March | April 2017 | Vol. 13 No. 2 A publication of the Wisconsin Institute of CPAs | wicpa.org
Ben W. Pechan, CPA CFO, Smith & Gesteland, LLP
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Plus: Winning the war for top talent | 16 Understanding the Canadian tax net | 24 Why employee background checks matter | 27
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A publication of Wisconsin Institute of CPAs | wicpa.org
March/April 2017 Vol. 13 No. 2
6 Features
Columns
6 Carpe diem
24 TAX
Ben W. Pechan, CPA settles into the role of CFO at Smith & Gesteland, LLP.
Navigating through the Canadian tax net: Practical guidance for U.S. practitioners
Consider new methods to recruit, retain and motivate top employees at your company.
By Harry Chana, CPA, CA and Ben Podraza, CPA, PFS, MTAX, CGMA 27 HUMAN RESOURCES
Companies must be creative, enlist the right people, invest money and ensure recruiting is a top priority.
Learn whether an employee background check is warranted and how it should be used. By Jason A. Kunschke, Esq.
30 INDUSTRY
By Jamie Fitzpatrick
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How forward-thinking employers should view background checks
By Bret A. McKitrick, J.D.
16 Winning the war for talent
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Discover red flags that should alert Wisconsin practitioners that their clients may have Canadian sales tax obligations.
By Cynthia M. Hodnett
10 Employing millennials: How the right benefits strategy can help you recruit and retain a new generation
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What can businesses expect from Trump’s presidency? Although it is unknown how a Donald J. Trump presidency will affect the U.S. economy, this article examines major economic policies that have been discussed and/or promised by his administration.
Departments 2 Odds & Ends | news briefs 3 Outlook | chair’s letter 5
Membership Matters | member benefits
15 In Touch | president & CEO’s message 22 Kudos | members in the news
By Bill Ford
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Odds & Ends 2013 Apex Award for Publication Excellence 2016–2017 WICPA OFFICERS/BOARD MEMBERS Chair Steven G. Handrick, CPA, CGMA Chair-elect William L. Komisar, CPA, J.D. Past-chair Jean M. Hansen, CPA, MBA, CGMA Secretary-treasurer Katherine L. Hauser, CPA, CGMA Directors Michael D. Akers, CPA, CBM, CFE, CGMA, CIA, CMA, Ph.D. Lucien A. Beaudry, CPA, J.D. Ryan J. Hanson, CPA, CGMA Debra L. Lenz, CPA, CGMA, CIA, CRMA Terri M. Lillesand, CPA Matthew A. Los, CPA Scott D. Miller, CPA, ABV, PFS, CVA Matthew J. Schaefer, CPA, CGMA Wendi M. Unger, CPA AICPA Council Rick E. Dreher, CPA, CGMA Neil R. Keller, CPA, ABV, CVA President & CEO Dennis F. Tomorsky, CPA, J.D., CGMA Chief Financial & Operating Officer Tammy J. Hofstede Vice President of Communications Amy E. Gaeth Editor Cynthia M. Hodnett Copy Editor Joan Bahr
Need tax resources? Build your tax competency with new resources from the American Institute of CPA/Chartered Institute of Management Accountants. Discover what you know, find targeted learning for what you don't and build your expertise with these resources (http://tinyurl.com/aicpacimatools).
Trends shaping the workforce in 2017 HR is transforming itself into “people science” and nontraditional benefits are becoming less popular. Read about these and other trends that are shaping the workforce in the article, “These are the top 5 workplace trends we'll see in 2017” (http://tinyurl.com/2017workplace).
Survey: Business leaders optimistic about U.S. economy Business executives express strong surge in optimism about the U.S. economy over the coming year, according to the American Institute of CPAs fourth-quarter Economic Outlook Survey (http://tinyurl.com/aicpaeconsurvey).
KMA Bodilly CPAs expands into Verona KMA Bodilly CPAs & Consultants, S.C., a Madison-based accounting firm, acquired Hometown Tax & Financial, S.C. in Verona. Hometown Tax conducts business at its Verona-Enterprise Drive location and retained all existing staff. The newly acquired firm changed its name to operate under the KMA Bodilly brand. The integration of both companies will take place over the next several months, to ensure a smooth transition.
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On Balance is published six 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 (WI/MN); Fax: 262-785-0838; email: jessica@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 2017 On Balance.
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WANT YOUR BUSINESS MENTIONED IN ODDS & ENDS?
Email your announcement to cynthia@wicpa.org.
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OUTLOOK | CHAIR’S LETTER “The CPA profession is respected, and our voices and opinions are heard through the WICPA. Our membership, with regard to all levels of experience including retirement, helps the WICPA protect our interests and keep our profession strong.”
The true value of your WICPA membership
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t’s hard to believe that my year as your WICPA Board chair is almost complete. More than two years ago, the WICPA Board of Directors and staff began working with me to take on this important leadership role for the 2016–2017 year. This past year, I was often asked: “Why should a CPA in Wisconsin belong to the WICPA?” I would like to give my perspective on the value of the WICPA to CPAs. Much of what occurs at the WICPA to support us in our daily activities happens behind the scenes. All state CPA societies, including Wisconsin, support the mission and vision of the AICPA. After attending four AICPA Council meetings, I realized that the success of the AICPA has much to do with the collaborative effort between the AICPA and state societies. Wisconsin is the only licensing jurisdiction that doesn’t require CPE as a requirement of licensure. The WICPA is working diligently with the Wisconsin Accounting Examining Board and state legislators to put Wisconsin on the same playing field as the rest of the jurisdictions. In conjunction with that effort, the WICPA would become the first jurisdiction to allow up to 50 percent of CPE to be “informal learning.” This would include individual reading, research, coaching/ mentoring and business volunteer work, and allow creditable learning in five minute increments. The AICPA is watching us closely as they look to revamp their traditional CPE model. There were many CPA candidates who no longer qualified to sit for the Uniform CPA Examination due to regulatory interpretations of the rules adopted in 2016. This was an unintended consequence of the new rules, and the WICPA became involved in fixing this matter. We were successful in doing so by working to implement emergency rules for those candidates affected. We included Wisconsin university educators in helping us craft the appropriate language for
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the emergency rule. As a result, we have a new Higher Education Committee comprising of university educators from across the state. Last year was an election year, and the WICPA met with the appropriate legislators to inform them of our position on certain matters affecting CPAs. A big part of what the WICPA does for us is advocacy. Individually, we cannot accomplish what the WICPA can do in terms of this support. In January, we sponsored another successful Advocacy Day in Madison. Another important development was that legislators reached out to the WICPA for recommendations to improve Wisconsin tax laws and processes. Overall, the WICPA supports us and carries out activities and events we can’t experience on an individual basis due to time, money and logistical constraints. The CPA profession is respected, and our voices and opinions are heard through the WICPA. Our membership, with regard to all levels of experience including retirement, helps the WICPA protect our interests and keep our profession strong. Your continued membership in the WICPA is an investment in the future of your CPA profession.
