NJ CPA Nov/Dec 2012

M a g a z i n e o f t h e N e w J e r s e y S o c i e t y o f C e r t i f i e d P u b l i c A c c o u n t a n t s N o v • D e c 2 0 1 2

Tax Matters2012 Promises to Be a Memorable Tax Year

Helping Clients with Property Tax Appeals

The Evolution of Domicile in New Jersey

Navigating the Foreign Information Reporting Landscape

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Date created: 9/5/12Pub: Interim ReportCover Date: 4th EditionMaterials due: 9/10/12

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New Jersey CPA (ISSN 1534-6692) is published six times per year by the New Jersey Society of Certified Public Accountants, 425 Eagle Rock Avenue-Suite 100, Roseland, NJ 07068. Issue No. 36 Copyright © 2012 New Jersey Society of Certified Public Accountants. Annual membership dues includes $9 for a one-year subscription to New Jersey CPA magazine. Members may not deduct subscription price from dues.

Periodicals postage paid at Roseland, NJ, and at additional mailing office. POSTMASTER: Send address changes to New Jersey CPA, 425 Eagle Rock Avenue, Suite 100, Roseland, NJ 07068-1723.

The materials and information contained within New Jersey CPA are offered as information only and not as practice, financial, accounting, legal or other professional advice. The opinions expressed herein are those of the authors and not necessarily those of the New Jersey Society of CPAs. Publication of an advertisement in New Jersey CPA does not constitute an endorsement of the product or service by the New Jersey Society of CPAs.

N o v e m b e r • D e c e m b e r 2 0 1 2

The New Jersey Society of Certified Public Accountants425 Eagle Rock Avenue Suite 100Roseland, NJ 07068-1723973-226-4494 Fax: 973-226-7425njscpa.org

Ralph Albert Thomas, CGMA Chief Executive Officer &Executive [email protected]

Ellen C. McSherry, CGMAChief Operating [email protected]

Don MeyerDirector, Communications & [email protected]

David PlaskowManaging [email protected]

Jeanette L. Miller Editorial [email protected]

Editorial Advisory BoardNeil B. Becourtney, CPATimothy A. Burley, CPASalvatore A. Collemi, CPARebecca B. Fitzhugh, CPACatherine Z. Horn, CPABernard M. Kiely, CPAMarcella LoCastro, CPAAnthony F. Marone, CPAWilliam C. McNamara, CPAMarc D. Mintz, CPAJohn F. Raspante, CPAMargaret Van Brunt, CPA

The Warren GroupDesign / Production / [email protected]

4 Letter to the Editor

5 Close UpDiversity: Why the Profession Needs to Change and How to Do It

6 News Briefs 16 A&A Buzz

How Pronouncements Affect Covenants

18 Best PracticesThe Need for a Progressive Discipline Policy

20 Financial PlanningTake a Tip on TIPS

22 Forensic FileThe Impact of Federal Rule 26 Changes

24 Industry InsightsDon’t Lose Track of Tracking Shareholders

26 Small/Sole PractitionerReporting Information on K-1 Partnership Forms

28 Tax Talk New Jersey’s Responsible Persons Law

30 Tech CenterThe NJ Technology Business Tax Certificate Transfer Program

42 Student OutlookAn Opportunity to Bring It On Again

44 Legislative ViewsSociety Delivers NJ Congressional Delegation Fiscal Tools

46 Member Profile It’s All Downhill for This CPA

Society PagesCPE Offerings and Events, 32Get Involved, 34Member Benefits, 36Year-End Financials, 37NJ State Board of

Accountancy Report, 40Classifieds, 41

f e a t u r e s 8

2012 Promises to Be a Memorable Tax Year The president-elect will certainly have his hands full in 2013 and beyond, including the expiring Bush tax cuts and health care reform.

10 Helping Clients with Property Tax Appeals See how the current real estate market presents another avenue for CPAs to solidify themselves as clients’ trusted business advisors.

12 The Evolution of Domicile in New Jersey Discover the precedents for establishing domicile in NJ and the factors currently used to determine it.

14 Navigating the Foreign Information Reporting Landscape With increasing economic globalization, learn about foreign reporting requirements necessary for your clients to withstand scrutiny.

I’ve read with interest your September/October article on “Obama Versus Romney: The Student Perspective” and

the issue of college affordability, with the total amount of student loan debt recently topping $1 trillion. I’ve spent a decade investigating student loan accounting, policy and law and have watched as graduates have become despondent over their insurmountable debts. Why?•Studentloandebtistheonlydebtexemptfrommost

consumer protection laws.•It’sadebtthatyoucantaketoyourgraveasit’sonlydischargeableinbankruptcyunderthemostdireofcircumstances.

•Defaultduetoadisablingillnesscanresultinwagegarnishment.

•Mostprivatecorporationsmishandlepaymentprocessing,interest and fees, and as many as 99 percent of students pay thousands of dollars more than owed while being informed that they are delinquent when, in fact, they’re not.

Student loan debt can be a figurative debtor’s prison. WhywouldAmericaexposethebestandbrightesttothesedraconian,yetlegal,strategieswhichareexpectedto continue under both presidential candidates? That’s a question for debate.

LynnM.Petrovich,CPAOakhurst

DearMs.Petrovich,

Thanksfortakingthetimetowrite.TheSeptember9,2012,Newsweekcoverstory,“IsCollegeaLousyInvestment?”says a lot about the current state of college affordability. Manyarecallingitthenextgreatbubble.Themoreinformation we can get to accounting professionals who can, in turn, pass it along to clients, the better.

DavidPlaskowNJSCPAPublicationsEditor

Student Loan Debt Crisis Worth Debating

2012/13 Board of Trustees

EXECUTIVE COMMITTEEPresidentThomas F. Roche III, CPAPresident-ElectGerard Abbattista, CPASecretaryBrad E. Muniz, CPATreasurerWalter J. Brasch, CPAImmediate Past PresidentCarole A. Hedinger, CPACEO & Executive DirectorRalph Albert Thomas, CGMA

TRUSTEESJose E. Bombino, CPASusan Burke-Leichner, CPAWilliam A. Cadmus, CPAEdward I. Guttenplan, CPAMichael W. Gutwetter, CPAKarl A. Halteman, CPARobert P. Herman, CPAMaryann Holloway, CPAKenneth Pogrob, CPAJody Rorick, CPAMary E. Zago, CPAJoseph A. Zielinski, CPA

N E W J E R S E Y C P A • N o v e m b e r • D e C e m b e r 2 0 1 2

LETTER t o t h e e d i t o r

4

ESTIMATED CREDIT SUMMARY

Confirmed Credits

Member Added Credits

Pending Credits

Estimated Total

65

23.5

0

88.5

Have you met your 20-credit CPE minimum?Not to worry if you haven’t, there are still 2 months of seminars and conferences.

njscpa.org/cpetracker

njscpa.org/catalog

Diversity: Why the Profession Needs to Change and How to Do ItBy DON MEyER, COMMuNIC ATIONS & MARKETINg DIRECTOR, NEW JERSEy SOCIETy OF CPAS

DiversityintheCPAprofessionhas changed very little in the last

25years.AccordingtoanAmericanInstituteofCPAsreport,2011 Trends in the Supply of Accounting Graduates and the Demand for Public Accounting Recruits, minority hiring in the profession has seen slight improvements, but overall stagnation.

From2008to2010,minorityhiringrosefrom22percentto25percent.Brokendownbyethnicity,Hispanichiring increased from 4 to 7 percent of total hires over the two-year span; African-American hires stayed steady at 4 percent; Asian/Pacific Islander hires alsoremainedfixedat12percent;andAmericanIndian/AlaskanNativehiresfellfrom2percenttozero.Multi-ethnichiringaccountedfor2percentofnewhires.

Tokeeppacewithpopulationdemographics and client/employer needs, the profession is acting now. In August,NewJerseySocietyofCPAsCEOandExecutiveDirectorRalphAlbertThomas,CGMA,thefirstAfrican-AmericantoleadastateCPAorganization,participatedinadiversitysummit sponsored by the Indiana Society ofCPAs.Diversityleadersexploredthe most effective and innovative tools and proven results needed to address the challenges associated with minority hiring and retention. I sat down with Ralph to discuss why the profession needs to change and how to accomplish it.

What is the business case for increased diversity?Demographicchangesaremakingdiversity a business imperative. The total number of minorities in the U.S. willbethemajorityby2042.The

number of minorities that are business owners or occupy top roles continues togrow.Organizationslookingtodobusiness with those companies need toaskthemselves,“Dowehavetheknow-how,understandingandin-househuman capital to fully understand the culture, needs and sensitivities of our minority clients?” From a staffing perspective, younger staff, both current and prospective, will have grown up in a much more multicultural environment than their parents’ generation. The best and brightest among these populations are going to be attracted to firms that value and embrace diversity.

What challenges are associated with attracting minorities into the CPA profession?Eventhoughaccountinghasbeenconsistentlyrankedasoneoftheleadingmajors for students, minority students are not considering it a viable option. Manyminoritystudentshavetheperception that accounting is simply too boring. They seem to hold stereotypes and misconceptions about what accountants do, so they tend to opt for more glamorous majors or professions where they see more diversity. Additionally, the profession has difficulty holding onto qualified candidates. At each step in the supply chain, the percentage of minority representation drops, from college enrollment to overall CPAfirmemployees.

How do we make the profession more desirable to minorities?ExamaffordabilityissignificantlyassociatedwiththelikelihoodofbecomingaCPA.Irecommendthataccountingfirmsofallsizes,alongwithstateCPAsocieties,exploreproviding

financial assistance by paying for CPAExamregistrationandassociatedfees. Also, in a recent membership survey conducted by the National AssociationofBlackAccountants,81percent of respondents agreed that having a powerful mentor contributes to a successful career. I agree with thatassessment,butIthinkthatfirmsshouldtakethatonestepfurtherandmove mentor programs to sponsorship/advocateprograms.Mentorsarevaluable, but sponsors/advocates are close enough to their protégés’ career trajectories and personal goals to clearly see in detail where protégés should be focusing their efforts in the near future to accomplish their professional, and sometimes life, goals.

If a firm is serious about diversity initiatives, where should it start?Two good places to start are assigning minorities to major clients and giving themchallengingtasksontheseengagements, and increasing the minority pipeline at both the senior and manager levels.

For more information about the profession’s diversity initiatives, visit aicpa.org/career/diversityinitiatives.

CLOSE u p


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The interview continues here...

...or at njscpa.org/closeupvideo.

NEWS b r i e f s

AICPA Provides More Detailed Critique of Complex IRS Capitalization RulesTemporary regulations proposed by the Internal Revenue Service (IRS) governing the deduction and capitalization of tangible property expenditures would be unnecessarily complex and burdensome for many taxpayers, barring substantive changes, according to the American Institute of CPAs.

The AICPA believes the IRS should provide illustrative examples to guide taxpayers on the interrelationship of some of the temporary regulations, particularly the disposition provisions, general asset account (GAA) elections and improvement provisions.

The AICPA provides new recommendations on the treatment of improvements, materials and supplies under the temporary regulations. The AICPA also expanded its previous comments on dispositions/GAA elections, Method Change Guidance and acquisition costs. The AICPA believes the de minimis rule in the regulations, which requires an annual financial statement that meets the definition of an Applicable Financial Statement (AFS), discriminates against smaller taxpayers. The AICPA suggests an alternative to expand the definition of an AFS to include a financial statement that has been reviewed by a CPA.

Room to Improve on the IRS RPVPA Treasury Inspector General for Tax Administration (TIGTA) report concerning the IRS Return Preparer Visitation Project (RPVP) found that the program has been correctly implemented, but its effectiveness remains to be determined. TIGTA analyses found that in 2011, the RPVP issued letters to more than 10,000 paid preparers and conducted 2,498 visitations, or nearly 100 percent of its goal.

The TIGTA determined that those visited may not have benefited the most from an

educational visit. Several paid preparers remarked that the use of IRS resources to visit their office was wasteful because their CPE requirements were much more extensive than the information presented by the revenue agents. The TIGTA also determined that the RPVP did not have performance measures or tracking procedures to successfully evaluate its effectiveness.

FASB Issues ASU 2012-02The Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2012-02, Intangibles – Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment. The update simplifies the guidance for testing the decline in the realizable value (impairment) of indefinite-lived intangible assets other than goodwill. The standard applies to all public, private and not-for-profit organizations.

The amendments allow an organization the option to first assess qualitative factors to determine whether it is necessary to perform the quantitative impairment test. An organization electing to perform a qualitative assessment is no longer required to calculate the fair value of an indefinite-lived intangible asset unless the organization determines, based on a qualitative assessment, that it is “more likely than not” that the asset is impaired.

The amendments in this update are effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. Early adoption is permitted.

IRS Whistleblower Claims Approach Triple DigitsOften under fire for a slow response to acknowledging claims and claim payments, the IRS has paid 90 claims since October 2011 and is monitoring 60 others. In recent

years, Congress has increased the amount of whistleblower awards and dedicated staffing.

SEC Reports on Municipal Securities MarketThe Securities and Exchange Commission (SEC) issued a report to help improve the structure of the $3.7 trillion municipal securities market and enhance investor disclosures. The report recommends that Congress consider authorizing the SEC to set baseline disclosure standards and require municipal issuers to have audited financial statements. Other recommended legislative changes include:•Eliminating SEC exemptions for conduit

borrowers who are not municipal entities.•Authorizing the SEC to establish the form and

content of financial statements for municipal issuers who issue municipal securities and to recognize a designated private-sector body as the standard setter for generally accepted federal securities law purposes.

•Providing a safe harbor from private liability for forward-looking statements of repeat municipal issuers that satisfy certain conditions.

•Permitting the IRS to share information with the SEC.

•Providing a mechanism to enforce compliance with continuing disclosure agreements and other obligations of municipal issuers to protect municipal securities bondholders.

The SEC report also discusses potential initiatives to improve pre-trade and post-trade price transparency.

PCAOB Issues Release Concerning Its Inspection ProcessThe Public Company Accounting Oversight Board (PCAOB) issued a release to provide information to audit committees about its inspection process and the meaning of reported inspection results. The goal is to better equip audit committees of public company boards of directors to engage in meaningful discussion with PCAOB-registered audit firms about the results of inspections.

The release provides information about the meaning and significance of PCAOB

New Jersey Teacher Tenure Overhaul Bill by the Numbers

100,000 Number of NJ teachers affected

2014 Date for changes to take full effect statewide

11 Number of states (including NJ) that have last-in, first-out policy for teacher layoffs

4 Years until eligible for tenure

6N E W J E R S E Y C P A • N o v e m b e r • D e C e m b e r 2 0 1 2

Succession Planning ResourcesWith a large number of Baby Boomers facing retirement, succession planning has become a top concern at many CPA firms. The New Jersey Society of CPAs has created a Succession Planning Resource Center on its website to help members deal with this important issue. Features include:• CPASuccessionMatch – The NJSCPA has partnered with the Connecticut Society

of CPAs to offer CPASuccessionMatch, a matchmaking website for CPAs looking to sell, grow or buy a firm. There is no middleman and no pressure to act. Subscribers can anonymously search for and contact a buyer, seller or merger match in a confidential environment. When and if there is a match, subscribers can exchange contact information and take the conversation to the next level. CPASuccessionMatch currently serves several states in the Northeast and has plans for expansion. The subscription rate is $300 for six months and $500 for a full year.

