An inheritor’s trust is not just another estate planning tool—it’s your secret weapon for keeping wealth protected and under control. This trust is designed to protect and manage the assets you pass to a beneficiary. An inheritor’s trust allows your beneficiary to receive his or her inheritance in trust rather than as an outright gift or bequest. It locks down the assets and shields the beneficiary from taxes, creditors, and bad decisions. The beneficiary gets his share, but the assets are kept out of his or her own taxable estate.

Having assets pass directly to a trust not only protects the assets from being included in the beneficiary’s taxable estate but also shields them from other creditor claims, such as those arising from a lawsuit or a divorce. The inheritance is protected because the trust, rather than your beneficiary, legally owns the inheritance and because the beneficiary doesn’t fund the trust.

To ensure complete asset protection, the beneficiary must establish an inheritor’s trust before receiving the inheritance. The trust is drafted so that your beneficiary is the investment trustee, giving him or her power over the trust’s investments.

Your beneficiary then selects an unrelated person — someone he or she knows well and trusts — as the distribution trustee. The distribution trustee will have complete discretion over the distribution of principal and income, which ensures that the trust provides creditor protection.

The trust should be designed with the flexibility to remove and change the distribution trustee at any time and make other modifications when necessary, such as when tax laws change. Bear in mind that the unfettered power to remove and replace trustees may jeopardize the creditor protection aspect of the trust, which could result in the inclusion of the trust property in the beneficiary’s taxable estate.

Because it’s your beneficiary, and not you, who sets up the trust, he or she will incur the bulk of the fees, which will vary depending on the trust. In addition, he or she may have to pay annual trustee fees. Your cost, however, should be minimal — only the legal fees to amend your will or living trust to redirect your bequest to the inheritor’s trust.

Wealth preservation

Another benefit of an inheritor’s trust is that it can help ensure that inherited assets remain within the family lineage. By keeping assets in the trust rather than transferring them outright to beneficiaries, the trust can prevent wealth depletion due to mismanagement, overspending, or other poor financial decisions.

The trust’s grantor can include specific provisions or restrictions. These may include setting limits on distributions or requiring certain milestones (like completing education) before beneficiaries can access funds.

Follow the law

Ensuring an inheritor’s trust is properly drafted isn’t just a legal formality—it’s essential for protecting both the assets and the beneficiaries. Trusts must comply with federal and state laws to avoid potential IRS audits or court challenges. Most importantly, by taking the time to establish the trust correctly, the grantor ensures that his or her beneficiaries receive the full benefits of their inheritance without unnecessary risk.

This material has been prepared for informational purposes only, and is not intended to provide or be relied upon for legal or tax advice. If you have any specific legal or tax questions regarding this content or related issues, please consult with your professional legal or tax advisor.

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After numerous promises and delays, the IRS and Treasury have finally issued Proposed Regulations addressing Previously Taxed Earnings and Profits (PTEP) of foreign corporations and the related basis adjustments.

The proposed regulations are a follow-up of Notice 2019-01, which was issued in response to 2017’s Tax Cuts and Jobs Act (the “TCJA”). This notice provided a preview on how previously taxed income should be tracked and allocated when distributed. The current proposed regulations present a framework for tracking and managing PTEP to ensure that US shareholders in controlled foreign corporations (CFCs) are not taxed twice on the same earnings.

US Shareholders in CFCs are subject to a handful of tax regimes which require them to recognize “phantom income,” or income attributed from the foreign corporation, without even having received a distribution of cash or property. These regimes include Subpart F, Global Intangible Low Taxed Income (GILTI) and the one-time Section 965 Transition tax, ca. 2017.

When an actual distribution of cash or property is made, these earnings could be subject to US tax for a second time. The PTEP rules provide that these earnings, previously taxed under one of the above-mentioned regimes, should be excluded from income when distributed, preventing double taxation.

The latter two regimes, GILTI and Section 965, were codified as part of the 2017 TCJA and resulted in a tremendous increase in the number of US taxpayers that were recognizing phantom income and in the amounts of PTEP that were in the system. Hence, the increased urgency for guidance on the practical application of the PTEP rules.

The 350-page proposal does not make for light reading, and experts claim it doesn’t cover many issues that still need to be addressed.

Below are some key points:

PTEP Accounting and Tracking – The regulations require tracking of PTEP at both the U.S. shareholder and foreign corporation levels.

Categorized, annual PTET accounts – Taxpayers must maintain annual PTEP accounts categorized by the different types of income inclusions (e.g., Subpart F income, Global Intangible Low-Taxed Income [GILTI], Section 965 inclusions).

Share-by-Share Basis Adjustments – This approach entails applying basis adjustments to specific shares or property, which prevents improper shifts and ensures accurate gains or losses upon sale.

Tiered structures present challenges because they involve multiple layers of ownership. Under Subpart F/GILTI/Section 965 rules, lower tier foreign corporation income can bypass intermediate holding companies and be allocated directly to the US shareholder, making it difficult to accurately account for PTEP.

Adjustments to basis are generally made at the beginning of the taxable year in which the inclusion or distribution occurs.

Foreign Currency Dollar Basis Pools – Taxpayers are required to maintain U.S. dollar basis pools to compute foreign currency gain or loss under Section 986(c).

Foreign Tax Credits Allocation and Apportionment – The proposal includes rules for allocating and apportioning foreign taxes to PTEP distributions.

The proposed regulations are set to apply only for future tax years of foreign corporations, starting on or after the date when the regulations are officially finalized. They are not retroactive.

Taxpayers have the option to apply the regulations retroactively to open tax years.

The proposed regulations are welcome and will be helpful for taxpayers who have had recognized Subpart F, GILTI or other phantom inclusions from CFCs. However, accounting for US investments in foreign corporations and keeping updated about the new ordering rules, basis adjustments, and distribution classifications is not for an amateur. Taxpayers should work closely with tax professionals who can help them update their tracking systems, accurately categorize PTEP pools, and strategize to avoid double taxation and address compliance issues.

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Like much else under the new Trump presidency, the country’s tax landscape is shifting and reshaping beneath our feet.

Thousands of federal jobs have been slashed, including a large swath at the IRS. This, coupled with an IRS hiring freeze, will reduce the IRS’s ability to pursue tax debt collection and slow down audits, collections, and legal actions. The Department of Government Efficiency’s (DOGE) access to the IRS’s Integrated Data Retrieval System will accelerate a swing toward AI-driven fraud detection and enforcement, and could increase scrutiny on delinquent taxpayers and open the door to a wave of litigation in defense of data privacy. Lastly, the Tax Cuts and Jobs Act (TCJA) of 2017, which has kept tax rates low, key deductions and credits in place, and favorable tax breaks available, is set to expire by the end of 2025 and may or may not be renewed.

These potential changes have tax professionals worried about taxpayer health and the IRS’s capacity to enforce tax law and resolve tax controversy issues. Will scrutiny on delinquent taxpayers increase or weaken in 2025? Will there be sufficient IRS staff available to address delinquencies for tax debtors who want to resolve their obligations? What is the recalcitrant taxpayer to do in these tumultuous times?

What are taxpayers thinking

Taxpayers who are in arrears may wonder if it is the right time to come clean and resolve their outstanding tax issues, or to continue to cruise, hoping that IRS disarray will stand in their favor.

According to statistics generated by the Professional Managers Association, the IRS workforce stands at more than 100,000 total employees. Approximately 28,000 of those have been onboarded within the past year, and about 30,000 employees have worked there less than three years. The IRS, as of February 19, 2025, reports that it plans to lay off approximately 6,000 first-year probationary employees, despite the hiring freeze recently imposed by President Trump. These layoffs will disproportionately affect IRS employees in enforcement because they represent a large share of new employees.

While it’s true that the disorder in federal functioning may translate into diminished scrutiny, the dearth in staffing means that there won’t be agents and reps available to address taxpayers’ issues when necessary. If a taxpayer is at the “Final Notice” stage, automated notices will continue to be released, and a levy will automatically be imposed. However, there likely won’t be enough IRS agents to review appeals, release levies, arrange payment plans, or offer compromises for petitioners. We recommend that the delinquent taxpayer move to resolve his tax debt before he gets caught up in the IRS’ machinery and finds he has no recourse for his debt.

 What we’ve seen at the IRS

Our tax controversy team communicates with IRS representatives daily and has found that auditors, tax reps and agents share taxpayers’ state of confusion. They are stressed and anxious in the face of DOGE’s aggressive layoffs, wondering if or where the hatchet will fall next. Many are considering retirement to get out of the line of fire. New employee training has been frozen mid-stream, leaving longstanding agents worried about the extra burden they will shoulder to compensate for insufficient staff. Their state of limbo does not enhance operations. As one auditor told us, “Sorry if I sound muddled; it’s because I am.”

What You Should Do

Compliance is always the answer. File your taxes on time to avoid additional penalties. If you are in arrears, consider setting up a payment plan now, before IRS processing delays get worse. Stay abreast of policy changes; if TCJA provisions expire, your tax bill will change. Finally, if you are out of your depth, seek the help of an accounting professional.

