A decade into the Great Depression, the U.S. housing market was barely breathing. Credit had evaporated, foreclosures were mounting, and homeownership—once the cornerstone of the American dream—was fading fast.

With the housing market in freefall, President Franklin D. Roosevelt had two options: stand back and watch, or redraw the rules entirely. He picked up his executive pen, and in 1938, Fannie Mae was born.

“Main Street, Broadway, the mills, and the mines will close if half the buyers are broke. I cannot escape the conclusion that one of the essential parts of a national program of restoration must be to restore purchasing power to the farming half of the country.“

Franklin D. Roosevelt, in a nationwide radio address, April 7, 1932, via The American Presidency Project

Not a typical government agency and not quite a private company, it was a strange hybrid—a government-sponsored enterprise, or GSE. Its job: to buy up mortgages, free up bank capital, and restore the flow of home loans.

It worked. Too well, some would say.

By the late 1960s, Fannie Mae had grown into a financial giant, dominating the secondary mortgage market and holding massive sway over U.S. housing finance. Recognizing the risk of an institution that was well-intentioned but growing too powerful, policymakers introduced some healthy competition in the form of a little brother for Fannie: Freddie Mac, launched in 1970 to keep the market balanced and avoid monopolistic control. While not direct rivals, the two GSEs developed slightly different pricing models and operational styles—subtle distinctions that gave lenders reasons to favor one over the other. That quiet competition helped the system stay efficient and responsive.

In building a secondary mortgage market, where loans could be efficiently packaged and sold to investors, they didn’t just solve a Depression-era crisis; they created a system that would go on to anchor the American economy for generations.

The Collapse of Two Titans

During the 2003–2007 housing bubble, private investment banks led the subprime charge—but Fannie Mae and Freddie Mac weren’t far behind. Eager to defend their turf, they loosened underwriting standards and bought huge volumes of securities backed by risky loans. Fannie, in particular, dove deep into subprime territory.

By the time the bubble burst, the GSEs had over $5 trillion in combined obligations and were, according to the Financial Crisis Inquiry Commission, “grossly undercapitalized.”

Foreclosures soared. The market seized up. And suddenly, Fannie and Freddie were the last major buyers still standing—forced to keep purchasing mortgages, even the toxic ones, to keep the system from collapsing.

“Today, the Federal Housing Finance Agency (FHFA), the regulator of Fannie Mae and Freddie Mac, has determined that these housing mortgage companies cannot continue to operate safely and soundly and fulfill their public mission, posing an unacceptable risk to the broader financial system and our economy. FHFA has announced that it will place the companies in conservatorship and appoint new leadership.“

George W. Bush, in a televised national address from the White House, September 7, 2008, via The American Presidency Project

In September 2008, the government stepped in. Both GSEs were placed under conservatorship—a legal limbo where they remained technically private but were fully controlled by a federal regulator. Their boards were sidelined, profits rerouted to the Treasury, and key decisions handed over to Congress. The bailout was massive. They ended up drawing $191.4 billion from taxpayers—an extraordinary intervention that few saw coming, and even fewer forgot. Shareholders were not spared; stock values collapsed, dividends were halted, and their equity was effectively wiped out. And yet, despite the scale of the rescue, the companies themselves rebounded. As of today, they have paid $279.7 billion to the Treasury, generating over $88 billion in net gains for taxpayers—not shareholders.

What began as a stopgap intervention has become a long-term arrangement—and their fate has been in limbo ever since.

Trump’s Privatization Push

A few months ago, President Donald Trump announced he was “giving very serious consideration” to privatizing Fannie Mae and Freddie Mac. It wasn’t his first time. He’d pushed for it in his first term but ran into a wall of political resistance, competing priorities, and the sheer complexity of pulling it off. To Trump, the case is simple: the government shouldn’t be in the mortgage business. The longer the GSEs stay in conservatorship, the more they blur the line between public mission and private enterprise.

