The new FASB lease accounting standard will likely need to be addressed sooner than many private businesses realize. For privately held calendar-year-end companies it takes effect in January 2020. In a June 27, 2017 article in Accounting Today, Michael Cohn writes, “[A] survey, by PricewaterhouseCoopers and CBRE Group, found that 23 percent of companies have yet to begin the initial adoption process of the leasing standard, while 47 percent of organizations that started implementation of the leasing standard reported the effort is bigger than they had expected.”
Private companies affected by this standard must bear in mind that if they typically issue comparative financial statements, FASB requires that the standard be applied retroactively to the preceding year – that means 2019, just over one year from now. Early adoption, which is permitted, may be the most proactive approach to ensure your accounting department is prepared for the new reporting requirements.
FASB, in its continued mission to improve transparency in financial reporting, issued Accounting Standards Update (ASU) 2016-02 to bring off-balance sheet lease rights and obligations, previously relegated to the financial statement disclosures, front-and-center onto the face of the financials. The standard has re-characterized these arrangements whereby a lessee’s contractual access to leased property represents an asset, and the related future obligation to pay for that right is debt. The new treatment shines a stronger light on lease rights and obligations as they relate to the financial health of an entity, which may add new metrics in negotiating credit terms and meeting financial covenants. While all businesses with long-term leases will be required to implement the new standard to comply with GAAP, certain industries will feel the impact more acutely given how entrenched their operations are in leasing arrangements: retail, manufacturing and distribution, construction, and restaurants, to name several.
It is not too early to start preparing. Tackling the challenges of a smooth adoption must include instituting internal processes to accurately gather lease data, monitor lease arrangements on a timely basis, and appropriately report lessee assets and liabilities.
If you would like more details about the new lease accounting rules, or have questions about how ASU 2016-02 may affect your business, please contact your accounting professional at DiSanto, Priest & Co.
To remain competitive in today’s working environment employers will offer employees the opportunity to participate in a pre-tax retirement plan. In addition, they may offer to match the employee’s contribution up to a certain percentage. As part of the process, the employee is required to complete certain paperwork which includes a Beneficiary Designation Form (BDF). This form directs the plan administrator as to who should receive the funds in your retirement plan upon your death. This document takes priority over your will.
Just recently (March 2017) there was a case decided in Florida Federal District Court that addressed an improperly completed Beneficiary Designation Form. The case, Ruiz vs. Publix Super Markets, was about a former employee who wanted to change her beneficiary designation. The Plan had clear directions on how to complete the BDF.
The former employee called and was informed to make a change she would need to do the following:
“She must write a letter. And in the letter, she must put the person she wants, with their social security number….That she must include her name, her Social Security number, cards if she can get ahold of them. The main thing was, they kept emphasizing that the most important part of the letter was to make sure she signed it and dated, that was a must.“
The former employee was able to obtain a BDF but did not sign and date it. Instead, she referenced the letter she had written. Publix did not process the request but sent it back because the BDF was not signed and dated. The former employee died a day after she wrote the letter.
The funds were distributed to the original beneficiaries and the court agreed and ruled that the Plan’s requirements were not precisely followed. The BDF was not signed and dated by her. The fact that there was a written letter that “substantially complies” did not matter.
Moral of the story…..“Follow Directions”.
You should periodically review your beneficiary designations on all retirement accounts including IRA’s and company plans. More importantly, you should look at your beneficiary designations when one of the following life changing events take place:
- Marriage
- Divorce
- Birth or adoption of a child
Today’s health care providers face an onslaught of new rules —including complex coding requirements, privacy concerns, higher copays, unpaid debts, and denied claims, to name a few—making it more important than ever for medical offices to create clear medical billing policies.
Establishing a comprehensive written set of policies and procedures—and training staff to use it effectively—can help with accounts receivable management and provide consistency among the billing staff.
Experts seem to agree that there are at least eight steps that are fundamental in this process: 1) registration. 2) Establishment of financial responsibility. 3) Check-in/check-out. 4) Coding/billing compliance. 5) Preparing and transmitting claims. 6) Adjudication. 7) Generating bills. 8) Assigning payments/arranging collections.
