CONNECTIONS - November . December 2017

CONNECTIONS n ove m b e r

P R A CT I C E M A N A G E M E N T

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D E C E M B E R

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PRACTICE MANAGEMENT 8 | Social Engagement Strategies 12 | Captive Insurance Company Planning 19 | Culture Innovation 22 | Disengaging to Benefit your Firm and Clients

DEPARTMENTS

INSIDE THE ASCPA

4 | ASCPA 2017

14 | Zoebelein on Tax

5 | Message from the Chair

21 | New Faces at the ASCPA

10 | Meet David

28 | Leadership Academy 2.0

16 | Member News 34 | Classifieds

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MESSAGE FROM JEANNINE

ASCPA 2017 WHEW! I’m sure you could hear a giant sigh of relief from colleagues all over the state as we reached the September 30 CPE compliance deadline. June through September is the ASCPA’s “busy season” as we provide top-quality continuing education for members. It was a very good year, thanks to our excellent CPE staff which includes VP Education Jessica Roberts, Conference Coordinator Corena Cottles (who missed a lot of the fun by having son Wilder a month early!), Seminar Coordinator Ashley Peters, and summer/fall intern Matthew Berube.

very specific, narrow areas, to become the “go to” person for a particular topic. Jim Boomer of Boomer Consulting discusses innovation, Davis Smith of Gilpin Givhan reveals the latest rulings about captive insurance, and Tom Zoebelein offers Zoebelein on Tax to assist you with knotty problems you encounter.

Your state society continues to grow and learn as well, and we’re pleased with the kind of response we’ve had with CONNECT, our ASCPA communities. We’ve seen problems shared and solutions offered. You’ll notice that more and more communities will spring up as members request them. When you receive your weekly digest, jump in and take part in those threads. They will offer you lots of “watercooler” conversations, plus provide on-the-ground knowledge you could not access in any other way.

We especially appreciate it when you take a few minutes to make suggestions on topics, locations, specific venues or other aspects of our programs. Please believe me when I say that we hear you, even more, we listen to you, and do all we can to make positive changes. We’re already well down the road in planning our schedule for the next year. Look for the 2018 CPE Calendar at the very end of the year.

The eleven chapters of the ASCPA have held events all summer and continue to plan socials, luncheon meetings and even CPE events into the late fall. Check the schedule of events in the weekly digital newsletter or on the website. Make note of the remaining education offerings for the year. You can get a jump on your 2018 requirement!

Welcome to the Practice Management issue With about 50% of ASCPA members in public accounting, it’s easy to think that the majority of our members are in midsized or larger firms and have multiple resources at their disposal. Actually, the opposite is true. Most members in public accounting are in smaller firms with just a couple of CPAs or are sole proprietors. That means that owners/partners are wearing a lot of hats, including managing all business aspects of the firm, even marketing. That’s where the Alabama Society can assist by offering access to resources and experts.

In fact, if you’re attending the 71st Federal Tax Clinic, our own Jessica Roberts will lead a session on Thursday, November 16 titled “Appy Hour”, introducing different apps to make your life as a professional a little easier.

As always, our whole staff stands ready to assist you and to make being a member of the Alabama Society a rich, complex and meaningful experience.

Read Carey Rome’s article on the hottest marketing trend on pages 8 and 9. It will give you food for thought on how you can leverage your knowledge and expertise, sometimes in

Jeannine ASCPA ChaIr Marc Hamilton underwent unexpected surgery on October 20 and is continuing his recuperation at home in Andalusia.

We wish him a complete and uneventful recovery.

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MESSAGE FROM THE

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CHAIRMAN

hope everyone is enjoying the cooler mornings and football weekends! Although, if you are like me, it seems the ever-changing demands for our me can some mes cause us to forget to stop and take a deep breath! A lot of our me is becoming focused on dealing with the con nuous intensity of disrup on occurring in our society. I want to share some thoughts with you on disrup ons that our profession is experiencing. Recognize that disrup on brings with it so many challenges but also many opportuni es. At the highest level, the recent joining of forces of the AICPA and CIMA creates an en rely new breadth of the accoun ng profession. Yet maintaining a suffici t talent pipeline, managing con nuous technology improvements and performing e ec ve succession planning consume an everincreasing investment of time t the firm l vel.

In her acceptance speech as chairman of the AICPA board of directors, Kimberly EllisonTaylor noted that a key goal for the accoun ng profession is the “pursuit of complementary and some mes unexpected skills that drive new ways of thinking and doing.” A major transforma on to facilitate this concept of breadth occurred with the newly-created Associa on of Interna onal Cer fie Professional Accountants. Like Kimberly, I have had the opportunity to work in both public and management accoun ng roles and agree that establishing creden als to professionalize management accoun ng, giving it consistency, principles and protocols will enhance the quality, competency and integrity that the public expects of our profession and our fina cial systems. The poten al to collaborate and o er new types of advisory services is limitless.

We also share the belief that the success of our profession is driven largely by technology and our people. The greatest challenge noted

by Kimberly “is to stay one step ahead of the complexity and to make sure we have our fi gers on the pulse of where we can help serve

the public interest and enable our members to solve problems before they arise.”

The AICPA and the ASCPA have had a longstanding commitment to ensuring the accoun ng profession has a robust pipeline of talent. Our e orts are focused on making sure that the pipeline remains strong, with ini a ves to att act the best and brightest students in the country into the profession. Enabling the next genera on of CPAs to be er address the complex environment and to help ensure the profession con nues a high standard of working in the public interest has cause the Uniform CPA Exam to evolve, pu g more emphasis on higher-order skills, such as cri cal thinking. Addi onally, there is an increasing pressure to devising new methods of con nuing professional competency development, and measurement of that competency, that is not going away.

The technology challenges and opportuni es may be the greatest disrup ve force because they are not necessarily specific to our profession, but are generally societal. Systems designed around the emerging blockchain technology are beginning to take root. In fact, the Harvard Business Review in early 2017 suggested that blockchain is a “founda onal technology”, one that may change the nature of economic, social and poli cal systems and iden fie “smart contracts” as currently the most transforma onal applica on of blockchain technology. The concept of a distributed ledger and cryptocurrency could completely transform the a est func on of our prac ces.

On another side of the technology challenge is the compounding growth of data, systems and data storage. As we have all seen in recent headlines, these systems and repositories have created a signifi ant prac ce opportunity around cybersecurity. The AICPA is addressing this opportunity by providing tools needed to serve needs related to cybersecurity risks, as 5

well as establishing a cybersecurity a esta on performance and reporti g guide for auditors.

Wow these are exci ng mes - to stay just ahead of the curve is so challenging!

I would also like to comment on how impressed the ASCPA Board is with how well our local chapters and chapter opera ons have evolved.

We have invested a lot of discussion and e ort into transforming how our chapters func on and how they can bring value to the membership. Par cularly in the past couple of years, the chapter leadership, the support for chapters from the ASCPA staff and the level of interest and par cipation from members has been incredible. We are very excited about the role our chapters play in member engagement, local professional rela onship building, and developing leadership. I encourage you, if you are not involved at your local chapter, to invest some me in networking with others through the scheduled chapter ac vi es.

I hope you share the importance of how these disrup ve pressures impact daily opera ons and the importance of priori zing and inves ng resources in managing each. I trust this dialog has given you some points of interest as you decide which investments are most cri cal to your firm ma agement.

I appreciate the opportunity to serve that you have given me.

Marc

Tay l or C h an d l e r, L LC A young(ish) Montgomery firm allows growth to take its own course.

The firm began in September 2003 with managing partners Britt Taylor and Norman Chandler. They were young, with Taylor in his mid-thirties and Chandler in his late twenties, but had a vision for a CPA firm with a different model for both employees and client base. Their goal was a full-service firm with a very hands-on approach.

Following the concept of organic expansion, Taylor used his own retail background to encourage the purchase of a retail accounting firm with a focus on independent grocers.

They are now deeply involved in dayto-day operations and all aspects of accounting, ranging from bookkeeping to gross profit analysis, for more than 80 independent grocers.

“We work closely with our clients to fully understand their needs, to create a customized approach for success and ultimately strive to build and maintain long-lasting business relationships”, stated Britt Taylor.

“By becoming a business partner, rather than just a service provider, we help our clients improve their tax position, capital position, business structure, benefits package, acquisition potential and much more.

We have learned a great deal since we began 13 years ago, and we apply this knowledge to enhance our clients’ growth and success”, emphasized Norman Chandler.

They began primarily by auditing traditional insurance companies and nonprofits. As their business grew, so did their industry expertise, fueled

by Chandler’s ambitious pursuit of industry education. Those efforts eventually resulted in his earning CSFS, CFE, ARe, AIAF, ARC, ACP and CPCU designations. The designations meant credibility in insurance circles, expanded the opportunities available to the firm and enhanced the quality of services they provided.

This concentration in the insurance industry led them to the creation of Arsenal Insurance Management. In 2016, it was named Independent Captive Manager of the Year (U.S.) by Captive Review magazine.

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They’ve achieved steady growth through the addition of professionals and the firm now has 50 employees.

They also grew geographically, with acquisition of a firm in Georgia in 2011, and one in Florida in 2012, increasing the firm’s involvement in the areas of estate planning and taxation.