• Events – See a schedule of upcoming programs and seminars on succession planning and mergers and acquisitions.

• News and Articles – Read about everything from identifying future firm leaders to developing a succession plan to merger/acquisition tips.

Access the Succession Planning Resource Center at njscpa.org/succession.

inspection findings in the context of both engagement reviews and quality control reviews. The release also suggests some specific approaches that an audit committee might consider for initiating or enhancing inspection-related discussions with an audit firm. The release highlights certain areas of inquiry that audit committees may wish to address with their auditors, such as whether the audit overseen by the audit committee was selected by the PCAOB for an inspection and whether any findings were made; potentially relevant inspection findings on other audits performed by the firm; the firm's response to PCAOB findings; and the firm’s remedial efforts in light of any quality control deficiencies that may have been identified by the PCAOB.

New GASB Pension Standards Now AvailableThe Governmental Accounting Standards Board (GASB) has published standards intended to improve the accounting and financial reporting of public employee pensions by state and local governments. Statement No. 67, Financial Reporting for Pension Plans, revises existing guidance for the financial reports of most pension plans. Statement No. 68, Accounting and Financial Reporting for Pensions, revises and establishes new financial reporting requirements for most governments that provide their employees with pension benefits.

The provisions in Statement 67 are effective for financial statements for periods beginning

after June 15, 2013. The provisions in Statement 68 are effective for fiscal years beginning after June 15, 2014. Earlier application is encouraged for both.

Sports Leagues Sue NJ Over Sports BettingMajor League Baseball, the National Basketball Association, the National Football League, the National Hockey League and the National Collegiate Athletic Association filed suit in U.S. District Court in Trenton to prevent sports betting in New Jersey, citing a threat to the integrity of the sports. One consequence could be the 2014 Super Bowl and potential future Super Bowls in the Meadowlands.

AICPA Recommends Change to IRS Rules Governing Gift CardsThe AICPA recommends a modification to IRS guidance that governs the treatment of retail gift cards when the issuance and redemption of a card is handled by financially unrelated entities. Previously, gift card programs were largely self-contained, with the owner of a retail brand responsible for both the sale and redemption of a card. But it has become increasingly common for retailers and other entities to participate in clearinghouses for card programs, with the settling of proceeds governed by service agreements. Under current IRS rules, however, an issue arises

regarding eligibility for the deferral method when redemption involves two entities with unconsolidated financial results.

Tax Delinquent Federal Employees in CrosshairsThe U.S. House of Representatives passed a bill that would terminate federal employees who are “seriously delinquent” in paying their taxes and make those delinquent taxpayers applying for federal jobs ineligible. The bill’s sponsor, Rep. Jason Chaffetz (R-Utah), claims there are approximately 100,000 federal employees who fall into the seriously delinquent category owing more than $1 billion. The bill now goes to the Senate.

PCAOB Adopts Auditing Standard No. 16The PCAOB adopted Auditing Standard No. 16, Communications with Audit Committees, to establish requirements that enhance the relevance and timeliness of the communications between the auditor and the audit committee and is intended to foster constructive dialogue between the two on significant audit and financial statement matters. The standard supersedes the board’s interim auditing standards AU Sec. 310, Appointment of the Independent Auditor, and AU Sec. 380, Communication with Audit Committees. The new standard will be effective for public company audits of fiscal periods beginning after December 15, 2012.


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njscpa.org Spotlight

A Grand Bargain?InDecember2010,justpriortowhentheBushtaxcutswereinitiallysettoexpire,ObamastruckadealwiththeRepublicansinCongress,creatingtheTaxRelief,UnemploymentInsuranceReauthorizationandJobCreationActof2010(2010TaxReliefAct)toextendtheBushtaxcutsforanadditionaltwo years. That legislation included a reduction in the employee Social Security taxwithholdingratefrom6.2to4.2percentforcalendaryear2011.Congressinitiallyextendedthisprovisionfortwomonths through the end of February 2012.InFebruary2012,thepresidentsignedtheMiddleClassTaxReliefandJobCreationActof2012extendingthe

4.2percenttaxratethroughtheendof2012.Thiswasararesituationwheretherewasbipartisansupportfortaxpolicy, as neither political party wanted tobeaccusedofhikingtaxesontensofmillionsofworkers–especiallyinanelectionyear.TheSocialSecuritytaxcomponentofself-employmenttaxwillsimilarlyremainat10.4percentforallof2012.

Estate and Gift TaxesEstateandgifttaxesweresignificantlyimpactedbythe2010TaxReliefAct,whichincreasedtheestateandgifttaxexemptionto$5millionfor2011and2012(indexedforinflation)andloweredthetopestatetaxratefrom55to35percent. No different from the other Bush taxcuts,uncertaintyexistsastofederalestateandgifttaxesbeyond2012.

Tax ExtendersNumeroustax-extenderprovisionsexpiredattheendof2011,including:•R&Dtaxcredit.•15-yeardepreciablelifeforqualified

leasehold improvements.•100-percentbonusdepreciation(50percentforqualifying2012acquisitions).

•$500,000Sec.179expenselimitation($139,000for2012taxyears).

•Salestaxdeductioninlieuofstateandlocalincometaxdeduction.

•Increasedindividualincometaxalternativeminimumtaxexemptions.

With the political conventions and debates behind

us, the U.S. economy will almost certainly be the

defining issue in the presidential race between

PresidentBarackObamaand formerMassachusetts

GovernorMittRomney–includingwhattodoabout

the Bush tax cuts which are scheduled to expire

onDecember 31, 2012. It falls on each candidate

to clarify his position on tax policy, butwhether

this will translate into any action on the part of the

incomingCongressremainstobeseen.

2012 Promises to Bea Memorable

Tax Year

By Neil B. Becourtney, CPACohnReznick LLP


•Transfersfromindividualretirementaccountstocharityifoverage70½.

VariousmembersofCongresshavetalkedabouttheneedtoevaluateall132extenderprovisionstodeterminewhichones merit reinstatement. In this election year,taxpayersandtaxpractitionershavebeen left in limbo as to the fate of these varioustaxprovisions.

Health CareTheU.S.SupremeCourthandeddownitsdecisioninlateJune2012thattheAffordableCareActwasconstitutional.Twonewtaxesincludedintheoriginallegislationwillthereforetakeeffectin2013–a0.9-percenthospitalinsurancetaxonearnedincomeanda3.8-percentunearnedincomeMedicarecontribution(UIMC)taxoninvestmentincome.Bothofthesetaxesaretriggeredwhereincomeexceeds$250,000formarriedjointfilers,$125,000formarriedcouplesfilingseparatelyand$200,000forsingleandhead-of-householdfilers.TheUIMC,combinedwiththeexpirationoftheBushtaxcuts,couldresultinthetoptaxrateonqualified dividend income increasing from 15to43.4percentandthetoptaxrateonlong-term capital gain income increasing from15to23.8percentin2013.

New JerseyWith the need to balance their budgets each year, states cannot delay important

taxpolicydecisionslikethefederalgovernment routinely does. In New Jersey,GovernorChrisChristiepushedforanacross-the-board10-percentgrossincometaxcuttobeimplementedoverthree years, which he first proposed in February. The Legislature countered with a bill reinstituting the so-called millionaire taxthatwouldhaveincreasedthegrossincometaxrateontaxableincomeofmorethan$1millionfrom8.97to10.75percent. The governor vetoed that bill, and the state budget was adopted without either measure included.

Onthebusinessside,thefixed-dollarcorporateminimumtaximposedonScorporationswasslashedby25percentfortaxyearsbeginningwith2012.Forcorporations with $1 million or more of New Jersey source gross receipts, thehighestlevelofminimumtaxwillthereforedropfrom$2,000to$1,500.TomakeNewJerseymorecompetitivewith neighboring states, the corporation businesstaxthree-factorformulaisbeingchanged to a single sales factor over a three-yearperiodbeginningwith2012(70percentsales,15percentpayrollandproperty).

New YorkNewYorkstateincreasedthefilingthresholdsfortheMetropolitanCommuterTransportationMobilityTax(MCTMT)to eliminate a filing requirement for manysmallertaxpayers.Effectivewith

thesecondquarterof2012,thepayrollexpensethresholdforemployersincreasedfrom$2,500to$312,500,andtheself-employment earnings threshold increased from$10,000to$50,000effectivefor2012.InAugust,theNewYorkStateSupremeCourtdeclaredtheMCTMTunconstitutional; the state is apealling the decision.LastDecember,theNewYorkLegislature passed a bill establishing a new toppersonalincometaxrateeffectivefor2012andfutureyearsof8.82percentforsingletaxpayerswithataxableincomeofmore than $1 million and joint filers with taxableincomeofmorethan$2million.

Other State DevelopmentsOutsideoftheNewYorkmetropolitanarea,somestateshavepursuedtaxcutswhileothershavepursuedtaxhikesfor2012.Idahoreduceditstoppersonalincometaxratefrom7.8to7.4percent.Marylandincreaseditstoppersonalincometaxratefrom5.5to5.75percent.AndCaliforniahasaNovemberballotmeasureaskingvoterstoapproveanincreaseinthetoppersonalincometaxratefrom10.3to12.3percent.

Neil B. Becourtney, CPA, is a tax partner at CohnReznick LLP. He is a member of the New Jersey Society of CPAs Federal Taxation and State Taxation interest groups and the Editorial Advisory Board of New JerseyCPA magazine. Contact him at [email protected].


9

See The Good.At the Community Foundation of New Jersey, we’re focused on helping our donors use their funds to create real impact in their communities and see the good their charitable giving creates.

Here are two recent examples of innovative ways our donors are using their CFNJ funds to make a difference:

• CFNJ Helps Fund New Report on New Jersey’s Fiscal Challenges: CFNJ, along with the Geraldine R. Dodge Foundation, the Fund for New Jersey and the Robert Wood Johnson Foundation, was instrumental in including New Jersey in State Budget Crisis Task Force. The Task Force examined the threats to near and long-term fi scal sustainability in six states. The goal of the Task Force isto move states closer to righting their budgetary problems.

• Giving to Children in Foster Care: The Rogers Family Fund developed A Gift in Time as a way to fulfi ll gift requests of foster children. Having worked with Court Appointed Special Advocates (CASA), a non-profi t devoted to supporting children in protective services, the idea for A Gift in Time was born after hearing the one thing that stood out to a young girl was a red pair of shoesgiven to her by a CASA volunteer. The initial launch of $5,000to the fund has turned into $15,000 worth of small giftsthat have made a big difference in these children’s lives.

If your clients are looking to make a difference through charitable giving, we’d like to be of assistance. Please contactHans Dekker at [email protected] | 973-267-5533.

To learn more, go to www.cfnj.org

© 2012 Community Foundation of New JerseyFollow us: facebook.com/GivingNJ twitter.com/GivingNJ cfnj.tumblr.comFollow us: facebook.com/GivingNJ twitter.com/GivingNJ cfnj.tumblr.comFollow us: facebook.com/GivingNJ twitter.com/GivingNJ cfnj.tumblr.comFollow us: facebook.com/GivingNJ twitter.com/GivingNJ cfnj.tumblr.comFollow us: facebook.com/GivingNJ twitter.com/GivingNJ cfnj.tumblr.com

2012 Year-To-Date (August):Grants Issued - $18.3MM | Gifts to Donor Advised Funds - $13.5MM

26946_CFNJ_NJCPA_7p375x3p125_Sept21.indd 1 9/21/12 10:36 AM

Being familiar with the rules, processes and procedures involved in preparing,filingandpresentingataxappealunderNewJerseylaw,CPAsandtheir property-owning clients can be successful.

The Numbers Don’t LieNew Jersey has seen a dramatic increase inpropertytaxappeals.AccordingtotheNewJerseyDivisionofTaxation(state.nj.us/treasury/taxation/pdf/lpt/appealsbycounty.pdf),thenumberofpropertytaxappealsfiledincreasedfrom32,980in2008to87,313in2011.

The success rate of these appeals can be foundonstate.nj.us/treasury/taxation/pdf/lpt/appeals2011.pdf.

Timing and NotificationEveryJanuaryorFebruary,propertyowners in New Jersey receive a postcard fromtheirtaxassessorwiththeassessedvalue of their properties, along with netpropertytaxesbilledforthecurrentyear. As this comes at the same time of year as many of the documents needed forincometaxreturnpreparation,many property owners simply file this along with the other documents used to either prepare their own returns or give totheirtaxpreparers.Althoughthispostcard may provide some assistance inpreparingtheincometaxreturn,itisrequiredunderN.J.S.A.54.4-38.1togive notice of the assessed value of the property and outlines the appeal process in the event a homeowner disagrees with the assessed value.

An appeal of a property’s assessed value is filed with the county board of taxation.ThedeadlinetofileisApril1orwithin45daysofthebulkmailingof the aforementioned assessment notices,orMay1whereamunicipal-wide revaluation or municipal-wide reassessment has been implemented. Currently,filingfeesarebasedon

New Jersey’s property taxes remain among the

highest in the country. Following the housing sector

crashof2008,propertyvaluesfelldrasticallyacross

thenation, andNew Jerseywasno exception.The

recent decrease in property values providesCPAs

the opportunity to discuss property tax appeals

with their clients, as homeowners may be paying

propertytaxesonassessedvaluesgreaterthantheir

properties are worth.

Helping Clients withProperty Tax

Appeals

By Margaret Van Brunt, CPARowan university


assessed value of the property and range from$5(assessedvaluationlessthan$150,000)to$150(assessedvaluation$1,000,000ormore).Individualtaxpayersmayrepresentthemselves;however, business entities other than sole proprietorships must use an attorney.

To File or Not to File?Todetermineifapropertytaxassessment is fair and if a client should fileataxappealin2013,someworkisrequired. The New Jersey Legislature adoptedaformulacalledChapter123to test an assessment’s fairness. When comparedtotheproperty’struemarketvalue, the current assessment must fit withinthecommonlevelrange.Everyyear,theNJStateDivisionofTaxation,alongwithlocaltaxassessors,computestheseratiosbyanalyzingsalesofcomparable properties over the prior 24months.Thelistofaverageratiosispublished every year in January at state.nj.us/treasury/taxation/lpt/chapter123.shtml.Mosttownshipsalsopublishtheirtaxratiosontheirrespective websites.

