35 minute read
Message from ASCPA Chair, Jon Heath
My goodness, how times can change. When I was growing up, we called August the “Dog Days of Summer” and started school closer to Labor Day. It’s mid-August; I have one daughter attending her junior year in high school, and one registering for her junior year in college. By the time you read this, football season will be in full swing!!
But you’ve probably heard, the more things change… the more they stay the same. This time of year brings a renewed sense of optimism and opportunity. I would be surprised if the class of 2023 didn’t believe that they were going to be the most amazing class to have graduated from their respective school(s). Of course as Dr. Tom Ratcliffe would say, “they would simply be in error”; the class of 1989 holds that title in perpetuity.
New opportunities abound in the form of new educators, students, coaches, conference alignments, seasons, etc. Yet, they are built on familiar foundations that give us a sense of understanding, purpose, and comfort. Life’s cycles seem to provide that. For the first time since 2019, we seem to be returning to a more familiar cycle. I hope and pray that this blessing continues.
This Connections issue focuses on the Accounting Pipeline – the talented, new people entering our beloved and wellestablished profession. Connecting this new talent to our organizations allows us to continue to serve our clients, customers, and stakeholders with a renewed sense of purpose and fresh perspectives, while providing exciting and rewarding career possibilities to the next generation.
The “Pipeline” seems to be the number one topic of conversation inside the profession, as it affects all member categories: public practice, government, business and industry, and academia. As you can imagine, this complex subject will take some time to address. In May, the ASCPA Board decided to invest our efforts and resources into an area that would result in the greatest positive change for the profession. In June and July, we convened a task force, engaged outside consultants, consulted with the AICPA, and began networking with our counterparts in other states to accelerate and facilitate solutions. In mid-August, we held a strategic session to formulate our objectives and purpose. Please stay tuned, as we’ll provide updates as we proceed with this initiative.
In 2019, more college students were enrolling in accounting majors than ever. In 2022, the enrollment in college, business schools, and accounting majors has reduced. What remains the same is the dedication of our colleagues in education and the outstanding programs that their universities offer. The AICPA and ASCPA are determining the best way to attract students to the profession. Part of the solution will consist of articulating our “why”, “purpose”, or “cause.” Serving
others and the public interest IS our purpose
– e.g. providing assurance, assisting with tax and compliance needs, offering financial advice, and helping people grow their businesses and dreams. For those students reading this, notice that I didn’t mention “doing math”; the profession is much more about building relationships and providing solutions than anything math-related. The profession needs you to get back into junior colleges, high schools, and even junior high schools to share your stories and successes with young people of diverse backgrounds and skill sets. If college football coaches are offering scholarships to junior high players, then shouldn’t we consider similar strategies?
The technologies and skill sets needed to deliver value is rapidly changing. Our profession is agile. The AICPA, NASBA, state regulators, and societies employed our change management super powers to modernize the CPA Exam to meet the changing landscape. The new exam will go into effect in January 2024. For more, visit evolutionofcpa.org
On to a few things that haven’t changed. First, the great work of the ASCPA Educational Foundation and their Scholarships for Student (S4S) continues. We sincerely
thank you for your generous donations that supported $123,500 in scholarships last year.
For a cost lower than your Netflix and Hulu subscriptions, you can join us in ensuring a strong and diverse pipeline of talent that will support the future of the profession! For more, visit alabama.cpa/educational-foundation.
Next, the September 30th CPE deadline is drawing near. If you need CPE hours, then I encourage you to take advantage of the ASCPA offerings. See all the offerings and enroll at alabama.cpa/catalog/events.
The final unwavering item is our appreciation of and for you – our members. It’s such an honor and privilege to serve you.
The future is bright for our profession. We will continue to focus on the Pipeline in order to attract and retain the brightest and to serve.
