May/June 2015 by New Jersey Society of CPAs

Co Spe nv cia Iss ent l ue ion Magazine of the

New Jersey Society of Certified Public Accountants

May • June 2015

Improving Business in NJ The Economic Past and Foreseeable Future of NJ, p. 6 Six Tax Reform Measures to Improve NJ Business, p. 8 Improving NJ Business via Legislative Initiatives, p. 10 You Can’t Beat NJ Toughness, p. 14

Q&A with NJCPA Convention Speaker Eric LeGrand, p. 14.

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May • June 2015

Ralph Albert Thomas, CGMA Chief Executive Officer & Executive Director rthomas@njcpa.org

Ellen C. McSherry, CGMA

Chief Operating Officer emcsherry@njcpa.org

Don Meyer

Chief Marketing Officer dmeyer@njcpa.org

David Plaskow

Managing Editor dplaskow@njcpa.org

Jeanette L. Miller Editorial Assistant jmiller@njcpa.org

Janice M. Celeste Multimedia Specialist jceleste@njcpa.org

Editorial Advisory Board Daniel R. Arcuri, CPA Neil B. Becourtney, CPA Timothy A. Burley, CPA Salvatore A. Collemi, CPA Rebecca B. Fitzhugh, CPA Catherine Z. Horn, CPA Ryan J. Lapinski, CPA David A. Lopez, CPA Anthony F. Marone, CPA Marc D. Mintz, CPA Margaret Van Brunt, CPA

features 6

The Economic Past and Foreseeable Future of NJ While the state faces many challenges, there are bright spots that can help propel NJ forward economically.

Six Tax Reform Measures to Improve NJ Business These six initiatives would prove immensely beneficial to the state and its residents by helping to keep Garden State businesses in New Jersey.

Improving NJ Business via Legislative Initiatives See which legislative initiatives the NJBIA is advocating to achieve a better business environment in the Garden State.

The New Jersey Society of Certified Public Accountants 425 Eagle Rock Avenue Roseland, NJ 07068-1723 973-226-4494 njcpa.org #njcpamag ReadNew NewJersey JerseyCPA Read CPA digital at digital at njscpa.org/newjerseycpa. njcpa.org/newjerseycpa.

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You Can’t Beat NJ Toughness Hear what former Rutgers football player (and NJCPA Convention & Expo speaker) Eric LeGrand thinks about the people, places and things unique to the Garden State.

2 Close Up NJ’s Cities Are Too Important to Fail

28 Tax Talk The Science of Resolving Tax Notices

4 News Briefs

30 Tech Center Performing Vulnerability Assessments and Penetration Testing

18 A&A Buzz Don’t Get Burned by the Heat from the Sunshine Act 19 Best Practices Create a Quality-of-Life Committee at Your Company 21 Business & Industry Insights Transformation Projects: Two Schools of Thought 22 Financial Planning The Mystique of the Self-Directed IRA 24 Forensic File Dissecting the NJ Alimony Reform Act of 2014 26 Small/Sole Practitioner Small Business Tax Nexus

40 Young Professionals NJCPA Celebrates Its 55th Scholarship Awards Ceremony 42 Legislative Views NJ Pension Crisis Boils Over – Part I 44 Member Profile The Time-Traveling CPA Society Pages 2015/16 Executive Committee, 32 Board of Trustees, 34 CPE Offerings and Events, 35 Member Benefits, 35 Get Involved, 36 NJ State Board of Accountancy Report, 38 Classifieds, 39

New Jersey CPA (ISSN 1534-6692) is published six times per year by the New Jersey Society of Certified Public Accountants, 425 Eagle Rock Avenue-Suite 100, Roseland, NJ 07068. Issue No. 51. Copyright © 2015 New Jersey Society of Certified Public Accountants. Annual membership dues includes $8 for a one-year subscription to New Jersey CPA magazine. Members may not deduct subscription price from dues. Periodicals postage paid at Roseland, NJ, and at additional mailing office. POSTMASTER: Send address changes to New Jersey CPA, 425 Eagle Rock Avenue, Suite 100, Roseland, NJ 07068-1723. The materials and information contained within New Jersey CPA are offered as information only and not as practice, financial, accounting, legal or other professional advice. The opinions expressed herein are those of the authors and not necessarily those of the New Jersey Society of CPAs. Publication of an advertisement in New Jersey CPA does not constitute an endorsement of the product or service by the New Jersey Society of CPAs.

NJCPA Convention & Expo Speaker

NJ’s Cities Are Too Important to Fail B y Dr. James H. Johnson J r . , Universit y of North C arolina at C hapel H ill

ew Jersey cities have a rich history: Paterson, “Silk City;” Union City, “Embroidery Capital of the U.S.;” and Trenton, “Trenton Makes and the World Takes.” Unfortunately, these nicknames are from a bygone era. Is it possible to revitalize Garden State cities, many of which are known more for blight, corruption and despair, rather than world-class commerce? Decades-long research shows that communities that have proven to be highly attractive places to live and do business today possess a distinct set of characteristics. They: 1. Actively and aggressively pursue strategic alliances with other communities to develop profitcentered activities that generate revenue and create jobs for the local citizenry. 2. Create a regulatory environment that promotes and supports the generation of new community wealth via civic entrepreneurial ventures and innovations that are designed specifically to sustain and enhance the health, viability and vitality of the community. 3. Recognize the need for, and are committed to continuous investment in, a world-class physical infrastructure that connects them to the regional, national and international economy. 4. Invest heavily in educational systems (K–12, community colleges and four-year institutions) to ensure the availability of education and training programs for their citizens so that they can compete for neweconomy jobs, thereby enhancing the community’s attractiveness to businesses. 5. Instill in their citizens the attitudes, values and beliefs about education

and work that are key to upward mobility in the knowledge-based economy of the 21st century. 6. Strive to reduce geographical, racial and/or ethnic and class disparities by investing substantial resources in an array of communitybuilding institutions (e.g., YMCA, YWCA, Boys and Girls Club) that seek to mend the social fabric and provide bridges to education and the economic mainstream for their members, especially those who are socially and economically disadvantaged. Underpinning these characteristics are six types of community capital assets: polity, physical, financial, human, cultural and social that interact to create a healthy, highly competitive community. The absence of any one can seriously limit the ability of a community to compete. However, it is the polity capital (local government) that creates the conditions or climate enabling the other five types of capital to drive competitiveness. As such, NJ’s cities could look to implement a strategy that would: • Rebrand the city as a sustainable community. • Embrace diversity and make talent recruitment a core element of the sustainable community economic development. • Leverage the web and social media to brand the city in the economic development marketplace. • Re-engineer education so that the system better equips the current and future workforce with the skills they will need to thrive and prosper in the highly volatile global economy of the 21st century. • Nurture and grow the local eldercare economy. N E W J E R S E Y C P A • m ay • j u n e 2 0 1 5

• Aggressively pursue regional collaborations with border communities as a core economic and employment growth strategy. It’s not a one-size-fits-all strategy. The ratios of activity need to be customized to each city. But if New Jersey is to truly be a place to work, live and enjoy in the 21st century and beyond, then these cities must make an effort to recapture at least part of their former glory. Dr. James H. Johnson Jr. is the director of the Urban Investment Strategies Center at the University of North Carolina at Chapel Hill and will be speaking at the NJCPA Convention & Expo.

2014/15 Board of Trustees Executive Committee President – Brad E. Muniz, CPA President-Elect – Frank R. Boutillette, CPA Secretary – Edward I. Guttenplan, CPA Treasurer – John M. Szczomak, CPA Immediate Past President – Gerard Abbattista, CPA CEO & Executive Director – R alph Albert Thomas, CGMA Trustees Sharon J. Bishop, CPA Leonard N. Brooks, CPA William A. Cadmus, CPA Joseph C. DiFalco, CPA Michael W. Gutwetter, CPA Robert P. Herman, CPA Sarah Krom, CPA Edward G. O’Connell, CPA William J. Ryan III, CPA Audrey J. Sherrick, CPA Lorenzo T. Vanore, CPA Joseph A. Zielinski, CPA

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NEWS IRS Issues Relief on Repair Regulations

The Internal Revenue Service (IRS) has made it easier for small business owners to comply with the final tangible property regulations. Requested by many small businesses and tax professionals, the simplified procedure is available beginning with the 2014 return taxpayers are filling out this tax season. The new procedure allows small businesses to change a method of accounting under the final tangible property regulations on a prospective basis for the first taxable year beginning on or after January 1, 2014. Also, the IRS is waiving the requirement to complete and file a Form 3115 for small business taxpayers that choose to use this simplified procedure for 2014. The new simplified procedure is generally available to small businesses, including sole proprietors, with assets totaling less than $10 million or average annual gross receipts totaling $10 million or less. Details are in Revenue Procedure 2015-20 on irs.gov. The revenue procedure also requests comment on whether the $500 safe-harbor threshold should be raised for businesses that choose to deduct, rather than capitalize, certain capital expenses.

PCAOB Reports Deficiencies in BrokerDealer Audits

The first five inspections of broker-dealer audit and new attestation engagements subject to Public Company Accounting Oversight Board (PCAOB) standards show deficiencies in the auditors’ application of these standards, according to the PCAOB. The requirement to follow PCAOB standards became effective for broker-dealer annual

briefs reports with fiscal years that ended on or after June 1, 2014. The new attestation standards distinguish between the requirements for carrying broker-dealers with custody of customer assets and those who are non-carrying and do not have such custody. The PCAOB focused its inspections on areas relevant to the amended Securities and Exchange Commission (SEC) rules and aspects of the auditor’s work that are unique to engagements subject to PCAOB standards, which included the examination of compliance statements and review of exemption statements. Visit pcaobus.org.

IRS Needs to Mitigate Fresh Start Initiative Risks

While the IRS Fresh Start initiatives have helped thousands of taxpayers resolve outstanding tax liabilities, revenue collection could be jeopardized if potential risks are not mitigated. That is the conclusion of a report by the Treasury Inspector General for Tax Administration (TIGTA). The TIGTA recommended that the IRS (1) file new Notices of Federal Tax Liens (NFTLs) for the 524 taxpayers who defaulted on their direct debit installment agreements after their NFTLs were withdrawn; (2) establish controls to ensure that new NFTLs are filed on taxpayers who default on their direct debit installment agreements; (3) assess the long-term revenue protection impact of the Fresh Start initiative that increased the minimum dollar threshold for NFTL determinations in Field Collection; and (4) establish methods to monitor and assess the performance of the Fresh Start initiatives.

2014 CPA Exam Statistics Released The National Association of State Boards of

States with the Slowest Job Growth Rate in 2014 50.

Mississippi, 0.02 percent

49.

Alaska, 0.62 percent

48.

New Jersey, 0.74 percent

47.

Maryland and Virginia, 0.77 percent

Accountancy (NASBA) announced the release of the 2014 Uniform CPA Examination Candidate Performance Book, which features comprehensive statistical data from all four testing windows of the Uniform CPA Examination administered in 2014. The publication includes summary data points, demographics and tables that provide a granular view of individual exam event and performance data. NASBA first began gathering data on CPA Examination candidates in 1982 and has published reports on performance and selected characteristics since 1985. To purchase NASBA’s 2014 Uniform CPA Examination Candidate Performance Book, or for questions, contact cpb@nasba.org or 615-312-3806.

Nine Questions to Ask to Improve IoT Risk Management

Global IT group the Information Systems Audit and Control Association (ISACA) has released new guidance urging companies to ask nine critical questions as they grapple with the Internet of Things (IoT): 1. How will the device be used from a business perspective, and what business value is expected? 2. What threats are anticipated, and how will they be mitigated? 3. Who will have access to the device, and how will their identities be established and proven? 4. What is the process for updating the device in the event of an attack or vulnerability? 5. Who is responsible for monitoring new attacks or vulnerabilities pertaining to the device? 6. Have risk scenarios been evaluated and compared to anticipated business value? 7. What personal information is collected, stored and/or processed by the IoT device? 8. Do the individuals whose information is being collected know that it is being collected and used, and have they given consent? 9. With whom will the data be shared? Learn more at isaca.org/internet-of-things.

N E W J E R S E Y C P A • M AY • JUNE 2 0 1 5

SEC Proposes Rules for Hedging Disclosure

The SEC announced proposed rules that would enhance corporate disclosure of company hedging policies for directors and employees, as mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act. The proposal would require disclosure about whether directors, officers and other employees are permitted to hedge or offset any decrease in the market value of equity securities granted by the company as compensation or held, directly or indirectly, by employees or directors. The proposed rules would require disclosure in proxy and information statements for the election of directors and apply to companies subject to the

federal proxy rules, including smaller reporting companies, emerging growth companies, business development companies and registered closed-end investment companies with shares listed and registered on a national securities exchange. The proposal specifies that disclosure would apply to equity securities of the company, its parent, subsidiary, or any subsidiary of any parent of the company that is registered under Section 12 of the Exchange Act.

NJ Reminds Employers to Report All New Hires

agent of the New Jersey Department of Human Services dedicated to helping children in New Jersey receive the child support to which they are entitled. They use new hire information to locate parents who owe child support, to establish new child support orders, to enforce and modify existing orders and to issue income withholding orders. By reporting accurate new hire information in a timely fashion, employers serve as key partners in ensuring financial stability for children and families. Visit nj-newhire.com.

State and federal laws require all employers to report new and re-hired employees to a statewide directory within 20 days. The New Jersey New Hire Directory is an authorized

njcpa.org Spotlight

All of Your Event Registrations and CPE History in One Place • Obtain moderator materials. If you are a seminar moderator, chapter volunteer or committee/interest group chair, you can download and print the materials you need for your meeting, such as the sign-in roster, checklists and walk-in forms.