“I am giving very serious consideration to bringing Fannie Mae (FNMA) and Freddie Mac (FMCC) public. I will be speaking with Treasury Secretary Scott Bessent, Secretary of Commerce Howard Lutnick, and the Director of the Federal Housing Finance Agency, William Pulte, among others, and will be making a decision in the near future. Fannie Mae and Freddie Mac are doing very well, throwing off a lot of CASH, and the time would seem to be right. Stay tuned.“

Donald J. Trump, May 21, 2025, via Truth Social

Now that the GSEs are generating steady profits under federal control, this may be Trump’s window of opportunity. Last week, the Wall Street Journal reported that the Trump administration is exploring plans to start selling stock in the mortgage giants, potentially raising around $30 billion, putting the combined value at over $500 billion.

Moving from government control to private hands is easier said than done. Privatization would require navigating a thicket of legal, political, and structural obstacles: Congressional sign-off, regulatory redesign, housing affordability mandates, and deep questions about who takes on credit risk if the government steps back.

Hedge funds and private investors who hold shares in the GSEs are eager for privatization because it could dramatically increase the value of their holdings, which have been depressed for years under government conservatorship. That includes the federal government, which holds a 79.9% warrant stake in both GSEs—potentially worth hundreds of billions—and, like investors, sees value in monetizing those warrants if the companies are released from conservatorship. Some hedge fund managers, like Pershing Square’s Bill Ackman, have gone as far as suggesting merging the two GSEs, but the roadmap for that would be even murkier.

Potential Repercussions of Privatization

Critics warn that without a federal backstop, the entire mortgage system could become riskier, more expensive, and less accessible.

Start with interest rates. If lenders can’t rely on continuous government guarantees, they’ll raise rates to cover the added risk. Even a one-point spike could make homeownership unaffordable for millions and derail investment math across the board. We’ve already seen a similar surge in recent years. According to data from FreddieMac.com, the Federal Reserve’s benchmark rate climbed by roughly 5.25 percentage points, from near zero to about 5.5%, while the 30-year fixed mortgage rate rose by about 4 percentage points—from around 3.2% to just over 7%.

But the problem isn’t just price—it’s reach. Private lenders, freed from any public mandate, may retreat from borrowers with weaker credit or lower incomes. Communities that rely most on affordable housing could be the first locked out.

That brings us to multifamily. Fannie and Freddie finance about 40% of the apartment market, including a huge share of affordable units. If that lifeline disappears, investors may still finance deals—but at a much steeper cost. A $50 million loan could carry $500,000 more in annual interest. That cost gets passed down, unit by unit, to renters.

The housing market runs on predictability. Shake that too hard, and the ripple effects hit everyone—from first-time buyers to institutional landlords.

The Verdict Is Still Out

Fannie Mae and Freddie Mac were designed to make housing finance work—for lenders, for borrowers, and for the system as a whole. They succeeded, then failed spectacularly, then became something no one quite planned for: profitable, permanent, and politically untouchable.

Privatization could unlock long-term value, restore market discipline, and finally resolve a crisis that’s been dragging on for over a decade. Or it could fracture the system that, according to 2016 data from the Federal Housing Finance Agency’s Office of Inspector General, supports $11 trillion in mortgages and helps finance 40% of America’s apartments.

For borrowers, it’s a question of affordability. For investors, it’s certainty. For the country, it’s a question we’ve dodged since 2008: should housing be treated as a public good or a private risk?

We’re still waiting for an answer.

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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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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“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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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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In a May 24, 2024, press release the American Health Care Association (AHCA) announced that, in conjunction with the Texas Health Care Association (THCA) and several Texas long term care facilities, it has filed suit against the U.S. Department of Health and Human Services (HHS) and the Centers for Medicare and Medicaid Services (CMS). In June, trade association LeadingAge, which represents more than 5,400 nonprofit aging service providers, joined the fray and announced that it has joined as co-plaintiff with AHCA. No surprises here. Since CMS’ April 22 release of its final mandate establishing new requirements for nursing homes staffing, healthcare associations and operators have been gearing up for a fight.

