8 A helping hand
Robert Hartzheim Jr., CPA, CGMA, immediate past president of St. Vincent de Paul – Fond du Lac County, has been committed to volunteerism since he was a young man.
By Marcia Tillett-Zinzow
14 New energy incentives for NFPs Energy tax incentives in the Inflation Reduction Act (IRA) create unprecedented new opportunities for tax-exempt entities.
By Michelle Weber, CPA and Erin McGlinchey Couture, JD
20 Fiscal sponsorship
New attention focuses on fiscal sponsorship to help smaller nonprofits share administrative support, expertise and technology.
By Melodi Bunting, CPA, CMA,24 SECURE Act 2.0: What’s in it for you?
CGMA
Enacted Dec. 29, 2022, as part of the Consolidated Appropriations Act, the SECURE 2.0 Act makes a number of changes in the law related to retirement plans.
By Timothy C. McDonald, JDLease considerations for NFPs
Find out how the lease accounting standard, ASC 842, impacts not-for-profit organizations.
By Ashley Johnson, CPA32 CORPORATE FINANCE
3 steps for being a modern accountant and controller
Corporate finance professionals need a mindset change if they’re going to handle all their traditional tasks while meeting modern business demands.
By Michael Schultz
36 PRACTICE MANAGEMENT
Worker classification: It’s everyone’s business
When an unemployment insurance audit finds that an employer has misclassified workers, there are significant negative consequences.
By Michael Myszewski and Janell Knutson40 TAXATION
Underutilized incentives for Wisconsin investors
Wisconsin has enacted programs to attract and incentivize entrepreneurs, but some have escaped business owners’ attention.
By Victoria Thayer, CPA and Stephan Mesdjian, CPA, EA3 Outlook | chair’s letter
4 In Touch | president & CEO’s message
6 Welcome | new members
18 Memorials | departed members
22 Kudos | members in the news
On Balance is published five times a year by the Wisconsin Institute of Certified Public Accountants (WICPA). Change of address should be sent to: Membership, W233N2080 Ridgeview Pkwy, Suite 201, Waukesha, WI 53188; Phone: 262-785-0445 or 800-772-6939; Fax: 262-785-0838; email: comments@wicpa.org. Statements and opinions expressed are those of the authors and not necessarily those of the WICPA. Publication of an advertisement does not constitute an endorsement of the product or service by On Balance or the WICPA. Articles may be reproduced with permission. © Copyright 2023 On Balance
2022-2023
WICPA OFFICERS/BOARD MEMBERS INSIDE STAFF
Chair
Steven A. Pullara, CPA, CGMA
Chair-elect
Matthew J. Schaefer, CPA, CGMA
Past Chair
Angela C. Thomas, CPA
Secretary/Treasurer
Lucien A. Beaudry, CPA, JD Directors
Christopher M. Cholka, CPA, CGMA
John R. Heindel, CPA
Donna R. Scaffidi, CPA
Kyle R. Stephens, CPA
Stacy A. Stinson, CPA
AICPA Council
Ruth A. Kallio-Mielke, CPA
Neil R. Keller, CPA/ABV, CVA
President & CEO
Tammy J. Hofstede
Design & Layout
Brett Stallman
Advertising
Sue Daniels
Editor
Marcia Tillett-Zinzow
Printing Delzer
The last year sure has flown by. It’s hard to believe my year as your WICPA board chair concludes April 30. It has truly been an honor and privilege to have led the board and our strategic planning and risk management for this wonderful organization. Over the last year, I’ve developed an even greater appreciation for our organization, our profession and each and every one of our members. The insight, feedback, input and ideas provided by all of you will help us, collectively, to continuously improve this already outstanding profession.
There are way too many people to thank for making my dreams of leading the board a reality this last year. I would be remiss to not thank a few in my last chair’s letter.
First, thanks to my wife, Patti, for all her support throughout my career; my parents, Tony and Iretta, for their outstanding parenting and upbringing; and my firm’s leadership for encouraging me to devote time to the WICPA and its board through the years.
I also want to thank the other board members, committee chairs and members who devote their time, energy and talents to the organization. Your involvement helps make this organization the great resource it is.
And most importantly, thank you to the small but unbelievably effective, hard-working, creative and professional staff of the WICPA. The teamwork , collaboration and excellent work of the group with Tammy’s leadership — especially around our Level Up With Accounting CPA pipeline initiative — is amazing and second to none. These folks have all made my job easy — just as I was told they would.
I’ve heard many people say something to the effect of “It isn’t what you do or accomplish in life and your career; it is what you pass on.” I believe I’m doing my best to pass on my professional skills and knowledge to those who succeed me in
our profession and those whom I associate with — especially the younger professionals. I encourage all of our more experienced members to do the same.
I was fortunate to have a lot of mentors who shared their knowledge and professional expertise with me throughout all stages of my career. I encourage our younger professionals to actively seek out more experienced members for mentorship to gain knowledge, problem-solving skills, experience and practical wisdom that they, in turn, can pass along.
In other words, I urge everyone to please PASS IT ON — just as I will be doing for our next WICPA board chair!
“It has truly been an honor and privilege to have led the board and our strategic planning and risk management for this wonderful organization.”
“I am grateful to our staff for their assistance as we navigate through initiatives and decisions; to the board members, who have supported us during these changing times; and to you, the members, for continuing your commitment to the profession by renewing your dues, donating to the WICPA Educational Foundation and contributing to our legislative funds — and for making these initiatives possible.”
It was quite a busy year as we readjusted to finally coming back to some normalcy while adapting to the changes the pandemic brought.
One of the most significant adjustments was coming back to in-person activities and shifting and planning for the new norm of hybrid meetings and events. We also made significant progress on our new pipeline initiatives, defeated legislation that would have negatively impacted the CPA credential and profession and continued building relationships with agencies and legislators to make the WICPA and its members a key resource for business and tax issues in Wisconsin.
Advocacy promotes the profession and protects its credibility, and it is a powerful benefit of your membership. We’ve had success with advocacy efforts and continue to build valuable relationships with legislators, leaders and agencies. We have built relationships with several legislators who now come to the WICPA and our members directly for our input when introducing legislation that will impact services CPAs provide.
We created a new Legislation Review Committee to review tax legislation so we can provide input to legislators. The new committee comprises members from our Wisconsin Taxation and Federal Taxation committees. Most recently, the WICPA has provided input and had meetings on the proposed flat tax, tax-free retirement exemptions, the personal property tax elimination and the equalization of interest on over- and underpayments.
Over the last year, I have met with several key legislators as well as new legislators and the secretaries of the Department of Safety and Professional Services and the Wisconsin Department of Revenue (DOR), continuing to build and
maintain relationships with both parties and key agencies that can impact our members.
As a result of our collaboration and relationship with the DOR, we were able to voice our concerns and recommend solutions regarding the print functionality of the DOR’s manufacturing assessment returns when they moved their system to the new My Tax Account earlier this year. The department listened and made it a priority to add this feature by Feb. 17, increasing efficiency and reducing the burden, time and cost that members and their clients would have encountered.
When the occupational licensing issue came up again this year, we held a meeting with members of the legislative Occupational Study Committee to educate them on the differences between professional and occupational licenses. We provided information on the substantial equivalency and reciprocity system CPAs have — which is working — and we suggested the committee focus on aspects of licensing in Wisconsin that are not working and use the system CPAs have as an example. Although we have not seen any new legislation proposed at this time, it will be coming — and we are watching.
The WICPA hired a new lobbying firm to provide enhanced services, strategies and monitoring and build positive relationships in both parties. The new lobbyists will assist with proposed legislation that could negatively impact CPA licensure, the exam and business in Wisconsin. They will also assist with passing legislation to improve the Wisconsin business climate, including tax law changes.
A new contribution form was designed to better articulate the two legislative funds that members are encouraged to support. Without this funding, we would not be able to support or defeat legislation. Thank you to those of you who have contributed and continue to contribute to our WICPA Campaign for Political Awareness (CPAC) and Legislative Involvement Fund (LIF).
We continue to see the members-only online community — WICPA Connect — becoming a key resource for members to ask questions and share expertise on many topics. Similarly, the private communities our boards and committees use to share information also have been greatly utilized. Members are finding these tools to be very beneficial.
During the year, I was invited to give state and national updates to many of our CPA firms’ partners. The importance of these updates is underestimated, and many members are amazed when they learn what is happening and what the WICPA is doing for them and for the profession. I would welcome an invitation to meet or visit with any firm or organization that would like me to provide these updates.
The CPA pipeline initiative “Level Up With Accounting” is one I am most excited about, and it will be launching soon! As I mentioned in my last column, we added a new high school student membership; we will have new marketing materials as well as a high school and college online community, member videos (which also highlight diversity in the profession), and enhanced website pages that provide everything students and educators need to know about becoming a CPA.