On the recently updated njcpa.org website, we have consolidated several event/CPE tools and features into one place. The expanded My Events section is where you can now: • View all upcoming New Jersey Society of CPAs events you are registered for. Access electronic handout materials, when available, here. • Access events you have attended in the past. Handout materials for past events will be available for one year. • Review your CPE Tracker and monitor your progress toward mandatory CPE requirements. Access credit letters for events you have attended.

You can access My Events at njcpa.org/myevents. Questions? Contact the NJCPA Education Department at 973-226-4494 or education@njcpa.org.

N E W J E R S E Y C P A • m ay • j u n e 2 0 1 5

The Economic Past and Foreseeable Future of NJ Winston Churchill once said: “It is always wise to look ahead, but difficult to look further than you can see.” Here, we will try to isolate the major challenges and opportunities facing New Jersey in the short term, provide a few economic policy suggestions and offer summary guidance as to the future opportunities for accounting and other business professionals. Threats and Opportunities in the Garden State

By Dr. Christopher Young and James Janos Sobel & Co., LLC

New Jersey’s economy is likely to continue to experience turbulence, uncertainty and a general lack of comfort for its many businesses and residents. The Garden State typifies that which is plaguing the economy of many U.S. states and the federal government: (1) rising income inequality, (2) no increase in real income for non-management workers; (3) increasing property taxes; (4) an unfriendly business environment; and (5) a ballooning public pension burden. Together, these features create a lessthan-desirable environment that pushes corporations and high-income residents to lower-domicile states, such as North Carolina, Georgia and Florida, thus further removing the opportunity to remediate the situation. These attributes are collectively applying negative pressure to the state’s tax base, while N E W J E R S E Y C P A • m ay • j u n e 2 0 1 5

increasing the cost base due to the heavy pension burdens. Approximately 90 percent of the increase in New Jersey’s 2015 tax base will be allocated to pay for unfunded pension liabilities, health care for public retirees and related debt service. In 2015, New Jersey is scheduled to make a $2.25 billion pension payment, the largest in U.S. history for any state. Despite the economic challenges facing New Jersey, one of the bright spots is its education system. In 2014, USA Today ranked New Jersey second in the nation for best schools. New Jersey also claims some of the best colleges and universities in the country. According to the Times Higher Education magazine and the Center for the World University Rankings, Princeton University and Rutgers University are considered among the best universities in the world. A robust and expanding technology industry is another bright spot for New Jersey’s economic future. Technology employment accounted for more than 350,000 jobs in 2013 (11 percent of private sector employment), compared to the 9.6 percent of private sector employment nationally. Moreover, there are 13,000 information technology companies located in New Jersey, with the average employee making approximately $111,000 annually, 52 percent higher than the average New Jerseyan’s yearly salary.

competitive location with access to seaports, airports and major highways. As described by the Brookings Institute, the resurgence of manufacturing in Newark will accelerate innovation to improve productivity and product development, promote resource efficiency and sustainable supply chains, connect manufacturers to new market opportunities and create a 21st century manufacturing workforce. The trend binding the resurgence of manufacturing in Newark and the credit programs provided by the NJEDA is based on a simple idea that New Jersey needs to continue to attract or retain newly created, high-technology companies in the state, while taking advantage of retraining residents in lower-cost areas.

The Policy Dilemma

To address the aforementioned challenges, New Jersey needs to simultaneously increase its tax revenue base—to ensure that the short- and medium-term pension liabilities are funded—and it needs to reduce its personal income tax and property tax burdens.

Economic Policy Propositions

As the broader U.S. economy continues to expand and sales grow for New Jersey companies, the push for these firms to decrease expenses and exit the state may be stalled for a very short time, giving the New Jersey Legislature the opportunity to fund the pension liabilities and further restructure the pension system. Similarly, the continued push by the state government to reduce public overhead and adopt gains in efficiencies using technology should not be overlooked. There are other policy initiatives that may benefit New Jersey. They should be employed long term, yet heavily emphasized and marketed in the short term. With its strong education system, host of top universities and great location, New Jersey can further cultivate the intellectual property

graduating its universities each year. For instance, the New Jersey Economic Development Authority (NJEDA) has created a series of programs to further increase the number of startup technology companies wanting to open and remain in New Jersey. One example of a policy that is very attractive to recruiting technology companies is the Angel Investor Tax Credit Program. This program provides a tax incentive credit to investors who invest in small New Jersey technology companies, which helps establish a strong investor network—a necessary service for a high-technology culture. Another worthy policy initiative is to increase incentives for manufacturing companies to relocate to major cities, such as Newark, Trenton, Camden and others. In conjunction with efforts between the Brookings Institute, Rutgers University and the Newark Legislature, there has been a resurgence of New Jersey manufacturing companies moving back to cities in hopes of igniting economic prosperity and growth. For instance, Manischewitz and Panasonic USA have relocated to Newark in hopes of further engaging with the renaissance it appears to be undergoing, while at the same time taking advantage of Newark’s N E W J E R S E Y C P A • m ay • j u n e 2 0 1 5

Future Opportunities for Accounting Professionals

To the extent that the New Jersey Legislature can execute the aforementioned policies, many commercial opportunities are foreseeable. These include, but are not limited to, increased tax consulting services for those companies leaving the state and those migrating to the cities; increased forensic services related to valuations; outsourced recordkeeping; personal tax services for the expanding wealth in the cities; and a menu of services for the technology sector, to name a few. As such, professional services firms should take stock of their services to make sure they are mapped to the changing ecosystem of New Jersey’s businesses and residents. To read a more in-depth version of this article, visit njcpa.org/newjerseycpa/ mayjune15. Christopher Young, Ph.D., M.B.A., CVA, is the director of valuation and dispute advisory services at Sobel & Co., LLC, and a professor at Rutgers University. James Janos is an economic analyst in valuation and dispute advisory services at Sobel & Co., LLC. Contact the authors at 973-994-9494.

Six Tax Reform Measures to Improve NJ Business The economic climate is challenging for New Jersey business owners. And it’s time for policymakers to smooth the road for small business, the engine that will drive vital growth in our state.

By Joseph R. Doren, CPA O’Connor Davies, LLP

At just 0.7 percent, New Jersey’s 2014 job growth pales in comparison to the 2.4-percent national average, according to the New Jersey Department of Labor and Workforce Development and the U.S. Bureau of Labor Statistics. Add to that New Jersey’s anemic 14-percent revenue growth over the last 10 years, which is a direct result of its ongoing economic woes, according to James W. Hughes, dean of Rutgers Edward J. Bloustein School of Planning and Public Policy. One of the major challenges to growth is the state’s tax code. New Jersey is one of a handful of states to impose both estate and inheritance taxes. Participants in an economic roundtable recently convened by NJ Assembly Republican leaders agree that the state’s personal income tax is extremely onerous. The 8.97-percent top individual gross income tax bracket for those earning $500,000 and more hits small business owners hardest—on top of a 9-percent corporate income tax rate that is also one of the highest in the country. The result is that precisely when New Jersey needs to catapult opportunity and generate revenue, it is instead discouraging entrepreneurs from launching new businesses, hiring state residents, attracting investment, and growing profits and visibility. Despite the fact that the federal government recognizes the benefits of taxing capital gains at rates lower than those of other income sources, New Jersey does not. Both its corporate and N E W J E R S E Y C P A • m ay • j u n e 2 0 1 5

personal income tax rates are higher than those of surrounding states, negating essential opportunities for stimulating investment and growth. This must change. Solutions are urgently needed and entirely feasible. The following proposals would prove immensely beneficial to the state, its businesses and residents, as well as to the scores of small to mid-sized companies that would choose to locate and stay here.

1. Reduce the Estate Tax

For many owners who have built successful small to mid-sized businesses, when it’s time to sell, it’s time to move. States like New York, with a higher estate exemption, and Florida, with no estate tax at all, suddenly become highly appealing to those planning to fund retirement with proceeds from the sale of their companies. When they move out of state, New Jersey loses potential income tax revenue, sales tax revenue, real estate taxes, associated consumer spending, and often the promise of future family generations. This is too hefty a price to pay. The estate tax exemption should be aligned with that of the federal government and/or surrounding states— in our case to perhaps $5 million—in order to help prevent such losses by encouraging more business owners to remain New Jersey residents after the sale of their businesses.

2. Allow Pass-Through Entity and Sole Proprietor Business Loss Carryovers to Subsequent Tax Years The inability of individual owners of pass-through entities (PTEs) or sole proprietorships to carry forward business losses to offset future income is a hardship that discourages new

or expanded business growth in the state. Start-up founders and small business owners, many of whom own businesses that are organized as PTEs or sole proprietorships, fully anticipate periods, often years, of investment before generating profits. If New Jersey is to attract and maintain entrepreneurs and their businesses, it must allow these entrepreneurs the same ability to carry forward business losses as their corporate counterparts.

3. Allow Individual Capital Loss Carryover to Subsequent Tax Years

The inability of individual taxpayers to offset future capital gains by carrying forward investment losses is a hardship that discourages investment activity. By reducing the capital gains tax rate, as described above, and allowing capital loss carryover, New Jersey would be in a far stronger position to attract and retain wealthy residents, a key to boosting overall revenue growth.

4. Expand the Angel Investor Tax Credit Program

This valuable opportunity currently applies only to emerging technology companies with fewer than 225

employees, 75 percent of whom must reside in New Jersey. Expanding the credit—currently 10 percent of a qualified investment made within the state and up to a maximum of $500,000—to businesses in other sectors, such as manufacturers and distributors, would serve as a meaningful incentive and spur the growth of new business.

5. Ease the PTE Tax Payment Requirement

Afford nonresident owners of PTEs based in New Jersey the option to sign an agreement that they will either file an individual tax return or participate in a composite return. This would serve as a waiver of the PTE payment responsibility currently imposed on such entities in the state. Due to effective tax rate differences, the PTE payments can exceed the actual liability, resulting in an often months-long wait to recover overpayments, another unnecessary burden for New Jersey’s small and midsized business owners.

6. Reinstate Simultaneous Filing of the Annual Report and Corporate Tax Return Although tax law previously allowed

N E W J E R S E Y C P A • m ay • j u n e 2 0 1 5

concurrent filing, it now requires each of these to be filed separately. Overlooking the annual filing is a frequent mistake; doing so two years in a row can result in revocation of a business’ charter. Charter reinstatement costs thousands of dollars in needless expenses and fees for businesses that can ill afford them. It’s time to simplify the filing process for business owners by restoring the option to file simultaneously both the annual report and corporate tax return. All relevant research reaffirms that small business is the engine driving growth in New Jersey, which is why it is imperative to create a welcoming economic environment. Enacting the changes outlined above are vital to protecting the state’s fiscal health, engineering genuine financial incentives, framing a tax infrastructure favorable to business owners and reclaiming the heritage so integral to the many businesses and residents who proudly call New Jersey home. Joseph R. Doren, CPA, CGMA, is a partner at O’Connor Davies LLP. He is a member of the New Jersey Society of CPAs. Contact him at jdoren@odpkf.com or 908-272-6200.

Co NJ E x n ve C P po nt A Sp ion ea & ke r

Improving NJ Business via Legislative Initiatives

The New Jersey Business & Industry Association’s (NJBIA’s) annual Business Outlook Survey showed that our members are cautiously optimistic about the state’s economic climate. In 2015, our economy is on the upswing following two years of slow and steady increased sales and profits for NJ businesses. Businesses feel good about their own prospects for the coming year, but they are concerned about the broader economy.

By Michele N. Siekerka New Jersey Business & Industry Association

We hear that businesses are ready to invest in expansion and employment, but they are holding back. Why? There is uncertainty about what policymakers may do that could impact the economy. Entering the budget cycle, I have been asking our policymakers to send our members early positive economic signals in order to assure them that their spending will be a good investment in 2015. Where does the concern for uncertainty come from? A history of being overtaxed and subjected to expensive mandates has increased our cost of doing business. NJ has N E W J E R S E Y C P A • m ay • j u n e 2 0 1 5

among the highest taxes in the nation, including income, corporate, sales and property taxes. Health care costs are skyrocketing, and government continues to place mandates on business. These include a higher minimum wage that is constitutionally mandated to increase each year by the Consumer Price Index, the new ban-the-box law, duplication of federal requirements, the Affordable Care Act and more. We now have mandatory paid sick leave staring at us and a brand new bill that would allow each one of the state’s 500plus municipalities to enact its own minimum wage.

Further, New Jersey is one of only two states to have both an estate tax and inheritance tax, and we are facing the reality of trying to fix a broken pension system and transportation infrastructure. There is good news, though. Governor Christie’s new budget offers continued relief to businesses, including the $660 million final phase in of his business tax reductions, a revamp of the BEIP program, taking the tax credits out of the annual appropriations process and a pledge not to raise taxes. This is on top of a commitment to address the state’s faltering pension system, which would allow future funds to be directed to other state priorities. This is a great start, but our policymakers need to do more. We must be proactive in pushing for a

paradigm shift. Policymakers must stop issuing mandates that make our business climate less competitive than our neighboring states along with other states that are looking to capture our talent pool. Instead of mandating business practices, like paid sick leave, we ask policymakers to reward good, solid business practices. Our members know they have to offer good employee benefits if they want to remain competitive in the marketplace. Good benefits will attract a skilled workforce, which will lead to increased sales and profits. This year, NJBIA is concentrating on three legislative issues: (1) fighting against the mandatory paid sick leave bill; (2) opposing the bill permitting municipalities to each set their own minimum wage; and (3) advocating

for a phase out of either the estate or inheritance tax.