Selected Financial InformationASCPA FINANCIAL UPDATE Revenues 2022 Alabama Society of CPAs ASCPA Selected Financial Information - Revenues 2022
Conferences & Meetings 3% Contributions 2%
CPE Seminars 30%
Membership 38%
Selected Financial Information Expenses 2022 Alabama Society of CPAs ASCPA Selected Financial Information - Expenses 2022
CPE Seminars 27% Conferences & Meetings 3% Membership 6% Other Program Costs 8%
Newsletter 2%
Public Relations 10%
Quality Review 16%
Investment Income 3% Newsletter 2% Other Program Charges 6%
Quality Review 18%
Alabama Society of CPA's Condensed Statement of Position For the Year Ended April 30
Compiled from consolidated audited financial statements
Assets Cash equivalents and certificates of deposit Other current assets Property and equipment, net Investments in stocks and bonds, fair value
Total Assets 2022 2021
$ 486,250 $ 1,158,367 134,730 71,382 1,426,679 1,475,688 5,772,128 5,558,226
$ 7,819,787 $ 8,263,663
Administration 26%
Liabilities Deferred revenues Other current liabilities Deferred compensation - Long-term portion Debt - Long-term portion
Total Liabilities
$ 79,913 $ 124,404 238,454 140,820 241,566 210,626 295,536
$ 559,933 $ 771,386
Net Assets
$ 7,259,854 $ 7,492,277
See the Society website at www.ascpa.org for a full set of consolidated audited financial statements.Alabama Society of CPA's
Condensed Schedule of Activities For the Years Ended April 30
Compiled from consolidated audited financial statements
Programs : Professional Development Seminars Membership Quality Review Public Relations Scholarships and awards Newsletter Conferences & committees Chapter activities Political Contributions
Total Program Services Charges for 2022 2021 Services, Dues, Net Revenues Over Net Revenues Over Expenditures and Contributions (Under) Expenditures (Under) Expenditures
$ 708,818 $ 814,358 $ 105,540 $ 188,042 151,901 1,053,643 901,742 782,612 477,371 432,865 (44,506) 24,898 256,891 (256,891) (194,581) 134,634 62,731 (71,903) (71,449) 64,256 47,638 (16,618) (35,767) 112,610 83,391 (29,219) (32,485) 4,033 (4,033) (8,050)
15,250 (15,250)
$ 1,925,764 $ 2,494,626 $ 568,862 $ 653,220
Management and general expenses Net realized/unrealized gain on investments Other revenues
Net Revenues Over Expenditures
$ (675,728) $ (502,867) (371,772) 958,891 246,215 123,825 $ (232,423) $ 1,233,069
HONORING A LEGEND
The University of Alabama Celebrates the Career of Dr. Edward Schnee
By Karen Miller
The University of Alabama is known as the place “where legends are made,” and in the Alabama tax community, there is no greater legend than Dr. Edward Schnee. Dr. Schnee recently retired from the Culverhouse School of Accountancy after providing forty years of dedicated service to students in the undergraduate and graduate level tax courses and to tax professionals throughout the state.
Dr. Schnee joined the faculty at the University in 1982 and served as the director of the nationally recognized Master of Tax Accounting (MTA) program for the majority of his tenure at the University. Dr. Schnee’s significant contributions to the University were highlighted in his selection as the recipient of the 2019 National Alumni Association Outstanding Commitment to Teaching Award. Dr. Rich Houston, director of the Culverhouse School of Accountancy, noted that Dr. Schnee “taught others how to teach and find the answers themselves, and communicate them effectively to others.”
Recent MTA graduates praised Dr. Schnee’s commitment to teaching his students the critical thinking skills which are necessary for a successful career in the tax profession. Danielle DuBose, a 2016 graduate of the MTA program, commented that, “Dr. Schnee’s unique teaching style taught me how to be a critical thinker and pushed me in a way that prepared me for my future endeavors. Dr. Schnee uses a socratic teaching method that is typically reserved for law school classes. This method prompted me to think critically about what I was learning and also learn the tax law in a way that stuck with me for the long run. His lectures were laced with references to events that shaped the law – cases, business practices, regulations, and policies from Congress.”
Dr. Schnee’s consistent commitment to excellence and teaching others is also evident in the numerous articles that he has published in leading practitioner journals such as the Journal of Accountancy and the Tax Adviser. Dr. Houston further noted that Dr. Schnee is “unparalleled in his ability to interpret and provide guidance on the most complex tax issues, and does so despite the fact that laws and regulations change constantly.”
Under his direction, the University’s MTA program became nationally renowned, and its graduates have gone on to have extremely successful careers in all aspects of taxation. In addition to his role as Director of the MTA program, Dr.
Dr. Edward Schnee with University of Alabama President Stuart Bell.
Dr. Schnee at his retirement celebration with 2022 MTA students.
Schnee also served as chairman of the Culverhouse College of Business Faculty Executive Board, which oversees all curriculumrelated issues in the College. Dr. Schnee’s commitment to teaching was also greatly evident in this role, as he unfailingly upheld academic standards and proper curriculum design.
On a national level, he was a co-founder of the American Taxation Association, the first editor of the Journal of Legal Tax Research, and he has won several awards for teaching and his articles on tax topics. Most notably, in 2011 he received the Outstanding Tax Educator Award, which recognizes outstanding contributions by a faculty member teaching taxation. He also chaired national committees that directly impacted tax policy, and he provided outstanding leadership and direction to the Federal Tax Clinic, which supports continuing education for tax practitioners in the state and also provides scholarships for students. Roger Boatner, a 1990 graduate of the MTA program, noted that Dr. Schnee is “always working to advance the professional education for his students, for his former students, and for all the tax accountants in the state and surrounding area.”
Dr. Schnee’s impact is also apparent in the current full-time teaching roles that fourteen of his former students now hold at various universities. This legacy, as well as his many achievements and commitment to educating others, will continue to inspire future generations of tax professionals throughout the country.