We updated our new member kits and designed new WICPA T-shirts for new members and volunteers. We also purchased several new WICPA swag and promo items for our in-person events, to be given away to all attendees as well as to those who attend high school and college visits and career fairs.
With the return of the High School Educator Accounting Symposium, we were able to provide information to high school accounting and business educators about the profession, including a CPA panel representing different areas of accounting, a college educator panel and sessions on teaching innovation and the next generation of CPAs. The WICPA Educational Foundation also awarded $25,000 in accounting awareness grants for teachers to take their classes to visit with organizations and learn more about accounting through their CPA staff.
The Reading Makes Cents program is back for Financial Literacy Month in April and Money Smart Week, April 15–21. These financial literacy activities involve simply visiting one of your local elementary school (grades K–4) classrooms, reading a book to the class and discussing the basics of money and savings. The WICPA Educational Foundation provides everything you need: a money-themed book, a teacher/ parent guide and a gift for each student. Email Devin Yates at devin@wicpa.org to sign up today!
The WICPA and WICPA Educational Foundation continued their 26-year partnership with and support of the Young Entrepreneurial Scholars (YES) program. The goal of the YES program is to expand opportunities for minority students and increase diversity in the accounting profession. We also partnered with the National Association of Black Accountants (NABA) and James Madison High School in Milwaukee to provide volunteers and mentors to assist with their Career Day and entrepreneur series. We have also developed relationships with Milwaukee Public Schools, and we are exploring how we can work together to bring accounting into the district’s classrooms. Several of our new videos will feature the topic of diversity in the profession, including one about the YES program.
We were very excited to hold all our conferences and events in person this year! Our conferences were offered in person and as livestreams. Although we saw a decline in in-person attendance, the livestream and on-demand options continue to be increasingly popular.
With nearly 300 attendees, the Member Recognition Banquet last May recognized membership milestones with new awards for 25-, 40- and 50-year members and honored the Excellence Awards recipients. Our New CPA Banquet, held in June, was a hit with our newly licensed CPAs. The banquet featured casino-themed entertainment and a presentation by the CFO of Fear the Deer LLC — including a visit and photo opportunities with Bango and the Bucks championship trophy. In September, the annual golf outing exceeded expectations with a record attendance of 231 registrations. The outing was sold out in less than a month!
Our breakfast programs remained (and will remain) virtual so more can attend from around the state, but we kept the popular Individual Income Tax Update as an in-person event with livestream and on-demand options. We also offered more one-, two- and four-hour livestreamed seminar and webinar programs to continue the trend of shorter CPE increments with the ease of fitting CPE into members’ schedules and without necessitating travel.
I am grateful to our staff for their assistance as we navigate through initiatives and decisions; to the board members, who have supported us during these changing times; and to you, the members, for continuing your commitment to the profession by renewing your dues, donating to the WICPA Educational Foundation and contributing to our legislative funds — and for making these initiatives possible.
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If you ask Bob Hartzheim what he’s passionate about, he won’t answer “public accounting.” He might trip a little over “technology,” but if he boldly says “volunteerism,” you can say “bingo!”
After just one semester of college, Hartzheim enlisted in the U.S. Army. He taught photography and photo development at Ft. Monmouth in New Jersey and was later assigned to the Army Security Agency. He was awarded the Army Commendation Medal First Oak Leaf Cluster.
After his service, he completed his college education and earned his bachelor of arts degree in accounting from the University of Wisconsin–Oshkosh in 1977, becoming certified in 1984. His first public accounting job was with Alexander Grant (now Grant Thornton), and he stayed just over a year before moving on to Fond du Lac County, joining as general government accounting manager and ultimately advancing to finance director. That’s when his interest in information systems (IS) took hold.
He had taken a couple of classes in IS in college, back when the only computers were mainframes, one of which he worked on while at Grant Thornton. But when he moved on to the county, he began actively working on building accounting systems.
“I helped computerize the payroll system and the tax collections, even though that was not my bailiwick,” Hartzheim said. “We did a budgeting and general ledger system, and then we put in a patient billing system. For that, we needed a front-end accounts receivable system, so we began working with Software International’s general ledger. Once that was all set up, we went to doing monthly reporting for all the departments, which had never been done.”
The county also got a clean audit opinion for the first time as a result of the computerized systems. Hartzheim worked for the county for more than six years and then in 1983 was hired by Software International, where he again worked on mainframe software and held the title of pre-sales consultant.
“There was a lot of travel involved, and it got to be crazy,” he said. “Also, the company was sold to Computer Associates Inc. PCs were coming about, and I had worked on them a little bit at the request of my VP, so I decided to focus on that.”
Hartzheim’s first PC was a Commodore 64. He doesn’t remember the name of his next PC, which was portable but not comparable to today’s laptops: “It was about the size of a travel suitcase, and it weighed 42 pounds!”
He continued working in the technology arena until 1988, when a former co-worker at the county — Gilbert (Gib) Hietpas, CPA — contacted him and asked if he’d consider bringing his computer consulting skills back into the public accounting arena.
“So we became partners in the firm of Hietpas and Hartzheim CPAs, and I handled the technology consulting end,” recounted Hartzheim.
Technology boomed when Windows came on the scene, and as the software evolved, the firm began working with Fortune 500 companies. “Those projects were much bigger. Instead of having PCs for the boss, the accounting manager and a data input person plus one or two other PCs, all of a sudden you had 100 or 150, which was a whole different thing,” Hartzheim said. “The volume of work was overwhelming.”
So when a friend asked him to go into the technology business with him in 2000, he said yes. The company was called Frontline Systems, and Hartzheim was co-owner for more than 16 years. For the last six years, he’s been a selfemployed technology consultant.
Hartzheim’s interest in volunteerism started at an early age. His parents both did volunteer work, and that resonated with him. But it was a part-time high school job helping photograph weddings that really set the stage for Hartzheim’s passion.
“My boss volunteered with St. Vincent de Paul,” he recalled. “We were photographing a wedding, and he had to leave for a couple of hours to drop off food for people. After the wedding, we went and had a soda and talked about what he did. I thought about it a lot. And in 1999, when I was done traveling around the country for work, I started volunteering with St. Vincent’s. I’ve been doing that ever since.”
In October 2016, Hartzheim was chosen to serve as president of the Fond du Lac County St. Vincent de Paul, serving in that role for six years until recently. Prior to that, he served on the organization’s board and as vice president.
While he was serving as vice president, a survey was sent to 40,000–50,000 households in Fond du Lac County to assess the organization’s progress and perceptions in the community. One major question was What’s missing? What do we need?
“‘A homeless shelter’ was the biggest answer,” Hartzheim said. “We started figuring out how we could do it and ultimately decided we couldn’t do it on our own. So we started talking to different agencies and ended up with the Solutions Center, which at that time ran a single men’s shelter and a domestic violence shelter in Fond du Lac.”
The two organizations had partnered on a home visit program and found they worked well together, and the Solutions Center already had experience running a shelter — something St. Vincent’s did not have.
“Then we got serious about it and hired a contractor and an architect,” Hartzheim recounted. “We first looked at some existing buildings that were empty. But the costs of rehabbing the buildings and putting in sprinkler systems and air conditioning was prohibitive.”
So the partners decided to build a new building and began searching for the best location — which ended up being right next to St. Vincent’s Thrift Store.
Once the location was selected, the group focused on what they wanted the shelter to be. What they didn’t want it to be was just a place for people experiencing homelessness to go.
The groups wanted the shelter to be program driven, with classes in budgeting and assistance in seeking employment and finding housing. St. Vincent de Paul’s “Getting Ahead” class, which helps participants move away from poverty and toward financial stability, would also be part of the programming. The goal was for the individuals to find a
job and a place to live within a 60-day time frame, with a maximum stay of 90 days if necessary. If someone would arrive and not agree to participate in the programming, that person would not be able to stay.
The shelter was named after St. Katharine Drexel, the patron saint of racial justice and philanthropists, who is one of only two American-born saints canonized by the Catholic Church. Coincidentally, one of the project’s major donors was Drexel Building Supply in Campbellsport, which covered about one-fifth of the building’s $5 million cost. There is no link between the company and the saint beyond a deep faith and belief in philanthropy.
With all work done, the shelter opened in late May 2022. The 20,000-square-foot building can house 15 families and 36 single men and women and is separated into three sections, with individual wings for single men, single women and families.
“The people are actually quite busy,” said Hartzheim. “We don’t need a cleaning staff or a maintenance person because everyone is assigned tasks. Some of the larger businesses we met
with said, ‘What do you mean, you don’t have a cook?’ I explained that the people need to know how to cook when they move into their apartments. We have two kitchens upstairs, one for single adults and one for families. Surprisingly, even some of the women who come in don’t know how to cook or operate a stove.”