Mandatory Paid Sick Leave

The mandatory paid sick leave bill would require all businesses to offer both full- and part-time employees either five or nine sick days per year, no matter how big the company. This bill places a tremendous burden on businesses. If a business already has a sick leave policy, as approximately 70 percent of Garden State businesses do, it would have to rewrite those alreadyexisting policies to conform to the bill. This punishes businesses that are already offering employees sick leave. Per the bill, businesses would be required to keep leave records of every employee for at least five years, workers

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HR. Payroll. Benefits.

would not be required to find their own replacements, and there are strong antiretaliation provisions that will make it difficult to discipline workers for abusing leave. This bill will add costs and place an additional burden on businesses.

Local Minimum Wage

NJBIA also opposes the bill permitting each county and municipality in the state to enact its own minimum wage. Imagine the chaos that would ensue should the more than 500 counties and towns do this. Businesses on the same street could have to pay two different minimum wages. Companies with more than one business location in the state could be forced to pay employees different wages for the same work. It would be a competitive and logistical nightmare.

“Death” Taxes

There also must be legislative action that will begin the phase out of either the

estate or inheritance tax. We are one of only 14 states with an estate tax, one of only seven with an inheritance tax, and one of only two states with both. According to a 2010 report by Boston College, between 2004 and 2008 the state lost 302,779 households. During the same period, New Jersey’s inflow of wealth dropped by $183 billion and declined in net wealth by $168 billion. Another study, issued in 2014 by RegentAtlantic, reported that 87,630 2010 federal tax returns were filed in states other than New Jersey by people who filed their 2009 tax returns in New Jersey. Clearly, taxpayers are leaving the state and the twin death taxes are a significant reason. Policymakers must understand how businesses think. High taxes and continuing mandates erode the confidence of businesses to the point N E W J E R S E Y C P A • m ay • j u n e 2 0 1 5

where they no longer wish to be here. If businesses don’t have confidence in the state’s economic climate, they will not invest and create jobs and they will look to our neighboring states where the tax burden is lighter and there are more attractive incentives. Governor Christie has taken positive first steps with his new budget. The legislature can pick up that mantle by keeping pro-business policies in place and rejecting onerous ones so that we can build on the state’s improving economic climate and create an environment where businesses can thrive. Michele N. Siekerka is president of the New Jersey Business & Industry Association. Contact her at 609-393-7707. See Siekerka appear as a panelist on the “NJ Business & Economic Roundtable” at the NJCPA Convention & Expo.

You Can’t Beat NJ Toughness The story of Eric J. LeGrand has been told many times: How he became paralyzed while playing college football for Rutgers. How, through dedication and hard work, he has since regained movement in his shoulders and sensation throughout his body. How he persevered and resumed his college studies and graduated from Rutgers in 2014 with a degree in labor relations. But, LeGrand being a New Jersey guy through and through, I wanted to find out what he liked about the state: its places, its sights and its people.

By David Plaskow NJCPA Communications Manager

What do you like about New Jersey? I love my connection to New Jersey. The people often get a bad rap, but they’re tough and can come together like they did when Superstorm Sandy hit. When you leave NJ and you meet someone from there, it’s like family. I really enjoy going to the boardwalk at the Jersey Shore in the summer. And I like going to Hoboken and seeing the NYC skyline. I also have great memories of going to Six Flags Great Adventure. There’s really so much to see and do here. What do you think of NJ’s education system? I’ve gone to public school in NJ my whole life. I thought the teachers and education were top notch. I remember going to Colonia High School in Woodbridge Township and the teachers imbedded in us: “No one else is going to do your work for you in college.” They put a little scare into us, but this made us more self-reliant. N E W J E R S E Y C P A • m ay • j u n e 2 0 1 5

You got to see other colleges while playing football. How do you think Rutgers stacks up? Yes, I got to see the University of Maryland, the University of Virginia and others. Going to Rutgers was a tremendous experience, and it was really special for me and my family that I got my degree. The teachers are great; the students couldn’t get their degrees without them. And they were a tremendous help to me after I got hurt, helping me take my courses. Rutgers is a huge campus, with a variety of living options, and you can meet someone new every day. The school goes back to 1766, and there’s some beautiful old buildings. You’ll hear some creaking noises in some of these historic buildings. Hopefully, they’ll continue making the necessary upgrades. But Rutgers really does hold its own against other universities. I see you majored in labor relations at Rutgers. Why this particular major? I started in communications and then switched to criminal justice, but they weren’t for me. I explored labor relations and found it very interesting—the history of labor and unions in the U.S. I also felt that labor relations offered me a broad spectrum of options, such as law school, speaking or broadcasting. After your injury, you went to Hackensack University Medical Center and then the Kessler Institute for Rehabilitation. What are your thoughts of NJ’s health care system? Hackensack Hospital saved my life. The staff made me very comfortable. Kessler is incredible; it’s a special place. I still go there three times a week. It’s

an internationally acclaimed facility. I didn’t have any bad experiences at Hackensack or Kessler. Also, I’ve worked with home health aids. They have a really difficult job and do it well. I don’t know what they make, but they deserve more money. What are your thoughts of NJ’s sports landscape, its teams and its fans? There’s that split of northern NJ fans who root for NYC sports teams and southern NJ fans who like Philadelphia teams. I wish we as New Jerseyans could get together and just pick one team to root for. [It’s at this point that we discuss the two NFL teams that are called NY but actually play in NJ. Eric then admits to being a Denver Broncos fan and I confess to being a Dallas Cowboys fan.] As for New Jersey’s fans, they’re a tough crowd to please. Being part of the number one media capital in the world, NJ is great when you win. But if you don’t do well, you’ll hear it from the fans. They’re passionate and will always support you. What about NJ’s infrastructure in general? The highway system is great. I live near several major highways and feel like I can get anywhere in the state in about an hour. Thankfully, the state has great broadband service. I was able to take many of my classes via Skype. With respect to facilities for the disabled, I’d give NJ a 7 out of 10. The majority of places are accessible, but the state has a decent number of old buildings that don’t have ramps and elevators. Overall, it’s good, but you can always do better. Tell us about Team LeGrand of the Christopher & Dana Reeve Foundation. We do fundraising to find a cure for paralysis and to fund quality-of-life therapies. One of our big projects is epidural stimulation that has proven to return certain bodily functions to paralysis patients. Our goal is to raise $15 million and we’re about halfway there. I’m really proud and happy to be part of this foundation.

What will you speak about at the NJ Convention in June? I’m going to share my life story and some of the things I’ve learned that have turned me into the man I am today. Hopefully, I can provide some inspiration. No matter what walk of life you’re from, everybody needs some inspiration at one point or another.

my story. Afterward, I really enjoy talking to people and hearing what they thought about my story.

What do you like about being a motivational speaker; what do you get from it? Just to see peoples’ reactions. Usually, you can hear a pin drop when I tell

See LeGrand’s session, “Believe: the Story of Eric LeGrand,” on Wednesday, June 10, at the NJCPA Convention & Expo at the Borgota in Atlantic City. Visit njcpa. org/education/conv15.

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Seems like plenty of companies have the right business solutions for your company. HOW DID WE GET HERE?

Everything You Didn’t Know About

ERP

In the Past Enterprise Resource Planning (ERP) systems history started during middle of the last century. From its early beginnings to the business processes software it is known for today, the goal of such tools has always been to help businesses operate more efficiently. ERP was born from its predecessor, Manufacturing Resource Planning (MRP). MRP and the first ERP systems were designed as an organizational and scheduling tool for manufacturing firms. It wasn’t long before other industries began to recognize the benefits of ERP systems; government agencies

and organizations in the service sector began taking advantage of the technology.

How It’s Changing The 1990s was a time of explosive growth for the technology, particularly with ERP software systems that were meant to integrate businesses processes throughout every functional area. Additional functions like “purchase-to-pay” and “order-tocash” were being incorporated more and more regularly. New developments and the number of options in both software and hardware quickly grew. To satisfy the environment of planning and initiating, accounting, HR and supply chain business process software suites grew in functionality. More than 60% of the Fortune 1000 companies installed or implemented a packaged ERP system to support their back-end business activities. Growth for the Future The major industrial information systems manufacturers that emerged from the 1980s and early 1990s defined the history of the development of ERP systems. They have left out a huge gap in terms of their solution being complex, expensive and only targeting few industries. Analysis of the market penetration of ERP systems shows clearly that the current players have to downsize their products and offerings to be attractive to smallto medium-size enterprises. This situation again is an opportunity for smaller players to seize the day and offer smaller systems running on smaller hardware platforms more efficiently. These innovators will ultimately take the lead in the ERP software market as large systems will not produce the continual income stream that small, robust, easy-touse systems can achieve. Future successful vendors will capture large markets of smaller businesses who will provide a more consistent and enduring income stream.

An Answer for the Modern Market A world class innovator of supplying ecommerce and business management software, Artha Systems is on the industry’s cutting edge. Artha’s business management software solutions incorporate everything a modern business needs to stay in control, sustain the momentum and steer itself toward expansion and growth. The system is designed to help manage multiple aspects of business operations: Human Resource Management, Finance Management, Operations Management, Manufacturing and more. With this software, companies are able to better analyze and control what’s happening in their business, ensuring a smoother operation and increased revenue. Not only does Artha’s cloud-based business software help manage organizations run more efficiently, but it does it in such a way to minimize transactions made by humans thus narrowing the margin for error. Checks and balances are built in so that everything adds up giving the assurance that financial data and other important records are accurate. What distinguishes Artha from other systems is that it is a total end to end solution, fully integrated, resulting in seamless data flow across all divisions as needed for functioning efficiently. For business operations small and large, Artha is the complete ERP package, plus more, offered at an affordable price.

Artha Systems LLC www.arthasystems.com

Seems like plenty of companies have the right business solutions for your company. HOW DID WE GET HERE?

Everything You Didn’t Know About

ERP

and Where It Is Headed The business environment is becoming increasingly complex with functional units requiring more and more inter-functional data flow for decision making, timely and efficient procurement of product parts, management of inventory, accounting, human resources and distribution of goods and services. In this context, management of organizations needs efficient information systems to improve competitiveness by cost reduction and better logistics. It is universally recognized by large and small-to medium-size enterprises (SME) that the capability of providing the right information at the right time brings tremendous rewards to organizations in a global competitive world of complex business practices. Below is a brief outline of the history of these systems and what to expect in the future. In the Past Enterprise Resource Planning (ERP) systems history started during middle of the last century. From its early beginnings to the business processes software it is known for today, the goal of such tools has always been to help businesses operate more efficiently. ERP was born from its

predecessor, Manufacturing Resource Planning (MRP). MRP and the first ERP systems were designed as an organizational and scheduling tool for manufacturing firms. It wasn’t long before other industries began to recognize the benefits of ERP systems; government agencies and organizations in the service sector began taking advantage of the technology. It was during 1970’s and 80’s it started gaining its popularity. How It’s Changing The 1990s was a time of explosive growth for the technology, particularly with ERP software systems that were meant to integrate businesses processes throughout every functional area. Additional functions like “Purchase-to-pay” and “order-tocash” were being incorporated more and more regularly. New developments and the number of options in both software and hardware quickly grew. To satisfy the environment of planning and initiating, accounting, HR and supply chain business process software suites grew in functionality. More than 60% of the Fortune 1000 companies installed or implemented a packaged ERP system to support their back-end business activities. Growth for the Future The major industrial information systems manufacturers that emerged from the 1980s and early 1990s defined the history of the development of ERP systems. They have left out a huge gap in terms of their solution being complex, expensive and only targeting few industries. Analysis of the market penetration of ERP systems shows clearly that the current players have to downsize their products and offerings to be attractive to SMEs. This situation again is an opportunity for smaller players to seize the day and offer smaller systems running on smaller hardware platforms more efficiently. These innovators will ultimately take the lead in the ERP software market as large systems will not produce the continual income stream that small, robust, easy-to-use systems can achieve. Future successful vendors

will capture large markets of smaller businesses who will provide a more consistent and enduring income stream. What Artha is and how it answers the call for a modern ERP Artha Systems was born and is a world class innovator of supplying ecommerce and business management software. Artha’s business management software solutions incorporates everything a modern business needs to stay in control, sustain the momentum and steer itself toward expansion and growth. The system is designed to help manage multiple aspects of business operations. Human resource management, finance management, operations management and manufacturing are among the features of the software. With this software, you are able to better analyze and control what’s happening in your business, ensuring a smoother operation and thus, increased revenue. www.arthasystems.com Artha answers the call for businesses who can’t afford traditional ERP systems while still needing all the benefits. It delivers a robust suite of features encompassing finances, inventory, point of sale integration, e commerce platform, business and financial reports, The modern business’s needs are far reaching and require a system tailored to meet them. A system that not only affords them every tool needed to succeed, but also the flexibility to manage their unique business from anywhere at any time. It’s the co Not just a software, minimize transactions made by humans to eliminate error. Checks and balances built in so that everything adds up and the room for error is minimal. What distinguish-