Forexample,assumethecommonlevel range of your client’s property falls within42.69to57.75percentoftruemarketvalue.Thehome’struevalueis$350,000,anditiscurrentlyassessedat$233,500.Because$233,500is66.71percentof$350,000($233,500÷$350,000),itfallspastthemaximumpercentage within the common level rangeandapropertytaxappealshouldbe considered. Using the same common levelrangeof42.69-57.75percentoftruemarketvaluealongwiththehome’struevalueof$350,000,ifitiscurrentlyassessedat$100,000,thenitisat28.57percentoftruevalue($100,000÷$350,000)and,therefore,falls below the common level range. Thus,apropertytaxappealwouldnotbe recommended.

Burden of ProofProperty owners considering an appeal should understand that the burden of proof is on them to prove that the assessed value is unreasonable comparedtoamarketvaluestandard.Recent comparable sales are the best

evidence. These are recent sales of properties similar to your client’s and should precede the October 1 annualassessmentdateofthepre-taxyear. There are various resources for gettingthisinformation(e.g.,countyclerkrecords,realestateagentsandappraisers),buttheyarenotallfree.Usestate.nj.us/treasury/taxation/lpt/taxlistsearchpublicwebpage.shtmlasaresource to assist in comparing assessed values. Also, sites such as tulia.com and zillow.comcanhelpinsearchingrecentsales.

Finding recent sales data may not be aneasytaskinthissluggishhousingmarket.Incertainareas,therearelimited comparable home sales. Another obstacle is that estate sales, foreclosures and short sales are not considered arm’s length transactions in New Jersey and, therefore, one would not be allowed to present those types of transactions as comparable sales data during an appeal.Asmanyrealtorssendmarketingmaterials advertising recent sales in neighborhoods,thisinformation–alongwithphotos–issomewhateasytoobtain.

HearingsTaxappealhearingsaregenerallyheldannually within three months of April 1. In some instances, if the assessor, municipalattorneyandtaxpayeragree

to a settlement or otherwise resolve the issues, it may not be necessary for the client to attend a hearing.

Beware SolicitationsDuetothepopularityoftaxappealsresulting from a decline in property values, there has been an increase in individualsandgroupssolicitingtaxappeals. Your clients should be aware that if they have received notices from companies representing themselves as a service to lower an assessment, it is not an automatic means for reduction. Remember, the burden of proof falls on the property owner to present comparable sales at the time of the hearingtoprovethetruemarketvalueof the property.

Propertytaxappealsrepresentanother avenue to solidify your status as a client’s trusted business advisor. Learn moreatstate.nj.us/treasury/taxation/pdf/lpt/ptappeal.pdf.

Margaret Van Brunt, CPA, is the assistant dean of the William G. Rohrer College of Business at Rowan University. She is on the New Jersey Society of CPAs Educators Committee and the Editorial Advisory Board of NewJerseyCPA magazine. She is also the treasurer of the Southwest Jersey Chapter of the NJSCPA. Contact her at [email protected] or 856-256-4047.


11


Generally,individualsdeterminedto be New Jersey domiciliaries will beresidentsfortaxpurposeswithoutregard to the amount of days they are actually present in New Jersey. The process to codify domicile in New Jersey evolved over a period of many years.

Domicile DefinedDomicileisdefinedasanyplacethatthetaxpayerregardsashis/herpermanent home or the place he/she intends to return to after traveling. Once established, domicile continues untilthetaxpayermovestoanewlocation with the intent to establish a permanent home there and to abandon the prior domicile. As such, moving to anewlocation–evenforanextendedperiodoftime–doesnotconstitute

a change in domicile if there is an eventual return to New Jersey.

Lyon v. GlaserThetaxpayer’sintentisparamountinultimately determining domicile. In Lyon v. Glaser(60NJ259)1972,theNewJerseySupremeCourtstated:“Aperson has the right to choose his own domicile, and his motive in doing so is immaterial.”However,theburdenofproofisstillonthetaxpayertoprovethat the choice has been made and executed.

NESTOAIn1978,NewJerseybecamepartofa cooperative agreement on domicile, residencyandmultipletaxationissueswhichincludesthe12-memberNorthEasternStateTaxOfficialsAssociation(NESTOA).OtherNESTOAstatesincludeConnecticut,Delaware,Maine,Maryland,Massachusetts,NewHampshire,NewYork,Pennsylvania,RhodeIsland,VermontandtheDistrictofColumbia.

Goffredo v. Director, Division of TaxationTaxpayersoftenwanttokeepthetraditional family home and try to establishresidencyinlow-orno-taxstateslikePennsylvaniaorFlorida.However,abandonmentoftheNewJersey domicile is necessary before one can establish a new domicile somewhere

Manybelieve that an individualwho is a long-time

resident of New Jersey can simply claim residence

elsewhere if he or she is living outside of New

Jerseyfor183daysormore.Althoughthiscommon

misconception is often put into practice, the rule

is that one must first abandon his/her New Jersey

domicileinorderforthe183-daytesttoberelevant

in determining whether an individual is a New Jersey

residentfortaxpurposes.

By James A. Toto, CPAWeiserMazars LLP

The Evolution ofDomicile in New Jersey


13

else. In Goffredo v. Director, Division of Taxation(1987,NJTaxCt)9NJTax135,thetaxpayersestablishedresidencyinPennsylvaniafor16years,butwereunable to prove establishment of a new domicile because they never abandoned the old one. The court concluded that “by reason of the fact that plaintiffs did maintain a permanent place of abode in New Jersey, it is not necessary to makeadeterminationwhethertheyspentintheaggregatemorethan30days in New Jersey. It is concluded that since plaintiffs were domiciled in NewJerseyfrom1958tothepresentand maintained a permanent place of abodeinNewJerseyduringthetaxyears in issue, plaintiffs are New Jersey residenttaxpayerswithinthemeaningofN.J.S.A.54A:1-2(m)(1).”

What Determines DomicileItems such as changing your driver’s license and voter registration are insignificant in determining domicile. In New Jersey, domicile is determined by applying the following factors:•Homevalue.•Timespentinthedomicile.•Itemsconsiderednearanddear.•Activebusinessinvolvement.•Familyconnections,iftheother

criteria are not conclusive.

Home ValueNormally, the value of the home is a significant factor in determining

domicile. Factors such as behavior patterns will also apply to this test. For example,wheredoesthetaxpayerspendhis/herholidays?Fortaxpayerslookingto abandon New Jersey residency, selling the traditional family home will allow themtomakeastrongargumentthatthey had changed their domicile and established one elsewhere.

TimeTime is another important factor. Anyonespending183daysinNewJersey who also maintains a home in New Jersey will be considered a resident fortaxpurposes,evenifsuchindividualis not a New Jersey domiciliary. However,spendinglessthan183daysin New Jersey does not necessarily excludeanindividualfrombeingconsidered a New Jersey resident for taxpurposes.Forexample,ifsomeoneisinNewJerseylessthan183daysbutspends more time in New Jersey than in the location he/she considers a new domicile, that may be an indication that a change in domicile has not occurred.

Near and DearItems near and dear refer to the taxpayer’smostprizedpossessions.Inthis instance, the location of valuable jewelry or collectibles is important. If you are trying to prove that you are no longer a resident of New Jersey, when insuring items of this nature, list them as being located outside of New Jersey.

Active Business InvolvementActive business involvement considers not only the physical location from whichtheindividualworks,butwherethetaxpayer’snetworkofcustomers,colleagues and other business associates are primarily located. This may not be as much of an issue for retirees, but for those still actively involved in business –especiallyifitisacloselyheldfamilybusiness–thisisadifficulttesttopassif the business is still operating and located in or near New Jersey.

Family ConnectionsA family connection is the last factor considered, and only if the other four tests do not conclusively determine domicile.

Determiningdomicileandresidencyinthe21stcenturyismadeonacase-by-case basis using parameters developed largely during the previous one.Youneedtoanalyzetheaforementioned factors to determine domicile, and every determination of residency will be based on the particular facts of each case.

James A. Toto, CPA, is a partner at WeiserMazars LLP. He is the Immediate Past President of the New Jersey Society of CPAs Middlesex/Somerset Chapter. Contact him at james.toto@ weisermazars.com or 732-549-2800.

MostpractitionersarefamiliarwithFormTDF90-22.1,ReportofForeignBankandFinancialAccounts(FBAR),the annual report filed with the U.S. TreasuryonorbeforeJune30oftheyear immediately following the calendar yearbeingreported(withnoextension).Individuals and certain entities are required to answer a question on theirtaxreturnsaboutownershipand signatory authority over foreign accounts.Corporationsthatowndirectlyorindirectlymorethan50percentofone or more other entities may file consolidated FBAR reports.

The2010ForeignAccountTaxComplianceAct(FACTA)createdSection6038DfortaxyearsstartingafterMarch18,2010.Section6038Drequires disclosure on the new Form

8938,StatementofSpecifiedForeignFinancial Assets, and is included with theannualincometaxreturn,Forms1040or1040-NR.Atsomepoint,filings by domestic entities will be addressed. Absent the filing requirement foranincometaxreturn,thereisnorequirementforForm8938anditdoesnotreplaceoraffectataxpayer’sobligationtofileFormTDF90-22.1.Taxpayersmustfileeachformforwhich they meet the relevant reporting thresholds. Financial asset reporting underFACTAismandatedundertheInternalRevenueCodeandisseparatefromtheFBARrequirements.Differentaccount levels, disclosure information, filing deadlines, mailing instructions, penalties and statutes of limitations apply to each.

The IRS website at irs.gov has a comprehensive chart comparing Form 8938andFBARrequirements,detailingthe differences in reporting thresholds, types of foreign assets and whether they are reportable, valuations, due dates and penalties.Preparersshouldfamiliarizethemselves with the rules, as failure to disclose leaves open the statute of limitations.

FACTArequirementsaremorecopiousthanFBAR,sotaxpayerswhohaveneverfiledTDF90-22.1maybe

The2012filingseasonintroducednewrequirements

for owners of foreign financial accounts. In an effort

to provide greater transparency of foreign financial

assetsownedby taxpayers in theU.S. (bothcitizens

and aliens) the InternalRevenue Service (IRS) has

created new filing requirements, along with possible

criminal penalties for noncompliance.

By Rosemary F. Ervin, CPAand Kenneth A. Hofsommer, CPA

The Hunter group CPA LLC

Navigating the Foreign Information

Reporting Landscape


subjecttofilingForm8938.Specifically,the definition of a foreign financial asset reportableonForm8938isbroaderthan the foreign financial account reportableonFormTDF90-22.1.While both are reporting documents, FBARreportingisutilizedforlawenforcement,whileFACTAisusedintaxadministration.FBARreportingisnot confidential; federal officials are able to access the computer database intheircriminal,taxandregulatoryinvestigations.

Taxpayersshouldunderstandallcomponents of the comparison chart to determine filing requirements, as the reporting thresholds include different financial assets. For example,Congresshasexpandedthepassive foreign investment company reporting requirements, an area of U.S.internationaltaxcompliance.Form8621,InformationReturnbya Shareholder of a Passive Foreign InvestmentCompany(PFIC)orQualifiedElectingFund,isnotrequiredby certain indirect shareholders if an intermediate entity files the form. However,thevalueofthePFICisincludedindeterminingtheFACTAfiling threshold.

FilingofFormTDF90-22.1isrequiredifataxpayerhasevenasignatory authority over a foreign accountinexcessof$10,000foroneday.FACTAassetsarevaluedonthelast day of the year and at the highest fairmarketvalueduringtheyear.While FBAR addresses foreign financial accounts,FACTAalsoincludesforeignstock,securitiesandforeignpartnershipinterests not held in financial accounts.

FACTAincludesforeignhedgefundsand foreign private equity funds.

Form8938assetsgenerallyincludeincome, gains, losses, deductions, credits, gross proceeds or distributions that are required to be reported on an incometaxreturn.Hence,Form8938isincludedwiththeincometaxreturn.FormTDF90-22.1includesassetsaccording to legal title and authority to control the disposition of the assets.

Foreign operations and investments mayaffectaU.S.person'sU.S.taxliability, but it is difficult for the IRS to obtain information directly about assets and activities abroad, especially if the recordsarekeptabroad.FACTAenablesthe IRS to obtain information about U.S. persons who directly or indirectly hold accounts or other investments abroad who earn income that has not been reported to the IRS. Foreign financial institutions will be required to enter into an agreement with the IRS to disclose and identify certain financial accounts of specified U.S. persons or they will be subjecttowithholdingtax.TherewillbedisincentivesforU.S.taxpayerstodo business with a financial institution that has chosen not to enter into an agreement. The intent is to enable the IRS to obtain information about investments held abroad that earn income that has not been reported to theIRS.Effectivelyconnectedincomewill not be subject to withholding. Agreements and withholding requirements are currently subject to phase-inafterDecember31,2013,during which time additional guidance is expected.

Form5471,InformationReturnof

U.S.PersonswithRespecttoCertainForeignCorporations,isusedtocollectinformation about foreign corporations with substantial U.S. ownership. Form 926,ReturnbyaU.S.TransferorofPropertytoaForeignCorporation,reports outbound transfers to foreign corporations. IRS enforcement currently includesinternationalexaminers,andattention will continue to be focused on cross-border transactions, while transfer pricingandforeigntaxcreditruleshavebeen addressed.

TaxadministrationhasevolveddrasticallysinceSeptember11,2001.Reporting of foreign assets and cross-border transactions has been the focus of legislation that requires attention to compliance details. Foreign reporting is nolongerlimitedtothosespecializingin international practices. A global economy requires that even small practitioners be aware of reporting requirements.Becausetaxpayerstodayremain generally ill-informed of these changes, your professional counsel will be of critical value.

Rosemary F. Ervin, CPA, is a tax consultant and Kenneth A. Hofsommer, CPA, M.S.T., is the tax practice director for The Hunter Group CPA LLC. Both are members of the New Jersey Society of CPAs. Contact the authors at 201-261-4030.


Member BenefitIntroduction to U.S. Taxation of International TransactionsMonday, December 10, IselinVisit njscpa.org/catalogExpress Code: E1212113


16

Generally accepted accounting principles(GAAP)arefrequently

described in most loan agreements. Financial institutions traditionally have written a broad range of financial covenants into loan documents that allowthebankstomonitortheborrower’s financial position. These financial covenants allow the financial institution to react to a possible deteriorating financial position of the borrower, thus enabling the institution to reduce credit or consider the loan in default and demand repayment.

Debt CovenantsDebtcovenantscanbeeitherfinancial, nonfinancial or both.

Financial statements to be submitted within so many days, a provision that alltaxesandinsurancehavebeenpaid or environmental compliance areexamplesofanonfinancialcovenant. In most loan documents, financial statements often include the term “prepared in accordance with generally accepted accounting principles” or “accounting principles generally accepted in the United States.”

Financial CovenantsFinancial covenants typically consist of several ratios that the creditor deems relevant to the loan. The borrower must compute these on an

annual or more-frequent basis. These ratios are often submitted to the lender along with a certification and the financial statements that support theunderlyingdata.AsGAAPevolves,computing covenants become affected which could result in a company unintentionally failing to meet the financial covenants as defined by the creditor. This is all because the loan agreement mandates that the financial statements must be in accordance withGAAP.