Operationally, St. Vincent de Paul covers all the building costs (insurance, utilities, maintenance, anything else to do with the building). The Solutions Center pays for wages, supplies, etc. on the family side, and St. Vincent’s pays for these expenses on the singles side. The shelter was built with an eye on economics, not just in regard to construction but also operationally, as it relies on philanthropic and government help.
“We get a lot of food from the federal government and from companies that donate food. Some companies volunteer to have their staff come in, prepare a meal and teach the people how to cook what they’re preparing,” Hartzheim said. “We also had a donor who bought 192 solar panels from the Alliant Energy solar farm,* and that usually saves us around $410 a month in utility costs.”
In addition to his executive work with St. Vincent’s, Hartzheim and his wife, Ardena, have for years been involved in St. Vincent’s home visit program, assisting people who need help with things like food or rent. He also serves on the organization’s National Housing Task Force and volunteers with its National Disaster Services Corp. as well as with Healing Paws Inc., which provides pet therapy services. He is currently vice president of the St. Vincent de Paul–Milwaukee Archdiocesan Council, as well.
The couple have two children: John, 44, who works as a paramedic firefighter in Colorado, is married (Elizabeth) and has three children; and Kimberley Bienemann, 40, who works in Madison as a policy analyst for the state of Wisconsin and is also married (Dominic).
Michelle M. Adams
William R. Ahlstrom
Karl T. Ahonen
Michael D. Akers
Margaret Albrecht
William G. Anderson
John C. Andres
Laura J. Arnow
Richard G. Barry
Donald J. Becker
Thomas G. Bendt
David A. Benner
Ronald C. Berman
Michael J. Berns Sr.
Mary R. Bertram
Rita Bills
Lawrence C. Bittner
Karla E. Blair
James R. Blinka
Jennifer M. Bogli
Aldo Bonfiglio
Daniel L. Borreson
Richard J. Boulay
Janet V. Brown
Dana E. Brunstrom
David G. Chapman
Stephan J. Chevalier
Chris M. Cholka
Timothy L. Christen
Edward H. Cichurski
Michela J. Cobb
Cheryl A. Connor
Robert E. Cook
Joann Noe Cross
Jonathan Crowell
Jeffrey A. Davis
Tanika Davis
Curtis M. Day
Gerald E. Denor
Suzanne M. Denzine
Patti L. Desrosier
Jeff Dewane
Linda S. Dicks
Richard A. Dieffenbach
Paul C. Dingee
Peter J. Doemel
Sean P. Donahue
Susan L. Dwyer
Dale L. Ebert
Kathy-Ann Edwards
Kathryn Erickson
Gary A. Ertel
Deidre A. Erwin
Jennifer Fahey
Fred G. Farris
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Robert J. Foulks Jr.
Jeffrey A. Frank
Charles F. Freiberg
Ann B. Freund
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John A. Gerold
Charles E. Gierl
Charles H. Gietzel
Alan J. Giuffre
Daniel L. Goelzer
Robert C. Goldie
Kathryn L. Golsteyn
William D. Goodman
Michael H. Grams
Robert C. Graveen
Kurt E. Gresens
William P. Grimmer
Randall S. Grobe
Douglas W. Haag
Michael J. Hablewitz
David A. Hagen
John A. Haider
Gail L. Hanson
Theodore E. Hart
Martin G. Hartwig
John R. Heindel
Keith D. Helm
Glen V. Helmbrecht
Joy L. Hertlein
John M. Hicks
Patrick G. Hoffert
Kathleen J. Hoffman
Katy Hook
Daniel E. Horton
Wayne N. Huberty
Lynne H. Huebschen
Patricia R. Huettl
Joseph P. Imhoff
Janet E. Isbister
George S. Jaloviar
Bradley J. Jansen
Noah J. Janssen
Maria Jarvi
Jeffrey A. Jaschinski
David M. Johnson
Elizabeth R. Johnson
Ruth A. Kallio-Mielke
David A. Kamke
Carl F. Kantner
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Fr. Kurtis J. Klismet
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Thomas H. Koplin
Rosanna L. Kopling
Thomas G. Kortas
Nicole C. Kraus
Jason R. Krentz
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Bernard Kristal
Arthur E. Kronenberg Jr.
David W. Kuesel
John A. Kuhn
Keith M. Kwaterski
Mary L. La Macchia
Gregory P. LaFreniere
John G. Lauber
Jack G. Lee III
Charlotte J. Liddicoat
Ronald A. Ligman
Richard D. Lindgren
Thomas P. Luken
Patrick R. Lyons
Andrew D. Maroo
Muriel L. Marx Hoffmann
Lucretia S. Mattson
Robert T. McGrane
Krista M. McMasters
Michael P. McNamara
Gary J. Mennen
William P. Merrick
Thomas L. Mickelson
Glen A. Milkus
Howard C. Miller
James P. Miller
Robert C. Miller
Amber M. Mulrooney
Nanine M. Nelson
Chad S. Neumann
Terence A. Niewolny
William C. O’Loughlin
Wayne E. Olsen
Gerald A. Ontko
Dana S. Outhouse
Dennis Pelzek
Jeffrey E. Peterson
Sandra M. Peterson
Ray Petkovsek
Thomas J. Polacek
Steven J. Pope
James L. Possin
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Gerald E. Powers
Keith A. Radke
Thomas G. Ragatz
Mary E. Repka
Andrea C. Retzki
Michelle M. Riley
Edward E. Roberts
Ronald E. Roder
Betty J. Roethle
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Larry J. Rose
Henry A. Rueden
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Eli H. Schmukler
Robert A. Schneider
Harold L. Schroeder
Frank R. Scott
Richard A. Scott
Mary K. Scrivner
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Donald W. Smith
Jane M. Somers
Richard W. Spencer
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Mary E. Stroud
William S. Tatman
Edward M. Terry
Martin C. Thomas
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Scott B. Tracy, CCIFP
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Robert O. Wittke Jr.
Dennis G. Wojahn
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The $268 billion package of energy tax incentives recently enacted as part of the Inflation Reduction Act (IRA) creates unprecedented new opportunities for tax-exempt entities (tax-exempts). The bill generously enhances and extends existing incentives while also creating several new energy credits. More important, new options to monetize the tax incentives were crafted specifically so tax-exempts could benefit.
The growing interest across the economy in environmental, social and governance (ESG) initiatives is even more pronounced in the not-for-profit space. Many tax-exempts have set aggressive environmental goals or are eager to show stakeholders they are committed to reducing their carbon footprints. The new energy incentives will give tax-exempts the economic tools to make their physical spaces more energy efficient, green their fleets or even generate their own electricity.
Erin McGlincheyA drawback to many tax incentives is that they provide little benefit unless the entity claiming them is paying tax. That is why many incentives fail to drive the intended activity in the tax-exempt space. Lawmakers writing the IRA recognized this problem and created a special election under new Section 6417 that allows tax-exempt entities, state and local governments and instrumentalities, Indian tribal governments, the Tennessee Valley Authority, Alaska Native settlement corporations and rural electricity cooperatives to elect to receive the new and enhanced energy credits as refundable tax payments. This will allow tax-exempts to fully benefit from the credits even if they have no unrelated business income or pay no tax. There are also new ways to monetize the enhanced deduction for energy-efficient commercial property, as discussed below.
The IRA enhances and extends the two tax credits generally available for projects generating energy from renewable sources such as wind, solar or geothermal: the Section 45 Production Tax Credit (PTC) and the Section 48 Investment Tax Credit (ITC). In the past, the ITC was
specifically barred for tax-exempt entities, and taxpayers could not claim them even if they were leased to tax-exempt entities. This forced tax-exempts and government entities, particularly colleges and universities, to enter complicated transactions in which third parties retained ownership of the property and sold the electricity back to the ineligible entity. The new direct-pay mechanism discussed above will allow tax-exempts to directly benefit from renewable projects, which may range from large wind or geothermal projects to a simple array of solar panels on a roof.
The ITC generally offers a one-time 30% credit based on the cost of the project when it is placed in service. The IRA also expands eligible property to include battery storage, microgrid controllers and other equipment. Alternatively, the PTC offers a per-kilowatt credit for selling the electricity for 10 years after the project is placed in service. For most property, including wind and solar, taxpayers can choose either credit.
To qualify for the credits, taxpayers must generally begin construction before the end of 2024. After 2024, the credits will be replaced by new technology-neutral versions.