The aforementioned pressures have led to the development of a number of best practices that help medical offices streamline billing from start to finish as well as save time, money and frustration. Some of those best practices are the following:
Collect Co-Payments At Registration
First thing’s first: The best way to secure co-payments is to require it in full as part of the registration process. Post a sign at the front desk and train the receptionist to review insurance cards and collect the appropriate payment. Health care is increasingly seeing cost burdens shifted to the patient. Staff needs to be aware of these changes and confirm the proper amount is collected, every time.
Train (and Retrain) Coders
Never has medical coding been so complex and never has the risk for underpayment due to coding errors been so high. It is essential that medical billing clerks are trained and certified before they start work. And the more specific the training, the better. An effective billing policy must, therefore, include clear training standards for new hires and incorporate regular retraining sessions. Medical associations, insurance companies, and hospitals offer educational resources and classes. Monitor common errors and denial claims as well as review them regularly with the billing staff.
Forms of Payment
It’s a fact: we live in an increasingly cashless (and checkless) world. The more different kinds of payment you accept, the more customers you can process. At the same time, mobile payment options like Square, Google Wallet, and Apple Pay have streamlined transactions even further. What’s more, security improves by the day. Nevertheless, like all vendors, you’ll need to look out for identity theft so a fraud detection protocol should be part of the collections policy. Keep an active credit card on file to expedite payment. Utilize technology (electronic remittance, claims status, insurance confirmation) to increase efficiency and payment.
Rule for Non-Payment
It’s inevitable, especially in a time of increasing health costs, some customers will be unable to pay. As difficult as it is to turn patients away, carrying a balance for them is not sustainable. Set a maximum limit for non-payment (anywhere from $150-$250 is typical). Make it clear upfront that there will be late fee charges and that accounts will be turned over to a collection agency after a set period of time.
Last Resort: Collection Agency
Unfortunately, there will be occasions when a collection agency becomes necessary to retrieve debts. Adherence to the collection practices listed above should help limit these instances, but the billing policy should include a clear system for debt collection when all else fails. Set clear deadlines so your staff doesn’t have to make individual decisions. Not all collection services are created equally. Find one that is experienced in healthcare collections and the relevant privacy laws. Do your homework, conduct interviews, check references, and choose carefully. The fee charged for collections can vary widely and the cost of using an agency should always be compared against exhausting all in-house options.
We all know that people are your most important asset. They create new ideas, service your customers, and handle all the things that machines simply cannot. Let’s face it, that large payroll expense on your income statement is there for a reason. You have probably spent quite a bit of time trying to hire the best people, the smartest people, and the ones that fit your company’s culture; essentially trying to build your dream team. You have probably never gotten your entire team just perfect, but most likely you have identified a few MVPs, your go-to people who you know can solve the problem or get things done. On a few occasions, you probably didn’t even fathom the idea of that person leaving the company…but then they do.
Why? They probably have given you some explanation about a great new opportunity that they couldn’t pass up, and that may be true, but chances are there is another reason that is not being communicated. So to help you keep your most important people and hopefully finish assembling that dream team, here are 6 of the top reasons people leave and some suggestions for avoiding these pitfalls.
- Unchallenged – Although we tend to think of routine as a good thing, employees who find themselves doing the same thing day after day, or who find their responsibilities unchanged, eventually get bored. Good employees look for new challenges and want to grow. The lack of challenge can leave an employee feeling unfulfilled and potentially even untrusted. As a result, they will look for an employer willing to provide that new experience. Talk to your employees about their roles, specifically what parts they dislike, what they enjoy, and what they would like to learn. Consider giving each of your employees a new responsibility at least annually, while also keeping in mind that some of their previous responsibilities may also need to be reallocated to someone else.
- Lacking opportunity for advancement – Good employees often look to advance into higher and more rewarding positions. Those employees will become frustrated if they feel no advancement opportunities exist or if the path to succession is unclear. Similarly, employees can become frustrated if they feel that someone less qualified for a position has been promoted, while they resume the same position. Make sure that job descriptions and responsibilities are clear; and that the company has an organization chart to keep employees aware of potential roles that they can work towards.
- Inadequate system of rewards – Employees want to feel valued for their efforts, especially when putting in extra hours to meet a deadline or accomplish a big project, but also on a day to day basis. If employees feel under compensated for the work they perform, they will likely leave in search of a job where they feel compensation is more adequate. Additionally, when employees go above and beyond their daily responsibilities, they want to feel appreciated for that extra effort. Employees should be recognized both financially and publicly. Consider announcing good work and accomplishments during company meetings, or awarding bonuses for exceeding certain performance goals.