“ Dr. Schnee’s unique teaching style taught me how to be a critical thinker and pushed me in a way that prepared me for my future,” said Danielle DuBose, MTA ‘16
Meet Brianne Smith
PATHWAY TO CPA
After taking Principles of Accounting her sophomore year in college, Brianne Smith fell in love with accounting. More specifically, she discovered her passion for individual finances and specialty tax. “I didn’t even know it was a thing,” she joked. Which is exactly why, according to Smith, getting students introduced to the profession early is key.
Smith’s career as a CPA began in public accounting, doing specialized lowincome housing tax credit audits. After a few years, an opportunity in the state trust department presented itself - and that’s when the wheels really began to turn. Fourteen years later the assistant provost from a local college asked her if she knew anyone that was interested in teaching.
“I’ve always, in the back of my mind, thought, ‘I would love to teach. I’d love to go get my PhD.’ So, that actually started the conversation,” said Smith. And with that, she stumbled upon her second passion - teaching.
“At the time I had three little kids and it was the best ‘mommy schedule’ you could possibly think of,” said Smith. “But when I got into it, I was really surprised that I didn’t feel like I was busy enough. I was teaching two hours a day, and I had all summer off.” Cue third passion - Brianne C. Smith, CPA, LLC.
“I started my practice in 2016, just to do some big projects,” she said. “Financial planning projects, and then also business valuations.”
GIVING BACK TO THE PROFESSION
Smith currently serves on the AICPA Personal Financial Planning Executive Committee, and is in year one of her three-year term.
“I’ve been interested in serving on this committee for quite some time, because it really does make all the things I do makes sense,” said Smith. “I teach in an accounting program, but my PhD is in financial planning.”
The goal of this committee is to help provide resources (Figure 1.11) to practitioners interested in expanding their practice, but also to educate students that this pathway is an option.
“We also believe it is a draw to people being interested in being CPAs, because a lot of people would like to work with individuals in a different way - other than preparing tax returns.”
For Smith, the existence of an actual section in the AICPA that’s dedicated to CPA financial planners means they are preparing for CPA Evolution. The Tax Compliance and Planning (TCP) section of the Uniform CPA Examination tests the knowledge and skills that new CPAs must demonstrate.
“I’m part of this group of amazing leaders who’ve been doing this for a long time,” said Smith. “Pushing through and trying to grow awareness of this pathway, and also making wonderful resources for people like me who want to expand their tax practice into adding financial planning into an existing tax practice.”
THE PIPELINE
“One myth is that if you pick the accounting track, you’ll be expected to sit behind a desk,” said Smith.
When it comes to discussing the traditional idea of pipeline, Smith thinks long term. “This is why I think the CPA exam is changing, too, because we’re moving away from being either audit or tax. Instead, we’re really moving more towards solutions.”
“If we have a client who’s really struggling with something, and they’re calling us constantly about one particular problem,” she said, “instead of spending more time helping them fix the problem, we try to find a technology solution to fix the problem and integrate it into what they already have.”
“I guess you could say I’m not chasing a billable hour for a particular pay, and the hours in my day are not capping the possibilities,” said Smith.
As a college professor, Smith is always surprised at the number of students who stumble upon accounting through an elective, or a required course late in their curriculum, and then think to themselves, “Ah! I like this! I wish I had known.”
“I always ask, ‘Who likes money?’”said Smith. “And when you say, ‘You get to be a trusted advisor. I shut these doors and people spill their guts. They tell me everything. And you have to keep it to yourself and help people through their problems. A lot of these are related to their financial decisions, but not all of them.’ They really like that trusted advisor piece.”
As Smith points out, people have left the workforce recently because they have figured out how to make their own money being entrepreneurs.
“I think it’s really motivating to students to say, ‘Hey, accounting is a really great way to learn how to be an entrepreneur, and then advise other entrepreneurs,’” said Smith. “They also really like that it’s going to show them how to grow their own wealth and build their own net worth.”
As much as the profession, and the world around the profession, is changing, Smith says the students give her energy and keep her and her research current.
“Practicing feeds the teaching,” said Smith. “It gives me the stories, the case studies.”
“I feel like I can’t do one without the other.”
To read more about Brianne Smith, visit alabama.cpa/CPA-Brianne-Smith.
Figure 1.11
Tax Compliance and Planning
The Tax Compliance and Planning (TCP) section of the Uniform CPA Examination (the Exam) tests the knowledge and skills that new CPAs must demonstrate with respect to:
U.S. federal tax compliance for individuals and entities with a focus on nonroutine and higher complexity transactions
U.S. federal tax planning for individuals and entities
Personal financial planning
The assessment of federal tax compliance will focus on an nlCPA's role in both the preparation and review of tax returns. The assessment of federal tax planning will focus on an nlCPA's role in determining the tax implications of proposed transactions, available tax alternatives or business structures. The assessment of personal financial planning will focus on planning strategies and opportunities that an nlCPA typically identifies in connection with the preparation and review of individual tax returns.
