AZ CPA May 2016 by ASCPA

AZ CPA May 2016

Financial Planning Issue

Leveraging Charitable Giving

Marketing Secrets in a Digital World ASCPA Supports AICPA/CIMA Joint Venture

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MAY 2016 AZ CPA

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

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Karen Abraham Armando Roman

Chapter Presidents Southern Chapter Northern Chapter

Cathy Poore Bethany de Alva Southwest Chapter Jennifer Sullivan North-Central Chapter Ellen Carpenter AZ CPA is published by the Arizona Society of Certified Public Accountants (ASCPA) to provide information, news and trends in the profession of accounting. It is distributed 10 times a year as a regular service to members of the Society. 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 225-B Phoenix, AZ 85034-2021 Telephone (602) 252-4144 AZ Toll-Free (888) 237-0700 www.ascpa.com

AZ CPA Volume 32 Number 4

May 2016

Features 11

The Business of Saving Lives

An interview with Donor Network of AZ’s CFO Kathy Mills, CPA by Patty Gannon

2016/17 ASCPA Board Members

Fear and Greed The impact of human emotion on investor behavior by Michael Carlin, AIF, WMS

Columns & Departments

Leveraging Charitable Giving Helping others get the most out of their philanthropy by Kimberly C. Kur, J.D. and Judith Smith, CFRE

Chair’s Message by Greg Nelson, CPA

Members News

A Dash of SALT by James Busby, Jr., CPA

Quick Quiz

Marketing Secrets in a Digital World The best marketing plan needs to be timely, consistent, relevant and personal by John J. Chichester, Jr., CPA, PFS, CFP, AIF

Classifieds 26

Supports AICPA/CIMA 22 ASCPA Joint Venture Arizona Society of Certified Public Accountants 4801 E. Washington St., Suite 225-B Phoenix, Arizona 85034-2021 www.ascpa.com

MAY 2016 AZ CPA

ASCPA Chair’s Message

My Journey to No. 12,356 In August 1996, my family was flying en route from Charlotte, N.C. to our new home in Phoenix. As my wife looked out the window at the brown, dry landscape below, I noticed her tear up at the thought of leaving the verdant South. Here I thought we were good at corporate relocation. This was our fourth job transfer in the past six years.

by Greg Nelson, CPA

... I have come to appreciate that my house can be anywhere, but my home is where I connect with my community.

AZ CPA MAY 2016

Arizona is blessed with the beautiful Grand Canyon, the red rocks of Sedona, and the Diamondbacks, who were in the midst of building a new stadium. And Canadians retire here, right? With a young, growing family and a history of uprooting much too often, I began to think about putting down roots in the desert … if we could. After almost 20 years, we’re still here. Along the way I have come to appreciate that my house can be anywhere, but my home is where I connect with my community. It’s where I work to live, not live to work. Although work is always an important part of the equation (you have to eat, pay the mortgage, pay for college, save for retirement, etc.), opportunities outside of the office to connect with others through volunteering makes a place home. At first, volunteering seemed to be a time hog and a chore. But I later discovered that thinking about it as giving without getting, resulted in getting much more than I thought possible — community and a home. I am pleased to have this opportunity to serve as chair of the board of directors for the Arizona Society of CPAs over the coming year. Our ASCPA is staffed by an amazing group of individuals who care about you and your profession. Hundreds of volunteers give generously of their time to provide all of us with a professional community. If you are a member reading this, you are an important part of the Arizona business community with values in common with other CPAs in Arizona. Last November, during the bi-annual strategic planning session, the ASCPA confirmed the Society’s Core Values, the first of which is to acknowledge that our “Members are the reason for the existence of the ASCPA.” As such, our association is committed to delivering the best value proposition for your membership. You are part of an exclusive group of professionals. And as our President & CEO Cindie Hubiak often says, “You are Valued!” This month’s magazine theme is financial planning. Financial planning is a natural space in which CPAs bring value to others. What we do today impacts our future in a significant way. We can’t always accurately predict the future, but we can and should plan based on what we know. As the rhetorical question goes, “When is the best time to plant a shade tree?” The answer? “Ten years ago!” Soon after landing at Sky Harbor and settling into our new home and community, I felt compelled to register my certification with the Arizona State Board of Accountancy. Likewise, membership in our state society seemed logical and necessary as a CPA. Unfortunately, my former certification had lapsed, and I was now fearful of the re-registration process. However, on advice from a call to the ASCPA and further conversation with the State Board, my fears were allayed that the registration process did not include sitting for the CPA exam. (CPA = Couldn’t Pass Again). I’m now happily registered as No. 12,356. In closing, I would like to thank our current chair, Rob Dubberly, for his service during the past year. I sincerely appreciate the many hours of work and leadership you have invested in our society. You have provided a great example of volunteerism that we all hope to emulate. n

ASCPA past chair Anita Baker, CPA, has been nominated to a three-year term on the AICPA board of directors beginning October 2016. CBIZ MHM, LLC & Mayer Hoffman McCann P.C., promoted the following people: Bailey Tocco, CPA, tax director; Denise Foshe, CPA, tax manager; Chuck McLane, CPA, as senior managing director and Travis Magneson, CPA, audit senior manager. They also hired the following individuals: Ron Darling, tax senior manager; Suzanne LaCross, CPA, tax senior associate; Kyle Felix, audit senior associate; and Max Braverman, audit senior associate. BeachFleischman PC appointed Marc Fleischman, CPA, as CEO. Fleischman succeeds Bruce Beach, who led the firm as CEO since 1990. Christine Ulibarri, CPA, was hired as a senior tax manager. Bill Moss, CPA, and Lori BoothHoule, CPA, were hired by TCI Wealth Advisors, Inc., as shareholders. Husband-and-wife team Greg Lane, CPA, CFP®, CHRS® and Lisa Lane, CSA, CCWS®, RDN published a new book — 21 Days to Wealth, WellBeing, and Abundance Now! M a t t h e w Wa l k e r, C PA , w a s promoted to senior associate at Miller Russell Associates. A m a n d a I v e r s o n , C PA , w a s promoted to shareholder and COO at Pinnacle Plan Design in Phoenix. Josephine Giordano, CPA, joined Kotzin Valuation Partners.