- No connection to the big picture – Although employees can be exceptional at fulfilling their role, it can be easy to lose sight of where that role fits into the big picture or overall mission of the organization. This can cause the employee to feel a lack of meaningfulness, which can reduce motivation or excitement towards that role. Make sure your employees are aware of how their role fits into the organization’s overall goals. This will help to give your employees a sense of purpose. Additionally, try to give your employees new responsibilities that fit their interests and specific skills. Developing your employees’ specific interests and skills creates trust and empowerment, which can also help to boost motivation and morale.
- Feeling like a number – We often get so caught up in our work and getting things done that we forget to ask people how they’re doing. In these situations, employees may see how their role is important to the organization, but they don’t feel that they themselves filling that role, rather than someone else, is important to the organization. It’s important to listen to your people. Make time for your employees, be respectful, and make sure they know they are valued.
- All work and no play – Feeling overworked is one of the top reasons employees claim for leaving their job. We have several commitments in the course of a day in addition to our jobs, such as our family, our health, and our hobbies; and employees want a job that leaves enough time for all the other commitments. Many employers have started creating flexible work arrangements that allow employees to create a schedule that works best for them, rather than the typical nine to five work day. Employers are also looking for ways to make the workplace fun to boost employee morale. Consider having at least one fun activity a month, such as a team competition, or office lunch, or small after work happy hour.
Many companies are expanding their business transactions across state borders and finding themselves operating with a mobile workforce. With many states aggressively attempting to find ways to close their budget deficits, these expanding companies become a means of generating new sources of revenues. Compensation to employees is generally taxable in the state where it is earned, making it necessary for companies with a multi-state workforce to consider both the state income tax withholding and unemployment tax laws of multiple states.
State Income Tax Withholding
The general rule of thumb for states that have an income tax is that employers are required to report wages and withhold tax from the employee’s earnings for the state where the underlying services are performed. This general rule applies to most situations where the employee works and lives in the same state. However, in today’s mobile business environment, three additional rules may need to be considered pertaining to employees:
- Residency Rules – Attention needs to be given to how a particular state defines residency in order to properly determine withholding requirements. Most states define residency based on either an individual being domiciled in the state or a threshold of spending more than a number of days in the state.
- Reciprocity Rules – Some states have reciprocal agreements with other states to allow withholdings in the state of residence rather than where the work is performed. These agreements need to be reviewed annually as they frequently expire or change.
- Resident/Non-Resident Rules – If reciprocity does not exist between the states, then the withholding rules of both states must be considered when an employee works in a state other than one they reside in. In this scenario, the ordering is to consider the work state first and then the resident state. If the resident state’s withholding requirement is higher than the work state, then the excess would be withheld and remitted to the resident state. This reporting scenario will necessitate multiple states withholding being reflected on the employee’s W-2. Whether or not the employer has nexus in a state must also be taken into consideration for withholding purposes. Outside of honoring a reciprocity agreement, an employer that does not have nexus in the employee’s resident state is not required to withhold income tax for the state where the employee resides.
Unemployment tax
Although there may be multiple state income tax withholding requirements for the same employee, unemployment tax is only paid to one state per employee. To determine the state that the wages are reported to for unemployment tax purposes, all states follow the same four-pronged test outlined below:
- Localized Services – Where is most of the employees’ work completed?
- Base of operations – Where is the employee headquartered?
- Where is the place of direction and control of the employee?
- If a state has not been identified by the above three prongs of the test, then the employee’s state of residency is to be used as the reporting state for unemployment tax purposes.
Current Legislation
On March 7, 2017, a mobile workforce bill was reintroduced to the U.S. House of Representatives and the U.S. Senate. H.R. 1393, the Mobile Workforce State Income Tax Simplification Act of 2017, creates a uniform standard that only non-residents who work more than 30 days in a single state are subject to that state’s income tax withholding requirements. The bill was passed in the House of Representatives on June 20, 2017, and now goes to the Senate for consideration. Previous mobile workforce bills have repeatedly died in Congress and how far this legislation advances remains to be seen.
Do you have a real estate project that is not able to raise sufficient funding?
Do you have a project at risk of having to relocate to another state?
Rebuild Rhode Island may be the answer!
