AZ CPA September/October 2021

AZ CPA September/October 2021

2021 Arizona Legislative Report: Financial Focus The Arizona Society of Certified Public Accountants y www.ascpa.com

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AZ CPA The Arizona Society of Certified Public Accountants Oliver Yandle Heidi Frei

President & CEO Editor

Heidi Frei

Advertising Board of Directors Chair Chair-Elect

Tom Duensing Rachael Crump Andrea Levy

Secretary/Treasurer Directors

Samantha Crum

Jessica Estrada Glen Evans Tabitha Fox David Gephart Barbara Gonzalez James McGettigan Lauren Murro Eugene Park Megan Romo Gidget Slater Christopher Tyhurst

Immediate Past Chair Ginny DeSanto AICPA Council Members Mike Allen

Jared Van Arsdale

Chapter Presidents Northern Chapter James Shankland Southwest Chapter Helen Greenwell North-Central Chapter Gidget Slater

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AZ CPA SEPTEMBER/OCTOBER 2021

AZ CPA is published by the Arizona Society of Certified Public Accountants (ASCPA) to provide information, news and trends to the accounting profession. It is distributed six times a year as a regular service to ASCPA members. The ASCPA, its members, board of directors and administrative staff assume no responsibility for advertisements herein. The ASCPA and the above people also assume no liability for business decisions made by readers in reference to statements and/or claims in articles or advertisements within this publication. Opinions expressed by contributors are not necessarily those of the ASCPA. Arizona Society of CPAs 4801 E. Washington St., Suite 180 Phoenix, AZ 85034-2040 Telephone (602) 252-4144 AZ Toll-Free (888) 237-0700 www.ascpa.com

Volume 37 Number 5

AZ CPA

September/October 2021

Features 2021 Arizona Legislative Report: 9 Financial Focus

by Ryan DeMenna

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12 ASCPA PAC Report

2021 Arizona Legislative Report: Financial Focus

All Things Considered – 14 TAaxes: Summary of the July ASCPA Columns & Departments

Tax Talk Webcast

By John Baumer

Chair’s Message by Thomas F. Duensing, CPA

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Member News

19

Classifieds 22 Quick Quiz

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rizona State Board of 16 AAccountancy Update

By Monica Petersen

inancial Unrest – Don’t Let Your 20 FClients Throw Away Their Plan

By Michael Carlin

4801 E. Washington St., Suite 180 Phoenix, Arizona 85034-2040 www.ascpa.com

SEPTEMBER/OCTOBER 2021 AZ CPA

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ASCPA Chair’s Message 2021 Legislative Session Recap One of the very important functions of the ASCPA is to create opportunities for our members, maximize their potential and advocate for them. As an advocate, it is critical that we maintain our strong reputation with Arizona lawmakers and continue to provide thoughtful insight on potential legislation, especially on issues that affect the profession. Our stance has been to provide and advocate for legislation that is fair, simple and equitable.

Thomas F. Duensing, CPA Chair, Arizona Society of CPAs Financial Services Director, City of Tempe

Each year, an issue of AZ CPA Magazine is dedicated to a recap of the most recent legislative session, and this year’s session was certainly one for the books.

On Wednesday, June 30, the Arizona Legislature adjourned its 55th regular legislative session. This session had a number of firsts and historic occurrences.

For instance, this was the third-longest session in our state’s history; coincided with the highest revenues ever collected, more than $14 billion: and we saw the Legislature enact the largest tax cut ever. It should also come as no surprise that this year also saw a record-breaking 1,899 pieces of legislation introduced.

Finally, Arizona now has a one-vote Republican majority in the House (31-29) and Senate (16-14), the closest margin in decades. Combine this with the fact that 23% of the legislators are brand new to the process, and you get an unpredictable and tumultuous session.

Our role as a Society is to continue to be a nonpartisan, expert resource for Arizona policymakers on various issues including taxation, business regulation, and licensure requirements, and it’s no surprise that the ASCPA worked diligently leading up to and throughout this session. Income tax filing extensions, liability during a pandemic and tax conformity were all issues we addressed this year. I am proud to say the Society was proactive in its efforts to engage with lawmakers and successful in having a seat at the table to ensure the CPA profession was well represented and our voices heard.

To get a recap of Arizona bills signed into law, and bills that failed, I encourage each of you to go to the ASCPA website and review the July 2021 Legislative and Board of Accountancy Update (www.ascpa.com/jul21leg) Moving forward, the ASCPA board has been exploring the issue of membership advocacy. This encompasses a strategic and thoughtful approach on how we represent our membership and become a stronger partner and advocate for the profession. This is not an easy process, but the board feels this is critical in these unprecedented times of political will and regulation.

Navigating political and legislative processes is seldom easy. But with the record-breaking 171-day session behind us, I am confident the ASCPA will be able to face whatever 2022 has in store and continue to strongly represent the membership. I would like to personally thank ASCPA President & CEO, Oliver Yandle and ASCPA Director of Government Relations, John Baumer, and the entire ASCPA staff for their tireless work in monitoring and advocating on behalf of all Arizona CPAs. I would also like to thank DeMenna Public Affairs for their continuous efforts. They continue to make a difference. l

Respectfully, Tom Duensing

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AZ CPA SEPTEMBER/OCTOBER 2021

Member News Katie M. Ward, CPA has been promoted to audit manager at Conover Asay CPAs, PLLC.