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The growing interest across the economy in environmental, social and governance (ESG) initiatives is even more pronounced in the not-for-profit space.Couture, JD
apprenticeship requirements on their projects to qualify for the full credit rates. The wage requirements specify minimum prevailing wages be paid based on project locations. The apprenticeship requirements require a set percentage of total labor hours be performed by qualified apprentices.
Enhanced credit rates are available for projects in which the components are sourced domestically or for projects in specific geographies. Many tax-exempts may already be operating in the low-income or distressed communities that will be eligible for enhanced rates. For projects financed with tax-exempt bond financing, not all is lost. Projects qualifying for the ITC or PTC that also qualify for tax-exempt financing can be 100% financed with tax-exempt bonds, resulting in a maximum 15% reduction in the amount of the tax credit.
The use of alternative-energy vehicles has become an extremely popular way for organizations to show their commitment to their environmental goals. The IRA created a new credit under Section 45W for qualified commercial clean vehicles acquired and placed in service after Dec. 31, 2022. Unlike the general consumer credit for clean vehicles under Section 30D, this credit for businesses and tax-exempts is not shackled by stringent new battery and mineral sourcing requirements.
The nominal credit rate is 15% of the cost of qualifying vehicles with a gasoline or diesel engine or 30% of the cost of other qualifying vehicles but is limited to the incremental cost of the vehicle relative to a comparable vehicle powered solely by a gasoline or diesel engine. The credit is also capped
at $7,500 for vehicles weighing less than 14,000 pounds and $40,000 for heavier vehicles. The credit is not allowed if a Section 30D general clean vehicle credit was claimed.
Like the ITC and PTC, this credit is specifically available to tax-exempts as a refundable payment but only for tax years beginning after 2022. Lawmakers also created special rules for tax-exempts, allowing them to claim the credit even if the vehicle is not subject to an allowance for depreciation, which would otherwise preclude many tax-exempts from benefiting.
Tax-exempt entities greening their fleets, or simply looking to encourage electric vehicle use, can also consider the tax credit under Section 30C for installing electric vehicle charging stations and other alternative-fuel refueling property. The IRA replaced the credit’s $30,000 cap per “location” with a $100,000 cap per charging station. The new credit, however, will be limited to property placed in service in nonurban census tracts and census tracts eligible for the new-markets
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The use of alternative-energy vehicles has become an extremely popular way for organizations to show their commitment to their environmental goals.
tax credit. It should be noted that the Section 30C credit is not directly applicable to tax-exempt entities; however, the IRA carved out a special provision. The company that sells the qualified equipment to the tax-exempt may be treated as the taxpayer eligible for the 30C credit. The provision requires that the seller disclose to the tax-exempt the amount of the allowable credit. As such, tax-exempts should consider whether price negotiations are warranted.
The new version of Section 179D will offer tax-exempts a powerful incentive to make their physical footprints more energy efficient. Section 179D provides for an immediate deduction for energy-efficient HVAC, lighting and building envelope property, such as windows and roofing. It offers as much as $5 per square foot to reward the construction of energy-efficient commercial buildings and multifamily buildings that are at least four stories. In addition to energyefficient ground-up construction, energy-efficient retrofits of older buildings may also be eligible.
While Section 179D is not a new provision, the IRA allows the Section 179D tax deduction to be allocated to designers of commercial property owned by tax-exempt organizations, Indian tribal governments and Alaska Native corporations. This expansion is a notable win for organizations with substantial real-estate footprints — including colleges, universities and hospitals. Moreover, the ability for tax-exempt organizations to negotiate the allocation of the deduction to the designer also could result in substantial cost savings in the development of new projects.
In addition to the tax credits outlined above, many taxexempt organizations may be interested in new provisions in the IRA that allow for a direct-payment election under new Section 6417 for certain specialized tax credits. These provisions present an opportunity for tax-exempt organizations to utilize and monetize credits that may not have been accessible to them in the past. Notable directpayment credits include the following:
• Section 45Q credit for carbon capture and sequestration
• Section 45U zero-emission nuclear power production credit (new)
• Section 45V clean hydrogen production credit (new)
• Section 45X advanced manufacturing production credit (new)
• Section 48C advanced energy project credit
These credits generally have their own timing and qualification requirements.
The IRA represents a unique opportunity for exempt organizations to align their value for green investments with potentially refundable tax credits. Due to the complexity of the law and specific provisions for tax-exempt organizations, these entities should look closely at the opportunities and the requirements around them.
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The IRA represents a unique opportunity for exempt organizations to align their value for green investments with potentially refundable tax credits.
Bill Appel, CPA, age 91, passed away on Wednesday, Dec. 21, 2022. He was a partner in the CPA firm of Sattell, Johnson, Appel & Co. for over 50 years, retiring at the age of 85. His love of community defined his life outside of family, friends and work, as he served as president of the Jewish Community Center in Milwaukee and then a member of the board up until the last year. He also was first chairman of the Holocaust Educational Resource Center and served on numerous committees. He sat as North Shore Little League Commissioner in the late 1970s and early 1980s. Appel is survived by his wife of 61 years, Elaine; a daughter and two sons; six grandchildren; three sisters; two brothers; numerous nieces and nephews, in-laws and dear friends.
Ronald O. Helstad, CPA, 91, passed away Saturday, Dec. 31, 2022. Helstad was born in Ettrick and grew up on his family’s farm in French Creek. After graduating from high school, he served in the U.S. Marine Corps and was recently honored to participate in the Freedom Honor Flight program. After his service, he earned an accounting degree from UW–Whitewater and worked as an accountant at the La Crosse Trane Company. Soon after, he began his career as a CPA with Engelson and Associates, which continued for over 50 years. Helstad was a member of the VFW, Rotary Club and the Sons of Norway. He also served as treasurer for the Norwegian Club, Nord Hedmark og Hedmarken Lag. He was a longtime member of Grace Evangelical Lutheran Church in La Crosse, where he served as an usher and treasurer. Helstad is survived by his wife, Audrey; three sons; four grandchildren; three great-grandchildren; a brother and sister-in-law; and many other relatives and friends.
Curt Romenesko, age 53, passed away on Wednesday, Jan. 18, after a nearly two-year battle with brain cancer. Curt was born and raised in Little Chute. As the youngest of four, he learned to be tough, strong and carefree. These characteristics were tested and proven when Curt became a quadriplegic at the age of 22 as the result of a car accident. The life-altering moment led him to devote much of his time to the ThedaCare Prevent Alcohol and Risk Related Trauma to Youth (P.A.R.T.Y. ) program, speaking to youth throughout northeastern Wisconsin about how irresponsible behavior can change one’s life forever. Curt earned a bachelor’s degree in accounting from UW–Green Bay, became a CPA and worked more than 20 years at Spectrum as an accountant, business analyst and workforce management administrator. He is survived by a brother, two sisters and 10 nieces and nephews.
Paul T. Sheahan, CPA, CFE, passed away Friday, Dec. 23, 2022. Sheahan graduated from Oak Creek High School and later from the University of Wisconsin–Milwaukee with a bachelor’s degree in accounting. He began his career at the family business, Technical Metal Specialties, as a controller. He later obtained his CPA credential and worked for various firms throughout the greater Milwaukee area, most recently for SVA Certified Public Accountants in Brookfield. Sheahan is survived by his parents; the love of his life, Audra Stewart, and her two sons, to whom Paul was a father figure; his two brothers; nieces and nephews; and many other relatives and friends
Samuel J. Stagliano, CPA, passed away on Thursday, Dec. 29, 2022. A WIPA member, Stagliano served on the WICPA State Small Business Assistance Committee and received the 1995 WICPA Small Business Accountant Advocate Award. In 1976, Stagliano graduated from Eau Claire North High School, where he played many sports; was a class officer; and was active in DECA, Radio-TV Club, Student Council and the National Honor Society. He went on to receive his Bachelor of Administration degree in accounting and mathematics from UW–Eau Claire in 1981 and began his CPA career working for public accounting firms in Green Bay and Minneapolis before joining Bauman Associates, Ltd. in 1984. He retired in December 2019. Stagliano was also active in many community organizations. He served as past president or chairman of the board for the following groups: Eau Claire Area Chamber of Commerce, UW–Eau Claire Alumni Association, Rotary Club of Eau Claire, Leave-A-Legacy Chippewa Valley Inc. and the Eau Claire Jaycees Inc. He also served as a past board member of Downtown Eau Claire Inc., the Eau Claire YMCA and Leadership Eau Claire. As a member of the Eau Claire Jaycees for 13 years, Sam worked on many community projects, such as Eau Claire Sawdust City Days, several airshows, Easter egg hunts and Haunted Hollow Trail. In 1989, he chaired the four-day Eau Claire Sawdust City Days Summer Celebration. From 1999 to 2004, he took over management of Eau Claire’s summer event, Festival in the Pines, together with two other local businessmen and his wife, Cheryl. From 2003 to 2010, he and Cheryl took over management of Eau Claire’s Christmas event — Sinterklaas Market. Stagliano is survived by his wife, Cheryl; two children; a granddaughter; two brothers; and many other relatives and friends.
