quite often from executives and business owners regardless of size or industry. It typically prompts several data governance questions from me.

How do you know?  

What steps have you taken to understand your data? 

What information is important to you or your competitors? 

What information would be most damaging to your business if it became public? 

How do you plan to stop someone from stealing your data?

In the 2015 RSM Manufacturing & Distribution Monitor Survey¹, most businesses reported that their information is at little or no risk. Despite the concerns of some executives participating in the study, very few felt that their information is actually at risk. Although cyber-attacks and data breaches continue to make headlines, most companies feel they are immune to such a threat.

While many of the reported stories of information breaches involve large, well-known companies such as Target, Barnes & Noble, Nortel, Nissan, and others, in the world of cyber-crime size doesn’t matter – only information does. Just because an information breach isn’t splashed in the headlines doesn’t mean it isn’t happening. Companies large and small across the country and our region deal with this every day and the reality is that your business could be next. One company’s Internet footprint looks the same as another to anyone interested in finding something of value, whether it’s credit information, personnel information, intellectual property such as engineering drawings or processes, technology or other industrial assets.²

Cybersecurity is moving to a business imperative that is enabled by IT. No longer is this just an IT issue keeping your CIO up at night. Many boards and audit committees are finely tuned in to what is going on around the world related to cybersecurity and data governance. Executive leadership is increasingly being held accountable for protecting the company’s information assets. Regulators have continued to up their cyber game and pay closer attention to how a company’s information security program could impact the going concern of their business.

A strong information security program can facilitate business growth, create market advantages, and build brand trust. Data privacy and trust have become critical business requirements as exponentially more consumer and business information is generated and shared with your partners. 

What can your company do now?

Data governance is the foundation to implementing an effective information security program.  Unfortunately, there is no one size fits all approach. I would suggest that you kick start your data governance approach with three simple questions:

1. What is your most important data?
2. Who would want this information?
3. What are you doing to protect it?

Be thorough with the evaluation and document the findings. Performing this data inventory takes time; however the end result will provide significant insights in to the effectiveness of your current information security program. Cyber security and data governance are key components of your broader enterprise risk management activities. Taking a systematic approach to understanding, managing, and monitoring risk can give management better insight into company operations and may even allow your company to turn certain risks into opportunities.

A risk-management program can help identify, prioritize and monitor risks both inside and outside an organization.  Steps in such a program include the following²:

• Establish a formal, disciplined framework and governance strategy
• Formalize the process to identify all key risks within the organization, including their likelihood and impact
• Develop quantitative and qualitative measures
• Quantify risks, examine risk treatment and determine risk gaps
• Establish risk monitoring processes and continuous improvement opportunities

By implementing this type of program, executives can be justified in feeling that their information risks have been minimized.  With the rise in information breaches, keeping your data secure can be a competitive edge.

Just remember, you can’t protect everything, so be sure to protect what’s most important to you.

1 2015 Manufacturing & Distribution Monitor, RSM

2 Managing information security risk, RSM

Matt Hoverman is a director with Gilmore Jasion Mahler, LTD and leads the Firm’s IT consulting practice. He has spent his career helping businesses assess their risk level and creating a plan to secure their information.  Learn more about Gilmore Jasion Mahler’s risk advisory services when it comes to protecting your company’s data.

You’ve worked hard to build your business through the years. An investment policy statement (IPS) is a critical part of your future growth. But what should or shouldn’t be included in an IPS? Here are some guidelines:

Goals for your company’s investment portfolio should be:

• Specific to your company
• Flexible enough to meet current market and firm needs
• Adaptable to changing needs, but reflect risk tolerance
• Easily modified

Source: CFMA Treasury Management Series Presentation Session 2, Steven Lords, CFO Arizona Pipeline Company

Gilmore Jasion Mahler Audit Partner Bob Bobek is on a team presenting at the upcoming Construction Financial Management Association (CFMA) 2016 annual conference and exhibition "Building it Forward" in San Antonio, Texas on June 25-29. The importance of a company IPS is part of the team's Treasury Management Series presentation at the conference. Gilmore Jasion Mahler's Construction & Real Estate Team works to provide advisory and other services to support financial and strategic goals for businesses within the construction, real estate and utilities industries. Bob Bobek is an active member both locally and nationally with CFMA.