In order to enhance transparency in the financial statement presentation and disclosure of supplier finance programs, the Financial Accounting Standards Board (FASB) issued ASU 2022-04, Disclosure of Supplier Finance Program Obligations and related amendments.
Supplier finance programs (AKA structured payables, payables finance, or reverse factoring) allow buyers to offer early payment for goods or services purchased from a supplier by way of an intermediary, which is essentially a third-party lender.
While each of the three parties involved have various motivations for participating in these agreements, the key advantage to a buyer is the ability to obtain extended payment terms and potential monetary benefits passed down to the buyer from the intermediary.
FASB Requires the Following Disclosures
Qualitative Disclosures
- Key terms of the program, including a description of the payment terms (i.e. payment timing and basis for determination).
- Assets pledged as security or other forms of guarantees provided for the committed payment to the finance provider.
- A description of where the obligations are presented in the balance sheet.
Quantitative Disclosures
- Amounts outstanding that remain unpaid by the buyer as of the end of the period.
- Rollforward of obligations stated in the balance sheet. This includes the amount confirmed and outstanding at the start of the period, the amount added during, the amount settled during, and the amount outstanding at period end.
These required disclosures do not impact the recognition, measurement, or financial statement presentation of the obligations covered by supplier finance programs.
The majority of these required disclosures became effective in 2023. Disclosure of the rollforward information described above became effective in 2024.
Questions on Supplier Finance Programs?
Are you looking for more information on supplier finance arrangements, and related tracking and reporting of these programs? If so, you may contact us at (401) 921-2000, or fill out our contact form.
The rules of 401(k) plan eligibility for Long-Term Part-Time employees (LTPT) have significantly changed. This is a result of the SECURE Act of 2019 and SECURE Act 2.0 of 2022. The new rules took effect at the beginning of 2024 and have widened the circle of eligible 401(k) plan participants for many employers. This includes part-time employees on their payroll.
To stay compliant, employers are required to closely scrutinize, and perhaps modify, how payroll and labor hours are tracked. Under the old rules, employees who completed one full year of employment (~1,000 hours of service) were eligible to participate in a 401(k) plan.
401(k) Plan Updates for LTPT Employees
As of January 2024, part-time employees over 21 who work for at least 500 hours over three consecutive years are permitted to contribute to a 401(k). Beginning in 2025, the consecutive annual requirement drops to over two years.
While the rule change will affect many employers, certain exclusions from LTPT qualification do apply. These include:
- Employees covered by a collective bargaining agreement.
- Non-resident aliens who receive no US sourced earned income.
The rules related to employer contributions have not changed. Though free to do so, employers aren’t required to make employer contributions through matching or non-elective contributions for LTPT employees.
Questions?
Need information on whether any of your employees qualify as LTPT, when they become eligible to participate in your 401(k) plan, or related reporting requirements? Call us at (401) 921-2000 or fill out our contact form.
Massachusetts governor Maura Healey has signed into law the 2025 fiscal year budget which includes a new tax amnesty program set to go into effect in Fiscal Year 2025. This program offers a unique opportunity for taxpayers to clear their outstanding tax debts while avoiding most penalties. Here’s what you need to know about this upcoming initiative.
What is the Tax Amnesty Program?
The tax amnesty program is a 60-day initiative established by the Massachusetts Commissioner of Revenue. The program is designed to encourage taxpayers who have fallen behind on their taxes to come forward and settle their debts. In exchange for their participation and compliance, the commissioner will waive most penalties.
When Does the Program Start?
While the exact start date has not been announced, the program is set to run in FY 25 and will end by June 30, 2025. This gives taxpayers a limited window to take advantage of this opportunity.
Who is Eligible?
The amnesty program applies to tax returns due on or before December 31, 2024. The specific tax types, tax periods covered, and applicable look-back periods will be determined by the tax commissioner.
What are the Benefits?
Participating in the tax amnesty program can provide significant benefits. Most notably, the program allows taxpayers to pay their outstanding tax debts without incurring the usual penalties, including late filing and late payment penalties. Note the commissioner does not have the authority to waive interest.
Conclusion
The new Massachusetts tax amnesty program represents a valuable opportunity for taxpayers to resolve their outstanding tax liabilities and avoid most penalties. However, it’s important to act quickly, as the program is only available for a limited time.
If you have any questions about how the amnesty program may apply to you, please call us at (401) 921-2000 or contact us here and stay tuned for more updates as we get closer to the launch of the program.
