Cleveland Tax Accountant

Click here to view Part 1 of our series and learn more about the stock option landscape or Part 2 to learn more about the accounting and tax ramifications of issuing stock options.

What To Do?

As discussed above, there are significant risks that a company brings upon itself if it decides to issue stock options without properly valuing the options and the equity of the company. Rather than issuing stock options, if a company wants to offer an employee the opportunity to obtain an ownership interest, the most efficient and “clean” method may be to allow the employee to purchase shares from the company or from existing owners. There is no valuation requirement in this case (unless a party wants to hire an expert to ensure that they the transaction price is fair and reasonable) which also eliminates the out-of-pocket cost for the employer. In fact, a business actually recognizes a cash inflow when an employee purchases shares directly from the company. 

I am a valuation expert and I directly benefit from work associated with the valuation of stock options, so why am I telling you to consider alternative routes of compensation? Too often, the companies that issue stock options without having them professionally valued are the same companies that will fight against having their options valued at all due to the cost associated with the valuation. I simply want to spread awareness that there are other avenues of compensating employees and giving them opportunities for equity ownership that may be more cost efficient for companies that are under the illusion that issuing stock options does not require a cash outlay.

If you take anything away from this article, remember that issuing stock options is not a “cashless” expense. Consider that there are other alternatives for compensating employees other than using stock options. Remember that there are transaction costs associated with issuing stock options, specifically, hiring a valuation expert, that will create real out-of-pocket cost for any company. Unless you are ready to comply with the valuation requirements associated with issuing stock options, you may be better off simply not using them and compensating employees in another manner. Finally, just like selling a home, if you are going to issue stock options make sure that you bring in an expert to ensure that the value of the company and options are determined and documented appropriately – and be prepared to pay the “commission” for these services.

The information in this article is not meant to represent legal or tax advice. Please consult with a Skoda Minotti business valuation professional or your tax/legal advisor regarding the applicability of these issues to your particular situation.

Visit our web site for more information on our business valuation services. Skoda Minotti is a CPA, business and financial advisory firm with offices in Cleveland and Akron.

Accounting and Tax Ramifications of Issuing Stock Options

 Click here to view Part 1 of our series and learn more about the stock option landscape.

To give you more perspective, first let us review the accounting treatment for the issuance of stock options (rest easy - this will not be too painful). When stock options are issued, an expense must be recorded based on the value of the option. A stock option’s value is derived from a variety of factors, two of which are the value of the stock as of the date of the option grant and the exercise price of the option (the price at which the option holder can purchase a share of stock). Determining the value of a company’s stock is not difficult when it is publicly traded, but privately-held companies do not have readily available market prices, which necessitates the services of a valuation expert. Unless the option is properly valued, a company cannot correctly record the associated compensation expense. If a company is unable to correctly record the results of its operations, it may find obtaining a clean audit opinion to be a difficult, if not impossible, task.

Now that I have warned you about the headaches that you may encounter on the “accounting” side of issuing stock options, let me further alarm you with the tax ramifications. If a company sets the stock option exercise price lower than the fair market value of its stock on the grant date, the stock option could be deemed to be deferred compensation according to Internal Revenue Code 409A. Under 409A, such deferred compensation would be immediately taxable to the employees receiving the grant and subject to regular income tax rates plus 1%. Perhaps even more distressing, a 20% penalty plus interest would also be triggered. In addition, employers would be responsible for withholding income taxes for employees on these types of option grants, which if not done, could result in additional tax penalties. The immediate taxability, penalty and withholding requirements do not apply when the stock option exercise price is equal to or greater than the fair market value of the company’s stock on the grant date. It is impossible to compare the exercise price of a stock option to the fair market value of a company’s stock unless a valuation of the company’s stock has been performed. In addition, when a valuation has been performed to establish the fair market value of a company’s stock, the burden of proof shifts to the IRS to disprove the appraised value. Therefore, unless there is documentation to support the fair market value of a company’s stock near the option grant date, there could be significant tax issues in addition to the accounting issues alluded to earlier.

The information in this article is not meant to represent legal or tax advice. Please consult with a Skoda Minotti business valuation professional or your tax/legal advisor regarding the applicability of these issues to your particular situation.

Visit us tomorrow for Part 3: What to Do?

