The Kentucky CPA Journal - Issue 5 2015

The Kentucky CPA Issue 5 2015

The Journal of the Kentucky Society of CPAs

kycpa.org

Journal

Season of change …Q&A with Kentucky’s gubernatorial candidates

Shine a light on tax• LLET opportunities and traps• Deconstructing the Final Tangible Property Regulations• New tax due dates

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The Kentucky CPA Journal / Issue 5 2015 Administration

President’s message

How many times have you said or thought

to yourself, “If I had only known then what I know

now”?Since becoming a CPA and

starting my own firm, I have had this thought on quite a few occasions. Interestingly enough, I have always concluded that I would have earned my certificate years earlier. I am certain I would have benefited greatly and so would my business. I’m convinced the same is true for anyone considering the profession. However, we find ourselves in a time where we have to work harder to attract talented young professionals to the industry.

Now is a great time to be a CPA. Recently, a lot has been written about the need to bring new people into the accounting profession as CPAs. There is a looming CPA shortage, fueled by retirement, which will create tremendous opportunities for younger individuals in the profession. In fact, 42 percent of KyCPA members say they hope/plan to retire in the next 10 years. The AICPA reports it is facing similar challenges. I don’t believe it takes a CPA to figure out the possibilities available for those who are around to take advantage of the situation.

CPAs earn more. It is reported that, on average, a CPA will earn $1 million more over his or her career than an accountant who did not earn a certificate. This is a significant amount, but I contend that disparity is increasing, so it is worth the effort.

Work schedules can be somewhat flexible. Depending upon the type of work a CPA performs and the type of firm where he or she is working, a CPA can have great scheduling flexibility. It is true that we have significant mandated hard deadlines, but they do not change. As such, we are generally free to determine when and how - and for some firms - where to meet them. Flexibility is a great drawing card for a career as a CPA, as many of you know and appreciate.

Technology can be leveraged to create even more work schedule flexibility. The use of technology appeals to younger professionals for many reasons, but this one is obvious. Cloud-based technology makes it relatively simple to unlock the shackles of an office. From my firm’s Web site, I can be working on a client project or looking at our firms’ work products, and easily show and explain that work to our client through our video application. The client does not need to know I am at the beach!

Here is the sales pitch. Our industry needs CPAs and we need your help to recruit and retain them. Too many accounting students graduate from college and do not sit for the exam. Even more perplexing is the number of young CPAs who earn their certificate, let it lapse and then get out of the profession. We have a responsibility to reverse this trend. With the advantages the profession offers as well as the tools at our disposal, we can accomplish this with increased focus and with the help of the KyCPA and AICPA

The KyCPA is a sponsor of JA BizTown, a popular program within Junior Achievement. Through this program, students as young as the 5th grade are introduced to the profession, where they learn how important CPA professionals are to business and society. Older students gain exposure through KyCPA’s Business and Accounting Summer Education (BASE) Camp and the Governor’s Scholars program. These are just two of the programs KyCPA sponsors or is actively involved with at the high school level. At the college level, accounting students received $47,000 in scholarships on behalf of the KyCPA Educational Foundation this year.

Retaining talent. The AICPA has been tracking and reporting CPA trends for many years to enable firms to attract the best talent. It recently conducted a study that reported CPA candidates feel workplace influences are the most critical factors for determining whether they become a CPA. Providing the CPA candidate financial assistance to cover the expenses, as well as time away from the office to study for the exam, were listed as critical success factors. Additionally, management taking an interest in the CPA candidate and letting him or her know

By Bob Patterson

Continued on p. 5

The Kentucky CPA Journal / Issue 5 2015 What’s inside

4

What’s insideThe 2015-2016 KyCPA Board of Directors: Bob Patterson, president, of Patterson & Company, Louisville; Kevin Schwartz, immediate past president, of Myriad CPA Group, Owensboro; William Jessee, president-elect, of Henderman Jessee & Company, Louisville; Kevin Joynt, secretary-treasurer, of Deloitte & Touche, Louisville; Rebecca Phillips, executive committee member, of MCM CPAs & Advisors, Louisville; Elizabeth Woodward of Dean Dorton, Lexington, executive committee member; Jaclyn Badeau of Tempur Sealy International Inc., Lexington; Melissa Buddeke of the Buddeke Company, Louisville; Lori Dearfield of Kelley Galloway Smith Goolsby, Ashland; Jennifer Hughes of Deming Malone Livesay & Ostroff, Louisville; Skip Looney of Rudler, Fort Wright; Wes Omohundro of the Allen Company, Inc., Lexington; Elizabeth Rankin of Creative Retirement Systems, Cincinnati, Ohio; William Stout of the University of Louisville, Louisville; and David Tate of BKD, Louisville2015-2016 Editorial Board: Mark Loyd, chair, of Bingham Greenebaum Doll, Louisville; Brian Breidenbach of Breidenbach Capital Consulting, Louisville; Haley Edin of Stuedle Spears & Francke, Louisville; Renee Fulton of Talis Group, Louisville; Michelle Musacchio of Fit Money CPA, Louisville; Gordon Crowley of Eastern Kentucky University, Richmond; Sheri Henson of Western Kentucky University, Bowling Green; Esther Thompson-Long of LG&E and KU Services, Louisville

CEO - Penelope P. Gold Editor - Lorri Malone Associate editor/Art director - Kimberly Lindsey

Letters to the editor: If you have ideas to share, opinions to express or suggestions for future stories, please email Editor Lorri Malone, KyCPA communications director, at [email protected].

Advertising: If you would like to advertise in The Kentucky CPA Journal, please contact the Society at [email protected]; 502.266.5272.

Please note: this publication is not technically reviewed. Opinions expressed in The Kentucky CPA are those of the authors and do not necessarily reflect Society policy or editorial concurrence. Publication of advertisements does not constitute an endorsement of products or services. The editor reserves the right to accept or reject advertising and editorial material in accordance with editorial judgment and publication guidelines.

AdministrationPresident’s message.......................................... Page 3Across the Board................................................ Page 6Business and IndustryTech trap: making an IT investment............... Page 7CoverQ&A with the candidates................................. Page 10CPEPricing and discounts for seminars................. Page 17Calendar ............................................................. Page 182015 Annual Ethics Update for CPAs............. Page 20Live streaming CPE events .............................. Page 21Professional Issues Update ............................. Page 21Conferences ....................................................... Page 22December Clusters and Vern Hoven.............. Page 25Tax in the BluegrassKentucky’s LLET opportunities and traps..... Page 27FocusThe final Tangible Property Regulations........ Page 31New tax due dates............................................. Page 34Educational FoundationGiving back to the profession.......................... Page 36Create a Legacy.................................................. Page 37Perfect weather for golf..................................... 0Accounting careersKyCPA College Leadership Institute.............. Page 42Scholarship applications................................... Page 432015 PEAK Competition Co-Champions....... Page 44EthicsProfessional Ethics for CPAs........................... Page 45Ethics CPE........................................................... Page 45How internal audit can support culture........ Page 46SocietyKyCPA honors 100% Champions.................... Page 49CPA Champion Award .................................... Page 51Emerging Professionals event.......................... Page 51Classifieds..................................................... Page 52MembersMembers in motion........................................... Page 52Welcome new members.................................... Page 53Member profile.................................................. Page 54WatercoolerBy the watercooler............................................. Page 55

how significant the certificate is to his or her career was determined to be very important, according to the research. These factors may not be intuitive or standard practice; however, firms cannot ignore the findings. CPA firms can help those business and industry owners who are not CPAs themselves better understand the value in helping someone on staff earn his or her certificate.

No thriving industry can afford to lose productive staff members, including ours.

Presidents message continued

We need to recognize how to best attract and keep younger professionals, given the void we are facing as tenured professionals retire. Success in recruiting and retaining young CPAs will be a team effort. Start with words of encouragement for the young CPA - that can go a long way as he or she begins a career. Also, I encourage you to give generously to the KyCPA Educational Foundation because of its efforts to grow and support student interest in the profession. The scholarships and programs

the Foundation sponsors make a difference.

We know how great a CPA career can be. Let’s do everything we can to be sure that the younger generation knows what we know … now.

Thanks for all you do for the KyCPA.

About the author: Bob Patterson CPA,CGMA, CFE, is the founder and president of Patterson & Company CPAs in Louisville.

kycpa.org 5


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Across the BoardBy Penny Gold


When thinking about your most rewarding

professional milestones, you are likely to think

about those who helped you along the way. One of

the most important elements of success is collaboration. Whether you confer with a mentor, partner, peer or spouse, there is a collective intelligence that broadens our perspective and improves decision making.

“Collaboration is becoming more critical as trends affecting the profession are rapidly changing the way you work.”To be sure, engagement with your professional

Society provides a myriad of ways to strengthen your connections within the accounting profession. Spending time with others in your field is the perfect place to discuss trends; explore creative ways to solve problems; expand your referral base; learn about career opportunities; and generally improve your outlook.

KyCPA conferences are an outstanding way to build professional relationships. Not just as an attendee, but as an advisor. I am always heartened by the more than 175 CPAs who serve on committees or task forces. They come together to plan and execute KyCPA conferences, member events and student pipeline projects each year. By doing so, volunteers get to know one another better as they work together to bring national-quality programming to KyCPA members right here in Kentucky. Their collective knowledge base enhances the programs, but also helps those involved gain more cutting-edge information in their own field of interest.

Of course, attending conferences is also very beneficial. Learning takes place from the speakers, of course, and also from the member collaboration that

naturally occurs. Both contribute to a rich learning experience. I have often heard members say they learned as much from other CPAs at the event as from the speakers. One great idea picked up during a sidebar conversation or while on break might save you thousands of dollars in time or money. The new gathering area at the Gratzer Education Center helps to foster easy conversation. I hope you will all come by to see your new home base.

One of the best places for collaboration is at the membership luncheon prior to the Professional Issue Update programs (following the KyCPA Annual Ethics presentation) around the state. I encourage you to come by and take advantage of this opportunity each year to catch up on hot topics in the profession, as you connect with others in your field. New business opportunities quite often spring from rekindled relationships. Of course, the Annual Members Meeting and Leadership Luncheon offer similar opportunities for CPA collaboration. Please mark your calendar for this excellent event: it will be held on Friday, June 10, 2016 at The Olmsted in Louisville.

Collaboration is becoming more critical as trends affecting the profession are rapidly changing the way you work. Think about the trend toward specialization. It is more important than ever to stay connected to others working in your field of interest.

Changes in technology and related risks are impacting how we serve others and share, store, create and analyze data. Collaboration can be a tremendous help in getting it right. Fast changing standards, rules and regulations are difficult for even the largest organizations to grasp. Reaching out to others who have already forged the way can save time, money and worry.

More macro-economic trends continue to shake the accounting landscape. The US CPA is facing more competition from international accounting credentials than ever. At a recent AICPA meeting, it was reported that by 2030, US accounting students will make up only 7 percent of the global student base. Already facing problems with recruitment and retention, it is even more important that Society

Continued on p. 7

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The Kentucky CPA Journal / Issue 5 2015 Business and Industry

Asking the right questionsBy David Stein

CFOs in charge of overseeing IT investment strategies now have a new name to describe

their responsibilities: technology evangelist.That’s according to a recent survey of 1,275 global executives commissioned by Accenture and Oracle. Sixty-seven percent of respondents said their CFO strongly champions the use of emerging technologies to deliver innovation and growth within the finance function.

It’s a title not to be worn lightly. With many companies’ IT departments now reporting to the CFO, an increasing number of people are counting on senior finance executives to lead their own function’s new technology investments and those of the entire organization.

How can CFOs – whose technical knowledge is often not as strong as that of their IT colleagues – prepare themselves for these critical decisions?

The starting point must be a holistic assessment of how IT projects can work together to achieve a

company’s strategic goals, said Jeanne Ross, director and principal research scientist at the Center for Information Systems Research at MIT Sloan School of Management in Cambridge, Mass., who’s written extensively on the intersection between technology and finance.

Technology should do two things: help standardize processes and integrate data across those processes. For finance executives who fail to focus on projects that accomplish both of these requirements, the risk is sub-optimization. “You could end up with something very, very cool that is totally unimportant,” Ross said.

In making IT investment decisions, here are some key questions for finance executives to ask: What are your company’s critical capabilities?

Choosing the right technology solutions starts with understanding your principal business strategies. For example, if forming a comprehensive customer relationship is important, then every IT project should align with the strategic goal of integrating customer data.

Tech trap: making an IT investment

members come together to support aspiring accounting students through mentorships, encouragement and donations to the Educational Foundation.

A 2014 study by Applied Research & Consulting (ARC), commissioned by the AICPA, clearly shows that the most important factor affecting one’s decision to sit for the CPA exam is the culture of the workplace. Individually, we all have the power to influence a few students, but think how much more we can all do together through collaboration.

As a profession, we are stronger together. If you would like to help with the Society’s scholarship and student pipeline projects, you can do so easily at kycpa.org/get involved/educational foundation. If you would like to volunteer for a committee or task force, just give me a call at 502.736.1372, and we can collaborate on the options that best match your interests. About the author: Penny Gold is the CEO of the Kentucky Society of CPAs. She can be reached at [email protected]

Across the Board continued

Continued on p. 8

This may seem like common sense. But according to Ross, many companies haven’t articulated – and then followed through on – this simple premise.

UPS is among the companies that have, Ross said. In the early 1990s, the parcel delivery company realized that information about packages was just as important as the packages themselves. In response, the company built a single database housing all of its package data. Since then, UPS has made sure other projects complement this core IT strategy.

Once capabilities are identified, a project’s particulars can be considered, said Byron Patrick, CPA/CITP, CGMA, the CEO and co-founder of Simplified Innovations, a technology service provider for accounting firms.

“You need to make a list of project must-haves – the minimal requirements. And then a list of nice-to-haves,” Patrick said. This helps simplify the evaluation process – and eliminates costly features that don’t appear on either list. Which past projects generated the intended value?

Examining past successes – and disappointments – can help finance executives judge whether the business case before them is inflated.

Ross cited USAA as a model. The US financial services company evaluates whether every IT project has realized its business case. This exercise helps project managers rethink what was originally requested and be more realistic for the next project.

“Even in the middle of a project, [USAA executives] want to know, ‘Are we going to make it?’ If not, they’ll stop the project,” Ross said.

Setting realistic expectations is important to avoid disappointment. “Just because something is more expensive doesn’t mean it will work better. And just because there are cost savings doesn’t mean it’s better, either,” said Patrick, who sells IT services but is also a current and past buyer of technology solutions.

Value drivers besides reduced expenses shouldn’t be overlooked, Patrick added. Mobile IT solutions, for example, provide the increased flexibility required by a global workforce, helping to retain quality personnel. How much will it cost to run year after year?

Companies often make the mistake of focusing on the initial investment, which isn’t always the most costly part of a project, Ross explained.

Rather, recurring expenses turn out to be the real cost drivers. Licensing, maintenance, and staff training all contribute to the full budget to implement, Patrick said.

“I like to have my clients project out the total cost of ownership three to five years,” Patrick said. “That way, if there’s going to be a hardware lifecycle refresh, they can factor that into the cost of the system.”

It’s the responsibility of finance – and particularly management accountants – to help IT departments understand what’s driving these ongoing costs, Ross said. How can I help IT deliver what’s requested?

Although it’s important for finance executives to have a general understanding of a project’s technical components, that’s not where they can have the most influence.