In Memoriam Dr. William Huizingh (See pg. 10) Michael Francis Magnan

Member News Excellence in Teaching Award Larry Watkins, Ph.D. is this year’s recipient of the Arizona CPA Foundation for Education and Innovation’s 2016 Excellence in Teaching Award. Dr. Watkins is Professor of Accounting at Northern Arizona University. Throughout his 30-year career at NAU, Watkins established an exemplary record of teaching excellence and innovation, engaged in a prolific research agenda, and provided strategic leadership in area initiatives, while mentoring both students and faculty. One of his recent students summed his career up best: “Dr. Watkins is legendary. He is one of those teachers that could teach anywhere in the world, but every Tuesday and Thursday blesses us with his presence. Not only did I learn how to apply myself in researching the FASB codification to a whole other level, I learned important life lessons that will take me far in life. The first day of class I walked into ACC 590 as a boy, now I am leaving as a man!” Help us honor Professor Watkins at the ASCPA Annual Meeting on May 19.

A Spectrum of Opportunities ASCPA Annual Meeting and Awards Luncheon May 19, 2016 Arizona Biltmore Resort Join us as we honor new Life Member Steve Harris, CPA, and our 2016 Excellence in Teaching Award Recipient Larry Watkins, Ph.D. and remember Dr. William Huizingh. We will also hear from our keynote speaker Past AICPA Chair Tommye Barie. Thank you to our gold sponsors: ADP, CPACharge, Headfarmer and Southwest Risk Management, LLC Register at www.ascpa.com MAY 2016 AZ CPA

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A Dash of SALT

Beware of Arizona’s Local Speculative Builder Tax This month’s state and local tax (SALT) column addresses Arizona’s speculative builder tax, a local privilege tax that operates like a stealth real estate transfer tax and that many taxpayers do not even learn about until they hear from a tax auditor. Some states have a real estate transfer tax that is well known to real estate professionals and routinely accounted for by escrow agents on settlement statements, but the State of Arizona does not impose anything like a real estate transfer tax. However, Arizona cities and towns impose a privilege (sales) tax on speculative builders that operates much like a real estate transfer tax in some situations. Unfortunately, however, Arizona’s local speculative builder taxes are not well known to real estate developers and professionals and, as a result, are not routinely accounted for by escrow agents on settlement statements. Rather, many taxpayers do not even learn about Arizona’s local speculative builder taxes until they hear from a tax auditor after a property changes hands.

What is Speculative Builder Tax? Speculative builder tax applies to 65 percent of the total selling price from the sale of “improved real property,” after taking into account all available exclusions, deductions, exemptions, and credits. Currently, speculative builder tax rates vary from 1.5 percent to 5.0 percent, so tax liabilities can be significant — especially if the taxpayer did not consider the tax before agreeing to the economic terms concerning the sale of the property.

The Tax Only Applies to Sales of Improved Real Property Fortunately, the tax does not apply to sales of unimproved real property; it only applies to sales of improved real property. However, it does not take much to be classified as “improved real property,” which is defined for purposes of this tax as any real property “(A) upon which a structure has been constructed; or (B) where improvements have been made to land containing no structure (such as paving or landscaping); or (C) which has been reconstructed as provided by Regulation; or (D) where water, power, and streets have been constructed to the property line.”

by James G. Busby, Jr., CPA

James G. Busby, Jr., CPA, is a state and local tax attorney at The Cavanagh Law Firm. Busby previously worked in the SALT departments at Arthur Andersen and Deloitte & Touche. Before entering private practice, Busby was in charge of all transaction privilege (sales) tax audits at the Arizona Department of Revenue. If you have any questions, please contact the author. He can be reached at (602) 322-4146 or JBusby@CavanaghLaw.com.

Who is Liable for the Tax? The tax is imposed on “speculative builders,” which are defined as “ownerbuilders” who either sell or contract to sell: (1) at any time — one or more homes, regardless of the state of completion, or improved residential or commercial lots without a structure; or (2) improved real property other than that specified above prior to completion or before the expiration of 24 months after the improvements to the property sold are substantially complete. “Owner-builder” is defined as “an owner or lessor of real property who, by himself or by or through others, constructs or has constructed or reconstructs or has reconstructed any improvement to real property.”

MAY 2016 AZ CPA

For purposes of this tax, “substantially complete means the construction contracting or reconstruction contracting: (1) has passed final inspection or its equivalent; or (2) certificate of occupancy or its equivalent has been issued; or (3) is ready for immediate occupancy or use.” Municipalities generally only attempt to impose speculative builder tax on the first sale of a property after it is substantially complete. But, to postpone the tax liability on residential lots or partially completed residential properties until substantial completion of the home, the buyer must provide an appropriate exemption certificate. The incidence of speculative builder tax is on the speculative builder/seller. However, any person who purchases or acquires — by foreclosure, by sale under trust deed or warranty deed in lieu of foreclosure, or by any other means —improved real property upon which speculative builder tax has not been paid may become liable for the tax. n

Arizona Accounting Icon Passes Away ASCPA Life Member Dr. William Huizingh, an icon in the Arizona accounting profession who taught thousands of students at ASU and contributed greatly to the community, passed away on March 18. “Dr. Huizingh leaves a legacy through the students he taught, the CPAs he mentored and the leadership he provided the community. The ASCPA, the CPA profession and the public have benefited from Bill’s guidance in multiple ways. From a personal perspective, he taught my governmental accounting class at ASU, and I requested his counsel on business matters many times. Please join us in celebrating the contributions of an amazing man at the Annual Meeting,” requests Cindie Hubiak, ASCPA President & CEO. For more information on Huizingh, please go to our website at www.ascpa.com.