Artha Systems LLC www.arthasystems.com

A&A

buzz

Don’t Get Burned by the Heat from the Sunshine Act By Deborah A. Nappi, CPA, SaxBST LLP

ith summer fast approaching and winter thankfully in the rearview mirror, we long to feel the warmth of the sun. The Centers for Medicare and Medicaid Services (CMS) will also be basking in the sun. This comes in the form of compliance under the reporting provisions of the Sunshine Act. While you do not run the risk of UV exposure, you may have exposure to fines and penalties for noncompliance. The Sunshine Act was introduced as part of the 2010 Patient Protection and Affordable Care Act. This legislation was created to shed light on physicianindustry financial relationships. The law excludes resident physicians and applies to the following types of doctors as long as they hold a current U.S. license to practice: doctors of medicine, doctors of osteopathy, dentists, podiatrists, optometrists and chiropractors. The Sunshine Act requires manufacturers—including certain distributors of medical devices, covered drugs and medical supplies—to track and report certain payments and gifts made to physicians and teaching hospitals. The law does not restrict industry physician interactions or prohibit payments of transfers for value, but rather requires the tracking and reporting of these payments that result from such transactions. This is an effort to provide patients with transparency into the relationships their health care providers have with life science manufacturers, including medical technology companies. The disclosures then become public information on the CMS website. The list of payments required to be reported includes consulting fees, compensation for services other than consulting, honoraria, gifts, entertainment, food and beverages,

travel and lodging, education, charitable contributions, royalties, current or prospective ownership or investment interests, compensation for serving as a speaker for an accredited or nonaccredited education program, a grant, or rental of space. The final regulations define a covered product as any drug, device, biological or medical supply for which a payment is available under Medicaid, Medicare or the Children’s Health Insurance Program that is reimbursed separately or as part of a bundled payment. An applicable manufacturer with one covered product must disclose any and all payments and transfers for value, even if the payments are not related to the covered product. Certain exempt payments and transfers for value are not subject to disclosure. These include payments that are less than $10 unless the aggregate for the year exceeds $100, product samples which are for patient use, loans of covered medical devices not to exceed 90 days and discounts that include rebates. Educational materials intended for patient use are also excluded from reporting. The registration for data submission for physicians and teaching hospitals is a voluntary process on the CMS Enterprise Portal. This allows both the physicians and teaching hospitals to review and dispute the data submitted by applicable manufacturers and group purchasing organizations prior to the public posting of the data. Any data that is disputed but not corrected by the industry will be marked as disputed. Physicians will have two years to seek correction of disputed information. Reports of the 2013 submitted data were released to the public. CMS reported that 4.45 million documents were recorded reflecting $3.7 billion N E W J E R S E Y C P A • m ay • j u n e 2 0 1 5

of payments. Royalty and licensure payments to doctors and hospital inventors accounted for 31 percent of the total dollars, and promotional talks accounted for 21 percent. Medical doctors received 69 percent of the value of the general payments, while teaching hospitals received 25 percent. Users have reported long delays and error messages when trying to upload and view the stored data. Many payments are submitted under various subsidiaries; pharmaceutical companies report their drugs under name variations, as well as the names of doctors; and hospitals have been omitted. Sunshine Act noncompliance penalties are steep. Due to system glitches, CMS has not yet assessed any penalties for 2013 data originally submitted that required resubmission. The 2014 open payments system is now open for registration, the submission of 2013 corrected information and 2014 data submission. CMS provides information on its website (cms.gov), such as spreadsheets and tutorials, to guide you through this reporting process. Deborah A. Nappi, CPA, M.S.T., is a senior health care manager at SaxBST LLP. She is a member of the New Jersey Society of CPAs Federal Taxation and Health Care interest groups and Health Care Conference Work Group. Contact her at dnappi@saxbst.com or 973-472-6250 x401.

BEST

practices

Create a Quality-of-Life Committee at Your Company By L isa C alic k , W iss & Compan y, L L P

he long-term success of any organization is highly dependent on how it attracts, motivates and retains its workforce. An employee’s satisfaction level is a key indicator of performance. While companies pay close attention to an employee’s compensation and title structure, companies also need to recognize that employees look for a certain quality of professional life. One way to meet those employee needs is via a quality-of-life committee. The purpose of such a group is to improve the work experience of your employees and find ways for them to feel energized about their jobs. In order to have a successful quality-of-life initiative, top management must be on board. It is important to educate them about the justification for these programs and how they will benefit both the employees and the organization. Once a quality-of-life committee receives upper management’s blessing, it’s time to start planning, implementing, promoting and evaluating.

what are successes, failures and course corrections. Note: It is important that upper management clearly communicates to department heads that this is a vital company initiative and that committee members will need the appropriate time, within reason, for these meetings and programs.

Implement

When considering quality-of-life initiatives, communication is key. Discussions should center on the common needs of employees. What may work for one company may not

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Plan

It is important that the person leading this committee has a “pulse” for quality-of-life issues at the company and can organize committee members to get things accomplished. The actual committee’s makeup is vitally important. It must be representative of the people for whom it is intended—from all levels and all departments within the organization. Any quality-of-life committee should include at least one member from human resources. Schedule regular meetings in order to determine which programs are implemented; who is responsible for certain resources and programs; and

be needed at another. It’s also important to not bite off more than you can chew. Here are just a few quality-of-life ideas: Scheduling – Implement a flexible work policy to help recognize the needs of working parents. In the summer, consider changing company hours to allow for either full-day or early closings on Fridays. Health – Start a company-wide wellness program, which can consist of employees getting a group rate at a gym; bring into the office a chiropractor or smoking cessation professional; or employees simply meet for a lunchtime walk.

Brian Gordon, CPA State and Local Tax Director bgordon@st-cpas.com

Former NYS Dept. of Tax and Finance — District Audit Manager Frequent Speaker at Hudson and Bergen County Tax Seminars • Appeals • Offers in Compromise • Deferred Payment Plans

• Tax Planning • Multi-State Nexus Studies • Voluntary Disclosure

www.st-cpas.com Long Island Office: 350 Jericho Turnpike, Suite 1, Jericho, NY 11753 | Phone: 516-938-5219 New York City Office: 275 Madison Avenue, Suite 1711, New York, NY 10016 | Phone: 212-370-3743

N E W J E R S E Y C P A • m ay • j u n e 2 0 1 5

Again, the key is communication among the committee as to what the specific needs may be at the company and who will be responsible for programs and/or program elements.

newsletter, on the bulletin board in the kitchen and so on. Perhaps have a kick-off day where people find a memo tied to a treat on their desks when they get to the office one morning. It’s important that everyone knows the who, what, where, when, why and how. Your committee may have wonderful initiatives, but what good are they if no one knows?

Promote

Evaluate

Social – Hold regular social events, such as bowling nights or a summer picnic. Create a company softball team. Volunteer as a group for a charity.

Once program initiatives have been decided upon, it’s time to let the staff know. Place announcements on the company website, in the company

After a quality-of-life program has been active for six months to a year, the committee needs to determine its success or failure. Send staff a questionnaire.

It doesn’t have to resemble War and Peace, just a few questions about usage, likes, dislikes and wants. Once the information is tabulated it’s time to act by tweaking a program, discontinuing a program or creating a new program. If done properly, a quality-of-life committee can enhance staff members’ work experience, create more of a bond among employees and ultimately increase productivity. Lisa Calick is a human resources director at Wiss & Company, LLP. Contact her at lcalick@wiss.com or 973-994-9400.

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BUSINESS & INDUSTRY

insights

Transformation Projects: Two Schools of Thought B y Robert Cummings, C PA, and Robert W ilson, C PA , W eiser M azars L L P

usiness transformation has recently enjoyed both good and bad press. Positive stories expound on how companies transform aging, manual and error-prone infrastructures into agile, scalable, accurate and timely information-providing systems. Conversely, the negative stories spotlight costly projects that deliver few, if any, tangible benefits. Often, the difference between a good and bad business transformation outcome is not necessarily the people or the technology, but the approach. We have seen an evolution in business transformation away from large-scale, multi-year projects to a more iterative, short-cycle approach. There are two primary theories as to the best approach for business transformation, each with its own particular benefits and hurdles. These are the (1) big bang; and (2) the iterative (aka agile) approaches.

Big Bang Approach

The big bang approach generally utilizes large technology (enterprise resource planning, general ledger) and large consulting teams to gut and replace the current technology footprint of a business in a single effort. The main benefit of this approach is that the entire organization can collectively take a giant leap forward. However, the drawbacks and challenges can be significant. First, the management and costs of these projects are difficult to contain, and there are no incremental achievements that can be retained if the project goes bust. So, if management decides to scrap the implementation because they are X dollars over budget and Y years behind schedule, they go back to square one and get zero return from that investment. Similarly, if the implementation team underperforms, there can be significant negative

consequences for the organization in lost time, lost resources and detrimental cultural impacts that could result in the organization shying away from future enhancement opportunities. Even with a successful transformation, the return on investment is often difficult to ascertain due to the scope of the project and management’s inability to quantify the gain. The pace of change in the big bang approach is often intolerable to resources within the organization, increasing the time and expense of technology adoption. There is also the possibility of changes in organizational leadership during these lengthy transformation efforts, and what may have been a priority for the former management team may fall by the wayside under new leaders.

Agile Project Management Agile project management or development involves taking smaller steps more often. The goal is to break the large transformation effort into smaller pieces that can be evaluated and measured along the way. Here, an organization can more gradually change while deriving benefits from the program while it is still being implemented. Further, if an issue arises or a business change is necessary during the transformation, there is no need to wait until the project is concluded to address it as there is in the big bang approach. And if a decision is made to terminate the program, the business retains the benefits already achieved. Culturally, gradual change adopted through an iterative or phased approach can be more easily digested by both individual employees and the organization as a whole. As the organization gets used to the new processes, the modified skillset is firmly

N E W J E R S E Y C P A • m ay • j u n e 2 0 1 5

built into the organization. The negative connotation of change is removed for the process owners, and they are better enabled to adopt future process or technology enhancements. Another benefit of the agile/iterative approach is the leveraging, rather than dismantling, of the current technology footprint. There are many applications— generally termed “business process management” solutions—that can increase the useful life of core business systems, while delivering state-of-theart user and customer interfaces. This can decrease the overall software and hardware costs of a transformation; and when the day does come for a processing engine to be replaced, it can be done behind the scenes without affecting the users’ system interface. Businesses will continue to take an increased interest in iterative and agile approaches to transformation in order to maximize the cost-benefit of investment. As additional applications and technology are developed to expedite business transformation, expect early adopters of these approaches and technology to leverage them as a means of competitive differentiation. Robert Cummings, CPA, and Robert Wilson, CPA, CGMA, M.B.A., are partners at WeiserMazars LLP. Wilson is a member of the New Jersey Society of CPAs. Contact the authors at 732-549-2800.

FINANCIAL

planning

The Mystique of the Self-Directed IRA B y Damien J. Paumi, Nisivoccia W ealth Advisors L L C

ith tax season behind us, I’d like to take a moment to reflect on some of the creative things clients did this year. One favorite is the self-directed Individual Retirement Account (IRA). The classic Jersey story is a client walks into the office, we prepare the tax return, as he’s leaving the client then asks: “By the way, I know this guy who just bought a place in Florida with his IRA. He spent $100,000 from the IRA fixing it up and then sold it to another friend. But he lost about $200,000 in the process, whereby the friend sold it back to the original guy, so the guy got $200,000 worth of improvements from the IRA with zero tax. Can I do that?” The answer would be no.

Don’ts

Internal Revenue Code sections 408 and 4975 help us understand what is

prohibited. The key is that the owner of the IRA or any “members of his or her family (spouse, ancestor, lineal descendant and any spouse of a lineal descendant)” may not “transfer income or assets to, or use them by or for his or her benefit” (irs.gov, Retirement Topics—Prohibited Transactions). If it is determined that at any point in the year a prohibited transaction had taken place, then the IRA is treated as a distribution as of January 1 of the year in which the transaction takes place resulting in a taxable (and 10-percent penalty if under age 59.5) distribution of 100 percent of the account. Further, if there is a gain on the transaction that is greater than the December 31 value, that gain must be included in the IRA owner’s income. The most common IRA prohibited transactions include borrowing money N E W J E R S E Y C P A • m ay • j u n e 2 0 1 5

from it, selling property or assets into it, receiving any compensation for managing it, using it to secure a loan, using it to pay for any personal expenses or using it for personal reasons. For additional information regarding prohibited transactions, see the Internal Revenue Manual – 4.72.11 Prohibited Transactions.

Dos

Now that we have a basic understanding of what you can’t do with self-directed IRAs, here are some of the things that you can do: • Buy real estate, including residential and commercial—both domestic and international—home flipping, farms and raw land. • Invest in private equity of privately held companies. • Make private loans.

• Make other unique investments, such as golf courses, hardwood trees, racehorses and hedge funds.

What’s the Big Deal?

What makes self-directed IRAs an interesting topic is the fact that not many people use them. In 2011, the Investment Company Institute reported that of the $4.7 trillion in IRAs, only $94 billion (2 percent) was invested in self-directed IRAs. This is also a hot topic because it allows people to invest in areas that traditional banks, brokerage firms and custodians do not allow. Why? With self-directed IRAs, there are only a few trustees that actually facilitate these transactions and they will generally not evaluate the risks, legitimacy

or quality of the investments. These trustees will merely help the consumer facilitate the transactions. Lastly, this is a timely topic because self-directed IRAs are often self-reported in terms of value and activities. Unlike most IRAs that are handled by major institutions that have recordkeeping and audited reporting, these accounts are all managed at the individual level, and each IRA owner must use fair market value determinations to report yearend values to the custodian. This offers the biggest opportunity for fraud as evidenced by SEC v. United American Ventures and SEC v. Stinson.

CPA Opportunities

As the number of self-directed IRAs

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N E W J E R S E Y C P A • m ay • j u n e 2 0 1 5

grows each year, this presents several opportunities for CPAs: • Who will dominate the market for auditing services for self-directed IRAs? Even though it is not currently a requirement, as these become more popular and the assets become greater, clients will inevitably want audited financials for their records. • Who will be the primary advice-giver on what can and cannot be done with them? • How will you help clients avoid potential fraud scenarios? Damien J. Paumi, CFP, is the director of wealth management and planning at Nisivoccia Wealth Advisors LLC. Contact him at dpaumi@nisivocciawealth.com.