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The market has two to three major corrections each decade, and always recovered afterwards to new highs.

Variations of this principle echo through advisory offices across the country during every market downturn. As financial advisors, a fundamental part of our job is talking clients off the proverbial ledge during market corrections and crashes. An equally important challenge, and one that receives far less attention, is pulling clients’ heads out of the clouds.

When markets plummet, clients often seek to abandon their long-term financial and investment plans. Conversely, they are often tempted to derail those same plans when market conditions are excessively favorable. “Maybe we should put just 20% of our money in Nvidia /Bitcoin / leveraged funds/ another ‘YOLO’ or high-risk, high-reward asset.” Every advisor has heard versions of this sentiment during euphoric market phases.

This presents a unique challenge in financial advising. To calm investors during downturns, an arsenal of historical data, charts, and evidence is available to prove that historically, markets have always recovered. This factual approach is effective because the pattern is well-established.

Managing euphoria is different. Booming markets often come with powerful narratives of fundamental change that convince investors that traditional strategies will not suffice, and aggressive positioning is not just desirable, but necessary to keep pace with a new reality. History offers little reassurance here because these moments always feel unprecedented.

In the late 1990s, investors piled into internet stocks, convinced that brick-and-mortar businesses were obsolete. The dot-com bubble promised a new economic paradigm where profits were secondary to “eyeballs” or views, i.e. a massive user base. Growth must be maintained at any cost. It was not just speculation; it was the future. Until, at least from an investing perspective, it wasn’t.

Sir John Templeton famously warned, “The four most dangerous words in investing are ‘this time it’s different.’ “Each era of market euphoria comes with a compelling story about why the old rules no longer apply. But history shows that markets eventually reassert discipline, and fundamentals still matter.

The best defense against both fear and greed is a well-crafted, long-term plan. A structured investment strategy keeps conversations grounded in clear financial goals, helping clients resist the emotional extremes of both downturns and booms. Interrupting a sound, long-term plan—whether due to panic or euphoria—can be costly. As advisors, our job is not only crisis management during bear markets, but also expectation management under all market conditions.

This material has been prepared for informational purposes only and is not intended to provide or be relied upon for legal or tax advice. If you have any specific legal or tax questions regarding this content or related issues, please consult with your professional legal or tax advisor.

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On January 14, 2025, the US Treasury and IRS released final regulations on the classification of digital content and cloud transactions. These rules address how transactions related to software, including streaming content, SaaS, and other cloud-based solutions are classified for US tax purposes. The guidance is relevant specifically to cross-border tax provisions, including withholding on payments made to foreign persons, and specific rules under Subpart F & GILTI.

How transactions are classified impacts how they are taxed. The new regulations clarify whether digital transactions are classified as leases, sales, or services. Once the tax classification of a transaction is established, the taxpayer can rely on the existing sourcing rules to understand what is defined as US sourced and what is foreign sourced – and the implications of each. The goal of refining the regulations is to help businesses, including multinational corporations, understand how cross-border digital transactions will be taxed and to ensure compliance with U.S. tax laws.

Given that businesses have been engaged in cloud transactions for decades, this guidance is long overdue. The IRS has yet to issue guidance on the classification of more advanced technology-related transactions, such as those involving Artificial Intelligence or digital assets; and there is no current indication that such guidance is forthcoming. Ultimately, guidance that provides clarity on these topics help both U.S. and foreign companies comply with U.S. tax obligations, while they navigate the challenges of the digital economy.

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The US real estate market offers abundant investment options and attractive opportunities for foreign investors. However, achieving success in US inbound investments requires a clear understanding of US tax law and its implications.

All income related to an underlying US real property asset is taxed in the US. To ensure maximum returns, investors must be knowledgeable about potential tax liabilities before committing to an investment.

Rentals

Rental income from properties located in the US is subject to a 30% withholding tax on gross rental income. If the rental income is sourced from rental activity classified as “active rental income” it is taxed within the US, but not on the gross amount. Rather, it is taxed on the net income amount, at the graduated marginal tax rates applicable to the taxpayer based on their income bracket.

If the rental activity does not meet the “active rental” income threshold, there is an option for the foreign owner to elect to treat the activity as active in order to obtain the benefit of the reduced tax rate. The impact of such election would have to be considered prior to making the election.

Sales

Sales of US real property results in capital gains income that is subject to US tax. At the time of the transaction proceeds from the sale of US real property are subject to 15% withholding of the gross amount. This amount withheld could far exceed the actual tax liability due because the withholding is on the total proceeds not the gain. In a case where the tax withheld exceeds the actual amount due, the foreign investor would have to file an income tax return to claim a refund for the excess taxes withheld. There is an option to obtain a withholding exemption from the IRS, but this process can take up to several months and delay a transaction.

If the foreign seller is an individual, then the capital gains income may be taxed at the lower long term capital gains tax rate available to individuals.

Indirect investment

Foreigners do not usually invest in US real property directly. Typically, they choose to invest through a legal entity, like a partnership or an LLC. Partnerships and LLCs are transparent for US tax purposes; they are considered pass-through for U.S. tax purposes, where income is taxed at the investor level rather than at the entity level. Therefore, if foreign individuals invest directly in a partnership or LLC whose underlying asset is US real property, they will be required to file individual income tax returns in the US and pay their US taxes related directly to this income.

A key consideration for structuring an investment would be to ensure that the rental income would be taxed as low as possible in the US considering the benefits of various available elections. Another key consideration is to make certain that any taxes paid in the US related to income in an LLC or partnership structure, would be creditable in the investor’s home country.

Go corporate

Investing in the US real estate market through a partnership or LLC offers certain protections but can be less efficient and may create delays in cash flow due to the withholding rule that would apply. Another alternative is to invest in the US through a corporate vehicle. This can be through a foreign country holding company or through a US holding company. If the real estate is held through a corporation, whether it is domestic or foreign, the income will be taxed at the standard corporate tax rate of 21% plus any state and local income taxes that would apply in the district where the real estate is located.

Investing in US real estate through a corporate vehicle introduces an extra level of tax in the form of a dividend withholding tax. The real estate tax is taxed at the corporate level at a rate of 21%, and then it is subject to a 30% withholding when the earnings are distributed (or deemed distributed in the case of a foreign corporation). If there is a treaty in place between the US and the country of residence of the foreign investor, then this dividend withholding tax can be significantly reduced or, in some circumstances, even eliminated entirely.

US vs foreign corporation

When comparing the benefits of investing through a US Corporation or a foreign corporation there are several factors to consider. From a cash flow perspective, it is usually beneficial to structure the investment through a US corporation because:

There would be no withholding at source
The investor has more control over the timing of tax submission
The investor would avoid having taxes over withheld

Alternatively, the benefit of using a foreign corporation as an investment vehicle is that the stock in the foreign corporation is not considered US situs property and would avoid US estate taxes. Conversely, stock in a US corporation, even when held by a foreign person, would be considered US situs property and be subject to the US estate tax.

As demonstrated, in addition to the income tax implications, there are oftentimes estate tax implications to consider when designing a structure for US investment. Another factor that is often considered is the foreign investor’s ability to easily and efficiently reinvest earnings in the US market.

Do it through debt

After considering these complexities, it is no wonder that some investors choose to go a more simplified route by investing in US real property through bona fide debt instruments. This method is efficient and often does not attract US taxes. However, this approach limits the investors’ profit potential because in order to be considered debt, and possibly exempt from US taxes, the nature of the transaction must be true debt with a fixed rate of return.

Compliance

Once a structure is implemented, it is essential to understand the US tax compliance requirements. The IRS has robust requirements related to reporting entities and activities with foreign owners. Failure to comply with these requirements can result in significant penalties of $25,000 or more. Thus, even when an efficient structure is in place, inadequate compliance could ultimately lead to significant and unnecessary costs.

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Autism rates are skyrocketing across the country, reshaping the healthcare industry’s landscape for families, insurers, and providers. Does this surge in the autistic population make the ABA space a surefire investment opportunity? We believe there is great potential in this space, however, like any industry, a successful ABA agency comes with its own unique challenges and operational demands. To navigate these challenges and ensure long-term success, ABA agencies must focus on key performance indicators that drive both operational efficiency and profitability.

Escalating Demand

Applied Behavior Analysis or ABA has become widely known as the go-to therapy for treating individuals with autism spectrum disorders (ASD). Historically, insurers excluded ABA therapies, classifying them as educational rather than as medical services. However, the 2013 release of The Diagnostic and Statistical Manual of Mental Disorders, Fifth Edition (DSM-5) significantly broadened the definition of autism and today, Medicaid and most insurance plans are mandated under the 2014 Affordable Care Act (ACA) and state law to provide coverage for autism treatment, including ABA therapy.

