AZ CPA: January/February 2024

AZ CPA January/February 2024

Real Talk: Diversity, Equity & Inclusion Insights From a CPA

The Arizona Society of Certified Public Accountants y www.ascpa.com

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Maximize Your Learning Options The ASCPA is here to help you meet your CPE requirements, and in-person learning is not going away. See ascpa.com/classroom for in-person learning opportunities.

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AZ CPA JANUARY/FEBRUARY 2024

Andrea Levy Lauren Murro Eugene Park Austin Billingslea Ben Cilek Dave Collins Tithi Debnath Marissa Graves Joe Heidleburg Ignatius Jackson Gabby Luoma Dennis Osuch Lisa Parke Jesse Porras Stella Shanovich

Immediate Past Chair Rachael Crump AICPA Council Members Mike Allen

Jared Van Arsdale

Volume 40 Number 1

AZ CPA

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January/February 2024

Real Talk: Diversity, Equity & Inclusion Insights From a CPA

Features Real Talk: Diversity, Equity & 9 Inclusion Insights From a CPA

By Jevonne Shepherd, CPA

he Future of CPA Licensure: 13 TInsights From an ASCPA Member Survey on the 150-Hour Requirement From the Arizona Society of CPAs

Columns & Departments

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 benefit 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.

Chair’s Message by Andrea Beth Levy, CPA

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Member News

7

Quick Quiz

27

17 The 5 C’s of Credit

By Kevin Herbst

Reduction Act Incentives 21 Inflation for Clean Energy Projects

By Doug Baldessari, CPA

24 What’s Happening at the ASCPA?

Arizona Society of CPAs 410 N. 44th St. Ste 205 Phoenix, AZ 85008 Telephone (602) 252-4144 AZ Toll-Free (888) 237-0700 www.ascpa.com

410 N. 44th St. Ste 205 Phoenix, AZ 85008 www.ascpa.com

JANUARY/FEBRUARY 2024 AZ CPA

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ASCPA Chair’s Message

Member News

New Year, New Changes to the Profession

Christina C. Roderick, CPA,

Thank you to the ASCPA for serving as a member-first organization.

It’s an honor to write our first issue of 2024. In the spirit of the new year and new beginnings, what keeps you motivated?

Andrea Beth Levy, CPA Chair, Arizona Society of CPAs Vice President of Finance and Operations Greater Phoenix Chamber

A recent article published by Nick Wignall provides tactical ideas on how to increase motivation: “Taking action is something we have direct control over; feeling motivated is not.” Let go of the belief that you are more likely to do an action if you have the feeling of motivation. Spending extra time thinking about feeling motivated may be unhelpful. He recommends that you “sharpen your why.” When you consider your reason for wanting to feel motivated, you have an increased ability to perform. Or, you could create a PSP (painfully specific plan) to increase the odds for action and achieving a goal. As a New Year’s resolution, I plan on moving forward in this direction and look forward to sharing my results with this community.

In October, I had the incredible opportunity to attend the Fall AICPA conference.

Speakers came from around the globe to share their views about our profession.

One notable trend is that we are experiencing “the great join” between finance and accounting and shifting from the rear-view window to the windshield view.

Our professional staff needs to be ready for a range of scenarios. We are required to be more effective and think bigger than we have ever been before.

Our profession is being reshaped by key drivers including technology strategy, embracing services such as AI, value creation in the role of business, and higher and broader expectations of assurance. There is an expectation and obligation for CPAs to increase our role as trusted advisors while embracing a digital mindset. These comments align well with the timing of the new CPA Evolution-aligned exam.

Effective January 1, 2024, a new CPA Evolution-aligned exam with three Core sections and three Disciplines has been implemented. Both the AICPA and NASBA voted to advance the CPA Evolution initiative and have worked collaboratively for years. According to a recent NASBA press release, “the CPA Evolution initiative is transforming the CPA licensure model to recognize the rapidly changing skills and competencies the practice of accounting requires today and will require in the future.” Let’s explore the different parts of the new CPA exam.

The Core sections will focus on accounting, auditing, attestation and taxation with a recognition of the impact technology has on each area. The Core sections include content which newly licensed CPAs may be exposed to in the field, and then it assesses the knowledge and skills critical to protecting the public interest.