Last year they promoted Stephanie Chandler to partner. Ms. Chandler was recently recognized by the School of Accountancy at the Sorrell College of Business, Troy University, as their Young Alumnus of the Year.

SOCIAL ENGAGEMENT STRATEGIES FOR THE 21ST CENTURY

(How to leverage your EXPERTISE to SCALE and GROW without adding overhead) Carey Rome, CPA, Cypress Resources

“Think of us when…” is dead. The business model designed around the “Think of us when…” approach to sales and marketing is dead. Let me explain.A “Think of us when…” business approach tells the world, come to me at some point in the future when you might need what we offer. For decades, you’ve been encouraged to foster this marketing approach through repetition, with the assumption that repetition would create lasting memories so someone might call if they remember you when they have a need.

This sounds absolutely ridiculous when we say it out loud. It should.

Beyond the passive approach and lackluster growth that this model embodies, many organizations attempted to make up for a subpar marketing strategy by offering convenience. In fact, convenience once dominated this approach. However, today our customers’ definition of convenience has changed. Customer expectations are radically different.

Convenience is now in the palm of your customer›s hand or, rather, at the click of a mouse. This has caught many by surprise, but there’s no arguing the facts: “Think of us when…” is dead.

late fees. I’d argue that while late fees were certainly an irritation, these late fees were only symptoms of a much bigger problem.

What got exposed was a very vulnerable underbelly of a failing business model. As it turns out, if there was a better option, customers did not really want to go to a physical location to rent a movie anymore, no matter how convenient. So, what was the solution to everyone’s irritation?

The solution was Netflix. The reason people signed up for Netflix was the absence of late fees. However, the real solution Netflix provided was migrating from a “Think of us when…” business model and

moving customers into a new business model. This new model is an “I thought of you because…” business model. With Netflix, once you signed up, their algorithm noted patterns and tendencies of the movies you liked. By capturing a user profile that included your age, along with your rental tendencies, Netflix proactively recommended movies to you. In doing this, Netflix thought of your movie problem before you even knew that you had one. That, my friends, changed the game.

With much, much less information than is required to open a simple checking account, Netflix created customer profiles and personas. Based on a few demographic data points, Netflix projected what you might be interested in watching to form base assumptions. Then, with a simple algorithm, Netflix fine-tuned your profile based on their understanding of your engagement with their product.

Now, I certainly do not want to get into the weeds of Netflix’s technology. That is not the point.

My point here is that Netflix figured out a way to use the information required to truly Know Your Customer to create a persona. Then they refined that KYC persona based on user activity. In short, Netflix asked for what the banking world calls KYC information or Know Your Customer data. By utilizing existing information better, Netflix shifted business models.

Examples of this change have been increasingly evident for the last 20 years. When I first moved to Birmingham and was living in Cahaba Heights, the local Blockbuster [video store] was very convenient. What I didn’t realize until after the fact was the not so convenient 1) limited movie selection, 2) consistently unavailable “new releases” and 3) never-ending late fees.

This “I thought of you because…” business model has changed the world. Who does this affect? Well, the short answer is: everyone. My firm has deep expertise in banking and I can tell you that KYC is a massive, lost opportunity. Why? Regulators have long required banks to get KYC information. As such, banks have viewed KYC only as a requirement, not an opportunity. KYC shouldn’t only be viewed as a regulatory requirement.

In the late ‘90s, all of these inconveniences became obvious and Blockbuster met its demise. What was the problem that led to the end of the quintessential “Think of us when…” business model? Well, many believe that Blockbuster’s downfall came from the fact that the majority of people who rented from Blockbuster were upset with 8

Know Your Customer “KYC” is something banks live by, as we all should. However, because KYC is a regulatory requirement, most banks have not taken the leap from a “Think of us when…” business model to a “I thought of you because…” model. KYC is a necessity for every single bank to thrive.

Whether you work for a bank, a CPA firm, an insurance provider, a real estate organization or any business that is not a regulated monopoly, you will be impacted by this shift in business models. However, I believe there is great news for those technical professionals, those of us who are Subject Matter Experts (SMEs). The good news is that the customer wants to hear from you; you have value to deliver and by utilizing the right social platform to connect in the right way, you can leverage your expertise like never before.

Clearly what is dying is the “coffee, lunch, repeat” business development strategies of the past. “Networking” in order to stay top of mind is very much a “Think of us when…” strategy. So, what’s an SME supposed to do?

Three primary things: 1) Understand who you serve well. Target that specific wedge or niche where you are the expert.

2) Understand the pain points that they might experience before they hear of your solution.

3) Add value to each pain point along the way leading them to your solution.

I believe we are in a golden age for technical experts. Customers no longer want to waste time speaking to a sales person who does not add value to the conversation. It is easier now than ever to engage and add value with clients/customers or potential ones. Knowing Your Customer through the tactical use of social media truly is the clear path for SMEs to demonstrate value, drive business and scale like never before.

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2.

3.

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Understand YOUR unique area of expertise Define your TARGET MARKET Understand being on social vs. Actively engaging target customers on social EARN the right to connect Deliver VALUE consistently to your target market

BSA/AML is my unique area of expertise. BSA Officers, Chief Risk Officers, Chief Compliance Officers and other thought leaders in risk are my target market for this niche. One day I was on LinkedIn, and I noticed a BSA expert from a Top 10 CPA Firm “Like” an article.

The article was about how a Microsoft font helped bring down a Pakistani Prime Minister. After reading for myself, I realized the content related to an upcoming regulatory change. This is a change impacting everyone working in risk for all banks.

I immediately responded by shooting a video. In this video, I explained the impact to banks and the new regulation. I talked about why the content was relevant to this new rule. My goal was to provide context to a pain point that my target audience was experiencing. With this in mind, I discussed how the article could shed light on decisions they must make regarding the new rule. In this example, I executed steps 1, 2 and 3 by picking up a piece of content that I didn’t even create and demonstrated value to my target audience. By doing this, I delivered worlds more value than a “Like” or a “Share.” http://bit.ly/2g8tvyH

Let me give you an example. I am extremely active on LinkedIn, because it is a channel most business professionals use. I also specialize in KYC strategies and risk management. A subset of KYC risk management is BSA/AML (Bank Secrecy Act/anti-money laudering). If you’re thinking, wow, that’s pretty specific. Yes, and that is the point.

There are five critical steps to developing the right social strategy. They include:

It should come as no surprise that there is a recommended process for connecting, delivering value, and converting people to followers, clients, and advocates. Having a system for how you engage is what is most important. You want consistency across your organization. You need compliance. And, you want to ensure that you’re delivering value.

That takes following a proven process and continuous training for your team.

You may have heard it said that content is king. I believe this to be true. I also know that you are busy working, and few of us get paid to create content. So, you have to find hacks, shortcuts and efficiencies to ensure that you are delivering value. For me, video and audio are much faster than written content. So, think about what comes most natural to you.

Lastly, repurpose. Never create a piece of content that you will not repurpose. We’ve developed a strategy that builds from weekly blogs to longer form content such as white papers and webinars. Blogs get broken down into more frequent posts on LI and Twitter.

So, if you are producing a monthly newsletter already, you are sitting on a gold mine of content. What is most important is utilizing a repurposing strategy to leverage the assets you’ve already created.

Congratulations my CPA friends, it’s been a long time coming, but we finally have a platform to scale and deliver expertise without adding overhead. That’s a win for all of us.

Carey Rome, CPA, is a Louisiana native and graduate of both LSU and Louisiana Tech. He worked with HealthSouth and Arthur Andersen and served as COO and CFO for privately-held businesses before launching Cypress Resources in 2005. He added the role of CEO of AutoAML, which provides technology and expertise to the banking industry, in 2015.

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meet David more importantly, he became my very good friend. Mr. Tucker had one of the brightest financial minds of anyone I have ever known. His clients and employees benefited greatly from it, including me. There was never a dull moment around Jim Tucker. He died in 2013 and I miss him terribly.

David Scott is a partner in Tucker, Scott & Wates of Decatur. He recently joined the ASCPA Board of Directors and has served on the Alabama State Board of Public Accounting.

Where did you grow up?

I grew up on my family’s cattle farm near the Franklin County town of Hodges, Alabama.

Tell us about your undergraduate experience. Where did you attend college?

I went to the University of Alabama.

Like most college students, I enjoyed my time in school attending football games and going to parties. Having graduated from a small, rural Alabama high school, I found the accounting curriculum at the university to be difficult, but I was determined to graduate and become a CPA. I had excellent instructors who encouraged me along the way.

When did you decide on accounting as a career?

I entered college as an undecided business major with the intention of eventually going to law school.

Similarly, my first college roommate also intended to go to law school and he was an accounting major.

He convinced me to join him in accounting so we could go through the program together and then enter law school. After we got to intermediate accounting, he dropped out as an accounting major, but I stuck with it because I liked it. Today I am a CPA. He is a lawyer.

What did you do following graduation?

I was not interested in moving to a big city following graduation. My preference was to find a job within David Scott a reasonable driving distance of my northwest Alabama home. My first job was at the Decatur accounting firm of what is now Tucker, Scott & Wates.