“You must focus on the business impact. You don’t have to learn the technologist’s job,” Ross recommended.

Despite this division of responsibilities, finance and IT must work closely together, setting up regular check-ins. “If you wait for the final product, it’s a recipe for disaster. You must be fully engaged in the process,” Ross added.

8


Tech trap continued

kycpa.org 9


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It’s critical to connect with the end users, who ultimately have to live with the purchasing decision. Patrick said small groups and one-on-one conversations can provide perspectives on the work flows any new system would be designed to improve.

Finance executives need to remember that while technologies constantly evolve, the fundamental questions remain the same. “Not getting [the answers] wrong can have a huge impact on an organization,” Ross said.

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The Kentucky CPA Journal / Issue 5 2015 Cover

Editor’s note: Change is coming to Frankfort Nov. 3. We invited the gubernatorial candidates to participate in a Q&A for this issue. All three candidates – Matt Bevin (R), Attorney General Jack Conway (D), and Independent Drew Curtis – were invited to participate and each were given the same set of questions. Their responses are included here and have not been edited.

Season of change: Q&A with the candidates

kycpa.org 11


Continued on p. 12

Matt BevinThe state inheritance tax (the

so-called “death tax”) should be repealed immediately, allowing family members to pass on their business and property to their descendants without having

part of it taken away by the State Government. Kentucky is

one of only six states that still has an inheritance tax. This is an antiqued and unfair form of double-taxation.

Both personal income tax and corporate income tax rates must be gradually decreased. This will leave a higher percentage of earnings in the hands of job creators and Kentucky families and will make us more competitive with surrounding states. Any short-term losses to the State Treasury would be more than made up for over time from the compounded economic growth that would result from a consistent reduction in tax rates.

I believe we should begin immediately to phase out the inventory tax in Kentucky. We must reduce the complexity of our existing tax code. Our new tax code must be simpler, easier to understand and easier to comply with. The KyCPA has proposed many suggestions in its Taxpayer Rights Enhancement Act to making our current tax code easier to navigate, which is a great start. We must make the tax code itself easier to understand and comply with.

As Governor, I will call for a significant reduction in the tax exemptions known in State Budget Parlance as “tax expenditures”. There are nearly 300 such exemptions costing Kentucky nearly $10 billion dollars annually. There is little to no oversight or review of these favors being doled out at the taxpayer expense.

1. KyCPA: Comprehensive tax reform has been a hot topic in Frankfort for decades. Every gubernatorial candidate has said that our tax code should be changed to make our state more competitive. How would you do that?

Jack ConwayOur tax code needs to be

reformed to make sure we are in the best position to grow Kentucky’s economy and create more good-paying jobs. I’m committed to holding the

line on taxes and I support eliminating the state portion of

Kentucky’s inventory tax to keep our Commonwealth competitive. As Governor, I’ll conduct a top-to-bottom review of every tax incentive offered by our Economic Development Cabinet to make sure that businesses have the right tools to create more jobs.

Drew Curtis From Governor Beshear’s

proposal, I like:• Exempt inventory from

property tax.• Repeal spirits case tax.• Eliminate select

negligible property tax rates for some tangible personal property.

• Bourbon tax credit – I like how this doesn’t negatively impact property taxes and education and requires reinvestment.

• Refundable state Earned Income Tax Credit at 7.5% of federal EITC.

• Phase in single factor apportionment. • Expand Research & Development credit to

human capital.• Double the New Markets credit. • Tax e-cigarettes at 20 percent.

• Restore rolling papers tax.• Broaden sales tax to include some services.• Reduce Adjusted Gross Income exclusion for

retirees with $80,000 income and eliminate it for those with an income of more than $100,000.

• Phase out $10 individual tax credit.• Eliminate spouses filing separately.

However, I’d make the following changes:• Expand the Angel Investor tax credit even

further, basing it off Colorado’s model which was designed in part by both angel investors and legislators. Anything that pumps money from large funds directly into the economy is good.

• Income tax rate overhaul. I would keep the top bracket at 6 percent though (5.9 percent is proposed), because the upper tax bracket is impacted least by the tax.

• Leave corporate tax unchanged; they’re getting huge savings on the apportionment already.

• Do not lower the wholesale tax on alcoholic beverages.

• Increase cigarette tax to at least the national average of $1.46. Beshear’s proposal wants to raise it to $1 for health reasons; if that’s the real goal here then raising it over the average should help even more.

2. KyCPA: Are you categorically opposed to any tax reform proposal that immediately raises revenue overall, or would you consider such a proposal if it matched your taxing philosophy?

Matt Bevin I am not opposed to having a discussion about

tax reform that has the possibility of raising revenue, especially if it comes as part of a comprehensive reform that makes our tax code more attractive to businesses, but I would be very apprehensive of simply raising tax rates or adding tax categories solely for the purpose of raising revenues.

Instead of raising tax rates to increase revenue, my philosophy is, rather, to broaden the base of people/businesses paying taxes. I prefer reforming our archaic and confusing tax system to make it more likely to attract businesses to Kentucky. When more businesses are created in, or relocate to, Kentucky, the obvious result will be more jobs for Kentuckians. This results in an increase in revenues. As Governor, this is the philosophical approach I would bring to the Commonwealth.

Jack ConwayAs Governor, I am committed to holding the line

on taxes to ensure that Kentucky businesses have the ability to grow and create more good-paying jobs.

Drew CurtisWhen you factor in shortfalls for pension

underfunding, Kentucky’s budget is running at an annual loss of almost $1 billion. My taxing philosophy is keep things simple and transparent and tax as little as possible, while recognizing that we still need working roads, schools, police, and infrastructure. Anything that increases revenue without burdening citizens and businesses is on the table. For example, significantly increasing cigarette taxes is fine by me, but significantly increasing tax on food is not. Because one is a choice and the other isn’t. The cigarette tax is problematic because it lands harder on lower income earners, but if we could offset it by consumption-based tax on goods or services consumed by upper income individuals, it might work well in tandem.

12


Q&A with the candidates continued

kycpa.org 13


Matt Bevin The KyCPA proposed Taxpayer Rights

Enhancement Act (TREA) is filled with many common-sense solutions to valid issues facing Kentucky Taxpayers and the accountants who help them navigate Kentucky’s outdated tax requirements. Unfortunately, common sense solutions don’t always find their way into government offices. While some of the solutions would require legislative changes, many could be implemented as internal department policy. As governor, I would push to implement many such common-sense solutions as internal department policies to ensure taxpayers have proper guidance, clear requirements, easy to use forms, and most importantly, ensure that taxpayers are treated as customers whose business we seek to earn—as they should be. In the end, the easier we make it for taxpayers to pay their taxes, the more likely they are to do so.

For those recommendations that would require legislative action, my legislative liaisons would work closely with legislative leaders to discuss and push for needed changes to update the TREA.

Jack ConwayI support predictable and transparent tax

policies that create a stable environment for Kentucky businesses to thrive. The Taxpayer Rights Enhancement Act contains many reforms that would benefit Kentuckians across the Commonwealth. I support proposals requiring the Department of Revenue (DOR) to better its tax education and information process while formalizing and streamlining the DOR’s review and complaint process.

3. KyCPA: During the 2015 session, KyCPA proposed the Taxpayer Rights Enhancement Act to strengthen Kentucky’s current Taxpayer Bill of Rights. How should our tax code be administered to ensure transparency, predictability and efficiency?

Drew CurtisHB361 and HB399 seem to be in line with the

goals of the TREA. I am a strong supporter of transparency, predictability, and efficiency. The Department of Revenue needs to give specific guidance to CPAs on an annual basis because this results in a lower workload for everyone involved.

Continued on p. 14


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4. KyCPA: Kentucky’s pension system is rated as one of the worst-funded systems in the country, and many businesses are hesitant to locate in our state because of the massive unfunded liability. Analysts have said that Kentucky can’t invest or grow its way out of the problem. How would you properly fund the system, and what specific structural changes would you make to the system moving forward?

Matt Bevin According to a study by State Budget Solutions,

Kentucky has an estimated $109 billion pension liability, with only 24% of this funded by current assets. This is the third worst rate of pension funding in the nation. The modest steps at reform taken in 2013 aren’t nearly enough and do not come close to putting our state’s pension plans on a sound footing. If our current unfunded liability was distributed evenly to Kentucky residents, it would amount to more than $19,000 for every man, woman, and child in the state. This high amount of debt obligation will only get worse if the pension crisis is not addressed honestly.

As Governor, I will call for an immediate, outside and transparent audit of every single state retirement plan. All resulting information will be made available to the public. All new hires must be enrolled in a defined contribution (standard 401(k) type) plan similar to those in the private sector and we should examine options that would allow some existing employees to voluntarily move into the same plan. State employees will then own and have managerial control over their own retirement accounts. Putting individual employees in charge of their own retirement plans will free the taxpayers of Kentucky from new future liabilities and will decrease our indebtedness over time.

We must honor our commitment to current employees and retirees to whom we, as a state, have made pension promises. All current employees may possibly be required to make increased contributions in order to help secure their own pensions and make the system more financially sound.

As Governor, I will refuse to take a taxpayer-funded pension and will seek to eliminate taxpayer-funded pension plans for all future elected officials in Kentucky.

Drew CurtisI’ve provided a highly detailed solution on my

campaign website, complete with a downloadable spreadsheet that uses RVK’s own KERS-Non-Hazardous projections. In short, the solution is fully fund the ARC, then structure a bond like a line of credit and use it as needed to peg fund returns to 4 percent for the next 30+ years. Tap the line when the fund underperforms 4 percent, and pay the line down when the fund outperforms like it did in 2013 when it returned 13 percent. Over time, this grows the funding ratio back to 100 percent, while preserving our ability to pay out pension checks to hardworking Kentuckians every month.

The idea here is to minimize interest expense and only borrow what we need when we need it. This bond is not new debt – it is a restructuring of part of the existing obligation to our retirees.

Phase two, which is not on my website, would be to do the same for Kentucky Teachers’ Retirement System. While the funding gap for KTRS is larger, KTRS will survive for a few years longer than KERS-NH will –and I project that KERS-NH will go bankrupt in 2018. Going forward we need to prevent the legislature from underfunding pensions.

This is a triage situation where two patients are dying. I believe we can save both. You can read my whole plan here: http://drewcurtis.nationbuilder.com/drew_curtis_releases_plan_to_fix_ky_pensions

Jack ConwayIt took years to create our pension problem and

it will take a commitment to making the annual required contribution for the next fifteen or twenty years to resolve it. As Governor, I will work with both parties to find a dedicated stream of revenue to make those contributions. Any changes to the system will be made with the input of Kentucky’s retirees, workers and leaders of both parties.



kycpa.org 15

Matt Bevin Given the short time frame I’ll have to create a

budget, it is unlikely that there will be big changes that will shock the system in my first budget. I’ll use current and previous budgets as baselines, consult with legislative leaders, and make minor changes to align with my priorities. I will spend the next few years making the government more efficient, and gathering the information I need to make more comprehensive budget and tax reforms in my second biennial budget.

I will conduct a comprehensive review of all tax expenditures to determine which ones are no longer serving the purpose for which they were enacted. Many have been on the books for decades, with no sunset provision, and it is not clear whether they are providing a good return on investment or are sufficiently incentivizing the types of behavior we intended. This would be one area I would look at as a potential revenue source for closing the gap in our underfunded pensions.

I would also look at unused or surplus property owned by the state and examine whether we can financially benefit by selling or leasing such property.

As far as Medicaid is concerned, we cannot continue to offer Medicaid at 138% of the federal poverty line as it exists today—we simply cannot afford it. I would repeal the expansion as it currently exists, and seek a Section 1115 waiver from the Center for Medicaid Services, that would allow us to customize a plan that works better for Kentucky.

We can develop a plan that incentivizes proper use, encourages healthy behavior, improves health outcomes, and uses health care dollars more efficiently. Indiana and several other states have requested and received approval under the Section 1115 waiver authority, and I would build our plan using the best elements of what other states have

5. KyCPA: If you win in November, you’ll be faced with quickly developing the next state budget. Along with a growing contribution to the pension system, the state will also have to fund its portion of the Medicaid expansion. Have you established any spending (or cutting) priorities?

offered. This is a vastly superior approach to the one size fits all Medicaid expansion pushed on us by Obamacare. It is also something that, hopefully, we can use to help us work within our budget constraints.

Jack ConwayA priority of mine in the first budget will be

identifying a dedicated revenue stream to fund the annual required contribution to our pension system. As I work to find efficiencies in our state budget, I will use the same strategies I used in the Attorney General’s office where we have a record of doing more with less. For every dollar invested in my office by the state legislature, we’ve returned over three dollars back to the taxpayers. We prosecuted Medicaid fraud and won over $300 million in settlements, created a model cybercrimes unit that has a 100 percent conviction rate, and took on Kentucky’s drug epidemic even as our budget was cut. I have a record of fiscal responsibility that I will continue as Governor when I work with both parties to develop a budget that works for Kentucky.

Drew CurtisOur share of Medicaid expansion will most

likely pay for itself due to increased employment and usage of the healthcare industry. The amount we need in 2017 is $74 million; we should be able to clear that.

The amount we need in 2021 to cover our 10 percent obligation is $363 million though. I’m less optimistic about having money on hand to pay that amount, mainly because the odds of a recession in the next four years are close to 100 percent - they happen every 5-7 years.

Continued on p. 16


16

If, as predicted, the expansion pays for itself, that’s great. However projections are sometimes wrong, and I’ll keep a close eye on it. If we do not have the money in 2021 (or earlier) to pay for our contribution, then difficult choices will have to be made. I’m not interested in impairing or eliminating healthcare for Kentuckians but we can’t support unsustainable systems. It remains to be seen if the Medicaid expansion is sustainable or not.

As for spending priorities, shoring up the pension system is at the top. As for cutting priorities, I intend to test some well-known corporate turnaround theories on a small state department first to see if they work. In particular, this involves (among many other things) taking an inventory of

who in state government is highly effective and who isn’t, which involves a reverse review process where employees review the performance of management. We’ll be able to locate a significant amount of deadweight at the top of the employment structure, clear it out, and reward long-suffering underpaid state employees with the cost savings.

Along those same lines, I’ve been told that the Governor appoints something like 3,500 people to positions across the state. I doubt very much that most of these positions are highly functional, and suspect many of them are expensive to maintain. I’m exploring a rotating-directorship system to consolidate these positions down as much as possible, saving millions in the process.

6. KyCPA: During recent budget sessions, the governor and legislature have swept various agency and licensing board accounts (i.e. “fund transfers”) to fill budget holes. Would you support the abolition of this practice?

Drew CurtisYes. It looks like the result of a bad budgeting

process.

Matt Bevin I would support the abolition of this practice. If

revenues are earmarked for a specific purpose, they should be used for that purpose. This “robbing Peter to pay Paul” account raiding must stop.

The state should not consistently rely on funds intended for other uses to cover repetitive revenue shortfalls. Such transfers can harm necessary programs, raise fees and taxes, and continue to inappropriately push expenses down the road.