Casey J. Savatski, CPA, Insight, was selected to attend the 2021 AICPA Leadership Academy.

Pamela S. Stelzer, CPA, Henry+Horne was named one of the Most Influential Women in Arizona Business

by AzBusiness magazine.

Haynie & Company and CBIZ & MHM are listed as top companies to work for in Arizona by the Arizona Capitol Times.

Zoom Gatherings Connect with colleagues via Zoom for the following programs.

Cannabis October 27 | Insurance Coverage Considerations in the Cannabis Industry January 26 | Banking Challenges in the Cannabis Industry Get more information and register at www.ascpa.com/gather

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2021 Arizona Legislative Report: Financial Focus

By Ryan DeMenna

From the outside looking in, it appears that the Arizona State Legislature doesn’t have much focus. To some extent, this is true.

There’s a lot happening. But there are always a few policy areas that eventually receive lawmakers’ undivided attention.

This year, state lawmakers focused a lot on the state’s election procedures in the wake of the 2020 General Election. But it’s safe to say that you’ve already heard more than enough about that.

Lawmakers also focused quite a bit on tax policy. When compared to previous legislative sessions, their focus on tax policy was greater than ever.

Close observers of Arizona politics likely recall that when Governor Doug Ducey was first elected in 2014, he promised supporters he would do everything he could to reduce, if not eliminate, the state income tax.

Over six years later, and with less than 18 months left in office, Governor Ducey is closer than ever to achieving that goal.

The recently enacted $12.8 billion state budget included a “flat tax” of 2.5% that will be phased in over three years – assuming certain state revenue “triggers” are met. The flat tax eliminated the state’s progressive taxation system that ranged from 2.59 to 4.5%.

Proposition 208, an initiative approved by Arizona voters that imposed a 3.5% tax surcharge on high-income earners, spurred the renewed focus on a flat tax.

The revenue produced by the surcharge is intended to boost the salaries of teachers and other school employees. Proposition 208 would have raised the top tax rate to 8%, but the flat tax ensures that individuals with income above $250,000 and couples with income above $500,000 will pay no more than 4.5%.

In the wake of his legislative victory, Governor Ducey has already hinted that more income tax reductions are coming.

The flat tax, however, wasn’t the only noteworthy policy change in the state’s financial realm.

SEPTEMBER/OCTOBER 2021 AZ CPA

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Senate Bill 1783, sponsored by Senator J.D. Mesnard (R-Chandler), will create an alternative income tax on certain businesses, retroactive to Jan. 1, 2021. The legislation provides an option for individuals to be taxed under either the regular individual income tax or the alternative income tax created by SB 1783.

Proponents of the measure have claimed that the legislation was not in response to Proposition 208, but it’s not easy to argue that point.

An individual who elects to be taxed under SB 1783’s alternative income tax is not subject to the 3.5% surcharge created by Proposition 208, and the taxes collected under SB 1783’s alternative income tax will be deposited in the State General Fund.

Unrelated to Proposition 208 and in response to a provision included in the 2017 federal Tax Cuts and Jobs Act (TCJA), lawmakers across the country have introduced State and Local Taxes (SALT) “parity” legislation.

In Arizona, Representative Joe Chaplik (R-Scottsdale) sponsored legislation that will create an optional entity-level income tax for partnerships and S corporations. Retroactive to Jan. 1, 2021, if the partners or shareholders of a pass-through entity (PTE) elect to be taxed at the entity level, the PTEs would be taxed at 4.5% of their Arizona taxable income. Under the TCJA, the amount of itemized deductions that can be claimed is limited to $10,000, but this election will allow PTEs to claim the full deduction on their federal partnership return for state taxes paid at the entity level.

With this legislation in place, Arizona joins roughly 20 other states that have adopted SALT parity legislation since the TCJA took effect.

The Arizona Society of CPAs (ASCPA) plays a critical role in the policymaking process, and given the focus on tax policy, the ASCPA was more central to the process than ever.

This session, the ASCPA and the Tax Legislation Review Committee tracked and provided feedback to lawmakers on over 120 bills.

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The ASCPA also sponsored an event hosted by the Arizona Capitol Times, called the Morning Scoop. Morning Scoops cover various hot-button topics throughout the year, and this particular Morning Scoop focused on Arizona’s tax climate.

The panel of tax experts included the ASCPA’s Past Board Chair, Jared Van Arsdale, and the panel discussion served as a terrific platform to educate state lawmakers – especially the newbies – about the importance of income tax conformity and getting it done as far in advance of Tax Day as politically possible.