In a study issued in October of 2024, the journal JAMA Network Open reported that data gathered from over 12 million patients enrolled in major U.S. health care systems determined that between 2011 and 2022 the number of people diagnosed with autism climbed to a shocking 175%. Autism rates stand highest among the very young; according to calculations issued by the U.S. Centers for Disease Control and Prevention, about 1 in 36 children were diagnosed with ASD in 2020.

Do the math – this could translate to an estimated 2.9 million autistic individuals by 2034.

Key performance indicators

Revenue per Client, Therapist Utilization Rate, and Accounts Receivable Turnover are essential key performance indicators. They provide measurable data that enables an agency to monitor cash flow, improve billing efficiency, and maximize revenue. They can help reduce delays in payments, thereby reducing a business’ working capital requirements and enabling appropriate cash flow. These metrics also serve to reflect whether an agency’s performance holds value to a potential investor.

Consider this fictional case scenario:

All-Smiles ABA Center is a friendly place and prides itself on its dedicated and professional staff.

The Accounts Receivables representative is often sick and behind in billing. She manages the agency’s finances by documenting when cash comes in and out, without keeping track of the revenue or expenses for each specific service or the date they are provided.

All-Smiles’ warmhearted therapists will often spend extra time with patients and understand occasional no-shows. The administrative staff is always ready to delay documentation until the client is comfortable with its services.

At the request of its clientele, the agency heavily promotes social skills groups, even though these sessions are reimbursed at much lower rates than direct one-on-one therapy. The majority of the agency’s clients are on Medicaid, which provides lower reimbursement rates, but the agency values its relationships and doesn’t want to make clients feel unwanted by focusing on a more diversified mix.

Accounts Receivable Turnover – All-Smiles billing and receivables processes are underperforming. Agencies must be able to consistently submit accurate and timely claims, in compliance with payor requirements to minimize rejected claims and payment delays. Timely collections are crucial to ensure that funds are available for salaries, and administrative and operational costs. Important metrics for accounts receivables include tracking average days in accounts receivable, collection rates by payor, and percentage of overdue accounts.

Therapist Utilization Rate – Compassionate and dedicated therapists may enhance services – but unbilled time translates directly into lost income. clients whose services earn lower reimbursements, or who take up extra, unbilled, therapy time are bringing in less revenue than it costs to serve them. Tracking an agency’s percentage of billable hours against total hours worked, the average caseload per therapist, and therapists’ cancellation rates maximizes therapist productivity and ensures operational efficiency. All-Smiles would also be wise to assess their client base and focus on clients with more robust coverage that yields reimbursements at higher rates.

Revenue per Client: Understanding how much revenue each client generates is essential in order to evaluate profitability, identify inefficiencies in billing, and ensure the business remains financially sustainable. Tracking revenue by service type helps the company assess which services yield the most profit. All-Smiles accounting and billing processes are so poor that it does not realize that its social skills sessions generate low revenues relative to therapist’s time. As a result, it fails to expand on therapy services or train additional staff and misses opportunities to boost profitability. Because All-Smiles operates on a cash basis and never reviews revenue and direct expenses on a date of service level, they are unable to properly track AR and know its accurate revenue, bad debt, and trends.

By analyzing the information revealed by these KPIs, an agency can track its revenues, scrutinize its performance, and use the data to create its own unique competitive advantage in the industry. It can evaluate profitability and identify opportunities to improve.

Working with our clients in the ABA space has proven that profitability in this industry is less about the volume of clients served and more about operational excellence and strategic management. For existing healthcare entities, the burgeoning autistic population offers promising opportunities to extend services and take advantage of this explosive growth. Established ABA agencies would be wise to analyze these key performance indicators to recognize red flags, maximize their returns, and set a value on their entity to attract potential investors.

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The Employee Retention Credit (ERC) was introduced in response to the COVID-19 pandemic as part of the CARES Act in 2020. It is a refundable tax credit with the purpose of incentivizing businesses to keep their employees on payroll during the disruptive pandemic period.

The ERC is calculated per employee and (for 2021) offers a credit of 70% of qualified wages paid to each employee during eligible quarters. Wages are capped at $10,000 per employee per quarter, resulting in a maximum credit allowance of $7,000 per employee per quarter.

Applying for the ERC should have been a fairly straightforward process, but a glitch in the IRS system triggered a spate of erroneous notices of disallowance to many applicants, causing complications, frustration, and losses for taxpayers.

The IRS claimed the disallowances were due to discrepancies in the number of employees reported by applicants. To support this accusation, the IRS points to taxpayers’ filed Form 941, Part 1, Box 1. Taxpayers are asked for the number of employees appearing on the payroll for the quarter. If the IRS finds that the employee count cited on Form 941 is less than the amount of employees claimed for the ERC on the employer’s 941X, it will disallow the credit.

The source of the problem boils down to the language used on the form. Form 941, Part 1, Box 1 of the 941 requests:

“Number of employees who received wages, tips, or other compensation for the pay period including Mar. 12 (Quarter 1), June 12 (Quarter 2), Sept. 12 (Quarter 3), or Dec. 12 (Quarter 4).”

The instructions explicitly request employee counts for a specific ‘snapshot’ of time – the 12th day of the last month of the quarter—rather than for the entire quarter.

In practice, the quarter ends on the last day of the last month of the quarter. Any fluctuation in employee count that an entity experienced between the 12^th and the close of the quarter will not be accounted for in the ‘Box 1 count’. The total number of employees for the entire quarter is not properly reflected in the original 941 filing because the filing requested the employee count only for the pay period including the 12th of the month, not for the whole quarter.

Thus, many discrepancies in taxpayers’ employee counts are not a result of payroll errors or fraudulent reporting, but instead are a reflection of the misguided and ineffective language used by the IRS when requesting taxpayers’ data. Employers are eligible for the ERC on all employees who were paid during the quarter, not only on the ones that were employed during the “snapshot” pay period.

We advise taxpayers who have received this type of disallowance notice to respond to the IRS in writing, with an explanation of their calculations – including the number of employees that may have been onboarded after the 12^thof the month, but within the quarter. If the taxpayer can support the employee count as reported on the Form 941 filing, there is every reason to believe they can reinstate their full legitimate credit, as provided by law. Many of our clients who responded in this manner have already received IRS notices confirming their full credit has been approved.

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What is International Tax?

Any time a business or individual engages in a financial transaction that crosses a border, there are international tax implications, and therefore an international tax advisor should be consulted. Some examples of such transactions are:

investing in non- U.S. investments
selling services or products to customers outside of the U.S.
hiring an employee outside of the U.S.
establishing a foreign subsidiary
collaborating with a business based outside of the U.S. in a joint venture
borrowing money from a non-U.S. lender, or
purchasing real estate in a different country.

What are some International Tax implications?

Any time you do business or make an investment, the country where the transaction took place has the right to tax the income you’ve earned. In our digital world, even if you don’t have any physical presence in a particular country, that country may still leverage a tax on the income generated within it. An international tax advisor can assist you in understanding what are the local country’s tax implications of your activities and what may be your potential tax liability. There will likely be income tax ramifications and a Value Added Tax (VAT), a tax which is common in Canada and many European Countries. Often, these additional taxes can be as high or higher than a country’s corporate income tax.

In addition to the foreign country’s tax implications, there are specific tax rules that address how the IRS taxes transactions outside of the U.S., and there are additional disclosure requirements. These requirements usually take the form of specific filings that report details of the foreign activity. Even when there may not be a significant taxable impact from the cross-border activity, there will be a filing requirement that, if left unmet, could result in heavy penalties starting from $10,000 per form. The costs of missing a filing requirement or planning opportunity in the cross- border context can be very high, more so than in a purely domestic context.

How can one benefit from using an International Tax Advisor?

Anyone dealing in any cross-border transaction could potentially need international tax services. Cross-border tax is fraught with traps for the unaware; it also offers many planning opportunities. Consulting with a knowledgeable international tax specialist can help you avoid unnecessary costs or potential penalties and inform you about opportunities to minimize your effective global tax rate.

Businesses with international connections and multinational corporations require insight into the international marketplace, as well as information regarding the global business arena.

Whether regarding regulations, compliance, or tax advisory, international tax consultants can help you navigate the complex web of the international market and help you achieve your business goals.

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On the campaign trail, Trump vocally championed American business interests and vowed to support corporate America and draw business back into the U.S. Now it’s showtime, and one area where we may see Trump’s plans begin to emerge is in changes to business tax law and policy. While no detailed tax plan has been issued yet, Trump has hinted at how tax policy may take shape next year.

Trump has proposed a 1% decrease in the corporate income tax rate, which presently stands at 21%, and he is suggesting a more substantial 15% rate for companies that manufacture in the U.S. This tax cut is relatively modest, but it will increase corporate profits and give businesses more resources to reinvest and grow. Unless the changes also address pass-through tax rates or deductions, there will likely be no significant benefits for small businesses organized as pass-through entities. There is the possibility that the tax cut could improve global competitiveness and tempt international corporations to return or transfer operations to the U.S., potentially stimulating modest economic growth.