As part of the budget recently signed by the governor on June 17, 2024, Rhode Island announced legislative changes to several tax laws. The majority of these legislative updates will go into effect on January 1, 2025, and cover a variety of areas.
For pass-through businesses in the State, such as S Corporations and Partnerships, there will be a significant change to the pass-through entity (PTE) credit. The percentage that an owner receives for the tax paid by the entity has been lowered from 100% to 90%. This change aligns with neighboring states’ treatment of similar pass-through credits. Since the pass-through entity tax is elective in Rhode Island, the federal tax savings from the resultant deduction will need to be reevaluated in 2024 to ensure the benefit continues to outweigh the cost.
The Net Operating Loss (NOL) Carryforward period will be increased to 20 years from 5 years. Rhode Island will continue to limit the NOL deduction amount to the federal NOL allowed in that tax year.
For individual tax filers, the Pensions and Annuity Income Modification will increase from $20,000 to $50,000 (or $100,000 for Married Filing Jointly filers). However, the qualifying income thresholds already established will not be impacted.
The $50 fee associated with filing RI Estate Tax returns will be eliminated starting January 2025, along with the $25 application fee for the certificate of exemption for Sales and Use tax for certain Tax-exempt organizations.
Many Rhode Island tax credits have also been extended, clarified, or expanded under the current legislative updates effective July 1, 2024. This includes the popular Motion Picture Production Tax Credit and the Historic Preservation Tax Credit.
If you have any questions about how this new legislation may apply to you, please call us at (401) 921-2000 or contact us here.
On April 23, 2024, the US Department of Labor (DOL) announced incremental increases to the compensation thresholds used in determining whether an employee is exempt from federal overtime pay requirements.
The changes take effect on July 1, 2024 and are expected to affect millions of employees previously deemed exempt. The new rules encompass thresholds for both “highly-compensated employees” (HEC’s) and “executive, administrative, or professional” employees (EAP’s).
As of July 1, 2024
- To qualify as an EAP-exempt employee, the threshold increases from $684 per week (or the equivalent of $35,568 annually) to $844 per week (or the equivalent of $43,888 annually).
- To qualify as an HCE-exempt employee, the threshold increases from $107,432 to $132,964 annually.
As of January 1, 2025
- To qualify as an EAP-exempt employee, the threshold increases to $1,128 per week (or the equivalent of $58,656 annually).
- To qualify as an HCE-exempt employee, the threshold increases to $151,164 annually.
In addition, on July 1, 2027, the DOL will adjust the EAP and HCE thresholds every three years. These increases are based on the Bureau of Labor Statistics’ most recently available earnings data.
Depending on the nature of your workforce, preparing for these changes could be challenging and you may have many questions, such as:
- How will this affect company budgets?
- Would targeted salary increases for certain employees to exceed exempt thresholds be more cost effective?
- Are scheduling changes the best way to contain costs?
- How will this be communicated to employees?
For detailed information on the DOL’s updated overtime rules and how to manage any potential financial repercussions, call us at (401) 921-2000 or contact us here. We are ready and happy to assist you.
The SECURE Act 2.0 of 2022 brought many retirement plan provisions aiming to increase savings and simplify rules for 2023 and beyond. This is what you need to know for 2024.
Since January 1, 2023, the required age for which distributions need to be taken from retirement plans increased from 72 to 73. Taxpayers who turned 73 in 2023 had the ability to defer their first distribution until April 1, 2024. If this was done, they must take their distribution by the end of 2024. This needs to be considered for tax planning as the additional distribution within the same calendar year could make these individuals subject to a higher tax rate.
SECURE Act 2.0: Distribution Exceptions
There are two new exceptions to the 10% early withdrawal penalty effective for distributions made after December 31, 2023.
Emergency Personal Expenses
Distributions up to $1,000 are allowed to pay for “unforeseeable or immediate financial needs relating to necessary personal or family emergency expenses.” No subsequent withdrawals are allowed from the same plan within a three-year period unless:
- the distribution is repaid to the plan; or
- new contributions exceed the amount of the emergency withdrawal.
Domestic Abuse Victims
This change allows retirement plan participants who self-certify they’ve experienced domestic abuse to make withdrawals without being subject to the 10% early withdrawal penalty. These individuals can withdraw the lesser of $10,000, indexed for inflation, or 50% of their vested account balance. Participants can choose to repay withdrawals over a three-year period. Funds repaid within the allowable period can be used to claim a refund for any income taxes paid on the amounts previously taxed upon withdrawal.