“We had hoped it would not come to this; we repeatedly sought to work with the Administration on more productive ways to boost the nursing home workforce,” said Mark Parkinson, President and CEO of AHCA. “We cannot stand idly by when access to care is on the line and federal regulators are overstepping their authority. Hundreds of thousands of seniors could be displaced from their nursing home; someone has to stand up for them, and that’s what we’re here to do,”

AHCA’s complaint argues that the agencies’ decision to adopt the one-size-fits-all minimum staffing standards is “arbitrary, capricious, or otherwise unlawful in violation of the APA.” Further, the lawsuit argues that the rule exceeds CMS’s statutory authority and imposes unrealistic staffing requirements.

The final mandate demands a minimum of 3.48 hours per resident per day (HPRD) of total staffing, with specific allocations for registered nurses (RN) and nurse aides. The allocations call for significant HPRD of direct RN care, and direct nurse aide care, and require the presence of an RN in all facilities at all times. Nursing home operators around the country claim that these requirements are unattainable, unsustainable, and unlawful; they could lead to widespread closures that will put the country’s most vulnerable population at risk.

Partnering with Texas nursing home industry leaders was a fitting move by AHCA as more than two-thirds of Texas facilities cannot meet any of the new requirements and suffer from a nursing shortage that is not expected to abate. The lawsuit emphasizes that, “Texas simply does not have enough RNs and NAs to sustain these massive increases. On the other hand, Texas has a relatively high proportion of licensed vocational nurses (“LVNs”) but the Final Rule largely ignores their important contributions to resident care.”

LeadingAge, with a membership spanning more than 41 states, represents the aging services continuum, including assisted living, affordable housing, and nursing homes. Katie Smith Sloan, president and CEO of LeadingAge, was vociferous in LeadingAge’s stance on the mandate. “The entire profession is completely united against this rule,” she said in a statement. LeadingAge voiced its opposition to the proposed mandate back in 2022, at the outset of Biden’s administration, and now joins the legal battle against its implementation, claiming that, “it does not acknowledge the interdependence of funding, care, staffing, and quality.”

At inception, the new mandate triggered strong opposition from industry leaders and lawmakers. Industry leaders claim the rural areas will take a harder hit than urban areas. Rural facilities are grappling with an unprecedented and acute shortage of registered nurses (RNs), rising inflation, and insufficient reimbursement. Additionally, both Republican and Democratic Congressmen joined in protest of the mandate and threw their support behind the Protecting Rural Seniors’ Access to Care Act (H.R. 5796) which would have effectively suspended the proposal. Ultimately, the staffing mandate was finalized before the House of Representatives took it up.

On the other side of the courtroom, the Centers for Medicare & Medicaid Services’ (CMS) officials maintain that facilities will be able to comply with the mandate because the three phase plan will “allow all facilities the time needed to prepare and comply with the new requirements specifically to recruit, retain, and hire nurse staff as needed.” The lawsuit counters this assertion stating that a delay in deadlines will do nothing to fix the underlying problem.

“To be clear, all agree that nursing homes need an adequate supply of well-trained staff,” the lawsuit states. “But imposing a nationwide, multi-billion-dollar, unfunded mandate at a time when nursing homes are already struggling with staffing shortages and financial constraints will only make the situation worse.”

In conversations with our healthcare clients, the consensus that seems to be forming is that the new staffing mandate’s attempt to address healthcare staffing issues is simply not feasible. The mandate only exacerbates the post-Covid, turbulent environment of the healthcare industry. It is most likely that the legal assault against the mandate has only just begun as nursing home owners and healthcare companies turn to the courts to mitigate the effects of the mandate and to strongarm CMS into drafting a more equitable ruling. How the mandate will ultimately be implemented, which of its components may be reversed, and what adjustments and policy updates will arise, is yet to be seen. Stay ready for updates as the situation evolves.

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The 485x is a newly enacted tax credit recently unveiled in Governor Hochul’s FY 2025 Budget. This tax credit, also referred to as the “Affordable Neighborhoods for New Yorkers” program, replaces the 421-a tax incentive program which was created in 1971 to provide a partial real estate tax exemption for newly constructed housing. 421-a required that developers provide a certain percentage of affordable units to middle or low-income tenants in exchange for a 35-year tax credit. Over the years, the 421-a has been periodically suspended, reactivated, restructured, and has now reached its final expiration date. Like its predecessor, the 485x offers developers a long-term tax credit in exchange for the development of a percentage of affordable units; in addition, it seeks to secure fair wages for construction workers at projects benefiting from the program.