AZ CPA MAY 2016

In Good Company

The Business of Saving Lives An interview with Donor Network of AZ’s CFO Kathy Mills, CPA “The best part of my job is that I get to do something with my accounting degree that is not typical, and I get to be involved in this great community — being a part of saving and improving lives every day,” says Kathy Mills, CPA, senior vice president and CFO of Donor Network of AZ (DNA). Mills has worked for more than 23 years with the state’s federally designated, nonprofit organ procurement organization. DNA recovers organs and tissue to save and improve lives and corneas to restore sight. Last year, DNA assisted more than 2,000 donor families who chose to give the gift of life, saving 460 lives and giving nearly 1,000 people the gift of sight. Tissue donations also set a record with 1,200 tissue donors whose donations will touch tens of thousands of lives over the next three years.

“Just my small role in all of that is exciting,” says Mills. Her responsibilities at DNA include: finance; IT; insurance; quality systems; regulatory affairs — Federal and audit scrutiny and Medicare. She oversees the financial management of the organization, and all that entails, including budgets and tax reporting for a 501(c)(3). She works with a team of three directors and their staff. With those responsibilities come challenges. “I would have to say that our biggest challenge is the recruitment and retention of the quality and specialized staff that we require for our unique needs,” says Mills, “It is further complicated by a 24/7 operation. Whether for our organ and tissue referral and recovery or laboratory processes, we interact with donor families, medical staff and patients, and need staff who are clinically skilled and competent, as well as who possess a high degree of emotional intelligence.” DNA is also dealing with decreasing resources in terms of costs, which ultimately affects their partners (the hospitals). “We are working with hospitals which have decreasing resources and we envision it will only get worse over time,” states Mills. Although they do a little bit of fundraising, they mostly charge fees to cover their costs. The organ acquisition charge (as well as tissue and ocular donation) is charged directly to the hospital. Under Mills’ financial leadership last year, DNA reduced costs pertaining to donor hospital charges by 13 percent; ensured a positive operating margin variance that doubled the budget ($2.6 million); and increased cash, investments and net assets by $5 million while maintaining a no-debt position. One of the most satisfying aspects of her job is working with the many people who are passionate about DNA’s mission and the many people who are affected by it. “So many people are profoundly impacted by our organization,” says Mills. “And the growth since I started has been incredible.” “We used to have about two organ donors a month in 1992,” explains Mills. “In January of 2016, we finished a record month with 28 organ donors and 105 organs transplanted. We had 22 employees when I started, and we now have 200.” Mills has a degree in business and accounting from Arizona State University. She has been a member of the ASCPA for 21 years. “Having the CPA designation gave me the opportunity to work here,” says Mills. “It is just one piece of the puzzle for sure, but it is an important one. Being a CPA gives me credibility and helps others see that I am serious about my career. It also helps me work with the financial auditors.” In her spare time, Mills loves to read and enjoys watching politics, although she won’t disclose who she is voting for this year. She also likes to hike and recently moved to McDowell Mountain area of Scottsdale. She enjoys spending time with her two children. “I have a senior in high school and I have a daughter who is majoring in Accounting at ASU,” says Mills. “She just called me today to tell me she got an A on her accounting exam!” n — Patty Gannon

MAY 2016 AZ CPA

2016-17 ASCPA

Board Members

Greg Nelson ASCPA Chair VP & CFO, WorldatWork

Brenda Blunt ASCPA Director 2015-2017 Mike Allen ASCPA Secretary/Treasurer

Partner, Eide Bailly, LLP

Principal, REDW, LLC

Molly Montgomery ASCPA Chair-Elect

Rob Dubberly Immediate Past Chair

Owner, Ascension Consulting

Audit Partner, KPMG, LLP

Jared Van Arsdale ASCPA Director 2016-18 Ullman & Company, P.C. 12

AZ CPA MAY 2016

Michael Chesin ASCPA Director 2016-18 Senior VP and CFO Helios Education Foundation

Virginia DeSanto ASCPA Director 2016-18 VP, CFO and Treasurer ASU Foundation for A New American University

Teresa Finley ASCPA Director 2015-2017 Maricopa County Finance Dept.

Jeffrey Quick ASCPA Director 2016-18 Senior Partner Quick, Mitchell & Maish, CPA, PLLC

Julia Miessner ASCPA Director 2016-18 Senior Manager BeachFleischman PC.

Curtiss Smith ASCPA Director 2015-2017

Mark Patton ASCPA Director 2015-2017 Attorney Lewis Roca Rothgerber, LLP

Senior VP, Northern Trust

Nancy Thomas ASCPA Director 2015-2017 CFO, U.S. Office of Navajo and Hopi Indian Relocation

Char Woodall ASCPA Director 2016-18 Manager, RSM US, LLP

Karen Abraham AICPA Council Member CFO, Blue Cross and Blue Shield

Armando Roman AICPA Council Member Principal, Axiom Financial Advisory Group LLC

MAY 2016 AZ CPA

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The Cycle of Fear and Greed After such a monumental financial event, it is worthwhile to examine the human pattern of fear and greed with money. The lottery provides a near term illustration of this cycle. There is the fear of not buying a lottery ticket with such a small investment that could lead to a limitless fortune. Then, there is the greed of buying a large stash of tickets even though a disproportionate amount of tickets doesn’t improve your chance of winning a great deal (statistically speaking). The Powerball subplot mirrors similar emotions that stay within investors on Wall Street. Professional institutions and normal retail clients can get dizzy trying to grow their money over the long-term during certain intervals where dreams of prosperity overtake the reality of consistent, stable growth. The euphoric dream of swimming the backstroke amidst a pile of loose $100 bills can overpower low mathematical realities and encourage behavior that is both out of character and fundamentally flawed.