SECURE Act 2.0: Additional Considerations
The SECURE Act 2.0 also provides additional relief to the following groups:
Beneficiaries of 529 College Savings Accounts
Beneficiaries will be permitted to make direct trustee-to-trustee rollovers into a Roth IRA tax-free. This will provide an option for those who have a remaining balance in their 529 account after the beneficiary’s education is complete. The account must have been open and in the beneficiary’s name for more than 15 years. The eligible rollover amount must have been in the 529 account for at least five years. Rollovers are subject to annual maximum Roth contribution limits, but are not limited based off the taxpayer’s adjusted gross income.
Widows/Widowers
Effective January 1, 2024, the surviving spouse of an employee who dies before the required minimum distributions have begun under their employer-provided qualified retirement plan may be able to be treated as the employee for purposes of the required minimum distributions (RMD). The surviving spouse must be the sole beneficiary of the account owner. Once they elect in, the surviving spouse will be treated as the employee for RMD rules of Code Sec. 401(a)(9).
Required minimum distributions will not need to begin before the date the deceased employee would have attained the applicable age. If the surviving spouse dies before the distributions begin, the surviving spouse is then treated as the employee to determine the distribution period.
SECURE Act 2.0: Roth Limitations
The catch-up limit on IRA contributions is now indexed for inflation. Under prior legislation, the limit on IRA contributions increased by $1,000, not indexed for inflation, for individuals who have reached age 50.
Important changes are coming into effect to Roth plan distribution rules. Prior to the passing of the SECURE Act 2.0, required minimum distributions were not required to begin before the death of a Roth IRA’s owner. However, pre-death distributions were required for Roth designated employer plans such as a Roth 401(k). This requirement has been eliminated.
Questions?
If you have any questions regarding estates, gifts, or any topics in this area, give us a call at (401) 921-2000 or contact us here.
The U.S. Internal Revenue Service has revealed increases in the annual gift tax exclusion and the lifetime estate and gift tax exemption for 2024.
What is the Annual Gift Tax Exclusion?
The annual gift tax exclusion allows taxpayers to transfer gifts to unlimited donees – up to a designated yearly amount – without experiencing gift taxes.
The lifetime estate and gift tax exemption provides the limit for lifetime gifts as of the date of the gift (or date of death) before incurring a gift or estate tax liability.
The exclusion is also an important consideration for estate planning purposes. Taxpayers can make gifts up to that amount before utilizing any of their lifetime estate and gift tax exemption. The value of any gifts in excess of the gift tax exclusion would then be subtracted from the lifetime exemption.
As the lifetime exemption gets used over the taxpayer’s lifetime, the amount that can be excluded from the taxable estate upon death also decreases.
Updated Amounts for 2024
For the 2024 tax year, the exclusion increased by $1,000 to a total of $18,000. The exclusion covers gifts an individual makes to each donee per year.
Married taxpayers can combine their gift tax exclusion as they can share their two annual exclusions. For example, married taxpayers with three children could potentially transfer $36,000 a year to each child (or a total of $108,000) without incurring any gift taxes.
For 2024, the lifetime exemption will increase by $690,000 to $13,610,000. Additionally, the total available to a married couple will be $27,220,000 in 2024.
Questions?
If you have any questions regarding estates, gifts, or any topics in this area, give us a call at (401) 921-2000 or contact us here.
Since 2018, taxpayers have been able to take advantage of favorable bonus depreciation rules found in the Tax Cuts and Jobs Act. However, these rules will begin to phase out over the next several years. Read on to find out how this could affect you.
Bonus Depreciation
The passing of the TCJA allowed most taxpayers to claim 100% bonus depreciation for the cost of qualifying business property. This included tangible property with a recovery period of 20 years or less and depreciated under MACRS rules. It also included most computer software, water utility property, and qualified artistic productions.
However, the anticipated phase-out of bonus depreciation became effective on January 1, 2023. For assets placed in service starting on this date, the deduction for the first-year will be reduced to 80% of the asset’s adjusted basis. Under current law, bonus depreciation will continue to drop an additional 20% annually through 2027.
The deduction phase-out is scheduled as follows:
- 2023: 80%
- 2024: 60%
- 2025: 40%
- 2026: 20%
- 2027: 0%
These changes present tax-planning opportunities to consider as companies project out their taxable income. It’s also important to note that it’s possible to elect out, if so desired.
Section 179 Depreciation
In lieu of bonus depreciation, taxpayers may also be able to expense the cost of certain fixed asset purchases under Code Section 179. Eligible property includes tangible 1245 property depreciated under MACRS, off-the-shelf computer software, qualified improvements, roofs, HVACs, fire protection systems, and security systems. The acquired eligible property may be new or used. Taxpayers can elect to utilize Section 179 when the return is filed or on an amended return in the year of election.