GAAP ChangesFor a company to maintain its loan in good standing and prevent default, it must not only submit financial statements, but the financial statements must be in accordance withGAAP,notothercomprehensivebasis of accounting, cash basis or incometaxbasis.Hence,wheneverchangesinGAAPoccur,thecompanymust adopt the new pronouncement or face automatic noncompliance with the loan provisions. Noncompliance means default; default means reclassification of the long-term portion of the debt to a current liability which creates additional problems.

Example 1Let’sexaminehowaGAAPchangecanaffectcovenants.Oneexampleis the consolidation of variable interestentities.CompanyA,theprimary beneficiary, has a loan that mandates a debt service coverage ratio(DSCR)minimumof1.5.Underthis ratio, earnings before income, taxes,depreciationandamortization(EBITDA)mustexceed1.5timesthecurrent portion of long-term debt plusinterestexpense.CompanyAeasilymeetsthisrequirement.EnterFinancial Accounting Standards

How Pronouncements Affect CovenantsBy JAMES H. RuITENBERg, CPA, BEDERSON & COMPANy LLP

A&A b u z z


Board ASC810-10,akaFIN46,Consolidation of Variable Interest Entities.FIN46definesCompanyAas the primary beneficiary of a rental realestateentity(CompanyB)andrequiresconsolidationwithCompanyB(thevariableinterestentity).CompanyB has a mortgage on its building with asizablecurrentportion.Underthebank’sformulaforcomputingDSCR,CompanyAnowfailstomeettheminimumcoverageof1.5duetotheincreased current portion of debt.

Example 2ImagineCompanyBdoesn’texistandCompanyAleasesitsmanufacturingfacilities from an unrelated landlord whereFASBASC810-10doesnot

apply.Again,CompanyAhasaloanthatrequiresaDSCRminimumof1.5.CompanyAhasnodifficultyin meeting this ratio under current lease accounting pronouncements. Under the current lease accounting treatment, the leased asset and related obligation are not on the balance sheet. Approximatelytwoyearsago,theFASB and the International Accounting StandardsBoardbeganworkonanexposuredraftregardingleasingactivities. This proposed standard would redefine leases by requiring a liability on the balance sheet equal to the present value of the lease payments. This new liability, or a portion of it, willfactorintoCompanyA’sfinancialcovenant, increasing the denominator

and potentially causing the coverage ratiotofallbelow1.5resultinginatechnical default under the terms of the loan agreement.

Pronouncements do affect covenants and may cause a technical default which could result in unanticipated and undesirable consequences. It is incumbent on the practitioner to be aware of possible scenarios.

James H. Ruitenberg, CPA, CFP, PSA, is a partner at Bederson & Company LLP. He is a director on the board of the New Jersey Society of CPAs Passaic County Chapter. Contact him at [email protected] or 973-530-9129.

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18

You have professional liability insurance, general insurance and

likelyofferyouremployeesmedicalinsurance.Havingaprogressivedisciplinepolicyislikehavinganotherkindofinsurance–frommakingbadhumanresource(HR)decisionsandgetting sued for improperly terminating employees.

What Is Progressive Discipline?Whenanemployeebreaksaruleorisnotperformingasexpected,awarningis issued, perhaps verbally initially. If the behavior is not corrected, the supervisororHRprofessionalwouldthenmovetothenext(progressive)

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The Need for a Progressive Discipline PolicyBy MICHAEL MARIANO, LEAF, SALTZMAN, MANgANELLI , TENDLER & MIELE , LLP

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19

step, which is typically a written warning. And if the behavior still has not changed for the better, then the employee is either terminated or receives a final written warning. In the case of the final written warning, termination becomes the final step if the behavior still does not change within a specified period of time.

The number of steps is relatively unimportant. What is important is that a decision is made on how many steps there are, that they are in writing and that the policy is communicated to all employees so that they understand expectations.

When the employees are informed via due process that their behavior is unacceptable, what about it is unacceptable and what they need to do to correct the unacceptable behavior, then their ability to sue the employer for not handling the situation properly isminimized,andthatislikeinsuranceagainst getting sued. The court system likes–andemployeescanappreciate–thatthissystemisbasicallyfairandapplies to everyone. There is decreased concern that different employees will be given different punishments for similar infractions. As a result, employees will feelliketheyhaveastable,professionalenvironment whose conditions are more nurturing.

The Human ElementWhile insurance against lost time and money is a major benefit of the progressive disciplinary review policy, it’s not the paramount one. The human impact is the greater benefit. Mostpeoplelikestructureandrules,especiallyintheworkplace.Itmaynot seem that way, but psychology tells us that it is human nature to wantdefinedboundaries.Itmakesuscomfortableknowingwhatisacceptableor unacceptable in any given situation. Secondly, structure gives employers the potential to turn a borderline employee into a productive one. If employers terminated every employee, without the benefit of progressive discipline, who didnotliveuptoexpectationsordidsomethingwrongintheworkplace,they

could lose many good employees in the long run. I’ve seen several employees whodidn’ttaketheirjobsseriously,but after being given a first or second warning,theyrealizedexactlywhatthey would be losing. As such, they turned over a new leaf, improved their performance and became top employees.

Policy DownsideWhile the pros definitely outweigh the cons, there are disadvantages to having a progressive discipline system. The policy can become a double-edged sword in at-will employment states. The at-will law allows employers to terminateemployeesat-will–withnoreasonneeded–aslongasthereasonisnot illegal, such as protected class. This allows employers to terminate those employees who simply don’t “fit” into theirorganizationforwhatever(legal)reason.However,whenyouintroducea progressive discipline policy, you are now hampered by a process that slows down or limits termination. Those who support progressive discipline, however, argue that good hiring practices can mitigate this downside.

Policy ReviewIt’s a good idea for you to periodically review your progressive discipline policy. No policy can last forever as it is first written, and policies evolve as themodernworkplaceandourlawsevolve. It may not be top of mind, but it is important to not let the policy gather dust.

P.S.Progressive discipline is fine in most circumstances, but some infractions are clearly too grievous to be given a second chance, and in those cases termination is warranted. This should also be part of the written policy as wellasemployees’expectations.

Michael Mariano, PHR, AAAPM, is the firm administrator for Leaf, Saltzman, Manganelli, Tendler & Miele, LLP. Contact him at [email protected] or 973-808-9500.

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C


FINANCIAL p l a n n i n g

Treasury Inflation Protected Securities(TIPS)areoneasset

class that can play an important role in any diversified portfolio. TIPS are bonds issued by the U.S. Treasurywhoseprincipal(parvalue)fluctuateswithchangesintheconsumerpriceindex(CPI),thereby offering investors a way to helpreduceinflationrisk.Anotherimportant TIPS feature is that while the coupon rate on TIPS stays constant, coupon payments are based on a principal amount that is adjustedforCPIchanges.Thus,inanincreasing inflationary environment, the actual interest income paid by the bond will rise accordingly. These are two important distinctions when comparing TIPS to traditional bonds, because par value does not change with traditional bonds.

Inflation Example 1A significant long-term threat to investors is inflation. Inflation erodes investor purchasing power and can be particularly corrosive to bonds. When an investor owns a bond, especially a long-term bond, there generally is not much concern about receiving theprincipalbackatmaturity.However,manyinvestorsoverlookthe purchasing power of that bond when it matures.

Let’s assume an investor buys a$10,00010-yearbondpaying3-percentinterest.Theinvestorwill receive annual interest income of$300andattheendof10yearsreceive$10,000ofprincipal.Factoring in inflation at an assumed rateof3percent,theinvestorwouldlose26percentinpurchasingpower.The$10,000thatwasinvestedfora decade would only be able to buy $7,441 worth of goods at maturity. Thisdoesn’ttakeintoaccountthe$3,000ofinterestthatwasearned

overthebond’slife.Butwhentakingtaxesintoaccount,theinvestorbreaksevenatbest.Ifinflationgrewat 4 percent annually, purchase power erosionwouldgrowto32percent.That’squiteariskforaninvestortotakeinaconservativeinvestment.

Inflation Example 2Nowlet’sexamineasimilar$10,000,10-yearTIPSinvestmentthathasa1.5-percentcouponandanannualinflationrateof3percent.Attheendof10years,theinvestorwould receive a principal payment of$13,439,whichrepresentstheinflation-adjusted principal. Total interest payments over the bond’s lifewouldtotal$1,720,foratotalearningsof$5,159.Thisisclearlythe superior investment, even though the coupon rate is half that of the traditional bond. If inflation was to increase to 4 percent, the bond would pay$14,802,andcumulativeinterestpaymentswouldtotal$1,801.

It’s clear that TIPS can be a superior investment to traditional bonds,especiallywhereinflation(oraninvestor’sinflationexpectations)ishigh.However,thatisnotalwaysthecase. Remember, TIPS are affected by theCPIrate,andthatratecanalsoturn negative. When that happens, the par value of the bond is reduced and so is the corresponding income. Both the value at maturity and coupon payment will fluctuate with inflation.

Today’s TIPTIPS are generally a good investment; investorscanreduceinflationrisksignificantly by adjusting their principalandincometoCPIchanges.Unfortunately, TIPS are a rather unattractive investment in today’s marketbecausetheyareexpensive.Concernsabouttheeconomyandgeneralriskaversionamonginvestors

have caused TIPS to have high perceived safety, with treasury notes and bonds being perceived as among thesafest.Riskaversionissohightoday that some investors are willing tolockinnegativerealratesofreturnbybuyingTIPS.A10-yearTIPatpresstimeyieldedabout-0.6percent!

Certainly,differenttypesofinvestments involve varying degreesofriskand,asalways,pastperformance may not be indicative of future results. But TIPS can play an important role in a well-diversified portfolio. Remember, TIPS are but one ingredientinthatportfolio.Thekeyto any successful investment portfolio is relative weighting. It’s up to you, as a client’s trusted financial advisor, to help determine that weight.

Michael R. Steiner, CPA, CFP, is a wealth manager at RegentAtlantic Capital, LLC. He is chair of the New Jersey Society of CPAs Investment Committee and a member of the Personal Financial Planning Interest Group. Contact him at [email protected] or 973-425-8420.

Take a Tip on TIPSBy MICHAEL R . STEINER, CPA, REgENTATLANTIC C APITAL, LLC

BEHIND EVERY SCHOLARSHIP IS A STORY.

njscpa.org/scholarship


A forensic accountant is often engaged by

an attorney in a litigation matter to assist a client in proving or defending a case. When engaged in a litigation matter, my firm is subject to both its own professional

standards and the rules of civil procedure followed by the court in the jurisdiction in which the case was filed. Forexample,whenacaseisfiled in federal court, its civil procedures apply.

One of the most relevant

FederalRulesofCivilProcedures for forensic accountants, as well as other experts,isFederalRuleofCivilProcedure26(Rule26)whichgovernsdiscoverymatters and mandates the disclosure of certain facts

to the adversary. Because discovery rules differ, we are often engaged first as a non-testifyingexpertandlaternamedasatestifyingexpert.Anon-testifyingexpert’scommunications, notes and thelikearenotrequiredto be turned over to the adversary, while a testifying expert’sare,asamendedbychangesmadeinDecember2010.Thesearethefirstsuchamendments to be put in placesince1993.

The1993amendmentscaused quite a dilemma for thetestifyingexpertsandattorneysworkingtogetheron a case. These amendments required any communication, whether oral or written, be turned over to the adversary or deemed discoverable and notsubjecttoworkproductprotectionrules,makingitdifficultfortheexpertandattorneys to openly discuss facts of the case. As a result, and to the detriment of the case,theexpertandattorneylimited their written and oral communication, and theexpertpreparedonlyone draft of his/her report. In some matters, to avoid disclosureundertheworkproduct privilege, counsel or his/her clients hire non-testifyingexpertstorundifferent scenarios and calculations.Here,testifyingexpertsareabletoshowattorneys a copy of their reports on a laptop or other device for review and editing without creating another draft.

FORENSIC f i l e

The Impact of Federal Rule 26 ChangesBy SEAN RAquET, CPA, BEDERSON & COMPANy LLP


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TheDecember2010amendments included limiting the discovery of draft reports, attorney-expertcommunicationsandchanged the requirement that all “data and other information” be disclosed to “the facts or data considered by the witness” being disclosed to the adversary. Theexpectationwasandis that these changes will streamline the discovery process when testifying expertsareusedduringlitigations. Not only will it eliminate unnecessary questioning at deposition, but it will also reduce associated costs.WhileRule26changesinclude the protection of most communications between attorneys and expertsanddraftreports,certain information is still discoverable, including:•Theexpert’scompensation

arrangement.•Informationconsidered

that was provided by counsel for whom he/she is working.

•Anyassumptionsusedthatwere provided by counsel.

The modifications do not protect communications with third parties, such as othertestifyingexperts.Forexample,whenaforensic accountant relies on information provided by anothertestifyingexpertinformulating his/her opinion, he/sheoftenspeakswiththeotherexpert.Beware,those discussions are

discoverable. If the forensic accountantisaskedifhe/she had any conversations by opposing counsel during the deposition, the forensic accountant will have to divulgethecontent.Hadthe conversations been with the attorney, they would be privileged and he/she would not be required to respond to the question.

In its report to the Judicial Conference,theCommitteeon Rules of Practice and ProcedurelookedtoNewJersey’s success after enacting its own rules prohibiting discoveryofdraftexpertreports and limiting discovery of attorney-expertcommunications.The committee stated that it “obtained information from lawyers practicing on both sides of the ‘v’ and in a variety of subject areas abouttheirexperienceswithit” and that “the New Jersey practitionersemphasizedthatdiscovery had improved.”

As a forensic accountant who has been engaged as a testifyingexpertinfederallitigationmatters,Rule26changeswillmakeiteasierto complete assignments without hindering a litigant’s rights to fair due process. It’s a win for all involved.

Sean Raquet, CPA, CFE, is a partner at Bederson & Company LLP. He is a member of the New Jersey Society of CPAs. Contact him at [email protected] or 973-530-9128.

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INDUSTRY i n s i g h t s

I’veassisteddozensofcompanieswith their financial statements and

taxreturns.Oneoften-overlookedarea is maintaining accurate and up-to-date shareholder information. For smaller companies, this is relatively easy, but for companies that have grown significantly and added morecomplexcapitalstructures,the need for proper shareholder accounting becomes that much more important.

Beyond the BasicsMostsmallbusinesseshaveshareholders who’ve remained unchangedforyears.Sanssomekeyevent, such as a death, sale of an interest or shareholder addition, the accounting is fairly straightforward. Manycompaniesmaintaintheshareholder information in a simple ExcelorWorddocumentandupdateaccordingly. As companies grow,

the capital structure can become morecomplexandrequireenhancedshareholderaccounting.Dependingonthecompany’staxstructure,proper shareholder accounting is crucial so as to not disqualify the entityfromcertainpreferentialtaxtreatment.