In the meantime, visit our web site for more information on our business valuation services. Skoda Minotti is a CPA, business and financial advisory firm with offices in Cleveland and Akron.
 

When selling your home, it is common to use an agent to list, promote and show the property. In exchange, you pay a portion of the sales price as a commission to the agent. The benefits of using an agent include: 1) the listing of your home in a database so that homebuyers can access information about it; 2) the agent acting as your middleman during the negotiation process; and 3) the incentive it gives the agent to sell your home quickly (so that her or she can earn their commission). 

Some people choose to sell their home by owner and forego using an agent. These are typically the homes that have “For Sale” signs in their yards for many months, sometimes even years (you know the ones), before they are actually sold. These people often believe that the benefit of not having to pay an agent commission on the sale of their home is worth the prolonged period it will likely take to sell the property. 

What does the choice of hiring a real estate agent or selling your home by owner have in common with private companies issuing stock options? The strange answer is: Much more than many of us realize. 

The Stock Option Landscape

More and more private companies are issuing stock options as part of their key employees’ compensation plans. This may be driven by the ideas that: 1) stock options don’t “cost” anything to the company; 2) stock options will positively influence employees’ performance; or 3) since public companies issue stock options, it must be a good idea and private companies should follow suit. Regardless of the motivation, what most private company owners and executives do not realize is that accounting for stock options, for both tax and financial reporting purposes, may actually have an out-of pocket cost that is greater than the value of the options themselves.

In order to value stock options issued by private companies, there are two major steps that must be undertaken:

1. Determining the value of the company’s equity (which is a key input to valuing a stock option)

2. Determining the value of the stock option

There are not many privately-held companies with the in-house resources or expertise necessary to perform either of the requirements above, both of which are essential in accounting for the issuance of stock options. This often puts accountants in the awkward position of trying to explain to business owners the “unseen” costs and accounting ramifications associated with issuing stock options.

Back to our analogy, hiring a valuation expert to determine the value of stock options is much like hiring a real estate agent to sell your home. A valuation expert is able to perform both of the tasks identified above that are necessary to value the stock options issued by a private company, much like a real estate agent takes care of the necessary steps to sell your home. This work is not free, however, and depending on the complexity of the company and the options issued, the cost to value a private company’s stock options can range in cost from thousands to tens of thousands of dollars. When private companies issue stock options, they often do not consider the “commission” that they will have to pay to a valuation expert to ensure that the options are properly valued. Unlike real estate agent commissions, however, which are based on the sale price of the home, valuation fees are relatively fixed. 

Just like selling a home “by owner,” some companies will issue stock options and try to determine the value themselves (or even worse, not value them at all). By not using a real estate agent, homeowners often find themselves making no headway in the sale of their home. Similarly, by not hiring a valuation expert to value the stock options that they have issued, private companies create the risk that their auditors will not sign off on their financial statements. Maybe even more importantly for business owners and employees, unsubstantiated option values leave both companies and their employees in danger of stiff tax consequences.

The information in this article is not meant to represent legal or tax advice. Please consult with a Skoda Minotti business valuation professional or your tax/legal advisor regarding the applicability of these issues to your particular situation.

Visit us tomorrow for Part 2: The Accounting and Tax Ramification of Issuing Stock Options

In the meantime, visit our web site for more information on our business valuation services. Skoda Minotti is a CPA, business and financial advisory firm with offices in Cleveland and Akron.

With the passage of Health Care Reform, the big question is, "How will it affect my business?" SmartBusiness Cleveland recently hosted a webinar series which looked at this topic from five angles: tax implications, legal issues, economy, benefits, and health care.

Click here to download my segment which looked at how the accounting and tax implications of the health care reform will affect your business, and how you should react and adapt to absorb the changes.

For more information on how health care reform will affect your business, post a comment below or contact our Tax Group at 440-449-6800.

It's like a game of hide and seek for wealthy Americans.  In 2001, the Internal Revenue Service estimated that Americans owed $345 billion more in tax than they paid, or about 14% of federal revenues from fiscal year 2001.  Where were these tax dollars hiding?  The U.S. government is betting a good portion is hiding in the Swiss Alps. 