Fear and Greed The Impact of Human Emotion on Investor Behavior by Michael Carlin, AIF, WMS In 2016, the national news buzzed as the Powerball reached epic heights. The surreal jackpot soared to an estimated $1.56 billion, making it the largest lottery winnings in world history. People from all over the country lined up days before the drawing to buy tickets in hopes of winning the grand prize. It was nearly impossible not to get caught up in this hysteria. As the greed slowly took over their subconscious, hopeful winners started asking questions like “what will you do with the money if you win?” Debates about the best way to spend and plan for a billion dollars sparked all over the United States. Once the winning numbers were revealed, all but three families found themselves in the same financial position as before the lottery began (less the price for lottery tickets). Plans of living the easy life fizzled instantly when everyone else realized they didn’t have the winning combination of numbers.

Fear, Greed and Investing Relating the fear and greed cycle in investing, a psychological effect takes over when the market falls. Research on this matter ranges from professors at MIT to universities like University College located across the pond in London. Many different studies found that the term Human Emotion Theory (HUEMO), risk avoidance, the prospect theory and a host of other psychological ailments and theories spring forth from investors when trying to make investment decisions. The unpredictable patterns of the stock market exacerbate the unpredictability of human emotion and further strengthen the emotions that get in the way of making proper investment choices for portfolios. Whether we know it or not, all of the studies of human emotion mean that our bodies physically take over and our own psychology affects our investing capabilities on a subconscious level. Traditionally, the study of financial markets assumes that markets are always efficient and rational. Put more

MAY 2016 AZ CPA

602.631.2300 | 800.231.1363 simply, if the market is down, conventional wisdom suggests that there must be something wrong with the economy or the stock market. The human emotion that seeps into our subconscious while the market wallows at low levels induces a real depression and despondency, as indicated in the chart above. Conversely, when the market rises, all must be well with corporate profits and the economy is expanding while feelings of euphoria and inner self confidence grow. Investors feel justified and right when the market is up, and exactly the opposite when the market is down. Can this be right?

Market Events and Investor Behavior

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Yet, that is certainly not how things really work as the stock market undulates. Economists know that humans make investment mistakes and choices that cannot be explained with logic. So, as much as we want to believe that when a company makes more money for its shareholders the stock will rise in value steadily and evenly as profits rise, reality dictates that this is not always the case, which defies common logic. Behavioral finance plays a large role in investor sentiment and the critical drivers behind stock prices. Moreover, we need to understand that investor inclinations and psychological emotions play a vital role in helping the motivations behind the stock market undulations. A shrewd investor or adviser can stay disciplined, unemotional and use those psychological breakdowns to take advantage of market overreactions and invest in the market. Meanwhile, others incorrectly overreact and run away. A review of some of the worst market events in our history that help shed a light into investor behavior include Black Monday in 1987, the Dot Com Bubble of 1999-2000, and Stories of the Great Recession of 2008. In each case, investor psychology took over beyond the news and reality, leading to spiraling market downturns. Market cycles will happen. Economic turmoil rears its ugly head in the boom and bust cycles every few years. Invest-

ment trends become dominant and money floods into them with reckless abandon until such a point as values become unsustainable and eventually go down.

The Big Picture The big picture – be a prudent investor. Understand the cyclicality of the stock market. Gather information from multiple sources and don’t let your personal judgments cloud your discipline. The other big picture – be disciplined. If you see an opportunity to invest in the market, don’t try to buy into the absolute bottom. Also, don’t be lulled into thinking everything is perfect while the market makes all-time highs. The market environment goes through booms and busts, so be wise with what the stock market data is telling you. Early in 2016, the stock market fell by 12%+/-. Now looking back, it was a good time to invest to make a nice profit. We don’t know if every 10%+ correction will lead to a quick turnaround. Nor do we know that the market recovery in March will be sustained. Yet, we do promote the discipline of being forward thinking, not panicking and investing wisely at a discount when the opportunities arise. Stay diversified. Be sure to review your portfolio for diversification and risk. If you need help, reach out to an adviser you trust. n Michael Carlin, AIF, WMS, is the president of Wealth Management, LLC, an affiliation of Henry & Horne, LLP. He founded the firm in 2005. Contact Carlin at (480) 483–3489 or mcarlin@wealthmgtllc.com. (Securities and advisory services offered through Independent Financial Group, LLC (IFG), a registered broker-dealer and investment advisor. Member FINRA/SIPC. Wealth Management, LLC and IFG are unaffiliated entities. OSJ Branch: 12671 High Bluff Dr. Suite 200, San Diego, CA 92130. Registered principal offering securities and advisory services through Independent Financial Group, LLC, a registered-brokerdealer and investment advisor. Member FINRA & SPIC. Wealth Management, LLC and IFG are not affiliated entities.)