The assessments described above will also incorporate:
Data and technology concepts including the verification of the completeness and accuracy of source data used to prepare returns and supporting schedules.
Applied research with a focus on reviewing and using excerpts of source materials (e.g., Internal Revenue Code, Treasury Regulations) to complete a range of tasks including identifying issues, analyzing facts and determining appropriate responses.
A list of reference materials relevant to the TCP section of the Exam is included
under References at the conclusion of this introduction. Content organization and tasks The TCP section blueprint is organized by content AREA, content GROUP and content TOPIC. Each topic includes one or more representative TASKS that an nlCPA may be expected to complete when performing tax preparation services, tax planning services or personal financial planning services.
The tasks in the blueprint are representative. They are not intended to be (nor should they be viewed as) an all-inclusive list of tasks that may be tested in the TCP section of the Exam. Lists or examples included within the text of a representative task beginning with the word "including· are not intended to be exhaustive. Within some representative tasks are parenthetical lists. If a parenthetical list begins with •e.g.·, this is not intended to be an exhaustive list but rather examples of the types of content that could be assessed. Parenthetical lists that do not include "e.g.• are intended to be an exhaustive list of the content to be assessed with respect to that representative task. Additionally, the number of tasks associated with a particular content group or topic is not indicative of the extent such content group, topic or related skill level will be assessed on the Exam.
Content allocation The following table summarizes the content areas and the allocation of content tested in the TCP section of the Exam:
Content area Allocation
Areal Tax Compliance and Planning for Individuals and Personal 30-40% Financial Planning
Area II Entity Tax Compliance 30-40%
Area Ill Entity Tax Planning 10-20%
2022
Pearlie Aaron Athens State University
Matthew Carroll Auburn University
Molly Drouge
Samford University
Raegan Ballinger
Athens State University
Xun Chen Jacksonville State University
Gabriella Felkins University of West Alabama
Ansley Hicks BirminghamSouthern College
Sarah Hicks
BirminghamSouthern College
Brandon Bonvillian
Spring Hill College
Chelsea Cole University of Montevallo
Marissa Fletcher University of Montevallo
Carley Hood Auburn University
RECIPIENTS
Noah Bryant University of Alabama
Catherine Couch Auburn University
Emily Gilbert Faulkner University
Victoria Johnston Athens State University
Landry Bussey Jacksonville State University
Natasha Drain Athens State University
Haley Heard Alabama State University
Jonathan Langston University of Montevallo
Brock McNeely University of Montevallo
Alexis Rennhack
BirminghamSouthern College
William Nguyen
University of South Alabama
Bentley Rice
Auburn University
Lucas Pennington
Jacksonville State University
Dylan Stallworth
Alabama State University
Christy Pickett
University of Alabama at Birmingham
Jayda Stinnett University of Mobile
Madeline Pugh University of North Alabama
Anna Tanner Samford University
Elijah Taylor
Athens State University
Kaeri Ward
University of Montevallo
Abigail Williams
Auburn University at Montgomery
Stewart Wilson
Troy University
Madeline Zimmerman
Spring Hill College
Congratulations also goes to the following scholarship recipients: Lauren Dumar, Samford University; Teressa Nicosia, Spring Hill College; Jameson Chandler, University of Alabama at Birmingham.
Since 1967, the ASCPA’s Educational Foundation has been providing support to students majoring in accounting at Alabama colleges and universities. Over time the scholarship amounts have grown from $500 to $2,500. In 2021 Foundation scholarships were expanded to included CPA exam scholarships. The $500 scholarships provide financial assistance to students taking the CPA exam. These were a natural extension of the commitment to encourage students to become a CPA. The process of selecting scholarship recipients each year is the Foundation’s most visible activity. Each Spring our college and university contacts are asked to share our online application with their students so they can then apply. The application covers all four of our scholarships: (1) $2,500 general scholarships, one per accredited accounting program; (2) $2,500 diversity scholarships, 5 are awarded to students who meet the diversity requirement; (3) $2,500 financial need scholarships, 2 are awarded based on demonstration of financial hardship and (4) $500 CPA exam scholarships, 5 are awarded. Please know that the scholarship selection process is very difficult! However, the application requires the student write an essay and share their journey. And, quite frankly, it is usually what the students share in these essays that help us most with our selections. This past Spring we awarded over $100,000 in scholarships to deserving students across Alabama. Our Educational Foundation and its mission to promote CPA careers through educational scholarships is just as vital now as it was in 1967. Thank you for your continuing support of that mission and in the nurturing of future Alabama CPAs.