Things just worked out for me at the firm, and in the city of Decatur, and I’ve never worked anywhere else.

Did you have a mentor in high school or college?

I had many great teachers in high school and college who taught me a lot of life lessons. However, my mentor would have to be Jim Tucker, CPA. I went to work for Mr. Tucker right out of college. Over time I became his business partner in our accounting firm. But

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MEMBER PROFILE

between the State Board and the state Society. I never want to see this happen in Alabama.

What have been the biggest changes in the profession during your career?

There is no question that the biggest change has been technology. I think the subject of every single one of these member profiles have said the same thing. When I first started in public accounting we had one computer in the office. Keeping up with technology can be very frustrating at times and is always expensive.

Tell us about your experience on the board so far.

As a new member of the board, I have only attended two meetings, but it’s been great getting to know the other board members, who have made me feel welcome. I have been most impressed with the quality of the Society’s employees. Everyone seems excited about their job. I get the feeling that everyone enjoys going to work every day!

What are the biggest challenges facing the profession right now?

Technology is the answer to this question, too. I find the concept of cloud accounting to be fascinating. I think the challenge of maintaining a paperless office environment through the implementation of new technology to be intriguing. I think the recruitment of quality students to the accounting profession, which will eventually result in quality CPAs, will continue to be a challenge of the future.

What keeps you inspired and motivated each day?

Two things keep me inspired and motivated: my clients and my employees.

The best thing I like about public accounting is working with so many different clients in such varied businesses. I learn something new each day. The employees at our firm are some of the best people I know and it is a pleasure to work with each of them day in and day out.

What prompted you to become a member of the ASCPA? When I became a CPA the next step for me was to join the Society. I knew it was the main organization in the state of Alabama that promoted the accounting profession which, in turn, would help me in my career.

What do you do to relax away from the office? Hobbies? Travel?

I enjoy boating on the Tennessee River with my family and friends. I enjoy beef cattle ranching on my farm. I enjoy exercising at the gym. I enjoy watching SEC football.

How does membership benefit you as a CPA? I mainly use the Society as a networking tool with peers. I have greatly enjoyed making new friends with fellow CPAs all over Alabama. I also benefit from the Society’s political action committee, Alabama CPA PAC, which advocates for members and business interests in the Alabama Legislature.

Tell us about your family.

Also a CPA, my wife is Morgan County Revenue Commissioner Amanda Scott. We have three daughters. Lucy Beth is a graduate of the University of Alabama and works in Denver for an upcoming gubernatorial candidate.

Mary Ella is a junior at UA majoring in accounting. Katherine is a senior at Decatur High School and plans to attend Alabama next year. We are members of the First United Methodist Church of Decatur.

Why did you decide to join the ASCPA’s Board of Directors?

I view my membership on the ASCPA’s Board of Directors as a way for me to give back to the profession which has given me and my family so much over the years. As a former member of the Alabama State Board of Public Accountancy, I value the positive relationship between the board and the Society. I hope my being on the ASCPA Board of Directors will continue to advance this relationship. In many states, an adverse relationship exists

What keeps you up at night?

Worrying about my three daughters (ha!ha!). Three boyfriends. Three cars.

Three college educations. Three weddings.

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CAPTIVE INSURANCE COMPANY PLANNING AFTER AVRAHAMI Davis Smith, Gilpin Givhan, PC

On August 21, 2017, the Tax Court issued Benyamin Avrahami and Orna Avrahami v. Commissioner, and Feedback Insurance Company, Ltd. v. Commissioner, 149 T.C. No. 7 (collectively, “Avrahamí”), its first ruling addressing a captive insurance company that has elected to be taxed under Internal Revenue Code Section 831(b). The court’s ruling that the transaction did not qualify as insurance for federal income tax purposes represents a high point in the IRS’s multi-year focus on small captives and their promoters. The court’s decision depended heavily upon the particular facts of the case, but some guidance is provided.

A captive is an insurance company formed for the purpose of writing insurance on a small, usually related, group of insureds. Captives are often used to supplement a company’s risk management strategy by, among other benefits, providing coverage for gaps in commercial lines, reducing total premium expense by increasing deductibles in commercial coverages and insuring the deductibles in the captive, and formalizing the risk management process as opposed to using reserves on the balance sheet to address losses on an as-needed basis. Popular coverages provided by captives include professional liability, cyber, supply-chain and medical stop-loss.

The IRS is concerned that some taxpayers are abusing captives that make Section 831(b) elections. Section 831(b) permits captives that receive no more than $2.2 million in premiums per year to elect to be taxed on investment income only. For example, if Affiliate X pays Captive Y $2.2 million in 2017 in a transaction that qualifies as insurance for tax purposes, then Affiliate X may deduct the premiums while Captive Y excludes the premiums from its taxable income. The IRS has been targeting groups they believe have been promoting this structure solely for tax purposes.

In Avrahami, the taxpayers owned three jewelry stores and three real estate developments that employed 35 people. The year before setting up a captive, the taxpayers’ total premium expense was approximately $150,000. Upon recommendations from their accountant and attorney, they met with a captive manager about setting up a captive.

The captive (“Feedback”) was established offshore and directly insured the taxpayers’ businesses. Feedback also participated in a risk pool operated by Pan American, an insurance company licensed in the same offshore domicile. The risk pool, which consisted of

between 80 and 100 participating captives, was structured to allow captives to distribute risk by reinsuring risk from unrelated parties.

Under the structure, businesses would purchase terrorism insurance directly from Pan American and their affiliated captives would agree to reinsurance a pro rata share of all terrorism risks insured by Pan American.

In order for premiums to be deductible by the insured, and excluded by the captive under Section 831(b), the transaction must qualify as insurance under a four-factor test: an insurable risk must be present (as opposed to business or investment risk), the risk must be shifted away from the insured to the captive (for example, the insured should not guaranty the captive’s obligations), the risk must be distributed by the captive so that the risk of loss can be reasonably calculated to be equal to the premiums paid, and the transaction must be insurance in the commonly-held sense. Unfortunately, the court addressed only risk distribution and insurance in the commonly-held sense.

The court first analyzed the taxpayers’ participation in the risk pool in order to meet the risk distribution standard. While not condemning participation in risk pools in general, the court had issues with the substance of Pan American’s operations. First, there seemed to be a circular flow of funds because the same amount of premiums paid by the taxpayers to Pan American were paid back out to Feedback within two years. Second, the taxpayers’ actuary was not able to convince the court that the premium calculations for the terrorism policies were reasonable.

Third, it was extremely doubtful that any event would ever occur that would trigger a claim under the policy and even if there was a claim, payment would be difficult because Pan American was so thinly capitalized. Finally, Pan American’s compensation by flat fee did not resemble the fronting industry standard of being compensated as a percentage of premiums. The combination of these factors led to the court’s conclusion that Feedback did not sufficiently distribute risk by participating in the risk pool since Pan American was not a bona fide insurance company.

The court also held that the transaction between the taxpayers and Feedback was not insurance in the commonly-accepted sense.

There were several facts highlighted by the court that supported its finding that Feedback did not operate like a traditional insurance company. For example, Feedback had 13

an “ad hoc” claims handling process. No claims were made by the taxpayers until after the audit had begun. A significant amount of the captive’s surplus was tied up in illiquid, long-term loans to related parties which were made without regulatory approval. The insurance policy language was confusing to the court. Finally, premium calculations were once again found to be unreasonable and did not justify the increase in premium expenses for the taxpayers from $150,000 to $1.1 million.

Captives can be a useful part of an organization’s overall risk strategy. But to be effective, and have a chance of surviving a challenge on audit, the captive must work in conjunction with an organization’s primary commercial policies. For example, if a practice is willing to put some of its professional liability insurance in a captive, then the commercial policy coverage should be modified so that the two coverages work in conjunction. The captive program must adopt and rigorously adhere to policies and procedures that are common within the insurance industry, such as claims adjustment procedures and conservative investment policies. Finally, the business purpose for adopting a captive program should be well documented and relevant to the specific businesses being insured. Even after Avrahami, captives can be successful risk management tools if established for a proper business purpose, but not if the sole purpose is tax savings.

DAVIS H. SMITH is managing partner of Gilpin Givhan, PC, and regularly advises captive insurance companies, risk retention groups and self-insured funds on transactional, regulatory and tax matters. Davis is a frequent speaker and writer on captive insurance companies, including recent articles in Captive Review (“Captive Strategies for Healthcare Organizations”) and State Tax Notes (“SelfProcurement Taxes and the Equal Protection Clause”). Gilpin Givhan was a finalist among law firms for Captive Review’s 2017 US Captive Awards. Davis was co-author of the 2016 rewrite of the Alabama Captive Insurers Act and founding member of the Alabama Captive Association. He was chairman of the Tax Section of the Alabama State Bar during 2016-2017.

ZOEBELEIN ON TAX

Tom Zoebelein, CPA

If year-end planning for our clients isn’t hard enough when we know what tax rate will be in 2018, it appears at the time I am writing this article to be nearly an impossible task.