Though a 1% decrease seems insignificant, given the scale of U.S. corporate earnings, it could have a noteworthy and negative impact on U.S. tax revenues and may increase the country’s deficit. Much will depend on how businesses use their 1% savings, where they allocate them, and how the broader economic environment reacts to the adjustment.

Trump also proposes to repeal the limitation on excess business losses for non-corporate taxpayers. The limitation, created by the American Rescue Plan Act of 2021 and extended through 2028 by the Inflation Reduction Act of 2022, prevents non-corporate taxpayers from deducting excess business losses above $578,000 (2023-married filing jointly) or $289,000 (other), with any excess losses treated as net operating loss carryforward (subject to indexed thresholds).

Repealing this limitation would mean more deductions available for non-corporate taxpayers, including S Corps, partnerships, and sole proprietors. It would enable them to offset their business losses against other types of income, like wages or investment income, and overall, it would reduce their tax burden. Critics may claim that this tax cut favors the rich, who have multiple income streams and are more likely to have large business losses and other income to offset.

Besides tax relief, the injection of additional cash into businesses could spur growth and reinvestment. As above, this tax cut would also reduce federal tax revenues and may raise the deficit unless other revenue-generating measures are implemented.

Even with the possibility of a Republican-controlled Congress, it is uncertain whether Trump will be successful in pushing through tax cuts and policy changes. He may face backlash from the public for seemingly favoring the wealthy, or lawmakers may question whether his tax initiatives can benefit the overall economy. The Fed will be cautious of any changes impacting inflation and, by extension, interest rates. With so many economic moving parts, it is hard to predict whether or how Trump’s intentions will be realized.

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As we stepped into 2024, the investment landscape was filled with uncertainty. Several significant challenges loomed, posing threats to financial stability. Some of these challenges included:

Persistently high inflation
Widespread predictions of a recession by economists and strategists
Uncertainty surrounding the Federal Reserve’s next steps
A rapidly escalating national debt
Historically high interest rates
An imminent housing crash fueled by those high rates

These menacing issues were further intensified by the pending election, with its highly charged public sentiments and the expectation of political unrest and chaos.

Despite these challenges, the stock market has shown remarkable resilience, surging 27.56% year-to-date in 2024. This performance underscores an important lesson: attempting to time the market based on macroeconomic conditions or political developments is a futile exercise.

You might be thinking, “If the market weathered all these storms, doesn’t that mean it never goes down? Maybe investing is smooth sailing.” But that assumption couldn’t be further from the truth. Historically, the market experiences a 30% correction approximately once every five years, in addition to many smaller intermittent corrections. It’s far from a smooth ride. The takeaway is that predicting when the ups and downs will occur is incredibly difficult—arguably impossible.

Instead of getting caught up in fear or trying to anticipate market movements, a prudent investor focuses on maintaining a diversified portfolio and committing to their long-term financial goals. By tuning out the noise and staying invested, you can position yourself to benefit from the market’s resilience and the power of compounding your investment over time.

2024’s stock market resilience, despite a seemingly endless array of concerns, serves as a powerful reminder that time in the market—not timing the market—is the key to investment success. As we navigate the unpredictable road ahead, remain disciplined, stay invested, and trust in the long-term potential of the U.S. stock market to deliver substantial returns.

his material has been prepared for informational purposes only and is not intended to provide or be relied upon for legal or tax advice. If you have any specific legal or tax questions regarding this content or related issues, please consult with your professional legal or tax advisor.

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When you peek under the hood at inflation data and the latest cost-of-living trends, you might feel some relief upon noticing that, while some high prices still sting, costs are stabilizing overall. All except for one notable, stubborn exception: housing.

Since the pandemic, home prices have shot up dramatically, pushing the dream of homeownership further out of reach for many Americans. Every market has its quirks, but on the whole, the median home price across the U.S. tells the same story – prices are up, and they aren’t trending downward.

To add insult to injury, interest rates were raised in 2022 and 2023 as a mechanism to quell inflation. The natural result should have been a downswing in housing prices. Yet, despite the hikes, home prices didn’t budge. So, now we’re getting hit with the classic one-two punch: higher home prices are prevailing and interest rates have been climbing.

Here’s a typical real-world example: Imagine you had your eye on a $600,000 house back in 2021. With a 30-year mortgage at a 3% rate and a $200,000 down payment, your mortgage bill would have come to an estimated $1,686 a month. Fast forward and today, that same house would likely be priced closer to $800,000, with mortgage rates now hovering around 6.5%. Assuming that the same down payment was applied, the monthly mortgage cost would jump from $1,686 to $3,792 – a staggering difference.

The Fed-fund rate is regulated by the Federal Reserve, while Treasury and Bond rates tend to be controlled by the market – and the rates typically align. However, when the Fed announced a recent half-percent rate cut on September 18th — intended to signal economic stability and control over inflation—many hoped it would signal some relief, especially with the Feds projection of more cuts on the horizon. But ironically, the market has pushed back and treasury bond yields and mortgage rates have actually risen. Economists are practically falling over each other to explain this strange turn of events.

At Equinum, we believe that, while rates might dip a little, the only way we’re likely to see a meaningful drop in home prices or mortgage rates, would be through a recession. In a recession, employment drops and there is less money circulating in the economy; people cannot afford homes and real estate prices fall. The Fed generally responds by cutting interest rates, hoping to stimulate the economy and pull it out of its inertia. While a period of recession may be good news for those seeking to purchase real estate, it comes at the expense of joblessness and unemployment. This solution presents a difficult dilemma: choosing between affordable housing and job stability, an uneasy balancing act that none of us wants to experience.

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Global crises and natural disasters are on the rise and in response, people all over the country are opening their hearts and their wallets to support those in need. But this rise in altruism has its challenges. In the wake of Hurricanes Milton and Helene, the Internal Revenue Service recently warned taxpayers to beware of scammers who exploit public generosity by creating fake charities that gather donations and steal sensitive personal and financial information. According to recent data from the Federal Trade Commission, in 2023, nearly 10,000 reports of charitable solicitation fraud were filed in the United States, resulting in a loss of approximately $22.5 million to donors. Scammers commonly take advantage of peoples’ generosity during the holiday season, and when natural disasters or other tragic events occur; and their victims are often the easier marks – seniors and groups with limited English proficiency.

Scammers are imaginative and don’t limit themselves to pulling on heartstrings only as a response to a natural crisis. In a shameful example of fake charity fraud, in 2023, student Madison Russo, fraudulently raised nearly $40,000 by claiming to have multiple cancers, including stage 2 pancreatic cancer and leukemia. She publicized her story on TikTok and set up a GoFundMe page for donations. Ultimately, she was challenged and, after failing to provide medical records or proof of her diagnosis, was convicted and sentenced to probation and restitution to her donors.

Sham charities can go corporate too. In a March 2024 announcement, the Federal Trade Commission, along with ten other states, brought suit against Cancer Recovery Foundation International, also known as Women’s Cancer Fund, and its operator, Gregory B. Anderson. The suit alleges that from 2017 to 2022, the organization collected more than $18 million from donors to support women cancer patients. It only spent 1.1%, or approximately $196,000, on financial support to patients, while a cool $775,139 went to pay Anderson, its operator.

The FBI warns citizens to avoid making financial contributions to groups that support terrorism. Foreign Terrorist Organizations (FTOs) are foreign organizations that are designated by the Secretary of State in accordance with section 219 of the Immigration and Nationality Act (INA). The US Department of State provides a public list of Designated Foreign Terrorist Organizations and warns donors to keep their distance.

“We all want to help innocent victims and their families,” said IRS Commissioner Danny Werfel. “Knowing we’re trying to aid those who are suffering, criminals crawl out of the woodwork to prey on those most vulnerable – people who simply want to help. Especially during these challenging times, don’t feel pressured to immediately give to a charity you’ve never heard of. Check out the charity first and confirm it is authentic.”

To that end, the IRS offers the Tax-Exempt Organization Search (TEOS) tool, which taxpayers can access on the IRS website to help them find or verify qualified, legitimate charities. Beyond this, how can a donor make sure that his or her charitable donations reach their intended recipients? The wise donor will do their research and will stick with charities they know and trust. It’s best to make targeted donations, designated towards specific purposes instead of to a general fund. Cyber-safety should always be paramount; never click on links or open attachments in unsolicited e-mails, texts, or social media posts. Also know that most legitimate charity websites end in “.org” rather than “.com.” Charities that ask for cash or wire payments raise a red flag. It is always more prudent to pay by credit card or write a check directly to a charity; and never make a charitable donation check out to an individual.

As charitable scams continue to evolve, it is vital for donors to stay vigilant and informed about how to identify potential fraud. Always verify the legitimacy of a charity through reliable resources, such as the Tax-Exempt Organization Search, Better Business Bureau or Charity Navigator, and be wary of unsolicited requests for donations. By staying aware and conducting due diligence, you can ensure that your contributions reach those who genuinely need support, while safeguarding yourself against scammers.