ASCPA EDUCATOR CONFERENCE
10.28.22 I 9AM-3PM Free for educators 4-hour CPE with lunch provided
Attend in-person at the ASCPA office or via Zoom.
Plan to discuss the Future of the Accounting Profession, Update from the State Board of Public Accountancy, Partnerships with ALSDE, High School Pipeline initiatives, CPA Evolution (PFP), and much more.
For more information or to register visit: www.alabama.cpa/edu22.
You will be challenged to understand the importance in developing holistically as a leader. It’s our goal to assist you in becoming better at the art of working with others, all while helping you plan your next steps as a leader.
Register today at alabama.cpa/els.
NOVEMBER 4, 2022
Warren Averett CPAs and Advisors, one of the largest accounting and advisory firms in the Southeast, is celebrating its 50th anniversary during 2022. Team members throughout Warren Averett’s 15 offices are reflecting on the accomplishments of the past and looking forward to growth in the future.
“We are so proud of all that the firm has accomplished over the past 50 years,” said Mary Elliott, the firm’s Chief Executive Officer. “As we look forward to the firm’s future and continue to provide the best service to our clients, it’s been nice to look back and reflect on how far the firm has come through the work of our team members who have helped propel Warren Averett to new heights.”
The History
Since 1972 (and in some parts of the firm’s footprint, even earlier), the firm has provided services to help clients accomplish what’s most important to them. In the 1950s and 1960s, many of the firm’s predecessor CPA practices began serving clients, and in 1972, several Birmingham entrepreneurs opened a small firm named Pearce & Summerford, PC, which would eventually become Warren Averett. During the 1980s, Warren Averett saw a series of reorganizations before becoming Warren, Averett, Kimbrough & Marino, PC in 1986. By the end of the 1990s, the firm was the country’s 71st largest accounting firm. In 2012, three regional accounting firms across the Southeast joined forces to create today’s Warren Averett CPAs and Advisors. The firm continued to increase in size and gained offices in Tampa, Atlanta, Mobile and Panama City.
The Team
One thing that transcends city and state lines, evident in no matter which office you visit, is the spirit of the Warren Averett Team. You might even say their spirit is awardwinning. Throughout Warren Averett’s long history, the firm has been named as a Best Place to Work in multiple locations, and in many places for multiple years. And if you’re looking for Warren Averett on Instagram, it shouldn’t surprise you how you can find them - @WATeam.
“I would say the team concept is a big part of our clientservice mentality,” said Tommy Sisson, who currently serves as the Birmingham Office Managing Member. “When I bring in a client, it’s not my client; it’s a firm client. We don’t operate in silos. So, when Jim brings a client in, when Mary brings a client, when I bring a client in - it’s a firm client.”
Not only does the team care about their clients, they also care about each other. In 2017, the Warren Averett Foundation, an internal employee benevolence foundation, was established so that team members can give back to each other - to help other firm employees in need. Whether it’s an employee dealing with an illness in the family, an employee personally dealing with cancer, or a natural weather disaster, the foundation has proven helpful.
The Community
To honor 50 years of helping local communities, Warren Averett introduced a “50 Acts of Service” challenge, where team members will complete 50 community service projects throughout the Southeast this year.
Number six on Warren Averett’s list of “50 Acts of Service” took place in Montgomery. The Warren Averett Team held a dog and cat food drive, benefiting the Montgomery Humane Society in March.
“We have lots of animal lovers at Warren Averett,” said Sandy Coaker,
1986 FOUNDED 1972
1988 Powell & Company
Burton, Canaday & Moore James A. Stroud & Associates, P.C.
1986 1993
1988 Powell & Company
1995
1993
Burton, Canaday & Moore
CELEBRATING
50 YEARS
Lapidus, Tuck & Raymond Joseph Decosimo & Co.
Birmingham Office Lapidus, Tuck & Raymond 1998
2000 1999Joseph Decosimo & Co. Birmingham Office
1998 1999
BENEFIT CONSULTANTS
2001
BENEFIT CONSULTANTS
2001 2000
formerly
formerly
1995
Jinks & Moody, P.A. Jinks & Moody, P.A.
Rödl
Member of Rödl & Partner International
2004
Rödl
Member of Rödl & Partner International
2004
White, Fleming
formerly
White, Fleming
formerly
Goodgame Burleson/Kirkland & Co.
Goodgame Burleson/Kirkland & Co.
2008
Banking Practice of Schauer Taylor, PC 2008
2011Banking Practice of Schauer Taylor, PC 2012 2013
STAFFING & RECRUITING
2011 2012 2013 2015 2016 2017
2015 2016 2017
STAFFING & RECRUITING
Montgomery Office Managing Member. “It was something that most everybody could engage in and be supportive of.”
Team members turned the event into fun for the whole staff, adding an in-person puppy visit from the Montgomery Humane Society.