CPA candidates are required to pass the three Core sections.

Candidates will then select one of three Discipline sections. The proposed Discipline sections are business analysis and reporting, information systems and controls, and tax compliance and planning.

CPA exam scores are released on a rolling basis throughout the year. CPA exam scoring is treated with a high level of importance, due diligence and attention to accuracy. By implementing the CPA Evolution-aligned exam, our profession can position itself as trusted advisors, enabling profitable growth and keeping pace with the rapid developments in technology. For more information, visit ascpa. com/chaircolumn to view the resources. l

of REDW was appointed to the Arizona State Board of Accountancy.

Yesenia Barraza Simmons, CPA, of YB Company LLC was awarded the Entrepreneur of the Year Award from Women of Association of Latino Professionals For America.

Jena Diane Ford, CPA, advanced to principal (employee benefit plans) at CLA (CliftonLarsonAllen).

Diego G. Ahumada, CPA, advanced to principal (real estate) at CLA (CliftonLarsonAllen).

Daniel Thomas Akmon, CPA, advanced to principal (manufacturing and distribution) at CLA (CliftonLarsonAllen).

Melissa O. Hangsleben, CPA, has advanced to signing director (not-for-profit) at CLA (CliftonLarsonAllen).

Janeen H. Butler, CPA, started a new position as senior tax manager at FORVIS.

Stella M. Shanovich, CPA, retired from BDO.

See the Nominations of 2024-2025 ASCPA Leadership With the new fiscal year approaching, here are your nominations for next year’s Board of Directors.

Learn more: ascpa.com/board24

Best, Andrea Beth Levy 6

AZ CPA JANUARY/FEBRUARY 2024

JANUARY/FEBRUARY 2024 AZ CPA

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Real Talk: Diversity, Equity & Inclusion Insights From a CPA

By Jevonne Shepherd, CPA (licensed in CA)

I’m not a DEI professional. I’m a CPA. I am heavily involved in diversity organizations in both my personal and professional lives, and thus, there is substantial overlap. My journey to become a licensed CPA was arduous, and I frequently explore this journey within the framework of DEI (diversity, equity and inclusion) and the accounting profession.

Three years on from the social justice movement which resulted from the deaths of George Floyd, Breonna Taylor and countless others, the need for action involving DEI continues. Continued action is needed, because we as a society are past the point of conversation.

The AICPA publishes an annual Trends Report, which identifies key trends in the U.S. Accounting profession. As of September 1, 2023, there are 672,587 actively licensed CPAs in the United States.

Per the 2019 AICPA Trends Report – the most recent report to include data on the profession’s demographics – 58% of CPAs were male and 42% female. Additionally, 84% of the Accounting profession identified their ethnicity as white, while the rest of us are squeezed into the remaining 16%: • 10% Asian/Pacific Islander • 4% Hispanic/Latino • 2% Black.

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JANUARY/FEBRUARY 2024 AZ CPA

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That means as a CPA, there are 13,450 others like me across the United States.

To measure how small that number is, State Farm Stadium, which hosted the 2023 Super Bowl LVII, has a capacity of 63,400. This means that Black CPAs would fill up less than 25% of the seats.

Additionally, per the 2019 AICPA Trends Report, 1% of U.S. firm partners, principals or managing directors are Black.

It is worth noting that I use the term “Black” instead of “AfricanAmerican,” because I want to include the experiences of everyone from the African Diaspora.

The African Diaspora refers to people of African descent dispersed throughout the world, largely because of the slave trade. I have found that many of my Black friends, colleagues, and peers are not American. They are from Cameroon, Belize, Nigeria, Haiti, and varied parts of the world Their experiences are different from mine, but some are shared in many ways.

Thus, I honor our differences and similarities by refraining from using the term “African-American.”

Recent trends in CPA licensure are the lowest in almost two decades.

Per the 2023 AICPA Trends Report, the number of new CPA Candidates was 30,251 in 2022. This is down almost 20% from the number of CPA Candidates in 2006 at 36,078.

The AICPA has taken steps to enhance the CPA pipeline by convening the National Pipeline Advisory Group.

