AZ CPA March April 2021 by ASCPA

AZ CPA

March/April 2021

Life Member Anita F. Baker, CPA Changes to the Paycheck Protection Program New Requirements for Partnerships Capital Reporting

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

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AZ CPA MARCH/APRIL 2021

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MARCH/APRIL 2021 AZ CPA

AZ CPA The Arizona Society of Certified Public Accountants President & CEO Editor Advertising

Oliver Yandle Patricia Rife Heidi Frei

Board of Directors Chair Chair-Elect

Ginny DeSanto Tom Duensing Secretary/Treasurer Rachael Crump Directors Keith Cowan Kelly Damron Jessica Estrada Tabitha Fox David Gephart Ross Grainger Jessica Iennarella Andrea Levy Anthony Lorenzo James McGettigan Lauren Murro Gidget Schutte Immediate Past Chair Jared Van Arsdale AICPA Council Members Rob Dubberly

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Chapter Presidents Southern Chapter Clark Goding Northern Chapter James Shankland Southwest Chapter Helen Greenwell North-Central Chapter Gidget Schutte

AZ CPA is published by the Arizona Society

Renew Your ASCPA Membership What a year we have had! Thank you for your support and for being a member during 2020. Your renewal statement will be available by April 1, 2021. Please submit your renewal payment by May 31 to remain eligible for the additional 25% discount on most CPE.

Renew online by visiting www.ascpa.com/renew or contact membership at (602) 252-4144. 4

AZ CPA MARCH/APRIL 2021

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 2

AZ CPA

March/April 2021

Features

Anita Baker to Receive ASCPA Life Membership Find out more about Anita F. Baker, CPA, who will become a Life Member at the Annual Meeting on May 13.

Why Diversity and Inclusion 11 Matter

Columns & Departments Chair’s Message by Virginia E. DeSanto, CPA

Member News

by Julie Silard Kantor

New Requirements for Partnerships Capital Reporting

Tax professionals have been waiting for the IRS to provide guidance with regard to partnership capital account reporting. by Anne Davison, CPA, MBA

Classifieds 22 Quick Quiz

Companies that want to foster diversity will need to mentor and sponsor more diversely.

and Carl D. Harper, CPA

The Consolidated Appropriations Act released at the end of December brought significant changes to the Paycheck Protection Program and may open up the door for organizations to receive additional relief.

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

Changes to the Paycheck Protection Program

by Amy O’Loughlin, CPA

MARCH/APRIL 2021 AZ CPA

ASCPA Chair’s Message

Best Friends This challenging past year has provided time for many people to reflect on their lives and to think about their inner self and it’s interaction with the world around it. How many of us remember our first best friend?

Virginia E. DeSanto, CPA, CGMA Chair, Arizona Society of CPAs CFO & Treasurer, ASU Enterprise Partners

My wish is for each member of the ASCPA to fully take advantage of all that’s offered. Engage, mentor, educate and care for each other.

I believe that we all develop and determine best friends in our own unique way. For me, I think back to the best friend I met when I was nine years old. We met playing soccer and we went all the way through high school together, almost inseparable. We are still friends today, and while we only talk a couple times a year, it’s like no time has elapsed since our last conversation. My son, on the other hand, would come home from elementary school and tell me about his new best friend that he met that day. I would ask what his name is and my son would never know, but the next day he’d have another new best friend with no name. When I look back over my life, I can see how best friends move in and out of our lives based partially on our emotional needs, or theirs, at the time. When you’re young, you think you can only have one best friend at a time, but as you age, you see that there’s no limit to the number of best friends you can have. Many people consider their spouse or significant other to be their best friend and that can certainly be true. I’ve found that work colleagues can also be best friends and parents of your children’s friends can be your best friends. Best friends can be around forever or for a certain time in your life, but all of them serve an important role in your life. Today, I have many best friends ... my mother, my daughter and son, my husband, and many others that I interact with frequently. These people ground me and help me stay sane and centered. I have loved the opportunity to lead the ASCPA as its chair and have found that one of the most important things the ASCPA does is give its members a network of colleagues and potential best friends. The ASCPA staff are excellent leaders, providing the membership with so many opportunities to interact with each other and work together to make our profession the strongest and most respected it can be. My wish is for each member of the ASCPA to fully take advantage of all that’s offered. Engage, mentor, educate and care for each other. This is our greatest strength. Thank you for the opportunity to serve as chair of this wonderful organization. Stay safe and be well. l

AZ CPA MARCH/APRIL 2021

Ginny

Member News Kristen C. Otsuka, CPA, has been promoted to manager at Hunter Hagan & Company, Ltd.