“It was a great event for us because we all got to socialize with the representatives from the Humane Society,” said Coaker. “And we collected over 500 pounds of dog food to provide to this worthy cause.”
As the year comes to a close you can keep up with all 50 acts by visiting warrenaverett.com/50-acts-of-service/.
TECHNOLOGY GROUP
TECHNOLOGY GROUP
1972 TH ANNIVERSARY 2022
Alabama | Florida | Georgia | www.warrenaverett.com
The Brand Promise
Whether they are serving a public company, a nonprofit, a private company or a governmental entity, Warren Averett has proven they have the expertise to help anyone thrive. “I think what makes us unique is what’s in our brand promise — help our clients thrive and accomplish what’s important to them,” said Ray White, Huntsville Office Managing Member. “Our goal is to be your Trusted Advisor.”
“When you think in terms of what keeps a client up at night, or what they are most worried about,” said Elliott. “I want our clients to come to us and ask that question, and if we don’t have the answer, we can help them find it.”
“Our tagline is helping our clients thrive - that’s what attracted me to the firm initially more than 40 years ago,” said Sisson. “Helping (our clients) be successful in whatever it is that’s important to them.”
“I hope the public and our clients see us as a strong, innovative, aggressive firm who is always looking ahead, and looking into what our clients and our business community are facing,” said Coaker. “Because we are very intentional in that our name includes Warren Averett CPAs and Advisors. And we really embrace that advisory role.”
With IRS Partnership Audits Ramping Up, Will More States Enact the MTC Model Statute?
By Bruce P. Ely and William T. Thistle, II
Landmark changes in the federal income tax treatment of partnerships (including multi-member LLCs) became effective in 2018 for many more partnerships than first anticipated. As a result of the Bipartisan Budget Act of 2015, the IRS can now audit certain “large” partnerships, instead of each of their partners, and assess income tax, interest and penalties against the partnership itself. IRS partnership audits have begun and a group of “super auditors” are completing their training. We also learned from IRS officials that a surprising number of not-so-large partnerships didn’t exercise their annual right to opt-out of the comprehensive partnership audit regime (CPAR), and are therefore subject to the new audit rules – whether they like it or not.
The laws of most states don’t allow for the direct assessment of partnerships because these entities are not considered taxpayers under state law; they are pass-throughs with the tax liability resting at the owner level. With the CPAR, states now have a choice: (1) enact legislation that allows them to separately audit and assess certain partnerships; (2) substantially conform with the new federal CPAR and simply wait for the IRS to provide revenue agent report (RAR) information about recent audits of partnerships with connections to that state; or (3) do nothing and let what could be substantial amounts of state tax revenue go uncollected.
Because of concerns by professional and business trade associations that their partnership clients/
members might be subjected to multiple state audits, as well as a comprehensive IRS audit, a number of these groups agreed to negotiate a model statute that could be enacted by every state that levies a net income tax. Representatives of the Multistate Tax Commission (MTC), in conjunction with the AICPA, the Council on State Taxation (COST), the ABA Tax Section*, the Tax Executives Institute, the Institute for Professionals in Taxation, and other groups, met for approximately 2 years to develop this model. The MTC Model Statute was approved by the MTC in January 2019 and soon endorsed by each of the other organizations. Thankfully, the gist of the model statute endorses option (2), allowing only the IRS to conduct partnership audits and then passing along the audit information to the states to proceed with their own assessments. So far 21 states have enacted all or large portions of the Model Statute (although at least 3 need revisions to more closely follow the MTC Model Statute).
Critically, the Model Statute addresses reporting federal audit changes for all taxpayers – not just partnerships – although several states have enacted a version that’s limited only to partnerships. The model is designed to provide states with a uniform, simplified method to apply the results of IRS partnership audits, which may increase substantially with the hiring of more revenue agents as a result of the Inflation Reduction Act of 2022. On the other hand, the Model Statute gives taxpayers and their partnership representatives certain state-level
States That Need to Enact Legislation to Adopt the MTC Model, Or Need Improvements to More Closely Follow the MTC Model (As of August 1, 2022)
WA
States that have enacted legislation States that have enacted legislation, but need improvement to more closely follow MTC Model States that potentially need legislation
AK OR
CA NV ID
UT
AZ MT
WY
CO
NM
HI ND
SD
NE
KS
OK
TX MN
WI MI NY
IA
MO
AR PA
IL IN OH
KY
TN WV VA
NC
SC
MS AL GA ME
VT
NH MA
RI
CT
NJ
DE
MD
DC
LA
FL
Disclaimer: This information should be used for general guidance and not relied upon for compliance. Source: Council On State Taxation
elections that may vary from their federal election. A good example would be electing for federal tax purposes to “push out” the liability for the assessment to those who were partners during the audit period, while electing on a state-by-state basis whether to have the partnership itself pay the apportioned amount of the assessment.