Forensic

file

Dissecting the NJ Alimony Reform Act of 2014 B y Cynthia F. L owe, C PA, Lowe Valuation and Accounting S ervices , L L C

n September 2014, Governor Chris Christie signed into law the New Jersey Alimony Reform Act. It is an amendment to alimony statute N.J.S. 2A:34-23 and the result of legislative debate that began in early 2012. Simply defined, alimony is a legal obligation for one party to provide financial support to another during and after a matrimonial action or dissolution of a civil union action. The revised alimony statute was intended to update antiquated alimony laws, provide clearer guidelines for more equitable results and ensure consistent treatment of alimony across the state. The act went into effect on September 10, 2014, and applies to judgments

for alimony entered on or after that date. Parties with a final “judgment of divorce” or “settlement agreement” entered prior to the effective date may have the ability to modify alimony obligations under the act only if the judgment or agreement does not have specific provisions on how certain alimony issues are to be resolved. For example, if no details were included regarding how alimony may be impacted by the retirement of the payor, then the provisions under the act may apply. Each case is fact specific, and legal counsel should be sought to address a particular situation. The act primarily addresses the issues surrounding the length and N E W J E R S E Y C P A • m ay • j u n e 2 0 1 5

amount of alimony, as well as changes in circumstances that may warrant a revision to the payor’s alimony obligation. Prior to its enactment, a permanent alimony award could potentially obligate a party to continue to pay alimony past his or her retirement age and/or result in alimony awards lasting longer than the marriage. The act includes durational limitations and corresponding guidelines to be used in the determination of alimony. In addition, the act provides more specific guidelines to be used in consideration of a modification to alimony obligations in situations

such as retirement, unemployment and cohabitation. Finally, the act includes instances whereby the court is required to make specific written findings of fact and conclusions of law on the reasons why it reached a particular conclusion. The major provisions of the act can be summarized as follows: • “Permanent alimony” is replaced with “open durational alimony.” • For marriages or civil unions of less than 20 years, the duration of alimony will not exceed the length of the marriage or civil union aside from the possible exceptional circumstances defined in the act. • Alimony shall terminate upon the payor’s retirement age, which is defined as the age a person is eligible to receive full retirement benefits under the Social Security Act.

• Neither party has greater entitlement to the standard of living enjoyed during the marriage or civil union. • Alimony may be suspended or terminated if the payee cohabits with another. Intertwined finances, sharing or joint responsibility for living expenses; social recognition of the relationship; living together; sharing of household chores; an enforceable promise of support; or any other relevant evidence will be considered by the court. The fact that the parties do not live together full time will not rule out the possibility of a modification of an alimony obligation. • In the court’s determination as to the length and amount of alimony, it will consider all 14 factors outlined in the amended statute, of which no one factor shall be elevated over any other.

It is critical that both parties in divorce or dissolution litigation understand the current and future ramifications of their agreement. The NJ Alimony Reform Act provides guidance for attorneys, judges and litigants in an effort to provide an equitable settlement. Even so, one question still remains: “Is it fair?” It depends on whom you ask. Settlements and court actions are the result of the unique facts and circumstances of each case. This article is not intended to provide legal advice, but rather an introduction and overview of the Alimony Reform Act, which is available at njleg.state.nj.us. Cynthia F. Lowe, CPA, ABV, CFF, is the founder of Lowe Valuation and Accounting Services, LLC. Contact her at 732-5524643 or cynthia@lowevaluation.com.

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N E W J E R S E Y C P A • m ay • j u n e 2 0 1 5

Small/Sole

practitioner

Small Business Tax Nexus B y James A. L awrence , C PA, Traphagen F inancial G roup

tate economic nexus has resulted in hundreds of legal cases over the past three decades. In looking for ways to generate new business revenue, a state will impose an income tax on out-ofstate businesses that generate revenue in its state. States can also require an outof-state business to collect and remit sales tax on revenue generated in that state. States can tax an out-of-state business only if that business has nexus within that state. Nexus is a connection or series of connections linking two or more things. However, nexus becomes complicated when applied to state taxation. It basically means that a business has a connection to a state and requires that business to conduct a certain amount of activity to be subject to the sales tax collection requirements

and, in general, income tax. The nexus rules for income tax and sales tax are different and, therefore, must be analyzed separately.

Sales Tax Nexus

A business is typically required to collect sales tax if it has nexus within a state. If left to each individual state, most would likely assert that any activity performed in the state by an out-of-state business would create nexus for that out-of-state business. States prefer to tax out-of-state businesses, rather than increase taxes on businesses in their home state. To prevent abuse, the federal government created the Due Process Clause and the Commerce Clause that prohibit a state from imposing a tax obligation on an out-of-state business unless there N E W J E R S E Y C P A â&#x20AC;˘ m ay â&#x20AC;˘ j u n e 2 0 1 5

is a minimal business connection to that state and other substantial nexus requirements are met. The two clauses were tested in U.S. Supreme Court case Quill Corporation v. North Dakota, 504 U.S. 298 (1992). Although the standards for establishing sales tax nexus differ for each state, most businesses rely on the conclusions set forth in that case. The Supreme Court ruled that a business does not have constitutional nexus in a state unless that business has a physical presence established through either companyowned property held in that state or it has employees or agents in that state. Quill provides a basic foundation for determining nexus; however, the courts continue to hear nexus cases. One of the more controversial ones is click-

through nexus. For online businesses that advertise on a website, the argument is that sales tax is required on sales made via the website and remitted to the state in which the server is located.

Income Tax Nexus

Currently, 45 states and the District of Columbia impose a tax on income generated by a business. A business is generally subject to income tax in the state in which it is incorporated and may also be subject to income tax if it meets another state’s nexus rules. The nexus rules for income tax purposes generally follow the physical presence test outlined in Quill with one major exception: Public Law 86-272. This 1959 law prohibits a state from

taxing the income of an out-of-state business if the only business activity is the solicitation of orders by company representatives for sales of tangible personal property. Thus, for a business to avoid having nexus for income tax purposes (1) orders must be sent outside the state for approval; and (2) shipment or delivery must be made from a point outside the state. This protection only applies to taxes imposed on net income and does not eliminate the requirement to collect sales tax or to tax gross receipts and franchise taxes. Although businesses try to minimize the number of states in which they must collect sales tax, file business returns and pay income tax, a review of the

nexus rules is an integral part of the process. Businesses that have customers in multiple states or enter new markets in a different state should perform nexus due diligence in those states. If a requirement to file exists—either income tax or sales tax—and the filing requirement is not met, the consequences to the business owner and the accounting professional could be substantial in terms of liability, since the statute of limitations remains open for all returns not filed. James A. Lawrence, CPA, is a partner at Traphagen Financial Group. He is the leader of the New Jersey Society of CPAs Federal Taxation Interest Group and a member of the State Taxation Interest Group. Contact him at jim@tfgllc.com.

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N E W J E R S E Y C P A • m ay • j u n e 2 0 1 5

TAX

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The Science of Resolving Tax Notices B y Joseph C . G raff, C PA, Ross, Rosenthal & C ompan y, L L P

ax notices—the bane of tax preparers—have exploded in recent years as e-filed returns are processed, matched against reported data and run through various verification and screening models by tax authorities. Not only do these additional notices burden the accounting profession, they burden the budget-constrained resources of government agencies. What can we, as practitioners, do to facilitate their efficient resolution? The answer lies in understanding the tax law and using all available resources. Practitioners can help themselves by taking certain steps when preparing income tax returns. All returns should reflect applicable estimated tax penalties. Extended returns with balances due should reflect adequate interest and late-payment penalties. This can save client annoyance and preparer embarrassment. If there are questions as to the completeness of income data, obtain an Internal Revenue Service (IRS) transcript to review 1099 and other income that payors have reported. This generally is only practical for returns with extended filing deadlines, because much of the data is not posted until the summer. IRS transcripts can be obtained online using the Transcript Delivery System. The process begins by submitting a Power of Attorney on Form 2848 via fax to 855-2147519. The transcript will generally be available 48 hours after submission. Similarly, estimated tax payments and credits can be verified using the New Jersey Division of Taxation Electronic Services website at state.nj.us/treasury/ taxation/online.shtml. If a tax notice is received indicating a balance due, the first step is typically to call the appropriate practitioner hotline and ask for a 60- to 90-day hold on collection efforts. This allows time to analyze and resolve the issue. After the notice is analyzed and the issues are understood, it may be appropriate to

pay the assessment. If not, software such as the RIA IRS Response Library provides model responses that include an index by IRS notice codes. If the issue is a failure to pay a penalty, be aware of the first-time abate criteria of IRM 20.1.1.3.6.1. N E W J E R S E Y C P A • m ay • j u n e 2 0 1 5

Resolution of New Jersey tax issues depends on the tax practitioner’s expertise and the New Jersey Division of Taxation agent’s knowledge and workload. The first correspondence often forwarded to the practitioner will be from Pioneer Credit Recovery, a

collection agency to which the division has outsourced, even minor, current balances due. This additional party complicates the resolution of matters that used to be routinely resolved with a phone call to the division. Pioneer can abate penalties after supervisory approval, which can take a week. However, a credit recovery fee is often added. This fee will not be waived by Pioneer, and it requires that the matter be referred back to the division, which can be frustrating. Recent experience with NJ-1040 audits reveals the need for extra caution by practitioners. Submission of information to the examining agent may be followed by several months

of silence, followed by the issuance of the agent’s findings in a Notice of Deficiency 90-day letter. This recent loss of dialogue in the audit process is unfortunate. The findings are often not sent to the practitioner who has power of attorney. Thus, the practitioner who adopts a no-news-is-good-news strategy does so at his or her own peril. Moreover, 90-day letters have gone undelivered to taxpayers and this fact is often unknown to practitioners until they receive a call from the agent with only about 15 days left. In such case, the practitioner should request reissuance of the letter with a current date. The law requires that a written petition and request for a conference be

received by the director within 90 days of the Notice of Deficiency’s issuance date. Efforts to negotiate a reasonable settlement with the agent can drag on. Once the 90-day period lapses, the taxpayer has no recourse if a petition was not filed in a timely manner. Prudence dictates filing a petition after 75 days, regardless of the perceived status of the negotiations. Joseph C. Graff, CPA, is a partner with Ross, Rosenthal & Company, LLP. He is a member of the New Jersey Society of CPAs Business Valuation Forensic Litigation Services Interest Group. Contact him at jgraff@rossrosenthal. com or 973-538-7071.

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N E W J E R S E Y C P A • m ay • j u n e 2 0 1 5

TECH

center

Performing Vulnerability Assessments and Penetration Testing B y A nthon y Mongeluzo, PC S

t one time or another, we all think about our personal vulnerability, whether it’s walking alone in a dark parking lot or conducting an assessment of our financial position. But many companies don’t give the same thought to their information technology (IT) security. Despite the avalanche of media attention on this topic, many companies don’t plan for safety breaches, which generally means that they don’t consider conducting vulnerability assessments and penetration tests (aka pen tests).

Vulnerability Assessment

Vulnerability in an IT system, whether it’s one computer or a network of thousands, exposes breaches that could occur because of system flaws. Penetration testing is a process where an individual legally tests a computer system to see where and how he or she can enter a system that could lead to a loss or unwarranted use of private data. Some over-the-counter products claim the ability to provide an accurate assessment and deliver a pen test; however, I’m unconvinced. This is like hiring a security agency to outfit you with a cookie-cutter approach to home security without customizing it for you. Don’t you think hackers also buy these programs to understand how they operate in order to circumvent them? You want an external, independent IT specialist who has seen numerous security configurations so that he or she can more accurately assess what vulnerabilities exist. For example, the IT professional should ask these questions: • Are all the patches current, applied and satisfactory? • Has your internal IT staff configured your system to make it more difficult to breach, or has it unwittingly allowed it to be a virtual open bridge to your important data?

• Can entry into the system allow the intruder to leverage the invasion into other parts of the system that could also be attacked? The value of a vulnerability assessment is that a professional can develop a comprehensive report that suggests or indicates precisely where vulnerabilities exist. This then becomes the road map for solidifying the current system.

Penetration Testing

A pen test is the actual effort to penetrate the system, even after an assessment audit, to see whether an outsider can hack into your system. People always ask me: Should I conduct these tests, and what does it cost? You must first answer the question: How important is the information to myself and my clients? Whether you have one client or thousands, it’s an issue of data value. A breach at an accounting firm would not only affect the accountant but the clients whose private financial information rests with the firm. Professionals who do this legally are great at thinking about possible scenarios for breaking in than most of us would ever consider, hence the moniker “white hat” hackers. What does penetration testing cost? It varies depending on the size, complexity and thoroughness involved. N E W J E R S E Y C P A • m ay • j u n e 2 0 1 5

What You Need to Know Beforehand

When considering an assessment audit and a penetration test: Understand Terms – A vulnerability test is your defensive capability; a pen test is an offensive initiative. Establish Timing – Get a vulnerability assessment or pen test annually. The IT world changes rapidly, and so do hackers and their tactics. Reassure Staff – Assure your IT person that what these specialists do is not a reflection of the in-house work. Hire Two Firms – One firm should perform the assessment; the other firm should do the pen test. It’s okay, even preferred, for them to compete against each other. Determine Liability Exposure – Check with your insurance carrier and attorney. If someone breaches your defenses, what’s your exposure in a lawsuit? Consider assessments and penetration tests like a war game. If you conduct both, you’ll recognize your strengths and weaknesses. Most importantly, you’re more likely to foil an intrusion that can be destructive and chaotic, not only to your IT system but to the entire business. Anthony Mongeluzo is the CEO and president of PCS. Contact him at anthony@helpmepcs.com.