Jack ConwayAs Governor I will work to cut down on fund

transfers out of our agencies and boards. I am committed to making smart and responsible budget decisions with input from both parties to make sure that Kentucky’s agencies and boards have the resources they need to be effective.


kycpa.org 17

Live seminar pricing KyCPA member Nonmember4-hour seminars (with Early registration) 4-hour KyCPA live webcasts

$149 New lower price

$199New lower price

8-hour seminars (with Early registration) 8-hour KyCPA live webcasts

$269 $369

16-hour seminars (with Early registration) $389 $589Ethics Update for CPAs (Not eligible for discounts) $79 $99Professional Issues Updates (Not eligible for discounts) $39 $79Vern Hoven Federal Tax Update. Prices when registering at least 14 days in advance. Registration fee for Vern Hoven Tax Update includes both print and electronic manuals.1-day Vern Hoven Federal Tax Update Jan. 8, 2016 (with Early registration)

$349 $449

2-day Vern Hoven Federal Tax Update Dec. 10-11 and Jan. 6-7, 2016 (with Early registration)

$519 $719

Early bird discount available up to 14 days before the event.Conference pricing – see each conference for specialized pricing at kycpa.org. All courses include electronic materials. We can provide you with a printed manual at most events for an additional $30; please order printed manual at registration except Vern Hoven seminars, where printed manuals are included in your fee.

Register Online: Visit our Web site at kycpa.org and register using your VISA, MasterCard or AMEX.By mail: Mail registration form in CPE catalog with payment to the Kentucky Society of CPAs, 1735 Alliant Avenue, Louisville, KY 40299. By fax: Credit card registrations may be faxed to the Society office at 502.261.9512.By phone: Call the Society at 800.292.1754 (in Kentucky), or 502.266.5272.The registration fee in most instances includes electronic course materials, instruction, lunch and coffee breaks. Lunch is not included at 4-hour seminars.

Save moneyMember discount: KyCPA members save $100 on most 8-hour programs; however, attendance at CPE classes is open to the public. You may qualify for the member discount fee if you are a CPA and have paid your KyCPA membership dues, you are a member of another state CPA society or you are a non-CPA staff member.Get Smarter discount: KyCPA members only. Register for three or more 8-hour live seminars, conferences and/or CalCPA webcasts and save $20 on each event. Save at least $60—the more you buy, the more you save! Please register for all programs at the same time and pay at registration. Combine the Get Smarter discount with the Early Bird discount ($50) and/or your AICPA discount ($30) and save even more! Does not combine with Group Discount.Early bird discount: Register for 4, 8 or 16 credit-hour seminars and conferences at least two weeks in advance to receive a $50 discount on most events. Some events are excluded—see descriptions for complete pricing information.Group discount: Save $25 per person when 4 or more from one organization register for the same 8-or 16-hour event. Please register and pay together. Does not combine with Get Smarter Discount.AICPA discount: AICPA members are eligible for a $30 discount per 8 credit-hour day on all AICPA-produced seminars (marked (A) in the seminar description). This discount is applied automatically to online registrations if your membership information is updated in our database.

Pricing and discounts for seminars

The Kentucky CPA Journal / Issue 5 2015 CPE


18

Date Title City Credit type10/22-23 Ohio Valley Construction Conference Louisville CPE10/22 Tech Tools & Gadgets for Greater Efficiency (AM) Louisville Tech10/22 Do It Yourself Business Intelligence (PM) Louisville Tech10/22 Financial Statement Analysis: Basis for Management Advice (A) X Louisville A&A10/23 Excel Financial Reporting & Analysis Louisville Tech10/26 Best Federal Tax Update Paducah Tax10/26 Internal Controls & Risk Assessment: Key Factors in a Successful Audit (A) Louisville A&A10/27 Best Federal Tax Update Owensboro Tax10/27 Identity Theft: Preventing, Detecting & Investigating (A) Louisville A&A10/28 Best Federal Tax Update Madisonville Tax10/29 Best Federal Tax Update Somerset Tax10/30 Best Federal Tax Update Ashland Tax11/2-3 Audit Staff Essentials – Level 2 – Experienced Staff Louisville A&A11/2 Best Federal Tax Update Florence Tax11/3 Reviewing Individual Tax Returns: What Are You Missing? (AM) Louisville Tax11/3 Capitalized Costs & Depreciation: Key Issues & Answers (PM) Louisville Tax11/4 Form 1041: Income Taxation of Estates & Trusts (A) Louisville Tax11/4 Horsing Around Equine Update Lexington CPE11/5 A&A Year in Review: Exploring the Latest Issues & Challenges Facing CPAs X Louisville A&A11/5 Slashing Taxes for Your Small Business Clients: Corps., Partnerships & LLCs (A) Louisville Tax11/6 Nexus Update: Latest Developments in State Income, Franchise & Sales Tax (A) Louisville Tax11/6 The New Reporting Option: FRF for SMEs Louisville A&A11/10 Commercial Real Estate Conference X Louisville CPE11/10 Ethics Update for CPAs Erlanger Ethics11/10 Professional Issues Update Erlanger CPE11/11 Construction Contractors Advanced Issues (A) Louisville A&A11/12 Advanced Real Estate Accounting, Auditing & Taxation (A) Louisville A&A11/16 Single Audit Testing & Documentation Louisville YB11/16 SPFs: Preparing & Reporting on Financial Statements Lexington A&A11/17 FASB's Big 3: Revenue Recognition, Leases, & Financial Instruments Louisville A&A11/17 Governmental A&A Update Louisville YB11/18 Audit Documentation Louisville A&A11/18 Mastering Basis Issues for S Corporations, Partnerships, & LLCS X (AM) Louisville Tax11/18 Understanding the Net Investment Income Tax in 2015 X (PM) Louisville Tax11/19-20 Accounting & Auditing Workshop (A) Louisville A&A11/19 Taking Your Medicine: Health Care in 2015 (AM) Louisville Tax

Fall CPE calendar

X Live Webcast option

New lower pricing on 4-hour courses, see p. 17.


kycpa.org 19

Date Title City Credit type11/19 Understanding the Passive Activity Rules in 2015 (PM) Louisville Tax11/23 Ethics Update for CPAs Lexington Ethics11/23 Professional Issues Update Lexington CPE12/1 Kentucky State Tax Conference X Louisville Tax12/2 Ethics Update for CPAs X Louisville Ethics12/2 Professional Issues Update Louisville CPE12/3 Performing a Single Audit Under the Uniform Guidance for Federal Awards

(A) X Louisville YB

12/4 Recognize & Respond to Fraud Risk in Governmental & Not-for-Profit Organizations (A)

Louisville YB

12/7-8 Kentucky Technology Conference Louisville Tech12/10-11 Vern Hoven 2-Day Federal Tax Update Louisville Tax12/14 Advanced Partnership/LLC Workshop: How to Do Optional Step-Up in Basis Louisville Tax12/15 Advanced Issues in Compilation & Review Engagements (AM) Louisville A&A12/15 Advanced Technical Tax Forms Training -- LLCs, S Corporations, &

PartnershipsLexington Tax

12/15 Analyzing a Company's Financial Statement (AM) Louisville A&A12/15 Health Care Reform Act: Critical Tax & Insurance Ramifications (AM) Louisville Tax12/15 Not-for-Profit A & A Update (AM) Louisville YB12/15 Critical Skills for Budgeting Success (PM) Louisville A&A12/15 Frequent Frauds Found in Not-for-Profits (PM) Louisville YB12/15 Social Security & Medicare: Maximizing Retirement Benefits (PM) Louisville Tax12/15 Special Purpose Frameworks - Alternatives to GAAP (PM) Louisville A&A12/16 Controller's Update: Today's Latest Trends (AM) Louisville Finance12/16 Compilation & Review Guide & Update (AM) Lexington A&A12/16 Annual FASB Update & Review (PM) Lexington A&A12/16 Fraud: Recent Findings, Red Flags & Corruption Schemes (AM) Louisville A&A12/16 Practical Tax Tips & Techniques for Closely-Held Businesses (AM) Louisville Tax12/16 Yellow Book Financial Audits (AM) Louisville YB12/16 Frequent Frauds Found in Governments (PM) Louisville YB12/16 IRS Disputes: Identifying Options for Your Client (PM) Louisville Tax12/16 Risk, Cost & Cash Management for Controllers & Financial Managers (PM) Louisville Finance12/16 The New Revenue Recognition Standard: What All CPAs Need to Know (PM) Louisville A&A12/17 Accounting & Reporting Update for Tax Practitioners X Louisville A&A12/17 Federal Estate & Gift Tax Returns - Forms 706 & 709 Workshop Louisville Tax12/18 The Complete Trust Workshop! Louisville Tax


New lower pricing on 4-hour courses, see p. 17.


20

• Guidance for CPAs in public practice and industry

• Current and evolving issues• Avoid potential ethical problems

Speakers:• Elizabeth Woodward, CPA/CFF, CFE, leads the

Dean Dorton litigation support and forensic accounting team. She specializes in bankruptcy, litigation support and forensic accounting services.

• Lori Klumpp, CPA, with L&N Federal Credit Union in Louisville, has more than 21 years of experience in public accounting, and has performed, supervised, and managed full scope opinion audits, fraud audits, compliance audits and internal audits.

• Lance Mann, CPA/CFE/CGMA, serves Dean Dorton in Louisville as the director of assurance services. Mann has more than nine years of experience providing assurance, accounting and business advisory services for college and university, construction, not-for-profit, manufacturing, and retail.

Live presentations (scheduled with the Professional Issues Updates):Member fee: $79 Non-member: $99, includes lunch9:45 – 11:25 a.m. Local time

Register at: kycpa.org or call 502.266.5272Note: Professional Issues Update will follow this program and requires a separate registration.

Nov. 10 Erlanger - Receptions Nov. 23 Lexington - Embassy Suites Dec. 2 Louisville - KyCPA, Gratzer Education Center X

X Also available as a live-streaming webcast.

Go to kycpa.org for many other online ethics training options.

2015 Annual Ethics Update for CPAs

*Please note: The Ethics presentation will review key components of the AICPA Code of Professional Ethics and share current AICPA guidance for members in public practice and in industry. The printed brochure mailed directly to members erroneously stated the session would include an interactive case study. A case study will not be included in the course material.

On-site Ethics training

If you would like to train your staff together, at your convenience, you can choose the on-site training option. We will provide a DVD, materials and documentation, and a certificate following the training. This DVD is not available for individual self-study.

Fees for groups of CPAs and/or professional staff:5-10 $76 per person11-20 $73 per person21 or more $67 per person

To arrange an on-site training, contact Suzanne Sturgeon, [email protected], 502.736.1385.


kycpa.org 21

KyCPA conferences and seminars at your desktop

KyCPA now offers many of its quality seminars and conferences in the convenient live-

streaming webcast format. Now you can join CPE events as they happen right from the comfort of your desk, laptop or mobile device.

Upcoming live streaming events include:• Oct. 22, Financial Statement Analysis: Basis for

Management Advice• Nov. 10, Real Estate Conference• Nov. 18, Mastering Basis Issues for S Corporations,

Partnerships, & LLCS (a.m.)

Live streaming CPE events• Nov. 18, Understanding the Net Investment Income

Tax in 2015 (p.m.)• Dec. 1, Kentucky State Tax Conference• Dec. 2, Ethics Update for CPAs• Dec. 3, Performing a Single Audit Under the Uniform

Guidance for Federal Awards• Dec. 17, Accounting & Reporting Update for Tax

Practitioners

“I really like the video option, and the 3 hours of driving plus mileage expense saved.” - from KyCPA member feedback

ProfessionalIssues Update

4 CPE hours

Nov. 10, ErlangerNov. 23, LexingtonDec. 2, Louisville

Legislative Panel Discussions and/or Kentucky General Assembly Update An overview of issues important to the profession, including:• Current Congressional issues CPAs should

care about • New and emerging standards and exposure drafts• How the profession is dealing with threats to self-

regulation• Hot topics in federal taxation• Hot topics in accounting and auditing• And more …Tax Update

22


Ohio Valley Construction Conference

Oct. 22-23 CPE: 16Horseshoe Southern Indiana Course Code: CCC1022 Vendor: KyCPA/CFMA#KyCPAConstructionConf Topics• Financial management: Learn from a CFO the tools

and technologies you need to know to be successful today and in the future

• Mobile accessibility: The right tool for the right job• Captive insurance - an intro into alternative risk

transfer• Tax update considerations for contractors.• Joint ventures• Innovation: The world of construction 2.0• The Affordable Care Act: the long and winding road• Sales and use tax exemptions for contractors• FASB update• Internal audit “light” for contractors: The best & least

expensive form of risk management• Changing culture in your organization• Successional planning panel• Economic update with Anirban Basu• Fraud panel• CFO panel - best practices

Early Bird Fee: Register by Oct. 8CFMA/KyCPA member: $300 Nonmember: $325Regular Fee: After Oct. 8CFMA/KyCPA member: $325 Nonmember: $350

Commercial Real Estate Conference X

Nov. 10 CPE: 8Gratzer Education Center, Louisville Course Code: REC1110 Vendor: KyCPAWebcast Course Code: RECW1110 #KyCPARealEstateConfTopics• Repair and maintenance update: how to maximize

your opportunities• Creative structures for financing - EB-5• Federal real estate tax incentives• New market credits and tax incentives with Bill

Weyland• Fair value, leasing, GAAP update with Brian Lavin of

NTS• Lease disputes• What is trending in real estate

Early Bird Fee: Register by Oct. 27KyCPA member: $299 Nonmember: $399Regular Fee: After Oct. 27KyCPA member: $349 Nonmember: $449

Fall conferences

kycpa.org 23


Kentucky State Tax Conference X

Dec. 1 CPE: 8Gratzer Education Center, Louisville Course Code: KST121 Vendor: KyCPAWebcast Course Code: KSTW121 #KyCPAStateTaxConfTopics• Kentucky tax update, including income, sales

and property• Navigating state nexus rules• Key updates from Kentucky’s surrounding states• Representatives from the Kentucky Dept. of Revenue• Panel discussion on state tax policy• Update on the standard local occupational license

tax form• Overview of aircraft taxation

Early Bird Fee: Register by Nov. 17KyCPA member: $299 Nonmember: $399Regular Fee: After Nov. 17KyCPA member: $349 Nonmember: $449

Technology Conference

Dec. 7-8 CPE: 16Hilton Garden Inn Airport, Louisville Course Code: KTC1214 Vendor: K2#KyCPATechConfEighteen breakout sessions over two days will provide practical information to make you more effective and more efficient.Topics• Tech update 2015• Self service business intelligence with Power BI• Top ten technology articles you should have read• Remote access best practices• Risks and rewards of hosted, on-premise, and hybrid

solutions• Five common sense steps to secure your PC• Everything iOS• How to prevent & detect spreadsheet errors• The internet of things• Backups - critical to every organization• Dueling excel tips• Data security -- need we say more?• Leading solutions for CPA firms• Personal technologies• Using tables, PivotTables, and queries to automate

reporting• Revolutionizing small business accounting• Payment technologies• Technology policies to protect your organization• Beyond entry-level accounting, reporting, and analyt-

ics• Windows 10 - you’re going to love it • Best tools for collaboration• Welcome to the new world of Microsoft



Continued on p. 24


24

CPAs and Seniors: A conference for CPAs serving an aging population

Dec. 8 CPE: 8Gratzer Education Center, Louisville Course Code: ELC128 Vendor: KyCPA#KyCPACPAsSeniorsConfTopics• What to expect with aging clients and their health• Special needs trust planning for families• VA, Medicare, Medicaid• Estate planning for seniors• Guardianships, powers of attorney, elder mediation• Using your business forecasting skills for individual

and family life planning• Building a niche market with older clients• Social Security planning