Both programs’ goals may be the same but the terms are different. The new program provides an up to 40-year exemption on taxes, an increase from the 35 years offered by the 421-a program. Additionally, the legislature gives the 485x a longer life than the previous initiative, setting it to expire by June 15, 2034. Provisions for the 485x demand a larger proportion of housing project units to be designated as affordable housing, which makes requirements for affordability more stringent, and also includes mandatory sustainability requirements.

For all projects over one hundred units, construction crew wages must start at a base wage rate of $40 an hour. For projects of more than 150 units, depending on location, the program demands construction workers’ total compensation range be the lesser of $63 to $72.45 per hour, or 60 to 65% of the prevailing wage. To keep up with inflation, these rates will increase 2.5% every year. Projects with more than one hundred units must reserve 25% of the units for tenants earning a weighted average of no more than 80% of the area median income, going down to 60% for projects with 150 units or more, depending on their location. If a developer takes it down a notch, buildings developed with 6 to 99 units will have to provide 20% percent of the units for tenants earning 80% percent of the area median income. Condominium and co-op projects are also eligible if they are located outside Manhattan and are valued at an average assessed value of $89 per square foot or less. Developers currently approved under the 421a program have been given an extended deadline and have until 2031 to complete their projects.

The 421a was unpopular and left to languish because developers complained that it was too stringent, while tenant advocates and unions grumbled that it did not do enough. Will the 485x fare better? It’s hard to say. Developers will have to dig deep and make definitive calculations to decide if the 485x credit will prove profitable with its added labor costs and rental income limitations. This is especially applicable to larger developments as the 485x’s tiered scale raises the required base pay per unit built.

Despite these constraints, brokers are reporting that the new law has awakened interest in qualified properties, and values have responded, showing a slow rise. In today’s troubled financing landscape, developers need an incentive to plunge into new projects. The 485x may provide that push. Lawmakers are hoping that the creation of the 485x will serve the dual purpose of wooing developers back into construction mode and helping the city achieve a fair balance between wages and affordability.

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Healthcare entities regularly seek out merger and acquisition (M&A) opportunities to expand and diversify, but M&A becomes more expensive and less attractive when rising interest rates make the cost of borrowing prohibitive. Vacillating interest rates invite fluctuating costs of capital, disrupt valuations, and strain financing opportunities. Throw in the newly released staffing mandates and the combination of factors affects the overall volume of M&A transactions.

Interest rates and valuations generally work inversely. When interest rates climb, discount rates also rise. This brings on lower present values of future cash flows, which lowers valuations for companies. Fluctuating valuations affect the pricing of M&A transactions. Low valuations translate into potentially higher returns for investors and more M & A activity.

According to a recent report by Forbes, despite forecasts of reduced interest rates, the Federal Open Market Committee has not moved to cut them. Currently, it seems most likely that the FOMC will cut rates in September and December, according to the CME’s FedWatch tool. Lower rates will mean lower valuations and will lead to a higher volume of M&A activity.

Where do staffing mandates come in? The nursing home industry is in an uproar in reaction to the Centers for Medicare & Medicaid Services new staffing mandate that will demand that nursing homes provide residents with approximately 3.5 hours of nursing care per day, performed by both registered nurses and nurse aides. This is the first time nursing homes are looking at staffing requirements set by the federal government and they are none too pleased. The mandate has been widely opposed by the nursing home operators, claiming that it is unreasonable, and more importantly, unrealizable.

Over the next three to five years, as the mandate’s requirements are phased in, providers will be faced with threatening staffing costs. According to the American Healthcare Association (AHCA), the proposed mandate would require nursing homes to hire more than 100,000 additional nurses and nurse aides at an annual cost of $6.8 billion. This signals inevitable closures and sell-outs in the coming years. The new staffing mandates threaten the healthcare industry as a whole, especially the activity of mergers and acquisitions. The saving grace may come in the form of a marked lowering of interest rates which can more likely than not keep M&A activity active and even trigger a robust year for healthcare in general.

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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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