Steven G. Handrick, CPA, CGMA is chair of the WICPA Board of Directors. Contact him at March | April 2017 shandrick@new.rr.com. On Balance
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Register to Attend Thursday, May 4 at 5 p.m. Harley-Davidson Museum , Milwaukee ®
*Cost is complimentary to WICPA members. Guest tickets are $40. *RSVP is required.
Join us at the WICPA’s largest membership event of the year as we: • Recognize and thank our longevity members (10, 25 and 40-year members)
• Honor our Excellence Award recipients
• Elect the 2017–2018 WICPA Board of Directors
• Tour the Harley-Davidson Museum®
Enjoy dinner, drinks and entertainment. Thank you to our event sponsors! Event & Excellence Awards Sponsor:
Event Sponsors:
RSVP by Thursday, April 20, 2017 online at wicpa.org/Banquet or call 800-772-6939. 4
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MEMBERSHIP MATTERS “Committed to providing unparalleled service, von Briesen is a full-service law firm, poised and ready to assist you and your clients with business and corporate law, mergers, public finance, trusts and estates, and other practice areas.”
CPA-attorney partnership leads to client success for you
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n an effort to attain the highest level of service for clients, attorneys and CPAs often collaborate, each bringing a unique set of skills to the table. These strategic alliances ensure clients attain the most proactive and seamless service, through clear communication and the greatest business professionalism. By joining forces and building upon strengths, the resulting benefits for clients also mean a win-win for the partners involved. The opportunity to gain new business referrals is equally valuable. Collaboration can take place within a number of practice areas, including business valuations, employee benefit plans, employee stock ownership plans, sale of a business, intellectual property, estate and succession planning, and audit and tax controversies. WICPA’s newest affinity partner von Briesen & Roper, s.c. is the WICPA’s newest affinity partner. With more than 150 lawyers in nine offices and a history that spans more than 100 years, its practice is both local and global. In recent years, von Briesen has expanded in Milwaukee, Madison and Waukesha County, while new offices were opened in Appleton, Oshkosh and Green Bay. In fourth quarter 2016, von Briesen added 14 attorneys from the Milwaukee law firm, Weiss Berzowski LLP.
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Ask von Briesen leaders why they are different, and they’ll likely tell you the creative approach they take to a client’s need solidifies each relationship beyond a service provider. This dedication and trust is found in all the people who work at their firm, providing game-changing advantages in today’s marketplace.
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von Briesen shareholder and chair of the firm’s Tax Law Section, Robert A. Mathers, J.D., CPA, ABV, PFS, is a WICPA member and former partner with CliftonLarsonAllen LLP. Mathers is recognized in The Best Lawyers in America® in Trusts and Estates. Committed to providing unparalleled service, von Briesen is a fullservice law firm, poised and ready to assist you and your clients with business and corporate law, mergers, public finance, trusts and estates, and other practice areas. Learn more about von Briesen and their continuing education benefits available to you at wicpa.org/marketplace.
Ellen Engel is advertising manager for the WICPA. Contact her at 262-785-0445 ext. 4513 or On Balance March | April 2017 ellen@wicpa.org.
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Carpe Diem Ben W. Pechan, CPA settles into CFO role By Cynthia M. Hodnett
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en W. Pechan, CPA has been a senior accountant with a large accounting firm, a senior financial analyst at a major health care company and controller for a general contractor.
Then, in July 2016 at age 31, Pechan was named chief financial officer at Smith & Gesteland, LLP in Middleton. In this role, Pechan focuses on the firm’s strategic planning, risk management and accounting best practices. Also, he relies on his previous experience and knowledge in construction and real estate industries to support the firm’s niche services group.
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“The thing I like most about my position is the freedom and independence our managing partner and executive team give me to execute initiatives,” he said. “There is not a micromanaging culture here. Our firm is also big on work-life balance and it is not just talk. They allow employees to work on flex schedules and truly invest in people. “Another thing I truly like is the fact that I am both internally and external facing,” he said. “Eightypercent of the time, I am focused internally. But, I also get the opportunity for consulting and advisory engagements with our construction and real estate clients on an as-needed basis based on my skill set, which is very rewarding.”
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“Right now, I’m focused on being the best dad and husband I can be, and adding value to S&G every day I come to work."
Photography by Adam Ryan Morris
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Why I became a CPA “I really got serious about a career in accounting as a sophomore at UWWhitewater. I originally wanted to be an investment banker, but I soon realized I didn’t really know what that meant. I was fortunate to have several mentors at UW-Whitewater, including the late Dr. Robert A. Gruber, Ph.D., CPA, CGMA, CMA, who helped guide me on the path to my eventual career. In my senior year, I had the opportunity to work on an independent study with him, which primarily involved speaking to high schools throughout Wisconsin to promote the accounting profession. The experience was extremely rewarding.”