In an unprecedented move, the Swiss Justice Department agreed to disclose the names of 4,450 UBS account-holders from 2001 to 2008 that contained more than $1 million Swiss francs, where there was reasonable suspicion of tax fraud.  Suspicious activity that could be interpreted as tax fraud included the use of debit cards, cell phones, or wire transfers to hide accounts. 

The legal jockeying began in June of 2008 when the Justice Department filed court papers in Miami, Florida to allow the IRS to get information from UBS.  In essence, the investigators requested to serve "John Doe" summonses to obtain information about possible tax fraud against taxpayers whose identities are not known.  A former UBS banker started the ball rolling when he suggested there could be as much as $20 billion in undeclared funds sitting in Swiss accounts.  Tax laws require that taxpayers who have financial interest in or other authority over any foreign financial accounts with an aggregate value of $10,000, at any point in the tax year, to file Form TDF 90-22.1, to declare their overseas funds.  This allows the IRS to ensure the interest generated from these assets is being taxed in the United States.  Form TD F 90-22.1, a Report of Foreign Bank and Financial Account (FBAR), is due before June 30 of the succeeding year, with no allowed extensions. Penalties for not filing the TD F 90-22.1 are up to 50% of the highest annual balance of each account for each of the last 3 years.  The 50% penalty is imposed annually and therefore can wipe out the account entirely, with the taxpayer still owing taxes and interest. 

To allow taxpayers to come out of hiding on their own free will, the IRS enacted an amnesty program beginning April 2, 2009 - October 2, 2009, extended to October 31, 2009.  Under this program, the IRS will reduce the penalty to 5-20%, depending on whether the wealth was inherited and the IRS will levy the penalty just once, on the highest balance in the accounts over the last 6 years.  Although the amnesty program is cumbersome and requires filing additional forms and amending tax returns to pay the tax on interest earned in these foreign accounts (as well as interest and late filing penalties on the tax), the number of participants has been overwhelming. 

Let’s look at an example of a taxpayer who’s in the 35% tax bracket and has had a foreign financial account for six years and the highest balance over those six years was $1.3 million.  If this taxpayer came forward, they would pay $386,000 plus interest which includes tax of $105,000 – ($50,000 in interest income * .35) * 6), an accuracy-related penalty of $21,000 -- $105,000 * .2) and an additional penalty, in lieu of the FBAR and other penalties that may apply of $260,000 -- $1,300,000 * 20%.  While that seems like a lot, this same taxpayer could owe up to $4,481,000 if they did not come forward -- $2,306,000 in tax, accuracy-related and FBAR penalties and up to $2,175,000 in FBAR penalties for willful failure to file complete and correct FBARs.

Realizing this, a staggering 14,700 Americans, with assets hidden in more the 70 countries made a run for home base with their hands in the air.  (A normal year averages fewer than 100 taxpayers.) And although this outpouring does not relieve UBS of handing over the names of the American account-holders, the number of Americans playing the game has become quite apparent.  This isn't the first time the IRS has offered amnesty programs to lure those out of hiding, but this is the first time the Justice Department and the US Government used its bullying on the playground to force UBS to hand over the names of those playing.  Is this just the start of more to come?

Internal Revenue Service Commissioner Douglas Shulman was quoted as saying, "The whole game around bank secrecy, around offshore (tax) evasion is changing."  Tag…you're it.

Looking for tax planning assistance in Cleveland or Akron? Contact Skoda Minotti at 440-449-6800 or visit our web site.
 

In today’s economy, it is crucial to keep good tenants. The following nine points will help you maintain maximum occupancy in an uncertain environment:

1. Understand the tenant’s business. Research their industry so you can credibly talk about their business, and make them feel that you understand their concerns in today's economic conditions. 
2. Respond reasonably to rent relief or downsizing. This entails a two-step process consisting of listening to the request, and then formulating a personal response within three days. Establish limits to these requests and button down your parameters. If the tenant is downsizing, request their financials or tax returns to understand that their current financial position warrants this action. Make sure not to open the floodgates to requests every month, however.
3. Happy tenant employees means happy tenants. This is as easy as keeping the common areas clean and neat.
4. Go green, well. Reducing the amount of water or soap could get employees irritated. Also, automatic motion lighting in conference rooms or offices could be more of a hassle than a money saver, whereas they may work well in a hallway or a closet. Find other ways to go green that will help the environment and not hinder employees. Also, watch individual tenant leases when attempting to pass-through Green costs.
5. Follow up with tenants. Make sure to follow up with your tenants on a timely basis. There is a difference between "quick response" and "at their beck-and-call."
6. Be consistent with responses to tenants. Tenants talk to each other. Tenants get angry when your message is not consistent, whether it be costs, timing of an event (like cleaning), rent relief, management deferred maintenance plan, etc.
7. Tightly manage your broker’s promises. The easiest way to do this is to make sure that the broker and the property manager are on the same page - enforce constant and effective communication. Understand what the broker wants or needs so you can deliver. Also, promising occupancy before the tenant has signed the contract can get you into trouble - never anticipate a tenant's intentions until it is in writing. 
8. Keep current with billing. Tenants need predictability for cash flow purposes. Keep them updated and give them an estimated time frame when to expect the invoice if it will be late. Consider personally communicating changes in pass-through estimates each year - tenants appreciate the personal touch and the advanced notification.
9. Be strong, be fair, be smart. Remember that retaining the tenant may not be in the best interest for both parties involved. Also, don’t give up too easily, but if it is clear the tenant will not make it financially, come to an agreement. If the lease is more than 10 years old, update the lease to the way the property is operated today. Items specific to the lease that could have changed are holidays, weekend hours of operation, pass-through costs, timing and collection of rents; prohibited activities, sub-leasing, etc.

***This summary was based on a webinar from the members-only section of the NAIOP website. Most of the points have been modified pursuant to the blogger's experience.

Looking for a Cleveland or Akron accounting firm that provides services to the real estate industry? Contact the Real Estate and Construction Group at Skoda Minotti at 440-449-6800.

Many of us probably remember Harvey Dent, aka “Two-Face,” from our childhoods as one of Batman’s arch enemies. He looked like a normal guy from one perspective, but from the other side, he was a bizarre-looking villain. While normalizing adjustments in business valuation may not be quite as exciting as watching Batman battle Two-Face, they bear a similarity to this comic book character.

The results of many companies as reported in financial statements or tax returns do not always reflect economic reality. Therefore, normalizing adjustments are required when business valuations are performed to present a company’s income statements and balance sheets at their true economic levels, without distortion from accounting rules or the owners’ operational preferences. A company’s value can look completely different after normalizing adjustments have been made – it is almost like spinning Two-Face around to look at one side as opposed to the other. 

For example, an owner may be taking a very large salary in an effort to reduce taxable income and income taxes, effectively eliminating any net income. When employing an earnings-based approach in valuing such a company, a normalizing adjustment would likely be necessary to adjust owner’s compensation downward to an appropriate fair market value, effectively raising net income and the resultant value of the company. 

It is important to note that normalizing adjustments can both increase, or decrease, net income. Another common normalizing adjustment occurs when a related party rents property to the company being valued at a monthly cost lower than the property’s fair market rental value. In this case, the valuation expert would increase the company’s rent expense to fair market value, effectively reducing net income and lowering the company’s value. 

While valuation experts are trained to identify normalizing adjustments through trend analysis and management inquiry, business owners and advisors can make the valuation process run more smoothly by bringing potential adjustments to the attention of their valuation expert. It is ultimately up to the valuation expert’s judgment as to what normalizing adjustments are appropriate for a given company, but when a business owner is prepared to answer questions regarding potential adjustments, it can lead to a more efficient valuation engagement.

Looking for business valuation assistance in Cleveland or Akron? Contact our Business Valuation Group at 440-449-6800 for more information.

While the likely adoption International Financial Reporting Standards (IFRS) is a hot topic for accountants, many privately-held small and medium-sized business owners may not be aware of the potential changes on the horizon for financial reporting. The general consensus is that in the coming years, the U.S. will move to adopt IFRS in place of Generally Accepted Accounting Principles (GAAP) as the governing standards for financial reporting, although no official date for conversion has been set yet. 

As discussed in the September 2009 issues of the Journal of Accountancy, IFRS for Small and Medium-Sized Entities (SME’s) was released in July 2009 after five years of development. SMEs are defined as businesses that publish general-purpose financial statements for external users and do not have public accountability. IFRS for SMEs is much more condensed than the full version of IFRS and does not address many of the areas that do not apply for privately-held companies, such as segment reporting or earnings per share.