Changes made at the federal level, however, made this year’s conformity effort an especially heavy lift. Full conformity meant that Arizona would be conforming to every change made to the Internal Revenue Code, which included the Families First Coronavirus Response Act, the Coronavirus Aid, Relief, and Economic Security Act, the Paycheck Protection Program Flexibility Act, the Consolidated Appropriations Act, and the American Rescue Plan Act. The resulting price tag in Arizona for full conformity was estimated to be in excess of $620 million.

With that hefty price tag in mind, conformity was going to be folded into the broader budget discussions, which typically don’t occur until late May or June – well after the filing deadline has passed.

It was the ASCPA, however, that informed state policymakers that federal relief funds could be used to backfill any hit to the state’s coffers.

When lawmakers learned that they could treat conformity separate from the budget discussions, full conformity advanced and was signed into law by Governor Ducey on April 14 – well in advance of the May 17 delayed filing deadline.

It’s safe to say that the 2021 session was unlike any other as lawmakers conducted nearly every aspect of the policymaking process virtually.

Adjusting to this new dynamic was not easy, but the ASCPA didn’t skip a beat in pivoting from in-person to digital advocacy efforts.

AZ CPA SEPTEMBER/OCTOBER 2021

The ASCPA’s new President and CEO, Oliver Yandle, along with the ASCPA’s Director of Government Relations, John Baumer, did a terrific job of enhancing the ASCPA’s advocacy efforts in today’s digital environment.

An overarching and ongoing goal of the ASCPA is to ensure that members are in the know when it comes to the Legislature, regulation of the profession, and state politics, and Oliver and John launched a number of advocacy efforts that do just that. These efforts include: • Inside the Legislature – Interviews with legislators that provide short video and audio updates to members with relevant, timely information; • Tax Talk – An annual post-session panel of lawmakers and tax experts who review and discuss any recent tax-related changes enacted that year; and • Advocacy Roundtable – An annual event connecting ASCPA members with their state lawmakers.

Advocacy at the legislature is more important than ever. Knowing this to be the case, Oliver and John rose to the challenge in this virtual environment and worked to ensure that the ASCPA had the structure and team in place necessary to continue making a meaningful impact in the policymaking arena.

The successes of the 2021 legislative session, in light of the unprecedented circumstances, only serve to reinforce that the ASCPA is the gold standard for advocacy at the Arizona State Capitol. l Ryan DeMenna is a partner with DeMenna Public Affairs, the ASCPA’s lobbying firm. For more information, contact www.demenna.com. For more information on the tax package and ASCPA Tax Talk, refer to page 14..

Attend Don Farmer’s Tax Update In Person or via Webcast October 29, 2021 The Scottsdale Resort at McCormick Ranch or via Webcast Recommended CPE Credit: 8 hours The course will emphasize developments affecting 2021 returns and tax planning, including provisions contained in the American Rescue Plan Act of 2021, the Consolidated Appropriations Act of 2021, any other 2021 legislation, and important regulations, rulings and court cases.

Receive a 170+ page printed reference manual, along with downloadable presentation slides to use throughout the tax planning season. Get updated on 2021 tax developments with practical solutions to problems and tax planning opportunities.

Special thanks to our sponsors: Paychex, Jewish Tuition Organization, CPACharge, Catholic Education Arizona, Arizona Community Foundation and MS Consultants – Cost Segregation Studies & More Register at www.ascpa.com/taxup21

ASCPA CPE Bundles

Bundles are a convenient way to sign up for multiple webinars with a single registration at a discount to build your expertise in a specific topic area. Each bundle features high-quality presentations and opportunities to explore with case studies, group discussions and team exercises.

Internal Controls Deep Dive — 16 CPE ($450 member, $720 nonmember)

Oct. 12 Operations Level Internal Control – 4 CPE Nov. 2 How Post-Pandemic Attitudes Will Change Internal Control Development – 8 CPE Nov. 23 Internal Control Changes for Telecommuting Workers – 2 CPE Dec. 14 Defining Where and Why Internal Controls are Needed – 2 CPE Find out more and register at ascpa.com/bndl SEPTEMBER/OCTOBER 2021 AZ CPA

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ASCPA PAC Report The ASCPA is a well-respected voice at the Arizona Capitol, renowned for providing guidance and expertise in accounting, finance, business and tax.

Your contributions to the ASCPA PAC help support incumbent legislators and candidates who understand and support the issues important to the CPA profession. Thank you to the ASCPA members who contributed more than $56,980 last fiscal year. These contributions ensure the CPA voice is heard in the political process and help protect your investment in the profession. Every contribution makes a difference; the average contribution to the ASCPA PAC is $200. Show your support and pride of the CPA profession and contribute to the PAC today at www.ascpa.com/pac.