The Shareholder AgreementThe first item to reconcile is the underlyingbooksandrecordsreflecting the shareholder agreement. Thisbasictaskisoftenoverlooked,and companies report the incorrect owner percentages or reflect the wrongstockclass.Accountforeach shareholder agreement, and document any changes to shareholder status.Thecompanyshouldalsokeepa summary of the basic terms of the shareholder agreement: voting rights, stockclassandanyotherpertinent

information.Manycompaniesusestockissuancetoraisecapital.I’veencountered many instances of the underlyingbooksandrecordsnotreflectingtheissuanceofstock,which presents a number of issues. The financial statements may report thewrongamountsofstockissued,andthetaxreturnsmayhaveincorrectly allocated profit or loss or, even worse, not reported a new shareholder.

ISOsAn increasing number of companies havebeenofferingincentivestockoptions(ISOs)toemployeesforperformance-based compensation. An ISO requires the company to manage each employee agreement and account for various items, such as issuance date, vesting period, qualified versus non-qualified, to name a few. ISOs also require certain valuations to be performed to report the correct compensation for each employee.

Another component of managing shareholdersisprimarilytaxrelated.Manystatesrequirecompaniestoremittaxesforout-of-state shareholders. Shareholders must provide change-of-address information for any mailings, and the taxreturnsneedtoreflectthissameinformation.Datesbecomemoreimportantfortaxpurposeswhenthere is a change in shareholders for S corporations so that income or loss is allocated correctly. Keep accurate records related to shareholder basis forScorporations.Eachshareholder’scapital account should be accounted for, and a schedule should reflect all additions and subtractions (income,loss,capitalcontributedanddistributions)toarriveatanending capital balance. I’ve seen shareholders with negative capital

Don’t Lose Track of Tracking ShareholdersBy MICHAEL J . NAPOLITANO, CPA, CITRIN COOPERMAN & COMPANy, LLP


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accounts which, in some instances, prevented loss deductions. This has led the shareholder to question the accounting of his or her capital account and forced the company to spend many hours reconciling the last several years of transactions, wasting valuable time and money.

Employment AgreementsEmploymentagreementswithshareholdersarealsocritical.Howoften have we seen litigation between parties, especially during difficult economic times? When was the last time your clients’ buy-sell agreements were reviewed? If you can’t remember, it’sprobablyfartoolong.Theclockistickingonwealthtransferopportunitiesas2012comestoaclose.Thismaybe one of the last opportunities to giftlargevaluesofcloselyheldstock,unlessCongresssaysotherwise.

Shareholder SchedulesMaintainingshareholderschedulesis not a difficult process and, if done annually, future shareholder problemscanbeavoided.Companiescan go years without changes to their shareholders, and the idea of maintaining separate schedules becomesanafterthought.Mostofour attention is generally spent on managing the financial operations and cash flow, and shareholder schedules are usually at the bottom of the list. The fire drill occurs when a shareholder sells interest or the company is sold. These events are often the trigger for the shareholder to suddenlytakenotice.

Michael J. Napolitano, CPA, is a partner at Citrin Cooperman & Company, LLP. He is a member of the New Jersey Society of CPAs. Contact him at [email protected] or 973-218-0500.

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SMALL/SOLE p r a c t i t i o n e r

Under the passive activity loss rules, net income/loss from a publicly

tradedpartnership(PTP)isconsideredportfolio income to the partner and, therefore, is not passive activity income (Form8582).Passiveactivitylimitationsare applied separately to income/loss items attributable to each PTP and cannot be netted with income/losses from other PTPs. Upon a PTP disposition, there’s usually a statement attached to the K-1 that indicates the gainorlossthatmustbereported(e.g.,ordinary gain/loss versus capital gain/loss).Thisinformationisn’tincludedonthe face of the K-1.

Qualified Production Activities IncomeBox13oftheK-1containsthequalified production activities income (QPAI)andrelatedexpenses,whichcanbesixormorelineitems.Ifthisis the only source from which QPAI isearnedandtherearenoW-2wagesonline13,codeV,youdon’tneedtoenter any of the QPAI information into yourprogram,astherewillbenotaxbenefit. That’s because the allowable deduction is the smaller of 9 percent ofthequalifyingincomeor50percentof the qualifying wages. No wages; no benefit.

Reporting Information on K-1 Partnership FormsBy RALPH LOggIA, CPA, FAZIO, MANNuZZA, ROCHE, TANKEL, LAPILuSA LLC

Foreign TaxesScheduleK-1,box16containsforeigntransactions.IfthetaxpayerismarriedandtheamountinboxesLandM(foreigntaxespaid/accrued)isn’tmorethan$600,youdon’tneedtoinputintoyourprogramlines16A-K,unlessthereare other sources of foreign transactions thatwouldputthetaxpayeroverthethreshold.Oneexceptionisifthere’sacarryforwardforeigntaxcreditavailable.Theamountsonlines16A-Kcouldthenhelp release some of the carryforward credit.

NJ Partnership Filing Requirements and Other ConsiderationsIf your client is a nonresident of NJ and receives a NJ K-1 that shows no income or loss in column B for NJ source amounts, NJ requires the partnership to fileataxreturnifithasjustoneresidentpartnerinthatstate.Essentially,ifthepartnership does not conduct business in NJ but has a NJ partner or member, the partnership is required to file a NJ partnershiptaxreturnandissueK-1sto all partners or members. Some other states with this filing requirement include Delaware,Georgia,Maine,Missouri,NewYork,Oregon,PennsylvaniaandWest Virginia.

Part IV of an NJ K-1, which includes the supplemental information, reports the partner/member share of an Internal RevenueCodesection754adjustment.This adjustment is permitted as a deduction for NJ purposes and should decrease the amount of income shown in Part II of the K-1.

An NJ K-1 that reports a nonresident partner/membershareofNJtaxbasedon the amount of income allocated to NJisnotonlyincludedasataxpaymentontheclient’sNJtaxreturn,butisalsopermittedasanitemizeddeductiononthefederaltaxreturnforstatetaxespaid.However,notallK-1sprovideafootnoteastowhenthistaxwaspaidsothattheclient’staxpreparermaydeterminetheyearinwhichthetaxpayershouldtakethedeductiononScheduleA.

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It’snotnecessarytoasktheclientiftheestimatedtaxpaymentsweremadebythe partnership.

Visitstate.nj.us/treasury/taxationandenter the employee identification number and the name of the partnership to view thedetailsoftheestimatedtaxpaymentsmade. You can also use the website to fileandpayPart-100andPart-200-Tandmakeestimatedtaxpayments.NJrequires payment by electronic funds transfer if the partnership’s prior year liabilityexceeded$10,000.Don’tdeduct nonresident withholding on thepartnershiptaxreturn.It’snotanexpense,it’spartofthepartner’s/member’s distribution.

A gain on the sale or disposition of a partnership interest may be entitled to a Koch depreciation basis adjustment. Forcertainlosseswherethetaxpayer’sfederal basis was reduced, but where the taxpayerdidnotreceiveasimilarbenefitonhis/herNJtaxreturn,thetaxpayeris entitled to adjust the basis for NJ purposesinordertorecognizealowertaxablegain.Thisadjustmentshouldbereflectedinthebucketofnetgainsorincomefromdispositionofproperty(line18)onthetaxpayer’sreturn.

Finally, interests in partnerships that generate passive income without any offsetting passive losses, if disposed ofin2012,canrecognizegainat15percent before the federal capital gains rateincreasesandavoidthe3.8-percentMedicaretaxthatbeginsin2013.

Ralph Loggia, CPA, M.S.T., is a tax manager at Fazio, Mannuzza, Roche, Tankel, LaPilusa LLC. He is a member of the New Jersey Society of CPAs State Taxation and Federal Taxation interest groups. Contact him at [email protected].

Member BenefitHands-On Tax Return Workshop – Partnerships & LLCsWednesday, December 19, RoselandVisit njscpa.org/catalogExpress Code: E1212701


The corporation is widely knownasamechanismfor

business owners and managers to shield themselves from personal responsibility for a business’s debts. However,inNewJerseyandinanincreasing number of states, the corporate form offers little protection to responsible persons when a failure toremittrustfundtaxesisatissue.

Trustfundtaxesareconsideredasalestax,grossincomewithholdingtaxandmotorfuelstax.NewJersey defines a responsible person broadly. Both corporate officers and corporateemployeesareexposedtoa potential penalty. The touchstone for personal responsibility is not the corporate title, but rather whether the position imposes a duty to collect andremittrustfundtaxesonbehalfofthecorporation.Mereunexercised

authoritytocollecttaxeswillnotsuffice, while authority to oversee thosefailingtoremittaxesmaysuffice.In1993,theNJTaxCourtaddressed the issue of responsible persons in Cooperstein v. Director, Division of Taxation,13NJTax68.Thecourtanalyzedthesefactors:•Contentsofcorporatebylaws.•Officerand/orstockholderstatus.•Authoritytosignchecksandtheexerciseofthisauthority.

•Authoritytohireandfireandtheexerciseofthisauthority.

•Responsibilitytoprepareand/orsigntaxreturns.

•Day-to-dayinvolvementinthe business or management responsibility.

•Powertocontrolpaymentregarding corporate creditors and taxes.

•Knowledgeoffailuretoremitduetaxes.

•Derivationofsubstantialincomeorbenefits from the corporation.

TheNJDivisionofTaxationhas announced it will use these and possibly other factors. Upon a finding of personal responsibility, the division states that liability attaches tounpaidtrustfundtaxesalongwithpenalties and interest accrued on the delinquency.

Determiningwhetheracorporateofficer or employee is a responsible partywithadutytocollecttrusttaxesis a fact-sensitive inquiry. A seminal case, Cooperstein was decided in favor ofthetaxpayer.Thecourtturnedto“well-reasoned sister-state decisions” ofNewYorkcourtsforguidance,emphasizingthenearlyidenticalstatutorylanguageinNewYorkandalsonotingtheNewYorkdecisions’consistency with federal cases.

JosephCoopersteinwasalicensedrealestatebrokerandconsultanthiredby the sole proprietor of a corporation to discuss the commercial feasibility ofsellingthebusiness.Coopersteinadvised selling the business to family members, as the business had no real assets, and he became president anddirector.Coopersteinhadtheauthoritytosigncorporatechecksbutneverexerciseditduringthetaxperiodatissue,nordidheexercisetheproxygivinghimvotingcontrol.Hehadnoinvolvementintheday-to-day operations of the business or in its management, and his main participationwastoearnabrokeragefee.

The court applied the aforementioned factors as gleaned fromNewYorkcaselawtodetermine

TAX t a l k

New Jersey’s Responsible Persons LawBy gARy C . B INgEL, CPA, AND gINA gIORDANO, E ISNERAMPER LLP


29

thatCoopersteindidnothaveadutytoactforthecorporation.Coopersteinwas absolved from liability for the corporation’s unpaid sales and gross incomewithholdingtaxes.Thecourtspecifically rejected the notion that unexercisedauthorityalonemayleadto a finding of personal responsibility. Rather, the court focused on the degree of influence and control actually exercisedbytheofficer.

By contrast, the 1994 case, Skaperdas and Birkenholz v. Director, Division of Taxation,14NJTax103,foundtwoof the three corporate officers to be

personally liable for the corporation’s unpaidsalestaxes,employingmuchofthe same analysis as in Cooperstein. The two responsible officers signed checkswithregularity,controlled84percentofthecorporatestockandexercisedmanagementcontroloverthecorporation. The other officer did not exercisehisauthoritytosignchecksandcontrolledonly16percentofthecorporatestock.

The responsible party law seems far reaching and unforgiving; however, NewJerseycourtshavetakenapragmatic approach in its enforcement.

To avoid complication, a corporate officer or employee should promptly respond to a personal responsibility noticewithintheallotted90-daytimeframe.Note:Determinationsof personal responsibility may be challenged.

Gary C. Bingel, CPA, J.D., CMI, M.B.A., is a partner in the state and local tax consulting group at EisnerAmper LLP. Gina Giordano, J.D., MAcc, is part of EisnerAmper’s state and local tax consulting group. Contact the authors at 908-218-5002.

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TECH c e n t e r

NewJersey’sTechnologyBusinessTaxCertificateTransferProgramtargetsneworexpandingemerging

technology and biotechnology companies with unused researchanddevelopment(R&D)taxcreditsorunusednetoperatinglosses(NOLs).TheNJEconomicDevelopmentAuthority(NJEDA)determinesparticipants’eligibility,andtheNJDivisionofTaxationdeterminesthevalueofthetaxbenefits.

Theprogramprovides$60millionoftaxbenefitsannually,ofwhich$10millionisallocatedexclusivelyamong the eligible companies operating within three innovationzones(sectionsofCamden,NewarkandgreaterNewBrunswick).Awardsin2011totaled83,rangingfrom$21,475to$9,459,430,andtheaverageawardwas$833,333.

Transferabletaxbenefitsincludeaneligibleapplicant’sunused NOL carryovers multiplied by the applicant’s anticipatedcorporationbusinesstaxallocationfactorforthetaxyearinwhichthebenefitistransferred,andit is subsequently multiplied by the corporation business taxrateplustheapplicant’stotalunusedresearchanddevelopmenttaxcreditcarryovers.Anapplicantcantransferlessthanallofitsavailabletaxbenefits.

Transferabletaxbenefitscanbesoldtoacorporationbusinesstaxpayerforatleast80percentofthesurrenderedtaxbenefit.TheNJEDAreportedanaveragesalepriceof

93percentforsurrendered2011taxbenefits.Thebusinessmustbeaneworexpandingtechnology

orbiotechnologybusinesswithfewerthan225U.S.employees(includinganyparentcompanyandallsubsidiaries).Aneligiblecompanymusthaveatleastonefull-timeemployeeworkinginNJifthecompanyoritspredecessorhasexistedforlessthanthreeyears,fivefull-timeemployeesinNJifithasexistedformorethanthreeyearsbutlessthanfiveyears,or10full-timeemployeesinNJifithasbeeninexistenceforfiveyearsormore.

InSeptember2012,theNJEDAadoptedrulesestablishing a new definition of “full-time employee workinginthisstate.”Aqualifyingemployeemustspendatleast80percentofhisorhertimeworkinginNJandmust be eligible to receive health benefits under the group health plan of the applicant or an affiliate. Anyone who worksasanindependentcontractororonaconsultingbasis is not a full-time employee. Special rules apply for workersprovidedbyprofessionalemployerorganizations.

An applicant cannot show positive net operating income in either of the two full years of operations preceding the application date. Further, an applicant cannot be owned or controlled(directlyorindirectly)byanothercorporationorbe part of a consolidated group of affiliated corporations (asfiledforfederalincometaxpurposes)thathaspositivenet operating income in either of the prior two years.