Instead of having new tax legislation passed, and into law, as promised by both President Trump and the Republican-led Congress, we only have a nine-page outline on tax reform entitled “Unified Framework for Fixing Our Broken Tax Code,” (the “Framework”) released on September 27, 2017. Congress’s failure to pass tax reform legislation has left tax practitioners to cope with 2017 year-end planning meetings without any certainty as to what the 2018 tax structure will look like should tax reform become law.

I have been monitoring the various tax reform proposals closely and all signs point to a tax reform bill passing by November 2017. The fact that current budget bills for both the House and Senate have provisions for 1.5 trillion in tax cuts is a further sign that tax reform is on the front burner. Like it or not, we can’t ignore the Framework in our clients’ year-end planning. Therefore, in the following discussion I’ve summarize the important points in the Framework for you to consider.

Individual Provisions in the Outline The Framework has three important proposed changes to our current tax system for individuals. The first proposed change attempts to move taxpayers away from itemized deductions and towards the use of the standard deduction. The Framework would accomplish this by increasing the standard deduction while limiting itemized deductions to only mortgage interest and charitable contributions.

The increased standard deduction ($12,000 for single taxpayers, $24,000 for married filing jointly) comes with a hidden cost - elimination of the personal exemption. The Framework’s expanded standard deduction will mean modest additional deductions for nonitemizers of $1,650 ($6,300 + $4,050 = $10,350 - $12,000) for single filers, $3,200 (12,600+$4,050+$4,050=$20,700-$24,000) for joint filers, $800 ($12,600 + $4,050 + $4,050 + $1,250 + $1,250 = $23,200 - $24,000) for joint filers, where both are over 65. The elimination of the personal exemption will cause a $750 reduction for married couples with one dependent child ($12,600 + $4,050 + $4,050 + $4,050 = $24,750 - $24,000). Families with more than one dependent child will lose 14

an additional $4,050 for each dependent child over one. The losers will be those who itemized in the past…which is most of our clients.

The second change proposed in the Framework is a compression of the current tax rates to three rates: 12%, 25%, and 35% (zero rate for taxpayer at or below the standard deduction amount). The compressed tax brackets are progressive through the brackets as they are in current law. The width of the brackets in my opinion will be the only source of help for the balance of the “middle class.”

The last two individual provisions which may be the Framework’s few bright spots are: 1.

2.

Repeal of the individual alternative minimum tax and The elimination of “death tax and generation skipping taxes.”

The Framework appears silent on some important individual tax items which I think need to be noted: 1. The rate compression does not mention continuation of special tax

treatment of capital gains and dividend distributions, which may mean that treatment will not continue in any new tax bill.

2. The gift tax, by not being included in the estate tax repeal may indicate gift taxes will continue in any new tax bill.

3. Failure to mention the promised repeal of the Affordable Care Act tax increases means that the investment tax and the additional Medicare rate increases may continue into any new tax bill.

Finally, the Framework states that it envisions the repeal of numerous individual exemptions and tax credits in the name of fairness and simplification. The devil will truly be in the details.

Business Provisions The Framework appears to be a bit more generous with business than with individual taxpayers. Small businesses will be subject to maximum tax rate of 25% for sole proprietors, partnerships and S-corporations. Regular corporations will be subject to an entity tax capped at 20%. Similarly to individuals, the Frameworks seeks to eliminate the corporate alternative minimum tax.

The Framework will eliminate the current §199 domestic production expense, but preserves the R and D and low-income housing tax credits. Presently, the Framework looks at limiting net interest expense for regular corporations, but warns of similar treatment for non-corporations in the near future.

The Framework proposes to revive 100% first year bonus depreciation for qualifying new property placed in service after September 27, 2017. Qualifying new property specifically eliminates structures from the definition of qualifying property. This eliminates qualifying leasehold improvements, retail property, restaurant property and PATH’s expanded interior property from bonus depreciation.

The Framework has international tax aspects, but that is beyond the scope of this article.

The only aspect I’ll mention is the proposed limiting of US tax on multi-nationals to territorial income. If adopted into the Internal Revenue Code, will Alabama, by adopting by reference the Internal Revenue Code, also be adopting into Alabama tax law the concept of taxing only territorial income? Just my thoughts.

Here are some ideas to consider before yearend.

•

Consider completing capital projects by the end of 2017, as the 50% bonus is reduced to 40% in 2018 should any tax reform not be retroactive. If

enacted and 100% bonus is in final legislation, your client will be so much the better.

• This can be important especially for real estate property should structures be eliminated from bonus depreciation.

• Take advantage of qualifying improvement property that became effective for 2016 for property similar to leasehold improvements that does not qualify as 15-year real property.

• Don’t forget to consider grouping elections for real estate rentals, especially for those clients qualifying as real estate professionals.

• Consider enhancing itemized deductions, as this may be the last year if the Framework becomes law.

• Loss of special rates for capital gains and dividends if this was purposeful and not an oversight.

• This may be time to consider realizing capital gain positions before year end.

• Sub S-corporation with pre election corporate earnings and profits (E&P), this may be the time to declare and pay a dividend by year-end to wash out the corporate earnings while the rates are still favorable.

• Evaluate whether your clients qualify for the R and D Credit, as this is still a good move even under the Framework.

• The IRS has announced it is revoking the “no discount” proposed regulations for closely-held businesses. This may be a consideration in gifting for your client meetings given that the gift tax does not appear to be targeted for repeal.

• Don’t forget to look at the hurricane relief provisions for both Irma and Harvey, as well as the casual loss rules under §1033 • Partnership possible moves: • You need to make sure your clients’ operating agreements comply with the new audit rules effective 1/1/18 (please refer to Ely/Thistle article in September/October issue of CONNECTIONS).

• Multi-member LLCs looking to elect Sub S also need to look at their operating agreements to remove all references to special allocations, valuations, and distribution language [§704(b) “boilerplate” language], 15

as this can be construed to create a second class of stock. The IRS has been looking at the operating agreements and arguing that point. This would take away the pass-through aspect of the partnership and S corporation and treat the LLC as a C-corporation.

• This may be a good time to review the at-risk rules for allocating losses in advance of the new audit rules becoming effective next year. I especially want to bring your attention to the trailing guarantees or bottom-dollar allocation at-risk partnership debt.

This limits the allocation of at-risk debt to the partner that holds the larger portion of the debt guarantee. Partners in between will not be able to use their smaller guarantee as being at-risk. Though the new rules are in temporary and proposed regulation status and were issued for the disguised sale treatment, it can affect our clients. This rule is complicated, but the IRS does not plan to make substantial changes to the current regulations in this area as they indicated in their second report to the President on Executive Order 13789, Identifying and Reducing Tax Regulatory Burdens.

I hope this has been of some help to you in your client year-end planning. I wish I had a crystal ball to tell you what the tax reform will look like when finally passed. Based on my reading of the Framework, I fail to see how the Framework will help the middle class and I fear it will only push more of the tax burden on ourselves and our clients.

One of my co-workers made the comment, “How are you going to protect taxpayer identities by filing tax returns on postcards for all the world to see?” My best wishes for the holiday season, but be watchful for the “Grinch” that steals itemized deductions, tax credits and personal exemptions under the guise of tax simplification. May all your tax brackets be lower than they are today!

Tom Zoebelein, CPA, is Director of Tax Research at Pearce, Bevill, Leesburg & Moore in Birmingham.

Zoebelein on Tax appears in CONNECTIONS three times a year.

MEMBER NEWS CONGRATULATIONS

James D. “Jim” Gardner, Jr. has been named to the board of directors of Bank of York in Sumter County, with offices in York, Livingston and Tuscaloosa. Gardner is a partner in Mason Gardner CPAs LLC in Demopolis. He is a graduate of Mississippi State University. He worked in public accounting in St. Petersburg, Florida and Jackson, Mississippi before moving to Eutaw in 1977 to begin his own practice. He merged his firm to form Mason Gardner in 1986 with Phil Mason.

The firm has offices in Demopolis and Livingston. ___________________

Southeast Gas President and CEO Greg Henderson of Andalusia was recently elected chairman of the board of the American Public Gas Association (APGA).

The association is a national association representing more than 700 publicly-owned natural gas distribution systems in 37 states.

Henderson has served as Southeast Gas President and CEO since 2006. He joined the company as director of finance

and administration/CFO in 1998. He was previously with PowerSouth Energy in Andalusia and PricewaterhouseCoopers in Birmingham.

Henderson is a current or past member of many area non-profit, charity and professional association boards of directors. He is a graduate of Auburn University. ___________________

Warren Averett’s Mary Elliott has been named to Birmingham Business Journal’s Women to Watch. Elliott is the newlyappointed CEO of the firm, taking over from Jim Cunningham at the end of 2017. More than 100 nominations flowed in for the annual awards, which was a record number, and speaks to the significant role women are playing in the Magic City’s business landscape. Honorees were chosen based on their career accomplishments, their potential for future leadership, contributions to the economy and other factors. The honorees were featured at the annual Women’s Summit at The Club on September 22. ___________________

Leadership Birmingham class. This select group of 50 leaders will be educated on current issues and challenges in the Birmingham region. As a member in Warren Averett’sthe audit division, Cason specializes in accounting and advisory services, external and other specialized audits, review assurance services and turnaround advisory for the firm. He serves clients in a wide-range of industries, including higher education, nonprofit, construction, manufacturing and distribution, government and healthcare. His other professional affiliations include the Healthcare Financial Management Association and serving as an active board member for Restoration Academy, a nonprofit serving children in the Birmingham area. ___________________

strengthen and expand the leadership skills of promising young professionals. He was one of 38 chosen nationwide. ___________________ ServisFirst Bank has named Poenta Luckie as a senior vice president for the Fairhope office.