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SOCIETY

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2015/16 Executive Committee Frank R. Boutillette, CPA

Walter J. Brasch, CPA

Frank R. Boutillette, CPA, Partner at WithumSmith+ Brown, New York, joined the New Jersey Society of CPAs in 1986. He has served on the NJCPA Board of Trustees as treasurer, trustee and president-elect. He is a member of the NJCPA Finance and Peer Review Executive committees; an Education Foundation trustee; and the Retirement Savings Plan Committee chair. He has served on the Accounting & Auditing Standards, Governmental Accounting & Auditing, Health Care and Nonprofit interest groups; and NJ-CPA-PAC Board of Trustees. In the Middlesex/Somerset Chapter, he has served as director, secretary and treasurer. Boutillette is a member of the American Institute of CPAs Council, Quality Control Materials Task Force and Joint Trial Board. He has also served on the AICPA Peer Review Board. He is a frequent lecturer on accounting and auditing topics for the NJCPA and other organizations. Boutillette earned his B.A. in accounting from Rutgers University-Newark. He is a resident of Toms River.

Walter J. Brasch, CPA, CGMA, Partner & Chief Business Development Officer at O’Connor Davies, LLP, Cranford, joined the New Jersey Society of CPAs in 1977. He has served on the NJCPA Board of Trustees as a trustee, treasurer and secretary. He is a member of the NJCPA Finance, Strategic Planning, and Retirement Savings Plan committees and is an Education Foundation trustee. He was chair of the NJ-CPA-PAC. He has also served as president, vice president, secretary and director of the Monmouth/Ocean Chapter. Brasch is a member of the American Institute of CPAs and the Health Care Financial Management Association, a board member of the New Jersey State Chamber of Commerce and an associate member of the NJ Bankers Association. In his community, Brasch served as board chair of the Raritan Bay Medical Center, alumni association president of Christian Brothers Academy (CBA), and board member of the American Cancer Society and the Boy Scouts of America, Monmouth Council. He is a recipient of the CBA Alumnus of the Year Award and currently serves on the board of CBA. He also serves as an associate member of the Audit Committee of Monmouth University and a fundraising committee member for the Raritan Bay Health Care Foundation. Brasch earned his B.B.A. in accounting from St. Bonaventure University. He and his wife, Ann, reside in Little Silver and have a son, a daughter and three grandchildren.

WithumSmith+Brown President

O’Connor Davies, LLP President-Elect

N E W J E R S E Y C P A • m ay • j u n e 2 0 1 5

Edward I. Guttenplan, CPA

Wilkin & Guttenplan, P.C. Secretary Edward I. Guttenplan, CPA, CGMA, Managing Shareholder at Wilkin & Guttenplan, P.C., East Brunswick, joined the New Jersey Society of CPAs in 1981. This is Guttenplan’s second term as secretary. He has served on the NJCPA Board of Trustees as a trustee. He currently serves as an NJCPA Education Foundation trustee. He has served as a member of the NJCPA Student Programs & Scholarships, Human Resources and Special Awards committees; and the Accounting & Auditing Standards and E-File interest groups. He is a recipient of the NJCPA Medallion Leadership Award. In the Middlesex/Somerset Chapter, he has served as treasurer, secretary, vice president and president. Guttenplan is a member of the American Institute of CPAs and is active with many community organizations and boards. Guttenplan earned his B.S. and M.B.A. in accounting from Boston University. He and his wife, Bonnie, reside in Highland Park and have two sons and a daughter.

Lynn L. Albala, CPA InfoSight Partners LLC Treasurer

Lynn L. Albala, CPA, CMA, CGMA, Chief Financial Officer at InfoSight Partners LLC, Oakland, joined the New Jersey Society of CPAs in 1981. She has served on the NJCPA Board of Trustees as a trustee. She has served as a member of the NJCPA Federal Taxation, Accounting & Auditing Standards and Technology interest groups; Nonprofit Interest Group leader; a member of the Audit Committee; and leader of the Nonprofit Conference and the Accounting, Business & Technology Show work groups. Albala is a member of the American Institute of CPAs, past chapter president of the American Society of Women Accountants and the American Woman’s Society of Certified Public Accountants, and past chapter director of the Institute of Management Accountants. In her community, she is a Girl Scout Senior and Ambassador Consultant for the Oakland Girl Scout Service Unit and past Oakland GS Service Unit Manager. Albala earned her B.S. in accounting from Penn State University. She and her husband, Mark, reside in Oakland and have a daughter.

Brad E. Muniz, CPA

Sobel & Company LLC, CPAs Immediate Past President Brad E. Muniz, CPA, Partner in Charge of Accounting and Auditing at Sobel & Company LLC, CPAs, Livingston, joined the New Jersey Society of CPAs in 1991. He has served on the NJCPA Board of Trustees as president, president-elect, secretary, treasurer and trustee. He is on the NJCPA Finance and Retirement Savings Plan committees; on the Department of Labor Work Group; and an Education Foundation trustee. He has served as a member of the Scholars Institute Advisory Board; Strategic Planning and Volunteer Relations committees; Accounting & Auditing Standards Interest Group; and as a Scholarship Fund trustee. In the Morris/ Sussex Chapter, he has served as president, vice president, treasurer and director. Muniz is a member of the American Institute of CPAs and the AICPA Council. He is a member of the PKF North America Network and has served on its CPE Committee and as vice chair of the Accounting & Auditing Committee. In his community, Muniz is a board member of the Milton School and treasurer for Family Intervention Services. Muniz earned his B.A. in accounting from William Paterson University. He and his wife, Diane, reside in Parsippany and have two daughters and a son.

N E W J E R S E Y C P A • m ay • j u n e 2 0 1 5

Ralph Albert Thomas, CGMA New Jersey Society of CPAs CEO & Executive Director Ralph Albert Thomas, CGMA, began his service as CEO and Executive Director of the New Jersey Society of CPAs in 1999. He is a member of the American Institute of CPAs and serves or has served on numerous AICPA committees and the AICPA Council. He was appointed to the inaugural AICPA National Commission on Diversity and Inclusion. Thomas also serves or has served on the Accounting Advisory Boards of Lehigh University, Rutgers University, Seton Hall University, Montclair State University and Thomas Edison State College. He is a trustee emeritus at Lehigh University, former chair of Lehigh’s Diversity and Inclusion Subcommittee, and member of Lehigh’s Audit Committee. Thomas has been actively involved since 1977 as a member of the National Association of Black Accountants (NABA) and was elected National President of NABA for fiscal years 1990-92. Thomas is a member of the New Jersey Chamber of Commerce Cornerstone Initiative and the National Association of State Boards of Accountancy (NASBA) State Society Relations Committee. Thomas was selected by Accounting Today as one of the “Top 100 Most Influential People in Accounting” for the past five years. Thomas earned a B.S. in business and economics and an M.B.A. from Lehigh University. He and his wife, Valerie, reside in South Brunswick and have a daughter.

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Board of Trustees Trustees serving a three-year term expiring May 31, 2016

Sharon J. Bishop, CPA Bishop & Bishop, P.C.

Leonard N. Brooks, CPA Regeneron Pharmaceuticals, Inc.

Joseph C. DiFalco, CPA EisnerAmper LLP

Edward G. O’Connell, CPA WithumSmith+Brown

Audrey J. Sherrick, CPA Friedman LLP

Lorenzo T. Vanore, CPA ASDS Consulting Services

Roy H. Kvalo, CPA The Curchin Group, LLC

Stephen O. Richard, CPA NBA Properties

Trustees serving a three-year term expiring May 31, 2017

Sarah Krom, CPA Sharpe, Kawam, Carmosino & Company, LLC

William J. Ryan III, CPA Smolin, Lupin & Co., P.A.

Trustees serving a three-year term expiring May 31, 2018

Jean I. Abbott, CPA Stockton University

Carol Donatiello Iocca, CPA Wilkin & Guttenplan, P.C.

N E W J E R S E Y C P A • m ay • j u n e 2 0 1 5

CPE Offerings and Events Upcoming Education Foundation Events Date

Event/Code

Location

CPE Credit

5/19

Volunteer Night at the Community FoodBank of New Jersey (E1505360)

Hillside

N/A

5/20

New Jersey Law and Ethics Webinar (E1505294)

N/A

4/PE

5/21

Mergers and Acquisitions Conference (E1505320)

Roseland

8/SK

6/10-12

Annual Convention & Expo (E1506010)

Atlantic City

Multiple

6/16

New Jersey Law and Ethics Webinar (E1506084)

N/A

4/PE

6/18

Estate and Retirement Planning Half-Day Conference (E1506150)

Roseland

4/TX

6/19

IssuesWatch with Ralph Thomas (E1506044)

N/A

1/SK

Upcoming Chapter Events Date

Chapter

Event/Code

Location

CPE Credit

5/19

Union County

Fraud, Forensics and Valuation (E1505119)

Kenilworth

2/MC

5/19

Monmouth/Ocean

Real Estate Topics (E1505229)

Neptune

2/AA

5/20

Middlesex/Somerset

Accounting and Auditing Update (E1505149)

Somerset

4/TX

5/20

Atlantic/Cape May

Financial Planning (E1505099)

Northfield

4/TX

5/20

Monmouth/Ocean

Accounting and Auditing Update (E1505239)

Neptune

4/AA

6/1

Bergen

Golf Outing (E1506429)

Ramsey

N/A

6/19

Essex

Federal Tax Update (E1506029)

East Hanover

4/AA

6/23

Monmouth/Ocean

Golf Outing (E1506209)

Neptune

N/A

KEY CS – Consulting Services EC – Economics MC – Multiple Categories PD – Personal Development PE – Professional Ethics PM – Practice Management SK – Specialized Knowledge TX – Taxation Please note: Events are subject to change. For a full listing of all NJCPA events, visit njcpa.org/catalog.

AA – Accounting & Auditing MT – Management

Members on Member Benefits For this Member Benefits, we’re spotlighting a group of members, both CPAs and future CPAs, who’ve benefited from their membership. Here’s what they had to say: “Since high school, I’ve had a passion for writing. New Jersey Society of CPAs membership provides a way for me to volunteer my time and write articles to help inform accounting professionals and students on what the profession is all about,” Marilyn Carnevale, CPA. “Through my NJCPA membership, I’ve made many valuable connections,” Maryann Holloway, CPA. “The main benefit for me is the practical and cost-effective CPE. I also learn valuable information at the NJCPA Convention each year,” Michael Hogan, CPA.

“Forming relationships with other members has enriched my practice, whether it’s bouncing ideas off others or using them as a referral source,” Jody Rorick, CPA. “As an accounting student, joining the Society has been one of the best decisions I’ve made in preparing for a career as a CPA. The benefits from professional development, scholarship opportunities and networking events are immeasurable,” Luke DiMatteo. “Through the Southwest Jersey Chapter, I’ve continued to interact with CPA colleagues, as well as gained access to possible merger and buyout opportunities,” Gary C. Waxman, CPA. “By attending various young professionals events, I’ve been able to expand my network within both industry and among other industries such as banking, finance and law,” Melissa Soranno, CPA. “As the controller for a private corporation, the NJCPA has helped provide connections with other CPAs, which have resulted in relationships that have helped our business grow,” Dov Goldstein, CPA. How has your NJCPA membership benefited you? Renew your NJCPA membership today at njcpa.org/renew. Nonmember CPAs and future CPAs can also join online at njcpa.org/join.

N E W J E R S E Y C P A • m ay • j u n e 2 0 1 5

SOCIETY

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Get Involved Overcome Your “Volunfears” and Get Involved

Since LinkedIn added the Volunteer and Causes section to its profile three years ago, more than 10 million professionals have added volunteer activities to their professional identities. You want to make an impact, but your “volunfears” are holding you back. New Jersey Society of CPAs members have some words of wisdom to help you overcome these volunfears and get involved.

I Have Nothing to Offer Shaune Scutellaro, CPA, assumed his role as vice chair of the Federal Taxation Interest Group at age 30. He admits that the title sounded a bit imposing, especially since the core group has more client experience in federal taxation. “I quickly learned that my experience and knowledge can often help someone. There’s only so much time, and we don’t all know everything,” says Scutellaro. Thinking you have nothing to offer just might be a great jumping off point. Kelly Kennedy-Ryu, CPA, Committee Operations Committee Chair points out, “The NJCPA is all about sharing knowledge and best practices. Never be afraid to ask for clarification or guidance on implementing new standards.” The more you learn, the more you can offer. Scutellaro adds, “Society leadership is committed to making sure young professionals are getting more from involvement early in their careers. Not only will your contributions as a young professional be felt, they’ll be welcomed with open arms.”

I Won’t Know Anybody Ben Aspir, CPA, says: “It seemed daunting at first to attend young CPAs events knowing that I wouldn’t know anybody. Who would I talk to?” Once Aspir was there, however, he realized there were plenty of people who didn’t know anyone either. “I’ve connected with great people over the last few years, and I’ve become comfortable in these settings,” Aspir notes. He is now beginning his first year as a member of the Young CPAs Council. A natural introvert, student member Anna Kim learned to overcome her apprehensions about volunteering, especially in group activities. “If you’re having these same fears, think about how much you care about the cause,” Kim advises. “See it as a way to pursue a hobby. Volunteers are generally very friendly. Don’t let the fear of going alone stop you from making it happen. You’ll make a difference, have fun and connect with a diverse group of volunteers.” Maryann Holloway, CPA, another introvert, offers: “I actually feel more at ease in situations where I don’t know a lot of people.” She eventually got to know other members. Her involvement has led to her roles as Southwest Jersey Chapter President and NJCPA Trustee.