The NJ Technology Business Tax Certificate Transfer ProgramBy JAMES B . EVANS JR . , CPA, KuLZER & DIPADOVA, PA

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Net operating income is determined from the applicant’s financial statements, butdoesnotincludenetincomeresultingfromsellingNOLsorR&Dcredits,selling a major asset or other nonrecurring income. Financial statements of the applicant and all of its affiliates must be prepared under generally accepted accountingprinciples(includingfootnotes)andcompiled,reviewedorauditedbyanindependentCPAfirm.Internalfinancialstatementsortaxreturnscannotbe used to determine net operating income.

Thesalesproceedsmustfundoperatingexpensesofthesellingcompanyinthestate,includingexpendituresforrealestateandequipment,workingcapital,salaries,R&DexpendituresandanyotherexpensesdeterminedbytheNJEDAto be necessary to carry out the program’s purposes. If a selling business fails to usethesalesproceedsasrequired,itmustreturntothestate100percentofthenon-qualifyingexpenditures.

A company that fails to maintain a headquarters or base of operation in the stateduringthefiveyearsfollowingthesaleofitstaxbenefitsissubjecttoarecapturerequirement.Asellingbusinessmayretainonly20percentofthefacevalueofthetaxcreditcertificateforeachfullyearthebusinessremainedinNJ.The forfeiture provisions do not apply if the failure is due to the liquidation of theneworexpandingemergingtechnologyorbiotechnologybusiness.

James B. Evans Jr., CPA, J.D., LL.M., is an attorney with Kulzer & DiPadova, PA. He is a past president of the New Jersey Society of CPAs and a current member of the State Taxation and Federal Taxation interest groups. Contact him at [email protected] or 856-795-7744.

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SOCIETY p a g e s

CPE Offerings and EventsUpcoming Education Foundation Events

Date Event/Code Location CPE Credit

11/19 Loscalzo's Implementation Guide to the Risk Assessment Standards (E1211071) Iselin 8/AA

11/19 Loscalzo's Using Tax Basis and Other Special Purpose Frameworks Presentations Effectively and Professional Ethics for New Jersey CPAs (E1211471)

Voorhees 4/AA,4/PE

11/26 Mergers, Acquisitions and Sales of Closely Held Businesses: Advanced Case Analysis (E1211363) Iselin 8/TX

11/27 Multistate Conference (E1211010) Edison 8/TX

11/27 Cooperation with Bankers Breakfast (E1211770) Iselin 1/TX

11/27 Form 990: AICPA's Answer to Unlocking the Tax Complexities (E1211371) Iselin 8/TX

11/27 Financial Reporting: Turn Information into Action! (E1211203) Roseland 8/AA

11/28 Fraud Alert! Prevention and Follow-Up (E1211213) Roseland 8/AA

11/28 Loscalzo's 2012 FASB and AICPA Update (E1211081) Iselin 8/AA

11/28 New Jersey Law and Ethics Webinar (E1211104) N/A 4/PE

11/29 Loscalzo's Step-by-Step Guide to Compliance Auditing – A Gateway to Efficiency (E1211091) Iselin 8/AA

11/29 Advanced Technical Tax Forms Training – Form 1040 Issues (E1211291) Roseland 8/TX

11/29 AICPA's Annual Update for Controllers (E1211383) Roseland 8/MT

11/29 CPA Exam Application: Dotting Your I’s , Crossing Your T’s (E1211675) Roseland N/A

11/29 CPA Exam Study Session – Failure Is Not an Option (E1211685) Roseland N/A

11/30 Advanced Controller and CFO Skills (E1211393) Roseland 8/MT

11/30 Advanced Technical Tax Forms Training – LLCs, S Corporations and Partnerships (E1211301) Roseland 8/TX

11/30 Loscalzo's Not-for-Profit Industry Update and Major Accounting and Disclosure Issues (E1211051) Iselin 8/AA

12/3 Strategies and Tactics in the New War Against Higher Individual Taxes (E1212231) Iselin 8/TX

12/3 Loscalzo's Compilation and Review Essentials – Rules for Local Practitioners (E1212041) East Hanover 8/AA

12/3-4 AICPA's 1040 Tax Return Workshop by Sid Kess (E1212391) Roseland 16/TX

12/3 PowerPoint (2007 and 2010): Creating Dynamic Financial Presentations with Business Graphics (E1212443) Roseland 8/CS

12/4 Cloud Computing Unraveled and Social Media for Accountants (E1212683) Roseland 8/CS

12/4 Choosing the Best Entity Structure Under the New Tax Law in 2012 (E1212201) East Hanover 8/TX

12/4 Loscalzo's Accounts Payable Fraud: Overlooked Schemes and How to Detect and Prevent Them (E1212053) Iselin 8/AA

12/5 Young Professionals Holiday Party (E1212380) New Brunswick N/A

12/6 Nonprofit Conference (E1212130) Edison 8/MC

12/7 Loscalzo's Using Tax Basis and Other Special Purpose Frameworks Presentations Effectively and Professional Ethics for New Jersey CPAs (E1212011)

Iselin 4/AA,4/PE

12/10 Introduction to U.S. Taxation of International Transactions (E1212113) Iselin 8/TX

12/10 Advanced Form 1041 Practice Workshop (E1212241) Jamesburg 8/TX

12/10 The Best Individual Income Tax Update Course by Surgent McCoy (E1212251) Voorhees 8/TX

12/10 Business Law Refresher: What Every Financial Manager Should Know (E1212153) Roseland 8/MT

12/10 Fair Value Accounting: A Critical Skill for All CPAs (E1212403) Mount Laurel 8/AA

12/11 Skillful Negotiations: Getting the Most from Your Banker, Customers and Vendors (E1212163) Roseland 8/MT

12/11 The Best Income Tax, Estate Tax and Financial Planning Ideas of 2012 (E1212261) Voorhees 8/TX

12/11 Annual Update for Accountants and Auditors (E1212411) Jamesburg 8/AA

12/11 Tax Aspects of Bankruptcy: All Need Not Be Lost (E1212121) Iselin 8/TX

12/11 Loscalzo's Governmental Update and Major Accounting and Disclosure Issues (E1212141) Iselin 8/AA

KEY

njscpa.org/catalog

AA – Accounting & Auditing MT – Management

CS – Consulting ServicesPD – Personal DevelopmentSK – Specialized Knowledge

EC – EconomicsPE – Professional EthicsTX – Taxation

MC – Multiple Categories PM – Practice Management

Upcoming Chapter Events

Date Chapter Event/Code Location CPE Credit

11/19 Southwest Jersey Bank Night (E1211509) Voorhees 2/EC

11/20 Passaic County 1099 Primer and Changes (E1211759) Paterson 2/TX

11/28 Middlesex/Somerset Business Valuation and Succession Planning (E1211639) Somerset 4/CS

12/1 Union County Annual Tax Seminar (E1212559) Union 5/TX

12/4 Hudson IRS E-File Issues (E1212629) West New York 2/TX

12/6 Bergen New Jersey Law and Ethics (E1212459) Paramus 4/PE

12/6 Middlesex/Somerset Bankruptcy (E1212609) Somerset 4/TX

12/6 Monmouth/Ocean Accounting and Auditing Seminar (E1212649) Neptune 4/AA

12/7 Mercer Annual Tax Seminar (E1212589) West Windsor 8/TX

12/7 Southwest Jersey Annual Tax Seminar (E1212529) Cherry Hill 5/TX

12/7 Essex Offer in Compromise/Navigating the IRS (E1212579) East Hanover 4/TX

12/7 Monmouth/Ocean New Jersey and New York State Tax Update (E1212659) Eatontown 3/TX

12/7 Atlantic/Cape May Annual Tax Seminar (E1212509) Mays Landing 5/TX

12/12 Loscalzo's Not-for-Profit Auditing Made Easy (E1212071) Iselin 8/AA

12/12 Advanced Technical Tax Forms Training – Form 1040 Issues (E1212211) Voorhees 8/TX

12/12 Acquisitions to Grow the Business: Strategy, Structure, Integration and Due Diligence (E1212173) Roseland 4/MT, 4/AA

12/12 New Jersey Law and Ethics Webinar (E1212104) N/A 4/PE

12/13 AICPA's Annual Federal Tax Update (E1212421) Mount Laurel 8/TX

12/13 Advanced Technical Tax Forms Training – LLCs, S Corporations and Partnerships (E1212221) Freehold 8/TX

12/13 Make Money for You and Your Clients: Surgent McCoy's Top Business Tax Planning Strategies (E1212371) Roseland 8/TX

12/13 Chief Financial Officer: Executive Level Skills for Financial Managers (E1212183) Iselin 6/MT, 2/AA

12/13 The Loscalzo Answer to Frequently Asked Questions in Accounting and Auditing (E1212081) Iselin 8/AA

12/14 AICPA's Hottest Tax Topics for 2012 (E1212431) Mount Laurel 8/TX

12/17 Surgent McCoy's Advanced Individual Income Tax Return Issues (E1212291) Iselin 8/TX

12/17 The Best S Corporation, Limited Liability and Partnership Update Course by Surgent McCoy (E1212281) East Hanover 8/TX

12/17-18 Hands-On Tax Return Workshop – Individuals (Form 1040) (E1212481) Roseland 16/TX

12/18 The Best Individual Income Tax Update Course by Surgent McCoy (E1212271) East Hanover 8/TX

12/18 Loscalzo's Auditing Manual Utilizing the Risk-Based Audit Standards (E1212091) Iselin 8/AA

12/18 Advanced Tax Structures: Using Tiered Partnerships, Multiple Corporations, Series LLCs and Disregarded Entities (E1212303)

Voorhees 8/TX

12/19 Loscalzo's Hands-On Guide to Understanding and Testing Internal Control (E1212031) Iselin 8/AA

12/19 Hands-On Tax Return Workshop – Partnerships and LLCs (E1212701) Roseland 8/TX

12/19 Surgent McCoy's Handbook for Mastering Basis, Distributions and Loss-Limitation Issues for S Corporations, LLCs and Partnerships (E1212311)

Roseland 8/TX

12/20 Reading, Understanding and Structuring LLC and Partnership Agreements from a CPA's Perspective (E1212321) Roseland 8/TX

12/20 The Complete Guide to Payroll Taxes and 1099 Issues (E1212333) East Hanover 8/TX

12/20 Loscalzo's Tax Practitioner's Guide to Accounting and Reporting Issues (E1212021) Iselin 8/AA

12/21 Effective and Efficient Senior-Level Review of Tax Returns in Busy Season (E1212341) Iselin 8/TX

12/27 Hot IRS Tax Examination Issues for Individuals and Businesses (E1212351) Jamesburg 8/TX

12/28 Surgent McCoy's 2012 Top Ten Tax Topics (E1212361) Jamesburg 8/TX


33

SOCIETY p a g e s


34

Get InvolvedAccounting and Auditing Standards Interest Group Likes Making Comments

By Nicholas A. Jenner, CPA, MSPC Certified Public Accountants and Advisors, P.C.

One of the most compelling reasons for choosing a career in public accounting is the opportunity for professionals to have voices that allow them to shape the landscape of their profession. For those who have gravitated toward accounting and auditing, an increasing concern is the multitude of often-complex standards that govern the profession, even those standards at the proposal stage. As professional stakeholders, our ability to provide commentary on prospective standards provides a unique opportunity to advise the standard-setting bodies on the benefits that may (or may not) be provided by the adoption of those proposed standards.

Members of the New Jersey Society of CPAs Accounting & Auditing Standards Interest Group regularly comment on exposure drafts – drawing on the vast experience of the CPAs comprising the group. The group first educates its members through a contemporaneous exchange of ideas during the drafting of comment letters that convey the interest group’s position on a particular standard.

These comment letters serve a vital purpose by allowing for constructive outreach and due process between accounting professionals and the standard-setting bodies. They also serve one of the core missions of the NJSCPA: to encourage high professional standards through competency and ethics.

Recently drafted comment letters have included the Financial Accounting Standards Board’s revised proposed standard on revenue recognition, the Public Company Accounting Oversight Board’s proposed standard for revision to the auditor’s report and the Standards for Accounting and Review Services’ proposed statements. You can read these comment letters at njscpa.org/accounting.

Ultimately, an organization is only as good as the members who are ardent about its cause. Consequently, NJSCPA members and interest groups demonstrate their desires to improve the profession through their activities, affording those involved the ability to continually improve themselves and the profession as a whole which, in turn, benefits the public. For more information about the Accounting & Auditing Standards Interest Group, visit njscpa.org/getinvolved.

Nicholas A. Jenner, CPA, is a senior manager with MSPC Certified Public Accountants and Advisors, P.C. He manages MSPC’s quality control department, conducts reviews of engagement compliance with professional standards and coordinates staff training. He is a member of the NJSCPA Accounting & Auditing Standards Interest Group. Contact him at [email protected].

Members in Transition Come Together in New Online CommunityThe New Jersey Society of CPAs is sensitive to the unique needs of members in transition. We have created a new Members in Transition community on Connect, the NJSCPA’s online community site, to help unemployed or underemployed members who are actively looking for employment network as well as share job search ideas, résumé tips, interviewing techniques and more based on their personal experiences. This is a private space away from other members, recruiters and employers to discuss strategies, frustrations and success stories. Stewart Linder, CPA, has experience hosting a similar group and has volunteered to guide the community. Job listings from the NJSCPA Job Bank will be posted weekly, and job search resources are posted in the community library.

To join the community and begin posting questions, thoughts and resources, log on to http://connect.njscpa.org/communities, search for “Members in Transition” and then click the “Join Community” button. Select a subscription option and save. Contact Carolyn Hook at [email protected] for more information.

Young CPAs Kickball Tournament Kicks for a CauseThe NJSCPA Second Annual Young CPAs Kickball Tournament brought together some of New Jersey’s most competitive young professionals and raised $2,000 in donations for The Valerie Fund. A total of 12 teams from 11 firms and companies faced each other in single-elimination matches. It all came down to the teams from Rothstein Kass and KPMG in the final round. After 40 minutes of kicking, catching and running by both teams, the KPMG team (pictured) took the victory by a score of 9 to 4. For a complete wrap-up of the game, including one hospitalization and free beer, read the August issue of E-YoungCPA at njscpa.org/youngcpas.


35

Get Involved NowVolunteer opportunities are available throughout the year. Here are a few activities that need your support now. Let us know how you’d like to be involved at njscpa.org/getinvolved.

Be a Mentor and Make a Difference – CPA members under the age of 36 are needed to be mentors for the 2013 NJSCPA high school scholarship recipients to provide guidance throughout their college careers. Apply online by Friday, December 14, at njscpa.org/mentor.

Read and Rank Essays from NJSCPA High School and College Scholarship Candidates – Volunteers are needed to read essays, which are limited to 500 words, from high school candidates on Saturday, January 5, from 9:00am to 1:00pm at NJSCPA headquarters in Roseland. College essays can be read electronically from Saturday, January 12, to Friday, January 18.

Interview NJSCPA College Scholarship Candidates – Society members are needed to interview candidates for NJSCPA college scholarships. College interviews will be held on Saturday, January 26, at Ernst & Young in Iselin, with a snow date of Saturday, February 2.