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Excel and Power BI are both powerful Microsoft tools used in data analysis and reporting, but each has its distinct strengths and applications.

Excel, as a spreadsheet program, offers strong capabilities used for basic analysis and reporting; it features detailed, manual data entry and calculations. Excel is suitable for small to medium datasets for use in financial analysis, and it’s a comfortable choice for users who are already familiar with its functions and formulas. The program is commonly used by businesses and students for creating budgets, tracking expenditures, calculations and analyses, and other statistical functions.

Power BI is the go-to choice for advanced analytics and visualization. It offers more automation and scalability for large datasets and its interactive functions are used for advanced data analysis, forecasting, tracking key metrics and other tasks that require manipulating and sharing data.

Power BI vs. Excel: Why Power BI Stands Out

While Excel remains a popular tool for data analysis, Power BI offers several advantages that make it a superior choice for modern businesses:

Enhanced Visualizations: Power BI’s advanced visual tools make it easier to present complex data in a visually appealing and interactive way.
Real-Time Data Integration: Unlike Excel, which often requires manual data refreshes, Power BI can connect to live data sources for continuous updates.
Scalability: Power BI handles large datasets more effectively than Excel, making it ideal for businesses that deal with high volumes of data.
Seamless Integration: Power BI supports a wide range of data sources, including cloud services like Azure, and enterprise systems like SAP and Salesforce, making it more versatile than Excel.

Who’s got the Advantage?

Whereas Excel is the workhorse we all know and love, Power BI provides attractive bells and whistles. Its extensive features for formatting, natural language queries, and editing and filtering are visually appealing – with a customized dashboard offering a 360-degree view. Users can more easily drill down into data with Power BI and automate and share interactive reports across teams and organizations. Ultimately, these capabilities can help businesses make better-informed, data-driven decisions. While Excel’s calculation and spreadsheet functionalities make it ideal for studying data, Power BI is a better choice for performance and sharing.

Why Choose?

Excel and Power BI, both created by Microsoft, can complement each other effectively and integrate well. There’s no real need to choose between them – they can be used together for optimal results.

Data created in Excel can easily be shared with Power BI without transition glitches. The same goes for other Microsoft Office applications, like Power Query and Power Pivot. An amalgam of these tools can save a business time, automate its processes, and allow it to optimize and upgrade its data management.

Ask us about how RothTech can help your organization leverage the full potential of Power BI for deeper insights and better decision-making.

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Cost segregation is a key tool that allows a business to reclassify certain property components and potentially reduce its tax burden through accelerated depreciation. Property owners who have developed, acquired, expanded, or renovated real estate can optimize their depreciation deductions and defer income taxes at both federal and state levels. While cost segregation is common in office, hotel, and retail spaces, it can benefit any type of commercial property.

For tax purposes, residential rental properties typically depreciate over 27.5 years, while commercial properties depreciate over 39 years. However, properties include more than the building structure itself—elements like plumbing, flooring, and sidewalks can be depreciated on accelerated timelines. By separating specific property components, investors can fast-track depreciation deductions, cut taxable income, and improve cash flow. This method is especially valuable in commercial real estate, where larger investments yield substantial tax savings. Cost segregation is one way private-market real estate provides unique tax advantages, making it a particularly appealing asset class.

When selling property used in your business, understanding the sale’s tax implications is essential, especially given the complex rules involved.

Basic rules

As an example, consider a property for sale that is either land or depreciable property used in your business and has been held for more than a year. Under tax law, gains and losses from sales of business property are netted against each other. The tax treatment is as follows:

If the netting of gains and losses results in a net gain, then long-term capital gain treatment results, subject to “recapture” rules discussed below. Long-term capital gain treatment is generally more favorable than ordinary income treatment.
If the netting of gains and losses results in a net loss, that loss is fully deductible against ordinary income. (In other words, none of the rules that limit the deductibility of capital losses apply.)

The availability of long-term capital gain treatment for business property net gain is limited by “recapture” rules. Under these rules, amounts are treated as ordinary income, rather than capital gain, because of previous ordinary loss or deduction treatment.

The beauty of utilizing cost segregation to accelerate depreciation is that it offsets income – until it is time to sell. That’s when the recapture rule kicks in. There’s a special recapture rule that applies only to business property. Under this rule, to the extent you’ve had a business property net loss within the previous five years, any business property net gain is treated as ordinary income instead of long-term capital gain.

Different types of property

Under the Internal Revenue Code, different provisions address different types of property. For example:

Section 1245 property. This consists of all depreciable personal property, whether tangible or intangible, and certain depreciable real property (usually real property that performs specific functions). If you sell Section 1245 property, you must recapture your gain as ordinary income to the extent of your earlier depreciation deductions on the asset.
Section 1250 property. In general, this consists of buildings and their structural components. If you sell Section 1250 property that’s placed in service after 1986, none of the long-term capital gain attributable to depreciation deductions will be subject to depreciation recapture. However, for most noncorporate taxpayers, the gain attributable to depreciation deductions, to the extent it doesn’t exceed business property net gain, will (as reduced by the business property recapture rule above) be taxed at a rate of no more than 28.8% (25% plus the 3.8% net investment income tax) rather than the maximum 23.8% rate (20% plus the 3.8% net investment income tax) that generally applies to long-term capital gains of noncorporate taxpayers.

Other rules apply to, respectively, Section 1250 property that you placed in service after 1980 and before 1987, and Section 1250 property that you placed in service before 1981.

Even with the simple assumptions presented in this article, the tax treatment of the sale of business assets can be complex. Tools like cost segregation, combined with a solid grasp of tax rules, can make a significant difference in tax outcomes and improve a business’ overall financial strategy when it sells business property.

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In today’s data-driven world, businesses of all sizes—from small startups to large conglomerates—collect vast amounts of data. However, the true challenge lies in transforming this raw data into actionable insights that drive informed decision-making. Microsoft’s Power BI is a powerful business intelligence tool designed to help organizations convert data into meaningful reports and visualizations, making data analysis more accessible, insightful, and actionable.

Why Power BI is Essential for Modern Businesses

1) Data Consolidation Across Multiple Sources: Power BI allows businesses to integrate data from multiple sources, such as Excel, cloud services, databases, and even the web. This unified data access means that businesses can analyze sales, operations, finance, and customer data all in one place, enabling cohesive decision-making across departments.

2) Real-Time Analytics: Power BI provides real-time data streaming, meaning businesses can track key performance indicators (KPIs) and metrics as they happen. This allows companies to respond proactively to changes in market conditions or internal performance issues, rather than relying on static, outdated reports.

3) Advanced Data Visualization: While tools like Excel can visualize data to a degree, Power BI takes this a step further with interactive, highly customizable dashboards. These dashboards provide a clear view of complex datasets and help users easily identify trends, outliers, and opportunities through modern visuals like heatmaps, treemaps, and geographic maps.

4) Self-Service Business Intelligence: One of the greatest advantages of Power BI is its ease of use. Users across the organization, not just those in IT, can create their own reports and dashboards. This empowers all team members to make data-driven decisions and fosters a culture of data literacy throughout the organization.

5) Scalability and Affordability: Power BI is built on scalable data engines capable of handling large datasets without performance degradation. Additionally, its pricing structure is progressive, offering free options for small organizations using Power BI Desktop, and affordable licensing for larger enterprises that need cloud sharing and collaboration.

How to Set Up Power BI for Success

To maximize the potential of Power BI, proper setup and ongoing optimization are critical. Here’s a step-by-step approach:

1) Define Clear Objectives: Before jumping into Power BI, businesses should outline their goals. What key metrics are you tracking? What decisions do you hope to influence with your data? Aligning Power BI with these objectives ensures you are focused on the right data and insights.

2) Data Integration and Cleaning: Power BI excels when data is clean and consistent. Use tools like Power Query to prepare data from various sources, ensuring accuracy and reliability before analysis. Once cleaned, Power BI can pull in data from sources such as SAP, Oracle, Azure, and even websites.

3) Establish Roles and Permissions: To protect sensitive data, businesses should set up appropriate user roles in Power BI. The platform allows administrators to grant different permissions, ensuring that data is secure while still enabling collaboration across departments.

4) Foster a Data-Driven Culture: Training employees to use Power BI is essential for unlocking its full potential. Encourage team members to build their own reports and dashboards, fostering a culture where data literacy thrives.

Best Practices for Power BI Optimization

Even after setting up Power BI, ongoing refinement is essential to ensure the tool evolves alongside your business. Here are some optimization tips:

– Automate Data Refreshes and Alerts: Set up automatic data refreshes to ensure your dashboards always display the latest information. Use alerts to notify key stakeholders when KPIs reach critical thresholds, enabling faster responses to emerging trends.

– Optimize Report Performance: As data volumes grow, it’s important to optimize reports for performance. Techniques like DirectQuery and incremental refreshes can help keep reports running smoothly, even with large datasets.