Save the Date!

REDW promoted Cher yl Dee Folkerth, CPA, and Barbara J. Rohwedder, CPA, to principals.

ASCPA Annual Meeting

L i n d s e y B e n s o n , C PA , w a s promoted to senior manager at CBIZ & MHM.

May 13, 2021

Heinfeld, Meech & Co, P.C. promoted the following individuals: Patrick T. Copeland, CPA, and Jared J. Young, CPA, CGFM, to audit manager, and Holly Marie Macholl, CPA, Nolen Michael Cook, CPA, Alex Cooksey and Kalkin Stransky to staff associate II. RSM US LLP hired David Kimball Walser, CPA, as senior director of Tax and promoted Matthew Edward Vargas, CPA, to partner. BeachFleischman PC promoted Sarah DiMatteo, CPA, to tax senior manager. BeachFleischman PC entered into an agreement with the Phoenix-based cybersecurity firm, Silent Sector, to sell and market its cybersecurity services to clients throughout Arizona and nationwide.

Join us on May 13 to celebrate 2021 Life Member honoree Anita Baker and our latest Excellence in Teaching Award winner. We will also recognize 2020 honorees, Life Member Julie Klewer and Excellence in Teaching Award winner, Dr. Maria Rykaczewski.

Thanks to our sponsors Highlights of the ASCPA Board of Directors January meeting are online at: www.ascpa.com/ board_january21

MARCH/APRIL 2021 AZ CPA

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What is the most challenging thing about your job? The most challenging thing about my career is learning how to integrate my work life and personal life, especially when my children were young. Of course, keeping up with the professional standards and regulatory changes has also been very challenging. A career in public accounting requires multiple skill sets which are acquired through experience and continuous learning. My career path not only required technical skills, but also personal development skills, such as building relationships with other CLA professionals, clients, prospects and referral sources.

What advice would you give to young people just starting in the profession?

Anita Baker to Receive ASCPA Life Membership Anita F. Baker, CPA, a managing principal at CliftonLarsonAllen, will be honored with Life Membership at the ASCPA Annual Meeting on May 13, 2021. Baker served as past chair of the ASCPA and past chair of the Arizona CPA Foundation for Education & Innovation. She is also active in the AICPA, recently being appointed to chair of the AICPA Technical Standards DOL Subcommittee. Baker has served as a past member of the AICPA Board of Directors. We recently asked her to share some of her insights into her career and the profession. What made you go into accounting and what made you decide to become a CPA? When I was in high school, I thought that I wanted to be a physical therapist. I later discovered that I didn’t like science but I really liked math. I decided to pursue accounting in college because I like to be organized and it seemed like accounting was a very structured profession which required a lot of organization and math skills. I interned at a public accounting firm (CLA) and was offered a full-time position. It was a requirement at the firm to become a CPA in order to advance in public accounting, so I pursued the CPA designation. I also knew that this would provide opportunities for me in the future.

I think that young people should be curious and ask a lot of questions when they are starting out in the profession. Also, look for opportunities to volunteer for special projects and leadership opportunities, including getting involved in the community. It is important to find a coach and mentor that can help you achieve your career goals and to develop a career vision statement. This is my career vision statement that I developed in 1998, after 13 years in public accounting:

Career Vision Statement I will sculpt my career using my core beliefs and values. My career will allow me to have flexibility, independence and financial security. I will be a leader of people, coaching, mentoring and teaching others how to achieve success and satisfaction in their lives. I will have an attitude of service towards my clients and peers. I will commit to lifelong learning to improve my competency, as well as others’. I will be known and recognized for my accomplishments nationally. I will incorporate travel and interaction with people in my career. I will be a leader in the organization — a role model for women professionals.