My inspiration “My father has always been one of my greatest inspirations, especially as it relates to career growth. He has worked at the same company since he was 18 years old. He started out as basically a stock boy and is now a director at a very large distribution center in Madison. He wakes up at 5 a.m. to go to work every morning for the past 40-plus years, never complains, and is the shining example of work ethic and loyalty to a company. My parents divorced when I was young, and my mother went back to school and got her master’s degree from UW-Madison as a single mother. She taught me the importance of education, and showed that you can do anything you put your mind to.”
Room to grow Although Pechan didn’t plan to become a CFO, he knew at a young age he would pursue a career in business. He took his first accounting courses in high school. However, his passion for numbers began much earlier. “My mom used to joke that I would dump out her change jar and count the contents and give her the totals, less my fee for my services,” Pechan joked. “Does that model sound familiar? I think I was 5.” Pechan said his age isn’t a major barrier to fulfilling his vision for the firm and developing his career. “Sometimes people are surprised when they find out how old I am,” he said. “There may be some stigma to overcome, but I’d rather look at the positive. I’m not at the twilight of my career. Being young and at this point in my career gives me room to grow. I’m a results and tangibles kind of guy. Regardless if you have been here eight years, 10 years or 30 years, you should be promoted on and measured by your results and attributes, not by your age or longevity.” Although technical skills are important, today’s accounting
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professional must be able to communicate effectively to succeed, he said. “You have 15 different bosses, i.e. our 15 partners,” he said. “Managing different personality types and attitudes has become an increasingly necessary soft skill of mine. I put a lot of thought into how to approach different situations given the person I am dealing with, knowing I cannot use the same tones and mannerisms with different partners. It’s all about having strong learning agility and adapting to different personalities.” Pechan’s relatability, intelligence, skills and team-first attributes make him a perfect fit as CFO, said William Pellino, CPA, ABV, CVA, managing partner at Smith & Gesteland. “Ben’s previous experience as a controller for a large general contractor adds another dimension to our construction and real estate practice at S&G,” Pellino said. “For example, he recently took on a project for a large construction client that resulted in a dramatic improvement to their working capital. Ben is also mentoring some of the professionals in our construction practice and will teach some classes internally as part of our continuing education program at the firm.”
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Unlimited possibilities Pechan graduated from the University of WisconsinWhitewater with a Bachelor of Business Administration degree in 2007 and a Master of Accountancy degree in 2008. He is currently chair-elect of the UW-Whitewater Accounting Advisory Board. He earned his certified public accounting license in 2009. A WICPA member since 2012, he is a member of the Accounting Careers Committee. He also volunteers with the American Red Cross Badger Chapter, serving as a member of their board of directors, and as the vice president of Membership with the Construction Financial Management Association (CFMA). “It’s a rewarding experience, and it’s a great way to meet other people who I might not normally meet,” he said of volunteering. “It’s a great way to network, but you need to be passionate about the cause you’re volunteering for. It’s about giving without expecting anything in return.”
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Having now risen professionally at a young age, Pechan faces the question: What’s next? He plans to continue in his current role at the firm. His future may include consulting, partnership or a career in politics. Pechan enjoys spending time with his wife, Samantha, and their young son, Brantley. He also enjoys riding his ATV, golfing and curling with his friends. “Right now, I’m focused on being the best dad and husband I can be, and adding value to S&G every day I come to work,” he said. “It’s important to have balance and do things outside of work that you’re passionate about.”
Cynthia M. Hodnett is the communications manager at the WICPA. Contact her at 262-785-0445 ext. 4516 or cynthia@wicpa.org.
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Employing millennials: 10
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How the right benefits strategy can help you recruit and retain a new generation
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uch has been written about managing the millennial generation of employees. Without question, they are the most analyzed generation in history in terms of characteristics and expectations. It’s with good reason that this group is so heavily scrutinized. They are the largest and By Bret A. among the brightest generation to McKitrick, J.D. ever enter the workforce. This article will discuss the changing paradigm of recruiting and retaining employees, particularly focusing on the use of employee benefits to attract and motivate a new generation of workers.
Here are the millennials Millennials are defined as those between the ages 20 and 36 and 2015 was first year they outnumbered the baby-boom generation (ages 51 to 69), which surpassed 75 million people. By comparison, the Generation X population (ages 37 to 51) will not surpass the boomers until 2028. They are the smallest group. These numbers are significant when we think of the impact on the current workforce and the future need for employees. As baby boomers exit the workforce, there are not enough Generation X workers to take their place. This means millennials are needed
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to fill both new positions and the holes created by the mass exodus of retiring baby boomers — often taking on management, executive and other leadership roles sooner in their careers than prior generations. Because of such demand, the methods and incentives employers use to hire and keep the best people in these key positions are as important as ever.
Let’s generalize, just a little Each generation has its own personality. Its members often share similar values and motivations. While this may appear to be a simplistic generalization, we must remember that behavior and characteristics are what define a generation. Statistics and timelines show that generations are analytical constructs. However, demographic and attitudinal evidence of habits and culture are what help establish the years in which a new generation begins and another ends. In other words, what we may dismiss as a stereotypical depiction is likely an accurate characteristic that shapes not just the perception, but the indispensable significance of an entire generation. The potential millennials bring to the workforce is perhaps like nothing we’ve seen before. They have been provided with more knowledge growing up and have access to more information than any past group. That combination illustrates their potential to be the highest-performing generation in history. Millennials were also raised on high expectations, and thus have grown into adults with high expectations of themselves and others, both in work and in life.
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While other generations have sought to achieve a work-life balance, millennials were raised to find a job that makes them happy and fulfills a desire to have a positive social impact. While other generations may have considered their careers at odds with their idealistic ambitions, millennials truly believe they can shape the world in which they live through their work.