She has over 28 years of banking experience, most recently with Community Bank Coast as their Baldwin County market president.

Luckie is a graduate of Auburn University. ___________________

Tyler Crawford, supervisor at Barfield, Murphy Shank & Smith, attended the AICPA Leadership Academy at their headquarters in Durham NC in October. The rigorous 4-day program was designed to

WHAT’S GOING ON OUT THERE? Mauldin & Jenkins LLP, a Top 100 Firm, expanded its presence in South Carolina by adding Derrick, Stubbs & Stith, a firm based in Columbia. The merger will increase Atlantabased Mauldin & Jenkins by six partners.

The combined firm will have approximately 280 people with seven offices in five states, including one in Birmingham. Financial terms of the deal were not disclosed, but the combined revenue is expected to total approximately $50 million. Mauldin & Jenkins ranked 86th on Accounting Today’s 2017 list of the Top 100 Firms, with $44.8 million in annual revenue.

Shelby and Gloria Ingram are joined by Lynne Bozeman to celebrate Ingram’s retirement from Richard, Harris, Ingram and Bozeman and his 45 years as a CPA.

James Cason, also of Warren Averett, has been inducted in the 2018 16

Smishing-a New Frontier of Fraud

Steve Hines, CPA, co-founder, ThreatAdvice.com

As folks are slowly getting smarter about detecting normal phishing emails, the criminals have taken notice and are trying creative new ways to bait their targets. One such way is “smishing”. Simply put, smishing is any kind of phishing attempt that involves text messages. The victim will receive a fraudulent text message that says something about card deactivation or fraudulent charges or a customer service issue, and includes a web link or attachment in the text message. It also may ask the receiver to call a number for further instructions. Of course, the bad guy’s goal is to get the end user to click on the link which contains malware, or to call a number and give up personal information. When the link is clicked, the malware is downloaded and the cell phone is compromised, possibly giving up sensitive information like credit card, social security, and account numbers.

to clicking on a malicious link in a text than in an email. Somehow, we all seem to consider our phones as being much safer than our computers, but for all practical purposes our phones are small but very powerful computers. In their social engineering schemes, the bad guys have figured out that the good guys tend to let their guards down with mobile device security, and are using this fact to their advantage.

smishing scheme that luckily was caught just by calling to verify the validity of the text.

The best way to remain safe from this scheme?

A. Do not reply to text messages from people you don’t know.

B. If the text comes from a number that doesn’t look like a phone number (such as a “6000” number), be particularly cautious.

C. If you get a text from what appears to be a friend and it has a link in it, verify the validity of the text by directly contacting the sender.

D. If you are downloading apps, always get them from a legitimate app store. Do not install apps you receive in text messages.

E. Use different passwords for all mobile device logins such as online banking, social media platforms, etc.

F. If a text directs you to call a suspicious phone number, be very cautious. It likely is a scam.

These smishing tricks have been around for several years, but with the proliferation of smart phone users and people becoming a bit more aware of the email phishing tricks, the bad guys are gravitating to this means of trickeration. And, these types of attacks will likely become more and more sophisticated over time and graduate on to things such as apps.

As an example of the growing sophistication of these type attacks, someone recently received a text supposedly from their son-in-law and his contact information showed up as the sender of the text, but it had an attachment with it. Just before clicking the link, this person called the son-in-law to verify the text, Smishing is particularly worrisome because and he had no idea what she was talking Basically, it’s always best to err on the side of people tend to be more trusting of a text mes- about. So, the bad guys had spoofed the son- caution. It only takes one wrong click to make sage than an email, and are more susceptible in-law’s contact information in an elaborate life miserable.

ASCPA Endorses ThreatAdvice as Cybersecurity and Assessment Provider ThreatAdvice, a Birmingham-based provider of cybersecurity education and assessments, will offer continuing professional education and specific tools to ASCPA members. The company was founded in 2016 and addresses good cyber practices, helps to identify and respond to an attack and trains through cyberattack simulations.

very specific cybersecurity topic relevant to today’s environment. All courses can be completed at the participant’s own pace and will offer video segments and text to accommodate individual learning styles.

Each course concludes with a short online test to ensure employees are retaining course knowledge.

For more information, visit www.threatadvice.com, email info@threatadvice.com or contact the company at 800.915.3381.

Within the ThreatAdvice platform, Alabama CPAs will be able to obtain 10 self-study hours of continuing education credits. Each of the courses focuses on a

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How to Create a Culture of Innovation

by Jim Boomer, CPA, CITP | CEO, Boomer Consulting

The word innovation is thrown around a lot in our profession. Everyone wants ideas for doing things faster, easier, cheaper, or better. But rather than drive innovation from within the firm, they’re trying to keep up with what others are doing – essentially ensuring that their firm remains a step or two behind the competition.

The reality is that many firms are simply not built to innovate. They are too focused on satisfying existing clients, executing pre-determined processes, and hitting short-term growth targets. This would be acceptable in times when the rate of change is slow, and the risk of disruption is negligible. That is not the reality in our profession today.

How then can firms create a culture of innovation to support ideas rather than stifle them?

Get everyone involved Firm leaders must model innovative behavior, but they cannot be the sole drivers of innovation. Everyone in the firm must be a part of innovation and 10x thinking.

Dan Sullivan, the founder of Strategic Coach, pioneered the concept of 10x growth. It centers around the idea that it’s actually easier to grow your business 10 times over than it is to double it. To do this, everyone needs to think about their thinking.

Try this exercise: simply propose that your firm is ten times its current size in annual revenues. Now start writing the history of that accomplishment backward.

• What were the biggest changes you had to make to get there?

• What new things are you doing now that you’ve reached 10x growth?

• What types of work were delegated, outsourced, or automated?

Once people accept this growth as reality, they start to figure out what supports the future goal and what doesn’t.

This 10x focus works better than more “realistic” goals. If you were to ask your team what it would take to double your firm’s annual revenues, the focus would be on small tweaks and changes that would hopefully add up to progress. That mindset won’t get your team thinking about the difference-making changes that result in real growth. Looking honestly at the necessary steps to make significant strides in your firm will give you a formal structure for the process.

Formalize the innovation process Accenture’s 2015 US Innovation Survey took a look at what companies are doing in the area of innovation.

Although 96% of executives said that the longterm success of their organization depends on the development of new ideas, 72% of companies 19

allowed innovations to languish because they had no formalized process for such initiatives.

Some of the firms we work with have already addressed this disconnect by formalizing the innovation process and dedicating resources to it. One firm created a new “CIO” position – that of Chief Innovation Officer. The role isn’t necessarily to innovate but to drive the culture of innovation and accelerate the process.

Researchers in the Innovation: Management, Policy & Practice study identified a five-step recipe for sustainable innovation programs: Idea generation and mobilization – providing employees with time and resources to innovate:

1. Advocacy and screening – evaluating an idea and measuring its potential benefits and problems 2. Experimentation – testing an idea, not on its merits, but on its suitability for the firm at this particular time.

3. Commercialization – creating market value for an idea by focusing on its potential impact 4. Diffusion and implementation – company-wide acceptance of the idea and setting up everything needed to utilize or produce the innovation.

Embrace failure Accountants like certainty, but innovation by its very nature is inherently uncertain. Avoiding failure is simply not possible in a culture of innovation. As Tesla and Paypal founder Elon Musk says, “If things are not failing, you are not innovating enough.”

Many organizations that want to encourage innovation set up a reward system based on outcomes (successes). But we should instead focus on rewarding learning behaviors. Rather than rewarding only successes, celebrate and reward

idea generation and the ability to detect failure early and deal with it (correct it or kill it). These behaviors are the true drivers of a culture of innovation.

Firm leaders need to recognize that a culture of innovation does not happen by accident. Innovation culture is created daily by what we recognize and reward. Many claim innovation is a priority, but few excel at creating a culture where employees are truly empowered to generate and develop great ideas.

This article originally appeared in CPA Insider on September 19, 2017.

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E-12399-917 AL

E-12399-917 AL.indd 1

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7/31/17 4:58 PM

NEW FACES

anticipation of expanding as a hub for other state society peer review functions. Raegan holds an associate’s degree from Central Alabama Community College and held positions in the banking industry prior to joining the ASCPA.

at the ASCPA

Ashley Peters is CPE Coordinator and jumped in at the deep end of the CPE pool in July, as the ASCPA’s CPE season gained momentum. Her experiences in customer service, plus her tenure as intern at the Alabama State Board of Public Accountancy January-July 2017, gave her a head start. She is a graduate of Faulkner University with a degree in accounting and will pursue a graduate degree from UAB starting in January, largely through online classes.