The group includes leaders from state CPA societies, state boards of accountancy, academia, the AICPA & CIMA National Commission on Diversity and Inclusion, various firms and businesses in industry.

As AICPA-CIMA chair, Okorie Ramsey CPA, CGMA, PMP, NACD. DC Chair, has outlined his vision to redefine the future of the accounting profession. This vision involves leveraging technology to create

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efficiencies to drive value for clients, leading ESG (Environmental, Social and Governance) reporting efforts for increased transparency, and providing exposure and development opportunities for underrepresented groups and younger talent, respectively.

While these efforts will no doubt be effective to potentially create opportunities for the next generation of CPAs, we all can be mindful of ensuring that existing CPAs are supported in their career. This can be accomplished through actions designed to increase a sense of belonging within the accounting profession. That sense of belonging begins with dialogue about DEI. DEI conversations are uncomfortable for almost all participants because they usually explore topics of which most would rather not speak – disparities due to race, class, gender and/or socioeconomic status.

I mentioned earlier about the need for action, and this can actually be found in a dialogue – the action of active listening, asking questions to seek meaningful answers, working collaboratively and making a commitment to be part of a solution developed collaboratively.

To be actionable in DEI discussions and efforts, you can start by taking the following actions – considering, discussing and resolving.

You can consider DEI in the context of a post-social justice movement world: • Now that the noise has relatively quieted, what was the message?

• What does the composition of my team or department say (express or implied) about DEI efforts in my workplace?

• What does my recruitment strategy look like?

• Where do we look for talent and has this changed in the past x number of years?

AZ CPA JANUARY/FEBRUARY 2024

You can discuss behavior and perceptions related to DEI in a safe space by creating it: • Ask questions of coworkers and genuinely listen to the answer.

• Determine when the right time and venue are to engage in such a discussion.

• Take the temperature of the participants so as not to force a conversation that has the effect of disengaging interest, as opposed to having participants excited about the next discussion.

You can resolve to develop continued actions around a formal DEI program: • Hire a DEI professional as a Chief Diversity Officer.

• Engage in routine DEI training.

• Have informal DEI conversations.

• Define measurable DEI goals and appoint a group to monitor and track them.

These solutions may be short-term or long-term, broad or narrow.

Whatever the case, the solution should be memorialized in writing, with specific timelines, objectives and outcomes.

As a non-DEI professional, I have led and engaged in countless DEI conversations for almost a decade. These have come out of informal conversations and formal presentations. I know it takes courage to be vulnerable and admit to genuinely not knowing something about a person or that person’s culture.

As CPAs, our work life should not simply be all about getting the work done without empathy, acknowledgement or understanding of who is doing that work. l Jevonne Shepherd, CPA, CMA, CIA, PMP, is a consulting manager at Deloitte and has varied industry experience in finance transformation.

Shepherd serves as finance engagement manager and acts as a trusted advisor to clients in a variety of industries and sectors on operational and regulatory projects. You can hear more about this topic at the ASCPA’s Governmental Accounting Conference on February 2, 2024.

Register here: ascpa.com/gac.

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The Future of CPA Licensure: Insights From an ASCPA Member Survey on the 150-Hour Requirement From the Arizona Society of CPAs In addressing the CPA pipeline challenge, we sought your input in September through a survey on the 150-hour education requirement for CPA licensure.

Your valuable insights have enhanced our understanding of its impact on your organization, aiding the profession in exploring effective solutions.

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JANUARY/FEBRUARY 2024 AZ CPA

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A significant finding from the survey is that 81% of members advocate for alternative routes to CPA licensure, beyond the 150-hour education requirement.

When looking at staff who recently graduated with an accounting degree, which of the following statements best describes their preparedness to be a CPA?

20%

Responses to Question: 10.14%

81.11% YES

8.76%

According to the survey, 51% of respondents perceive no disparity in the preparedness of their accounting staff, whether equipped with 150 or 120 hours of education. Conversely, 28% affirm a slight or notably elevated level of preparedness with 150 hours, and 20% express uncertainty regarding any discernible distinction.