For more information on the above programs, contact Janice Amatucci at [email protected] or 973-226-4494 x209.

Meeting Planning Made Easy with Doodle.comChoosing a meeting date for a group of busy people can be difficult, especially when they use different calendar software or don’t keep an up-to-date calendar handy. Next time, try Doodle.com, an online scheduling tool that allows meeting planners to establish meeting time options. Participants can then indicate their availability and preferred meeting times. Site registration is not required for either the meeting planner or participants. Doodle provides a link for meeting participants and one for administration so that meeting planners don’t have to keep track of emails from participants on their availability, and it helps the group come to a consensus on a meeting time. “Doodle is very practical and efficient,” says Marc D. Mintz, CPA, chair of the NJSCPA Strategic Planning Committee, and he recommended the committee use it regularly to schedule meetings.

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1 2 3 4 5 6 7

8

9 10

11 12 13 14

15 16

17 18 19

20

21 22 23

24 25

26 27 28 29

30 31 32

33 34 35

Across1. Jersey Shore star4. Real Housewives of New

Jersey star, first name9. Shia LaBeouf attended this

university in Transformers: Revenge of the Fallen

10. Melted chocolate cake description

11. Zones14. Dress for a party15. Hoops grp.17. Famous Halloween

broadcaster in 1938 (two words)

20. Old British sports car21. Trenton, for one22. Recipe order24. I-95 sign26. The First Noel is one28. Singer who performed a

series of concerts at Revel casino, last name

30. Freeway division33. Try out34. And a partridge in a ___

tree35. Call, in poker

Down1. TV series set in New Jersey2. Popeye's girl3. Thrills5. Long, long time6. Christmas drinks7. Adding beauty to, the tree

perhaps8. Had a turkey12. Long, long ___13. Twice, for short15. One of the filming locations

for The Dark Knight Rises16. Pub order18. See 25 down19. Crowd roar20. Doctor21. Calcium symbol23. Christmas presents for

girls24. Hanukkah money25. Group featured in Jersey

Boys (goes with 18 down)27. Law & Order position, for

short29. Murder, __ Wrote31. Channel with mystery

shows, ___ and ___32. Above

See the answers on njscpa.org/newjerseycpa.

Finding that next great job opportunity in this difficult economy can prove to be a monumental challenge. To help you create an integrated job search approach that will help you land the job that’s right for you, the New Jersey Society of CPAs has developed a resource guide that highlights the member benefits to leverage for your search. Visit njscpa.org/ transition to explore these and other helpful benefits:

Chapters, Interest Groups and CommitteesNetwork and learn with members locally who share your interests.

ConnectConnect with your fellow members, use the membership directory and ask technical, management or administrative questions via the Open Forum at njscpa.org/connect.

Leave of Absence Membership Dues CategoryUnemployed members pay $88 per year and continue to receive the same level of benefits.

LinkedInMake contacts, keep in touch and find resources 24/7 with members and other professionals by joining the NJSCPA LinkedIn group.

Members in Transition Connect CommunityConnect with other members in your own online support and networking group for NJSCPA members seeking employment. See the Get Involved column in this issue for additional information.

NJSCPA Member Benefits MarketplaceSave money on business and leisure products and services.

Online Job BankPost your resume, search available jobs and find other job search resources.

Professional DevelopmentSharpen your skills, increase your knowledge and earn CPE at conveniently located conferences and seminars – all at special member pricing.

PublicationsStay current with the help of NJSCPA publications, including New Jersey CPA, E-NEWS, Tomorrow’s CPA and others.

Job Searcher Resources for a Tough Economy

SOCIETY p a g e s


37

HIGHLIGHTS OF FINANCIAL RESULTS

f o r t h e y e a r E n d e d M a y 3 1 , 2 0 1 2

W e are pleased to provide these financial highlights of fiscal 2012 for the New Jersey Society of CPAs and affiliated entities (NJSCPA Education Foundation and NJSCPA Scholarship Fund). Member programs and

services continued to be guided by the Society’s strategic plan, and operational results were enhanced by two key factors: the end of the CPE triennial reporting cycle and the NJ State Board of Accountancy’s adoption of a peer review program. While each of these factors was anticipated, actual results exceeded budget expectations and fueled the increase in unrestricted net assets. The third significant factor, uncertainty in the global investment markets, impacted all three entities, causing long-term reserves to decrease for the period, while still remaining above the targets established for each entity.

The Society continued efforts on its two major strategic programs, volunteer relations and firm outreach. Nearly 300 members submitted new volunteer interest profiles, and the number of NJSCPA 100-Percent Member Champion firms grew by more than 25 percent to almost 90 firms. The successful Pay It Forward Program reached 10,800 students thanks to the efforts of 140 members making presentations at 160 high schools. More than 220 new firms enrolled in the peer review program administered by the NJSCPA. Advocacy efforts focused on advancing appeal bond cap legislation, upholding privity and standard of care statutes in the courts, as well as the appointment of several members to the NJ State Board of Accountancy. The Society’s net assets increased approximately $113,000, more than $70,000 ahead of budget, despite unrealized investment losses of $165,000.

The NJSCPA Education Foundation completed the third year of the triennial reporting cycle with record-setting attendance, surpassing 30,500 attendees, and delivered nearly 162,000 credit hours. Strong attendance coupled with good program execution, including an increased emphasis on web training, allowed the foundation to increase its budgeted surplus by nearly $480,000 and increase net assets by approximately $660,000.

The NJSCPA Scholarship Fund continued to benefit from the strong support of the Society’s chapters, as well as from members, firms and companies. The fund increased the amount of awards granted to more than $500,000, the most in its history. More than 100 eligible students received awards, including awards by three Society chapters. Temporarily restricted net assets decreased approximately $131,000, due to unrealized losses of $176,000 on the fund’s investment portfolio.

MeMbership DuesIncome from membership dues increased approximately 1.4 percent over last year mainly the result of new member income since dues rates remained largely the same. Recruitment of new members exceeded budget by 170 members, while overall member retention declined slightly from 93 percent last year to 92 percent in 2012. Total membership remained flat at 15,400.

eDucational prograM FeesIncome from educational offerings was up more than $1.3 million over last year, due to the end of the CPE reporting cycle and the new requirement for a minimum number of live training credits. Attendance was very strong for each of the major lines of programming, and overall attendance was the largest since triennial reporting cycles began. Direct expenses of education programs increased accordingly.

other revenuesPublication income increased due to the biannual publication of the Forensic & Litigation Services Directory of CPAs. Royalties and commissions increased primarily as a result of expanded web-based CPE offerings. Investments declined approximately 6.7 percent, with unrealized losses of 8.5 percent, compared to a positive return of approximately 20 percent last year.

Revenues and OtheR suppORt 2011 2012

40%38%

40%

51% 3%

4%

2% 4%

2% 11%

4%

1%

Membership dues educational program Fees

peer Review Fees publications and advertising special events and Contributions

Investment, Royalties and Other


38

new JeRsey sOCIety OF CeRtIFIed publIC aCCOuntants and aFFIlIates

May 31, 2012 May 31, 2011

assetsCash and cash equivalents $ 6,614,000 $ 5,971,000

Investments 4,243,000 4,548,000

Other 919,000 916,000

total assets $11,776,000 $11,435,000

lIabIlItIes and net assets

Deferred revenue $ 2,198,000 $ 2,558,000

Other 884,000 825,000

Total Liabilities 3,082,000 3,383,000

Unrestricted net assets 6,233,000 5,460,000

Temporarily restricted net assets 2,461,000 2,592,000

Total Net Assets 8,694,000 8,052,000

total liabilities and net assets $11,776,000 $11,435,000

COMbIned stateMents OF FInanCIal pOsItIOn

2012 2011

pROgRaM seRvICes

Membership activities $1,277,000 $1,205,000

Communications and public relations 733,000 680,000

Educational activities 3,755,000 3,173,000

Peer review 304,000 271,000

Career awareness 776,000 725,000

total program services 6,845,000 6,054,000

suppORt seRvICes

Membership recruitment and fundraising 369,000 369,000

Management and general 1,684,000 1,594,000

total support services 2,053,000 1,963,000

tOtal pROgRaM and suppORt seRvICes $8,898,000 $8,017,000

Total expenses for 2012 increased 11 percent over last year and, exclusive of the increase in direct costs of education programs, they increased 6.5 percent. The increase in salaries and wages included an average merit increase of 2 percent, a severance package and additional hours for a part-time sales specialist. The remaining variance is due to the fact that last year included the effect of a change in vacation policy, lowering the vacation pay accrual and, with it, salary expense. Printing and distribution expenses were higher than 2011 due to the biannual production of the Forensic & Litigation Services Directory of

CPAs. Professional fees were up significantly due to additional peer review technical review fees and the launch of a comprehensive branding project. Other general expenses were up, mainly in the area of credit card fees, due to the increase in CPE registration volume, a larger portion of which came through e-commerce.

While the Combined Statements of Activities present expenses by natural classification, below are the combined expenses of the Society, the Education Foundation and the Scholarship Fund summarized by each major functional area.

2012

2011

FunCtIOnal eXpenses



operating expenses

Membership activities Communications and public Relations

educational activities

peer Review

Career awareness

Recruitment and Fundraising Management and general

4%

5%

9%

9%

15% 20%

8%

19%

8%

15%

3%

3%

42%

40%


39

new JeRsey sOCIety OF CeRtIFIed publIC aCCOuntants and aFFIlIates

year ended Year Ended May 31, 2012 May 31, 2011Changes in Unrestricted Net Assets Revenues and OtheR suppORt Membership dues and other fees $3,620,000 $3,569,000 Educational program fees 4,901,000 3,594,000 Peer review fees 384,000 306,000 Publication, directory and website advertising 182,000 136,000 Investment income (loss) (134,000) 446,000 Royalties and commissions 261,000 155,000 Special events 196,000 212,000 Other 72,000 76,000 Net assets released from restrictions 189,000 253,000 total unrestricted Revenues and Other support 9,671,000 8,747,000eXpenses Salaries, payroll taxes and employee benefits 3,670,000 3,449,000 Direct costs of educational programs 2,890,000 2,373,000 Rent and occupancy 431,000 422,000 Printing and distribution 152,000 136,000 Scholarship awards 463,000 425,000 Office and supplies 241,000 257,000 Professional fees 279,000 229,000 Travel and meetings 110,000 128,000 Special events 187,000 181,000 Other 475,000 417,000 total expenses 8,898,000 8,017,000 Increase in Unrestricted Net Assets 773,000 730,000Changes in Temporarily Restricted Net Assets Contributions 196,000 193,000 Investment income (loss) (138,000) 349,000 Net assets released from restrictions (189,000) (253,000) Increase (decrease) in Temporarily Restricted Net Assets (131,000) 289,000 Changes in net assets 642,000 1,019,000 Net assets at beginning of year 8,052,000 7,033,000 net assets at end of year $8,694,000 $8,052,000

COMbIned stateMents OF aCtIvItIes

These condensed financial statements are derived from the Society’s audited combined financial statements, which received an unqualified opinion. A complete copy of the financial statements is available by contacting the Society at 973-226-4494 or [email protected].




40

NJ State Board of Accountancy ReportSociety Offers Board CPE Tracker Program

Newark (September 20)

CommitteesRMA – The next Registered Municipal Accountant Exam is being held in Newark on Friday, December 7.

Education – The committee chair expressed an interest in possibly promoting the issues of eXtensible Business Reporting Language and International Financial Reporting Standards to accounting students.

Statutes/Rules/Regulations – The committee reviewed a number of issues – including the issue of didactic learning requirements – with the board’s regulatory analyst and legal counsel and is working on changes and adjustments and will send back to the board for review.

PublicNew Jersey Society of CPAs CEO & Executive Director Ralph Albert Thomas mentioned the Society’s quarterly board meeting being held on Friday, December 7, and a public policy forum on Tuesday, December 11, in conjunction with the New Jersey Business & Industry Association, which will cover the economic outlook for New Jersey, including recent regional survey data.

Thomas indicated a reciprocity bill is still in the NJ Legislature that addresses the retest requirement for CPA

practitioners whose licenses lapse after five years, the so-called “death penalty.” The proposed legislation would put the responsibility on the state board for addressing licensee deficiencies. Currently, New Jersey is one of only two states with this retest requirement.

Thomas reported that California recently passed mobility legislation, which is awaiting the governor’s signature. California’s mobility legislation should be effective as of January 1, 2013, making Hawaii the only state without a practice mobility requirement.

In light of the recent reports that the state is facing a larger revenue shortfall than previously estimated, Thomas said the Society is closely monitoring the state budget for potential vehicles to increase revenue, such as a tax on professional services.

Thomas will be presenting a proposal requesting the state board use the Society’s CPE Tracker system. This free system for Society members provides an electronic transcript of licensees who have taken courses through the NJSCPA, which includes the course, credit hours and course category. Thomas indicated that this system can streamline the review process and greatly decrease the amount of paperwork. It was noted that many large firms currently submit credit reports to the state board electronically for in-house credits taken.

SOCIETY p a g e s

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CLASSIFIEDS

Mergers/AcquisitionsWe are a well-established CPA firm in Essex County with a diverse client base and wonderful support staff. We have an opportunity for retirement-minded practitioners looking for a merger/succession plan or outright sale of their practice. Practices with $200K-$750K in business clients are welcome to call 551-655-1600. We can offer your clients the continuity and great service they deserve.

Goldstein Lieberman & Company LLC, one of the region's fastest growing CPA firms, wants to expand its practice and is seeking merger/acquisition opportunities in northern NJ and the entire Hudson Valley region, including Westchester. We are looking for firms ranging in size from $300,000 to $5 million. To confidentially discuss how our firms may benefit from one another, please contact Phillip Goldstein, CPA, at [email protected] or 800-839-5767.

Parsippany, NJ, three-partner CPA firm seeks retiring practitioner to merge/acquire practice ranging from $100K and up. Please contact Carl Gutt, 973-451-0800 x22 or [email protected].

Small Clifton CPA firm looking to buy out retirement-minded practitioner over 2-4 years. Will pay top dollar with large down payment. Let's discuss over coffee. File 80612

Central Jersey CPA firm seeks an individual, preferably with a small practice, for future partnership with retirement-minded partners. Email [email protected].

Established, northern New Jersey and New York City, mid-sized CPA firm seeks to merge with another like-minded CPA firm for mutually beneficial growth. We are seeking firms in the $500,000 to $2 million size in northern or central New Jersey or New York. This is your opportunity to expand without being gobbled up by one of the big guys. To confidentially discuss this opportunity, please contact [email protected].

Livingston sole practitioner seeks CPA with practice to assist in servicing clients leading toward association. Staff and office space available. Reply to [email protected].

The Curchin Group, LLC, a central NJ, Monmouth County firm is seeking to merge-in near-retirement sole practitioners and small firms needing succession planning. Other individuals seeking growth and expansion are welcome to inquire. Initial practice continuation also an option. Reply in confidence to Peter Pfister, CPA, at 732-747-0500 or [email protected].