Leveraging Charitable Giving Helping Your Clients Get the Most Out of Their Philanthropy by Kimberly C. Kur, J.D., and Judith A. Smith, CFRE With tax season barely in our rear view mirror, some of your clients may still be licking their wounds and wishing they could have avoided that high tax bill. Now may be the perfect time for you to suggest tax planning strategies through which your charitably minded clients can reduce their tax burden for next year—and well beyond. Here are some likely client scenarios and ways you might counsel them to help themselves:

The client who must start taking required minimum distributions from an IRA – and pay income taxes on it. Many of your clients will have left their IRAs untouched until hitting that magic age of 70½ and are suddenly hit with the RMD – and paying income tax on that

distribution. If your client is grumbling about this, suggest that he give to a charity instead. In 2015, the on and off “IRA charitable rollover” became permanent law and is now called the “Qualified Charitable Distribution.” The rules are the same as when the law was temporary: • Client has a traditional IRA • Minimum age of 70½ • Maximum qualified charitable distribution of $100,000 per year • Cannot fund anything that gives your client personal gain, e.g., tickets or tables at an event, income stream from a CRT, CGA, etc. • Cannot support a donor advised fund, supporting organization or private foundation • Because the client is not accepting the IRA distribution as personal income and therefore not paying income tax, the gift is not eligible for a charitable income tax deduction.

MAY 2016 AZ CPA

The client who needs income but is invested in money markets or other “safe” assets that no longer produce enough to live on. This client may be helped by working with a charity to set up a charitable gift annuity (CGA). This gift is based upon the donor’s age (the older, the better), can be for one or two lives, and provides income for life. Here are some things you’ll want to know in counseling your client: • This gift is not revocable. Whatever asset is used to fund the CGA is given away. • Most charities want the funding asset to be liquid. • If the funding asset is something like appreciated stock, the donor bypasses capital gains and the fair market value is used to determine the value. • The donor gets a charitable income tax deduction for present value of the remainder interest to charity. • Part of the income the donor receives during his lifetime is taxable until he reaches his life expectancy; after reaching life expectancy, all income from the CGA is taxable. • The charity is responsible for payments to the donor.

•

The charity should anticipate receiving approximately half the funding amount at the death of the donor(s). Not all charities issue CGAs and those that do won’t necessarily offer them in all states, as they’re regulated by each state. A 90-year-old donor would be eligible to receive a nine percent gift annuity.

The client who has a liquidity event and is in need of a substantial tax deduction this year, but either doesn’t know what charities he wants to give to and/or isn’t ready to make a substantial investment in a specific charity. This client may love the idea of creating a donor advised fund where he can set up a fund with a sponsoring organization, e.g., a community foundation, a university or a national charity, receive a tax deduction for each gift contributed to the fund, and use the fund to fulfill his charitable goals over time. The donor feels like he has a private foundation, but receives the tax advantages of giving to a public charity and is not required to make minimum annual distributions. Donor advised funds are very easy to establish; there are no set-up costs,

These topics and more will be discussed in greater detail during the authors’ session on June 8 at the ASCPA Financial Planning Conference. In the session, Leveraging Charitable Giving: Helping Your Clients Get the Most Out of Their Philanthropy, the authors will address the benefits and challenges associated with private foundations, donor advised funds and supporting organizations. They will review various planned giving strategies and cover the permanent Qualified Charitable Distribution, formerly known as the IRA Charitable Rollover, providing real-life examples and exploring ways to maximize both tax benefits and personal fulfillment for your clients. 18

AZ CPA MAY 2016

and ongoing administrative costs are very modest. The donor is able to enjoy using the fund to benefit his favorite charities without the costs, administrative responsibility and government regulation, excise taxes, etc. that are imposed on private foundations. Another benefit over private foundations is that a donor advised fund can make anonymous grants. A desire for anonymity is common among wealthy clients who are truly altruistic; they want to support cherished causes, but don’t want their names published. Those who wish to remain anonymous are perfect candidates for a donor advised fund. Ironically, private foundations are the least private of the foundation options, i.e., all contributions to and grants from private foundations are made available to the public. • The donor gets a charitable income tax deduction each time he or she adds to the fund. • Through the donor’s advice, grants are issued from the fund by the sponsoring organization. • The sponsoring organization handles all of the due diligence, check writing, correspondence, accounting, auditing, etc. • Donors enjoy the benefits of having a private foundation, but donor advised funds are faster, cheaper and have fewer requirements. • The donor receives as much visibility for the philanthropy as desired. As you can see, the tax advantages for your charitably-minded clients are many, and you have an opportunity to be a hero to your clients looking for logical ways to accomplish their personal and charitable aims. n Kimberly C. Kur, J.D., senior vice president, Planned Giving and Advancement, and Judith A. Smith, CFRE, director of Planned Giving, work together at the Arizona Community Foundation, serving donors, professional advisors and the nonprofit community in all areas of philanthropy. Together, they have more than four decades of experience in planned giving.

Marketing Secrets in a Digital World by John J. Chichester, Jr. CPA, PFS, CFP®, AIF®

One of the biggest concerns that Financial Planners and CPAs have when faced with growing their respective businesses is trying to figure out how best to market themselves to clients, especially online. First of all, let’s be clear that there is no magic bullet here! Marketing is as much an art as it is a science. Let’s also be clear that marketing is NOT sales. Marketing in our industry is when you are advertising yourself and your services to people who are a good fit for your business. Sales is when you are actually sitting in front of a prospect and discussing your services and they are ready to “buy” your services. Good marketing leads to good sales opportunities! So, how does one market themselves? Do you send out letters or newsletters? Do you use social media? Do you serve on local boards of directors? Do you volunteer your time at the ASCPA? The answer can be any or all of the above. In my opinion, the most important idea is to do something. Marketing needs to be timely, consistent, relevant and personal. If you can incorporate all of these concepts into your marketing plan, then you are well on your way to establishing your brand in the marketplace. To illustrate what I mean, we use the following strategies and tactics in our digital marketing plan.

The best marketing plan needs to be timely, consistent, relevant and personal.