MARCH/APRIL 2021 AZ CPA

Did you ever have a particular mentor that made a difference in your life? Yes, I worked with an executive coach at a critical time in my career. I was a new principal in the firm and my children were ages six and eight, so it was a very challenging time in my life. I went though a program with the executive coach which resulted in my personal vision statement, career

vision statement and this focused vision statement:

Focused Vision Statement My vision is to enable people to shape their future. I will establish myself as a trusted professional and mentor that can design pathways to transform vision into realities. I will anticipate and create opportunities for myself and others which are rooted in their abilities, interests and

values. I will empower others to take personal responsibility for their future and to celebrate their success. I will be a leader of people, a role model for women professionals, respected not only for my competencies, but for being true to myself and my core values. I recently reconnected with this exectuive coach to create my vision statement for my retirement journey.

How did you get involved in volunteering with the ASCPA? I met Cindie Hubiak (former ASCPA President & CEO) at an AICPA Council meeting after I was appointed as an at-large Council member. I had previously been involved in a committee at the ASCPA and was asked if I would be interested in serving on the Board of Directors. I served as a member of the Board, was the Chair in 2014-2015 and served on various other committees.

What has been your reward from your volunteer work? My volunteer work with the ASCPA has been very rewarding. I have worked with so many amazing professionals and developed relationships that will last a lifetime. I enjoyed getting to know the members of the ASCPA and traveling around the state meeting other leaders in the profession. I also enjoyed learning more about the ASCPA advocacy efforts and participating in the Capitol Hill visits.

What does it mean to you to become a Life Member? I am so honored to become a Life Member of the ASCPA. This recognition is a highlight of my career. My career in public accounting has been so rewarding, and I hope that I inspire others to fulfill their career vision. Getting involved in the profession is a great way to meet other professionals and develop your personal leadership skills. It is very rewarding to impact others’ lives through your volunteer service in the profession and community. l

Join us at the Annual Meeting on May 13 as we honor Anita Baker!

AZ CPA MARCH/APRIL 2021

Why Diversity and Inclusion Matter by Julie Silard Kantor Many organizations have come to recognize the impact of mentorship on advancing diversity and fostering inclusivity. But companies that want more diversity will need to mentor and sponsor more diversely. Mentoring, after all, helps employees develop a sense of belonging, which is important to building a diverse and inclusive culture. For companies, the key is to create a company culture in which team members feel individually recognized, valued and committed, while working toward common goals. That can be accomplished through mentoring initiatives focused on enriching relationships between cultural groups. On an individual basis, sponsorship is also equally important, wherein a sponsor takes an active role in championing a high-potential employee for growth opportunities within the organization.

MARCH/APRIL 2021 AZ CPA

AZ CPA MARCH/APRIL 2021

The Value of Sponsorship and Mentoring While a mentor speaks with their mentee and shares from their invaluable learning, a sponsor speaks about their sponsee behind closed doors and champions him or her to others. Sponsors have a dramatic influence on an individual’s career advancement, company succession plans and elevating diverse leaders. Unfortunately, not all high-potential employees have equitable access to sponsors, and most leaders tend to mentor and sponsor in their own likeness. Research from McKinsey, the Center for Talent Innovation and the Boston Consulting Group have all shown that people of color, women, LGBTQ+ individuals and other underrepresented groups often lack sponsors. Formal sponsorship programs engineer and ensure access to internal champions for high-potential employees. Simultaneously, these initiatives also help executives build their leadership skills and living legacies. In a 2016 Harvard Business Review article, “Why Diversity Programs Fail,” authors Frank Dobbin and Alexandra Kalev reported on the impact of mentoring, training, self-managed teams, diversity task forces and diversity managers on the representation of African American, Hispanic and Asian men and women at the manager level. The researchers found that mentoring had the largest impact of all strategies, resulting in an increase of representation of minorities at the manager level by 9 to 24 percent.

