Treasury Pulling Back from Limiting Valuation Discounts

Jason ThompsonBy Jason Thompson, CPA/ABV, ASA, CFE, CFF
Partner, Director of Valuation and Litigation Services
jthompson@sponselcpagroup.com

Earlier this month the U.S. Treasury announced its plans to withdraw its newly proposed regulations under Section 2704 related to limiting valuation discounts. The move came after intense pushback from valuation experts, the estate planning community and family business owners.

The move is good news for owners of closely held businesses who plan to eventually pass the company on to the next generation.

Commenters on the proposed regulation claimed Section 2704 would have hurt family-owned and operated businesses by making it difficult and costly to transfer companies to the next generation. Critics also claimed the valuation requirements of the proposed regulations were unclear and could not be meaningfully applied.

Treasury Secretary Steven T. Mnuchin made the announcement as part of the Trump administration’s ongoing effort to reduce the burden of tax regulations. Its comprehensive review has already identified over 200 regulations that Treasury believes should be repealed, which will begin in the fourth quarter of 2017, according to a statement from the Treasury.

“This is only the beginning of our efforts to reduce the burden of tax regulations,” Mnuchin said. “Our tax code has been broken for too long, and this retrospective review, along with our efforts on tax reform, will ensure that we have a tax system that fosters economic growth.”

If you have questions about transitioning your closely held business to the next generation, please contact Jason Thompson at (317) 608-6694 or email jthompson@sponselcpagroup.com.

Lingenhoel Joins Sponsel CPA Group

Abigail LingenhoelSponsel CPA Group has hired Abigail Lingenhoel as a Staff accountant in its Tax Services department. Her duties will include preparation of individual, corporation, partnership, fiduciary and other tax returns for a broad range of clients and industries.

Lingenhoel is a recent graduate of Taylor University with double bachelor’s degrees in Management and Accounting. She is currently studying for the CPA examinations.

“The demand for expert tax advice and planning from our clients continues to increase, and our firm is growing to meet that need,” said Nick Hopkins, Partner and Director of Tax Services. “Abigail represents the top tier of the next generation of CPA talent. She will help bolster what Sponsel CPA Group has to offer.”

AYS taps Blankman for Board of Directors

Lisa BlankmanINDIANAPOLIS – Lisa Blankman, a Manager in the Audit & Assurance Services department of Sponsel CPA Group, has been appointed to the Board of Directors of AYS.

Formerly known as At-Your-School Child Services, AYS is a not-for-profit group that specializes in providing high-quality, educational and safe programs for Central Indiana students outside of school hours. AYS runs a number of educational and support programs aimed at helping students and schools succeed. AYS serves nearly 3,000 children through the school year and 500 during summers.

Blankman is a veteran CPA who conducts audits, reviews and agreed-upon procedures. She works with clients across a broad spectrum of industries, including construction and non-profits, helping them find efficiencies and become more effective in the marketplace. She is a graduate of Marian University with a bachelor’s degree in accounting.

“I am so excited and honored to join the board of AYS,” Blankman said. “This is a vital organization that brings so much benefit to Indianapolis-area youth. I will bring all my energy and financial expertise to bear as a director.”

New Accounting Standards Your Organization Needs to Know

adam-parkhurstBy Adam Parkhurst
Staff, Audit & Assurance Services

Beginning Dec. 15 this year, several significant changes are going into effect for financial statements reported under Generally Accepted Accounting Principles (GAAP). These Accounting Standard Updates (ASUs) could affect the reporting requirements of your business or not-for-profit.

Below is a quick rundown of what these new standards could mean, broken down by types of organizations.

The following ASUs are becoming effective for all applicable entities:

  1. ASU 2016-14 Presentation of Financial Statements of Not-for-Profit Entities

This ASU significantly changes financial reporting for Not-For-Profit entities by making changes to net asset classes, expense presentation, statement of cash flows requirements and disclosure requirements. For more information on this ASU, please see 5 Things You Need to Know About the New Not-For-Profit Accounting Standard (ASU 2016-14).