8.76% NO

Do you believe it would be beneficial to the profession to provide alternative pathways to certification where 150 hours of college education is one option, but not the only option?

10.14% UNSURE

51.16%

51%

There is no noticeable difference in preparedness level between staff that have accounting degrees with 120 or 150 credit hours.

17.67%

28%

Staff with 150 credit hours have a slightly higher preparedness level than staff with 120 hours.

10.7%

81.11%

Member Feedback

A current talent shortage my organization is facing is...

12.96% 9.72%

21%

10%

A noteworthy 56% of participants acknowledge a shortage of both CPAs and accountants, underscoring a widespread talent gap. Additionally, 13% specifically report a deficit in CPAs, 10% face shortages of accountants following non-licensed and non-CPA paths, while 21 % assert they experience no discernible talent challenges.

This collective data signals a substantial industry demand for skilled accounting professionals.

13%

A shortage of CPAs to hire.

56%

A shortage of accountants (non-licensed and non-CPA path employees).

55.56% A shortage of both CPAs and accountants.

21.76% No talent challenges at this time.

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AZ CPA JANUARY/FEBRUARY 2024

Members also shared their comments on the 150-hour requirement and ideas for alternative pathways.

• Education vs. Experience: Several respondents propose replacing the 150-hour requirement with years of experience in the field, suggesting a more practical approach to certification.

• Alternative Qualifiers: Suggestions include experience-based or additional testing, emphasizing critical thinking skills and expertise in specific areas like information technology or advisory services.

• Work Experience Emphasis: A recurring theme is the importance of on-the-job experience, with suggestions for work experience requirements beyond mere time, akin to an apprenticeship.

• CPA Exam Focus: Many argue that passing the CPA exam should be the primary criterion for certification, regardless of education hours, stressing its relevance as a measure of competence.

• Master’s Degree Debate: A considerable number express dissatisfaction with the 150-hour rule, viewing it as an unnecessary financial burden, suggesting a disconnect between education and practical application.

• Specific Coursework: Many pointed out that the additional 30 hours of education may not be beneficial because these credit hours can cover any discipline, potentially lacking relevance to accounting or other courses essential for becoming a proficient CPA. • Impact on Recruitment: The 150-hour requirement is viewed negatively in terms of recruitment, potentially deterring students and leading employers to hire without certification.

• Need for Non-CPA Professionals: A subset of respondents argues for the necessity of non-CPA accountants, emphasizing the demand for basic accounting services at a lower cost.

Staff with 150 credit hours have a noticeably higher preparedness level than staff with 120 hours.

20.47% None of the above, or I don’t know.

Conclusion Members express a need for a more flexible and pragmatic approach to CPA certification, emphasizing experience, critical skills and the importance of passing the rigorous CPA exam. The accounting profession faces challenges in talent acquisition and retention, suggesting a need for adaptive strategies to address these concerns. To further this effort, we are working in tandem with the National Pipeline Advisory Group (NPAG) to identify and implement strategic next steps. The ASCPA will keep you updated on proposed alternative pathways and policies.

JANUARY/FEBRUARY 2024 AZ CPA

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DEI Strategies · Economy & GASB · Cybersecurity

LEVEL UP your accounting career February 2, 2024 | ascpa.com/gac

The 5 C’s of Credit

By Kevin Herbst

While most people have heard of the 5 C’s of credit, far fewer can name them. This article provides a detailed explanation of what banks mean when they consider the 5 C’s of credit.

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Character There is a reason character is the first “C.” It is absolutely critical to a bank that it lend money only to those businesses whose owners possess good character. When difficult times arise in business, and they always do, character shines through. What this “C” really defines is a willingness to repay debt borrowed, regardless of circumstance.

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How, then, can banks learn about the character of a business and its owner prior to beginning a relationship?

Reputation Most communities, regardless of size, are close-knit. Many companies know each other, either cooperatively or as competitors. Be aware that good bankers will be asking the company’s competitors their opinions. What would they say about you?

In many cases, if banks and bankers are of high quality, the company will already be known prior to them calling on you to win your business.

Word of mouth, good or bad, can be obtained relatively easily.

• Integrity: Does the company, and management, do what it says it will do within promised deadlines? Does it conduct business with honesty and consistency? Doing so will add to the company’s reputation in a positive way.