Diversity Issues A 2018 McKinsey study, Delivering Through Diversity, found gender diversity on executive teams is highly correlated with profitability and value creation. Companies in the top quartile for gender diversity on executive teams were 21 percent more likely to outperform on profitability and 27 percent more likely to have superior value creation. Women and minorities usually connect better with their mentors through

Companies in the top quartile for gender diversity on executive teams were 21 percent more likely to outperform on profitability and 27 percent more likely to have superior value creation. formal mentoring programs. Formal programs offer an established, credible and supported way to mentor women and minorities. The most effective mentoring programs provide training on how to have healthy boundaries in mentoring relationships and the role of unconscious bias in the workplace. Even so, numerous companies rely on informal mentorship. Although a lot of progress has been made, LeanIn.Org disclosed in the article, “Men, Commit to Mentor Women” in 2019 that one in six male managers feels uncomfortable mentoring women. Thirty-six percent of men surveyed claimed that they have avoided mentoring or socializing with a woman at work because they were nervous about how it would look. Deloitte’s 2014 report, From Diversity to Inclusion: Shift from Compliance to Diversity as a Business Strategy, says that even though diversity programs have been around for decades, most companies still do not have a highly inclusive workplace. Deloitte’s research uncovered that companies want to shift from diversity as a program to diversity and inclusion as a business strategy.

According to Deloitte, diversity is the measure and inclusion is the mechanism. High-performing organizations recognize that the aim of diversity is not just meeting compliance targets but tapping into the diverse perspectives and approaches each individual employee brings to the workplace. A diverse workforce is a company’s lifeblood, and diverse perspectives and approaches are the only means of solving complex and challenging business issues. Moving beyond diversity to focus on inclusion as well requires companies to examine how fully the organization embraces new ideas, accommodates different styles of thinking, creates a more flexible work environment, enables people to connect and collaborate, and encourages different types of leaders. l Julie Silard Kantor is the founder and CEO of Twomentor, a high-impact training and development company focused on talent strategies for a diverse workforce. She can be reached at julie@twomentor.com. First published in the November/December 2020 issue of New Jersey CPA magazine (njcpa.org/newjerseycpa).

MARCH/APRIL 2021 AZ CPA

Phoenix Tax Workshop Series 24 Hours of Live CPE for $375 * Added Bonus for purchasing 2021-22 Phoenix Tax Workshop Series! You will gain access to all 2021-22 recorded sessions for later viewing.

Who’s on the agenda? Presentation topics are selected and then matched with the expertise of speakers drawn from the Advisory Committee, members of the Legislature and Arizona government.

The Phoenix Tax Workshop was established in 1961 to educate professionals in all areas of taxation—federal, state and local. We invite you to join this elite group of tax professionals at their Saturday CPE/CLE sessions (eight times per year). This series is also offered as a webcast.

What is the Advisory Committee? The Advisory Committee is comprised of the Valley’s top legal and tax accounting professionals who have agreed to volunteer their time.

What does it cost? The annual fee of $375 (due by the first meeting in May) includes the opportunity to earn 24 hours of CPE/CLE credit per year, by attending eight, three-hour meetings. You may attend individual meetings for $70. (Payment can be applied toward annual fee if you decide to enroll in the series). To enroll in the Phoenix Tax Workshop Series, complete the registration form below or register online at www.ascpa.com/ptw22.

Meeting dates and times The following Saturday meetings are held at the ASCPA offices in Phoenix from 9 a.m. to noon.* (*Some may be webcast only.) You may participate by webcast from your home or office.

What’s on the agenda? Topics are drawn from current tax issues, court cases and current legislation on both federal and state arenas. You will have the opportunity to take part in question and answer sessions to ensure you leave with a complete understanding of the material. Updated agendas will be sent prior to each meeting and will be available in the online CPE catalog. Check periodically for updated information.

Name ___________________________________________ Company ________________________________________ Address ________________________________________ City ___________________State _____ Zip ___________ Phone __________________ Fax ____________________ Email ___________________________________________ Check all that apply: r ASCPA Member r Nonmember r CPA r Not a CPA r Attorney r Other I will be attending: r In-person r On Webcast

AZ CPA MARCH/APRIL 2021

May 15, 2021

Jan. 15, 2022

June 19, 2021

Feb. 19, 2022

Sept. 25, 2021

April 22, 2022

Oct. 23, 2021 Nov. 20, 2021

Method of Payment:

r Check r VISA r MasterCard r American Express Name on Card _______________________________ Card Number ________________________________ Exp. Date ____________ Amount $ Signature of Card Holderr______________________ Please return this form and payment to: Arizona Society of CPAs 4801 E. Washington St., Ste. 180 Phoenix, AZ 85034 Fax credit card orders to: (602) 252-1511 or register online at www.ascpa.com/ptw22