Want to sell or merge your accounting practice? Accounting Practice Sales has qualified buyers waiting and financing available to sell your practice quickly and get you the best deal possible. For information regarding our risk-free and confidential services, call Bradley Holmes at 800-397-0249. Buyers see listings and register for free email notifications at accountingpracticesales.com.

Growing CPA firm with first-class marketing culture in central NJ is looking to expand its practice. Ideal merger candidates are sole practitioners or small firms with established niche focus and strong business development skills and/or in need of a succession plan. Reply in confidence to [email protected].

New Jersey – CPA firm wishes to acquire or merge with progressive, small to mid-sized firms. File 0701

New Jersey practices for sale: Northeastern Atlantic City County CPA practice, gross $410K. Central Monmouth County CPA practice, gross $300K. For more information, call Bradley Holmes at 800-397-0249 or visit accountingpracticesales.com to view all listings and register for free email updates. Mergers and acquisitions are not the only road. Have you considered a structured client transfer? It’s an ideal solution for practitioners to lighten their loads without an obligation to merge or sell. Contact us to learn more about this option. We represent a highly motivated CPA firm looking to recalibrate its practice by pursuing a mutually beneficial transfer arrangement. Contact [email protected] for details.

Professional ServicesOutsource your pension practice. We do nothing but pension administration. Let us make your pension practice efficient and profitable. Contact Larry Zeller from Preferred Pension Planning at 908-575-7575 or [email protected].

Peer Review – Do you need a practical system or engagement reviewer? Obtain a free quotation at [email protected]. Audits – Does your client need an audit, but you don't provide audit services? You do the tax work, and I'll do the financials; contact [email protected].

Real Estate

Real estate appraising – Tax assessment appeals, eminent domain (condemnation), unique properties; consulting; business valuations. Charles A. McCullough, CPA, M.B.A., State Certified General Real Estate Appraiser, American Society of Appraisers member; [email protected], renwickandassociates.com, 856-779-7050, 609-923-5879.

Two furnished offices for rent located near routes 23, 46 and 80 in Little Falls. Includes use of kitchenette, conference room, reception area, copier, scan and fax. Call Peter: 973-785-4588.

Accounting office space available immediately in Washington Township. Two offices available in a beautiful, professionally decorated office. Old-world-style décor. Includes an 800-square-foot conference room and 300 square feet of storage space. Call Ted Harrington at 856-275-3256 for more information.

Classified Advertising Replies to ads with file numbers should be sent to:

File________________________

New Jersey CPA Classifieds425 Eagle Rock Avenue, Suite 100Roseland, NJ 07068-1723

To see additional classified listings or to place an ad, visit njscpa.org/classifieds.


42

There I was, standing in front of a U.S. Navy fighter planethissummer,27yearsold,talkingaboutmycareer

pathasanaspiringCPA.AfinancemanagerfortheNavyDepartment,IwasfilmingapartforBring It On III, a NewJerseySocietyofCPAsvideodetailingtheaccountingcareeropportunitiesforhighschoolstudents.Mymajor,thecollegeclassesIhadtaken,thejobsIhadheldandpeopleIhadmetallledmetowhereIwasthatday.Andthemakingof this video gave me a chance to reflect on my career thus far. It all boiled down to opportunities and action.

Opportunitiessometimescomealongduetoluck,butthey are usually a reflection of your decisions and who youare.Iliketothinkyoumakeyourownluck.Eitherway, I owe a lot to opportunity. In many cases, these were opportunities created by people going out of their way to give me chance: an interview, job reference or help on someaccountinghomework.Whateveritwas,andnomatter how big or how small the gestures, I appreciate all ofmyopportunitiesandrecognizetheirimportanceinmyprofessional development.

Opportunity,ontheotherhand,cannotbeseizedwithoutaction. Knowing when, how and what to act on, as well

as learning from past actions, are critical success factors. We’veallactedinwaysthatwewishwecouldtakeback,butlearningfromtheseexperiencescanprovidevaluablelifelessonsandmakeusbetterpeople.“Youmiss100percentoftheshotsyounevertake,”saidhockeylegendWayneGretzky.Asprofessionals,ourcareersarebuiltonandareflection of our actions.

DuringthemakingofBring It On III,Irealizedandappreciated the impact this could have on high school students. I also started to gain more and more admiration fortheworkofprofessionalassociationsliketheNewJerseySocietyofCPAs.Thereisgreatvalueintheservicesit provides to both students and professionals. By offering informationonjobpostings,careeradvice,CPAExamtips,CPE,eventsandmore,theSocietyactsasasoundingboardfortheCPAprofessionandprovidesitsaudiencewiththetoolsitneedstoleverageopportunitiesandtakeaction.Therearethosetwowordsagain!Bring It On III is aperfectexample.Itvisualizesaccountingopportunitiesforhighschoolstudentsthattheymaynothaveknownexisted.From supporting the troops in Afghanistan to dissecting the financial impact of a bad trade in the National Football

STUDENT o u t l o o k

An Opportunity to Bring It On AgainBy CHRISTOPHER S . FLEMINg, u.S . DEPARTMENT OF THE NAVy


43

League,CPAsflourishacrossallindustries.DuringthefilmingofBring It On III,Iwasaskedwhat

IthinkaretheadvantagesofbeingaCPA.Myanswerwassimply“opportunity.”BeingaCPAmeansnotbeingpigeonholed,whetherit’sworkingonWallStreetorowningyourownhardwarestore.Itmeansdevelopingtheskillsandtoolsrequiredtotakeactionandsucceedinajobmarketthatisalwayschanging–andnotalwaysforthebetter.Andit means earning the respect and trust of others through our actions, which are a reflection of our profession as a whole.

WhenIlookbackatmyopportunities,Ialsothinkaboutwhat I’m doing to help others, especially young people, withtheircareeraspirations.TheNJSCPAprovidesavenuefor professionals to pay it forward and provide young professionalswithopportunitiestosucceedatworkandin life. Students who see this video may have no idea of what they want to major in, never mind what they want to dofortherestoftheirlives.However,byprovidingthemwith an understanding of what accountants do and the opportunitiesthatexisttothem,weareprovidingthemvaluableinformationfromwhichtomakedecisions.I’mgrateful to have been a part of Bring It On III. It gave me an opportunity to reflect on my career, hold my head up high and consider what I can do to further the careers of others.

Christopher S. Fleming is an NJSCPA CPA Candidate Member. He is a finance manager with the U.S. Navy Department. Contact him at [email protected].

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NewJerseySocietyofCPAsmemberswhoattendedtheAmericanInstituteofCPAs125thAnniversaryCouncil

meetingearlierthisyearinWashington,DC,deliverednewtoolstomembersoftheNewJerseyCongressionalDelegationthataredesignedtopromotegreaterfiscalinsightandtaxawareness.ItwaspartofanationalAICPAcampaigntomakeCongressionalmembersmoreawareofthetruestateofthenation’sfiscalhealthandhowmuchtaxpayersarepayingintaxesonanational,stateandlocallevel.

TheNJSCPAmembersgavetheNJCongressionalDelegationcopiesoftheAICPA’srecentlyreleasedvideo,What’s at Stake: A CPA’s Insights into the Federal Government’s Finances, as well asinformationonhowtoaccesstheAICPA’sTotalTaxInsightsCalculator.

Thevideo,narratedbyAICPAChairGregoryJ.Anton,CPA,offersanonpartisananalysisintowhyreadingtheU.S.government’sfinancialstatements–preparedbytheU.S.TreasuryDepartment–offersAmericansabetterinsightintotheir government’s financial future than does the higher-profile annual federal budget.

“The budget describes the top target for government spendingeachyear,”Antonexplained.“Thefinancialstatementsprovideamulti-yearlook,takingallofthefederalgovernment’sexistingobligationsintoaccount.Accordingly,thefinancialstatementsprovideamuchmorecomplete–andsobering–analysis.”

“The growing mismatch between the federal government’s long-term spending obligations and projected revenues isprobablyoneofthetoughestissuesfortaxpayerstounderstand,”Antonadded.“Thevideoexplainsthemismatchinnon-technical language that clearly describes the magnitude of the problem. Knowing where our nation’s revenues come from, where the money is obligated to be spent and how much it

costs to service its debts gives very important insights into how wecanresetoureconomicpicture.”CPAsandmembersofthepublic can view the video and related government documents at aicpa.org/advocacy/pages/cpasinsight.aspx.

TheTotalTaxInsightsCalculatoristhenation’smostcomprehensivetaxcalculatorandwasdevelopedasatooltoenabletaxpayerstoestimatetheamounttheypayeachyearforthemostcommonfederal,stateandlocaltaxes.“We’veintroduced this new calculator to help Americans grasp how muchthey’repayingincombinedfederal,stateandlocaltaxes,”saidAICPAPresidentandCEOBarryC.Melancon,CPA.“Ourrecentnationalpollshowedthattaxpayersdonotknowthepercentagesoftheirincomethatgoestopaytaxesorhowmanytypesoftaxestheypayannually.TheAICPA’sgoalistomakefederal,stateandlocaltaxesmoretransparent,andtheTotalTaxInsightsCalculatordoesthat.”

Only basic information is required to use the calculator: thecountyorcityinwhichthetaxpayerlives,maritalstatus,federal adjusted gross income and number of dependents. The calculatorthenestimateswhatthetaxpayerispayingonanannualbasisforapproximately20differenttaxes.Individualsdo not need to identify themselves in any way, and the data is erased when a user leaves the website. Access the calculator by visitingtotaltaxinsights.org.

LEGISLATIVE v i e w s

Society Delivers NJ Congressional Delegation Fiscal ToolsBy JEFFREy T. KASZERMAN, NJSCPA gOVERNMENT RELATIONS DIRECTOR

Use Your Expertise to Help the Community

New Jersey State government has hundreds of boards, authorities and commissions that deal with practically every public policy issue imaginable. These bodies are made up ofthousandsofinterestedcitizenswhovolunteertheirtimeandexpertise.Mosttownsandcountiesalsohaveanumberofboardsthatareopentolocalcitizensjustlikeyou.

Appointments to the state boards are generally made by the governor. If you’re interested in serving, visit the governor’s website at state.nj.us/governor/admin/bca to

see a complete board listing. If you see something you’re interested in, upload your resume and apply for a position on that board.

The Society encourages its members to get involved with these boards. It’s a rewarding way for you to serve the communityandagreatwaytoletthepublicknowhowtalentedCPAsare.

If you prefer to get involved with a board on a more local level, contact your mayor, town council members or school board for more information. You can also contact your county officials to see what they have available.


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THE BUSINESSDIVORCEGROUPDISPUTES AMONGCO-OWNERS OF A BUSINESS RAISE DIFFICULT QUESTIONS:Should I buy out my partner? Should we sell the business? Is my partner stealing from the business? Is my partner breaching his or herfiduciary duties? Can I be fired? What are my rights? Should I sue?

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contact Advertising Manager George Chateauneuf at [email protected].

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TheskislopesofParkCity,Utah,arealongwayfromtheBronx,

whichiswhereStanleyGoldschmidt,CPA,grewup.Hismother,Helen,wasahomemaker,andhisdad,Nate, owned a butter, egg and cheese wholesaler. “Unfortunately, when I was a youth, that was around the time the Bronxreallystartedgoingdownhill,”recallsGoldschmidt.

HeenrolledinnightschoolatLongIslandUniversity(LIU)andworkedasanaccountingclerkduringthedayatasmallfirminManhattan.“Based on how the partners treated meandwhatIlearned,Ithinkthatheavily influenced my going into the accountingprofession,”Goldschmidtsays.“Thankfully,accountingfitsme,I enjoy it and feel that I’m pretty good at it.”

After graduating from LIU with a B.S.inaccountingin1969,Goldschmidtbecame a junior accountant at LKH&Hwherehedidauditsofretailbusinesses and hotels. After three years, Goldschmidttookapositionasthecontroller of a construction company in NewJersey.“Iwaslookingforlessofacommute and wanted to get out of New York,somyfamilymovedtoNewtonin1972,”commentsGoldschmidt.Hestayed in the construction industry until theearly1990swhenheopenedhisowntaxpractice.

Not long after moving to Newton, GoldschmidtobtainedtheCPAcredential.“Obviously,aCPAcertificatecanleadtobetteropportunities and compensation, but I also feel that if you are in a profession, you should be the best you can at thatprofession–andthat’swheretheCPAdesignationcamein,”admitsGoldschmidt.“Andmyemployersatthat time made it much easier by being

very supportive of my pursuit of the CPAcredential.”

ANewJerseySocietyofCPAsmemberformorethan30years,Goldschmidtappreciates the camaraderie, access to informationanddiscountedCPEthatcome with being a member. “I’m also a memberoftheNewYorkStateSocietyofCPAsandtheAmericanInstituteofCPAs,”henotes.HewasthedirectoroftheNewJerseyConstructionAssociationfor two years and a long-time member of the Newton Zoning Board. “That actuallycameaboutduetoazoningissue I had regarding my practice,” adds Goldschmidt.“Thezoningofficer,whoI became good friends with, told me I could be part of the solution or part of theproblem–soIbecamepartofthesolution.”

AfewofGoldschmidt’soutdoorsypursuitsincludecyclingandhiking.“IthoughtYellowstoneNationalParkwasbreathtaking,”hesays.“AndIcan’tforgetthetimeatAntelopeParkinUtahwherea500-poundmountainlionlookedatuslikewewerethemaincourse–thankfully,wehoppedinthecar before we went on the menu.”

OneofGoldschmidt’sotheroutdoorpassions came about as a result of some daddy-daughter time. Years ago,hetookhisdaughter,Yvonne,toherdownhillskiingraces.Likemany

parents, he got involved in his child’s activities. In this case, his involvement and passion led him to become a technicaldelegatefortheU.S.SkiandSnowboardAssociation(USSA).“Whilethe USSA is active on many levels, its ultimate goal is to help young athletes reachtheOlympics,”saysGoldschmidt.Some of his duties included being a gate judge, interpreting the rules, supervising safety and reviewing racing results. “I was the finish referee at a race where Picabo Street had competed, and she ultimately had a great Olympic career,”addsGoldschmidt.Itwasaround the time Street was winning goldatthe1998WinterOlympicsinNagano,Japan,thatGoldschmidtreceived an award from the USSA as an outstanding alpine official.

Goldschmidthasacoupleclients,but he’s essentially retired. This allowed himtopurchaseacondoinParkCity,Utah, where he and his wife, Sheila –aformerInternalRevenueServiceagent–hittheslopesforseveralmonths out of the year. “I just love the outdoors, the adrenaline rush and the friends I’ve made on the slopes,” notes Goldschmidt.“Eventhoughskiingis mostly physical and accounting is predominantly mental, you have to clear your mind when doing both and choose a path of action.”

It’s All Downhill for This CPABy DAVID PLASKOW, NJSCPA PuBLIC ATIONS EDITOR

MEMBER p r o f i l e


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