It isn’t often that the ASCPA adds new staff and certainly not three at one time! But that’s been the case this summer. There was strong motivation to expand, since there have been two additions to the “junior” staff with the births of Anna Claire Sellers (Ashley, Peer Review Administrator) and Wilder Cottles (Corena, Conference Coordinator). It became imperative to have coverage in both peer review and CPE as we moved into the busiest time of our year, June through September.

Chuck Jordan, CPA, is the ASCPA’s in-house Peer Review Technical Reviewer. He has served on the peer review committee for 15+ years and, with his retirement from full-time as a member in Warren Averett’s Montgomery office, he elected to share time between the firm and the ASCPA. His 43 years in public accounting have equipped him well to take on this position. As the only gentleman at the ASCPA, he keeps a low profile, lest he’s asked to move a heavy file cabinet! Chuck is an Auburn graduate and has served on non-profit boards, including Goodwill Industries of Central Alabama and the Tukabatchee Area Council of the Boy Scouts of America.

Please take a moment to meet our new staff when you’re visiting at ASCPA headquarters in Montgomery.

Raegen Nuffer is the new Peer Review Assistant, bringing that department to three staff members.

As the peer review process has evolved and grown more complex in the last two years, the ASCPA Board of Directors made the decision to bolster staff in 21

DISENGAGING TO BENEFIT YOUR FIRM AND THE CLIENT

by Suzanne M. Holl, CPA

Most CPAs — even those highly skilled at screening and bringing in new clients — will periodically encounter situations and client relationships that call for disengaging. While the subject of disengaging is typically thought of as (at best) unpleasant, disengaging can be a practice management tool that increases firm profitability and creates a better situation for both the CPA and the client.

Generally, today’s clients are making more demands and expecting broader services at a time when CPAs are becoming more specialized. When clients expect more from you than what your experience and staffing enable you to provide, the resulting expectation gap could lead to a deterioration of the professional relationship. But that doesn’t have to happen. By identifying clients and situations that call for disengaging, and by recognizing when to disengage, the CPA will be on the way to knowing how to disengage skillfully.

What Exactly Is Disengagement The disengagement process is as important as the engagement process in that it is a critical part of a successful practice. Initiated by the CPA, disengagement seeks to formally terminate the CPA-client relationship in the most positive way possible, freeing each party to pursue other professional ties.

A skillfully handled disengagement is mutually beneficial to you and the client. You are left with more time to grow your business by selling new services to existing clients, and to bring in new clients. The client from whom you disengage is also free to move on and find a successor CPA to meet their needs.

When to Disengage A proactive attitude that treats disengaging as a practice management tool means, in part, putting into place a system that allows you to re-evaluate your client base on a regular basis, be it annually or semi-annually. Incorporating such a plan into your business practice enables you to monitor your client base and note any changes that could have an impact on your professional relationship.

Of course, even the most proactive evaluation plans will sometimes be thwarted, creating a need to disengage immediately due to a critical situation, such as the discovery of fraudulent activity. However, by using a procedure that enables you to regularly monitor your clients, you can better protect yourself and your business from having situations escalate into crises calling for disengagement.

Another benefit that comes from regularly evaluating clients is that you 22

place yourself in an excellent position to gauge their changing business needs and therefore sell them new or different services that complement their growth or change.

Care needs to be taken when disengaging or withdrawing from an engagement after it has started, especially when the scope of the engagement includes audit, review, or compilation. Since attestation engagements are often used by the client for obtaining financing or satisfying loan covenants, disengaging while the engagement is in process requires careful attention to potentially negative effects.

Opportunity Cost of Continuing Relationship Only you can decide whether it is in the best interest of your firm to continue a relationship with a client who makes you uncomfortable, upsets your staff, or otherwise exhibits unseemly behavior.

Consider the time and energy your firm spends on serving that client. Working with certain clients may be so disruptive and upsetting that it is simply not worth the money they bring into the firm.

You should also carefully consider any

changes in a client’s business. Changes in management or in the direction of the business can create problems for you if you are not professionally staffed to perform the new, additional, or different services the client’s business requires.

When you are not qualified to accommodate a client’s new needs, yet choose to accommodate the client rather than disengage, you make yourself vulnerable to litigation. Not only are you inviting a potential lawsuit, but the firm is losing the opportunity to provide additional services to the existing client base and to build a stronger base in the firm’s area of expertise – a course of action that could be far more productive and profitable for the firm. Consider different options to best serve the client, such as a friendly joint venture with another accounting firm that specializes in another area of expertise. Such arrangements can be quite successful.

CPAs often try to adjust to a client’s changing behaviors or needs, especially for clients that have long-term professional relationships with the CPA. However, making adjustments can cause you to overlook risk factors and eventually

expose you to disputes and lawsuits.

Pay Attention to Difficult Clients When performing regular screening of existing clients, pay special attention to difficult or manipulative clients. Difficult behavior, such as consistently delinquent payment, should not be ignored and should be followed up. Take swift action on your own behalf to investigate. The following checklist of pertinent questions is intended to help you and your staff get to the heart of the matter and solve problems.

• What is causing the problem?

• Who is causing the problem?

• Does the client’s behavior indicate that there is a problem with the service provided?

• Are you dealing with a manipulative client?

• Is the problem due to a personality conflict?

• Could someone else better serve the client?

• When did you first realize you had a problem with the client?

• What tipped you off – an unpaid bill?

A change in attitude?

• Are you allowing emotional ties to over shadow professional concerns?

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It is possible that the behavior you see now is a reaction to something you did months ago but is still bothering the client.

Additional Questions to Consider • What can your firm do to better communicate with the client?

• Does the client feel the fees charged by your firm are too high?

• Was a new staff member assigned to the engagement?

• Is the client suffering a business or personal hardship?

• Is your firm’s billing method clear?

Dealing right away with difficult behavior may save the relationship and help you avoid disengagement, or it may confirm that it is time to sever the relationship.

How to Disengage

When you decide to disengage, you should seek to terminate the relationship professionally and formally, in writing. At a minimum, the disengagement letter should always contain the following:

_________________________ continued on page 31

Is it Time to Rebrand Your Firm?

Heather Robinson, Boomer Consulting, Inc.

The world of accounting is ever-changing.

Your clients’ needs evolve, regulators rewrite tax laws and accounting standards, and technology has made the accounting firm of today virtually unrecognizable from a firm of just two decades ago. Perhaps it’s time your firm’s brand to change. Is your messaging and value proposition behind the times? Are you looking to offer new services or expand into a new market? Or have you outgrown your original branding and need to renew your firm’s status in

the market? Sometimes depending on the situation, a full rebrand is required.

Before you get started, here are five tips to remember when rebranding your firm.

There is never a right time

A serious rebranding - when done right requires a significant investment of time, money and resources. From starting research to launching the new brand could take months or even years. It’s tempting to say you’ll put it off until after busy season, next year or even five years from now, but the truth is, nobody is getting less busy.

That said, just because it’s been a few years since you rebranded doesn’t mean it’s time to rebrand. Your firm’s messaging and brand could be perfect even though it hasn’t been updated recently. The time to rebrand is when you are failing to reach your target market. Rebranding can help a perception problem when your target market is ignoring you or unaware of what 24

you’re offering. In this case, there is no time like the present to get started.

Here are some reasons you might choose to move forward with a rebrand: • Expansion of firm offerings: ie Service Expansion, Market Expansion, Geographic Expansion • Merger or acquisition • Evolving with the market • Brand becomes complicated

Give your brand a story

What makes your firm unique? Hint: it’s not “service.” Every accounting firm believes it’s their service that sets them apart. By definition, if all accounting firms differentiate on the same point, it’s not differentiating anymore! Your excellent client service may help you retain existing clients, but service is not a unique selling position. How you deliver that service might be.

Get your whole team involved

The work of rebranding a firm should not be solely the purview of the partner group or your firm’s marketing department. Get everyone involved in the process! Your team can provide insight on what sets your firm apart from the competition and the qualities and characteristics they want people to think of when they hear the firm’s name.

Millennials can be particularly useful in this process. Millennials are the largest group of consumers in the US, and they highly value authenticity. Will your brand story appeal to Millennials or will they spot a dishonest brand a mile away? Run

When was the last time a new client found you via a phone book? It’s likely been several years. But chances are many clients find you or check you out via the firm’s website. Make sure your website is not an afterthought of the rebranding process. Your website should integrate with every other aspect of the brand and client experience, including: • Logos • Client portal • Marketing collateral • Social media sites • Email signatures • Advertising • Promotional material, etc.

_________________________ continued on page 31

Quessons to Ask Yourself

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Was the INVENTORY Year-End Count a difficult process this year?

?

Are you MANUALLY entering a lot of data every day?

?

Would you like to monitor and control LABOR costs?

?

Has Management asked for Operational and Financial DASHBOARDS in real time?

Do you have approvals in place that you can monitor through WORKFLOWS?

?

Rebranding is a financial investment, but doing it right requires hiring professionals with experience in rebranding professional service firms. Once you hire the right design team, trust their expertise. You will get to weigh in on every step of the process, but there will be times when you’ll need to defer to their knowledge and experience.

