CPE Day Covers Overtime Rules, R&D Credit, Lease Accounting & More – June 28, 2016 by Tracy Monroe

Cohen & Company’s most recent CPE day for our clients covered a lot of great topics and gave information CFOs and financial staff can use back at the office. We’ve provided a brief synopsis below of each topic.

Susan Rodgers of Buckingham Doolittle and Burroughs spoke on the new Department of Labor overtime rules, which drastically change the determination of which white-collar workers are paid overtime. The rule will make it more difficult for employers to classify employees as exempt from overtime requirements. In fact, the DOL estimates that 4.1 million salaried workers will become eligible for overtime when they work more than 40 hours in a week.The changes also have a tax impact, increasing employers’ payroll tax liability. Find more detail on this development in “DOL’s Final Overtime Rule Brings Sweeping Changes.”

Josh Messina and Alex Schneider of Cohen & Company briefed the audience on the three changes for the research and development (R&D) tax credit effective for the 2016 tax year. The PATH Act (Protecting Americans from Tax Hikes) signed at the end of 2015 does three things: 1) makes the credit permanent, 2) allows for eligible small businesses to use the credit to offset the Alternative Minimum Tax (AMT) and 3) allows qualified small businesses to apply a portion of the R&D credit against the 6.2% payroll tax imposed on businesses’ wage payments to employees. All of these are positive changes for business owners and could open up many new opportunities. Read more in “R&D Tax Credit: 3 Changes That May Impact You.”

Mike Meloy of Involta discussed data security in today’s vulnerable business environment. With security breaches always in the public eye, any breach in customer data could result in public controversy and financial loss for a company. Mike suggested businesses use a common sense, basic approach to security — monitor, monitor, monitor. Keep a watchful eye on everything inside and outside of your company; train employees to conduct safe practices, such as changing passwords and not clicking on links in emails that seem questionable; hold internal IT staff and external vendors accountable; have repeatable processes in place, particularly regarding using the cloud and personal devices; stay current on all software patches on all devices; and have a documented architecture in place. Bottom line: don’t make assumptions when it comes to security, start by putting your security efforts (and dollars) where your major revenue comes from, and know that you should always be working towards a secure environment. New risks are being created every day. Mike’s message was to learn from past mistakes, and try to make things better in the future.

Brian Fiedler of Cohen & Company shared details on the Financial Accounting Standards Board’s (FASB’s) long-awaited update that revises the proper treatment of leases under U.S. Generally Accepted Accounting Principles (GAAP). Accounting Standards Update (ASU) No. 2016-02, Leases (Topic 842), will affect companies that lease real estate, vehicles, construction and manufacturing equipment, and other assets. The standard requires these businesses to recognize most leases on their balance sheets, potentially inflating their reported assets and liabilities. Find more detail in “New Accounting Standard Change Lease Reporting on Financial Statements.”

Ray Polantz of Cohen & Company gave attendees an update on a host of international tax issues, highlighting the latest headlines, including corporate inversions, why companies are inverting and the legality and ultimate tax impact; the Panama Papers; and the Base Erosion and Profit Shifting (BEPS) initiative. Ray also focused on international issues affecting private companies, such as foreign tax credit utilization; accidental permanent establishment; and tax information reporting compliance, including FBAR filings and related Form 8938.

Tim O’Connor and Glynis Priester of Wells Fargo presented on the topic of managing transactional risk through insurance, namely representations and warranties insurance as well as environmental risk insurance. The former facilitates M&A and other business combinations by transferring risk from a buyer or seller to a third-party insurer. If there is a breach in representation and warranties, such as seller fraud, the insurance protects the policyholder from loss and acts as a more secure financial backstop for everyone involved. Tim pointed out that while the policy is attractive to private equity firms for protection reasons, it can also add value to a buyer’s bid early on in the transaction process. For environmental risk, particularly pollution legal liability, this specific insurance product is used in transactions to replace indemnifications, supplement them or satisfy lenders, since basic insurance usually doesn’t cover environmental liabilities. The policy protects buyers and sellers from financial loss due to unknown clean-up costs on and off site and within the building — mold, buried chemicals, unknown storage tanks, and even nuclear or biological terrorism. Glynis shared that the policy also helps with liability costs, e.g., if an individual or even a neighboring business is affected by mold or other contaminants from the policyholder’s building. Regardless of the type of transaction, once it’s closed the properties and other liabilities now become the buyer’s responsibility. Evaluating options for these and other insurance policies is something to put on the checklist early on in the transaction process.

We sincerely thank all of our speakers and attendees for another great program. See you in the fall!

We want to hear from you! We encourage you to comment below on this blog post, share it on social media or contact Tracy Monroe at tmonroe@cohencpa.com or a member of your service team for further discussion.

Cohen & Company is not rendering legal, accounting or other professional advice. Any action taken based on information in this blog should be taken only after a detailed review of the specific facts and circumstances.