If you are aware of a member obituary and believe it should be included in Memorials, please send a copy of the obituary or contact Marcia Tillett-Zinzow at mtzinzow@icloud.com.
ore than 1.5 million U.S. charitable nonprofits are described in section 501(c)(3) of the Internal Revenue Code. These organizations are incredibly diverse in mission, scope and impact and can range in size from local grassroots to large national organizations. Among the largest charitable organizations are a number of private and public foundations. While the term “foundation” has no firm legal definition, it is an organization created to fund other organizations or individuals for charitable purposes, often through grants.
No matter the size, all nonprofits are faced with risk management, complex regulation compliance and varied reporting requirements. Having the right systems
Mand expertise to manage these can be costly and often burdensome for smaller and local nonprofits. As a result, these organizations often face additional challenges investing in administrative capacity.
One potential solution to this problem is fiscal sponsorship. Fiscal sponsorship has been around for over 50 years but has recently been gaining more attention as an effective way for smaller nonprofit organizations to share administrative support, expertise and technology. Accordingly, fiscal sponsorship becomes a way to address the inequities and power imbalances inherent in the sector.
Fiscal sponsorship is not defined by law. Thus, Fiscal Sponsorship: 6 Ways to Do It Right, by Gregory Colvin, has become an informative guide, outlining six models of fiscal sponsorship often cited by nonprofit advisors.
One of these models supports a charitable project or startup nonprofit as the fiscal sponsor becomes the administrative home. In this model, the fiscal sponsor is a
501(c)(3) organization that allows a charitable project or startup organization to solicit tax-deductible donations without having to acquire its own 501(c)(3) status. Donations are given to the fiscal sponsor, so they are tax deductible for the donor. The fiscal sponsor generally accounts for the donations and expenses for the project or startup using fund accounting, as the fiscal responsibility lies with the fiscal sponsor.
One example of this is a startup that had a mission and vision but minimal resources to get started. The founder worked with a fiscal sponsor for the first 18 months. During that time, the founder was able to obtain independent 501(c)(3) status, build a donor base and develop an effective governance board. Five years later, the organization is flourishing and experiencing significant mission impact.
Lisa Dugdale, executive director of Center for Community Stewardship, a Madison-based fiscal sponsor, notes, “This is a good example. We find that almost all of our organizations stay for three to five years; some stay with us forever.”
In this model, the fiscal sponsor is generally performing the daily accounting as well as financial management and reporting, fiduciary oversight, development of resources, human resource management and other administrative services. In return for these services, the fiscal sponsor charges an administrative fee. Typically, this fee is a percentage of the total budget. The fee is a cost-effective way for smaller nonprofits, startup nonprofits or charitable projects to benefit from the tools, technology and expertise of the fiscal sponsor.
Some fiscal sponsors concentrate on a specific area of focus, such as social justice, health care advocacy, elder care, or arts and culture, as a way of expanding the benefits of sharing resources. This is important, as not all nonprofits serve the same audience or have the same risks to manage. Funding sources and applicable laws may also vary. Focusing on a specific nonprofit program niche provides more specific tools, technology and expertise specialized to the unique operations of the niche, allowing projects, startups and smaller nonprofits to improve mission impact. A relatively new organization is working to provide support and expand fiscal sponsorships specializing in a nonprofit niche.
During the pandemic, the arts and performance organizations struggled. This renewed the conversation about how to bring the arts and performance organizations to a broader audience and less densely populated areas. By sharing common administrative management and expertise, several smaller organizations have been able to remain in operation.
Another model is the grant relationship. In this model, the charitable project or startup applies to the sponsor for grant funding. This model is often used for arts
organizations. Fractured Atlas is an example of this focus. They have been serving as a fiscal sponsor for the arts for over 20 years.
Another benefit of fiscal sponsorship is the sponsor keeping abreast of the ever-changing nonprofit legal and compliance landscape so individual projects or organizations can focus on mission, programming and fundraising. In complex situations where professional judgment may vary, the fiscal sponsor can provide a different perspective in analyzing the appropriate direction.
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Another benefit of fiscal sponsorship is the sponsor keeping abreast of the everchanging nonprofit legal and compliance landscape so individual projects or organizations can focus on mission, programming and fundraising.
Molly Berenson, CPA, has been promoted to the position of outsourced accounting manager at Kollath CPA.
Bruce Berndt, CPA, CGMA, a partner at Berndt CPAs, was consulted for his expertise in an article in Madison’s In Business magazine about coping with inflation.
Jenni Bieck, CPA, has been promoted to shareholder and chief technology officer at Huberty CPAs. As a shareholder, she will be actively involved in the vision and strategy of the firm.
Kevin Block, CPA, has been promoted to partner at MBE CPAs in Madison.
Amber Drewieske, CPA, has been advanced to the role of principal by CliftonLarsonAllen (CLA) in Green Bay.
Melissa Gerrits, CPA, has been advanced to the role of signing director by CLA in Green Bay.
Kenneth P. Hahn, CPA, chief financial officer at Kondex Corp. in Lomira, has been recognized in the 2023 Wisconsin Titan 100, an annual list of the state’s top 100 C-level executives.
Kimberly Iley, CPA, CVA, has been promoted to partner in the Neenah office of Hawkins Ash CPAs.
Sara M. Johnson, CPA, previously a principal with Vrakas CPAs + Advisors in Brookfield, has been promoted to shareholder in the firm’s Audit Department.
Lynn Keller, CPA, has been promoted to director of tax at Sikich LLP in Brookfield.
Dale Kooyenga, CPA, has been hired by the Metropolitan Milwaukee Association of Commerce to serve as a senior vice president.
Bryan Kronberger, CPA, has been promoted to senior accounting associate at Northland CPAs.
Amanda Linehan, CPA, has been promoted to partner in the River Falls office of Guinn, Vinopal & Zahradka LLP.
Nathaniel Logan, CPA, has been advanced to the role of principal by CLA in Fond du Lac.
Jay McKenna, CPA, was named president and CEO of North Shore Bank after previously serving as president and chief operating officer.
Brian McMahon, CPA, a lifetime WICPA member, has been inducted into the Wisconsin Harness Horse Association’s (WHHA) Harness Racing Hall of Fame. McMahon, 84, has been involved with both thoroughbred and standardbred horses for nearly 80 years. He served a term on the WHHA board of directors and continues to serve as the organization’s CPA.
Cindy Meicher, CPA, CVA, managing partner at Meicher CPAs, was consulted for her expertise in an article in Madison’s In Business magazine about coping with inflation.
Becky Meyer, CPA, has been advanced to the role of signing director by CLA in Green Bay.
Steve Meyerson, CPA, MST, CGMA, owner of Steven Meyerson CPA LLC, offered helpful tax tips in a television news segment for southeast Wisconsin’s WDJT–CBS 58.
Adam Mleziva, CPA, has been advanced to the role of principal by CLA in Green Bay.
Leary Morris, CPA, has been promoted to director at Sikich in Brookfield.
Jordan Nettesheim, CPA, has been promoted to audit manager at Sikich in Brookfield.
Briana Peters, CPA, has been promoted to partner in the Green Bay office of Hawkins Ash CPAs.
Paul A. Rothering, CPA, previously a principal with Vrakas CPAs + Advisors, has been promoted to shareholder in the firm’s Audit Department.
Jason Sands, CPA, has been promoted to director at Sikich in Brookfield.
Paul D. Schoessow, CVA, previously a principal with Vrakas CPAs + Advisors, has been promoted to partner of Vrakas Business Valuations LLC, part of the Vrakas CPAs + Advisors family of companies.
Miranda Schultz, CPA, has been promoted to senior vice president and CFO at Wolf River Community Bank in the Fox Valley.
Josh TeBeest, CPA, has been promoted to shareholder and tax service line leader at Huberty CPAs. As a shareholder, he will be actively involved in the vision and strategy of the firm.
Alex Tetzlaff, CPA, has been promoted to the position of senior accountant at Kollath CPA.
Kari Theis, CPA, has been advanced to the role of signing director by CLA in Green Bay.
Kim Thome, CPA, has been promoted to shareholder and director of accounting at Huberty CPAs. As a shareholder, she will be actively involved in the vision and strategy of the firm.
Jordan Waech, CPA, has been advanced to the role of principal by CLA in Sheboygan.
Robert Zuengler, CPA, has been advanced to the role of principal by CLA in Fond du Lac.