Timely My office puts out an eNewsletter every month. We send it to all of our clients, strategic partners, centers of influence, and prospects. It goes out at the end of every month without fail. We’ve been doing this for years. Each and every edition

MAY 2016 AZ CPA

Financial Planning Conference June 8 Black Canyon Conference Center Join us to get updates on a variety of financial planning topics to make your clients and your practice more successful: • National and Local Economic and Real Estate Outlook — Elliott Pollack • Beyond Indexes/Smart Beta — Alex Cudzewicz • Leveraging Charitable Giving: Helping Your Clients Get the Most Out of Their Philanthropy — Kimberly Kur and Judith Smith • Navigate Through the New Rules: Discussion on ACA — Amy Girardo • Issues and Opportunities With Older Clients — Emily Kile • Evaluating the Markets — Mark Peterson • Estate Planning for Clients Under $5M — J. Phillip Glasscock, Esq. • Tax Issues and Planning Opportunities: What You Need to Know When a Client Dies — Ed Zollars See details for all conference sessions at

www.ascpa.com (Click on CPE, then conferences.)

AZ CPA MAY 2016

of this newsletter adheres to the four concepts listed above. Each month, we try and find topics that our clients are concerned about. We also cover topics that are being talked about in the news. If markets are going down, we try to find resources that address the need to stay put and have your accounts properly asset allocated. If something major is going on in the world, we will find a way to address that issue. We also will find articles that apply to the time of year that we are writing about. At tax time, we always discuss the IRA and 401(k) limits that people can contribute each year. We also educate readers on the various Arizona tax credit opportunities. The idea is that the content needs to be timely for the month that you are sending it out.

Consistent Make sure that you have a consistent plan for when your communications go out. We do this each and every month without fail. If you are inconsistent, then people will know this. They may not be waiting with bated breath for your eNewsletter to hit their inbox, but they will know when they haven’t gotten it. Not only do we send out an eNewsletter, but we are active on social media. Our social media content expands on the material we use in our eNewsletter. We utilize a combination of sources including our own website, industry articles, educational stories, inspiring quotes, and lifestyle content. Many of the posts that we send out are also some of the same articles that we include in our eNewsletter. The idea is this: it’s okay to repurpose the same content that you used in an eNewsletter on Facebook, Twitter, or LinkedIn. They may even have seen the post in the eNewsletter, but, for whatever the reason, did not get to read it then. They may decide to read it the second time that they see it. We send one eNewsletter a month and post on social media at least once every work day. We have a calendar of content planned in advance and we use an application that helps us pre-set

when those posts will go out each day. We also stagger the time that each post goes out. Facebook users tend to go on when they have down time, like at lunch. We will try and get our Facebook posts out during this time period. Many LinkedIn users will view this earlier in the morning, so we try to schedule those posts to be first thing in the morning. Again, you just need to find what timing works with each audience and stick to it.

Relevant Any content that you post needs to be relevant to your audience. If you work with a lot of Millennials, then articles that talk about living the good life in your retirement years are probably not going to be relevant to those clients. But, an article about saving for retirement and maximizing your 401(k) plan might be very appealing to this group. It is important to note that not every article or post is going to be relevant to every person reading your eNewsletter or social media posts. Some are going to resonate with them and others will not. The idea is that you want to pepper them with enough content geared toward your target audiences that they can pick and choose the articles that they want to read further. Every eNewsletter has a theme. For March, we talked about March Madness. We called it Financial March Madness and weaved the theme of the NCAA Division I basketball tournament throughout the newsletter. It starts out with a paragraph or two about the tournament and then has a link to an article with trivia facts about the tournament. From there on out, we had a link to an article by the National Endowment for Financial Education that had you filling out your financial goals similarly to the way in which you filled out your tournament bracket, and other articles that we felt were germane to our audience. We always tie back the theme in a call-to-action for our clients. In this case, we ask them to complete the bracket and then we will help them craft a plan to reach their “championship game.”

As soon as I got my staff involved, our eNewsletters and social media posts became fun! It was no longer a chore to do this; it became something that the whole office could be proud of.

In every case, we have a few teaser lines to describe the article, so the reader can determine which articles are relevant to them and which are not. In addition, the idea is to make it fun and interesting and have people look forward to your communications. Believe it or not, I have had many people over the years actually tell me that they look forward to receiving our eNewsletters. How’s that for positive affirmation?

Personal Make all your communications personal! Not only do they need to be personal to you, but they also need to be personal to your audience. I am a big believer in sharing part of my personal life in each and every eNewsletter. It might simply be a comment or two about how I interact with my children or a decision that I had to make in my own personal financial plan, but the idea is to let your audience know that you are human, too. I believe that it makes me and my team more personable to our clients and prospects. Many people know that I was a very high caliber runner at one point in my life. Running is part and parcel to who I am as a person. I still enjoy running and enjoy sharing my love of running. Because of that, we have a Running Corner section in our eNewsletters. These articles have absolutely nothing to do with financial planning; this is just my way of sharing a piece of myself. Those clients who are not runners or are not interested in running probably never read those articles. But, it doesn’t matter. The point is that you need to make your communications a part of

who you are, so people can see you as a full-fledged human being!

Involve Your Staff Early on, I thought that I had to do all of this myself. I very rarely got my team involved with these communications. A few years ago, though, I suddenly realized that I did not need to do all this work alone. As soon as I got my staff involved, our eNewsletters and social media posts became fun! It was no longer a chore to do this; it became something that the whole office could be proud of. I would encourage you all to seek the help of your staff in creating a marketing plan that everyone can work together on. You will be amazed at the way it will pull everyone together and how it can grow your business. Marketing is about top-of-mind awareness. When an opportunity arises for a client to refer you to a friend or colleague, you want to be the first name that comes to mind! Having a timely, consistent, relevant and personal marketing plan can help you reach all of your business growth goals. n John Chichester, CPA, CFP/PFS is president & CEO of Chichester Financial Group, LLC. He is a member of the ASCPA and very active in all of his communities. You can reach him at john@chichesterfinancial.com or (602) 283-2793. Chichester is a Registered Representative offering securities through First Allied Securities, Inc., a Registered Broker/Dealer and Member FINRA/SIPC, and an Investment Advisor Representative offering services through First Allied Advisory Services, Inc.