Conferences continued

300 W. Vine Street, LexingtonCentral Bank & Trust community room, 7th floor

Topics Include:• 2014 KY Thoroughbred Horse Farm

Compensation and Benefits Survey• Banking update• Fraud and internal controls• Equine law update

horsingaroundEquine Update

Nov. 4, 20154 CPE hours

kycpa.org

kycpa.org 25


Vern Hoven Federal Tax Update Dec. 10-11, 2015 CPE: 16 Tax Ramada Plaza, Louisville Jan. 6-7, 2016 CPE: 16 Tax Clarion Hotel, Lexington Jan. 8, 2016 CPE: 8 Tax Hilton Garden Inn Airport, Louisville

Vern Hoven Ron Roberson

One tax seminar a year is a must ... and this is the best! Our program - taught by practicing CPAs Vern Hoven and Ron Roberson, in a high-tech and often humorous manner - covers fast-breaking new tax developments affecting individuals, estates, businesses, partnerships and corporations, and provides attendees with the most complete reference manual available. Hoven and Roberson’s high energy and real-life experiences bring complicated tax topics to life and offer cutting-edge tax planning opportunities. Who should attend: All tax practitioners, both public and industry, who need the latest - and necessary - tax changes for their individual, partnership, corporate and estate clients. CFP

Gratzer Education Center, 1735 Alliant Ave., Louisville Indiana Wesleyan University, 1500 Alliant Ave., Louisville

Dec. 15 Dec. 158-11:30 a.m. 4 CPE hours 12:30-4 p.m. 4 CPE hours 8-11:30 a.m. 4 CPE hours 12:30-4 p.m. 4 CPE hours

Analyzing a Company’s Financial Statement A&A

Critical Skills for Budgeting Success A&A

Advanced Issues in Compilation & Review Engagements A&A

Special Purpose Frameworks - Alternatives to GAAP A&A

Health Care Reform Act: Critical Tax & Insurance Ramifications Tax

Social Security & Medicare: Maximizing Retirement Benefits Tax

Not-for-Profit A & A Update YB

Frequent Frauds Found in Not-for-Profits YB

Dec. 16 Dec. 16Fraud: Recent Findings, Red Flags & Corruption Schemes A&A

The New Revenue Recognition Standard: What All CPAs Need to Know A&A

Controller’s Update: Today’s Latest Trends Finance

Risk, Cost & Cash Management for Controllers & Financial Managers Finance

Yellow Book Financial Audits YB

Frequent Frauds Found in Governments YB

Practical Tax Tips & Techniques for Closely-Held Businesses Tax

IRS Disputes: Identifying Options for Your Client Tax

December Clusters 16 courses over 2 days—get up to 16 hours in Auditing and Accounting, Tax, Yellow Book or Management. New lower pricing on 4-hour courses.

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The Kentucky CPA Journal / Issue 5 2015 Tax in the Bluegrass/Focus

kycpa.org 27

Kentucky’s Limited Liability Entity Tax, a

tax that many commonly refer to as the LLET, is

intertwined with Kentucky’s income tax scheme in KRS

Chapter 141. The LLET replaced the Alternative Minimum Calculation (AMC) which was in effect during 2005 and 2006 tax years. So, Kentucky has had a gross receipts tax variant for nearly a decade.

LLET basics The LLET is a tax on the Kentucky gross receipts

or gross profits (i.e., gross receipts less cost of goods sold, as that term is statutorily defined) from the sale of tangible property of each non-exempt corporation and limited liability tax pass-through entity (LLPTE), such as a limited liability company (LLC), limited partnership, or an S corporation, doing business in Kentucky.

The LLET rate is the lower of $950 per $1,000,000 of Kentucky gross receipts or $7,500 per $1,000,000 of Kentucky gross profits, with an absolute “minimum” tax of $175.

Entities not subject to LLETThe LLET does not apply to a general partnership

because it is neither a corporation nor a LLPTE, nor does the LLET apply to an individual, estate or trust for the same reason.

A disregarded single member limited liability company (DESMLLC) is neither a corporation nor a pass-through entity – it is disregarded. A lower-tier DESMLLC owned by another DESMLLC, a LLPTE or a corporation is disregarded and is not subject to LLET independent of its corporation or LLPTE single-owner; such a DESMLLC is subject to LLET only as a part of its single owner. However, the Kentucky Department of Revenue has taken the position that any DESMLLC whose single member is an individual, estate, trust, or general partnership is subject to the LLET.

Managing the LLET liability of a number of affiliated DESMLLCs is not necessarily difficult. If, for example, an individual had 100 rental properties owning each property in a separate DESMLLC, a minimum of $17,500 (100 x $175) in LLET would be owed annually. However, if that individual held 100 LLCs in a single LLC holding company, each of the DESMLLC would be disregarded from the holding company LLC and a minimum of only $175 (1 x $175) in LLET would be owed annually.

LLET exemptions: exempt entities, QIPs and small businesses

Entities exempt from LLET include financial institutions (and like entities), insurance companies, tax-exempt organizations (including religious, educational, and charitable organizations), public service corporations, personal service corporations, and others. Generally, companies subject to industry specific taxes (e.g., banking or insurance) and most non-profits do not pay LLET. Viewing these exemptions from a legislative historical perspective, one need only recall that the LLET’s predecessor, the AMC, essentially replaced the corporate license tax and the intangibles tax, and many of these types of companies were exempt from the license tax, generally because they were tax-exempt entities or were subject to other taxes like the insurance premium tax or the public service corporation tax, etc.

There is also an exclusion from the LLET tax base of a LLPTE’s proportionate share of gross receipts or gross profits attributable to the ownership share of a qualified exempt organization, i.e., an entity exempt from the LLET. This exclusion prevents the application of LLET to, for example, a LLC wholly owned by a charity or by a utility (a public service corporation).

A qualified investment partnership (“QIP”), a pass-through entity that, during the taxable year, holds only investments that produce income that would not be taxable to a non-resident individual if held or owned individually, for example, stocks and bonds is exempt from LLET. It is not uncommon to see a family limited partnership formed for estate planning structured to qualify as a QIP.

Kentucky’s LLET opportunities and trapsBy Mark A. Loyd,

Esq., CPA

Continued on p. 28

The Department takes the position that a LLPTE is not a QIP when it owns an investment that produces income other than from securities, such as rental income or business income, even if that income has a source outside of Kentucky, e.g., rental income from rental property located outside of Kentucky. So, family limited partnerships which hold not only stocks and bonds but also other investments producing rental or business income do not qualify as QIPs under the Department’s position. Although an argument could be developed that certain such entities qualify as QIPs, consideration should be given to restructuring such holdings into a QIP entity and a non-QIP entity.

There is also a “small business” exemption for each business with total gross receipts or gross profits from all sources of less than $3 million (measured on a combined group basis). This exemption is phased out between $3 and $6 million, so that taxable entities with gross receipts and gross profits greater than $6 million pay the full LLET. While seemingly low, this threshold is often exceeded. Interestingly, there have been proposals to lower the small business exemption phase-out threshold to $1 million. Is this not going the wrong way?

“Doing business” in Kentucky

A non-exempt corporation or LLPTE that is “doing business” in Kentucky is subject to the LLET. An activity that causes a

corporation or LLPTE to have nexus for income tax purposes will also cause that entity to have nexus for the LLET.

The Department has taken the position that Public Law 86-272, a federal law which protects taxpayers from the imposition of income-type taxes when the taxpayer solely engages in protected activities related to the solicitation of orders in a state to be filled from out-of-state, does not apply to protect a taxpayer from the imposition of LLET. The Department has taken this position even though the KRS Chapter 141 imposes both the LLET and the income tax and even though the two taxes are intertwined therein. Query whether this may be challenged? Under the Department’s position, a taxpayer could be exempt from income tax under P.L. 86-272 but still subject to LLET.

LLET gross receiptsThe LLET’s tax base,

Kentucky gross receipts and gross profits derive from the apportionment provisions of Kentucky’s corporation income tax. The Administrative Regulation concerning the Sales Factor provides some insight as to the Department’s position as to what constitutes gross receipts and examples of what the Department considers to be Kentucky gross receipts. Although what constitutes gross receipts from tangible property and the assignment of same to the destination state appear to be relatively straightforward

concepts as presented in the Regulation, treatment of gross receipts from intangibles and services, particularly as compared to the sales factor statutory provisions, is less than straightforward, and some have argued, inconsistent with the sales factor statutory provisions.

As a practical matter, the Department often compares Kentucky and total gross receipts on Schedule LLET with Kentucky and total sales on Schedule A, Apportionment and Allocation. So, in preparing the Kentucky LLET portion of a Kentucky income tax return, maybe it makes sense to reconcile these amounts? A lack of matching can result in the Department issuing a Notice of Tax due to an LLET taxpayer, without prior contact with the taxpayer. In a somewhat Alice in Wonderland way, does this practice seem somewhat like, verdict first, trial later? Why not first send a letter requesting information or inquiring about the discrepancy?

LLET gross profits and cost of goods sold

Kentucky gross profits are computed by subtracting Kentucky cost of goods sold from Kentucky gross receipts. The Department has taken the position that only a taxpayer engaged in manufacturing, producing, reselling, retailing or wholesaling may deduct, as cost of goods sold, amounts directly incurred in acquiring or producing a tangible product (including,


28

LLET continued

both real and tangible personal property, but not intangible personal property) generating the Kentucky gross receipts. Note that the LLET Return requests a taxpayer’s NAICS Code Number and principal business activity in Kentucky. The Department pays attention to these and has issued Notices of Tax Due for LLET to taxpayers with an NAICS Code that would not appear to the Department to encompass an activity that comes within such activities (i.e., manufacturing, etc.). When preparing their LLET Return, taxpayers should pay close attention to the NAICS Code reported on its Kentucky income tax return.

Another trap that taxpayers inadvertently fall into is not realizing that the Department does not consider cost of goods sold for LLET purposes to be the same as cost of goods sold under the Internal Revenue Code of 1986, as amended, and as reported to the Internal Revenue Service on the taxpayer’s federal income tax return. Rather, the Department takes the position that cost of goods sold for LLET purposes

includes only direct labor costs and direct material costs.

Direct labor, according to the Department, is labor that is incorporated into the tangible product sold or is an integral part of the manufacturing process, and under the Department’s construction, consists of basic compensation, overtime, vacation and holiday pay, sick leave pay, shift differential, payroll taxes and payments to supplemental unemployment benefit plans relating to direct labor. According to the Department, this does not include pensions, profit sharing, workers’ compensation, life insurance, health insurance, membership dues, or union dues, even if relating to direct labor.

Direct material, according to the Department, is material incorporated into the tangible product sold or manufactured. The Department routinely disallows what it considers to be indirect costs including: utilities; repairs and maintenance; depreciation; insurance; quality control; and rent. Notably, bulk delivery costs for consumers’ gasoline and special fuels are included in cost of goods sold.

The Department is collecting information on each taxpayer’s computation of cost of goods sold for purposes of computing their LLET reported on Schedule COGS. The Department also reviews the computation by reference to each taxpayer’s federal income tax return and has been known to issue Notices of Tax Due to taxpayers with the initial contact being the Notice. For multistate taxpayers, the Department prefers taxpayers to compute Kentucky cost of goods sold using separate accounting. When it is not possible for a taxpayer to use separate accounting, the Department has taken the position that a taxpayer must compute cost of goods sold using the sales factor. Does this approach make sense to you?

LLET flow up of gross receipts, profits and credits

For apportionment purposes, gross receipts, and, likewise, gross profits, flow up from a LLPTE and certain general partnerships (those


kycpa.org 29

Continued on p. 30

Exploring the LLET opportunities and avoiding the traps.

organized or formed after January 1, 2006) to their owner. This would result in multiple levels of tax on essentially the same gross receipts; however, the owner of an LLPTE receives a current year nonrefundable credit for the

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proportionate share of LLET paid by the lower-level LLPTE (less the $175 minimum) on gross receipts/profits passed through to its owner. The credit applies across multiple layers of multi-layered organizational structures.

An LLPTE owner is also allowed a nonrefundable credit against the owner’s current year Kentucky income tax on income from the LLPTE for their proportionate share of the LLPTE’s LLET for the current year, after subtraction of any credits and reduced by the $175 minimum. Also, a corporation receives a nonrefundable credit for LLET (less the $175 minimum) against its current year Kentucky corporation income tax due from its activities in Kentucky.

Any remaining unused LLET credit cannot be carried forward; it must be used or lost. There are opportunities to manage the utilization of LLET credits.

“Oh yes, the past can hurt. But you can either run from it, or learn from it.” – Rafiki, from The Lion King (1994).

Over the past decade, there has been much that taxpayers attempting to comply with the LLET or resolving an LLET assessment have learned, i.e., to avoid traps and take advantage of opportunities to manage their LLET obligations.

About the author: Mark A. Loyd, Esq., CPA, is a member of Bingham Greenebaum Doll in Louisville and chairs its tax and finance practice group. He chairs the Society’s Editorial Board. He can be reached at [email protected]; 502.587.3552.


30

LLET continued

By Gian Pazzia, CCSP, and Alex Bagne, JD Editor’s note: Reprinted with permission from the Virginia Society of CPAs.

For years, the US Internal Revenue Service (IRS) and taxpayers disputed whether certain

expenditures were required to be capitalized and depreciated or be immediately written off as repair and maintenance expenses. For expenditures related to residential or commercial buildings, the tax consequences between taking an immediate deduction versus capitalization and depreciation over a lengthy 27.5 or 39 years are staggering. In 2004, the IRS began drafting new rules to address this conflict and, after several iterations, yielded the final Tangible Property Regulations (TPRs).

When the TPRs became fully effective for the 2014 tax year, CPAs and tax professionals scrambled to understand and implement the new rules. These regulations affect most businesses and many individual taxpayers. The TPRs apply to expenditures related to fixed assets and clarify rules applicable to the deductibility of materials, supplies and parts. They provide important new guidance on dispositions as well as optional elections that may yield tax savings. The TPRs may also impact previous years’ capitalized assets, which would then require filing Form 3115, Application for Change in Accounting Method.

In response to public concerns, the IRS issued Rev. Proc. 2015-20 as relief for small businesses. Rev. Proc. 2015-20 provides a simplified method of compliance for small business taxpayers (i.e., less than $10 million in assets or less than $10 million in average annual gross receipts) to change a method of accounting under the final TPRs on a prospective basis for the first taxable year beginning on or after Jan. 1, 2014. The IRS waived the requirement to complete and file Form 3115 for small business taxpayers that choose to use this simplified procedure. However, election statements are still required for the de minimis safe harbor and the small taxpayer safe harbor on a prospective basis.

For others not meeting the criteria of a small business, the implementation of the TPRs is a challenge that led many taxpayers to file extensions for 2014. Even though compliance with the TPRs can be time consuming, in many cases it can offer tremendous opportunities to claim faster tax deductions for various expenditures that were capitalized in prior years, even for those meeting the Rev. Proc. 2015-20 definition of a small business taxpayer. Below is a list of considerations under these new rules.