How this affects recruitment and retention There is a major transformation in the mindset of how to retain employees. Considering the emotional connection that millennials desire with their jobs, an attractive compensation package alone will no longer suffice in keeping key employees. Another significant driver of that change in retention strategy is the shift in employers’ expectations for longevity. No longer are employers seeking to retain employees for 10 or more years. A recent Forbes study indicated that 91 percent of millennials expect to stay with the same employer for less than three years. As a result, employers are increasingly striving to create compensation structures and environments that can make the two-year employee into a fiveyear employee, and hopefully longer.
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Need for benefits With the arrival of public and private health insurance exchanges — online marketplaces where individual health insurance policies can be compared and purchased — it may be natural to assume that the value of employer-sponsored health coverage as a recruitment or retention tool has diminished. Given the itinerant career paths many millennials enjoy and their tech-savvy tendencies, it may be easy to believe that an online health insurance exchange could provide a more desirable option. However, the reality may not be so simple. A recent survey conducted by Accenture measured the attitudes toward health insurance from more than 2,700 U.S. workers across all age demographics. Seventy-six percent of those who responded still saw employer-provided health insurance as a vital factor for continuing to work at their current employer. Additionally, those who seemed more ambivalent to employer coverage still preferred employers to help them find individual coverage. While far from a determination, surveys like this are helpful to show that employee benefits remain viable by filling an important need.
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One of the key advantages to employer-sponsored health coverage is the embedded tax savings that comes along with the benefit. Employees are not taxed on the value of coverage and are permitted to pay for coverage in a pre-tax fashion. When one considers the rates attributable to income taxes and FICA, the value of providing health coverage is significant for employees and employers alike.
Attitude toward benefits Earlier, we introduced the concept of what shapes a millennial’s mindset when it comes to a career. The babyboom generation has often been characterized as one where employees “live to work.” The natural rebellion of Generation X reversed that attitude to “work to live.” Millennials, however, do not view work and life as competing dichotomies. The two areas are integrated through a more centralized worldview that incorporates skill set, talent, motivation and opportunity. Likewise, the view of compensation has changed. This is where the type of health benefit offered and how that package is communicated become key points in every employer’s compensation strategy. Let’s be frank, money is still money. And additional perks of a particular job will largely be determined by industry and the culture of a specific employer. Benefits, as part of any employee’s overall compensation package, can often sway interest in a job depending upon how they are delivered. Looking at health insurance, the problem is not in determining the need of a millennial employee. It’s positioning and communicating that benefit in a way that is meaningful to that employee or prospective hire.
Defined contribution approach Traditional benefits are delivered in a manner that varies only by benefit type or coverage tier. While it seems like there are many choices, the reality is that the benefit is actually defined even though the employer contribution can vary greatly. This can lead to the problem of employers not getting enough bang for their buck. A defined benefit approach often results in unpredictable costs and inequitable contributions. Even worse, the benefits are packaged in a homogeneous manner that doesn't allow much flexibility or choice among participants. The result is a less than enthusiastic response from millennials whose work/life values may be significantly different from an older generation of workers.
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Employers who take a defined contribution approach provide roughly the same dollar amount contribution or fixed percentage of compensation to every eligible employee. The employee then pays the balance of the total cost of benefits elected by that employee. Unused contributions may be forfeited or cashed out as taxable income. If this set-up sounds like the old cafeteria plan suites, it’s because it is very similar. Qualified benefits still retain their taxfree nature, and any cash component is taxed accordingly. The defined contribution approach not only helps employers provide more uniform contributions among employee groups (which helps stabilize benefit budgets), it also provides employees more choices by allowing them to select benefits they value over those they may not want. The employee has more choices and greater decision-making power. Such benefits can fit better into a millennial’s lifestyle and approach to compensation. Employers are wise to consider ideas like concierge banking and lending services, advanced planning evaluations and incentives for community service. While benefits may vary based on taxability, the ideas for attracting young employees are limitless. Employers who apply a defined contribution approach find themselves better equipped to meet a millennial employee where they are at in terms of need, value and understanding.
Bret A. McKitrick, J.D. is a senior HR consultant at Associated Benefits and Risk Consulting in Waukesha. Contact him at 262-542-8822 or bret.mckitrick@associatedbrc.com.
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IN TOUCH | PRESIDENT & CEO's MESSAGE “Your WICPA membership connects you with mentors and influential leaders who enjoy sharing their career information and helping you develop and refine your own plans for career success.”
Maximizing your career success
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he historical concept of a “career path” implies that there is one linear, vertical, chronological progression for every professional to follow for advancement and growth. Some of us follow a straightforward progression, particularly when lifelong opportunities for professional growth luckily become available at the exact moments we are ready for the next step. Most of us, however, find that our routinely assigned tasks and projects eventually build skills, while accidentally illuminating new interests and talents. These seemingly random “strategic career inflection points” often drastically change the trajectory and timing of your career path, and these opportunities can be created with careful planning. Recent publications have noted many benefits to individuals and employers who proactively explore and plan career goals, and who intentionally arrange for timely exposure to professional assignments and learning. Such individuals experience accelerated professional authority, autonomy and advancement, along with increased compensation. Meanwhile, their employers benefit from reducing costly talent turnover, as well as increasing profitability from highly engaged and efficient colleagues. ROI for both professionals and their employers is maximized through planned professional growth and implementation of continuously refined action steps that include carefully selected assignments, lifelong learning, and other experiences that increase skills and opportunity. Tools and techniques for accelerating career advancement include: 1. Learning about the accomplishments and career paths of professionals who are in positions to which you aspire. 2. Identifying and initiating communication with mentors who have talents and information you determine are critical to achieving your own career goals.
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3. Establishing and continuously expanding your network of business contacts who can recommend opportunities that will build specific skills. 4. Requesting projects and participating in formal and informal educational activities that build critical communication, leadership and project management skills. 5. Maintaining positive visibility among influential leaders who will notice your talent and take action to provide you with opportunities. Your WICPA membership connects you with mentors and influential leaders who enjoy sharing their career information and helping you develop and refine your own plans for career success. And your participation in WICPA activities enhances your leadership and communication skills, while increasing your network of business contacts and your visibility among influential leaders. Take control of your professional advancement by leveraging your WICPA resources to establish, refine and travel your own successful career path.