In January, Northland CPAs received the Rhinelander Chamber of Commerce’s Company Culture Excellence Award, which recognizes an organization that has seen success in its efforts to better the company culture and employee development and engagement and that exhibits the traits of one of the community’s best places to work.
Enacted Dec. 29, 2022, as part of the Consolidated Appropriations Act of 2023, the SECURE 2.0 Act makes a number of changes to the law related to retirement plans. Following are some key changes.
Effective in 2023
Required minimum distribution (RMD) age: The RMD age increases, with a phase-in, from 72 to 75. The RMD age is:
• 73 for those reaching age 72 after 2022 and age 73 before 2033, and
• 75 for those who reach age 74 on or after 2032.
An individual could turn age 73 before 2033 and age 74 after 2032, so technical correction is likely.
RMD excise tax: The 50% excise tax on missed RMDs is reduced to 25%. It is further reduced to 10% of the missed RMD if the individual receives past-due RMDs and pays the
tax within two years after the year of the missed RMD and before receiving an IRS notice assessing the excise tax.
Hardship: An employer may rely on an employee’s certification as to the occurrence of a hardship event, as to the amount needed to address the hardship and that he/she does not have sufficient other liquid assets to satisfy the hardship.
De minimis incentives for elective deferrals to 401(k) plans: Employers now may provide, in addition to matching contributions, de minimis financial incentives (e.g., low-dollar gift cards) to encourage employees to make elective deferrals.
Employer Roth contributions: 401(k), 403(b), government 457(b) and other defined contribution plans may allow employees to elect to have immediately vested employer matching and nonelective contributions contributed as Roth contributions. Plans can include Roth contributions (and in-plan Roth rollovers/conversions) whether or not they permit elective deferrals.
Small benefit cash-out: and government 457(b) plans may automatically cash out a participant’s benefit on termination of employment, without consent, if his/her vested benefit does not exceed $7,000 (increased from $5,000).
Age 50 and over catch-up contributions: 403(b) and government 457(b) plans must treat as Roth contributions any catch-up contributions made by participants age 50 and over who received compensation greater than $145,000 (as indexed) in the preceding year.
No Roth RMDs: take RMDs from a Roth account under 401(k), 403(b), governmental 457(b) or other defined contribution plans during their lifetimes. The RMD rules applicable at death continue to apply to inherited Roth accounts.
Matching student loan payments: government 457(b) plans may permit employer matching contributions on employees’ qualified higher-education loan repayments. For testing purposes, the match is treated as match on elective deferrals.
Emergency savings account: 457(b) and other defined contribution plans may permit participants who are not highly compensated to make deposits to an emergency savings account. An eligible participant may be enrolled automatically to contribute to the account at a rate of not more than 3% of pay. His/her contributions must be Roth contributions and capped so the account balance does not exceed $2,500 (indexed). The deposits must be invested in a vehicle designed to preserve principal. An employee may take withdrawals from the account monthly. Matching contributions must apply to emergency savings account contributions at the same rate applicable to employee elective deferrals.
In-service withdrawal options for emergencies or domestic abuse: 401(k), 403(b), government 457(b) and other defined contribution plans may permit a participant to take a withdrawal for a personal or family emergency and/or in response to domestic abuse. These withdrawals will not be subject to the 10% penalty tax applicable to distributions taken prior to age 59-½ or 20% income tax withholding. Employers may rely on the employee’s certification that he/she has suffered a personal or family emergency or been the victim of domestic abuse. Certain limits apply.
Automatic enrollment: Beginning in 2025, 401(k) or 403(b) plans established on or after Dec. 29, 2022, generally must automatically enroll newly eligible employees at a rate of
at least 3% of pay and provide an annual automatic increase of at least 1% until the employee’s contribution is at least 10% (but not more than 15%) of pay. The arrangement must be an eligible automatic contribution arrangement, allowing employees to withdraw automatic enrollment deferrals within 90 days of automatic enrollment.
Age 50 and over catch-up contributions: The catch-up contribution limit for a participant who is age 60, 61, 62 or 63 will be the greater of $10,000 (indexed) or 150% of the regular age 50 and over catch-up dollar limit.
Part-time employees: Beginning in 2024, defined contribution plans (other than union plans) permitting employee elective deferrals must allow part-time employees who complete at least 500 hours of service in each of three consecutive years to participate. Beginning with the 2025 plan year, the three-year threshold is reduced to two consecutive years of at least 500 hours of service.
Under Code section 1042, a shareholder of a C-corporation that is not publicly traded may sell stock to the corporation’s ESOP and elect to defer the recognition of gain on the sale provided that following the sale the ESOP owns at least 30% of the corporation’s stock. The gain deferral applies to the extent the shareholder invests the sale proceeds in qualifying replacement property. Certain other requirements must be satisfied. Effective for sales after 2027, this option is extended to S-corporation shareholders for up to 10% of the proceeds from the sale of stock to an ESOP.
Lump-sum window: Effective upon issuance of regulations, employers offering a lump-sum window under a defined benefit plan will need to satisfy new notice requirements. The regulations will require advance notice to eligible participants and beneficiaries (i.e., at least 90 days before the window election period), advance notice to the Department of Labor (DOL) and the Pension Benefit Guaranty Corporation (PBGC) (i.e., at least 30 days before the window election period) and notice to the DOL and PBGC within 90 days after the close of the window reporting how many individuals elected the lump sum.
Annual funding notice: Starting with the 2024 plan year, annual funding notices must disclose different information, including the percentage of plan liabilities funded, the average return on assets for the plan year and whether the assets are sufficient to fund liabilities not guaranteed by the PBGC.
PBGC variable rate premium: Starting with the 2024 plan year, the PBGC variable rate premium for underfunded defined benefit plans is fixed $52 per $1,000 of unfunded vested benefits and is no longer to be indexed.
The IRS is directed to update the Employee Plans Compliance Resolution System (EPCRS). The EPCRS update will allow employers to correct inadvertent qualification errors in 401(k), 403(b) or other qualified retirement plans at any time under the Self-Correction Program (SCP) without needing to submit the correction to the IRS for approval. The SCP time limit for correcting “significant” errors will be eliminated. Correction under SCP will not be available if the IRS identifies the error before the employer demonstrates a commitment to correct.
Timothy C. McDonald, JD, is a shareholder with von Briesen & Roper s.c. His practice focuses exclusively on compensation and benefits/ERISA issues for publicly traded and private for-profit businesses, tax-exempt entities, municipalities and school districts, and religiously affiliated institutions. Contact him at timothy.mcdonald@vonbriesen.com.
The Property Tax Section of von Briesen & Roper, s.c. has extensive experience and is your comprehensive resource for property tax issues. From public to private entities, the Property Tax Section has assisted clients in contesting and defending property tax assessments, chargebacks, tax exemptions, and advising on PILOT agreements and TIF/TID districts. Our creative approach to the most complex matters has positioned us to be your trusted advisor on property tax. The bottom line? We get results.
To learn more about our Tax Section, please contact Daniel Welytok at daniel.welytok@vonbriesen.
vonbriesen.com/tax
he lease accounting standard, ASC 842, is now in effect — which we weren’t sure we’d see, after continued delays postponed the implementation start date. While organizations have begun to implement the standard, questions still remain. This comes as no surprise, though, as implementation is a large and complicated undertaking. The lease standard under ASC 842 affects all entities that issue financial statements in accordance with GAAP. That said, the majority of our not-for-profit clients will have to comply in some way. Below, we highlight key considerations for auditors to keep in mind as they audit the implementation for their not-for-profit clients.
By Ashley Johnson,Key take-aways of the standard are as follows:
Lease considerations: Embedded leases
The FASB enacted ASC 842 to align the reporting of leases more closely across organizations and industries to increase transparency, reduce balance sheet errors, and standardize and simplify reporting.
The standard requires organizations to recognize liabilities and related assets that are or contain a lease of identified property, plant or equipment. Specifically, the standard states that a contract is or contains a lease if the contract conveys the right to control the use of an identified asset for a period of time. As not-for-profit organizations operate on limited budgets, leased property and equipment are often utilized to cut costs and remain on budget. This type of arrangement will need to be analyzed under ASC 842.
Embedded leases are arrangements that bundle a service and a device — for example, the use of information technology in a service contract. Embedded leases also apply to rented food service and facilities management — such as water coolers or food service equipment for events — that are included in a service contract. Not-for-profit organizations must account for these leases under the new standard.