Tax-Time Volunteers Step Up

A big “thank you” to these 16 NJCPA members who answered 404 tax questions from the public at the Asbury Park Press and News 12 New Jersey in March and April: Christopher M. Arunkumar, CPA Breakpoint Assurance Company Neil B. Becourtney, CPA CohnReznick LLP Joseph L. De Lorenzo, CPA Traphagen Financial Group David Eliran, CPA I. David Eliran, LLC Ralph Evangelista, CPA Frazer, Evangelista & Co., LLC Pishoy Fahmi, CPA PNF Accounting, LLC Robert A. Fodera, CPA Baker Tilly Virchow Krause, LLP Marcia A. Geltman, CPA Nisivoccia LLP Edward A. Lempka, CPA Edward A. Lempka, CPA Stephen J. Mazur, CPA Mazur & Associates, CPAs Pat Pepe, CPA Pat Pepe, CPA Joseph R. Petrucelli, CPA PP&D Accounting Services, Inc. Genroso J. Romano, CPA Romano & Associates LLC James A. Toto, CPA WeiserMazars LLP Peter Traphagen Jr., CPA Traphagen Financial Group Patricia Vroman-Stuart, CPA Patricia Vroman-Stuart, CPA

I Won’t Fit In If you’re considering volunteering with the NJCPA, this one is easy. “The fact that you’re a CPA and will be with fellow CPAs means you already have something in common,” says 2015/16 Volunteer Relations Chair Michael VanderGoot, CPA. It’s certainly a start. For Joan D’Uva, CPA, who joined her first NJCPA committee in 1992, being appointed to the NJCPA Board of Trustees in 2006 reignited those “I won’t fit in” fears. “I felt out of place because I didn’t have as many years of involvement as a lot of the other board members,”

N E W J E R S E Y C P A • m ay • j u n e 2 0 1 5

she says. Thankfully, two members in particular helped D’Uva push those fears aside. “Anne Skalka made me feel right at home, and Cathy Horn’s warm smile made me feel like I was in the right place.”

It’s Too Much Work Jaime Campbell, CPA, is the perfect person to give her thoughts on this fear. Campbell has served on the Mercer Chapter Board as well as several interest groups, participated in Pay It Forward, and spoken at conferences and chapter events. She’s also written numerous articles and shared technology lessons through video and blog posts. Too much work? “I’ve never found volunteering to be taxing, because so many people are involved.” says Campbell. “Everything is handled and I choose the extent to which I can contribute. With so many hands involved, I’ve found volunteering to be pure fun, pure networking and pure value for myself and for those I’m serving.” You can always work your way up to getting more involved. Holloway adds, “There are all kinds of ways to get involved, and many of them don’t involve a significant amount of your time.” For example, those who contributed to this article probably took five to 10 minutes to answer a question on volunteering.

Get Involved Now

Volunteer opportunities are available throughout the year. Let us know how you’d like to be involved at njcpa.org/ getinvolved. Here are a few activities that need your support now: NJ CPA Month of Service – Organized by the New Jersey Society of CPAs, the NJ CPA Month of Service represents the CPA profession’s ongoing commitment to serving the communities where its professionals live and work. CPAs across the state volunteer at locations encompassing a variety of organizations. Volunteer for a community organization of your choice. Participate as an individual, a group or a firm. Commit to a whole day of volunteering or just a few hours—it’s up to you! Once you choose your volunteer activity, let us know by contacting Don Meyer at 973-226-4494 x207 or dmeyer@njcpa.org. In the meantime, check out the great work that our members and firms are doing at njcpa.org/service.

I’ll Be Disappointed After 22 years of NJCPA volunteering, D’Uva confessed, “My only regret is that I wasn’t more involved.” Kennedy-Ryu offers a guarantee: “Within a year of joining an interest group, your phone will have a minimum of five NJCPA members’ contact information. In the next year, you’ll find yourself with new business and new contacts from your second interest group.” Aspir invites you to get the best of both worlds by getting involved in young CPAs or chapter charitable events. “You get to give back to the community and network at the same time.” Take it from Holloway, “I think you’ll be pleasantly surprised at how rewarding volunteering with the NJCPA can be. Between the people you meet and the events you attend, there will be a lot that can satisfy your interests and exceed your expectations.” Find the volunteer activity that matches your interests, career stage and talents at njcpa.org/getinvolved. N E W J E R S E Y C P A • m ay • j u n e 2 0 1 5

Junior Achievement Accountants Bowl-A-Thon – The 11th annual bowl-a-thon will be held on Wednesday, May 20, 5:30-7:30pm at Playdrome in Cherry Hill, Jersey Lanes in Linden, Hanover Lanes in East Hanover and Majestic Lanes in Hopelawn. Enjoy networking, team building and fun while raising funds to support Junior Achievement’s mission of financial literacy education. Contact Nora Jones at njones@ paoliniandscout.com to join the Southwest Jersey Chapter’s team or Don Meyer at dmeyer@njcpa.org or 973-226-4494 x207 to participate at other locations. NJCPA Leadership Positions – Members interested in serving in leadership positions for 2016/17 and beyond— including board of trustees, chapter boards, group leader or committee chair, and standing committees—must complete a Volunteer Interest Profile at njcpa.org/getinvolved to be considered. Prerequisites may apply. Contact Carolyn Hook at chook@njcpa.org or 973-226-4494 x221.

SOCIETY

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NJ State Board of Accountancy Report Board Discusses Public Comments on Education Requirements Newark (February 19) Committees

CPA Examination – The committee would like the board to request from the National Association of State Boards of Accountancy (NASBA) its recent statistics on the Uniform CPA Examination. Peer Review Oversight – The board received from NASBA information on all employee benefit plan audits in New Jersey, which it will review. Monitoring Profession – The board will participate in a conference call with NASBA so that it can demonstrate its CPE management system, which can be used for CPE audits.

Public

New Jersey Society of CPAs CEO and Executive Director Ralph Albert Thomas, CGMA, offered the Society’s assistance when the board reviews the sunsetting regulations. The Society will perform its own review in conjunction with the American Institute of CPAs. The board indicated it would welcome any suggestions from the Society. Thomas will attend a state CPA society executive directors meeting at NASBA in March. Attendees will discuss diversity, Department of Labor and employee benefit plan audits, along with other issues. The state board should also expect to receive a survey from NASBA on the demographic composition of its board members. Thomas informed the board of the Society’s recent op-ed piece on a potential death/gas tax compromise.

Legislative

The board’s regulatory analyst reviewed with the board the comments submitted by several New Jersey college accounting professors and the NJCPA on the proposed changes

to the education requirements. Among the substantive public comments: 1. Provide a grace period after the education requirements become final so that students, professors and colleges can more effectively manage the transition. The board discussed an effective date of July 1, 2016. The Society and educators in attendance felt that July 1, 2017, would be better. 2. To maintain professional integrity, continue to mandate that 60 CPE credits must be earned via “live” sources. However, the board argued that a significant number of jurisdictions have no self-study restrictions and self-study CPE is substantially equivalent to live courses. 3. The addition of a CPE mobility provision in NJ to conform to the Uniform Accountancy Act. The board indicated it is willing to take a look at mobility, perhaps as part of the sunset review, but that the issue is currently outside the scope of the education requirements. 4. Develop a consistency in a college’s necessary accreditation as it applies to both undergraduate and graduate courses for the 150-hour licensure requirement and the 120-credit requirement to sit for the CPA Exam.

Newark (March 19) Executive Director’s Remarks

Acting State Board Executive Director Khaled Madin announced that he has been reassigned to other NJ professional boards. His replacement will take over the accountancy board on April 1.

N E W J E R S E Y C P A • m ay • j u n e 2 0 1 5

President’s Remarks

NJ State Board of Accountancy President John F. Dailey Jr., CPA, extended his appreciation to Madin for his extraordinary service to the board.

Committees

Ethics – The committee received a NJ Law & Ethics course submission, which it needs to review. Education – Quinnipiac University submitted three courses it wishes to consider accounting courses. The committee recommended that one of the three courses be accepted as an accounting course, as the other two are more finance related. The board voted in favor of the recommendation. Monitoring Profession – The committee is waiting for quotes from NASBA regarding its CPE monitoring tool.

Public

NJCPA CEO and Executive Director Ralph Albert Thomas, CGMA, mentioned a Society educators meeting in March that will cover the CPA Exam. The group will discuss exam evolution and relevancy, and a representative from the American Institute of CPAs will review exam analytics. Thomas mentioned to the group that Michael Bryan has stepped down as the director of the NJ Division of Taxation. Thomas referenced a decision from the February 19 meeting regarding the rules and regulations update. He asked the board to reconsider in the future the decision to not put a cap on the number of self-study CPE credits practitioners can take. He advocated for a blended learning model that has some component of face-to-face learning. Dr. James J. Carroll, CPA, submitted a letter to the board outlining the various accreditations universities can receive, in order to give the board additional information with the rules and regulations changes.

CLASSIFIEDS Mergers/Acquisitions Seize a merger/acquisition opportunity with benefits for you. Tired of dealing with issues of running a firm? We are looking for firms ranging from $300,000 to $5,000,000 eager to combine forces as we continue to grow across northern NJ, Westchester and the Hudson Valley region. Goldstein Lieberman & Company is ideally situated to service all types of industries. Visit glcpas.com; email me, Phillip Goldstein, CPA, managing partner, philg@glcpas.com; or call 800-839-5767 to have a confidential conversation. Parsippany, NJ. Three-partner CPA firm seeks retirement-minded practitioner to merge/acquire practice ranging from $100K and up. Please contact Carl Gutt, 973-451-0800 x22 or cgutt@ dglcpa.com. Thinking of selling your practice? Accounting Practice Sales is the leading marketer of accounting and tax practices in North America. We have qualified buyers waiting and the experience to help you find the right fit for your firm and negotiate the best deal possible. For information about our risk-free and confidential services, call Bradley Holmes at 800-397-0249 or email bradley@apsleader.com. Buyers see listings and register for free email notifications at accountingpracticesales.com. Mountain Lakes, two-partner CPA firm is seeking to merge with or acquire retirement-minded sole practitioners and small firms looking for succession planning. Firm’s gross billings should be from $100K on up. Please reply in confidence to Murray Leipzig, CPA, at 973-394-8920 x11 or northjerseycpas@earthlink.net.

The Curchin Group, LLC, a central NJ, Monmouth County firm is seeking to merge-in near-retirement sole practitioners and small firms needing succession planning. Other individuals seeking growth and expansion are welcome to inquire. Initial practice continuation also an option. Reply in confidence to Peter Pfister, CPA, at 732-747-0500 or ppfister@ curchin.com.

Classified Advertising

North NJ CPA practice for sale. Grossing over $400K. Owner is looking toward retirement. Tax and write-up practice; no audits, reviews, compilations. Higher-end clients. Long-term staff willing to stay. Owner wants to work part-time for at least four years. It is important to maintain the office in the local area. Please email me at njcpa2016@aol.com.

To see additional classified listings or to place an ad, visit njcpa.org/classifieds.

Pro Bono The Union Vicinage seeks volunteers in Union County to work in the county surrogate’s office to help establish a statewide guardianship system and review documents from guardians regarding the physical and/or financial well-being of adults deemed incapacitated by the court. Training is provided for all volunteers. Interested candidates can access the volunteer application at njcourts.com/guardianship.

Professional Services Cost segregation services – Seeking firms that want to increase their revenues by adding cost segregation to their portfolio of services. Contact Joe DeSantis at 800-785-1018 or joed@ carraraservices.com.