Dennis F. Tomorsky, CPA, J.D., CGMA is president & CEO of the WICPA. Contact him at OnorBalance March | April 2017 262-785-0445 ext. 4519 dennis@wicpa.org.
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he war for talent has increased and the recruiting landscape has changed dramatically over the past decade. Historically, finding a qualified candidate for a specific role was extremely difficult. With the growth of the internet and social media, the challenge has shifted By Jamie Fitzpatrick from finding qualified candidates to sourcing them and selling the opportunity and the company. To be competitive in today’s world, companies must be creative, enlist the right people, invest money, and ensure recruiting is a top priority.
How to find top talent? In this challenging recruiting environment, what strategies can companies utilize to find and source the best and the brightest? • Analyze your recruiting team. Do your recruiters have the right skills and tools to be successful? The most successful recruiters I have had the pleasure to know and work with have similar traits and qualities — pride and belief in their company, a sincere interest in helping others, and a very strong internal drive to compete and win. • LinkedIn. Every recruiter must have a seat on LinkedIn Recruiter, social media’s recruiting playground. The annual cost might scare some companies away. But I promise, it will pay dividends in finding and connecting with top talent and qualified candidates. • Stay connected with individuals who have historically interviewed and declined an offer. They were previously interested in the company. Maybe it was just not the right time to make a change. Stay in touch with them. Send him/her communications periodically highlighting key successes of the company, community involvement, articles highlighting culture, etc. • Employee Referral Program. An employee referral program is a must have in every organization but having it in place is just the beginning. Promote it often, create fun games and give always to heighten awareness and keep it top of mind. Communicate successful hires and highlight wins
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throughout the organization. Many of the best hires will come through your current employees. • Create a process to track passive candidates who might be interested in the future. Use your company’s applicant tracking software to create pipeline positions in which you can send periodic communications and hopefully reconnect when the individual is ready to make that change. • Geography. Do not limit yourself by searching only in your local area. Many individuals decide to return “home” at some point in their careers or opt to relocate to a more financially secure and growing area. Search out individuals based on schools they previously attended or cities where they previously resided. Some of my best hires have come through these types of searches. • Alumni. Do not ignore your alumni program. Stay connected with them as they may find the grass is not always greener on the other side.
Selling the candidate Once you have sourced a qualified candidate, how do you successfully navigate them through the recruiting process and sell them on the opportunity? • Capitalize on boomerang employees, let them tell their story. What better sells how great a company is than the employees who have left and then returned? Work with marketing to create videos of boomerang employees to share with prospects. Invite boomerang employees to speak with candidates during the interview process, sharing why they left the firm and then decided to return. • Ensure a consistent “story” is being conveyed. The company culture, strategy, plans for growth, opportunities for advancement, training and development, etc. Ensure all interviewers are fully “briefed” on the candidate’s background, what he or she is looking for in a new career and what areas each interviewer should focus on during his or her conversation. Always remember, during an interview we are both assessing the candidate and selling the opportunity. • Involve key stakeholders. A recruit is much more likely to respond to an initial outreach from a company’s leader vs. a recruiter. Also, ensure the right people are at the table during an interview. Involve individuals who have influence in the organization — the recruit will appreciate them taking the time to meet.
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• Know your audience. Ensure what's important to the candidate is discussed during the interviews. For example, if the candidate is looking for a reduced work schedule, introduce him or her to an individual currently working in that capacity. • Survey all of your new hires during on-boarding. Ask them to describe what was impactful to them during the recruiting process. Use that information to improve your selling approach. • Make it personal. During your courtship of a candidate, learn things about him or her, and make a point to incorporate your learnings into future conversations. Also, share this information with others who will be meeting with him or her. Maybe the candidate is taking a vacation to California in the next month. Reach out with possible suggestions of things to do or places to stay.
A successful on-boarding is critical First impressions are long-lasting. • On-boarding is crucial — being prepared for the new employees’ first day, week, month, etc. will make lasting memories. How an individual is welcomed into an organization makes a big impact, even the “little” things such as a handwritten welcome note on their desk. Planning lunch out with key people he or she should meet during
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their first few weeks will begin to build those relationships that will keep the employee engaged. • Every organization should have a buddy/mentorship program. Enlist a go-to individual for the new employee as they navigate their way through technology, processes, specific individual’s personalities, what to do and what not to do, etc. Effective buddy programs connect people with similar interests or backgrounds such as common schools, hometowns, love of sports, theater, etc. • Personalized gifts. Giving the candidate something personalized such as stationery or a pen during the interview or on-boarding process can go a long way to show individualization and thoughtfulness. Leave the “company branded gift” for an employee’s first day. As the recruiting space continues to evolve and change, we also will have to learn and adapt. What’s effective today may not be tomorrow. Continue to think outside the box and push the recruiting envelope. When you land that star recruit, you will be thankful you did.
Jamie Fitzpatrick is a senior recruiting manager at Baker Tilly LLP in Milwaukee. Contact her at 414-777-5480 or jamie.fitzpatrick@bakertilly.com.
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2017 WICPA CONFERENCES
X Marks
the Spot wicpa.org/conferences
Set your sights on these 2017 WICPA Conferences.
x CPAs in Industry Spring x Nonprofit & Health Care Financial Thursday, March 16
x Financial Institutions
x SECOND FALL LOCATION! CPAs in Industry Fall
x School District Audit
x Tax
x School District Audit
x Accounting, Auditing & Financial Management
x CPAs in Industry Fall
x Technology
Wednesday, May 10 Wednesday, May 17 Thursday, May 18 Monday, Sept. 18
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Monday, Sept. 25
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Monday, Oct. 23
Thursday, Nov. 2 - Friday, Nov. 3 Tuesday, Nov. 14
Thursday, Nov. 30 - Friday, Dec. 1
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21
kudos Eric S. Aronson, CPA was promoted to senior manager at Schenck SC in Appleton.