De minimis safe harborA new rule allows taxpayers to immediately

deduct certain small-dollar expenditures that may

The final Tangible Property Regulations

The Kentucky CPA Journal / Issue 5 2015 Focus

kycpa.org 31

Continued on p. 32

Want to learn more about this topic? Catch the webcast, Capitalization vs Expense on Repairs to Tangible Property – Final Regulations and Update. 4 hours of CPE; Nov. 11,14; and Dec. 11 & 22. Find out more at kycpa.org.

Shining a light on missed deductions and opportunities to accelerate deductions.

have required capitalization under previous tax rules. This safe harbor allows taxpayers with Applicable Financial Statements (i.e., audited financial statements in most situations) to adopt depreciation policies requiring the immediate write-off of items costing up to $5,000. Taxpayers using this safe harbor must have a written accounting procedure in place as of the beginning of the tax year and consistently follow the policy for both book and tax purposes. For taxpayers without Applicable Financial Statements, the threshold is $500 but a written policy is not necessary. This safe harbor requires a statement attached to a timely filed return.

Routine maintenance safe harbor

The final regulations allow a taxpayer to immediately deduct certain building costs if the taxpayer expects to perform the activity more than once within a 10-year period. Examples may include repainting a hotel lobby or replacing an escalator handrail if expected to be performed at least twice within 10 years. An election statement is not necessary.

Small taxpayer safe harbor

Taxpayers that meet the definition of a “small taxpayer” and own a building with an unadjusted basis of $1 million or less may be able to make

elections that allow them to immediately deduct certain costs that would otherwise require capitalization. For this purpose, a small taxpayer is one whose average annual gross receipts for the three preceding years is $10 million or less. An eligible taxpayer can deduct expenditures up to the lessor of $10,000 or 2 percent of the unadjusted basis of the building. For corporations and partnerships, the election is made by the entity and not the shareholder or partner.

Planning point: The $1 million building basis limit is only for building real property (not inclusive of land). For buildings over the $1 million threshold, consider a cost segregation study to reclassify personal property and land improvements from the basis of real property. For example, a $1.1 million building will not initially meet the safe harbor’s requirements but can qualify with a cost segregation study that reclassifies $200,000 into personal property, whereby the remaining real property basis is less than $1 million and qualify under this safe harbor in all future years.

Demolition costsUnder prior law, taxpayers

were required to capitalize removal costs into the basis of the replacement asset. Now, taxpayers can immediately deduct such costs as long as they claim a retirement loss deduction on the removed component.

Planning point: Taxpayers should request that contractors separately state demolition and removal costs on invoices so these expenditures can be immediately deducted (after carefully considering Code Section 280B).

Supplies The final regulations clarify

the definition of supplies and when taxpayers can deduct them. For example, anything that costs less than $200 or is expected to be consumed within 12 months can be treated as a supply and immediately deducted.

Re-characterization of past expenditures

The final regulations allow taxpayers to immediately deduct current or previously capitalized expenditures. Examples may include certain building costs such as electrical, plumbing or HVAC unit replacements. Conversely, taxpayers who were overly aggressive in immediately deducting capital expenditures should review their prior year repairs registers as well as their current year capitalization policies. Any corrections should be made in the 2014 tax return by filing IRS Form 3115.

Partial disposition election

Prior to the new rules, there was no clear guidance that allowed taxpayers to deduct


32

Tangible Property Regulations continued

costs of removed building components, such as an old roof, HVAC systems or windows. The final TPRs allow taxpayers to deduct any undepreciated basis of these removed components even if disposed in prior years, which may yield significant and immediate tax deductions. For example, a taxpayer that replaced a roof in 2010 can now deduct the undepreciated cost of that roof. However, taxpayers are only allowed to write off assets disposed in past years on the return for the tax year beginning Jan. 1, 2014.

Planning point: It is important to review all prior-year building improvements to determine if there were any partial dispositions of components. If this is not done for the 2014 tax year, the taxpayer must continue to depreciate these assets and forgo the opportunity to immediately write off any undepreciated basis as compliance with this provision may not be permitted future tax years.

New improvement rulesThe most significant portion

of the TPRs focus on clarifying rules on what can be immediately deducted or must be capitalized. Examples of immediately deductible expenses include the installation of a new roof membrane, replacing three of 10 HVAC units in a building or remediating asbestos. Proper analysis requires careful consideration of the unit of

property and of whether the expenditure results in a betterment, adapts the unit of property to a new or different use or results in a restoration. For buildings, each major building system must be analyzed as a unit of property.

Rule of thumb: For expenditures that are not considered a betterment or adaptation, the rule of thumb is that replacing one-third or less of a building component will be a repair expense as long as the taxpayer is not required to adjust the basis of the component disposed.

Increased importance of cost segregation studies

Cost segregation studies accelerate the timing of deductions by reclassifying personal property and land improvements, which have favorable tax attributes, from building costs, which do not. Quality cost segregation studies quantify the costs of removed components, which make it easy for taxpayers to take losses on them. Additionally, they can organize certain building information for proper repair analysis required by the TPRs. For buildings purchased and improved in prior years, a quality cost segregation firm employing TPR experts will analyze the new repair rules and provide information needed to claim missed deductions.

Suggestion: Only consider using a cost segregation firm that provides a final schedule clearly showing each building system stipulated by the TPRs along with other building categories that can be expected to be replaced (e.g., windows, doors, roof, lighting, interior finishes etc.). For multi-tenant commercial buildings, make sure the study breaks out each tenant improvement in a clear schedule allowing the taxpayer to properly claim abandonment loss deductions in future years.

ConclusionEven though the TPRs are

extensive and complex, they do offer a number of taxpayer-favorable provisions. With careful implementation of the new regulations, many taxpayers are claiming missed deductions from prior tax years as well as opportunities to accelerate deductions in current and future tax years.

About the authors: Gian Pazzia, CCSP,

is a principal with KBKG and is its national practice leader for cost

segregation. [email protected].

Alex Bagne, JD, MBA, is a director with KBKG and

leads its tangible property repair regulation practice. alex.

[email protected].


kycpa.org 33

From the AICPA

On July 31, President Obama signed into law a short-term highway funding extension that

contained important due date modifications for several common tax returns, including partnerships and C corporations. PL 114-41 is the culmination of a longstanding effort by the AICPA and state CPA societies to eliminate the awkward chronology for many returns.

Under the prior due dates, taxpayers and practitioners often had insufficient time to prepare returns because required information from a flow-through business was not available before the taxpayer’s income tax return was due. The idea behind the changes is to have flow-through returns completed before the returns in which the flow-through information is reported for the recipients - in forms 1040 and 1120, for example. Taxpayers and their preparers will now have time to receive and analyze the flow-through information before reporting it in other filings.

Most of these changes are ones that the AICPA and state CPA societies have been advocating for several years. The effort centered on urging a more logical flow of information that would help taxpayers and tax professionals file timely, more accurate returns. In articles, social media posts and personal appeals to other members, about 200 AICPA and

state society members volunteered their time to communicate the profession’s concerns. Discussions also were held between representatives of the profession and officials from the Internal Revenue Service and Treasury.

Among the changes, the new due date for C corporations generally will be the 15th day of the fourth month following the close of the corporation’s year (i.e., April 15 for calendar year C corporations). Currently, these returns are due on the 15th day of the third month following the close of the corporation’s year.

In some cases, due dates have been moved up. For partnership returns, the new due date will be the 15th day of the third month following the close of the taxable year (i.e., March 15 for calendar year partnerships). Currently, these returns are due on April 15 for calendar-year partnerships.

It’s important for practitioners to note that the new law generally provides six-month extensions (five and a half months for trusts), mitigating possible disruptions from the new due dates. The new law also provides for additional extensions not previously allowed. The due date for FinCEN Form 114, for example, will change from June 30 to April 15 to align with Form 1040 filings, and under the new law, Form 114 taxpayers will be allowed an extension, which was not previously permitted. That extended date, Oct. 15, is also aligned with the Form 1040 extension.

New tax due dates


34

Extended due dates: These dates apply for taxable years beginning after Dec. 31, 2015 (2016 filing season).1. Forms 1040, 1065 and 1120S shall be a six-month period beginning

on the due date for filing the return (without regard to any extensions).

2. Form 1041 shall be a 51/2-month period beginning on the due date for filing the return (without regard to any extensions).

3. Form 1120 generally shall be a six-month period beginning on the due date for filing the return (without regard to any extensions). Note that Dec. 31 year-end C corporations before Jan. 1, 2026, shall have a five-month extension, and June 30 year-end C corporations before Jan. 1, 2026, shall have a seven-month extension.

4. Form 3520, Annual Return to Report Transactions with Foreign Trusts and Receipt of Certain Foreign Gifts, for calendar year filers shall have due date of April 15, with maximum extension for a six-month period ending Oct. 15.

5. Form 3520–A, Annual Information Return of a Foreign Trust with a United States Owner, shall be the 15th day of the 3rd month after the close of the trust’s taxable year, and the maximum extension shall be a six-month period beginning on such day.

6. Form 5500 shall be an automatic 31/2-month period beginning on the due date for filing the return (without regard to any extensions).

7. Forms 990 (series) returns of organizations exempt from income tax shall be an automatic six-month period beginning on the due date for filing the return (without regard to any extensions).

8. Form 4720 returns of excise taxes shall be an automatic six-month period beginning on the due date for filing the return (without regard to any extensions).

9. Form 5227 shall be an automatic six-month period beginning on the due date for filing the return (without regard to any extensions).

10. Form 6069 returns of excise taxes shall be an automatic six-month period beginning on the due date for filing the return (without regard to any extensions).

11. Form 8870 shall be an automatic six-month period beginning on the due date for filing the return (without regard to any extensions).

12. FinCEN Form 114, relating to Report of Foreign Bank and Financial Accounts, shall be April 15 with a maximum extension for a six-month period ending Oct. 15, and with provision for an extension under rules similar to the rules of 26 C.F.R 1.6081-5. For any taxpayer required to file such form for the first time, the Secretary of the Treasury may waive any penalty for failure to timely request or file an extension.From the AICPA


kycpa.org 35

From the AICPA Note: New due date rules will go into effect for the 2017 tax filing season (tax year 2016), except for C Corps as noted above.

Return type Due dates under prior law

New law: Original and extended due dates

(Dates changed by law in bold)Comments

Partnership (calendar year)

Form 1065April 15Sept. 15

March 15Sept. 15

Under the new law, for fiscal year partnerships, returns will be due onthe 15th day of the 3rd month after

the year-end. A six-month extensionis allowed from that date

S Corporation(calendar year)

Form11205

March 15Sept. 15 March 15

Sept. 15No change

Trust and estate Form 1041

April 15Sept. 15

April 15Sept. 30

C Corporation(calendar year)

Form 1120

March 15Sept. 15

Before Jan. 1, 2026 After Dec. 31, 2025

April 15 April 15Sept. 15 Oct. 15

Starting with 2016 tax returns, all other C corps besides Dec. 31 and June 30 year-ends (including those with other fiscal

year-ends) will be due on the 15th of the 4th month after the year-end. A six-month

extension is allowed from that date.

C Corporationfiscal year end

(other than Dec. 31 or June 30)

15th day of 3rd monthafter year-end

15th day of 9th monthafter year-end



C Corporation June 30 fiscal year

Form 1120

Sept. 15March 15

Before Jan. 1, 2026 After Dec. 31, 2025

Sept. 15 Oct. 15April 15 April 15

Special rule for C Corporations with fscal years ending on June 30 - the new due date

rules will go into effect for returnswith taxable years beginning afterDec. 31, 2025 (2027 filing season).

Individual Form 1040

April 15Oct. 15

April 15Oct. 15

No change

Exempt organizationsForms 990

May 15Aug. 15Nov. 15

May 15Nov. 15

New extension will be a single,automatic 6-month extension, eliminating the need to process the current frst 90-day

extension.

Employee benefit plansForm 5500

July 31Oct. 15

July 31Nov. 15

Foreign trusts with a US owner Form 3520-A

March 15Sept. 15

March 15Sept. 15

No change

FinCENReport 114

June 30 April 15Oct. 15 Foreign Bank and

Financial Accounts Report (FBAR)

Informationreturns (i.e., W-2 and

1099s)

To IRS/SSA – Feb. 28 and March 31

if filed electronically

To IRS/SSA – Feb. 28 andMarch 31 if filed electronically

No change

A letter to my colleagues from Jennifer McGill, CPA, CGMA Dear fellow members,

Throughout my career, I have had the pleasure to volunteer with the Kentucky Society of CPAs’ Business and Accounting Summer Education (BASE) Camp program. Over the years, many students asked: “When did you know you wanted to be a CPA?” or “How did you pick this career?” So often, the answer from fellow CPAs comes back to early exposure to the accounting profession through an educator, parent, or friend of the family. Understanding the importance of early exposure to accounting, the Kentucky Society of CPAs (KyCPA) established the KyCPA Educational Foundation. The Foundation offers several outstanding programs to educate students, parents, educators and school counselors about the boundless career opportunities in the profession. The Foundation has touched the lives of many students. In the past 10 years, KyCPA’s BASE Camp has hosted more than 400 high school students; many have gone on to study accounting in college and have become CPAs. Since establishing a CPA “firm” at Junior Achievement’s Biztown, more than 100,000 elementary students have learned about CPA careers through activities like auditing, paying taxes, meeting payroll and writing checks.By far, one of the most important ways the Foundation supports future CPAs is through the college scholarship program. With the generous support of many KyCPA members, the Foundation recently awarded 39 scholarships totaling $47,000. These scholarships were given to deserving students pursuing bachelors and masters degrees in accounting. What a change since 1988 when we awarded our first and, what was at the time, our only scholarship! There are few efforts we can undertake that will advance our profession and secure a strong pipeline of future CPAs more than providing much-needed financial assistance to college students through the Educational Foundation. This year, Foundation Trustees received more than 75 scholarship applications, almost double the amount of funds available for scholarships. On behalf of the Foundation Board of Trustees, I appeal to you to support this work with a donation.

The Kentucky CPA Journal / Issue 5 2015 Educational Foundation

36

Giving back to the professionPlease help us pay it forward and consider making a donation to the Educational Foundation. We should all give back to the profession that has given so much to us. A $1,000 donation will fund a scholarship for a worthy accounting student, but please give what you can today or consider a multiple year pledge. If you are currently working on your estate planning, please consider any of the following longer-term giving examples:

• Bequests by will• Life Insurance policies • Charitable remainder trusts• Charitable lead trusts• Stock/security transfers • Memorial gifts • Outright gift

Don’t have a will? You’re not alone! Now is a great time to start planning, and please consider including a bequest to the KyCPA Educational Foundation in your estate plans. Contact KyCPA’s Vicki Blair at [email protected] for suggested bequest language and the Foundation’s tax ID to share with your attorney or tax advisor. It is critical that we identify our successors today because success without successors is failure. Please join the CPA firms and companies that have already given generously to support the Educational Foundation with a permanent named scholarship, as well as the many individual members who have given so generously as we continue to strengthen the future of the CPA profession in Kentucky.