Make sure everything is consistent

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Remember that successful rebranding requires a lot more than just selecting a new logo. You will need to perform research, interview key employees, obtain customer feedback, discover what sets your brand apart and develop your brand story all before even consider ordering business cards with a new logo. You’ll need to permeate all company communications, including the website, social media, collateral and signage with the new brand.

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Rebranding your firm is not cheap. It takes time, money, various project teams and often outside experts.

Don’t undergo a rebranding just to change your name or logo. In case you need proof that it’s a bad idea, consider the story of Radio Shack. In 2009, the retailer was facing intense competition from online retailers.

They decided to rebrand, changing their name to The Shack. The problem was that everything else about their failing business model stayed the same. Customers would walk into The Shack and see the same products that they weren’t interested in buying from Radio Shack. After intense backlash, the company reversed their brand. Radio Shack’s fortunes continued to decline, and the company declared bankruptcy in 2015.

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It’s expensive but worth it

Rebranding is not just a new name or new logo

To avoid such a catastrophe, make sure your rebranding coincides with some other change in how you do business.

That change could be to service offerings or rolling out new technology that will improve your client’s experience.

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People want to work with brands that have something to say. If your brand isn’t saying anything, why would anyone listen?

your ideas by them and by employees at all levels within the firm. Making them a part of the process will go a long way towards securing their buy-in on the changes you are trying to make.

?

Really dig deep to discover the story of your brand. How do you work with clients?

What is the history of your firm? What is your corporate mission? Does your branding represent what your firm does?

Why do they choose to work with you rather than every other firm in town that promises excellent client service? If you have a unique founder, this can be a good place to start.

?

Let the team of DLD Business Soluuons and Microsoo Dynamics GP assist you in meeeng your business objeccves this year.

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25

TOP TEN REASONS WHY LONG-TERM CARE INSURANCE IS IMPORTANT NOW

Many people mistakenly believe Long-Term Care Insurance is something they don’t need to worry about until they are much older. Few people try to understand long-term care costs and payment options until it’s a necessary part of their lives, and by then it’s too late. Sadly, some people even assume Medicare or the government will cover this cost. Almost everyone needs Long-Term Care Insurance now regardless of their age.

Reason #1: The need for Long-Term Care can occur at any age

Reason #2: Your health may change in the future and you may be declined

In this situation, they would have to pay the full costs for their care from their own resources.

The need for Long-Term Care can happen at any stage in life. It usually occurs when we least expect and it can be financially devastating if someone has not prepared for the possibility.

Long-Term Care Insurance policies are only available to people who do not currently have pre-existing conditions that make them more likely to need Long-Term Care in the future.

Reason #3: Long-Term Care Insurance premiums increase if you enroll at a later age

Non-age-related events such as accidents, strokes, cancer and Alzheimer’s can arise at much younger ages than most people anticipate they will need Long-Term Care.

The longer someone delays enrollment in Long-Term Care Insurance, the more likely they will have a health condition or cognitive impairment that prevents them from being approved.

Long-Term Care Insurance premiums are calculated based on the age at which you enroll. Premiums for people who sign up in their 70’s are much more expensive than for people who enroll in

26

their 60’s. Accordingly, someone who signs up in their 60’s will pay more than someone who enrolls in their 50’s.

Due to your age and health status – Long-Term Care Insurance rates are the most affordable right now!

Reason #4: There is a 70% chance you will need Long-Term Care in the future According to the U.S. Department of Health and Human Services, 70 percent of Americans who turn 65 will need long-term care at some point during the remainder of their lives. If you are married, the odds are very good that at least one of you will need long-term care.

This percentage has been increasing dramatically during the past two decades and is expected to continue to increase. Due to advances in modern medicine, many Americans are surviving health events such as stroke, cancer and heart attacks that previously resulted in a higher death rate. However, these advancements mean people are living longer and needing more assistance.

Reason #5: The high costs of Long-Term Care can financially devastate a wellplanned retirement A recent study indicates that the average lifetime cost of long-term care in retirement tops $250,000.

If someone has not prepared by setting aside funds to pay for this either through Long-Term Care Insurance or other funding resources, this high cost can drain most of a person’ s or couple’s retirement savings.

In many unfortunate circumstances, a surviving spouse is left destitute and unable to maintain the same lifestyle they are accustomed to or sadly, they can’t pay their bills due to retirement savings that were redirected to LongTerm Care costs.

Reason #6: Long-Term Care Insurance can prevent you from being a burden to your loved ones You may assume that if you need longterm care, your family will take care of you. However, if the time comes when you need such care, getting it from your family may not be an option. They may have moved away in the meantime or gained responsibilities that make it impossible for them to properly care for you. Long-Term Care Insurance can provide the resources to pay for your care so that you do not become a financial and emotional burden to your family.

Reason #7: Long-Term Care Insurance will allow you to receive the care you need in the setting you choose Long-Term Care Insurance will allow you to pay for a caregiver to come to your home so you can maintain your independence as long as possible while receiving the care you need.

You can also use your Long-Term Care Insurance benefits to reside in an Assisted Care Facility that provides meals, interaction with others and activities, as well as the level of care you need.

(Medicaid) will only pay after you have used up all your available resources to pay for your care Medicare pays only for acute care like hospital and physician charges.

Medicare specifically excludes intermediate and custodial care, which are the most needed types of long term care. All Medicare payments for LongTerm Care are limited to a maximum of 100 days.

Medicaid requires individuals to deplete personal resources until becoming eligible for welfare programs. Even if one qualifies, care is usually restricted to a nursing home.

Reason #10: There may be significant tax savings available for Long-Term Care Insurance premiums If you pay for your Long-Term Care Insurance premiums yourself and are not self-employed, you can deduct the following amounts in 2017 based on your age and to the extent that your total itemized medical expenses – including Long-Term Care Insurance premiums – exceeds 10 percent of your Adjusted Gross Income.

Age 40 and younger $410 Age 41-50, $770

Reason #8: Long-Term Care Insurance can preserve your lifelong savings for the purposes you intended

Age 51-60, $1530

Long-Term Care Insurance can help you to avoid having to use your lifetime savings for unintended purposes.

If you are self-employed or pay for your Long-Term Care Insurance premiums from your business, your premiums are tax deductible up to the thresholds listed above without meeting the 10 percent of AGI requirement.

Having a Long-Term Care Insurance policy can assist in making sure your savings remain for the purposes you intended, such as your and your spouse’s well-funded retirement or an inheritance for your kids and grandkids.

Reason #9: Medicare does not pay for Long Term Care costs, and the state 27

Age 61-70, $4090* Age 71 -older $5110*

*In 2017, the AGI threshold is 7.5 percent for anyone 65 or older.

To learn more about long-term care insurance with approved discounts for ASCPA members and their families please visit www.ascpaltci.com or call 1-888-915-3197.

It’s November, Prepare to Blitz!

The Blitz has been challenges them to sharpen their money Join the Alabama Society’s Young CPA ASCPA’s campus visits.

Cabinet as aAlabama volunteer when they gear Young instrumental in buildingas bridges between smarts. than 50 schools sign their up Join the Society’s CPA Cabinet a volunteer when More they gear up for up for their annual high school Classroom the Society and high school teachers, each year and 60+ volunteers spend annual high school Classroom Blitz, November 13-­‐17. The Blitz is one of several initiatives of Blitz, November 13-17. The Blitz is one whether they teach accounting, finance, one period or all day in the school they of several initiatives of the Cabinet: the economics or related topics. choose. the Cabinet: the YCPA Charity Golf Tournament in June, the young and emerging professionals’ YCPA Charity Golf Tournament in June, session at the Annual Meeting and speaking engagements of the ASCPA’s campus The YCPAs have prepared a PowerPointin support Contact Shirley Carroll, 334.834.7650 the young and emerging professionals’ presentation inspires students or scarroll@ascpa.org to volunteer. visits.

Blitz hMeeting as been in bwhich uilding bridges between the Society and high school session atThe the Annual and instrumental to major in accounting in college and speaking engagements in support of the teachers, whether they teach accounting, finance, economics or related topics.

The YCPAs have prepared a PowerPoint presentation which inspires students to major in accounting in college and challenges them to sharpen their money smarts. More than 50 schools sign up each year and 60+ volunteers spend one period or all day in the school they choose.

Businesses large and small are looking for a trusted advisor to help guide their human capital management (HCM)

can exceed the human capital Check the home page of the website for strategy. the link tPaychex o sign up for help the you Blitz, www.ascpa.org.

needs of all your clients through our industry-leading HCM

technology and expert support staff.

Become Your Clients’ to Most Trusted HCM Advisor • Recruiting and applicant • Hiring and onboarding

Seize the Opportunity

tracking •

Human resource administration

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Time and attendance

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Benefits administration

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Health insurance management

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Payroll administration

•

Retirement services

To learn more, contact your Paychex representative at 1-877-534-4198 or visit payx.me/ascpa-accounting-professionals

Paychex is proud to be the preferred payroll provider for the Alabama Society of CPAs.

Insurance sold and serviced by Paychex Insurance Agency, Inc., 150 Sawgrass Drive, Rochester, NY 14620. CA License 0C28207.