Kenneth A. Losey, CPA was named partner at Andaloro, Smith & Krueger, LLP in Waukesha.
Tony J. D’Alessio, CPA was promoted to supervisor at Schenck SC in Milwaukee. Kevin R. Dahlke, CPA was promoted to senior manager at Schenck SC in Green Bay.
Kenneth A. Losey, CPA
Carl Marzolf, CPA, CVA was named president of Sitzberger, Hau & Company in Brookfield.
Brian DelVecchio, CPA was promoted to supervisor at Schenck SC in Milwaukee. Kevin R. Dahlke, CPA
Jamie J. Hoffmann, CPA was promoted to senior accountant at Schenck SC in Wausau.
Katherine M. Fisher, CPA was promoted to supervisor at Schenck SC in Appleton. David M. Fochs Jr., CPA was promoted to supervisor at Schenck SC in Appleton. Scott R. Gokey, CPA was promoted to senior manager at Schenck SC in Milwaukee. Michael J. Gries, CPA was promoted to manager at Schenck SC in Sheboygan. Eric E. Gurholt, CPA was named a shareholder at Huberty CPAs & Trusted Advisors. Eric E. Gurholt, CPA
Cristina M. Kanethavong, CPA was promoted to senior accountant at Schenck SC in Manitowoc. Rebecca Kirst, CPA was promoted to senior accountant – government at Schenck SC in Milwaukee.
Lisa E. Kuenn, CPA
Taylor Madigan, CPA, a tax accountant at KMA Bodilly, CPAs & Consultants in Madison, received her certified public accounting license.
Taylor Madigan, CPA
Randy S. Nelson, CPA, J.D. was named shareholder at von Briesen & Roper, s.c. in Milwaukee. Amanda M. Nowaczynski, CPA was promoted to manager at Schenck SC in Milwaukee.
Joshua Pearce, CPA was promoted to senior accountant – government at Schenck SC in Green Bay. Mitchell Pezanoski, CPA was promoted to senior accountant – government at Schenck SC in Sheboygan. David J. Roettgers, CPA, J.D. was named shareholder at von Briesen & Roper, s.c. in Milwaukee. Jennifer A. Schleis, CPA, a controller, joined Camera Corner Connecting Point in Green Bay, according to the Green Bay Press-Gazette. Laura Schnelle, CPA was promoted to senior accountant at Dwayne Johnson & Associates, S.C. in Waukesha. Stefanie Schuh, CPA was promoted to senior accountant at Schenck SC in Appleton.
Lisa E. Kuenn, CPA was named partner at Andaloro, Smith & Krueger, LLP in Waukesha.
Want your
promotion or award mentioned in Kudos? Email your announcement and photo in JPG format to cynthia@wicpa.org.
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Join a Conference Planning Task Force and you’ll receive: • Free conference registration ($300-$400 value depending on conference) • Valuable interaction with peers, speakers and vendors to build your professional network • Leadership skill development • Recognition for your WICPA involvement
To join one of our seven task forces, visit wicpa.org/taskforce
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March | April 2017
23
{ Tax | Canadian tax net }
Navigating through the Canadian tax net: Practical guidance for U.S. practitioners 24
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{ Tax | Canadian tax net }
M By Harry Chana, CPA, CA and
any Wisconsin-based businesses have found lucrative expansion opportunities in Canada. The country is one of the U.S.’s largest trading partners and foreign exchange rates are making investments in Canada increasingly attractive. Although the North American Free Trade Agreement (NAFTA) and other favorable treaties have eased the complexity of doing business in Canada, far too often poor planning results in unintended tax consequences that can erode profits. As with interstate commerce, the ability of the Canadian tax authority to levy tax is largely based on facts and circumstances. The Canadian Income Tax Act (ITA), which is the Canadian equivalent of the Internal Revenue Code, does not define what is considered carrying on a business (COB) in Canada. COB is the Canadian equivalent of nexus in the U.S. tax system. COB is governed by Canadian case law, at a low threshold.
Ben Podraza, CPA, PFS, MTAX, CGMA
The “Convention between Canada and the United States of America” (Tax Treaty), however, raises this threshold so that only businesses that have a “permanent establishment” (PE) in Canada are liable for Canadian income tax. This article will briefly discuss some of the red flags that should alert Wisconsin practitioners that their clients may be COB or have established a PE in Canada. This discussion will focus on Canadian income tax, but practitioners should be aware that some of the activities identified could also create Canadian sales tax obligations. The following are some examples that would not be considered COB in Canada: • Receipt of dividends from a Canadian company. • Interest payments being received from a Canadian company.