– Design with Simplicity: Power BI dashboards should be clear and concise. Avoid overloading users with too much information, and focus on the most critical data points. Use consistent visualizations, round numbers, and clean layouts to enhance readability.

– Security and Governance: Power BI offers robust data security features, such as row-level security, allowing businesses to protect sensitive data while still leveraging the platform’s collaborative features.

Conclusion: Unlock the Power of Your Data with Power BI

Power BI transforms data into actionable insights, making it a critical tool for businesses looking to gain a competitive edge in today’s data-driven world. By integrating data across multiple sources, offering real-time insights, and enabling self-service reporting, Power BI helps businesses make informed decisions that drive growth, efficiency, and profitability.

With proper setup, ongoing optimization, and a commitment to fostering a data-driven culture, your organization can fully unlock the power of Power BI and harness the full potential of your data.

Ask us about how RothTech can help your organization leverage the full potential of Power BI for deeper insights and better decision-making.

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The IRS defines voluntary disclosure as “a way for taxpayers with previously undisclosed income to contact the IRS and resolve their tax matters.” It’s their way of offering remiss taxpayers the opportunity to mitigate potential penalties.

This new program refers specifically to the COVID-era Employee Retention Credit (ERC). If you claimed and received the Employee Retention Credit (ERC) for 2021 tax periods, but you are, in fact, ineligible, you will need to repay the credit. The Voluntary Disclosure Program, or VDP, may be your chance to regroup.

An analysis conducted by the IRS found that a whopping 60% to 70% of applications for the ERC show an unacceptable “level of risk.” This is IRS lingo for claims they believe have a high likelihood of being ineligible for the credit. Tens of thousands of these are slated to be denied in the coming months. This high percentage of erroneous filings has inspired the IRS to temporarily reopen the Voluntary Disclosure Program and give businesses the chance to repair or retract their improperly filed claims to avoid potential civil penalties, audit costs and possible litigation.

Round two of the Voluntary Disclosure Program (VDP) was launched on August 15, 2024 and will close soon – on November 22, 2024. The VDP offers a 15% discount on the repayment of a claimant’s errant claim and the opportunity to avoid penalties, audits, or fees associated with that incorrect claim.

The IRS is marketing this “discount” as defraying the high expenses that many businesses needed to pay their (overly aggressive) advisors or promoters in order to get the ERC in the first place. Couched in another way, the IRS is willing to pay 15% of the claim in order to get their hands on the other 85% and to get the business to rat on the promoters of ineligible claims.

The first ERC VDP earlier this year offered a more generous 20% discount, but that offer is gone. If a taxpayer believes that it is eligible for the ERC, but wants to recalculate to claim a different amount, it will have to file an amended return to report that reduced amount.

Only those who have claimed ERC for 2021 (not 2020) and have received the refund or the credit against their employment taxes, are eligible to take advantage of VDP 2.0. If a claimant has already received an IRS “clawback” notice demanding repayment, they’re out of luck. If they are in the middle of an employment tax exam for the credit period or are under criminal investigation, they have also lost their chance. When a claimant is accepted to the Voluntary Disclosure Program, they must execute a closing agreement explicitly stating that they are not entitled to the ERC – and the IRS doesn’t stop there. In its efforts to identify potentially abusive ERC promotors, the claimant will have to provide the names and contact information of the preparer or advisor who helped them submit the claim.

If you’ve applied for the ERC but have not yet received a credit or refund or have received a check but have left it uncashed, then you are not eligible for this program. Instead, the IRS offers a withdrawal process. This process effectively reverses your claim, treating it as if it was never filed. The IRS will graciously hold back from imposing penalties or interest as well. However, you won’t get the 15% “discount.” To date, the claim withdrawal process has led to more than 7,300 entities withdrawing $677 million.

The IRS continues hunting for erroneous or fraudulent ERC claims and has already mailed out thousands of letters disallowing unpaid ERC claims to businesses in these last few months. This deluge of letters represents more than $1 billion in ERC claims.

It is interesting to note that the IRS seems to be targeting only those that have already received their credits. For many businesses that have already received (and in most cases, spent) the monies, it would be very hard to part with what they already have in hand.

Do you need to rethink your ERC claim? Was your preparer above board? Was he or she knowledgeable about your business and informed about ERC qualifications? Was your eligibility based on “general supply chain disruptions?”

Our recent experience handling numerous ERC audits have shown us that the IRS has been operating under a policy of “deny first, ask questions later.” Your claim may deserve a revisit, and the Voluntary Disclosure Program may be your return ticket to proper compliance.

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“Democracy is the theory that the common people know what they want and deserve to get it good and hard.”

— H. L. Mencken

It’s that season again — when those running for public office start making promises of all shapes and sizes, even those that defy the laws of economics. But let’s not forget their ultimate goal: to get more votes. As Churchill lamented, “The best argument against democracy is a five-minute conversation with the average voter.”

Let’s examine a few recent examples:

Vice President Harris, in her “economic plan” released on August 15th, promised to ban price gouging. This term usually refers to sellers exploiting market power to unfairly raise prices. With grocery prices up 26% since 2020, addressing this issue sounds appealing. However, even The New York Times felt compelled to critique this proposal, quoting economist Jason Furman: “This is not sensible policy, and I think the biggest hope is that it ends up being a lot of rhetoric and no reality.” Harris’s economic advisers surely know that price gouging bans have never and will never work, but they’re banking on voters not noticing.

Then there’s former President Trump’s tariff proposal: a 10% tariff on all imported goods. While this might appeal to voters who favor “America First” policies and resist globalization, these tariffs would ultimately raise prices for consumers. Although certain adverse measures can be justified in certain areas like computer chips (national security) or medicine (as seen during COVID), they ignore the fact that importing cheaper goods has long kept American lifestyles more affordable.

A final example is the bipartisan silence on the solvency of Social Security and the national debt. Telling seniors they might face pay cuts, or juniors that they need to pay more into the system, doesn’t win votes. As a result, these topics remain taboo until they become ticking time bombs.

Historian Niall Ferguson recently highlighted his “personal law of history:” “Any great power that spends more on debt service (interest payments on the national debt) than on defense will not stay great for very long. True of Habsburg Spain, t ancient régime France, true of the Ottoman Empire, true of the British Empire, this law is about to be put to the test by the U.S. beginning this very year.” Tackling this issue isn’t politically advantageous, so it’s conveniently ignored.

While were not here to predict the future, it is important to recognize the incentives driving political stances. To draw from the Churchill well once again, “Democracy is the worst form of government, except for all those other forms that have been tried from time to time.” It’s high time for voters to wake up to economic reality – politics is often a game of fantasy.

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Partnerships, and some multi-member LLCs, are a popular choice for businesses and investments because of the federal income tax advantages they offer – particularly pass-through taxation. In return, they must also follow specific, and sometimes complex, federal income tax rules.

Governing documents
A partnership is governed by a partnership agreement, which specifies the rights and obligations of the entity and its partners. Similarly, an LLC is governed by an operating agreement, which specifies the rights and obligations of the entity and its members. These governing documents address certain tax-related issues that dictate how profits and losses are allocated, outline tax responsibilities, and ensure compliance with relevant tax laws.

Partnership tax basics
The tax numbers of a partnership are allocated to the partners. The entity issues an annual Schedule K-1 to each partner to report his or her share of the partnership’s tax numbers for the year. The partnership itself doesn’t pay federal income tax. This arrangement is called pass-through taxation because the tax numbers from the partnership’s operations are passed through to the partners who then take them into account on their own tax returns (Form 1040 for individual partners). Partners can also deduct partnership losses passed through to them, subject to various federal income tax limitations, such as the passive loss rules.

Special tax allocations
Partnerships are allowed to make special tax allocations. This is an allocation of partnership loss, deduction, income or gain among the partners that’s disproportionate to the partners’ overall ownership interests. The best measure of a partner’s overall ownership interest is the partner’s stated interest in the entity’s distributions and capital, as specified in the partnership agreement.

An example of a special tax allocation is when a 50% high-tax-bracket partner is allocated 80% of the partnership’s depreciation deductions while the 50% low-tax-bracket partner is allocated only 20% of the depreciation deductions. All unique tax allocations should be set forth in the partnership agreement and must comply with complicated rules in IRS regulations.

Distributions to pay partnership-related tax bills
Partners must recognize taxable income for their allocations of partnership income and gains — whether those income and gains are distributed as cash to the partners or not. Therefore, a common partnership agreement provision is one that calls for the partnership to make cash distributions to help partners cover their partnership-related tax liabilities. Of course, those liabilities will vary, depending on the partners’ specific tax circumstances.

The partnership agreement should specify the protocols that will be used to calculate distributions intended to help cover partnership-related tax bills. For example, the protocol for long-term capital gains might call for distributions equal to 15% or 20% of each partner’s allocation of the gains. Such distributions may be paid out in early April of each year to help cover partners’ tax liabilities from their allocations of income and gains from the previous year.