• References: If someone referred the business to a bank, this works great as a reference. Another way banks can obtain references is through payable and receivable agings. Some banks will have contacts among the company’s customers or suppliers whom they can connect with.

• Credit Reports/Background Checks: Many banks will look at two kinds of reports. A personal credit report (and that of an owner’s spouse) will be reviewed, as owners will almost certainly be asked to personally guarantee any debt requested. The credit report will show your history of willingness to repay personal debt. If personal finances are not handled responsibly, it is less likely business finances will be handled responsibly. In addition, banks can see how much personal debt exists, so they can then determine how much money the owner may need to withdraw from the business to maintain a lifestyle. In short, pay bills on time and minimize debt.

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Background checks on the owners and company will let the bank know if there have been legal actions against the above, and how many. Be honest and open about anything that might be negative – hiding something, and having the bank learn about it later, will guarantee a rejection of any request.

Intangibles Every bank, and banker, will have other key things they look for. The initial meetings are a “feeling out” process to determine the strength and capability of the owner, how well they understand the business, and whether any red flags are raised.

Bank lending is much more art than science, and at times a good company could be rejected, or a company with challenges could be approved, based on non-scientific information gathered during the underwriting process.

This could be anything from the look and feel of the contractor’s facility to the non-verbal signals of the business owner. While these factors are not concrete, it is worth including them because it is a real form of character evaluation, one all of us use in our daily lives.

Capacity If character is the willingness to repay, capacity is the ability to repay.

There are a variety of things banks look at to make this determination: Repayment History Banks look at financial statements to determine if other debts have been repaid satisfactorily. If a company, or an owner, has had collection actions, judgments, foreclosures, short sales or bankruptcies, it shows that repayment of the debt is not a sure thing, and approval of any debt is much less likely. Be aware that many banks will not lend to companies whose owners have dealt losses to the banking industry in the form of foreclosures and short sales on personal real estate.

AZ CPA JANUARY/FEBRUARY 2024

Cash Flow Generation This is a critical piece of bank underwriting. In this analysis, the bank is looking to determine if the company generates enough cash to make its payments.

The calculation typically works as follows, though each bank may have small variations: 1. The bank determines annual Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA). This is the sum of net income, interest expense, taxes, depreciation and amortization.

2. The bank subtracts distributions for taxes or for bonuses. This can be confusing, but note that any additional funds withdrawn from the company over and above tax payments reduces the amount of cash available for debt payments. In many cases, excessive distributions are a key reason why banks reject requests, even if the company is otherwise profitable. It is critical that distributions from the company are less than net income if you seek to borrow money from a bank.

3. The bank adds up all annual debt payments.

4. The cash available (EBITDA minus distributions) is divided by the debt payments to obtain a number. This number must be at least 1.0, which means that every dollar earned by the company was used for debt payments. If the number was less than 1.0, the company had to use its cash reserves to make payments, which cannot go on indefinitely.

Most banks will have a minimum requirement, typically anywhere from 1.10 to 1.50, so there is some wiggle room for other cash needs. Expect that, if this number is consistently less than 1.20 over the past few years, obtaining a bank loan will be very difficult unless there are extenuating circumstances.

Minimizing Leverage Banks will look at a company’s leverage to determine whether it has good prospects of repaying any debt approved.

Leverage is typically defined by banks with a ratio called “debt-totangible-net-worth.” This calculation is performed by taking total debt and dividing by net worth – simple as that. The lower the number, the better, but typically banks want to see a number no higher than 3.0. If the owner or other parties have lent the company money, that debt could be subordinated to the bank, and most banks will consider it equity for the purposes of the calculation.

Also note that this is tangible net worth. Goodwill and other intangibles, such as deposits or monies owed the company by affiliates, are not included as assets for this calculation.

Liquidity Cash is king. When a company runs out of cash, it must close the doors. Banks want to see that a company has adequate working capital, and this means cash on the balance sheet. Receivables are typically 90 days or less away from cash, and so they have some value as collateral. Inventory is typically even further away from being turned into cash, and so it has less value than receivables as collateral.