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Beyond these basic transactions, the Canadian COB threshold is fairly low. The following are examples that could be considered COB in Canada: • Sending U.S. employees into Canada or using Canadian resident employees to perform sales calls and/or attend trade shows. • Using sales agents in Canada to perform all or a portion of the sales cycle function for the U.S. parent company. • Performance of hardware and training services by a computer consulting firm as part of it normal operations in Canada. • Performance of project management or other engineering services by an engineering firm that sends its employees into Canada. Any of these activities create a strong likelihood that the U.S. company is COB in Canada and has an information reporting requirement. An exemption may be allowed under the Tax Treaty, but a common misconception is that the treaty benefits automatically apply. This is not the case. Instead, an income tax return (typically referred to as a treaty-based return) must be filed in order to invoke the treaty benefits, and penalties may be assessed for a failure to file treaty returns on a timely basis. Should the U.S. company not be in compliance with its Canadian tax filing requirements and in penalty territory, it may be able to avail itself with Canada’s voluntary disclosure program to alleviate penalties. Once a company establishes an office, a factory or any fixed place of business within Canada, it is considered to have a PE. At this point the business would be subject to Canadian taxation. This includes potential income tax, sales tax and/or value-added tax at both the federal and provincial
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{ Tax | Canadian tax net }
level. The company should expect to be subject to a taxation regime that rivals the U.S. in terms of complexity and administrative burdens. That being said, if a PE exists, the combined Canadian corporate tax rates (federal and provincial) are often less than U.S. corporate rates. The U.S. company can then consider claiming a foreign tax credit on its U.S. return to minimize tax leakage. The Tax Treaty contains a special provision that can deem a PE to exist when services are provided in Canada. Generally the application of the rules is a two-part test to deem a PE in Canada; the common tie with both tests is that services are performed in Canada for more than 183 days. For example, if the U.S. company sent employees to Canada to perform an installation or engineering contract for its Canadian customer and the duration of the contract is greater than six months, the deemed PE rules could be triggered. Tracking the number of days being spent in Canada is, therefore, important to ensure the deemed PE rules are not inadvertently triggered. One complication that arises is when US companies are COB through a Limited Liability Company (LLC). From a Canadian income tax perspective, a LLC is considered a corporation
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(regardless of how the IRS treats the LLC), so LLCs are not subject to treaty benefits unless certain conditions are met. If a LLC is COB in Canada, additional filing requirements and analysis are required to ensure treaty benefits can be ascertained. Despite these complexities a business should not be discouraged from exploring opportunities in Canada. Cultural similarities, favorable treaties and exchange rates and obvious geographical advantages make it an attractive choice for businesses looking to dip their toe in the global arena. When approached methodically, many companies have realized substantial economic benefits by doing business with Wisconsin’s closest international trading partner.
Harry Chana, CPA, CA is a partner with BDO Canada LLP. Contact him at 905-946-5457 or hchana@bdo.ca. Ben Podraza CPA, PFS, MTAX, CGMA is a managing director with BDO USA LLP. Contact him at 414-272-5900 or bpodraza@bdo.com.
wicpa.org
{ Human resources | Employee background checks }
How forward-thinking employers should view background checks wicpa.org
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27
{ Human resources | Employee background checks }
M By Jason A. Kunschke, Esq.
any employers use background checks. Along with ensuring job qualifications, background checks can help protect an employer against liability for negligent hiring, supervision or retention. However, background check policies, practices and procedures may also expose an employer to liability. This can happen if, among other things, the use of the background check results in a disparate impact on identifiable groups of applicants or employees.
Negligent hiring and supervision The most common rationale for background checks, especially criminal background checks, is that employers face liability if not performed. If a business engages someone, and that person harms someone else, e.g., steals from them, assaults them, or injures them, there is potential liability. Liability depends on whether the business was negligent. Did it do something it should not have done, or fail to do something it should have done? The Minnesota Supreme Court explained the doctrine of negligent hiring and negligent retention:
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The origin of the doctrine making an employer liable for negligent hiring, as well as negligent retention, arose out of the common law fellow-servant law, which imposed a duty on employers to select employees who would not endanger fellow employees by their presence on the job. The concept was later expanded to include a duty to “exercise reasonable care for the safety of members of the general public,” to the point that (the Court notes) the theory is “the rule in the majority of jurisdictions.” The Court explained: Liability is predicated on the negligence of an employer in placing a person with known propensities, or propensities which should have been discovered by reasonable investigation, in an employment position in which, because of the circumstance of the employment, it should have been foreseeable that the hired individual posed a threat of injury to others. Courts disagree regarding whether a background check, and especially a criminal background check, is required in any particular case. The answer depends on the jurisdiction, the facts of the employee’s conviction or other background, the employee’s job, and the co-workers, members of the public, or others, with whom an employee would foreseeably come into contact. Employers are thus presented with a conundrum: Whether to conduct a (criminal) background check and when and whether to exclude based on particular information obtained.
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{ Human resources | Employee background checks }
Federal law: Adverse impact discrimination theory Title VII of the Civil Rights Act of 1964 is the main federal law barring discrimination based on race, religion and sex, among other things. It is clearly unlawful for employers to deny employment because of race. The Supreme Court has held, however, that it is also unlawful to exclude applicants (or terminate or otherwise act against current employees) due to a facially neutral employment practice that has a significantly disproportionate impact on a group protected by Title VII. In one case, the Eighth Circuit Court of Appeals held that an across-the-board ban on hiring individuals convicted of “any offense, except the minor traffic offense,” is unlawful race discrimination. The Court held: We cannot conceive of any business necessity that would automatically place every individual convicted of any offense, except the minor traffic offense, in the permanent ranks of the unemployed. The Court of Appeals held that the plaintiff “and all other blacks who have been similarly denied employment on the basis of conviction records have been discriminated against on the basis of race in violation of Title VII…” A plaintiff alleging that an employer’s facially-neutral practice is unlawful must first show that a specific employment policy or practice has a “significant adverse impact on a protected group” of which the plaintiff is a member. Normally, the proof offered is statistical: Is there a statistically significant adverse impact or bias against any particular protected group (usually racial minorities)? While there is no legally required method of statistical proof, courts normally require statistical evidence showing that a statistical disparity is so large that it is highly unlikely to have occurred at random. Courts typically (although not always) find a 5 percent probability level, or “two standard deviations,” to be statistically significant evidence of discrimination. The bottom-line analysis: Does the policy or practice in question operate to eliminate one group (minorities) at a higher rate than it screens out other groups (non-minorities)? If so, the plaintiff has made an initial showing of adverse impact.
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In response, a defendant may challenge the statistical evidence, or offer alternative evidence, to show that there really is no statistically significant adverse impact. The employer may also defend itself by showing that its policy/ practice is “job related for the position in question and consistent with business necessity.” In the case of criminal records, and other data obtained through a background check, the question is: Is the information used to screen applicants or employees really related to the job in question? Does the employer really have a “business need” to exclude? To the extent that employers tailor background checks and screening methods to the particular job in question, employers have a lesser likelihood of adverse impact claims, and a greater opportunity to defend against such claims.