Total PAC Contributions: $56,980

$5,000 Deloitte & Touche, LLP

$1,250 Gary R. Dietrich

Total Contributed to Candidates/ Causes: $35,500

$500 Brenda A. Blunt Keith R. Cowan Rachael A. Crump Kelly K. Damron Virginia E. DeSanto Robert E. Dubberly Thomas F. Duensing Lawrence Field Tabitha L. Fox David G. Gephart Ross M. Grainger Anthony M. Hakes Jessica R. Iennarella Andrea B. Levy Anthony Lorenzo James S. McGettigan Lauren Murro W. Gregory Nelson Bruce J. Nordstrom Gidget S. Slater Leslie B. Stackpole Jared W. Van Arsdale Oliver P. Yandle

$300 - $450 Ronald Butler, Jr. Molly E. Montgomery

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AZ CPA SEPTEMBER/OCTOBER 2021

$250 Sandra A. Abalos Karen K. Abraham Michael T. Allen Susan A. Armstrong Corey Arvizu Kevin C. Bach Anita F. Baker Aaron M. Banda Steven E. Bandler Donald R. Bays Peter F. Beahan Glenn A. Bier Jeffrey A. Bither R. G. Blake Francis J. Brady James F. Brewer Christine Brueser Jay L. Buck Debra A. Callicutt Kevin F. Camberg Brian J. Campbell Joy C. Cervantes David J. Cohen George M. Cohen Andreas D. Coumides, Jr. David M. Damron Edward Demosthenes Bradley S. Dimond Kevin J. Donovan Michael C. Drexler Richard B. Eggleston Ryan P. Evans Matthew O. Everroad Evan C. Feldhausen Michael T. Finnegan Marc D. Fleischman Randy G. Fletchall Thomas L. Friend Sharlynn M. Garza Anthony R. Gerlach David S. Gifford Rufus Glasper Richard H. Goldenson Charles H. Goodmiller Christopher J. Gracey Jake Gregory Stephen T. Harris Joshua P. Hayes Christopher W. Heinfeld Brian J. Hemmerle George E. Henderson Herbert J. Hoffman Tracy L. Hughes Terri M. Hulse Carolyn B. Iacobelli David M. Iaconis Charles J. Inderieden Michael B. Jacobson Julie K. Jeffrey Steven L. Jenkins Christopher A. Jones

Colette Kamps Sara Kirk Evelyn A. Kleinhans Julie S. Klewer Allan C. Klose Joel B. Kramer Richard C. Kudzmas Jeffrey E. Kuhlin Mark L. Landy Donna H. Laubscher Leslie A. Lee Chris W. Ludwig Eric Majchrzak Alexander Marr Karen Mattull Karen K. McCloskey Phillip R. McCollum, Jr. Kevin W. McHolland Charles A. McLane David G. Miller, Jr. Bryan W. Mogensen Jessica Moulder John M. Murdough Dan Nahom Allen L. Nahrwold Melinda K. Nelson Amy A. O’Loughlin Randall L. Ottaway Brent Papek Eugene Park David P. Phillips Jonathan M. Poppel Bradley J. Preber Justin A. Price Christina C. Roderick Stephen J. Rodis Jay R. Rold Eric S. Rudner LeAnn M. Rudolph John P. Russo Stephen J. Schiltz James A. Schmidt Stella M. Shanovich Jill A. Shaw Jennifer L. Shields Jeremy A. Smith Karin Smith James M. Susa Steven L. Tait Candace B. Tooke Todd Trendler Christopher Tyhurst Scott T. Wallace Lynn C. Westergard Kelly M. White Cale L. Whittington Corrine G. Wilson Robert Wyndelts Melinda A. Xanthos Timothy P. Zingraf Edward K. Zollars

Help Your Clients Prepare for Year End

As 2021 begins to wrap up, we know that it can be easy to forget all that needs to be done. It’s important to be prepared for year-end reporting and taxation.

To help you stay organized, don’t forget to utilize the tools and resources available to you and your clients, including: • Paychex Accountant Knowledge Center (AKC). The AKC provides free online tools and resources to help you enhance your professional development and run your practice. Learn more at: Payx.me/ASCPA-AKC • AccountantHQ. Save time by managing your clients’ online payroll and HR data from a single platform on an account-specific dashboard. Gain access to an extensive resource library provided by Paychex as well as support from our U.S.-based dedicated service center. Register at: Payx.me/ASCPA-AHQ • Paychex WORX.Our robust online library features articles, eBooks, webinars, podcasts and more about the latest compliance, HR, and business trends that matter to you and your clients. Discover more at payx.me/ASCPA-PaychexWorx

To learn more about how we can help you and your clients, visit. payx.me/ASCPA-Accounting

Paychex is proud to be the preferred provider of payroll, retirement, and HR solutions for the ASCPA.. © 2021 Paychex, Inc. All Rights Reserved. | 08/02/21

Taxes: All Things Considered A Summary of the July ASCPA Tax Talk Webcast

By John Baumer In his State of the State address this January, Governor Doug Ducey told Arizona lawmakers to “think big” on taxes, and in the ensuing session, the Legislature enacted the largest tax cut in the state’s history. It also coincided with the largest state budget ever passed, more than $12 billion.

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AZ CPA SEPTEMBER/OCTOBER 2021

As the Republican-controlled Legislature began session with this charge to think big, it found itself with revenues far better than forecasted at the onset of the COVID-19 pandemic. It also found itself in the wake of a voter-approved initiative to levy a 3.5% income tax surcharge on high earners.