MAY 2016 AZ CPA

ASCPA Supports AICPA/CIMA Joint Venture

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AZ CPA MAY 2016

The board of Arizona Society of CPAs has adopted a resolution in support of the AICPA’s proposal to create a new association with the Chartered Institute of Management Accountants (CIMA) that would advance the entire accounting profession while preserving the existing AICPA and CIMA membership bodies. The ASCPA encourages members to vote ‘yes’ in the AICPA membership ballot taking place through June 16. “This proposal is about leadership,” says ASCPA President & CEO Cindie Hubiak, adding that the proposal has received support from 51 state CPA societies. “The initiative is about evolving to meet the challenges of an increasingly complex world. It’s about staying ahead of evolving trends so that the profession remains relevant far into the future.” Enrollment in accounting programs is at an all-time high, thanks in large part to the work of the state societies and the AICPA to build the pipeline. The CPA stands strong, with a full 88 percent of business decision makers saying that CPAs add value to their organizations and 84 saying they would have more confidence in a job done by a CPA. But the marketplace is changing rapidly, and our profession is affected by the same technological, demographic and international trends reshaping the work of our clients and our employers. Through this proposal, the AICPA and CIMA would maintain their respective membership bodies while integrating operations to deliver a stronger voice for the entire profession – both public and management accounting. The new association would represent more than 600,000 current and next generation accountants, providing a stronger defense against onerous regulations that are increasingly originating overseas– mandatory audit rotation in. Visit www.directvote.net/aicpa to enter or retrieve your unique voting credentials. n

AZ CPA Quick Quiz You’ve Read It, Now Get Credit Take this quiz online or submit this hard copy on AZ CPA content. Receive a score of 70% or more and earn one hour of CPE credit in specialized knowledge. It’s that easy! Fees: Members $25 Non-members $40 Online Access Login to www.ascpa.com and go to CPE/OnDemand CPE Quick Quiz to access links to all active quizzes. Purchase quiz and the quiz link and password will be emailed to you. Your results will be sent immediately after completing, 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 May, 2017. Please note that users have three attempts to pass the quiz with at least a 70% score.

May 2016 Issue of AZ CPA* 1. The new chair of the Arizona Society of CPAs is: m Barry Melancon m Anita Baker m Greg Nelson 2. The Speculative Builder Tax only applies to: m Sales of improved real property m Sales of unimproved real property m Sales of government property 3. Donor Network of Arizona … m Recovers organs only to save and improve lives m Only helps facilitate cornea transplants m Recovers organs and tissue and recovers corneas for transplant. 4. In 2015, the “IRA charitable rollover” became permanent law and is now called: m The Qualified Charitable Distribution m IRA Charities Fund m Charitable Gifting Allowance

5. In a Charitable Gift Annuity (CGA), part of the income the donor receives during his lifetime is taxable until the donor reaches life expectancy; after reaching life expectancy: m 10% of the income is taxable m All income from the CGA is taxable m None of the income is taxable

6. The best marketing plan needs to be: m Creative, cyclical and responsive m Inexpensive, timely and reactive m Timely, consistent, relevant and personal 7. Online marketing newsletters should: m Never relate personal information m Include lots of pictures and videos m Be personable and relatable 8. The AICPA is voting to create a new association with the: m Chartered Institute of Management Accountants m The UK’s Association of Chartered Certified Accountants m CPA Associates International 9. The AICPA will put the joint venture up for vote, with the balloting: m Taking place on April, 2017 m Taking place through June 16 and supported by the ASCPA m Being open to all CPAs 10. ASCPA members can find answers to tax and other questions on: m the ASCPA’s Connect site m on Pinterest and Snapchat m on Facebook and Instagram

Quick Quiz Registration Name: ____________________________________________________ Email:_____________________________________________________ Telephone: _________________________________________________

Payment m Member: $25 m Non-member $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 225-B, Phoenix, AZ 85034-2021; fax to (602) 324-6043; scan and send to ASCPACPE@ascpa.com.

MAY 2016 AZ CPA

Trending at your Society... Connect

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Trending on Connect Subject: SSARS 70 vs Compilations We formerly had quite a few clients where we prepared what I used to call Management Use Only financials that were not intended for third parties. We’ve been studying all the SSARS updates. So are more people going to be doing SSARS 70 “Preparation of a Financial Statement Engagements” or are they going to do compilations? Any thoughts on that?

Yuma Chapter Meeting

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Rob Dubberly and Cindie Hubiak attended an event where Governor Ducey spoke about the 2016 legislative session and issues related to education, including Prop 123.

Don Farmer Tax Update - our largest event of the year! Phoenix Tax Workshop Feedback: Phoenix Tax Workshop was fantastic! The AZ info on conformity was very useful. Looking forward to more Saturdays with the ASCPA.

AZ CPA MAY 2016

Renew your ASCPA membership today at www.ascpa.com

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Some great new members stopped by for our New Member Orientation. Welcome to the ASCPA!