New Requirements for Partnerships Capital Reporting

By Anne Davison, CPA, MBA and Carl D. Harper, CPA (in NM)

Tax professionals have been waiting for the IRS to provide guidance with regard to partnership capital account reporting. To provide some history, the IRS unexpectedly launched the tax capital reporting requirement in 2018 via the 2018 Form 1065 instructions. The IRS then delayed this reporting for tax years 2018 and 2019. On June 5, 2020, the IRS issued Notice 202043, requesting comments on the proposed-required methods for reporting partners’ capital under the tax basis method (TBM). In prior years, taxpayers were permitted to use a number of methods to report partners’ capital including tax basis, GAAP, Section 704(b) or other. Reporting on the tax basis allows the IRS to determine if a partner has distributions in excess of basis and estimate the basis on sale of partnership units.

MARCH/APRIL 2021 AZ CPA

On October 22, 2020, and January 14, 2021, the IRS released Form 1065 draft instructions that would require, for the tax year 2020, taxpayers to calculate partner capital using a transactional approach for the TBM. This reverses the IRS previous position, that the transactional approach could not be used. At this time, the IRS has not finalized those instructions, but Notice 2021-13’s recent publication suggests that they will not again delay TBM reporting. Notice 2021-13 provides broad penalty relief for 2020 and thereafter, should the 2020 beginning capital accounts include incorrect information, provided the partnership can establish “that it took ordinary and prudent business care in following the 2020 Form 1065 instructions ...” For the many partnerships that have used the TBM, this is not a change or an issue. However, for those that have used

AZ CPA MARCH/APRIL 2021

an alternative capital account method, such as 704(b), GAAP or other, and for those partnerships that have errors in their tax capital accounts, this can present a challenge. In addition to the TBM reporting, the draft instructions require several tax return statements: • The method used to determine beginning tax basis capital • If the Previously Taxed Capital Method is used, state the method used to determine the partnership’s net liquidity value • If on the 2019 return, a partners’ ending negative tax capital was disclosed and that value does not agree with the partners’ beginning 2020 tax capital, explain the difference • If the Form 1065 balance sheet is tax basis and the beginning or ending balance sheet capital

differs from the Schedule M-2 values, provide a reconciliation So, what is TBM? The most significant difference is market value adjustments under IRC Sections 704(b) and 743 adjustments under Section 754 are not included in TBM reporting. These adjustments would include step-ups due to sale of partnership interests and death of a partner. However, Sections 734 and 754 adjustments related to transactions with the partnership are included in TBM. Notice 2021-13 reiterates the four permitted methods that the draft instructions state must be used to calculate beginning tax basis capital. If the partnership has been using TBM, it can simply continue. If the partnership has TBM data, it can use it. If the partnership has not previously computed TBM capital, it must establish beginning tax

basis capital with one of the permitted methods. The same method must be used for all capital accounts. After beginning 2020 capital is established, the TBM is the only permitted method. Tax Basis Method. TBM is a transactional approach, applying partnership tax accounting principles: The TBM increases a partners’ capital by: • Money contributed • The tax-adjusted basis of property contributed • Partnership liabilities assumed by the partner • The distributive share of income, gain, and tax-exempt income • The partners’ share Section 734 adjustments The TBM decreases a partners’ capital by:

Specified Methods to Calculate Beginning Tax Basis Capital 1. 2. 3. 4.

• • • •

•

Tax Basis Method Modified outside basis method Modified previously taxed capital method Section 704(b) method

Distributions of money The adjusted tax basis of property distributed Partner liabilities assumed by the partnership. The distributive share of losses and deductions, depletion items (up to the property basis) The distributive share of the adjusted tax basis of charitable property contributions

•

The partners’ share of Section 734 adjustments

Modified Outside Basis Method. Beginning tax basis capital equals the partners’ adjusted outside basis, reduced by the partners’ share of liabilities and the net of all Section 743 adjustments. The partnership may rely on the basis information provided by the partners.

MARCH/APRIL 2021 AZ CPA

Modified Previously Taxed Capital Method. Beginning tax basis capital equals the amount of cash the partner would receive in a liquidation, after selling all of the assets in a fully taxable transaction for cash equal to the Fair Market Value (FMV). This cash amount is increased (or decreased) by the amount of loss (or gain) allocated on the sale. IRC 743(b) and remedial IRC 704(c) adjustments are not applied.