The 171-day road to the final $12.8 billion budget was full of false starts and long delays, with lawmakers recessing for two weeks at one point after hitting an impasse in negotiations. But as the fiscal year came to a close, the Legislature passed the largest budget and tax package on June 30.

After this historic session, the ASCPA hosted our first ever Tax Talk event with Senator J.D. Mesnard (R-Chandler), economist Jim Rounds, Joint Legislative Budget Committee Director Richard Stavneak and ASCPA lobbyist and longtime politico Kevin DeMenna to discuss the recently enacted tax package and its impact on Arizona.

Richard Stavneak shared an overview of the enacted tax changes this year, in addition to a revenue update. Stavneak noted the past fiscal year was “an extraordinary year” with general fund revenue growth at 29%, a modern record since 1975. Though that was due in part to the deferral of income tax collections in July of 2020, the revenues would still have grown by 18%. The banner year also included a 65% increase in corporate income tax collections.

As for what was in the tax package, the core of the omnibus, which consisted of three separate bills, was the phasing-in of a 2.5% income tax over several years. Another major point was an aggregate 4.5% cap on income taxes, a response to the passage of Proposition 208 in 2020. The package created a new tax classification for small businesses (Schedules B, C, E, F, parts of Schedule D, Form 4797, and Form 4835) and phases that income tax rate down to 2.5% by 2025. It also fully exempts veterans’ pensions from income tax; phases in a 16% tax assessment ratio for commercial property; and increases the homeowner’s rebate to 50%.

Senator Mesnard shared, “My top priority was responding to the passage of Prop 208.” With the new surcharge and existing sales and commercial property tax rates, he saw the impacts as “penny-wise and pound-foolish.” Economist Jim Rounds agreed with Mesnard that 208 would cause economic challenges and estimated that if it stayed in effect “the state was going to lose 124,000 jobs within a decade.” Not only that, but Rounds’ concern was that with the new income tax surcharge, Arizona would lose high-income

earners. “It’s really easy for people to buy a condo in another state as an investment, and all of a sudden that’s their residency. And we lose those individuals.”

But, as Rounds noted, there has to be a balancing act, “You have to be competitive, and you can’t have the lowest taxes of everybody, because then you can’t provide basic services that businesses and individuals need. And you can’t have the highest because you’re going to lose jobs.”

Senator Mesnard agreed about the need for competitiveness but says he prefers sales to income tax. “I’m a consumption tax person,” Mesnard said. “We don’t have a property tax at the state level. Between our various sources [of tax], sales is the most stable.”

The success of Arizona Republicans in passing this landmark tax deal isn’t the final word. Opponents of the measures want to put the legislation on the ballot and let the voters decide its fate. The referendum process outlined in the Arizona Constitution allows any measure passed by the Legislature to be placed on the ballot at the next General Election if enough valid signatures are gathered within 90 days of the adjournment of session. When discussing the fate of the tax package at the ballot, Mesnard thinks that at least his small business alternate tax bill, SB 1783, “if it’s referred,” will pass overwhelmingly, although that isn’t without its own problems. Laws passed by Arizona voters can’t be amended (unless they further the original purpose) or repealed by the Legislature. And that, Mesnard says, “could create some problems,” because if aspects of our tax code are voter protected, “you have this weird dynamic in the future.

If we want to make changes, we really can’t.”

Lobbyist Kevin DeMenna said there are options if opponents get enough signatures to place the laws on the ballot. When something is referred, “typically,” he said, “the Legislature meets and does a do-over.”

That was the case in 2017 when the empowerment scholarship account

legislation was referred to the voters.

For the tax legislation in 2021, that will depend on opponents getting the signatures necessary to make it onto the 2022 ballot. In the meantime, Senator Mesnard is OK with no major tax legislation next year, “I love this topic so much, but I wouldn’t mind taking a break after what we’ve done.”

All things considered, DeMenna prefers a more methodical approach to governing. “We don’t really have a governing fiscal plan in Arizona.

We don’t have a five-year plan. We don’t have a quarterly plan,” said DeMenna. For DeMenna, this may be in part due to term limits. “Once they get qualified, after eight years, we must fire them, and the learning curve starts over again. So, the notion that we have a plan or a design is just false.” Another problem DeMenna sees is the timeframe for session.

“The longer we’re there, the better the policy,” he said, “but do less, slow the march. We need to take more time legislating. I’m good for the full six months from January to June. Only the newbies schedule vacations before the 4th of July.” l John Baumer is the director of government relations at the Arizona Society of CPAs. You can reach him at jbaumer@ascpa.com. Watch your email for information on future Tax Talk events.

For more information on the legislative session, refer to page 9.

SEPTEMBER/OCTOBER 2021 AZ CPA

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Arizona State Board of Accountancy Update The COVID-19 global pandemic turned the workplace on its head over a year ago. While the Arizona State Board of Accountancy (Board) had a strategic vision to improve its operations, the pandemic and the challenges it presented expedited the work on key Board objectives.

By Monica Petersen The silver lining that the Board and many companies faced, is that with every huge disruption, there is also a significant opportunity. The pandemic has led to a transformation in how the Board operates; and, the shift will continue to benefit the Board’s operations and the applicants and registrants it serves long after the pandemic is in our rear-view window. The following are a few examples of how an increased reliance on technology has transformed the work of the Board and its advisory committees.