Yours in service, Jennifer McGill, CPA, CGMAChair, KyCPA Educational Foundation

P.S. For more information about the KyCPA Educational Foundation, or to make a donation please visit: kycpa.org/GetInvolved/EducationalFoundation.


kycpa.org 37

Create a Legacy

Legacy Named SchoLarShipS

Baldwin CPAs PLLCBKD True Expertise AccountingBlue & Co., LLC Brandon Lloyd Warden MemorialBrown-Forman DiversityCrowe Horwath LLPDave CalziDean Dorton PLLCDeloitte & Touche LLP DMLO CPAsErnst & Young LLPFreibert Bigg PLLCGordon Ford MemorialHenderman, Jessee & Co. PLLCKelley Galloway Smith Goolsby PSCKPMG LLPLouis T. Roth MemorialMCM CPAs and AdvisorsNational Insurance AgencyNeace LukensPapa John’s InternationalPatterson & Company PLLC PricewaterhouseCoopers LLPStrothman & Company AccountingWilliam J. Caldwell (Henderman Family Foundation)

Thank you for supporting the KyCPA Educational Foundation. By doing so, you are truly creating a legacy. If you would like to support the future of the profession by giving to the Foundation, go to kycpa.org or call KyCPA at 502.266.5272 or 800.292.1754. We make every effort to ensure this list of donors to the Create a Legacy or both Create a Legacy and Pave the Way campaigns is accurate. However, if you see an error, please contact Vicki Blair at [email protected].

Legacy LeaderS circLe• BKD LLP• Deloitte & Touche LLP• Ernst & Young LLP• KPMG LLP• Louis T. Roth & Co., PLLC• MCM CPAs and Advisors• Patterson & Company PLLC

heritage circLe• Baldwin CPAs PLLC• Blue & Co., LLC • Bramco, Inc.• Buetow LeMastus & Dick PLLC• Crowe Horwath LLP • DMLO CPAs• Kelley Galloway Smith Goolsby PSC• Strothman & Company

deStiNy circLe• Brown-Forman Corporation• Freibert Bigg PLLC• Henderman Family Foundation• Jones Nale & Mattingly PLC• Allen Norvell, CPA• Republic Bank & Trust Company• Rudler PSC• Stock Yards Bank & Trust Co.• Rick Ueltschy, CPA

Continued on p. 38

hoNorS circLe• Steve Allen, CPA• Anderson, Bryant, Lasky &

Winslow PSC• Chris Anderson, CPA• Dave Calzi, CPA• William Carroll, CPA• John Chilton, CPA• Christian Sturgeon &

Associates PSC• Cloyd & Associates PSC• David Conway, CPA• Nancy Davis, CPA• Lori Dearfield, CPA• Randy Franklin, CPA• Greg Greenwood, CPA• Rowe Hamilton, CPA• Greg Hintz, CPA• Jennifer Hughes, CPA• International Systems of

America LLC• Steve Jennings, CPA• Joe Johnston, CPA• Steven Kerrick, CPA• John Layne, CPA• Phil Layne, CPA• Steve Lenarz, JD, CPA• Mike Lenihan, CPA• Alan Long, CPA• Mark Loyd, JD, CPA • Stephen Lukinovich, CPA• Jack Lynch, CPA• Colleen Lyons, CPA• Jennifer McGill, CPA• Diane Medley, CPA• William G. Meyer III, CPA• Jennifer Monaghan, CPA• Mike Mountjoy, CPA

• Myriad CPA Group LLC• National Insurance Agency, Inc.• Neace Lukens Insurance• Chris Reid, CPA• Retirement Management

Services LLC• L. Porter Roberts, CPA• Michael Robinson, CPA• Jennifer Sanders, CPA• Mark Schmitt, CPA• David Smith, CPA• Jason Stockton, CPA• Ray Strothman, CPA• Lori Warden, CPA

gratzer circLe• Barr Anderson & Roberts PSC• David Bradley, CPA• Tony Brutscher, CPA• Deborah Burcham, CPA• Jennifer Burke, CPA• Jeffrey Calderon, CPA• Jennifer Chinn, CPA• Angela Clark, CPA• Diane Cornwell, CPA• Emily Cox, CPA• Steve Daniels, CPA• Delta Natural Gas Company, Inc.• Ken Drozt, CPA• Dulworth Breeding Karns &

Pleasants LLP• Louis Fister, CPA• Melissa Fraser, CPA• Kevin Fuqua, CPA• Ritu Furlan, CPA• Paula Hanson, CPA• Henry Hawkins, CPA• David Heintzman, CPA• Kevin Heyde, CPA• Margaret Jolly, CPA• Mimi Kelly, CPA

• Dr. Harold Little, CPA• Miller Mayer Sullivan & Stevens LLP• Chris Moore, CPA• David Morgan, CPA• Neikirk Mohoney & Smith CPAs

PLLC• Wes Omohundro, CPA• Becky Phillips, CPA• Earl Reed, CPA• Riney Hancock CPAs PSC• Steve Schulz, CPA• Brad Smith, CPA• Clay Stinnett, CPA• Dr. Bill Stout, CPA• Greg Stump, CPA• Nick Walker, CPA• Joshua Zik, CPA

SchoLarS circLe• Jason Aberli, CPA• Melissa Buddeke, CPA• Thomas Buetow, CPA• Vicki Buster, CPA• Dr. Margaret Combs, CPA• Trish Deatrick, CPA• Frank Farris, CPA• Patricia Featherston, CPA• Geoffrey Griffith, CPA• Quinn Hart, CPA• Bill Jessee, CPA• Kelly King, CPA• Todd Klimek, CPA• Mark Kristy, CPA• John T. Lane & Associates, LLC• Roger Johnson, CPA• Brian Malthouse, CPA• Rebecca Myers, CPA• Kevin Rose, CPA• Rory Satkoski, CPA• VonLehman & Co. Inc.• Melissa Wasson, CPA• Michael Wilson, CPA

Pave the Way Campaign ContributorCreate a Legacy Campaign Contributor

Pave the Way and Create a Legacy Campaign Contributor

38


Legacy continued

cariNg circLe• Robert Abner, CPA• Jaclyn Badeau, CPA• Thomas Baer, CPA• Joseph Baker, CPA• Janet Berry, CPA• Jason Bigg, CPA• Ann Bongiolatti, CPA• Joshua Bramucci, CPA• Gail Broady, CPA• Ellen Budde, CPA• J Robert Buschermohle, CPA• Earl Calhoun, CPA• Michael Caudill, CPA• Philip Ciafardini, CPA• Donya Clark, CPA• Travis Collins, CPA• Donnie Cox, CPA• John Craft, CPA• Carrie Crouch, CPA• Richard Crowder, CPA• James Daugherty, CPA• W. Garrett Dering, CPA• Michael Dicken, CPA• Meaghan Dixon, CPA• Olubunmi Dosunmu, CPA• Timothy Eldridge, CPA• Stephen Elliott, CPA• Dennis England, CPA• Myron Fisher, CPA• David Flanery, CPA• Lisa Foley, CPA• Harry Freibert, CPA• Andrew Gladden, CPA• Jeffrey Gooch, CPA• Joseph Graviss, CPA• Ollie Green, CPA

• John Grider, CPA• Joseph Guelda, CPA• Ralph Hannah, CPA• Danny Hardin, CPA• Christopher Hatcher, CPA• Jeffery Hatfield, CPA• Mark Henderson, CPA• Arthur Henson, CPA• Janet Jackson Hill, CPA• Ben Holbrook, CPA• Laurie Holloway, CPA• David Hostetter, CPA• Catherine Hunt, CPA• Dennis Joseph, CPA• Joseph King, CPA• Charles Kington, CPA• Edward Kirn, CPA• Kari Kollenberg, CPA• Edwinna Lambert, CPA• Joel Lane, CPA• Regina Lankswert, CPA• Stephen Larimore, CPA• G Don Lawson Jr, CPA• Brian Leedy, CPA• Thomas Lirot, CPA • Julie Long, CPA• Thomas Lonnemann, CPA• Barry Lucas, CPA• Jeffrey Mallory, CPA• Leonard Mariani, CPA• Frank McCracken Jr, CPA• William McNeill, CPA• James Medina, CPA• Kathleen Mitts, CPA• Charles Moffitt, CPA• David Morgan, CPA


kycpa.org 39

• Donald Morris, CPA• Michelle Musacchio, CPA• Glenn Norvell, CPA• Thomas O’Bryan, CPA• George Owens, CPA• Marilyn Owens, CPA• Tony Page, CPA• David Parks, CPA• Ashley Penn, CPA• Deborah Riley, CPA• Mark Ritter, CPA• Caprice Roberts-Price, CPA• John Rodes, CPA• Suzan Ross, CPA• Laura Stallard, CPA• Beth Stenberg, CPA• Theodore Stiles, CPA• Stephen Stovall, CPA• James Stilz, CPA• Trenton Stover, CPA• Tom Strohmeier, CPA• Kevin Stumbo, CPA• Wayne Sturgeon, CPA• Harvey Thompson, CPA• Mark Thompson, CPA• William Upchurch, CPA• Michael Veneman, CPA• Anne Wells, CPA• Arthur Wissing, CPA• David Wyatt, CPA

iN KiNd giftS• Becker Professional Education• Brown-Forman Paid Summer

Internships for Minorities• Deloitte & Touche LLP• John Hawkins, CPA


40

Summer Golf Scramble raises funds for Foundation

The KyCPA Educational Foundation Golf Scramble was held Aug. 24 at the UofL Golf

Club on what was an unseasonably mild and allover beautiful day. Many thanks to the golfers and sponsors who supported the event and helped raise funds for KyCPA Educational Foundation scholarships.

Event sponsors included: Accounting Principals/Parker Lynch, Anthem, Becker, CNA Professional Liability/Schwartz Insurance Group, CPA Mutual, Campbell Myers

Perfect weather for golf

& Rutledge, First Lexington, Henderman Jessee & Company CPAs, Jones Nale & Mattingly, Miller Mayer Sullivan & Stevens, MCM CPAs & Advisors, and National Insurance Agency.

Scramble and contest winners:1st place team:Jonathan Belcher, Brent Billingsly, Skip Campbell and Joe Rutledge2nd place team:Melissa Buddeke, Nick George, Bill Jessee, Todd LamkinLongest drive, women: Paula HansonClosest to the pin #8: Nick GeorgeLongest putt: David O’Bryan

The annual KyCPA College Leadership Institute took place Aug. 8 at the Gratzer Education

Center, Louisville. Twenty-one students from nine colleges and universities across the region completed the program. Each of the participants was nominated and recommended by an accounting educator.

This free, one-day event for college accounting majors helps students develop professional skills and identifies future leaders in the CPA profession. Sessions were designed to provide tools needed to cultivate effective communication and networking skills, and help students perform well during job interviews.

The program concluded with a Meet the Firms reception. The participating firms included: • BKD• Dean Dorton• Jones Nale & Mattingly• Crowe Horwath• KPMG• PricewaterhouseCoopers

Congratulations to the following student participants for completing the KyCPA College Leadership Institute: • James Bramer, Thomas More College• Drew Brueggeman, University of Kentucky• Blake Chidester, Transylvania University• Deziree Cook, University of Louisville• Nicholas DiLuca, University of Louisville• Katherine Dubin, University of Kentucky• Aaron DuVall, University of Louisville• Connor Gingrich, University of Kentucky• Bina K C Khatri, Indiana University Southeast• Megan Kelly, University of Kentucky• Alyssa Kennedy, Georgetown College• Elizabeth Kuhl, University of Louisville• Zachary Meikle, Transylvania University• Robert Muntis, University of Louisville• Ladybird Nwogu, Indiana University Southeast• Rosemary Osbourn, University of Kentucky• Peter Riefstahl, Indiana University Southeast• Andrew Roberts, Brescia University• Randall Smith, Alice Lloyd College• Drew Ulinski, University of Louisville• Rebecca Zimberg, Western Kentucky University

The Kentucky CPA Journal / Issue 5 2015 Accounting careers

42

KyCPA College Leadership Institute


kycpa.org 43

Thank you to the volunteers and presenters who shared their time and expertise with the group, including:• Bob Patterson of Patterson &

Co., Louisville• Ashley Penn of BKD,

Louisville• Dave Calzi of Ernst & Young,

Louisville• Aaron Miller of Leadership

Louisville, Louisville• Brittany Neaves of Dean

Dorton, Lexington• Paige Hincker of University

of Louisville’s Ulmer Career Management Center, Louisville

• Krystal Bronson of BKD, Louisville

• Julie Long of Extell Development Company, Louisville

• Mimi Kelly of LG&E & KU Energy, Louisville

• Scott Grant of Henderman Jessee & Co., Louisville

• Rebekah Michael of Kelley Galloway Smith Goolsby, Ashland

• Madgel Miller of Cloyd & Assoc., London

• Gosia Gralak of PricewaterhouseCoopers, Louisville

Thank you, sponsors, including:• MCM CPAs & Advisors• KPMG• Dean Dorton• BKD• Baldwin CPAs• Deloitte & Touche• Crowe Horwath• PricewaterhouseCoopers• Becker Professional Education

For more information about the 2016 College Leadership Institute, contact Samantha Bourque at [email protected].

Scholarship applications accepted Dec. 1 - Feb. 19Accounting students attending a Kentucky college or university are eligible to apply for KyCPA Educational Foundation college scholarships. Scholarship levels range between $1,000 and $2,500. Applications will be accepted Dec. 1, 2015 through Feb. 19, 2016. More info: kycpa.org or contact Vicki Blair at [email protected].

2015 Scholarship receipient Cameron Sallee (right) and Past President Kevin Schwartz.


44

The University of Pikeville and Bellarmine University teams became co-champions at

the 2015 PEAK Championship on April 24 at the Marriott Downtown in Louisville. Promote and Encourage Accounting in Kentucky (PEAK) is a Jeopardy-style quiz show competition that tests participants’ knowledge of the accounting profession, as well as those tough questions that appear on the Uniform CPA Exam. The competition is sponsored and coordinated by KyCPA.

Teams of college and university accounting students from around the state annually compete for a traveling trophy and bragging rights – as well as $1,000 KyCPA Educational Foundation scholarships, which are awarded to each member of the winning team. Becker Professional Education partners with KyCPA to prepare the teams for the competition and provides the contest questions.

2015 PEAK teamsCo-champions: University of Pikeville and Bellarmine University2nd place: Berea College3rd place: Eastern Kentucky University

Other participating teams included:• Campbellsville University• Lindsey Wilson College• Morehead State University• Northern Kentucky University• Transylvania University• University of the Cumberlands• Western Kentucky University

2015 PEAK Competition Co-Champions

2016 college Peak teams forming now!For more information about PEAK and how your school can form a team, contact Becky Ackerman at 502.736.1369 or [email protected].

Professional Ethics for CPAs

The Kentucky CPA Journal / Issue 5 2015 Ethics

kycpa.org 45

Committee welcomes questions

Welcome to the first column of Professional Ethics for CPAs. We hope this new section of

The Kentucky CPA Journal will be a regular part of your professional reading.

Who, you ask, is “we?”We are the KyCPA Professional Ethics

Committee. We are volunteers - all CPAs - from across the state. Combined, we work in public accounting and in industry. As a committee, we focus primarily in two areas - enforcement and education. The grounds for both are found in our Code of Professional conduct: enforcement embraces the concept of self-regulation (we monitor our

own members, so outside agencies don’t have to) and education embraces the concepts of technical excellence and professional competence.

In columns that follow, we hope to include useful reminders and thought-provoking examples of ethical dilemmas. We may discuss some public examples of ethical lapses, and we will share our thoughts on important trends – both good and bad!

If you have ethics-related questions or observations that you would be willing to share (either named or anonymous), please send them to our committee via Darlene Zibart at the Society, [email protected].