The Alabama Department of Revenue (ALDOR) has been working with the Alabama State Bar Tax Section to draft its own version of the Model Statute, but the project was shelved over a year ago. However, ALDOR indicated recently that it intends to restart the project, in cooperation with the State Bar Tax Section, and hopefully the Alabama Society of CPAs, and fine-tune its draft for possible introduction in the Spring 2023 legislative session.
With the expected increase in IRS partnership audits, especially with President Biden’s approval of the Inflation Reduction Act of 2022, and a near majority of the states with individual income taxes now having enacted all or substantial portions of the Model Statute, we expect several more states – including Alabama – to consider the idea in their next legislative session. Now is also the time for all partnerships (including multi-member LLCs) to have their tax advisers review their organizational documents and make the necessary changes to conform with the CPAR and corollary state laws. For the AICPA’s perspective on the Model Statute, visit alabama.cpa/CONNECTIONS/ModelStatute. For a comprehensive history of the Model Statute together with several helpful articles written about it, visit alabama.cpa/CONNECTIONS/pip.
1
* The authors chaired an ABA Tax Section task force in the early negotiations that eventually led up to the final version of the MTC Model Statute, but note that any opinions expressed in this column are their own and not necessarily those of their law firm, clients, or professional associations with which they are affiliated. © August 15, 2022. All rights reserved.
Bruce P. Ely William T. Thistle, II Bradley Arant Boult Cummings
ALABAMA CPAS UNDER ATTACK FROM CYBER CRIME
HANSLEMONS CTO,CONTROLALTPROTECT
Cyber Crime has been rising for decades and accelerated during the pandemic. The accounting industry is facing an unprecedented challenge to the security of operations and protecting consumer data. Nationally, billions of dollars are lost to insider threats, ransomware, business email compromise, and espionage. Customer information is regularly exfiltrated from inside corporate electronic perimeters and posted for sale to identity thieves on the dark web.
The Southeast United States is heavily targeted, as the vast majority of regional CPAs simply do not invest in data security. Alabama was one of the last states to create a Breach Notification Act, which requires businesses to report known data security breaches to law enforcement. The critical questions emerge, what are the root causes of the failures in information security, and what moves can CPAs make to lower the probability of a disastrous breach?
ControlAltProtect consults a wide spectrum of industries across the globe and provides the technology, framework, and education to help protect business from Cyber Crime. We have helped corporations across the world recover from Cyber Attacks, and plenty of them are based in Alabama. Because Alabama has seen growth in key industries, our businesses are primary targets. Financial, medical, and public accountants have suffered the brunt of attacks.
Many businesses see information security as a risk unique to their Information Technology group or “IT guy, ” and in response, don't give it the proper attention or budget. Many “check the box” for compliance or insurance reasons but lack the appropriate understanding of the field and often rely on IT resources to handle it. Because of this, businesses often suffer significant losses.
Businesses must shift their mindset if they are to be equal or better than these threats. We encourage CEOs to become an active part in securing their enterprise, and make sure that third party vendors do their part. Sophisticated Cyber criminals navigate around traditional Cyber defenses in days, if not minutes. Unless you hire an experienced Cyber Security professional, you are vulnerable. The onus of action remains with leadership, and a proactive approach to information security is very often the litmus of whether a company survives a breach.
FAAC Speaker Line Up
Audit & Attest Standards Update
Presented by Mike Glynn, CPA, CGMA
American Institute of Certified Public Accountants
Risk Based IT Audits
Presented by Paul Perry, THFMA, CISM, CITP, CPA, CDPSE
Warren Averett
Preparation, Comp and Review Standards