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1. Virtual Meetings – During the pandemic, the Board and most of its advisory committees were able to quickly pivot to virtual meetings. While some committees have looked forward to getting back to work as they did before the pandemic, others are quite happy with the new flexibility that remote work has afforded. While nearly 50% of Arizonans are fully vaccinated and the safety of in-person work is increasing, work culture has changed and full virtual or hybrid (some in-person attendance and some virtual participation) are likely a mainstay. One of the more positive outcomes of introducing virtual meetings is the ability for the public to participate in a board or committee meeting regardless of where they live in Arizona or where they may be in the world on the date of any particular meeting.

2. Webforms – The Board is pleased to announce the release of new webforms for Uniform CPA Exam applicants to complete initial or re-exam applications, for certification applicants to complete their certification applications by exam/grade transfer or reciprocity by substantial equivalency, and for any applicant or registrant wishing to complete a change of address form. These new webforms replace the Board’s prior fillable PDF forms. The webforms provide the following customer service, convenience and efficiency improvements: a. Webforms are dynamic, based on responses which provide for a cleaner more streamlined user experience. b. Webforms can be saved and finished later. c. Webform attachments can be uploaded as required. d. Webforms provide data validation to ensure it is complete and accurate before the webform will be accepted. e. Webforms can be e-Filed and credit card payments are accepted. f. E-file helps ensure instant delivery and saves the user’s time from mailing or delivery. g. E-file will provide a confirmation receipt to the user via email. h. Webforms ensure no lost or misplaced paperwork.

The webform is accessed through the internet via a secured connection and established profile.

As time and resources allow, the Board will continue to add to its offerings of webforms in an effort to add value to the customer service experience with the Board.

3. Document Management System (DMS) – Documents, whether electronic or paper, are an essential component of just about any enterprise. Managing business information, sometimes from several sources, can be a challenging task. A document management system that captures, stores and retrieves both paper and electronic documents offers many benefits. The Board is working on its final strategy to improve its records retention, which is the adoption of a DMS, which will be completed this fiscal year. Some benefits include reduced physical storage space; enhanced security; easier retrieval; better collaboration, backup and disaster recovery; and improved business continuity.

Finally, the pandemic did not slow down the work of the Board to modernize and improve its rules. The Board amended a few rules which became effective August 1, 2021. On July 22, 2021, the Board sent an email to all CPAs and CPA firms with an email address on file with the Board about the changes; but, if the email was missed or you don’t have an email on file with the Board, the provisions are summarized below.

CPAs and CPA Firms 1. Requires that CPAs and CPA firms registered with the Board notify the Board of an email change of address in addition to a business, mailing or residential change of address within 30 days.

2. Permits the Board to accomplish service of most documents by attaching the document to an email and sending it to the email address last provided to the Board, in addition to personal service or service by mail.

As the Board has worked to modernize its operations, it has increased its reliance on email to provide service to registrants in an efficient and cost-effective manner.

Historically, emails have been used primarily for things like registration renewal reminders for CPAs and CPA firms; important updates to Arizona Revised Statutes, Arizona Administrative Code, or Board substantive policy statements; or any other matter like the impact of an Executive Order on the Board’s operations or its applicants and registrants. The added requirement to have registrants update their email addresses provides the Board an opportunity to evaluate its business processes and determine where email may be used in lieu of regular mail to improve the efficiency and cost-effectiveness of the Board’s operations. If you don’t currently have an email on file with the Board, we’d encourage you to fill out a Change of Address form to provide it.

3. Allows CPE credit to be earned for the writing or development of online course curriculum for undergraduate, graduate or doctoral education that contributes to the accounting profession.

4. Updates incorporations by reference for peer review and the AICPA Code of Professional Conduct.

Exam and Certification Applicants 5. Updates the timeframe that the Board may grant a Notice to Schedule (NTS) extension based on good cause to a Uniform CPA Exam applicant from one testing window to 90 days in response to testing windows being replaced by continuous testing.

6. Provides authority for the Board to grant a 90-day extension to a conditioned credit for Uniform CPA Exam Applicants based on good cause.

7. Delineates the required attachments for an applicant applying for certification under A.R.S. ­§ 32-4302 regarding universal licensing.

A copy of the Notice of the Final Rulemaking can be found on the Board’s website – www.azaccountancy.gov under News and Updates. l

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ASCPA'S ANNUAL CONFERENCE: CONVERGE NOV. 9-10

Desert Willow Conference Center Or Via Webcast The NEW ASCPA Annual Conference CONVERGES specialized content with the connection you have come to experience at our larger conferences. Designed for ALL CPAs, this one-of-a-kind event offers eight tracks, the flexibility to attend one day and focus on a specialty track or both days, totaling 16 CPE credits and features favorite local and national speakers.

