Experts Talk Economic, Healthcare, Tax and Legislative Outlook– May 24, 2013

Cohen & Company recently held its annual Executive Focal Point event, an intimate forum we’ve designed to connect business owners with their peers and to provide information they can use to strategize for their businesses’ success. This year’s speakers focused on the economy, healthcare, taxes and a legislative outlook of what may be coming down the pike from Washington. Below is just a glance at the insightful information provided to our audience.

Our Economy
Tom Haught of Sequoia Financial Group kicked off the morning with a global review of our economy and markets. Focusing in detail on the major sectors, Tom discussed the challenges and bright spots we are seeing on a national and global level that impact businesses in our own region. Overall, individuals are saving less and spending more, likely a result of the “wealth effect,” which comes into play when those who are not necessarily making more money feel wealthier and are more comfortable spending because their net worth has gone up (i.e., rising home values). In the jobs market, participation is down for younger individuals, who are finding it hard to get jobs right out of college, but is up for the 65+ demographic. On the housing front, supply remains at a good level and multi-family housing starts are up; mortgage rates are low but top credit scores still dictate who qualifies for a new mortgage; and delinquencies are still high and will continue to be an issue for banks. Corporate balance sheets overall are strong, and the manufacturing sector continues to expand — good news for Ohio. In particular, U.S. car manufacturers are gaining more market share. Inflation remains low and should remain so throughout 2013. Slow downs are occurring in the European and emerging markets as Europe’s recession continues. See important disclosures below.

The Healthcare Industry
Maria Shinn Bouck of Cohen Healthcare Consulting provided a unique look at the past, present and future of healthcare costs, including the impact of hospital and insurance coding practices, and healthcare reform. The U.S. healthcare industry has many challenges ahead: the transition to life under the Patient Protection and Affordable Care Act; a contraction in health providers; the burden on providers to spend less time with patients, record better data and yet provide better patient outcomes; and the unknown future of Medicare funding. Controlling costs will be a significant issue for the industry and should include fostering physician-patient relationships geared toward wellness and preventive medicine, and transparency of costs to employers.

Maria also discussed with business owners the need to be on the lookout for more solicitations from the industry, whether from hospitals, insurance companies, vendors, health systems, etc. Employers will receive more direct-to-employer claims on how they can lower their healthcare costs via programs such as wellness, onsite clinics, executive health, concierge medicine, tele-medicine and health hubs. She reminded owners to be proactive in reviewing the financial benefit of any health program to ensure they are offering employees the right tools to lower healthcare costs.

Legislative and Tax Forecasts
Matt Kadish of Kadish Hinkel & Weibel brought a Washington-insider’s view to the table in his presentation, telling the audience what’s likely to happen, or not happen, legislatively this year. While the Sequester and a rebounding economy is helping reduce the deficit, this double-edged sword also means Congress has little incentive to find a permanent resolution until we are in crisis mode again, likely to be late summer or early fall. In fact, Matt warned that the Sequester could become an annual extender-type occurrence if Republicans and Democrats can’t figure it out together. Taking a long look at the president’s budget proposal, Matt talked about the reality of Chained CPI replacing the standard CPI to compute inflation. Some say this is a “politically safe way to cut expenses and benefits, including Social Security.” And of course, Matt touched on tax reform. It may still be a long shot, as capitalism has created a complex tax code that accounts for a wide array of interests, but 2013 may be the best chance for tax reform since reform last occurred in 1986. If it’s going to happen, Matt noted that it will likely happen fast, around the end of the year when constituent polls show dissatisfaction with inactivity on this front. Matt advised business owners to act quickly if they are concerned about potential tax changes that may impact their business.

Mike Kolk of Cohen & Company brought the event home with a look at taxes and tax planning opportunities. He set the stage of our current tax environment, noting that state and local governments are underfunded so are chasing more revenue. They are particularly looking to out-of-state sources of revenue, such as the Internet sales tax contained in the Marketplace Fairness Act passed by the Senate and awaiting action by the House. IRS audits, penalties and transparency efforts are on the rise as is tax preparer regulations, and businesses are seeing more international cross-border activity and the need for more complex company structures.

Mike advised that business owners consider reviewing their status relative to positions previously taken on out-of-state nexus positions and evaluating amnesty programs that may be available. He also reviewed the portability option for a deceased spouse’s remaining estate tax exemption, and reminded everyone to pay attention to the 3.8% net investment surtax that can apply even if income tax is not owed (particularly looking at rents). Mike’s general planning comments included revisiting prior agendas, such as reviewing wills, and re-examining new ideas, such as IC-DISCs, R&D credits, succession planning and the use of C Corporations to potentially create savings. With recent regulatory changes, some ideas that may not have been applicable before may have more impact on a business today.

Sequoia Financial Group, LLC Disclosures: Past performance is not indicative of future performance and the value of investments and the income derived from them can go down as well as up. The views expressed in this document are based on current market conditions. They are subject to change without notice. Investment Advisory Services offered through Sequoia Financial Advisors, LLC, an SEC Registered Investment Advisor. Certain Third Party Money Management offered through ValMark Advisers, Inc. an SEC Registered Investment Advisor. Securities offered through ValMark Securities, Inc., Member FINRA, SIPC. 121 South Main Street, Suite 300 Akron, Ohio 44308 Phone (330) 375-9480. Certain insurance products offered through Sequoia Financial Insurance Agency, LLC. Sequoia Financial Group, LLC and related entities are separate entities from ValMark Securities, Inc. and ValMark Advisers, Inc. This document and the information contained herein is for information purposes only. It is not intended as, and does not constitute, an offer or solicitation for the purchase or sale of any financial instrument.

This communication is for information only, and any action should only be taken after a detailed review of the specific situation and appropriate consultation.

Notwithstanding that these materials do not constitute legal, accounting or other professional advice, as may be required by United States Treasury Regulations and IRS Circular 230, you should be advised that these materials are not intended or written to be used, and cannot be used by you or any other person, for the purpose of avoiding penalties that may be imposed under federal tax laws. No written statement contained in these materials may be used by any person to support the promotion or marketing of or to recommend any federal tax transaction(s) or matter(s) addressed in these materials, and any taxpayer should seek advice based on the taxpayer’s particular circumstances from an independent tax advisor with respect to any such federal tax transaction matter.