Section 704(b) Method. Beginning tax basis capital equals each partners’ 704(b) capital account, minus the partners’ share of the IRC 704(c) built-in gain in the partnership’s assets, plus the partners’ share of the IRC 704(c) builtin losses in the partnership’s assets. Because IRC 704(b) capital account maintenance undergirds the allocation safe harbor, if TBM capital and IRC 704(b) capital do not equal, IRC 704(b)

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capital must continue to be computed for each partner. Workpaper schedules should identify the IRC 704(b) and 704(c) basis for each asset and each partners’ share of the tax cost and builtin gain or book-up amounts. Best Practices. Best practices include reviewing capital that has been checked as “Tax Basis” in prior years. Look for items that are not TBM, such as IRC 743(b) adjustments and if the balance sheet is accrual and the partnership reports on the cash method. Form 1065, Schedule M-2 must be reported on TBM. However, Schedule L (the balance sheet) reflects the partnership’s books and records and does not have to be tax basis. A reconciliation of capital between Schedules L and M-2 should be done to note differences. Older partnerships might find computing beginning tax capital under the TBM impractical or impossible, leading them to use another method. Partnerships and CPAs must balance the burdens of these new rules, as they try to reach the Notice 2021-13 prudent business care standard. l Anne Davison, CPA, MBA, is a tax manager at REDW specializing in small business entities, trusts & estates, and high wealth Individuals. Anne is a member of the AICPA and ASCPA. She can be reached at anne.davison@redw.com. Carl D. Harper, CPA (in NM), is a senior tax manager at REDW specializing in partnerships, real estate development and high wealth individuals. Carl is a member of the AICPA and NMSCPA. He can be reached at carl.harper@redw.com.

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AZ CPA MARCH/APRIL 2021

Second Draws

Changes to the Paycheck Protection Program by Amy O’Loughlin, CPA The Consolidated Appropriations Act (the Act) released at the end of December brought significant changes to the Paycheck Protection Program (PPP) and may open up the door for organizations to receive additional relief from the COVID-19 pandemic.Under the Act, the PPP received $284.5 billion in additional funding but there were some key changes to any new loans (PPP2 loans) and who can access the funding. Here are some of the key items to understand about what changed (and what didn’t) under the Act. Existing Loans Recipients of the first round of PPP loans should be in progress with their PPP loan forgiveness applications. The Dec. 31, 2020 safe harbor for calculating headcount and 24-week Covered Period have passed. Remember that you have 10 months from the end of your Covered Period to submit the PPP loan forgiveness application. There were no additional extensions granted for loan forgiveness by the Act, but there are some changes that could affect your loan forgiveness applications. For example, clarifications were made to the types of eligible payroll expenses that initial PPP loans could cover to include group benefit insurance (dental, vision, life, disability) as eligible payroll costs. If your forgiveness application was completed without these included, you may want to resubmit.

The Act permits PPP loan recipients to receive a second PPP loan if qualifying parameters are met. “Second Draw” PPP loans are available for up to $2 million for organizations that meet the following conditions: • Have 300 or fewer employees at the time of application • Have used or will use all of their first PPP loan funds before applying for a Second Draw PPP loan • Be able to show at least a 25% decline in gross receipts for any 2020 quarter compared with the same quarter in 2019 • Covered worker protection and facility modification expenditures, including personal protective equipment, to comply with COVID-19 federal health and safety guidelines • Made expenditures to suppliers that were essential at the time of purchase to the recipient’s current operations • Covered operating costs, such as software and cloud computing services and accounting needs • Covered property damage costs from vandalism or looting during public disturbances

Second Chance for First-Time Borrowers A provision in the Act enables borrowers who received a PPP loan but returned all or part of that loan to reapply for the maximum amount available to them. The maximum PPP loan amount for all borrowers in 2021 is $2 million, down from the original maximum PPP loan amount of $10 million. PPP2 borrower requirements were updated from the original PPP loans, which may assuage concerns from first-time-around borrowers about whether the SBA will forgive their loans. More details on those changes to borrower eligibility and eligible expenses are below.