Replies to ads with file numbers should be sent to: File______________________ New Jersey CPA Classifieds 425 Eagle Rock Avenue, Suite 100 Roseland, NJ 07068-1723

ADVERTISERS INDEX NJCPA Convention & Expo Advertisers Page #

Booth #

ADP 11 adp.com

300

Artha Systems LLC arthasystems.com

121

16, 17 23

206, 207

Camico C4 camico.com

419

Plymouth Rock Assurance njscpaquote.com

203

PNC Bank pnc.com

213-216

Provident Bank providentnj.com

112

31, 43

211

Valley National Bank C3 valleynationalbank.com

118, 123

Bank of America bankofamerica.com/smallbusiness

Rutgers University rutgers.edu

Additional Advertisers Accounting Practice Sales accountingpracticesales.com

Electronic Office Systems 25 eosnj.com

Magazine of the

New Jersey Society of Certified Public Accountants

July • August 2015

Estate Planning Team defercapitalgainstaxes.com

ImagineTime.com 37 imaginetime.com

July/August – Coming Attractions

Sanders Thaler Viola & Katz, LLP 19 st-cpas.com

The Client • Are We Truly Client Centric? • Measuring Client Satisfaction • Client Communications • When and How to Disengage a Client N E W J E R S E Y C P A • m ay • j u n e 2 0 1 5

Thomas Edison State College tesc.edu

Thomson Reuters C2 checkpointcatalyst.com

YOUNG

professionals

NJCPA Celebrates Its 55th Scholarship Awards Ceremony T

he New Jersey Society of CPAs Scholarship Fund awarded $568,500 to 105 New Jersey high school and college students— all-time highs—at the 55th annual NJCPA Scholarship Awards Ceremony in April. We applaud our members, chapters and firms for supporting the NJCPA’s efforts in helping secure the future of the CPA profession. Congratulations to these scholarship recipients:

In Name of Awards

Bowman & Company LLP (In Memory of Lisa A. Donahue) (Patron Level) Courtney Guglielmo ($5,500) Rowan University CohnReznick LLP (Benefactor Level) Nana Appiah ($5,500) Rutgers University – New Brunswick Catherine Hourihan ($5,500) The College of New Jersey EisnerAmper LLP (Partner Level) Paul Han ($5,500) The College of New Jersey Frazer, Evangelista & Company, LLC (Patron Level) Stephanie Spies ($5,500) William Paterson University

NJCPA Council of Past Presidents Award (Patron Level) Mark Errera ($5,500) Rowan University

NJCPA College Awards

O’Connor Davies, LLP (In Memory of Stephen Mannuzza) Ektaa Sanghvi ($5,500) Rutgers University – New Brunswick

Montclair State University Oluremi Faturoti ($5,500) Seth Kaplan ($5,500) Malgorzata Kruszewska ($5,500) Daphine Llosa ($5,500) Sean Mariano ($5,500) Fatima Wallizadeh ($5,500)

Passaic County Chapter Scholarship (In Memory of Gilbert P. Dorfman) Mark Janiak ($5,500) Seton Hall University Smolin, Lupin & Co., P.A. (Partner Level) Kristan Stack ($5,500) William Paterson University Untracht Early LLC (Patron Level) Kerrie Russo ($5,500) New Jersey City University

Lenore and Frederick Horn (In Memory Of ) Alyssa Blochlinger ($5,500) The College of New Jersey Maryna Zagurska ($5,500) William Paterson University

WeiserMazars LLP (Patron Level) Ashlyn Keller ($5,500) Stockton University

John Lee (In Honor Of ) Samorri Johnson ($5,500) Rider University

WithumSmith+Brown (Benefactor Level) Peter DeLeonibus ($5,500) Rowan University Kristen Fitzsimmons ($5,500) The College of New Jersey

Monmouth/Ocean Chapter Scholarship (In Memory of Joseph D. Leone Jr.) Gianna Figurelli ($5,500) Stockton University

Z. Thaddeus Zawacki (In Memory Of ) Ara Barotilla ($5,500) Seton Hall University N E W J E R S E Y C P A • m ay • j u n e 2 0 1 5

Caldwell University Anthony Guarisco ($5,500) Elena Klarberg ($5,500)

New Jersey City University Carlos Pena ($5,500) Jacqueline Rosa ($5,500) Ramapo College of New Jersey Paul Juelis ($5,500) Rider University Mateusz Szalda ($5,500) Geoffrey Watman ($5,500) Rowan University Daniel Mohnacs ($5,500) Rutgers University – Newark Ma. Vivienne Buenaventura ($5,500) Patricia Mrugalla ($5,500) Sandra Rodriguez ($5,500) Rutgers University – New Brunswick Kimberly Flynn ($5,500) Natalia Jouan-Benavides ($5,500) Monika Juzwiak ($5,500) Yogi Patel ($5,500) Robert Peters ($5,500) Yunqian Zhang ($5,500)

Seton Hall University Alec Alvino ($5,500) Erik Axelsen ($5,500) Stockton University Liudmila Kaliada ($5,500) Aaron Reader ($5,500) Gordon Ruffing ($5,500) Nicholas Scorzo ($5,500) The College of New Jersey Alec Badalamenti ($5,500) William Paterson University of New Jersey Luke DiMatteo ($5,500) Rotem Eshed ($5,500)

Minority Scholarships AICPA/NJCPA Valentina Cruz ($5,000) Kean University Joshua Rodriguez ($5,000) Rowan University

NJCPA/Northern New Jersey-National Association of Black Accountants Chanel Clarke ($5,500) Rutgers University – Newark Lorraine Wright ($5,500) Fairleigh Dickinson University

Chapter College Awards Atlantic/Cape May Chapter Fahad Farooq ($4,000) Stockton University Helena Frank ($4,000) Stockton University Kushal Patel ($4,000) Stockton University

Bergen Chapter Julianne Carlin ($2,500) Babson College Kathleen Cericola ($2,500) Seton Hall University John Cross ($2,500) William Paterson University Yiran Cui ($2,500) Felician College Jeff David ($3,500) William Paterson University Lisa DiNozzi ($4,000) Ramapo College of New Jersey Ana Dukoska ($2,500) Bergen Community College Benjamin Gutwetter ($2,500) Bentley University

Emily Japhet ($3,500) Bryant University Matt Kmetz ($5,000) Felician College Sang Lee ($4,000) Pennsylvania State University Jelena Melnichenko ($2,500) Bergen Community College Julia Sheridan ($2,500) Felician College Mercer Chapter Kelly Dunn ($2,500) Jerlin Fernandez ($2,500) Brian Haluska ($1,500) Dylan White ($2,500) Siheng Yu ($1,500) Mercer County Community College

Scholarships Funded by the Big Four Accounting Firms (Awarded over four years) Deloitte Nicole Wiesenfeld ($7,000) River Dell Regional High School Ernst & Young LLP Gregory Reilly ($7,000) Cranford High School

KPMG LLP Daniel Barracato ($7,000) Old Bridge High School PricewaterhouseCoopers LLP Jay Sirot ($7,000) Montville Township High School

NJCPA High School Awards (Awarded over four years) Rebecca Armand ($7,000) South Plainfield High School

Anthony Imbesi ($7,000) North Hunterdon High School Tara Kim ($7,000) Wayne Hills High School Neha Musthyala ($7,000) South Brunswick High School Rebecca Neyer ($7,000) Livingston High School Olivia Oramas ($7,000) Indian Hills High School Carlee Patton ($7,000) Seneca High School Annie Petrino ($7,000) Kinnelon High School Moises Philippsborn ($7,000) Cranford High School Jessica Raciborska ($7,000) Livingston High School Jesse Repko ($7,000) Buena Regional High School Kevin Roman ($7,000) Cranford High School Jamie Ruggiero ($7,000) North Hunterdon High School Lynette Santhakumar ($7,000) Watchung Hills Regional High School Kaitlyn Scaglione ($7,000) Sparta High School Adin Shah ($7,000) Monmouth Regional High School

Nicole Benway ($7,000) Pequannock Township High School

Kylie Turner ($7,000) Morris Knolls High School

Siena Chang ($7,000) North Hunterdon High School

Colin Vergilio ($7,000) Watchung Hills Regional High School

Elizabeth Christie ($7,000) Bridgewater Raritan High School Jordan DeCesare ($7,000) Rutherford High School Albert Del Cristo ($7,000) Notre Dame High School Daniel Ferioli ($7,000) Bergen County Academies N E W J E R S E Y C P A • m ay • j u n e 2 0 1 5

Elijah Viola ($7,000) Piscataway High School Daniel Weinbaum ($7,000) Hanover Park High School To support the NJCPA Scholarship Fund, visit njcpa.org/ scholarship.

LEGISLATIVE

views

NJ Pension Crisis Boils Over – Part I B y Jeffre y T. Kaszerman , NJ C PA Government R elations D irector

wo days of dramatic events in February pushed the state’s longsimmering public worker pension funding problem to the forefront in Trenton. The pension issue displaced other key issues such as funding for the depleted Transportation Trust Fund and reform of New Jersey’s onerous death taxes, as well as severely complicated the state budget negotiations that must be completed by June 30. On February 23, a state superior court judge ruled that Governor Chris Christie had illegally cut the payment designated to the state workers’ pension plans. The payment should have been part of the 2015 fiscal year budget as required by a 2011 bipartisan law that was hailed as fixing the state’s pension and health benefit funding problems. The 2015 budget, enacted by the governor in July, was $1.57 billion short of what the 2011 law required. The ruling also required the governor to put approximately $3 billion in the 2016 budget for pension funding, more than twice the amount he has proposed in the budget he released the day after the judge’s ruling. The governor has indicated that he will appeal this ruling. The day following the judge’s ruling brought more dramatic developments when the governor gave an annual budget address calling for huge changes in the structure and funding for state pensions. The NJ Pension and Health Benefit Study Commission released a far-ranging report calling for the same changes outlined by the governor. Adding to the drama was a statement by Christie during his address that the largest government workers union, the New Jersey Educational Association (NJEA), had agreed to the road map laid out by the commission. The union quickly replied that the governor overstated their agreement, and other unions criticized the NJEA for working with the commission without their input.

The latest controversy surrounding the pension issue arises from an unfunded pension liability ranging from $37 billion to $83 billion, depending on investment assumptions. This liability was caused by a failure of the past six governors, both Democrats and Republicans, to contribute adequate funding to the pension system. In 2011, Republican Governor Christie worked with a Democratic-controlled legislature to pass reform legislation that suspended cost-of-living increases for retirees and increased worker contributions in exchange for the state promising to make increasingly large multibillion dollar payments over the next seven years. Last year, the governor—citing budgetary N E W J E R S E Y C P A • m ay • j u n e 2 0 1 5

constraints—made a significant cut in the required payment for fiscal year 2014 and put $1.57 billion less than what was required in the 2015 budget. The unions immediately brought suit saying the governor was contractually obligated to make the full payments. The bold overhaul of the pension system called for by the governor and the commission essentially requires deep cuts in worker benefits in exchange for a constitutional amendment that would require the state to pay off the pension debt over a 40-year period. It’s a trade off of reduced benefits, more in line with private sector benefits, to guarantee solvency of the fund. So, what happens next in this unfolding drama? In politics nothing is certain, but Democrats in the legislature have been quick to demand that the governor make the payments required by the judge’s ruling. However, where the funding cuts necessary for such a massive allocation would come from would probably cause Democratic lawmakers as many headaches as they would the governor. Insiders believe that the governor will effectively delay any payments through the appeal process. As such, Christie can focus this year on pressuring the Democrats and unions to come to the negotiating table and agree to a plan similar to the one outlined by the commission—and perhaps find some time to run for president. Financial realities might ultimately make that scenario come to fruition and could work to the benefit of all parties involved: the state, taxpayers and union members. You never know what’s going to happen in the state capitol. In part II of this article, I’ll update you on the developments of this unfolding issue.

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Location: Cherry Hill NJ area To register visit:

pmac.rutgers.edu/infosessions or call 856-225-2700

Expect More. Be More. Choose RutgeRs.

MEMBER

profile

The TimeTraveling CPA By David Plaskow, NJCPA Communications Manager

“M

y dad passed away when I was four years old,” says Maryann Holloway, CPA. “And it was left to my mom to raise me and my four siblings.” Holloway’s dad would have been proud. She graduated magna cum laude from Rowan University in 1997 with a B.S. in accounting. “I worked full time at a bank doing wire transfers while I went to college,” recalls Holloway. “The year after I graduated Rowan, I started at Bowman & Company auditing government clients.” What does the Eastampton Township resident like about governmental accounting? “You’re helping municipalities stay fiscally sound, which means you’re ultimately helping the citizens.” To perform her governmental auditing duties, Holloway has achieved the Registered Municipal Accountants designation and the Public School Accountant license. Holloway mentions one of the more interesting facets of governmental accounting: “I’ve gotten to tabulate the results from a few local beauty pageants, which was fun.” Holloway cites an accounting career path based, in part, on a high school accounting course she found interesting as well as her appreciation for “keeping things in order.” But why take the next step and become a CPA? “Bowman is in the business of employing CPAs,” she notes. “The CPA designation puts you one step ahead of others, and it’s a credential you can carry with you for the rest of your life.” Holloway joined the New Jersey Society of CPAs in 1999. “I saw early on what involvement means, and I saw how much my mentor at Bowman, Jack Dailey, was involved,” she says. “It’s also important to give back to the profession.” She surely has,

volunteering for the Society’s Pay It Forward program, board of trustees, Volunteer Relations Committee and extensively for the Southwest Jersey Chapter. In her spare time, Holloway has been rather active on Ancestry. com. “Interestingly, I’ve located one descendent who was the focus of a 1700s article in Benjamin Franklin’s Philadelphia Gazette and another relative who, while selling his goods in town, was apparently chased by some British Redcoats.” Often the yin of someone who works with numbers for an occupation leads to the yang of an interest in words in his or her spare time. Such is the case with Holloway. “A couple of years ago, I was reading some online blogs and thought ‘I can do this,’” comments Holloway. She began writing an almost-daily blog of historical anecdotes: “If I Only Had a Time Machine.” This led her to write other things, both fiction and nonfiction. “I’ve written a few haikus

I write, I create Telling stories, sharing facts My words read worldwide —Maryann Holloway N E W J E R S E Y C P A • m ay • j u n e 2 0 1 5

and some short stories, one of which was published as part of an anthology on Amazon.com,” she adds. Her blog, https://mholloway63.wordpress.com, has nearly 500 followers. Encouraged by the positive feedback from her followers, Holloway started another blog, this one a little more personal. Never really knowing her father, she wanted to tell his story by telling the story of the ship her dad served on during World War II, The U.S.S. Hornet (CV-12). The blog, “USS Hornet (CV-12)—A Father’s Untold War Story” at https:// afatherswarstorynevertold.wordpress. com, traces the timeline of the ship through the battles it participated in. “It’s a way to get a little closer to the dad I never knew,” says Holloway. “Currently, I’m up to February 1945. So, because the war is winding down at this point, this particular blog will eventually end.” “The whole blogging process has been great,” notes Holloway. “I’ve gotten to learn a lot of tidbits about history. For example, my Saturday blog is titled WOW—World’s Outstanding Women. And, since I can’t sing or dance, blogging is a wonderful creative outlet that I hope to continue and expand upon.”

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