Presented by Michael Brand, CPA, CGMA
BMSS Advisors & CPAs
Fraud in the Workplace
Presented by Kelly J. Todd, CPA, ABV, CFF, CFE
Forensic Strategic Solutions
and
Lindsay Gill, CFE
Forensic Strategic Solutions
IN-PERSON EVENT
Common Yellow Book & Uniform Guidance Deficiencies | Virtual 9/20/2022 (12:30PM-4:00 PM) Galasso, Melisa | 4 AA
What’s Going on at the GASB Virtual 9/20/2022 (8:30 AM-12:00PM) Galasso, Melisa | 4 AA
ASCPA’s 2022 Sales and Use Tax Workshop | Virtual 9/22/2022 (8:30 AM-12:00PM) Thistle II, William T. | 4 TX
Maximizing Your Social Security Benefits | Virtual 9/22/2022 (8:30 AM-12:00PM) Frost, Michael A. | 4 TX
Required Minimum Distributions: Compliance and Planning | Virtual 9/22/2022 (12:30PM-4:00 PM) Frost, Michael A. | 4 TX
Advanced Trust Issues: A Roadmap for Success in an Increasingly Complex Area Virtual 9/23/2022 (12:30PM-4:00 PM) Frost, Michael A. | 4 TX
Controller/CFO Update: Hot Topics Facing Today’s Financial Professional Virtual 9/23/2022 (8:30 AM-12:00PM) Hamilton, Marc | 4 Other
Planning and Strategy Formulation for Your Organization’s Financial Success Virtual 9/23/2022 (12:30PM-4:00 PM) Hamilton, Marc | 4 Other S Corporation Taxation: Advanced Issues Virtual 9/23/2022 (8:30 AM-12:00PM) Frost, Michael A. | 4 TX
2022 Preparation, Compilation & Review (SSARS) Update for the Local Firm | Virtual 9/28/2022 (12:30PM-4:00 PM) Martin, Jim D. | 4 AA
Accounting & Auditing for Tax People Who Absolutely Detest Accounting & Auditing | Virtual 9/28/2022 (8:30 AM-12:00PM) Martin, Jim D. | 4 AA
2022 Real World Ethics Update for All Practitioners | Virtual 9/29/2022 (10:30AM-12:10PM) Martin, Jim D. | 2 AA
The New Auditing Standards Virtual 9/29/2022 (8:30 AM-10:10AM) Martin, Jim D. | 2 AA
ASCPA’s Financial Accounting & Auditing Conference (FAAC) Hybrid | Montgomery 9/30/2022 (8:00AM-3:30PM) Various | 8 AA
ASCPA’s Governmental Accounting and Auditing Forum ATTENDING BOTH DAYS (GAAF) Hybrid | Montgomery 12/8/2022 (1:00PM-4:00PM) & 12/9/2022 (8:30AM-12:00PM) Various | 8 AA
Join us for this in-person event
Register at alabama.cpa/GAAF
Congratulations to Alabama’s newest CPA Licensees
The following individuals have successfully passed all four parts of the CPA exam - Congratulations !
Robert James Allan, Montgomery Kolby Lee Benford, Florence Davis Henry Bowyer, Smyrna, GA
Mary Frances Brown, Demopolis Benson Jeffrey Bryant, Guntersville Leslie Beech Chambers, Auburn
Kelsey Lauren Ching, Coppell, TX Cathy Joann Clarke, Minneapolis, MN Jennifer Hope Cone, Steele Rebecca Lynn Crain, Hoover Joseph Luke Curtis, Montgomery Charna Cymone, Montgomery Paxton Grace Desimone, Trussville
Austin David Eck, Birmingham Sydney Nicole Engels, Dallas, TX Jillian Michelle Facella, Hoover
Marcos Neftali Franco, Montgomery Tyler Lanier Garner, Hoover Jillian Rae Gasser, Auburn
Colin Daniel Harper, Irondale Stephen Andrew Jernigan, Brentwood, TN Bridget Dione Luckey, Mobile Sarah Elizabeth McDaniel, Helena
Katherine Ann Miller, Atlanta, GA
Collins Ann Mills, Birmingham Brett Osman Murray, Montgomery Jackson Thomas Pope, Vestavia Hills Cooper Kenneth Reynolds, Birmingham Jacob Flynt Schuhmann, Birmingham Shenandoah Rhodes Terry, Ivoryton, CT
Michael Alton Thomas, Knoxville, TN
Montgomery-Lee Todd, Nashville, TN Jeffrey Mark Travis, Jr, Birmingham Hannah Nichole Williams, Auburn
Molly Grace Womack, Trussville
These individuals completed all four parts within the May 1, 2022-June 30, 2022 time frame.
ASCPA CHAPTER EVENTS Connect with other professionals
Stay plugged in to your community by attending a local chapter event. Connect with the CPAs who live and work near you.
Register at alabama.cpa/catalog/events. For more information contact Zack Camerio at zcamerio@alabama.cpa.
SEP 21
2022
Mobile Chapter Update with Lisa McKinney
The Admiral Hotel • 8 - 5 • 8.0 CPE (Tax)
SEP 23
2022
OCT 20
2022
NOV 4
2022
NOV 4
2022
Birmingham Chapter A&A Update with Jim Martin
The Harbert Center • 8 - 5 • 8.0 CPE (A&A)
Montgomery Chapter Rooftop Social
Ravello Ristorante • 4 - 6
Birmingham Chapter SALT Update with Bruce Ely
The Harbert Center • 8 - 12 • 4.0 CPE (Tax)
Tuscaloosa Chapter Luncheon with Mayor Maddox
The District Room • 11:30 - 1
JAN 12
2023
Birmingham Chapter Tax Update with Lisa McKinney
The Harbert Center • 8 - 5 • 8.0 CPE (Tax)
JAN 12
2023
Tuscaloosa Chapter Bankers & Attorney Luncheon
Indian Hills Country Club • 11:30 - 1