We are passionate about our service on this committee, and we are thankful for the opportunity to share our experiences and expertise with KyCPA members.

Need your Ethics CPE?In addition to the Annual Ethics Update seminars and on-site Ethics training options (see p. 20 for details), KyCPA offers more than 60 online Ethics courses from November through the end of the year (yes, even on New Year’s Eve!). More info and registration are available at kycpa.org or call our CPE department at 502.266.5272.

Nov. 2 Ethics in the Real WorldNov. 3 Ethics - Information Privacy Regulation OverviewNov. 3 Resolving Ethical ConflictsNov. 4 Ex-CPA Ex-Partner Chuck Gallagher Shares Inside Secrets of His DownfallNov. 4 Ethics: Interview with Past NASBA Chair Gaylen HansenNov. 5 Ethics Interview: Heinz Ickert CFE Exposes CPA’s MisconductNov. 6 Ethics in the Real WorldNov. 9 Ethics of Risk ManagementNov. 9 Ethics Distortions, Deceptions & Biases: How They Influence Risk ManagementNov. 9 Ethics: Crazy Eddie CFO and Ex-CPA Sam Antar Shows You How He Cooked the BooksNov. 10 Power, Influence and EthicsNov. 10 Ethical Dilemmas and War Stories: What Would YOU Do?Nov. 10 Revised AICPA Code of Professional ConductNov. 11 Interview with Ex Big-4 Partner Scott London on his Ethics Violations and Prison ExperienceNov. 12 Resolving Ethical Conflicts

Nov. 13 The Trustworthy Leader: Ethics and TrustNov. 14 Revised AICPA Code of Professional ConductNov. 16 New Ethics Requirements with Past NASBA Chair Gaylen HansenNov. 17 Ethics Interview: Heinz Ickert CFE Exposes CPA’s MisconductNov. 19 Ethics in the Real WorldNov. 20 Ethics and Trust: Become a Trustworthy LeaderNov. 20 Ethics from a Business PerspectiveNov. 23 Power, Influence and EthicsNov. 23 Tax Practice Ethics: Best PracticesNov. 24 Ethics: Crazy Eddie CFO and Ex-CPA Sam Antar Shows You How He Cooked the BooksNov. 24 Resolving Ethical ConflictsNov. 24 Accountancy Laws, Ethics, Taxes and Financial Reporting: Regulatory ReviewNov. 24 New Ethics Requirements with Past NASBA Chair Gaylen HansenNov. 24 Ethics of Risk ManagementNov. 28 Ethics from a Business PerspectiveNov. 30 The Trustworthy Leader: Ethics and TrustNov. 30 The Ethics of Power and Influence in OrganizationsContinued on p. 47

By Samantha White

Editor’s note: This article originally appeared in CGMA Magazine (CGMA.org) ©2015, AICPA. Used by permission.

There is growing consensus that weaknesses in corporate culture have been a significant factor

in a range of corporate and institutional scandals, so it is not surprising that culture has come under increasing scrutiny. Regulators have treated it as a high priority, and boards are increasingly keen to embed a sound corporate culture in their organization.

It is clear that the issue poses a significant risk that cannot be ignored simply because it is difficult to measure, said Peter Montagnon, author of a new report on the subject.

Based on interviews with audit committee chairs, heads of internal audit, and heads of ethics and compliance departments, the Institute of Business Ethics briefing looks into what internal audit practitioners can do to evaluate whether an organization’s culture meets its stated ethical standards and values. The briefing suggests that the function can play a central role in identifying weaknesses of corporate culture and where hidden risks lie.

Given that the department’s work involves observing and reporting on behavior, internal auditors are also well-placed to join the dots to identify the root cause of any problems. Through its work on assurance, internal audit can help evaluate the health of the company culture and provide a key line of defense against risks.

RecommendationsThere was a consensus amongst the practitioners

interviewed for the report that there is more mileage to be had in looking at the cultural aspects of what is being audited than in separating out culture itself. “Even if it cannot be measured precisely,” the report said, “it pays to look at the way culture within the firm affects the things that are being measured.”

The report outlines some of the indicators that can be used. The objectives that are set and how they are communicated throughout the business unit are a critical indicator of culture, as is the way people respond to basic frameworks. Indicators of a flawed culture include the failure of employees to complete relevant training, or late or grudging reporting of information.

“Late reporting of a control failure or a hostile response to a critical internal audit report doesn’t say anything immediately obvious about ethics, but it does indicate a state of mind which will readily sweep unpalatable things under the carpet,” Montagnon said at the London launch of the report this summer.

“And even this is therefore a good indicator of culture for internal auditors and boards, and often a pointer to where hidden risks lie.

“The task for them is not so much to grade the overall culture, but more to identify the particular parts of the organization where the culture is weak, whether because divisional management is poor or, perhaps, because an acquisition has not been very well-integrated.

“When something goes wrong, most investigations simply lead to the introduction of new bureaucratic processes designed to prevent a recurrence,” Montagnon said. “However, asking about the root causes of a problem may point towards a different solution. This means looking at different things, for example, how targets are set, how incentives are communicated, and how appraisals are conducted.”

Though it is the role of an organization’s leadership to set the culture, internal auditors can: • Help boards answer the question, “Are we living

up to our values?” • Evaluate whether the corporate culture supports

the organization’s purpose and business model. • Ask why something has happened, get to the

root cause, and seek to correct it, rather than simply identify what has happened.

How internal audit can support culture


46

How boards can support this work• To enable the internal audit

department to carry out this role effectively, a mandate from both senior management and the board is needed, with the latter usually taking the form of a reporting line and a close working relationship with the audit committee chair.

• Audit committee chairs need to be firm in their commitment to using internal audit to examine culture and be willing to listen to the concerns raised, even when these are based more on gut feeling than evidence.

• An environment in which people are encouraged to speak up so that mistakes can be corrected rather than tempted to cover them up out of fear of punishment will also support this work.

The skillset requiredMontagnon notes that internal auditors have to strike a balance between being perceived by other employees as policemen and adopting a more consultative role that may compromise their objective investigative status. Ultimately, the report says, internal auditors can be important agents for positive change.

About the author: Samantha White ([email protected]) is a CGMA Magazine senior editor.


kycpa.org 47

Ethics continued

Dec. 1 Solve Ethical Conflicts: Do the Right Thing and Keep Your JobDec. 2 Ethics Update for CPAsDec. 2 Ethics in the Real WorldDec. 2 New Ethics Requirements with Past NASBA Chair Gaylen HansenDec. 2 Ex-CPA Ex-Partner Chuck Gallagher Shares Inside Secrets of His DownfallDec. 3 Resolving Ethical ConflictsDec. 3 Ethics for Tax Professionals (EFTP)Dec. 3 Ethics from a Business PerspectiveDec. 8 Interview with Ex Big-4 Partner Scott London on his Ethics Violations and Prison ExperienceDec. 8 Ethics in the Real WorldDec. 8 Ethics from a Business PerspectiveDec. 10 Ethics - Information Privacy Regulation OverviewDec. 11 Ethics of Risk ManagementDec. 11 Power, Influence and EthicsDec. 11 Revised AICPA Code of Professional ConductDec. 14 Resolving Ethical ConflictsDec. 15 The Trustworthy Leader: Ethics and TrustDec. 17 Ethics Interview: Heinz Ickert CFE Exposes CPA’s MisconductDec. 19 Ethics - Information Privacy Regulation Overview

Dec. 19 Ethics of Risk ManagementDec. 22 Ethics in the Real WorldDec. 22 Revised AICPA Code of Professional ConductDec. 28 Ethics: Interview with Past NASBA Chair Gaylen HansenDec. 29 Power, Influence and EthicsDec. 29 Corporate Ethics Cases: Solve Real World DilemmasDec. 29 Ethics Distortions, Deceptions & Biases: How They Influence Risk ManagementDec. 29 Ethics: Crazy Eddie CFO and Ex-CPA Sam Antar Shows You How He Cooked the BooksDec. 29 Resolving Ethical ConflictsDec. 29 Interview with Ex Big-4 Partner Scott London on his Ethics Violations and Prison ExperienceDec. 30 Ethics - Information Privacy Regulation OverviewDec. 31 The Trustworthy Leader: Ethics and TrustDec. 31 The Ethics of Power and Influence in OrganizationsDec. 31 Ethics - Information Privacy Regulation OverviewDec. 31 Tax Practice Ethics: Best Practices

www.accountingpracticesales.com

Contact Mark W. Hause:

e-mail: [email protected]: 541-465-9410

877-345-7722

KEEPUS ONYOURRADAR

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Keep us on your radar. We will be there for you and your family when the time is right!

www.accountingpracticesales.com

The Kentucky CPA Journal / Issue 5 2015 Society

kycpa.org 49

The following firms and

businesses ensure all eligible CPA employees are members of KyCPA. This demonstrates their commitment to the profession, to the Society’s high ethical standards and a commitment to life-long learning. We appreciate their support of KyCPA and its mission.

The information below is verified annually at the time of membership renewals. Inclusion on this list is an opt-in basis. If your organization would like to join the list of 100% Champions, or you have questions about the program, please contact Heather Hibbs at [email protected] or 502.736.1368.

We make every effort to ensure the accuracy of this list. If you have voluntarily notified us of your 100% Champion status and we have left your name off this list, please let us know immediately, by contacting Heather Hibbs at [email protected].

KyCPA honors 100% Champions

100% Champions as of Sept. 25

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• Addington & Mills, PSC, Lexington• Alexander & Company, PSC, Owensboro• Alexander Toney & Knight, PLLC, Madisonville• Alford Nance & Jones, LLP, Madisonville• Anderson Bryant Lasky & Winslow, PSC, Louisville• Andrews Tackett & Associates, PSC, Flatwoods• Anneken Huey & Moser, PLLC, Ft. Wright• Anneken Huey & Moser, PLLC, Ft. Thomas• Baldwin CPAs, PLLC, Maysville• Baldwin CPAs, PLLC, Louisville• Baldwin CPAs, PLLC, Richmond• Baldwin CPAs, PLLC, Flemingsburg• Bargo Mills & Associates, PLLC, Barbourville• Bennett & Company, CPAs, Louisville• Berry Kington & Utley, PSC, Madisonville• Blandford & McCubbins, CPAs, PLLC, Bardstown

• Blue & Company, LLC - Commercial, Louisville• Blue & Company, LLC, Lexington• Bowden & Wood, CPAs, Louisville• Bramel & Ackley, PSC, Ft. Wright• Bruce & Company, PSC, Madisonville• Buckles Travis VanMeter & Hart, PLLC, Leitchfield• Buetow, Lemastus & Dick PLLC, Louisville• Buschermohle & Company, PSC, Louisville• Calhoun & Company, PLLC, Hopkinsville• Campbell Myers & Rutledge, Glasgow• Carr Riggs & Ingram, LLC, Bowling Green• Carr Riggs & Ingram, LLC, Russellville• Charles T. Mitchell Company, Frankfort• Christian Sturgeon & Associates, PSC, London• Compton Kottke & Associates, PSC, Louisville• Craft Noble & Company, PLLC, Richmond• Crowe Horwath, LLP, Louisville• Crowe Horwath, LLP, Lexington• DMLO CPAs, Louisville• Donald & Company, PSC, Lexington• Duncan Smith & Stilz, PSC, Lexington• Ecken & Smith, PSC, Louisville• Evans Harville Atwell & Company, CPAs, Somerset• Faulkner King & Wenz, PSC, Mt. Sterling• Fister Williams & Oberlander PLLC, Lexington• Flynn Accounting, LLC, Jeffersonville, Ind.• Fowler Durham CPAs and Advisors, PLLC,

Munfordville• Franklin Certified Public Accountants, Madisonville• Freibert Bigg, PLLC, Louisville• The Fyffe Jones Group, Ashland• Garstka Gander & Crabb, PSC, Lexington• Shirley Gifford, CPA, Ferguson• Grover Greweling & Company, PSC, Louisville• Hamilton Thomas & Company, PLLC, Louisville• Harding Shymanski & Company, PSC, Louisville• Harris & Associates PSC, Somerset• Hoover and Morris, PLLC, Livermore• Jaynes and Jaynes, PSC, Richmond• John T. Lane & Associates, LLC, Mt. Sterling• Jones Nale & Mattingly, PLC, Louisville• Kauffmann & Associates, CPAs, Louisville• Kem Duguid & Associates, PSC, Hopkinsville• Kemper CPA Group LLP, Paducah• Kemper CPA Group LLP, Henderson• Louis T. Roth & Company, PLLC, Louisville• Marr Miller & Myers PSC, Corbin• MCM CPAs & Advisors, LLP, Cincinnati• MCM CPAs & Advisors, LLP, Louisville

Continued on p. 50

Where members connect, communicate, collaborate.

KyCPA Community

50


• MCM CPAs & Advisors, LLP, Lexington

• Miller Mayer Sullivan & Stevens, Lexington

• Moffitt & Company, PLLC, Paducah

• Monroe Shine & Company, Inc., New Albany, Ind.

• Monroe Shine & Company, Inc., Louisville

• Morgan-Franklin, LLC, West Liberty

• Munninghoff Lange & Company, CPAs, Covington

• Myriad CPA Group, LLC, Henderson

• Myriad CPA Group, LLC, Owensboro

• Tony Page, CPA, Murray• Patterson & Company, PLLC,

Louisville• Peck & Milford, Paducah• RAAM Global Energy Company,

Lexington

• Raisor Zapp & Woods, PSC, Carrollton

• Retirement Management Services, LLC, Louisville

• Vickie C. Richardson, PSC, Mt. Sterling

• Riney Hancock CPAs, PSC, Owensboro

• Riney Hancock CPAs, PSC, Evansville, Ind.

• Robinson Hughes & Christopher, PSC, Danville

• Rueff and Associates, PLC, Louisville

• Smith & Company CPAs, PLLC, Bardstown

• Southern Star Central Gas Pipeline, Owensboro

• Strothman & Company, Louisville

• Stuedle Spears & Company, PSC, Louisville

• Sullivan & Curry, LLP, Greenville

• Summit Stragetic Advisors LLC, Louisville

• Tallent & Associates, CPA, Louisville

• Taylor Polson & Company, PSC, Glasgow

• TECO Coal, Corbin• Van Gorder Walker & Company,

Erlanger• Verbeck & Kaleher, CPAs,

Taylorsville• VonLehman & Co Inc, Cincinnati• Welenken CPAs, Louisville• Wendell Foster’s Campus for

Developmental Disabilities, Owensboro

• Williams Williams & Lentz LLP, Paducah

• Wise Buckner Sprowles & Associates, Campbellsville

100% Champions continued

An online community just for you! Check out KyCPA Community, an online gathering place exclusively for KyCPA members. Within the KyCPA Community, members may form discussion groups on any topic - ask questions, share ideas and news, and discuss the latest developments in the profession and your area of interest. It’s kind of like the old listservs, combined with online forums and social media. Check it out and get involved at kycpa.org.

KyCPA presented the 2015 CPA Champion Award to Rep. Tommy Thompson of Owensboro Aug. 19

during KyCPA’s Professional Issues Update program in Owensboro.

Rep. Thompson was recognized for sponsoring and championing HB361 and HB399 during the 2015 General Assembly. Known as the Taxpayer Rights Enhancement Act, HB361 and HB399 would have strengthened Kentucky’s existing Taxpayer Bill of Rights, required more guidance and taxpayer education, and made changes to speed up the resolution of tax disputes.