When creating a partnership or LLC, it’s crucial to document tax considerations in a formal agreement to avoid future complications. This includes clearly outlining how income, losses, and deductions will be allocated among members, as well as specifying the tax responsibilities each member will bear. By addressing these tax issues upfront, partners and members can avoid potential conflict and ensure compliance with federal tax regulations.

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Political passions run deep but allowing them to dictate investment decisions can be perilous. A 2020 UBS poll revealed that nearly half (46%) of American investors planned to adjust their portfolios based on the outcome of the presidential election. This highlights a concerning trend: letting political affiliation influence financial strategy. Beyond the inherent difficulties of market timing, throwing political aspects into the mix can lead to even greater risk.

Then there’s the research that exposes a more insidious enemy: confirmation bias.

Confirmation bias is the cognitive tendency to seek out, interpret, and favor information that confirms our pre-existing beliefs, while disregarding or downplaying contradictory evidence. In simpler terms, we often see what aligns with our established views, and readily reinforce them while dismissing anything that may challenge them. The thinking is always that if the “other guy” wins, markets will crash.

Even more concerning, party affiliation often colors perceptions of the national economy, with the party in power typically receiving higher approval ratings.

This chart illustrates a persistent trend: we tend to feel good about the economy if our party is in power, and vice versa. So it’s not only a divide in regard to what will happen in the future, we can’t even agree on what is happening right now! The last time public opinion was in agreement regarding the economy was during the Clinton administration, when strategist James Carville famously declared, “It’s the economy, stupid!” Apart from that, there’s always been a clear divide.

What may be surprising is that historically, investing only under a democratic president yielded a much higher return than investing under only republican administrations. The growth of a $10,000 investment in 1950 would have been $405,540 under the Democrats, versus only $77,770 under the Republicans. But here’s the kicker – had you remained invested the whole time, the growth of that $10,000 investment would have come to $3.15 million dollars!

Does the president actually have any sway on this? Or are market cycles the main actor? It’s hard to say that President Bush was at fault for the great recession and housing crisis of 2008, and it was definitely good luck for President Obama, to be in office during the recovery. Markets and business cycles sing to their own tune, and don’t care who is warming the chair in the oval office.

Despite being informed and educated, investors will often still want to base their “thematic investing” decisions, where they invest in a certain sector or theme, on their projected election outcome.

Consider someone who believed President Trump’s “drill, baby, drill” slogan would boost the oil and gas industry. Despite this expectation, the SPDR Fund Energy Select Sector (ticker XLE) plummeted by 48% during his tenure. Similarly, those who assumed natural gas would thrive under President Biden have been disappointed, with most ETFs tracking natural gas being down by about 70% during his time in office.

The takeaway? When it comes to your investment accounts, leave confirmation bias at the login screen. Focus on what truly matters: your financial goals. By employing a well-defined strategy tailored to your individual needs and risk tolerance, you can navigate the markets with greater clarity and avoid the pitfalls of political influence.

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Taxpayers and practitioners agree that attempting to contact the IRS by phone can be a frustrating endeavor. Every year, millions of taxpayers seek IRS assistance by reaching out to the IRS’ toll-free and international telephone lines with their federal tax questions, requests for tax forms, to check on the status of their refunds, or to follow up with IRS correspondence or notices. All too often, they are met with long wait times, disconnected calls and general anxiety. The Taxpayer Advocate Service, an independent organization within the IRS, was created to champion the taxpayers’ cause by mediating between taxpayers and the IRS to help resolve tax issues. But a recent study of TAS phone lines conducted by the Treasury Inspector General for Tax Administration (TIGTA), found that catching TAS for a heart to heart talk is equally as challenging as contacting the IRS directly.

With the Inflation Reduction Act (IRA) of 2022, $80 billion in supplemental funding was allocated to help the IRS up its game. One area of improvement focused on increasing the level of service via IRS telephone lines. In November of 2023, the Treasury Inspector General issued a report on the quality of customer service with the objective of determining whether IRS help lines were operational and able to provide taxpayers simple, fast, and accessible customer service.

Testers called 102 IRS customer service telephone numbers during the 2023 tax filing season to evaluate the quality of customer service and found that 21 of them placed the caller on hold for more than 30 minutes, before the caller ultimately ended the call. Other flaws emerged; taxpayers were referred to incorrect phone lines, the offer to provide messages in either English or Spanish was inconsistent, taxpayers did not always receive a return call as promised and hold times were excessive. In its Objectives Report to Congress for fiscal year 2025, the National Taxpayer Advocate service cited flaws in IRS taxpayer communications and advocated for the IRS to, “do a more comprehensive measure of phone service that includes the quality of the caller’s experience.”

Despite the Advocates Service’s best intentions, when TIGTA turned its spotlight on TAS itself, it didn’t fare much better. In July of 2024, TIGTA issued an evaluation report about how ready and responsive TAS phone lines were; the results sounded familiar.

TAS telephone lines were found to be inconsistent in providing taxpayers with the ability to speak with a TAS representative. TIGTA called all 76 local TAS telephone lines in the United States, using the telephone numbers listed on the TAS and IRS websites. Some telephone lines were found to be out of service, voicemail boxes were often full and unable to address the call, and recorded scripted messaging and callback times were inconsistent. Of the 76 calls made, only two were answered by a TAS representative. Automatic voicemail prompts promised that callbacks would be received anywhere between one business day to as long as four weeks. TIGTA also compared contact information for telephone numbers, fax lines, and local addresses between what was listed on the TAS and the IRS website and found several discrepancies. It identified voicemail messaging that had significant differences in the information being communicated.

After reviewing TIGTA’s draft report, TAS stepped up to the plate and agreed with much of its results and recommendations. TAS took corrective actions to make changes to voicemail messages, made updates to the IRS and TAS websites, and is striving to provide more consistent information to taxpayers. However, as claimed by its compatriot, the IRS, TAS management contends that it is short staffed and cannot adopt all of TIGTA’s recommendations.

Despite ongoing efforts to improve, IRS-taxpayer communications remain a messy business. In our experience, communicating with the IRS is best achieved by utilizing their call-back feature; which we have found to be fairly dependable and helpful. Nevertheless, when attempting to work out your issues with the IRS, patience and perseverance must rule the day.

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Whole Foods Market is now famous as the upscale supermarket chain that was acquired by Amazon for close to $14 billion. However, Whole Foods Market began with humble beginnings. In 1978, John Mackey and Renee Lawson borrowed money from friends and family to open a small natural food store in Austin, Texas. As the store expanded to open more locations and Mackey and Lawson admitted two additional partners and designated specific tasks to each partner, such as finance, human resources, and sales. This process continues today where, although Whole Foods Market is a multinational food chain with 500 locations, each regional manager has the autonomy and flexibility to decide on suppliers and pricing.

The proverb “too many cooks spoil the broth” applies to the management of a business. Thus, establishing the sequence of control as part of a succession plan ensures that the company continues to operate effectively and efficiently – especially if the business is bequeathed to children who do not work in the family business.

The sequence of control of a business succession plan outlines the decision-making process of a closely-held, family business once the owner is determined to be incapacitated or deceased. Although this can be emotionally tolling, the sequence of control is essential for the continuity of the business. The following are questions that arise when planning the sequence of control.

What is the definition of incapacitated?

You undoubtedly know of instances in which the patriarch of a family suffered from dementia or a form of memory loss. You are probably familiar with cases in which people took advantage of individuals suffering from Alzheimer’s disease. Such undue influence can arise if a business owner can no longer exercise prudent business reasoning and judgment. Accordingly, the business succession plan should define “capacity” and specify who makes the determination, which can be a physician or a member of the clergy.

Who assumes control?

It may seem irresponsible to vest absolute control to the child or children who work(s) in the business; however, it may be imprudent to allow children who do not work in the company to be involved in the decision-making process of the business. A business administrator who requires approval for the day-to-day operational decisions in the ordinary course of business may be unable to perform basic administrative duties of the company, especially if consent is needed from an adverse party. Nevertheless, a proper business plan may require a vote of all members for significant business decisions, or decisions that may alter the business structure or significantly impact the business.

How can I secure oversight over the business administrator?

Proper internal controls are always recommended to promote accountability and prevent fraud, but it is even more critical when one heir controls the family business. The business succession plan can provide for a salary and fringe benefits or performance-based compensation, methods for removing or replacing the administrator, an arbitrator to adjudicate disagreements or disputes among family members, and an exit strategy or process of dissolving the business or partnership.

How can I provide for myself and my spouse while incapacitated?

If you are considered an owner of the business during your lifetime or so long that your spouse is alive, your succession plan can stipulate that you receive periodic distributions. However, a fixed withdrawal may prove to be insufficient for your medical needs or general cost of living. Conversely, the business may be dependent on its working capital that is now being distributed and accumulated in your personal checking account.