Thank you to the following sponsors for helping make this event possible:

Platinum Sponsor

Gold Sponsors

Bell Bank CAMICO and Stuckey Insurance Catholic Charities Community Services Catholic Education Arizona CPACharge Institute for Better Education MS Consultants – Cost Segregation Studies & More Paychex PK Tech STO4KIDZ

Register Today www.ascpa.com/converge

Member Happy Hour September 28 4:30-6:30 p.m.

Fate Brewing (South Scottsdale Location) 1312 N. Scottsdale Rd. Scottsdale, AZ 85257 $30 for members (registration includes two drink tickets and appetizers) Join us for the first in-person member happy hour of the year! Enjoy connecting and catching up with your colleagues while having a refreshing end-of-summer drink and delicious appetizers. We reserved a private room for this event with plenty of space to move around.

Register at www.ascpa.com/happyhour

Professional Issues Update Webinar October 5, Noon-1 p.m.

If your organization is part of the ASCPA 100% Club, you have access to exclusive member benefits. One of those benefits is a complimentary hour of CPE for a Professional Issues Update presented by ASCPA President & CEO, Oliver Yandle.

You and your team may attend via webcast as a group or individually. If you and your team would like to view the update as a group, please let us know, to ensure all CPAs receive a CPE certificate. For questions, contact cquinonez@ascpa.com.

Register at www.ascpa.com/update2021

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Saving, spending + your long-term financial plan

Financial Unrest – Don’t Let Your Clients Throw Away Their Plan

By Michael Carlin Like many of your clients, you may have experienced a realization that you suddenly have more money than you planned on. Perhaps you got a bonus, an inheritance, or you were so busy keeping your nose down that a sum of money seemed to spontaneously appear in your bank account.

The point is, this sudden inflow of cash altered your sense of sensibilities.

You’re swept up with dreams of spending uncharacteristically big as the urge to find a “cash equilibrium” supersedes reliable spending habits.

Let’s talk about the most destructive financial force you have never even heard of – FINANCIAL UNREST!

Throwing Caution and Cash to The Wind Say a client of yours earns a nice living, saves dutifully to her retirement accounts according to her plan and suddenly her company experiences a great year with record profitability. Your client is recognized for her contributions to the company’s success and receives unexpected bonus payments. She feels like she hit the lottery and buys a second home in a hot seller’s market. She’s thinking she’s investing her cash in real estate (even though she bought at an all-time high) and doesn’t rent out the property for income.

Another client of yours inherits money from a deceased family member and decides this is the perfect time to own a home on the beach. You only live once, so why not?

A third client owns a business that experiences a banner year in profits.

Rather than reinvesting in the business, or building up a safety net and financial cushion, your client wants to spend his windfall. He finds himself looking at expensive trucks and home improvement plans.

Do you see why we should be discussing financial unrest with our clients?

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AZ CPA SEPTEMBER/OCTOBER 2021

According to tradingeconomics. com, nearly 70% of the U.S. economy is based on consumer spending. This spending largely dictates how much our economy grows domestically. So, we appreciate consumer confidence and the desire to spend. However, as professionals, we should advise our clients to live within their means and to plan for their future spending needs.

Let’s re-examine the above client cases (our financial version of the Ghosts of Christmas Past). How did these quick decisions affect their financial lives long-term?

Your first client bought a home in the Northwest for $700,000 and put down $250,000 while taking a mortgage out on the rest. The new mortgage put a financial burden on her that she didn’t have before.

Let’s hope her income stays at this unusually high level because if her bonus goes down in the future, she won’t be able to cover the second mortgage on the house and she lost the growth on $250,000 for the future.

Yes, the house in the Northwest will likely grow in value, but by buying high it could take her a decade to break even. Plus, the cost of keeping the house up, real estate taxes and the pressure of a second home make this a challenging financial situation. In all, this purchase may add as much as seven years of additional work to her retirement age, which drastically changes her financial plan. Her plan was designed for retirement at 58.

Now, she may have to work until she’s 65 to offset the cost of this purchase and increased risk/exposure.

Your second client bought a house on the beach for $2,000,000. It’s likely that additional money will be spent on future upgrades. People routinely forget real depreciation on beach houses is far greater than the norm because houses deteriorate more quickly in extreme weather conditions. With the inheritance gone, your client went from being

able to retire in five years to 16 years.

That additional eleven years of work will feel like an eternity. Like the Ghost of Christmas Past, this decision could come back to haunt the family, especially if the house was purchased at market highs with high upkeep costs.

Your third client spent $150,000 in home improvements. Those dollars may have increased the home’s value, but your client has no intention to sell. He loves his neighborhood and the school the children attend. Years from now, when he’s ready to sell, the updates will be outdated. If he invested the $150,000, earning 6% annually over the next 20 years, he might have accumulated an additional $481,000 in his investment accounts. Those extra funds would have dramatically improved his long-term plan.

Yes, there is value in getting out there to live your best life, but encourage your clients to be wary of financial unrest. It is real and pushes clients into making substantial investment decisions that might change their family’s financial life forever.