Collateral Collateral is what the bank uses if things go wrong, and the company is unable to repay the monies lent. In the case of a real estate loan, it means foreclosing on the real estate. In the case of an equipment loan, it means selling the equipment. In the case of a line of credit, it means collecting receivables and selling inventory.

The above is easier said than done.

In the case of real estate, the last 15 years have shown that values can plummet. As a result, even in situations where the bank only lends 75% initially, there could still be a shortfall. In most cases, companies go out of business during difficult

economic times, so equipment is typically depressed in value.

Receivables and inventory are very hard to collect, as many customers will claim monies are not owed.

Banks are not nearly as good as borrowers are at collecting a company’s receivables.

It is critical to understand that these shortfalls happen consistently – that is the reason banks will not lend higher percentages than what is seen. In reality, to be truly secure, eligible receivables should probably be closer to 25%, inventory 5%, and equipment and real estate 50%.

Capital Capital covers the company’s contribution to the asset being financed. To increase the chances of approval, banks want to see “skin in the game.” It is important to the bank not to bear responsibility for the entire burden of an asset purchase – the company should have a stake in the successful use of the asset as well.

For that reason, a down payment is always beneficial. The higher the down payment, the higher the likelihood of approval of the loan request.

Can the company show profits in difficult years? If yes, the company is more likely to repay its debts.

Conditions can also include the structure of the loan, such as length of term, interest rate and personal guarantees, among other things.

Conclusion Very rarely does one of the C’s determine approval or decline. They are typically judged as a whole.

Imagine a 1950s computer with dozens of buttons and levers. Pushing one button, or pulling one lever, will not make the bank’s decision, but it will impact all the other buttons or levers. If one area is weak, there must be very strong areas to mitigate the risk the bank is taking.

The key to the 5 C’s is to understand that they describe the framework that a bank uses to approve, or decline, a loan request. l Kevin Herbst is senior vice president and team lead of commercial banking at Bell Bank. He has worked in banking since the late 1990s, with much of that time focused on construction, contracting, nonprofits and aviation.

Conditions This is the “C” of credit that is least under the control of the company.

Banks lend based on the current macroeconomic conditions. If nearly every company in a particular industry is failing, it will be difficult for a business in that industry to look for a loan. Conversely, if a segment is going strong, that gives any company in that industry an extra boost of support.

The capability of management, however, is under the company’s control, and is a key determinant from the bank’s perspective. Strong management can outperform in difficult times, while weak management can underperform in good times. Economic performance in the last few years is a great gauge of the capabilities of management.

JANUARY/FEBRUARY 2024 AZ CPA

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AZ CPA JANUARY/FEBRUARY 2024

Inflation Reduction Act Incentives for Clean Energy Projects

By Doug Baldessari, CPA

The Inflation Reduction Act (IRA) was signed into law over a year ago, and it brought sweeping changes to how governments and other non-tax-paying entities evaluate clean energy projects.

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JANUARY/FEBRUARY 2024 AZ CPA

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The IRA is the largest energy incentive effort in U.S. history and provides almost $500 billion in tax credits and direct funding to encourage the adoption of clean energy options, energy conservation and related energy efficiencies. The goal of the IRA is to incentivize, through tax credits and other opportunities, a transition to cleaner energy production and move away from traditional fossil fuels.

Most of the tax credits are available for qualifying projects until 2032.

There are existing tax credits, along with new ones related to specific types of energy sources, construction projects, clean energy programs or electric vehicles. Over $40 billion in competitive loans and grant funding are available in addition to the tax credits for qualifying clean energy and carbon-reducing projects. Many governmental entities are already taking advantage of the IRA tax credit incentives which can reduce local funding requirements of eligible project costs by 30 – 50%.

Historically, non-taxpayers have not had access to clean energy tax credits, which have been around for many years. The IRA changed that, making tax credits available to many tax-exempt organizations and governmental entities through the “direct pay” provision for qualifying clean energy projects that previously were only available to for-profit entities.

The value of the IRA to an entity depends on many factors: • the type of project or definition of a “qualifying energy project”; • the multiplier effect of qualifiers like prevailing wage and apprenticeship; use of domestic content; • the location of a project for energy communities and environmental justice areas; • and, the timing of when the project starts and when it is placed in service.