MARCH/APRIL 2021 AZ CPA

Loan Forgiveness The Act clarifies that for PPP loans of $150,000 or less, the borrower will complete a simplified, one-page loan forgiveness application and not be required to submit supporting documentation. This form is still in development and should be available soon. Borrowers eligible for the streamlined application should keep supporting documentation on file in the event of further inquiry

from the Small Business Administration (SBA). Another potential relief component is that borrowers no longer will be required to deduct their Economic Injury Disaster Loan (EIDL) advance from their PPP forgiveness amount. EIDLs of $10,000 were made available for organizations that needed an immediate COVID-19 relief back when the Coronavirus Aid, Relief, and Economic

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AZ CPA MARCH/APRIL 2021

Security (CARES) Act was passed. EIDL loans could be rolled into a PPP loan. A new round of EIDL loans was made available in the recent legislation.

PPP Loan Necessity Questionnaire Organizations that received a PPP loan in 2020 should also note that the PPP Loan Necessity Questionnaire was finalized by the SBA at the end of November. This document is separate and distinct from the loan forgiveness applications and applies for organizations, including not-for-profit organizations, with loans of $2 million or more. Questionnaires will be furnished by the PPP loan lender and must be returned to the lender within ten days of receipt. The Loan Necessity Questionnaire will include the following items: • Revenue comparisons between 2019 and 2020 • The impact on business operations (both governmental and voluntary) • Mitigation costs incurred by the business • Liquidity assessment showing the resources available • Q u e s t i o n n a i re a l l o w s f o r borrower explanations and requires documentation for certain answers Borrowers must perform three certifications and sign the questionnaire. It is highly recommended your legal counsel review your Loan Necessity Questionnaire before you submit the questionnaire to your lender.

Accessing PPP2 Loans Eligibility for PPP2 loans differs slightly from the original program. Borrowers seeking first-time loans should meet the following requirements: • Businesses with 500 or fewer employees that are eligible for other SBA 7(a) loans • Sole proprietors, independent contractors, and eligible selfemployed individuals • Not-for-profits, including churches • Accommodation and food services operations (those with

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North American Industry Classification System (NAICS) codes starting with 72) with fewer than 300 employees per physical location Broadcast news stations, newspapers, and public broadcasting services; 501(c)(6) not-for-profit organizations; “destination marketing” entities; and housing cooperatives are newly eligible for the PPP as well

include group benefit insurance (dental, vision, life, disability) as payroll costs in their calculations. Importantly, these expanded expense categories are valid for both existing and new PPP loans.

Important Dates to Note Organizations seeking PPP2 loans will need to act quickly to take advantage of the relief. This is still a firstcome, first-served program so check with your PPP lender to see when they

will start taking applications. The deadline to submit for PPP2 loans is March 31, 2021. Proper documentation will be needed to support your application, and as with the first round, all recipients are expected to track loan forgiveness calculations in a spreadsheet. l Amy O’Loughlin, CPA, is tax director for CBIZ. Contact Amy O’Loughlin at aoloughlin@cbiz.com.

Restricted borrowers include: • Publicly traded companies • Lobbying organizations • Companies organized in or with significant operations in China or Hong Kong, and companies with board members who are residents of China • Companies that receive a grant for shuttered venue operators • Companies owned 20% or more by the President, Vice President, head of an Executive department, or a Member of Congress, or the spouse of such person

PPP2 Loan Terms PPP2 borrowers may receive a loan amount of up to 2.5 times their average monthly payroll costs in the year prior to the loan or the calendar year up to a $2 million maximum ($10 million maximum for affiliated entities and $4 million for a single corporate group). ). This loan amount is significantly less than the first draw of the PPP, which permitted loan amounts up to $10 million. In an acknowledgement of the devastating impact COVID-19 had on the hospitality sector, PPP borrowers with NAICS codes starting with 72 (hotels and restaurants) can get up to 3.5 times their average monthly payroll costs, still subject to a $2 million maximum.