Current EEOC guidance and recent EEOC litigation The EEOC enforces Title VII and reviews discrimination claims. The EEOC provides guidance on the laws it enforces, and the EEOC guidance includes a detailed discussion of the three factors relevant to the job-related/business necessity defense — the nature of the offense, the amount of time since the offense was committed, and the nature of the job. The EEOC recommends that employers implement a “narrowly tailored” written policy and procedures for screening applicants and employees for criminal conduct, based in part on the three factors noted above. The EEOC also recommends recording justifications for the policies and procedures that are implemented, and recording “consultations and research considered in crafting the policy and procedures.” Based on the aforementioned factors, in addition to compliance with the Fair Credit Reporting Act in conducting a background check, employers should review whether or not a background check is warranted and how it should be used.
Jason A. Kunschke, Esq. is a senior counsel at Michael Best & Friedrich LLP in Milwaukee. Contact him at 414-225-2759 or jakunschke@michaelbest.com.
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{ Industry | Economic forecast }
"Although it is left to be seen how a Donald J. Trump presidency will affect the U.S. economy, the following are some of the major economic policies that have been discussed and/or promised by President Trump."
What can businesses expect from Trump’s presidency?
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wicpa.org
{ {Financial | Investing IndustryPlanning | Economic forecast}}
F
or the past eight years, businesses have had to operate in a challenging environment. These challenges range from stifling regulations, high taxes, a cloudy immigration system, escalating health care costs, EPA and many other challenges. Although it is left to be seen how a Donald J. Trump By Bill Ford presidency will affect the U.S. economy, the following are some of the major economic policies that have been discussed and/or promised by President Trump.
Health care (Affordable Care Act) Trump’s election assures major changes to the Affordable Care Act, or Obamacare. Likely targets for elimination include the requirement that individuals buy health insurance and that employers with 50 or more employees are required to offer it. Look for the Trump administration to work toward allowing insurers to sell across state lines, which creates more competition. The Trump administration is also likely to create a federal high-risk insurance pool for people who are ill and unable to obtain private insurance, and to give grants to states for Medicaid. Certain popular provisions in Obamacare would be retained, such as allowing children to stay on their parents’
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health plans until the age of 26 and guaranteeing coverage to people with pre-existing medical conditions.
Tax reform There is a good chance for a broad tax reform deal, featuring across-the-board tax cuts, if legislation can be moved through the Senate via the reconciliation process, which allows Congress to bypass procedural hurdles. Odds appear favorable to such an approach. Trump has vowed to slash taxes and compress the tax code to three brackets from its current seven. Under his proposed plan, top earners will pay taxes of 33 percent, as opposed to the current top individual rate of 39.6 percent. He’d also decrease corporate taxes to 15 percent. S-corporations and other pass-through entities like LLCs would have a top tax rate of 15 percent. Trump also would likely go easy on companies that have been stashing cash overseas. Owners would be allowed to repay trade earnings, which would be subject to a one-time 10 percent tax. He would also close inversion loopholes that allow corporations to defer taxes by banking funds overseas. Instead, companies would pay taxes on income at the time it is earned.
Illegal immigration Due to Trump’s immigration promises, we expect to see a ramp-up in workplace enforcement actions, including both I-9 audits and raids by the U.S. Immigration and Customs Enforcement Agency. It’s also likely that Trump will move to
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{ Industry | Economic forecast }
cancel the work authorization granted under DACA (Deferred Action for Childhood Arrivals) and counteract any immigration reform measures put in place by the Obama administration. Trump promised that he will mandate E-verify to check the employment eligibility of all workers in the country if elected. He also stated that he would alter temporary work visa programs, such as H1-Bs, which allow employers to bring on highly-skilled foreign workers.
U.S. Department of Labor Trump has proposed a moratorium on all new regulations. Small business groups, such as the National Federation of Independent Business, say 45 percent of business owners consider regulations a very serious problem in today’s market. We can expect a thorough review of former President Barack Obama’s Executive Order revising the Department of Labor’s guaranteed salary threshold from $23,660 to $47,476.
Labor relations It’s probably safe to forecast that Trump’s victory will slow down the tide of aggressive pro-union and anti-employer developments at the National Labor Relations Board (NLRB), and in time will probably lead to a more employer-friendly panel of board members.
Workplace safety Based on comments made during the campaign, President Trump likely will streamline the Occupational Safety and Health Administration (OSHA), repeal some or all of its recent rules on increased penalties and reporting requirements, and refocus the agency on high-hazard enforcement. We believe it is likely Trump will reverse course on OSHA’s penalty increases, which in some recent cases saw penalty amounts rise by 80 percent. Even if he decides not to appeal the penalty increase rule in its entirety, look for Trump to at least
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remove the rules requirement that OSHA’s maximum penalties increase each year to account for inflation. Second, we likely will see an elimination of the electronic reporting rule slated to take effect on July 1. This rule will require certain employers to report injury and illness information to OSHA, which will then post this information online for public viewing on its website.
Non-competes and other post-restrictive covenants Recently, the Obama administration issued a “call to action” to gut the power of non-competes. However, we predict the Trump administration will no longer be exhorting the states to legislate in this area. Given his business background, it seems unlikely that President Trump will support legislation that is designed to take a tool out of the hands of business owners. Employer restrictive covenants including non-compete agreements are enforceable in most states throughout the country as long as they are reasonably tailored to the specific threats posed by the employee, and are not overly broad or unduly lengthy in their duration. As a successful businessperson, Trump seems unlikely to continue pushing states to dial back on the use of noncompetes, and we also suspect he would veto congressional efforts to limit the use of non-compete agreements against low-wage workers. While Trump did not specifically address this issue during his campaign, he did require his campaign staffers and even volunteers to sign confidentiality and non-compete agreements.
Bill Ford is president and CEO of SESCO Management Consultants in Bristol, Tenn. Contact him at 423-764-4127 or bill@sescomgt.com. The views of this author do not necessarily reflect the views of the WICPA, its members or employees.
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