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Do you want to control costs and improve delivery of your not-for-profit’s programs and services? It may not be as difficult as you think. First, you need to know how much of your nonprofit’s expenditures go toward programs, as opposed to administrative and fundraising costs. Then you must determine how much you need to fund your budget and weather temporary cash crunches.

4 key numbers

These key ratios can help your organization measure and monitor efficiency:

Percentage spent on program activities. This ratio offers insights into how much of your total budget is used to provide direct services. To calculate this measure, divide your total program service expenses by total expenses. Many watchdog groups are satisfied with 65%.

Percentage spent on fundraising. To calculate this number, divide total fundraising expenses by contributions. The standard benchmark for fundraising and admin expenses is 35%.

Current ratio. This measure represents your nonprofit’s ability to pay its bills. It’s worth monitoring because it provides a snapshot of financial conditions at any given time. To calculate, divide current assets by current liabilities. Generally, this ratio shouldn’t be less than 1:1.

Reserve ratio.Is your organization able to sustain programs and services during temporary revenue and expense fluctuations? The key is having sufficient expendable net assets and related cash or short-term securities.

To calculate the reserve ratio, divide expendable net assets (unrestricted and temporarily restricted net assets less net investment in property and equipment and less any nonexpendable components) by one day’s expenses (total annual expenses divided by 365). For most nonprofits, this number should be between three and six months. Base your target on the nature of your operations, your program commitments and the predictability of funding sources.

Orient toward outcomes

Looking at the right numbers is only the start. To ensure you’re achieving your mission cost-effectively, make sure everyone in your organization is “outcome” focused. This means that you focus on results that relate directly to your mission. Contact us for help calculating financial ratios and using them to evaluate outcomes.

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Your not-for-profit’s ability to pursue its mission depends greatly on its financial health and integrity. If your nonprofit is growing and your executives are struggling to juggle financial responsibilities, it may be time to hire a chief financial officer (CFO).

Core responsibilities

Generally, the nonprofit CFO (also known as the director of finance) is a senior-level position charged with oversight of accounting and finances. He or she works closely with the executive director, finance committee and treasurer and serves as a business partner to your program heads. A CFO reports to the executive director or board of directors on the organization’s finances. He or she analyzes investments and capital, develops budgets and devises financial strategies.

The CFO’s role and responsibilities vary significantly based on the organization’s size, as well as the complexity of its revenue sources. In smaller nonprofits, CFOs often have wide responsibilities — possibly for accounting, human resources, facilities, legal affairs, administration and IT. In larger nonprofits, CFOs usually have a narrower focus. They train their attention on accounting and finance issues, including risk management, investments and financial reporting.

Making the decision

How do you know if you need a CFO? Weigh the following factors:

Size of your organization,
Complexity and types of revenue sources,
Number of programs that require funding, and
Strategic growth plans.

Static organizations are less likely to need a CFO than not-for-profits with evolving programs and long-term plans that rely on investment growth, financing and major capital expenditures.

The right candidate

At a minimum, you want a CFO with in-depth knowledge of the finance, accounting and tax rules particular to nonprofits. Someone who has worked only in the for-profit sector may find the differences difficult to navigate. Nonprofit CFOs also need a familiarity with funding sources, grant management and, if your nonprofit expends $750,000 or more of federal assistance, single audit requirements. The ideal candidate should have a certified public accountant (CPA) designation and, optimally, an MBA.

In addition, the position requires strong communication skills, strategic thinking, financial reporting expertise and the creativity to deal with resource restraints. Finally, you’d probably like the CFO to have a genuine passion for your mission — nothing motivates employees like a belief in the cause.

Consider outsourcing

If your budget is growing and financial matters are becoming more complicated, you may want to add a CFO to the mix. Otherwise, consider outsourcing CFO responsibilities to a CPA firm. Contact us for more information.

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Most not-for-profits are intensely focused on present needs, not the possibility that disaster will strike sometime in the distant future. But because a fire, flood or other natural or man-made disaster could strike at any time, the time to plan for it is now.

You likely already have many of the necessary processes in place — such as evacuating your office. A disaster or continuity plan simply organizes and documents your processes.

Identify specific risks

No organization can anticipate or eliminate all possible risks, but you can limit the damage of potential risks specific to your nonprofit. The first step in creating a disaster plan is to identify the specific threats you face when it comes to your people, processes and technology. For example, if you work with vulnerable populations such as children and the disabled, you may need to take extra precautions to protect your clients.

Also assess what the damages would be if your operations were interrupted. For example, if you had an office fire — or even a long-lasting power outage — what would be the possible outcomes regarding property damage and financial losses?

Make your plan

Designate a lead person to oversee the creation and implementation of your continuity plan. Then assemble teams to handle different duties. For example, a communications team could be responsible for contacting and updating staff, volunteers and other stakeholders, and updating your website and social media accounts. Other teams might focus on:

Safety and evacuation procedures,
IT issues, including backing up data offsite,
Insurance and financial needs, and
Recovery — getting your office and services back up and running.

Planning pays off

All organizations — nonprofit and for-profit alike — need to think about potential disasters. But plans are critical for some nonprofits. If you provide basic human services (such as medical care and food) or are a disaster-related charity, you must be ready to support victims and their families. This could mean mobilizing quickly, perhaps without full staffing, working computers or safe facilities. You don’t want to be caught without a plan. Contact us for more information.

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It’s a well-known truism in the corporate world: Organizations that don’t evolve run the risk of becoming obsolete. But instead of anticipating and reacting to market demands like their for-profit counterparts, many not-for-profits hold on to old ideas about how their organizations should be run. Here are a few things your nonprofit can learn from the business world.

Thinking strategically

The strategic plan — a map of near- and long-term goals and how to reach them — lies at the core of most for-profit companies. If your nonprofit doesn’t have a strategic plan or has been lax about revisiting and revising an existing plan, this should be a top priority.

Although the scope of your plan will be specific to the size and nature of your organization, basic principles apply to most. For example, you should set objectives for several time periods, such as one year, five years and 10 years out. Pay particular attention to each strategic goal’s return on investment. For example, consider the resources required to implement a new contact database relative to the time and money you’ll save in the future.

Spending differently

You probably already develop an annual budget, but how closely does it follow your strategic plan? For-profit businesses use budgets to support strategic priorities, putting greater resources behind higher priority projects.

Businesses also routinely carry debt on their balance sheets in the belief that it takes money to make money. Nonprofits, by contrast, typically avoid operating deficits. Unfortunately, it’s possible to operate so lean that you no longer meet your mission. Applying for a loan or even creating a for-profit subsidiary could provide your nonprofit with the funds to grow. Building up your endowment also may help provide the discretionary cash essential to pursue strategic opportunities.

Promoting transparency

Although nonprofits must disclose financial, operational and governance-related information on their Form 990s, public companies subject to the Sarbanes-Oxley Act and other regulations are held to higher standards. Consider going the extra mile to promote transparency.

If you don’t already, engage an outside expert to perform annual audits, and make your audited financial statements available upon request. Outside audits help assure stakeholders that your financial data is accurate and that you’re following correct accounting practices and internal controls.

We can help with your audit needs and assist you in adopting for-profit business practices that make sense given your organization’s needs. Reach out to learn more.

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Competition is as fierce as it has ever been for private and public grants to not-for-profits. If your funding model depends on receiving adequate grant money, you can’t afford to submit sloppy, unprofessional grant proposals. Here are some tips on writing a winner.

Do your research

Just as you’d research potential employers before applying for a job, you should get to know grant-making organizations before asking for their support. Familiarize yourself with the grant-maker’s primary goals and objectives, the types of projects it has funded in the past, and its grant-making processes and procedures.

Performing research enables you to determine whether your programs are a good fit with the grant-maker’s mission. If they aren’t, you’ll save yourself time and effort in preparing a proposal. If they are, you’ll be better able to tailor your proposal to your audience.

Support your request

Every grant proposal has several essential elements, starting with a single-page executive summary. Your summary should be succinct, using only the number of words necessary to define your organization and its needs. You also should include a short statement of need that provides an overview of the program you’re seeking to fund and explains why you need the money for your program. Other pieces include a detailed project description and budget, an explanation of your organization’s unique ability to run this program, and a conclusion that briefly restates your case.

Support your proposal with facts and figures but don’t forget to include a human touch by telling the story behind the numbers. Augment statistics with a glimpse of the population you serve, including descriptions of typical clients or community testimonials.

Follow the rules

Review the grant-maker’s guidelines as soon as you receive them so that if you have any questions you can contact the organization in advance of the submission deadline. Then, be sure to follow application instructions to the letter. This includes submitting all required documentation on time and error-free. Double-check your proposal for common mistakes such as:

Excessive length,
Math errors,
Overuse of industry jargon, and
Missing signatures.

Take the time

To produce a winning proposal, you need to give yourself a generous time budget. Researching the grant-maker, collecting current facts and statistics about your organization, composing a compelling story about your work and proofreading your proposal all take more time than you probably think they do. Above all, don’t leave grant proposal writing to the last minute.

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