The Rhode Island Commerce Corporation, through the Rebuild Rhode Island Tax Credit Act, can provide incentives such as tax credits, loans or equity investments to eligible Projects!
Your financing gap could be filled with redeemable tax credits from Rebuild Rhode Island. The credits can cover 20% and in some instances 30% of project costs! Qualifying property includes:
- Commercial office
- Residential
- Industrial
- Residential
- Mixed Use
- Ground Up Construction
- Historic rehab
In order to be eligible to be considered for the tax credit for Commercial Property:
- Total project costs must be $5,000,000 or more
- Project contains at least 25,000 square feet
- Project, after placed in service, occupies one or more businesses employing at least 25 full-time employees
- And others…
Eligibility for a Residential Project:
- Property must be located in a Hope Community
- Typically $5,000,000 or more
- Project must be at least 20,000 square feet and contain at least 20 units
- And others…
Eligibility for a Mixed Use Project:
- Total project typically $5,000,000 or more
- Contain at least 25,000 square feet
For each type of project, the applicant’s equity and investment in the Project is required to be at least 20% of the total Project Cost.
If you believe you have a qualifying Project, the tax credit cannot exceed 20% of the Project cost, up to a maximum of $15,000,000. There is an additional 10% credit if the Project meets any of the following criteria:
- Project is Adaptive Reuse or Historical Structure
- For a Targeted Industry
- Biomedical Innovation
- IT/software
- Data analytics
- Design, food and custom manufacturing
- Transportation, distribution, and logistics
- Arts
- Education
- Hospitality and tourism
- More!
- Project includes Residential where minimum of 20% of the residential units are Affordable Housing or Workforce Housing
- And More!
For More Information
If you believe that you have a Project that could potentially qualify for the Rebuild Rhode Island Tax Credit, please contact Heather Prew, CPA at hprew@disantopriest.com or (401) 921-2000.
The section 179D tax deduction was passed by Congress in 2005 as part of the Energy Policy Act. It allows qualifying building owners and businesses to receive a tax deduction of up to $1.80 per square foot for their energy efficient buildings or significant improvements placed in service during all open tax years. Any of these tax deductions can be carried back two tax years or forward for up to 20 years.
How do you qualify?
In order for a building to qualify, the new improvements must surpass the American Society of Heating, Refrigerating and Air-Conditioning Engineers (ASHRAE) 2001 standards if placed in service before 2016 and the ASHRAE 2007 standards for buildings placed in service thereafter. The deduction of $1.80 per square foot is broken up into three pieces; the electrical, the HVAC, and the building envelope. There are multiple methods of obtaining this deduction depending on the levels of energy efficiency your project meets. For instance, if the improvements are only made to the HVAC system then the deduction will be limited to sixty cents per square foot which is approximately one-third of the total deduction available.
The deduction is available to the owners and lessees that build or significantly improve their commercial buildings. The commercial buildings that can qualify include:
- Retail Buildings
- Office Buildings
- Industrial Buildings
- Apartment Buildings
- Warehouses
Government owned buildings qualify
Since government entities do not traditionally pay tax, the owners of these buildings can allocate the potential deduction to the businesses responsible for the energy efficient improvements. The eligible designers and builders would include architects, engineers, general contractors, subcontractors, environmental consultants, and energy service providers. However, the deductions in this instance are available on a first come first serve basis. For instance, an electrical contractor would only qualify for a third of the deduction (the electrical improvements) of an energy efficient building. But if the architect that designed the entire building has already received the full $1.80 per square foot available, then the electrical contractor would not be entitled to a deduction.
Some examples of government owned buildings that would qualify are:
- Schools
- State universities
- Libraries
- Town halls
- Airports
- Post offices
- Courthouses
- Fire stations
Where to begin
In order to qualify for 179D, an independent third party firm must review the building and improvements to approve the energy savings and the potential tax deduction. Contact our firm today for more information on this process.
Also, for those businesses that are seeking the 179D deduction for work performed on government owned buildings, these companies are required to obtain an “allocation letter” signed by the government entity. This letter will allow the government entity to transfer the deductions. Obtaining this letter secures the entities right to take the deduction and ultimately starts the process. The next step will be engaging an independent third party firm to approve the energy savings.
For More Information
For more information on this valuable energy incentive please contact John J. Rainone, CPA/MBA, CCIFP today at 401-921-2000 or jrainone@disantopriest.com.