“Although we ultimately couldn’t get the bill over the finish line in a very compressed session, Rep. Thompson was instrumental in bringing significant attention to the issue,” said Penny Gold, KyCPA CEO.

Filing the legislation has prompted ongoing discussions between the state and KyCPA to improve tax compliance processes.

Rep. Thompson, the president of Thompson Homes, Inc. who represents the 14th district in western Kentucky, has served in the Kentucky House

of Representatives since 2003. Among his numerous committee assignments, he serves on the Banking & Insurance and Economic Development committees, as well as the Public Pension Oversight Board.

Thompson honored: CPA Champion Award

Rep. Tommy Thompson, center, accepts the 2015 CPA Champion Award from Kentucky Society of CPAs Government Affairs Director Charles George and CEO Penny Gold.


kycpa.org 51

KyCPA’s Emerging Professionals Task Force recently hosted a networking event at New Riff Distilling in Newport. Members of the Young Lawyers Sections of both the Northern Kentucky Bar Association and the Cincinnati Bar Association joined KyCPA members on a tour of the distillery. If you are an Emerging Professional - a newly licensed CPA under age 40 - and want to join us for fun events in the future, contact Samantha Bourque at [email protected].

Emerging Professionals networking event

Classified ads: Include businesses for sale or volunteer, nonprofit board positions; 50-75 words, max. Cost is $50 for KyCPA members; $100 for non-members. Email Lorri Malone at [email protected] and include your billing information. Employment ads: Information about posting your resume or placing free employment ads online may be found at KyCPA’s new Career Center, careers.kycpa.org.

Classifieds

Selling your CPA firm in 2015? Knowing what your firm is worth is the first step. Contact us TODAY to receive a free no-obligation market analysis of your firm. Accounting Biz Brokers has been offering personalized business brokerage services to CPAs for over 10 years. We know your market and our process is strictly confidential. Visit us at www.AccountingBizBrokers.com. Kathy Brents, CPA, CBI. Cell 501.514.4928 Office 866.260.2793.Email: [email protected].

CPA Practice Central Kentucky for Sale. CPA practice in Central Kentucky for sale. $700,000k annual gross revenue with approximately 1000 clients and handles the filing of approximately1400 tax returns per year. The sale of this practice presents an opportunity to acquire a book of clients with trained staff and a short-term lease. Please contact John Olmstead, by e-mail at [email protected] for more information.

Public accountingP. Harrison Price has joined the

Owensboro firm Riney Hancock as a supervisor in the audit and assurance

services division.

Brent Smith was recently elected director of tax services in Crowe Horwath’s Louisville office.

Travis C. Frick has been promoted to

partner at the Louisville firm Jones, Nale & Mattingly.

Members in motionFirm newsMCM CPAs & Advisors has been ranked No. 87 on INSIDE Public Accounting’s Top 100 Firm rankings for the second year in a row. The IPA 100, as ranked by net revenue, consists of the Big 4 accounting firms and 96 national, regional and local firms. The MCM has offices in Louisville, Lexington and Frankfort; Jeffersonville, Ind.; and Cincinnati, Ohio.

52

The Kentucky CPA Journal / Issue 5 2015 Members

services with the remainder from investment services. The Seller owns the building which will make transition easy for any interested buyer. Visit www.accountingpracticesales.com or call 877.345.7722.

(KY 1012) Laurel County Area Tax Practice For Sale: This practice is exclusively a tax practice with a heavy client load during tax season with a limited number of extensions for the off season. The firm is almost exclusively a one man show but does have a contract employee to assist with return preparation. The per hour realization rate is excellent due to being able to complete many returns with little professional time. This practice would fit any number of practice owners who seek extra tax season revenue or for a first time owner with close to 70% of revenues returning to the owner. With generous owner financing available for qualified buyers this firm is an ideal opportunity. Visit www.accountingpracticesales.com or call 877.345.7722.

East End Louisville Area CPA Firm Looking for Growth Opportunities. We are looking for retirement-minded CPAs and firms looking for an exit strategy over the next few years. All size of practices are desirable. Let us help you preserve the long term value you have created and continue the excellent service to your clients. Reply in confidence to Blind Box 1, KyCPA, 1735 Alliant Ave., Louisville, KY 40299. Considering Selling Your Practice? Consider all of your options. We do the work to sell your practice by finding qualified buyers that provide financial security coupled with the utmost in confidentiality. We have buyers actively seeking practices. Visit our web site at www.accountingpracticesales.com or call 877.345.7722. Accounting Practice Sales, we make dreams happen!

(KY 1011) Western Kentucky Tax & Investment Services Practice For Sale: The Seller of this tax and investment services practice is ready to sell and pursue other interests. The revenues are approx. 10% from write-up services, 60% from tax

StudentFadi S. Alhammuri, Northern Kentucky UniversityWasif Azmat, Harvard UniversityAngela Muncie Bartley, Spalding UniversityJames A. Bramer, Thomas More CollegeAaron C. Chandler, University of Alabama - BirminghamDeziree Nicole Cook, University of LouisvilleKatherine Leigh Dubin, University of KentuckyCameron Ferrell, Indiana University SoutheastChristina Gazaway, University of LouisvilleCatherine M. Leisy, Indiana Wesleyan UniversityHaley Hamilton, Western Kentucky UniversityTyler Wade Harris, University of KentuckyLaura Hochstetler, Western Governors UniversityBina K. C. Khatri, Indiana University SoutheastBrittany Renee McKnight, Morehead State UniversityZachary Mark Meikle, Transylvania UniversityJeannie Noe, McKendree UniversityTamara Sue Shaffer, University of LouisvilleRandall Smith, Alice Lloyd CollegeLaura Sue Stewart, Morehead State UniversityEstelle Withrow, Paris

Non-CPA Firm AdministratorDeena Bradley, Magnolia Bank, HodgenvilleRobyn R. Fields, Sammy K. Lee, PSC, BereaSusan P. Haehlen, Barr Anderson & Roberts, PSC, LexingtonSonya J. Hale, Kelley Galloway Smith Goolsby, PSC, AshlandJeanine Louw, VonLehman & Company, Inc., Ft. MitchellStephanie Milldrum, Bramel & Ackley, PSC, Ft. WrightCheryl D. Nally, Kemper CPA Group, LLP, HendersonCheryl Linda Owen, Miller Mayer Sullivan & Stevens, LLP, LexingtonLenora L. Rather, RFH, PLLC, Lexington

Traci W. Tyler, Myriad CPA Group, LLC, Henderson

Non-CPA AssociateSarah E. Adams, Jones Nale & Mattingly, PLC, LouisvilleJesse Ayers, VonLehman & Company, Inc., Ft. MitchellAlex Goffner, Heartland Payment Systems, Jeffersonville, Ind.Stacy L. Griffith, Kelley Galloway Smith Goolsby, PSC, AshlandAshlyn M. Herke, Kem Duguid & Associates, PSC, HopinsvilleBenjamin Michael Hoseus, Institute for Lean Studies, Viewbank, Victoria, AustraliaNathan T. Wilhite, Welch & Company, CPAs, PSC, GeorgetownKasey Lynn Unterreiner, Freibert Bigg, PLLC, Louisville

RegularCathryn Ellen Allison, Barr Anderson & Roberts, PSC, LexingtonSheryl L. Ball, Texas Roadhouse, Inc., LouisvilleRyann Ashley Boyd, BKD, LLP, LouisvilleTammy J. Brown, City of Frankfort, FrankfortErin Melissa Bukowski, Citizens Union Bank, ShelbyvilleErjola Causholli, Dean Dorton, PLLC, LexingtonAlex Conrad, Barr Anderson & Roberts, PSC, LexingtonKimberly Nicole Coomer, Louis T. Roth & Company, PLLC, LouisvilleYlonda D. Davis, Dant Clayton Corporation, LouisvilleJessica H. Edwards, ZirMed, LouisvilleMark Edward Eshenbaugh, Trover Solutions, Inc., LouisvilleMichael W. Gerichs, Humana, Inc., LouisvillePhilip M. Gonzales, Tichenor & Associates, LLP, LouisvilleNathaniel Goodson, Crowe Horwath, LLP, LouisvilleRyan Earl Gries, Kemper CPA Group, LLP, HendersonNicholas James Hamilton, Kindred Healthcare, Inc.David N. Henke, ZirMed, LouisvilleLindsey Flowers Herr, PricewaterhouseCoopers, LLP, Louisville

Robert Addison Hobbs, Crowe Horwath, LLP, LouisvilleBeth L. Holmes, Kelley Galloway Smith Goolsby, PSCSharon A. Jackson, Barr Anderson & Roberts, PSC, LexingtonManoj Kumar Jain, New Albany, Ind.Julia L. Keller, Buetow LeMastus & Dick, PLLC, LouisvilleStephanie D. Kellerman, King + Company, PSC, LouisvilleTodd Anthony Klimek, PricewaterhouseCoopers, LLP, LouisvilleDrew B. Meyer, Kemper CPA Group, LLP, HendersonGrace Ann Miller, BKD, LLP, LouisvilleKaitlyn H. Moore, Don Moore Chevrolet, OwensboroPatrick T. Mouser, DMLO, CPAs, LouisvilleMary C. Mulcahy, Ebelhar Whitehead, PLLC, OwensboroThomas E. Pavlik, Enderle & Company, PLLC, LexingtonCharles B. Powell, KentuckyOne Health, LouisvilleJ. Todd Renner, Woodford Financial, PLLC, VersaillesThomas Stephen Reynolds, III, ZirMed, LouisvilleCalvin Keith Riney, PricewaterhouseCoopers, LLP, LouisvilleKevin M. Romenesko, Faulkner King & Wenz, PSC, Mt. SterlingJustin Kyle Shelman, Dean Dorton, PLLC, LouisvilleCharles E. Shelton, Big Rivers Electric Corporation, HendersonSherill Hume Simon, Simon CPA & Company, PSC, LouisvilleClint Snodgrass, Western Kentucky University Foundation, Bowling GreenKristen Leigh Starck, Extell Financial Services, LouisvilleLauren Sturgeon, VonLehman & Company, Inc., Ft. MitchellAlma Facto White, JPMorgan Chase, Louisville

Resolution of RespectJohn M. DeAngelis, York Neel & Company, LLP, HopkinsvilleJeffery N. Hatfield, Collins & Love, PikevilleKenneth E. Mayer, Miller Mayer Sullivan & Stevens, LLP, Lexington


kycpa.org 53

Welcome new members

He’s 28 and works as the in-charge accountant at

VonLehman & Company, Inc. in Fort Mitchell. He earned his undergrad in accounting and masters of accounting from the

University of Kentucky and is active on KyCPA’s Emerging

Professionals Committee. He and his wife, Emily, live in Edgewood, with 2-year-old Andrew and newborn Matthew, born in September.

“With your new skills, new opportunities will also arise.” -Aaron Bessler

KyCPA: What made you want to become a CPA? AB: I decided to get my accounting degree because I wanted to work in our family business that my dad runs and owns, but I wanted a business background. He encouraged me to go for my CPA, as I would be much more valuable working for him if I got my CPA license, but he always encouraged me that if I liked it and wanted to stay in public accounting, then it would be a great opportunity for me.I ended up really liking my job and the work atmosphere at my firm and decided that making partner instead of going to work in my family business was my goal.

KyCPA: You’re the father of a newborn, so tell us how you juggle deadlines and diapers? AB: It takes a lot of hard work and commitment for both. Luckily I have a great work/life balance due to

the flexibility of my firm. I am able to work remotely from home when I need to - and during busy season, I work a lot from home at night instead of being in the office. I am always home before my kids go to bed and get to spend time with them before getting back into my work for the night after they are asleep.

KyCPA: What do you like to do for fun?AB: My parents have a lake house on Lake Cumberland and my in-laws have a lake house on Elk Lake in Owenton, so I spend a good majority of my summer weekends on the lake. We boat, four wheel, and relax there. I also like to snow ski. I try to go out west on a ski trip once a year, with my dad and three brothers, if I can get away from work for a week.

KyCPA: The KyCPA Fall Awards Banquet is just around the corner and we’ll be welcoming newly-minted CPAs to the profession that night … what advice do you have for those just entering the profession?AB: Be patient. There is a lot of information to learn all at once. It takes a while to take it all in and adapt to each position you start in. Your skills will grow extremely fast, but it is overwhelming at times with how much you learn each and every week. With your new skills, new opportunities will also arise within your firm to take on more responsibility. Do not shy away from taking on more responsibility, as that is how you move your way up through your firm. Sometimes it does not come as fast as you would like, but your superiors know who is taking on more and not shying away from learning new things. In the end it will help your career growth even if the results aren’t immediately noticed.

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KyCPA member profile: Meet Aaron Bessler

By the watercooler

The Kentucky CPA Journal / Issue 5 2015 Watercooler

“We should all do something to right the wrongs we see and not just complain about them.” - Jacqueline Kennedy Onassis

“Our lives begin to end the day we become silent about things that matter.” - Martin Luther K ing Jr.

“You cannot escape the responsibility of tomorrow by evading it today.” - Abraham Lincoln

Halloween spending trends

Halloween falls on a Saturday this year and consumers are ready to celebrate, according to the National Retail Federation’s Halloween Consumer Spending Survey. More than 157 million Americans plan to

celebrate Halloween this year, with total spending expected to reach $6.9 billion.

Other stats from the survey revealed:• An estimated 68 million Americans will dress up this Halloween.• Another 20 million pet owners will dress up their pet. • Consumers plan to spend an average of $27.33 on costumes for the whole family, with overall consumer

spending on store-bought and homemade costumes expected to total $2.5 billion. • Most of the money spent on costumes will go for adult costumes at $1.2 billion, and $950 million for

children’s costumes.• Consumers will also shell out $350 million on costumes for pets. • More than 90 percent of Halloween shoppers will buy candy, at a cost totaling $2.1 billion.• Of the 44.8% planning to decorate the home or yard, the average person will spend $20.34, with total

spending expected to reach $1.9 billion. • Pinterest is a growing source of Halloween inspiration. The site continues to grow in popularity - especially

among Millennials - with those looking for costume inspiration at 13.3%, nearly double the amount who used the site for inspiration just three years ago (7.1%).

See the full article at http://bit.ly/1jbqpce.

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Neace Lukens is KyCPA’s official partner in health insuranceAnnual renewalsLook for your annual renewal notice starting in early October. Open enrollment Dec. 1, 2015 - Jan. 1, 2016

KyCPA member benefitNeace Lukens is KyCPA’s sole agency of record for your health insurance needs. We chose Neace Lukens to represent the Society’s membership regarding our group health and dental programs because we want the best and we are confident that you will receive great service from Neace Lukens. For more than 20 years, Neace Lukens has helped businesses in nearly every industry develop specialized solutions tailored for their needs, and it has done the same for the Kentucky Society of CPAs group health insurance program. Please contact any member of your Neace Lukens team if you have questions regarding your renewals or would like to enroll in the group health insurance plan.

Your Neace Lukens teamTom Schifano [email protected] (502.259.9217)Brenda Ballard [email protected] (502.259.9210)Cherisse Mitchell [email protected] (502.259.9244)

neacelukens.com

Working together to develop

solutions that fit your health and dental insurance

needs.

The Kentucky CPA Journal - Issue 5 2015

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