  1. ASU 2017-09 Compensation – Stock Compensation: Scope of Modification Accounting

The purpose of this ASU is to provide clarity and reduce diversity in practice, as well as cost and complexity, when applying stock compensation guidance to a change in the terms or conditions of a share-based payment award.

The following ASUs are becoming effective for non-public entities, but are already effective for public entities:

  1. ASU 2015-17 Income Taxes: Balance Sheet Classification of Deferred Taxes

The purpose of this ASU is to eliminate the presentation of current deferred income taxes. All deferred taxes will now be presented as non-current.

  1. ASU 2016-05 Derivative and Hedging: Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships

This ASU clarifies whether the use of hedge accounting for a derivative arrangement must be discontinued when there is a change in counterparty.

  1. ASU 2016-06 Derivatives and Hedging: Contingent Put and Call Options in Debt Instruments

This ASU clarifies that the four-step decision model should be utilized when evaluating whether contingent call (put) options in debt instruments are clearly and closely related.

The following ASUs are becoming effective for public entities for fiscal years beginning after Dec. 15, 2017, and will become effective for non-public entities in the future.

  1. ASU 2015-14 Revenue from Contracts with Customers (previously ASU 2014-09)
  2. ASU 2016-15 Classification of Certain Cash Receipts and Cash Payments
  3. ASU 2016-16 Intra-Entity Transfers of Assets Other Than Inventory
  4. ASU 2016-18 Restricted Cash
  5. ASU 2017-01 Clarifying the Definition of a Business
  6. ASU 2017-07 Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost

For further information regarding the upcoming effective ASUs and how they might apply to your organization, please contact Adam Parkhurst at (317) 613-7858 or email aparkhurst@sponselcpagroup.com.

How Trump’s Tax Plan Could Affect You

Nick HopkinsBy Nick Hopkins, CPA, CFP®
Partner, Director of Tax Services

After months of behind-the-scenes discussion and hype, the Trump Administration and GOP leaders have finally released their framework for a major overhaul of the U.S. tax code – the biggest of its kind in more than 30 years.

The overall goal of this framework is to lower income tax rates for individuals and businesses, while eliminating some important deductions and simplifying the tax code.

The key components for business taxes are:

  • A reduction in the top corporate tax rate to 20 percent (down from 35%)
  • A new 25 percent rate for certain passthrough business income
  • International reforms that include a territorial tax system and a one-time mandatory repatriation tax
  • 100 percent full expensing for the cost of new investments in depreciable assets for at least five years, effective after September 27, 2017, while partially limiting the deduction for net business interest expense
  • Aims to eliminate the corporate alternative minimum tax (AMT)
  • Repeal the Section 199 domestic manufacturing deduction and “numerous other special exclusions and deductions,” but retains the research credit and the low-income housing tax credit

For individual taxes, the most important proposed changes are:

  • Replace the current seven individual tax brackets with three brackets with rates set at 12 percent, 25 percent, and 35 percent, with the possibility of a fourth higher rate for high-income individuals
  • Roughly double the standard deduction to $24,000 for married taxpayers filing jointly and $12,000 for single filers
  • Repeal personal exemptions
  • Increase the current $1,000 per-child tax credit by an unspecified amount
  • Eliminate the individual alternative minimum tax (AMT) and estate tax
  • Repeal “most itemized deductions,” though tax incentives for mortgage interest and charitable donations generally would be preserved, along with incentives for work, higher education and retirement security

It must be stressed that at this time the proposal is simply a framework for tax reform, and much of the specifics of legislation must still be worked out. Congress has to first pass a FY 2018 budget resolution, which could entail its own partisan challenges.

In addition, unless significant spending cuts are made, these tax cuts would potentially add to the federal government deficit in the years to come, with the goal of jump-starting economic growth and producing more tax revenue to close the gap.

Much remains uncertain: the framework leaves many difficult policy issues to be resolved by the House and Senate tax committees. We will keep you posted on specific developments in tax reform as the legislative process moves forward in the months ahead.

If you have any questions or feedback, please call Nick Hopkins at (317) 608-6695 or email nhopkins@sponselcpagroup.com.

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