The limits for 2023 and 2024 are as follows:
| 2023 | 2024 | |
| Section 179 Limit | $1,160,000 | $1,220,000 |
| Phase-out Limit* | $2,890,000 | $3,050,000 |
*Once this threshold is hit, a dollar-for-dollar phase out begins.
Questions?
If you have any questions regarding bonus depreciation or section 179 limits, call us at 401-921-2000 or fill out our contact form to get started.
You may not think about New Hampshire state income tax much, or lack thereof. But if you own a sole proprietorship or real estate such as a rental property, you may be generating income that’s subject to the New Hampshire Business Profits Tax and Business Enterprise Tax.
New Hampshire State Income Tax Filing Requirements
There is typically no New Hampshire state income tax withheld on wages and salaries, and many people choose to live in the state to avoid paying on it. However, individuals who own a sole proprietorship or are a sole owner of a single member LLC that has business activity in New Hampshire may have a filing requirement for the following:
- Business Profits Tax (BPT)
- Business Enterprise Tax (BET)
There are filing thresholds for each tax type that may change each year.
BPT and BET Thresholds
The BPT threshold is based on gross business income. On the other hand, the BET threshold is based on an enterprise value tax base. The business enterprise calculates its enterprise value tax base under New Hampshire regulation by adding up all compensation paid or accrued, all interest paid or accrued, and all dividends paid. The filing threshold for the 2023 tax year is as follows:
- $103,000 of business income (BPT)
- $281,000 of enterprise tax value base (BET)
Personal Services Deduction
If you meet the filing requirement for the BPT return, you may also qualify for the personal services deduction. This could reduce the amount of tax you owe on your business income. According to the New Hampshire revised statute section 77-A:4, this deduction is for total compensation that is “reasonable and fairly attributable” to its proprietor. Taking the full amount of this deduction requires that you maintain records necessary to prove that this deduction is reasonable.
New Hampshire State Income Tax: Get More Details
Want more information regarding potential exposure to BPT and BET tax liabilities? Call (401) 921-2000 or fill out our contact form to learn how you can decrease your potential tax liability.
Financial ratios for construction companies can be a key indicator of current performance and potential for future growth. No one ratio can truly tell the whole story of a company’s health. However, looking at several key ratios can help identify trends in the company and its overall well-being. Primary users of financial statements, including banks, bonding agents, insurance companies, and others, will usually be interested in this information. In addition, company management must ensure they fully understand these ratios before distributing their financials to avoid surprise by any concerns or follow-up questions.
5 Important Financial Ratios for Construction Companies
Here, we’ll explore several common ratios and how they can help you measure business performance and mitigate risk. The following are some key financial ratios for construction companies:
Current Ratio
This ratio compares current assets over current liabilities to determine how many times per year a company can pay its liabilities within the next 12 months. The company should have a ratio of at least 1.0 – 1.3 to ensure sufficient assets for covering liabilities as they become due.
Quick Ratio
This is a close relative of the current ratio, which includes all current assets in the calculation. However, the quick ratio just includes cash, cash equivalents, short term investments, and accounts receivable in the numerator. The denominator remains the same as the current ratio and includes all current liabilities. This ratio considers only assets that are cash or easily convertible to cash. A company is typically considered favorable when its quick ratio is between 1.1 and 1.5. This indicates that it has enough cash to cover its liabilities.
Debt-To-Equity Ratio
This ratio calculates how the growth of the company is financed through debt. In this instance, a person usually considers a ratio of 2.0 or lower favorable. As the ratio grows, it could signal that the company is financing its growth through too much debt and could become unsustainable.
Working Capital Turnover Ratio
A company uses the capital turnover ratio to identify its asset efficiency in generating sales. The company calculates the ratio by dividing the difference between current assets and current liabilities by its sales. For each dollar of working capital, a higher ratio generates more sales. However, a ratio above 30.0 could signal that the company may need more working capital to continue to grow in the future.
Equity Turnover Ratio
A company’s equity turnover ratio identifies how efficiently it generates sales using its assets. The company calculates its sales-to-equity ratio by dividing its sales figure by its total equity. Usually, a ratio above 15.0 may signal a company will have trouble growing in the future.
More Information
DiSanto, Priest & Co.’s experienced team of professionals can assist you in calculating, analyzing, and improving your financial ratios with a focus on maintaining your company’s health. For more information, call us at (401) 921-2000 or fill out our contact form.