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The IRA has also made clean energy tax credits transferable, allowing a project sponsor that is unable to use its energy tax credit to transfer and sell the credit to another entity that can effectively monetize the credit.

This creates further incentives for clean energy projects to be built.

The rules and calculation of the incentives are complex. Due to the complexities of the IRA, many entities will need to get help with prioritizing energy-related projects and figuring out how much of the incentives they are eligible for, based on the tax credits, grants and loans that are available. This complexity can result in extra costs for consultants, but with the significance of these incentives and resulting reduction in local funded costs, the added costs will likely be worth paying.

There are two main types of IRA tax credits, the investment tax credit (ITC) and the production tax credit (PTC). The ITC is a one-time tax credit following completion of the project, and the PTC is an annual tax credit based on the annual clean energy production. Based on the qualifying energy property type, either one or both can be used.

There are many qualifying clean energy projects being developed and even constructed currently, which are or will be eligible for the IRA tax credits. Certain clean energy projects like building solar arrays are popular right now for public power utilities, municipal buildings and utility treatment plants. Qualified biogas property projects can be very financially beneficial, such as upgrading or adding biogas equipment for wastewater treatment plants that can be used in operations, or that can be cleaned up and sold to the gas provider as renewable natural gas. Other qualifying projects include ground water thermal heating and cooling projects for university, school and municipal buildings, along with electric vehicle purchases and installation of charging stations.

AZ CPA JANUARY/FEBRUARY 2024

The eligibility framework for the tax credits is a base credit plus bonus criteria. Bonuses can be achieved for prevailing wage and apprenticeship, domestic content, energy community and environmental justice.

Construction must begin by December 31, 2024, for certain qualifying projects and must generally be placed in service by December 31, 2028, but there are many other qualifying net zero projects that will be eligible for the IRA tax credits beginning after December 31, 2024, through 2032. Qualifying projects which don’t start construction prior to January 1, 2024, will start seeing reductions in the overall tax credit for direct pay recipients if the domestic content requirements are not met.

There are many variables for an organization to consider when determining the optimal tax credit, grant or loan funding mix for a project.

With so much funding available right now through the IRA and other programs, it’s important to develop a plan with your financial advisor to make sure you are getting as much funding and incentives as possible for your projects. There has been much guidance provided recently on these tax credits, but we are still waiting for federal agencies to release additional significant guidance.

The first thing to do to determine if you have qualifying projects for the IRA incentives is to evaluate your project landscape for prior, current and future capital projects that involve energy efficiency, renewable energy or other eligible. Community mapping tools from accounting firms and other organizations can help you to locate areas for projects that will qualify for energy community bonus for the tax credits. l Doug Baldessari, CPA, is a partner at Baker Tilly Municipal Advisors, LLC. Baker Tilly offers additional resources on IRA tax credits, which can be viewed at ascpa.com/irabakertilly.

Baldessari will be speaking at the ASCPA’s Governmental Accounting Conference in February.

Visit ascpa.com/gac to register.

Three Simple Ways to Maximize Your ASCPA Experience

#1

List Your Business on Find a CPA If you are looking for new clients, you can register for the ASCPA’s Find a CPA online directory. This is a membersonly benefit that can assist you with growing and promoting your business. The directory can be accessed by the public at no charge. To review your listing visit www.ascpa.com/ find-a-cpa. If you’re ready to register or update your listing, log into your ASCPA account at www.ascpa.com/ my-firm or email membership@ascpa.com

#2

Opt-In to Text Alerts Get the most out of your membership by staying informed and connected to your CPA community. A quick way to do so is by opting into limited text messages about member information and important reminders.

#3

Know Your Community is Here for You There are communities on Connect for every area of the accounting profession.

Especially during tax season, the Tax Community on Connect is a great resource and one of the most active communities on the site. You can get answers to important questions that impact your clients and your business or share your expertise with colleagues that need your help.

If you haven’t used Connect yet, it is time to start; it will change your tax season!