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Leadership Academy Deadline is November 30 If you’re ready to take the next step at your organization and are a CPA with 3-8 years’ work experience, sign up for the ASCPA’s Leadership Academy. Biggest benefit? Getting to know your counterparts from all corners of Alabama to build a network beyond your own colleagues.

Email VP Education Jessica Roberts with questions and to request an application, jroberts@ascpa.org.

Thank you to Birmingham Young CPAs Trae Zablan, Meredith Harper, Sara Ridgeway and Ashley Boudreaux for volunteering at the Joint Leadership Development Conference of the Alabama State Department of Education. More than 6300 high school students visited the Career Expo on Tuesday, October 17 during the multi-day event. The volunteers engaged the students, shared materials and a fun Money $marts quiz.

In the September/October issue of CONNECTIONS magazine, scholarship recipient Gabriela Gomez-Perez was incorrectly identified. Ms. Gomez-Perez proudly attends the University of North Alabama. Go Lions!

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_________________________ continued from page 23

_________________________ continued from page 25

• A clear statement that you are disengaging and the effective date of the disengagement (e.g., We must formally end our relationship with you as your accounting firm <effective immediately, or as of [date]>); • A description of any work that is in process or unfinished; and • A statement of any due dates or filing deadlines that exist with regard to the work, whether finished, in process, or unfinished.

your client feeling that you have acted in the best interests of both parties.

Review and edit your disengagement letter carefully to ensure that it is professional, objective, and rational.

Situations that provoke disengagements are often emotionally charged.

Don’t let your letter reflect your personal feelings. Your client needn’t feel antagonized in any way. When done effectively, disengagement can leave

Launch the new brand strategically

Disengagement is an important practice management tool, and knowing how to do it skillfully and professionally will serve to help you expand your practice and avoid liability. Any time you need advice about a client situation or a disengagement letter, call your risk advisor.

Once you have some new logo branded gear in your hands, it’s tempting to want to start showing off all of the work you just put into rebranding, but now is not the time to act without a strategy. Plan and communicate your new branding strategy with your team.

Remember that this is not a one-day plan, but an ongoing process that will continue for months after your launch day. Look at your rebranding like an internal process that will change how your firm is externally viewed.

Suzanne M. Holl, CPA, is senior vice president of loss prevention services with CAMICO (www.camico.com). With more than 28 years of experience in accounting, she draws on her Big Four public accounting and private industry background to provide CAMICO’s policyholders with information on a wide variety of loss prevention and accounting issues.

Make sure everyone in the firm is on board with the new changes, and turn them into your brand ambassadors. Do they know your brand story? Can they communicate it effectively or will they still deliver the same old elevator pitch? Get your team on board by sharing the new “story of us.” Let them take ownership of the new brand and help you spread the excitement and the message.

Rebranding a firm is not for the faint of heart, but neither is it something to be avoided.

Take this opportunity to tell a new story, generate excitement, and rally your team around the brand. Once you’ve built your new brand, be consistent and persistent. If you want to be successful and rebranding, follow the strategies above and commit to your changes. Become that new brand, and eventually, people will follow.

Looking to add that “ZIP” to your accounting firm?

Then look no more!

License a name and concept that stands out to clients Build your practice around this concept Use this brand as it best fits with your practice Reasonable royalty and license fee

(844) ZIPPYCPA

steve@zippycpa.com

www.zippycpa.com

31

Heather Robinson is the marketing manager for Boomer Consulting, Inc., Heather’s primary focus is on developing the firm’s marketing strategy and brand awareness to help drive business results.

She manages and executes marketing and business development initiatives, with daily oversight of the website, social media, and thought leadership content.

In addition , as a part of the Business Development team, she provides leadership and strategic planning on marketing and communication practices for the firm.

ASCPA VOLUNTEER FORM Want to get involved with the ASCPA but aren’t sure how? Or where you might fit in?

Help us find a home for you by completing this form and sending to Diane Christy, dchristy@ascpa.org. Questions? Call 334.386.5752.

NAME__________________________________________________________________________________________________________________ ORGANIZATION___________________________________________________________________________________________________________ OFFICE PHONE______________________________CELL PHONE______________________________EMAIL________________________________

I’m a CPA in: ⃝ PUBLIC ACCOUNTING

⃝ EDUCATION

⃝ BUSINESS and INDUSTRY

⃝ GOVERNMENT

⃝ RETIRED/UNEMPLOYED

I’m interested in volunteering: ⃝ CHAPTER

⃝ YOUNG CPA CABINET (by application each January)

⃝ COMMITTEE (circle one)

⃝ BOARD OF DIRECTORS (through nomination each January)

EDUCATION

⃝ CPE TASK FORCE (help plan specific individual conferences and overall education program)

STATE TAXATION

⃝ YOUNG CPA CLASSROOM BLITZ (high school outreach each November)

FEDERAL TAXATION

⃝ TAX HOTLINES (each February)

AUDIT

⃝ CPE SPEAKER/WEBINAR SPEAKER/ON-SITE CPE ADMINISTRATOR

CPA PAC

⃝ YCPA CHARITY GOLF TOURNAMENT

ETHICS

⃝ KEY PERSON CONTACT (support ASCPA’s advocacy efforts at state and federal levels)

PEER REVIEW

⃝ PROFESSIONAL ARTICLES (CONNECTIONS magazine, weekly digital newsletter)

PROFESSIONAL STANDARDS DIVERSITY and INCLUSION

11/06 11/06 11/07 11/07 12/04 12/04 12/07 12/07

-

Dothan Dothan Auburn Auburn Birmingham Birmingham Pensacola Pensacola

11/06 - Dothan

To register, for more info, visit: 11/07 - Auburn or To register, or for more info, visit: 12/04 - Birmingham www.ascpa.org/sirote www.ascpa.org/sirote 12/07 - Pensacola To register, or for more info, visit: 11/06 - Dothan www.ascpa.org/sirote 11/07 - Auburn 12/04 - Birmingham 12/07 - Pensacola To register, or for more info, visit: www.ascpa.org/sirote 32

ASCPA Continuing Professional Education Registration Form Mail form to : ASCPA P.O. Box 242987 Montgomery, AL 36124-2987

Fax form to :

Register online at:

334.834.7310

www.ascpa.org

REGISTRANT INFORMATION Last Name

M.I.

First Name

ASCPA Member Number

Firm / Employer State Certificate Number Address

City

State

Zip

Business Phone

Business Fax

Please visit www.ascpa.org to view all registration policies, including information about cancellations and refunds.

Please attach a description of special requests or contact us at (334) 386-5763.

Email Address (for registration confirmation)

o Vegetarian o ADA Request

o Check if information has recently changed and needs to be updated in your member record Are you a member of the AICPA? o Yes verification)

How did you hear about this class?

o No

o Email

Course Date

Member Number: ____________________ (Required for discount; subject to o Newsletter

o Website

Course Number

Course Title

o Postcard/Special Mailing Course Fee

o Other

AICPA Discount *see note (where applicable)

ASCPA Non- Member Member

Book Fee ($40 per course)

Subtotal

Total: *CPAs who are members of the ASCPA may register at the member rate. CPAs who are not a member of the ASCPA or other State Society may register at the Non-Member rate. Please include the appropriate discount(s) when registering for events. áCPAs who are members of the AICPA may deduct $30 from AICPA seminars ONLY (8 hrs classes). (These are identified in the CPE Schedule online or in the ASCPA newsletter).

*Electronic course materials are included in the registration fee and will be available for download 3 days before the course date.

You can choose to purchase a paper copy of the course materials for an additional fee of $40 per course. o I acknowledge that I will receive course materials electronically (included in course fee). o I would like to purchase my manual for $40 per class Check: I have enclosed a check payable to ASCPA in the amount of $ ___________ I authorize the ASCPA to charge $ __________ to my credit card.

Credit Card:

Card Number

MC

Visa

Discover Month

o Company Credit Card ________________________________________ Print Cardholder’s Name

AMEX

Year

Expiration Date

o Personal Credit Card

________________________________________________ Cardholder’s Signature 2/23/15

Delivering Results - One Pract

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October 9, 1951-September 6, 2017 Dothan, Alabama | Certificate 2660R

David Michael (Mike) Hallford, age 65, died at home on September 6. Hallford loved spending time with family, his golfing buddies, his beach-loving friends from Panama City and the friends that gathered regularly to discuss football, politics and life in general. He and his wife Camille were an ongoing love story which survived the death of their 25 year-old son Davis in October of 2008.

Hallford was a graduate of the University of Alabama, with both undergraduate and master’s degrees. He left Flowers Hospital as vice president of finance before continuing his career as CFO at DSI Security Services in Dothan. He loved his career and was known as a loyal and devoted employee who valued his co-workers. Hallford was a member of the Alabama Society for 24 years.

34

8

w

May the light of the holiday season fill you with joy for the coming year.

Best wishes from your ASCPA family!

Presort Std US Postage PAID Permit No 131 Montgomery, AL

The Alabama Society of Certified Public Accountants 1041 Longfield Court P.O. Box 242987 Montgomery, AL 36124

Call or visit APS.net today for a free, confidential valuation of your practice.

Imagine... a chair without a desk Delivering Results - One Practice At a time Lori Newcomer, CPA & Tim Price, CPA PNGroup@aps.net

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