Lease considerations: Below-market and contributed leases
Not-for-profit organizations often utilize contributed and below-market leases, which are leases for no cost or below-market consideration. Under ASC 842, the FASB concluded that the definition of a lease does not apply to below-market leases. The standard clarifies that the definition of a lease requires an exchange for consideration; therefore,
CPA
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TThe standard requires organizations to recognize liabilities and related assets that are or contain a lease of identified property, plant or equipment.
the use of an identified asset without payment or with only a “de minimis” payment (such as a below-market lease) would not qualify. Instead, not-for-profit organizations should recognize the fair value of the below-market lease as contributed revenue and rent expense on a periodic basis.
In the case of contributed leases, the measurement of right-of-use assets at cost is consistent with guidance in ASC 842. The FASB determined that it would be less complex and costly for not-for-profit organizations to apply the new lease standards to contributed leases rather than to the fair-value measurement.
Preparing not-for-profit clients to adopt the lease accounting standards is an ongoing feat that is not slowed by implementation that has already begun. Auditors should be sure to review and discuss the following items with notfor-profit clients:
• Policy elections: ASC 842 provides several practical expedients for lessees that can have a significant impact on recorded balances. It’s important for organizations to both understand the impacts of these policy elections and document their decisions.
• Short-term lease exceptions: As an accounting policy, organizations may elect not to record “short-term” leases on the balance sheet. To qualify as a short-term lease, a lease must have an initial term of 12 months or less and not include renewal options or a purchase option that the lessee is reasonably certain to exercise. This accounting policy election is made by class of underlying asset.
• Reasonable capitalization threshold: This differs from the fixed asset capitalization threshold and must be analyzed separately.
• Risk-free rate: A lessee that is not a public business entity can elect by class of underlying asset to use a risk-free discount rate (determined using a period comparable to the lease term) as the discount rate for the lease.
• Discount rate: Lessees that are nonpublic businesses may use a risk-free discount rate that reflects a time period comparable to the lease term as an accounting policy election by class of underlying asset.
• Financial statement presentation: The standards enacted changes to the presentation and disclosure requirements for financial statements. Disclosures were significantly expanded.
As clients adjust to the changes under the new lease accounting standard, it’s crucial to understand the nuances of ASC 842 to support organizations during implementation. The above key considerations are aspects to pay close attention to when it comes to not-for-profit organization financial reporting.
Ashley Johnson, CPA, is an audit director at Sikich LLP, specializing in not-for-profit audit services. Ashley has more than 15 years of experience in public accounting with the past 10 years dedicated to serving not-for-profit clients. Contact her at 262-317-8507 or ashley.johnson@sikich.com.
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Traditional, manual and Excel-based accounting processes aren’t sustainable in the current business environment. Already long gone are the days of putting on our green visors and completing journal entries and account reconciliation financial statements and spending late nights with the audit team. While the work is still there, the ways we do it are rapidly changing and so too are the demands of corporate finance professionals. We’re now expected to be partners throughout our organizations, aligning with the CEO and CFO to support their needs, seeing through significant business transactions, having a hand in talent recruitment and retention, and so much more.
How do we manage all our traditional tasks plus these new demands? We could work more hours, but that’s not realistic or sustainable. We could hire more staff, but that’s not usually afforded to us. Or we could change when and how we work — this is what I call “modern accounting.”
Modern accounting is all about changing your mindset and not following the “same as last year” mentality. The good news is, while technology plays a key role in achieving this accounting nirvana, there are steps you can take now, even before the technology is in place, to start moving you in the right direction. While this may seem like a daunting task, it’s easier than you think.
As a recovering accountant with more than 20 years of experience in various accounting roles, I understand that change isn’t something we generally readily embrace. However, I think my view of what modern accounting and controllership is might excite you. Here are three steps to take now.
Do you have data coming at you from many different systems? Do you have processes that change based on who is completing a task? Do you have to hunt to get visibility into where the monthly close or annual audit are at? If you answered yes to at least one of these questions, then you likely need to unify.
With today’s new modern accounting technology solutions, you can integrate, or unify, all your data into one source, allowing you to link your data sources through various connectors, file transfer protocols and application programming interfaces. More importantly, by applying a timing interval of your choice — hourly, daily, weekly and so forth — the data is brought into the technology solution for you, cutting out manual effort.
By unifying your data, you’ll also be able to vastly improve the templates for standardizing your accounting processes, such as account reconciliations and journal entries. Every
Corporate finance professionals need a mindset change if they’re going to handle all their traditional tasks while meeting modern business demands.
time you look at a digital workpaper, it’ll look the same. No longer will you spend extra time looking at a spreadsheet to understand how it’s built. Instead, you can use that time to look strategically at the work in the workpaper.
What’s more, you’ll no longer have to call your team members, send emails or wait for responses in a bid to get the data you need. In a few mouse clicks, you’ll be able to understand things like which reconciliations are done, what journal entries need to be completed, where your audit stands, who’s accountable for the data and more.
In other words, unifying your data is a huge time saver — it standardizes your processes, and it affords you real-time, global visibility into the entirety of your finance function.
Automation is my personal favorite aspect of modern accounting and controllership. I, like many of you, didn’t spend time in university and studying for the CPA Exam only to do busy, manual, mundane work. A significant portion of the manual tasks we complete in our finance departments can be automated. One simple example is the ticking and tying of bank data. Depending on the number of transactions, this can take a significant amount of time. What if you could get this done in seconds and only spend time on exceptions? I know of one company that automated a bank transaction set, going from reviewing
40 million transactions each month to analyzing only a few thousand exceptions — an amazing time savings. My point is that being a modern accountant and controller demands you to seek ways to automate the manual, mundane and timeconsuming tasks that take you away from being the strategic business advisor you need to be to meet the ever-growing demands placed on you. Or, maybe more importantly, you free up the time to be the accountant or controller you want to be — one that’s not bogged down by the minutiae.
When do you complete certain tasks during your monthly or year-end close? Whenever the checklist tells you to, right? Why? Because that’s when your predecessor did the work, and that’s when their predecessor did the work. But is this the best way or time to work? No.
There are changes you can make today, even without the implementation of a modern accounting technology solution, that can help you become more efficient and invaluable to your organization. For example, one step might be as simple as moving certain tasks from the close period to earlier in the month. Consider this modification:
Your company issues 10-year debt. For the next 120 months, you journal the amortization of fees, accrual of interest and more. You’re doing this during the close only because the checklist says to do it on day two. However, why not do it throughout the month? It’s the same journal set month after month. This frees up time during the critical close period to focus on other things, like being a partner to the other departments in your organization.
Of course, this is just one example. There are many tasks that fall on the finance function that can be moved around to create positive change. Combine simple changes with unified technologies and automation, and there’s even more that you can do without the fear of errors or time constraints.
Ultimately, modern accounting and controllership are about modernizing your mindset and developing one that continually thinks about the future of the profession. Change is inevitable, and as corporate finance professionals we must embrace that change to stay relevant and be all we can be for our organizations. The costs of not changing may include longer close periods, riskier processes, lost time, shrinking profits and a diminishing of our value and credibility. The
“same as last year” approach must become a thing of the past. If you don’t embrace change now and start taking the steps to become a modern accountant or controller, you’ll be left behind.
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Change is inevitable, and as corporate finance professionals we must embrace that change to stay relevant and be all we can be for our organizations.
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Employers doing business in Wisconsin must correctly classify their workers as either employees or independent contractors. The Wisconsin Department of Workforce Development (DWD), through its Unemployment Insurance (UI) Division, works with employers to ensure that all workers are classified correctly.
There are significant differences between being classified as an employee or an independent contractor. For example, employees are eligible for unemployment insurance and workers’ compensation benefits.
The Fair Labor Standards Act also applies to employees. Federal and state taxes are withheld from employees’ paychecks, with employers paying half of the Social Security and Medicare taxes.
In addition, employees may be eligible for employerprovided benefits, such as vacation time, sick leave and retirement benefits. None of these protections and benefits are available to independent contractors.
In Wisconsin, workers are presumed by law to be employees. The employer has the burden to prove that a worker is an independent contractor. Worker misclassification occurs when an employer wrongfully identifies a worker as an independent contractor rather than an employee.
Worker misclassification has negative consequences for both workers and employers. Misclassified workers do not receive the legal protections to which they are entitled, such as unemployment and workers compensation benefits. Workers are also responsible for the entire Social Security tax and must manage their own federal and state tax payments.
Employers who misclassify their workers obtain an unfair competitive advantage by doing so. Employers who misclassify do not pay unemployment insurance taxes or workers’ compensation premiums, they do not pay the employers’ half of Social Security and Medicare taxes and they avoid the costs associated with employee tax withholding. This puts employers who correctly classify their workers as employees at a significant competitive disadvantage to those who engage in misclassification when bidding jobs or setting prices.
When an unemployment insurance audit finds that an employer has misclassified workers, there are significant negative consequences. The employer will owe UI back taxes and interest and may be assessed a penalty for failure to file tax reports.