Eligible Expenses As with the first PPP, the costs eligible for loan forgiveness in PPP2 include payroll, rent, covered mortgage interest, and utilities. PPP2 also makes the following potentially forgivable: The Act clarifies that borrowers can

MARCH/APRIL 2021 AZ CPA

Classifieds Employment CPA OR EA NEEDED — Would be responsible for preparation of individual, corporation, and Partnership tax returns and planning. Would also be responsible for accounting clients and background in QuickBooks is a must. Would also be able to represent clients with the IRS and Arizona. We are seeking a professional to join a fast-growing company and develop strong and lasting relationships with our clients (located in NW Arizona). Must have a minimum of 5 years of experience in tax preparation and accounting. Please send resume to 4usresumes@gmail.com. CPA — Tucson CPA firm has a position available for a tax manager who would like to become a partner in 2021 or beyond for a 9 person highly profitable, primarily tax practice. The candidate must have a minimum of

7 years of recent CPA firm experience preparing and reviewing business and individual tax returns. We offer competitive salaries and benefits, including tax season bonuses, group health insurance, 401(k) with a 4% company contribution, paid holidays, vacation and complete reimbursement of all CPA related expenses. Please apply for the Tax Manager/Partner opportunity today, by sending your resume/salary requirements to cpafirm3@gmail.com. BIG4 ALUMNI CPA Seeking perdiem work: Tax, Audit, Accounting, financial analysis, forensic, temp, p/t perm, Interim, project based. Sarbanes, PP&C’s, Controller, Director/VP Acctg, Forecasting, Planning, Reporting, SEC, M&A, Non-Profit, Gov, Private, Wealth MGMT, Bill pay, Bank Recon, systems support Implementation and conversion. (480) 524-3501 or TRBowmanCPA@gmail.com

SENIOR REVENUE ACCOUNTANT — Cable One, Inc. (NYSE: CABO), headquartered in Phoenix, AZ, has a Senior Revenue Accountant opportunity for you! You’ll be working closely with the Senior Manager of Revenue Accounting to successfully complete month end and will be responsible for ensuring proper revenue recognition in accordance with ASC 606. You’ll be involved with customer contract review, data analysis and ad hoc projects/ reporting. At Cable One and our family of brands, we keep our customers and associates connected to what matters. Find out why Cable One is the place to be by visiting our career site today. View the full details: https://tinyurl.com/ yc9jbw23 Office Space EXECUTIVE OFFICE SPACE FOR LEASE — Beautiful garden-style office complex in a great office environment located in north Phoenix. Easy access to SR 51 and SR 101 just north of NWC of Tatum and Shea Blvd. Executive office $800. Ample parking, beautiful conference rooms and seminar room. Copier, telephone and internet ready. Includes Front Office service to greet your clients. Contact Clara or Mary at (602) 953-5000. OFFICE SPACE AVAILABLE/HIGH END SCOTTSDALE ADDRESS — Executive Office Space with beautiful conference room. Located in beautiful North Scottsdale near the 101 and Bell Road (85260 zip code) $1100 a month. Copier, Conference Room, additional space available for an assistant (additional charge). Website:http://www. mosaicws.com.

For classified advertising, go to www.ascpa.com and click on classfieds.

AZ CPA MARCH/APRIL 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 TBM increases a partner’s capital by: m Money contributed. m The tax adjusted basis of property contributed m All of the above

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 April 2022. Please note that users have three attempts to pass the quiz with at least a 70 percent score.

March/April 2021 Issue of AZ CPA* 1. What is the theme of this month’s Chair’s message by Ginny DeSanto? m ASCPA Board Nominations m How to Register for CPE m Friendships 2. Who is this year’s ASCPA Life Member? m Anita Baker m Julie Klewer m Thomas Brady 3. What technique is proven to result in an increase of representation of minorities at the manager level? m Blind interviewing m Mentoring m Leadership seminars 4. A 2018 McKinsey study found gender diversity on executive teams is highly correlated with: m Increased law suits m Profitability and value creation m Employment satisfaction

8. “Second Draw” PPP loans are available for up to: m $1 million m $2 million m $10 million 9. The PPP Act clarifies that borrowers can include group benefit insurance (dental, vision, life, disability) as payroll costs in their calculations. m True m False 10. The deadline to submit for PPP2 loans is: m March, 31, 2021 m April 15, 2021 m June 30, 2021

What does TBM stand for? m Tax Basis Method m Tax Burden Method m Tax Basis Maintenance

6. Notice 2021-13 reiterates that how many permitted methods must be used to calculate beginning tax basis capital? m 4 m 5 m 10

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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.

MARCH/APRIL 2021 AZ CPA

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AZ CPA MARCH/APRIL 2021

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