Michael Carlin, AIF® President Henry+Horne Wealth Management

Free CPE Webinar for Members September 29 Palliative Care for Terminal Enterprises Sponsored by Resolute – www.resolutecommercial.com Webinars are held from Noon to 1 p.m. Learn more and register at www.ascpa.com/freewebinars

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Classifieds Employment CONTROLLER HONORHEALTH FOUNDATION Directs functional areas of all financial operations (General Accounting, Payroll, A/P, Capital Assets, Treasury, Financial Decision Support and Revenue Reporting).

Designs, monitors and provides leadership over financial and operational controls throughout the organization to ensure financial benchmarks are achieved.

Integrates financial planning with the long-term strategic planning. Provides leadership and guidance in facilitating the complete external audit process, including preparation and analysis of the consolidated financial statements, management letter, and presentation to key leaders of the organization and board of directors. Key financial leader responsible for ongoing and timely monitoring of debt management, including loan covenants and quarterly financial reporting. https://jobs.honorhealth.com/careers

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AZ CPA SEPTEMBER/OCTOBER 2021

AZ CPA Quick Quiz You’ve Read It, Now Get Credit Take this quiz on AZ CPA content online or submit this hard copy.

Receive a score of 70 percent or more and earn one hour of CPE credit in specialized knowledge. It’s that easy!

7. The Arizona State Board of Accountancy’s new rule change requires CPAs to keep their email address up to date with the Board. When is the effective date of the new rule? m August 1, 2021 m September 15, 2021 m December 31, 2021

Fees: Members: $25 Nonmembers: $40 Online Access Go to www.ascpa.com/quickquiz to access links to all active quizzes. Once a quiz is purchased, a link and password will be emailed to you. Your results will be sent immediately after completion, and certificates are emailed within two business days.

Hard Copy Please select one answer for each question. Fill out registration/payment information below and mail or fax to the Society office. Quiz results and certificates will be emailed to the address provided on the registration form. *This quiz will be available until October 2022. Please note that users have three attempts to pass the quiz with at least a 70 percent score.

8. The change of address form for the State Board can now be completed via a webform online. m True m False 9. According to tradingeconomics. com, nearly _______% of the U.S. economy is based on consumer spending

September/October 2021 Issue of AZ CPA* 1. ASCPA Chair Tom Duensing noted that _______ percent of lawmakers in 2021 are brand new to the process. m 23 m 15 m 12 2. The ASCPA’s Tax Legislation Review Committee (TLRC) provided feedback on more than _______ pieces of legislation this session. m 50 m 180 m 120 3. What was the estimated fiscal impact of full federal income tax conformity for 2021? m $550 million m $620 million m $475 million 4. The record-breaking length of the 2021 legislative session was how many days? m 171 m 110 m 151

5. According to Joint Legislative Budget Director Richard Stavneak, Arizona’s General Fund collections were up what percent, a record since 1975? m 56% m 38% m 29%

m 30 m 50 m 70 10. Financial unrest often pushes clients into making substantial investment decisions that might change their family’s financial life forever. m True m False

6. How much did ASCPA members contribute to the ASCPA PAC? m $20,000 m $41,000 m $56,980

Quick Quiz Registration Name: __________________________________________________________________________________ Email: ___________________________________________________________________________________ Telephone: _____________________________________________________________________________

Payment

m Member: $25

m Nonmember: $40

Checks: Please make payable to: The Arizona Society of CPAs Credit Card:

m Visa

m MasterCard

m American Express

Credit Card #: __________________________________________________________________________ Expiration Date: _______________________________________________________________________ Name on Card. ________________________________________________________________________ Mail to: ASCPA, 4801 E. Washington St. Suite 180, Phoenix, AZ 85034-2040; fax to (602) 252-1511 scan and send to ASCPACPE@ascpa.com.

SEPTEMBER/OCTOBER 2021 AZ CPA

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PRSRT STD U.S. Postage PAID Phoenix, Arizona Permit No. 952 4801 E. Washington St., Suite 180 Phoenix, AZ 85034-2040

ADDRESS SERVICE REQUESTED

Arizona Tax Guide

Pre-order your Arizona Tax Guide – the only comprehensive guide on Arizona taxes.

Learn more and purchase the guide at: www.ascpa.com/taxguide Authored by: Pat Derdenger, Steve Rodis and Ed Zollars The Arizona Tax Guide includes the following guides: The Arizona Income Tax Guide is a comprehensive reference that highlights the differences between Arizona and Federal income tax law and provides references to the Arizona Revised Statutes for a more in-depth analysis. It highlights the differences between individual, corporate, partnership and trust taxes, includes tax tables, and is arranged in a way that facilitates research on any topic.

The Arizona Sales and Use Tax Guide is a resource for anyone preparing or filing city sales and use tax returns. The guide details the various sales tax classifications, exemptions, deductions and rates as well as compliance, audits, refund claims and administrative appeals.

The Arizona Personal Property Tax Guide provides an overview of Arizona’s personal property tax system, including exemptions, the classification structure and assessment rates, reporting, valuation and appeals.

The Arizona Unclaimed Property Guide explains what unclaimed property is, reporting requirements for holders of unclaimed property, how owners of unclaimed property can claim their property and audits.