*When opting in, you agree to receive text messages about your membership, events and important reminders from the Arizona Society of CPAs. Message frequency varies but will not exceed 10 SMS messages annually. You may opt-out or stop messaging anytime by replying STOP to the text or updating your ASCPA online profile. Message and data rates may apply. View privacy policy at www.ascpa.com/legalprivacy.

JANUARY/FEBRUARY 2024 AZ CPA

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What’s Happening at the ASCPA? Speed Networking at ChandlerGilbert Community College November 8 ASCPA President & CEO Oliver Yandle attended a speed networking event for business students at CGCC. More than a dozen organizations attended to chat with students about career opportunities. ASCPA members Anthony Gerlach from REDW and Eugene Park from Heinfeld Meech were also there to represent their organizations.

Mountain Pointe High School Career Fair November 15 Thank you to ASCPA member Shelly Zhang for sharing her CPA story with high school students. This work is part of an ongoing effort to connect with future CPAs and inspire them to consider a career in accounting.

Upcoming Events January 19

Don Farmer’s Tax Update www.ascpa.com/farmer Don Farmer returns to Phoenix for his final visit to present in the valley. Join us at the Desert Willow Conference Center for a full-day session on current year developments and planning ideas affecting individuals, corporate and business income taxation.

Attend in person or online.

February 2 The ASCPA Brings Courses to Yuma November 16-17 The ASCPA brought federal tax update courses to the FourPoints

by Sheraton in Yuma. The ASCPA continues to offer excellent in-person learning opportunities.

Check ascpa.com/classroom to find your next class.

The ASCPA’s Governmental Accounting Conference www.ascpa.com/gac Hear from experts on GASB, fraud and cybersecurity at the Desert Willow Conference Center in a conference designed for professionals in local and tribal government. Attend in person or online.

Professional Issues Update in Prescott Converge23

December 1

November 6-7

ASCPA President & CEO Oliver Yandle and Chair-Elect Lauren Murro visited Prescott to meet with members to provide relevant updates on the Board of Accountancy and new efforts to bolster the talent pipeline. Senator Ken Bennett also spoke on updates from the Legislature.

Arizona CPAs and accounting professionals gathered in Phoenix for a two-day conference packed with learning and professional development. Keynotes shared new ways to engage clients and employees; find new ideas; bring about digital transformation and manage stress. Thank you to our platinum sponsor McGuire Sponsel for their continued support.

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AZ CPA JANUARY/FEBRUARY 2024

JANUARY/FEBRUARY 2024 AZ CPA

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AZ CPA Quick Quiz You’ve Read It, Now Get Credit Earn one hour of CPE credit in specialized knowledge by completing the AZ CPA Quick Quiz, available online. Receive a score of 70 percent or more about this issue’s articles for credit.

It’s that easy!

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 five business days.

Congrats, CPA Class of 2023

Congratulations to the Arizona CPAs who were licensed in 2023 and became ASCPA members. We are excited to continue being your connection to the CPA profession and focusing on ways to maximize your professional growth. To view a list, of names please visit ascpa.com/classof2023.

Above: 2023 Top Passers Luncheon

ascpa.com/annual

Change of Address?

If you have changed your address or email, don’t forget to update your contact information on your ASCPA account.

Don’t miss out on important member information and notices.

To update your information, log into your ASCPA account at www.ascpa.com/my-cpa.

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AZ CPA JANUARY/FEBRUARY 2024

Westin Kierland May 9, 2024

11:30 a.m. - 1:30 p.m.

AWARDEES & INNOVATORS 2024 Life Member

Bob Kilpatrick Nancy Wilburn

Andrea Beth Levy, CPA

To Be Announced

Michael David Lemme, CPA

2024 Honorary Members

Outgoing Chair

Excellence in Teaching Award

PREFERRED PROVIDERS

JANUARY/FEBRUARY 2024 AZ CPA

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2024 Arizona Tax Guide From Pat Derdenger, Karen Lowell, Steve Rodis and Ed Zollars For more than 30 years, the Arizona Tax Guide has been an essential reference for tax professionals. It includes: •

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The Arizona Sales and Use Tax Guide: Simplify Arizona and city sales and use tax returns with details on sales tax classifications, exemptions, deductions, rates, compliance, audits and more.

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