What does this new standard mean for small to medium-sized business owners and operators? 

Some of the most significant differences between IFRS for SME’s and U.S. GAAP are:

-          Simplified disclosures for pensions, leases, financial instruments, and other areas.

-          Prohibition of the last-in, first-out (LIFO) method of inventory valuation.

-          Amortization of goodwill and indefinite-lived intangibles over a period of ten years or less.

-          Simplification of the temporary difference approach to income tax accounting.

-          Greater use of historical cost in accounting for financial assets and liabilities.

While the actual transition from U.S. GAAP to IFRS has yet to occur, privately-held small and medium-sized business owners should know that the next set of financial reporting standards that they may have to follow have been tailored to fit their needs and the needs of the users of their financial statements.

Looking for Cleveland or Akron CPAs, business or financial advisors? Contact Skoda Minotti at 440-449-6800.

Many companies are unaware of their obligation to obtain a use tax account and self remit use tax on a regular basis.  Companies should review their purchases for potential risk to use tax.  Reviewing a company's use-tax exposure is a specialized service tax we are able to offer to our clients.

Who does use tax affect?

Purchasers of tangible personal property or taxable services that are consumed, used or stored in Ohio can be subject to use tax when a vendor does not charge sales tax.   However, there are exclusions and exemptions to this rule.   An example is the manufacturing exemption which is an exemption for manufacturers buying materials to be used in a manufacturing process.

What if you don’t file use tax returns?

The longer it takes a company to determine whether or not they have been paying the tax, the greater the risk becomes.  If a company has never filed use-tax returns, Ohio can audit back to its first day of business.  If a company has been filing, there’s a four year statute of limitation from the date of filing.  If a company owes money and never registered, they can approach the state through an adviser and possibly limit the audit look back period to thirty-nine months with no penalties.  This type of procedure is known as a voluntary disclosure process. 

Who is at risk?

Everyone who makes purchases of tangible personal property or taxable services for use, consumption or storage in Ohio and does not pay sales tax at the time of purchase is subject to use tax.   Ohio has been aggressively pursuing construction businesses that do not have a use tax account.   It seems more applicable to subcontractors and trade organizations than to general contractors because they are making more purchases of materials and equipment. 

What areas are the state focusing on?

Exemption certificates - a contractor may do work for both tax exempt and taxable customers.   When the contractor purchases the materials for the job, they may not know if it will be consumed on a taxable or exempt job; therefore, they provide the exemption certificate and do not pay sales tax on the purchase.   However, any of those materials that are consumed in a taxable job are subject to use tax So the contractor should be self remitting that use tax on a regular basis.  

What is a contract and what is not a contract?

Contractors are considered the consumers of the materials that they use in a construction contract.   A construction contract is an agreement for the transfer of tangible personal property and its incorporation into real property.   A construction contract is not considered a sale of the tangible personal property.   A construction contractor is any person performing the contract whether as a prime contractor or subcontractor.

Machinery, equipment, tools, supplies, etc. purchased or leased by a contractor and used or consumed in performing the contract are taxable.

Since a contract can only be a construction contract if the tangible personal property becomes part of real property, the classification of the property usually determines the tax regime.   For example, an agreement to sell and install a business fixture is a sale and not a construction contract because the business fixture is personal property.   The statutes do list certain items that are always treated as the sale and installation of tangible personal property.  They are:
 

• Carpeting
• Agricultural land tiles
• Portable grain bins
• Tress, shrubs, sod, seed, fertilizer, mulch and other tangible personal property transferred during a landscaping and lawn care service

• Contracts to Ohio, any of it political subdivisions, federal government or any of its agencies
• Horticulture structure of livestock structure  for those in the business of horticulture or producing livestock
• House of public worship or religious education or a building used exclusively for charitable purposes
• Contracts with an organization exempt from taxation when used exclusively for that organization's purpose
• Contracts for incorporation into real property outside Ohio 
• Contracts into the original construction of a sports facility as defined in the statute

A business valuation is a just a business valuation – isn’t it? This would be akin to saying that a steak is just a steak when, in fact, there are ribeyes, strips, sirloins, and filets (just to name a few). Likewise, business valuations come in two distinct “flavors” – conclusions of value and calculations of value.