Employers who are involved in construction-related industries and found to have intentionally misclassified employees can be assessed an administrative penalty of $500 per misclassified worker, up to $7,500, in addition to tax and interest. Further, if an employer continues to engage in misclassification, in addition to owing tax, interest and administrative penalties, a referral for criminal charges for intentional misclassification may be made by the Unemployment Insurance Division to the Wisconsin Department of Justice.
There are significant differences between being classified as an employee or an independent contractor.
DWD’s Unemployment Insurance Division administers a robust program of employer audits and worker classification investigations to ensure proper worker classification. Unemployment Insurance Division auditors conduct nearly 3,000 field audits per year.
One of the main functions of the compliance audits is the detection and identification of misclassified workers. The Bureau of Legal Affairs Worker Classification Section has investigative staff members who conduct worker classification investigations at construction worksites and business locations throughout the state. The investigative team conducts criminal tax evasion, intentional misclassification and employer coercion investigations. The team also conducts claimant benefit fraud and employer aiding and abetting benefit fraud investigations.
DWD created a nationally recognized website to assist employers in correctly classifying workers. The website, Worker Classification (wisconsin.gov), provides information on how to correctly classify a worker as either an employee or independent contractor for purposes of unemployment insurance. The website walks an employer through the independent contractor tests in a step-by-step process for general private employers, nonprofit employers, state and local government employers, trucking employers, logging employers and Indian tribal government employers. The website also contains the independent contractor tests for workers’ compensation, labor standards and equal rights. For those seeking more detailed information, statutory citations, links and case study references are included on the website.
The worker classification website also contains several videos on worker misclassification as well as two that address
unemployment insurance issues—how to properly classify workers and how to prepare for tax appeal hearings. The website also provides a Need Assistance? link to an email box that is monitored by Worker Classification Section staff. Questions on worker classification will be answered in a timely manner. The mailbox can also be used to submit complaints about businesses that misclassify.
Proper classification of workers benefits both employers and workers. Workers who are properly classified as employees receive the benefits to which they are entitled by law. Employers benefit because proper worker classification levels the playing field for all businesses and contributes to a more competitive environment. Additionally, the Unemployment Insurance Trust Fund is funded by employer taxes, and a stronger trust fund results in lower taxes for employers.
DWD makes every effort to work with businesses to help them properly classify workers. The department also will investigate and, if necessary, take enforcement action against businesses that do misclassify their workers.
Remember, workers are presumed to be employees unless the employer proves that workers meet the legal criteria to be independent contractors. For questions about worker classification, contact: workermisclass@dwd.wisconsin.gov.
Michael Myszewski serves as section chief of the Worker Classification Section at the Wisconsin Department of Workforce Development. Contact him at 608-261-5835 or Michael.Myszewski@dwd.wisconsin.gov.
Janell Knutson serves as director of legal affairs in DWD’s Unemployment Insurance Division. Contact her at 608-266-1639 or Janell.Knutson@dwd.wisconsin.gov.
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DWD created a nationally recognized website to assist employers in correctly classifying workers.
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hroughout the last decade, Wisconsin has enacted several programs to attract and incentivize entrepreneurs. Some of these programs have not been well advertised and have gone under the radar of both CPAs and business owners. Two of these overlooked programs are the Qualified Wisconsin Business program (QWB) (for which only 284 business owners registered businesses in 20211) and the Qualified New Business Venture program (QNBV).
The QWB is an annual business certification offered by the Wisconsin Department of Revenue (DOR) and is designed to increase labor opportunities in the community. This certification offers the following two valuable benefits for existing and future investors.
An individual who realizes a long-term capital gain and reinvests the gain in a QWB may, on his or her Wisconsin return, subtract from federal adjusted gross income the amount of the gain if all of the following apply:
• Within 180 days after the sale of the asset that generated the gain, the individual invests all or part of the long-term capital gain in a QWB.
• The individual attaches a completed Wisconsin Schedule CG2 income tax return for the taxable year in which the deferral of gain is claimed.
Individuals who sell an interest in a QWB are eligible to exclude long-term capital gain on the sale if all of the following apply:
1 https://www.revenue.wi.gov/dorreports/qualwibus2021.pdf
2 https://www.revenue.wi.gov/TaxForms2022/2022-ScheduleCGf.pdf
• The business must have been registered as a QWB in the year the investment was acquired and in at least two of the four subsequent years.
• The investment was the purchase of stock or other ownership interest in a partnership, corporation, taxoption (S) corporation or limited liability company (LLC) treated as a partnership or corporation.
• Investment in a single-member LLC that has elected to be taxed as an S-corporation after Jan. 1, 2011, may also be eligible.
o The excludable gain cannot include any amount of deferred gain from #1 above (if applicable).
o The excludable gain may not exceed the fair market value of the investment on the date sold less the fair market value of the investment on the date acquired.3
3 https://www.revenue.wi.gov/TaxForms2022/2022-ScheduleQI-Inst.pdf
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Throughout the last decade, Wisconsin has enacted several programs to attract and incentivize entrepreneurs.Stephan Mesdjian, CPA, EA CPA and
To register a business in 2023, a business needs to file within the Wisconsin My Tax Account website4 by Jan. 2, 2024. The registration does not have a cost, but it needs to be filed every year the business desires to be considered a QWB. New businesses must wait a year before registering. For example, businesses that are started in 2023 will need to wait until Jan. 3, 2024, to register.
A business may register with the DOR if all of the following apply.5
• The business has at least two full-time employees.
• The amount of payroll compensation paid by the business in Wisconsin is at least 50% of all payroll compensation paid by the business.
• The value of real and tangible personal property owned or rented and used by the business in Wisconsin is equal to at least 50% of the value of all real and
tangible personal property owned or rented and used by the business.
In addition, a real estate investment may not be considered an eligible business. Even if the business meets the requirements stated above, the Wisconsin DOR will evaluate whether the business has potential to create jobs, since this program’s purpose is to increase labor opportunities in the community.
When evaluating a business’s eligibility, it is important to keep in mind that a business does not have to be newly established to qualify for this certification.
The second program offered by Wisconsin is the QNBV certification, which incentivizes investment in technologybased businesses. The QNBV certification offers eligible
angel and venture fund investors income tax credits equal to 25% of the value of the investment in the taxable year the investment is made.
To register for this certification, the business needs to email the Wisconsin Economic Development Corporation.6 The applicant should be prepared to submit an up-to-date business plan or executive summary during the registration process. Each business must be recertified in each taxable year in which it desires certification. Therefore, a business can apply in a single year or consecutive years. There is no cost to register, and it should be noted that QWBs can be part of the QNBV program. The requirements for certification are as follows:
• The business must be headquartered in Wisconsin.
• At least 51% of employees must be employed in Wisconsin.
• The business must have the potential to increase jobs in the state, increase capital investment or both.
• The business (such as manufacturing, biotechnology, communications, agriculture, clean energy, pharmaceuticals, processing or assembling products) must be engaged in innovation.
• Less than 50% of revenue may come from real estate developments, insurance, banking, lending or professional services.
• The organization may not have more than 100 employees at the time of initial certification.
• The business must have been in operation in the state for not more than 10 consecutive years.
• For years after Dec. 31, 2017, the business may not have received more than $12M in investments that have qualified for tax credits under the program.
• Other factors that will be considered include high growth potential, management team experience, financial need, percentage of funds that will be spent in Wisconsin and barriers to entry.
• The business cannot have received aggregate private equity investment funds of more than $10 million in cash at the time of initial certification.
Since the 25% tax credit benefit is claimed in the same taxable year as the investment is made, the certified company is required to maintain its Wisconsin presence
during the three years after it receives an investment under which a tax credit may be claimed. Otherwise, the state will apply a penalty based on the timing of the relocation to another state. Penalties will apply as follows:
Relocation within 12 months — penalty will equal 100% of the tax credit.
Relocation between 12 and 24 months — penalty will equal 80% of the tax credit.
Relocation after 24 months — penalty will equal 60% of tax credit.
The QWB and QNBV programs are key initiatives aimed at incentivizing entrepreneurship in Wisconsin and serve as great opportunities for businesses to secure new investment and accelerate their potential for growth and job creation in the state.
Victoria Thayer, CPA, is a manager at Berndt CPA in Madison. Contact her at 608-274-7473 or vthayer@berndtcpa.com.
Stephan Mesdjian, CPA, EA, is a partner at Berndt CPA. Contact him at smesdjian@berndtcpa.com.
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The QWB and QNBV programs are key initiatives aimed at incentivizing entrepreneurship in Wisconsin and serve as great opportunities for businesses to secure new investment and accelerate their potential for growth and job creation in the state.
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