ASCPA Members had fun going Behind the Scenes at the Amazon Distribution Center

Facebook Trending on Connect Subject: Comfort Letters

Great to see all of our members at our Annual Meeting at the Biltmore Resort Facebook

Recently two of my business clients have requested comfort letters from their mortgage lenders. It is my understanding that issuing comfort letters, especially when they are asking for the CPA’s opinion, is very risky. I read the recent article by Benjamin Podraza, which seems to embody everything I’ve ever heard about issuing comfort letters—don’t do it… Thoughts? Comments?

Ethics Feedback: Really great presentation! Ed Zollars spends a lot of time discussing the topics that are most relevant. He gave a lot of perspective on IRS pronouncements that I thought I was familiar with, but really wasn’t!

Everyone is screaming for ice cream here on break with Walter Haig! MAY 2016 AZ CPA

Classifieds Business Opportunities/ Practices for Sale TWO PARTNER CPA FIRM SEEKS SUCCESSION PLAN — Located in north central Phoenix the firm serves a wide variety of clients with writeup, compilation, review, audit and consulting in addition to trust, estate, corporate, partnership, fiduciary and individual income tax services. The firm has a 25+ year history with annual revenues of $450K+. The partners wish to explore merger/buyout possibilities. Principals only, please respond to: cpa85020@gmail.com. SELL YOUR PRACTICE FOR CASH—Let our 33 years of experience work for you. Confidential, prompt, professional. No upfront fees. Cancel anytime. We finance buyers so you can cash out at closing! Contact Professional Accounting Sales at (800) 729-9031. http://www.cpasales.com.

Employment Audit Associate & Audit Senior — Walker & Armstrong LLP - Positions available for both an audit associate and audit senior; competitive pay and benefits; latest technology in paperless environment; team approach; guidance and supervision by experienced professionals; client and engagement variety including closely held businesses, nonprofits and governments; advancement opportunities. http://wa-cpas.com. Audit Associate — HintonBurdick CPAs & Advisors, an established and respected regional public accounting firm with offices in Arizona, Nevada and Utah, is seeking a talented, experienced, full-time Audit Associate to join our team in Flagstaff. You will oversee a wide variety of diversified and challenging assignments. The Audit Associate will be responsible for preparing financial statements

with disclosures, applying basic areas of GAAP as necessary, and documenting, validating, testing and assessing various control systems. This position will also be involved in performing compilation, review, and agreed-upon procedure engagements. Send cover letter and resume torecruiting@hintonburdick.com. Tax Manager — HintonBurdick CPAs & Advisors is an established and respected regional public accounting firm with offices in AZ, NV and UT, seeks a talented, experienced, full-time Tax Manager to join our team in Flagstaff. The position provides opportunities for advancement and promotion throughout your professional career and real work-life balance. You will oversee a wide variety of diversified and challenging assignments while ensuring the delivery of quality client service and maintaining profitable client relationships. You will also be responsible for coaching and developing team members and participating in business development activities. Commence in May 2016. Send cover letter and resume to recruiting@hintonburdick.com. Tax Preparation & Planner — Fun & strategic law firm in South Chandler looking for tax planner/preparer for its estate planning clients. Visit here for more information and to submit your application: https://ld119. infusionsoft.com/app/page/tax-associate.

Phoenix Tax Workshop Live or by webcast You can now sign up online by going to

www.ascpa.com

Office Space 2016-17 Dates May 21, 2016 Jun 18, 2016 Sept 24, 2016 Oct 22, 2016 Nov 19, 2016 Jan 21, 2017 Feb 18, 2017 Apr 22, 2017

16th Street & Glendale Area — SPACE FOR LEASE — Professional building has space available. Suite 104 is 1,400 rsf, perfect for a 1-2 person team. Suite 108 is 2,600 rsf, good for a 4-8 person team. Spaces are ready for instant move in, or can be built out to your needs. Call or email Jason (602) 850-5110 or Jason@azcre.biz Office Space Available for Rent — Great location just off the

AZ CPA MAY 2016

ASCPA Conferences 60 on Val Vista. Minutes from the SE courthouse & easy access to downtown Phx. Mesa is on one side of the street and Gilbert on the other. Two or three offices available, depending on your needs. Includes use of conference room & other amenities. Friendly, professional atmosphere. Mutual referral opportunity. Share space with an established firm. Very reasonable rent, with no multi-year lease requirements. Call Jessica at 480-345-0911 or email: jchaparro@rjhurwitzlaw.com for information and to schedule a visit.

For information about classified ads, visit www.ascpa.com and go to marketplace.

Not-for-Profit Conference June 22 Black Canyon Conference Center Keynote Session:

Changes in Not-for-Profit Accounting & Financial Reporting Jeffrey Mechanick, Assistant Director of Nonpublic Entities for the Financial Accounting Standards Board (FASB) will give a guided tour of GAAP developments of interest to the sector. We’ll make three major stops: • New Revenue Recognition standard (Topic 606) and some key implementation issues for NFPs • Recently issued final standard on Leases (ASU 2016-02, Topic 842) • FASB’s generational project on NFP Financial Statements (final ASU on Phase I soon to be issued).

Would you like to sponsor a conference or place a display ad in the AZ CPA? Contact Heidi Frei at advertise@ascpa.com.

The breakout sessions this year have four tracks: Risk Management, Revenue, Compliance, and Human Resources.

Special thanks to Platinum Sponsor: Eide Bailly LLP See details for all conference sessions at www.ascpa.com, click on CPE, then conferences.

A Spectrum of Opportunities ASCPA Annual Meeting and Awards Luncheon May 19, 2016 Arizona Biltmore Resort MAY 2016 AZ CPA

Arizona Society of CPAs 4801 E. Washington St., Suite 225-B Phoenix, AZ 85034-2021

PRSRT STD U.S. Postage PAID Phoenix, Arizona Permit No. 952 ADDRESS SERVICE REQUESTED

AZ CPA MAY 2016