As of January 1, 2008, valuation analysts who hold either the Certified Valuation Analyst (CVA) credential supported by the National Association of Certified Valuation Analysts or the Accredited in Business Valuation (ABV) credential supported by the American Institute of Certified Public Accountants have been required to follow new standards that clearly delineate between two types of valuation engagements. Similar to the differing levels of service traditionally offered by accounting firms in performing audits, reviews, or compilations, business valuation engagements are now separated into two defined service categories:

Conclusion of Value

-          All three valuation methods (asset-based, income-based, and market-based) are required to be considered

-          Detailed development and reporting requirements must be adhered to by the valuation analyst, making the engagement more time consuming than a calculation of value

-          This is the required type of report for estate and gift tax filings; Also typically required for instances in which the valuation analyst will need to defend his or her findings and report (i.e. in litigation)

-          The valuation analyst opines on the value of the business or business ownership interest

Calculation of Value

-          The valuation methods to be used in determining value are discussed and agreed upon beforehand between the client and the valuation analyst

-          Reduced development and reporting requirements compared to conclusion of value engagement

-          Ideal for planning purposes (e.g. strategic planning, transaction (purchase or sale) planning, or litigation or divorce proceedings in the settlement stage)

-          Valuation analyst does not opine of the value of the business or business interest, rather, the valuation analyst applies the valuation methodologies agreed upon with the client

-          Generally not defensible in litigation settings because the valuation analyst is not offering an opinion of value, rather, the analyst “calculates” a value based on methods agreed upon with the client

-          Typically costs less than a conclusion of value

-          Has been found to be useful in divorce situations in which a spouse will obtain a calculation of value to aid in the settlement process; If a settlement is not reached, the engagement can then escalate to a conclusion of value so that the valuation analyst can opine on a value and defend it in court, if needed

As you can tell from the discussion above, all “valuation” work is not created equal. For business owners, as well as their attorneys and other advisors, it is important to be aware of the varying levels of valuation service offered so that the appropriate type of report is obtained. You should discuss the purpose of the valuation with the valuation expert in detail as the engagement is forming so that the level of service can be tailored to your specific needs. 

The last thing that you want to do when having a valuation performed is pay too much to obtain a conclusion of value that will only be used for planning purposes or pay too little to obtain calculation of value that will not hold up in litigation or under IRS scrutiny.

Looking for business valuation assistance in Cleveland or Akron? Contact our Business Valuation Group at 440-449-6800 for more information.

Topics: Cleveland Business Valuation, Akron Business Valuation

That’s right. State officials now say that California’s financial situation is so serious that many taxpayers may receive IOUs instead of refunds for state taxes. Warnings of delayed tax refunds and warrants started as early as January, 2009. 

The State of California is planning on issuing warrants instead of refund checks. A warrant is issued by a government agency when they are unable to pay currently and are redeemable at some point in the future, usually with interest. Only once since the Great Depression has the State of California had to issue warrants. 

California is entering the 2009-10 fiscal year on July 1 with a deficit of nearly $24 billion. State tax revenues have fallen 27 percent in the past year. In February, the State passed a budget, but the legislation was dependent on the passage of several ballot propositions that were rejected by voters in May. 

Other than arranging for a smaller tax refund, which is too late for most, is there anything a taxpayer can do in this situation?

Individuals working in California can choose to have their refunds applied to next year’s taxes and then request lower wage withholdings. Business can also choose to apply to next year’s taxes and reduce subsequent year’s estimated tax payments.

Some reports cite the recession will last longest in the Midwest, including Ohio. Although officials in Ohio have not discussed issuing warrants, both individuals and businesses should minimize tax refunds in case this happens here in Ohio.

Click here to learn more about Skoda Minotti’s tax planning and preparation services or contact us at 440-449-6800.

Topics: Akron Tax Accountant, Cleveland Tax Accountant

This week is our final update in our series on the changing rules and regulations and their impact on employee benefit plan audits.

This week’s topic:

2009 Cost of Living Adjustments for Qualified Retirement Plans

The Internal Revenue Service announced cost-of-living adjustments applicable to dollar limitations for pension plans and other items for tax year 2009.

Click here for more of this article.

Looking for assistance with your benefit plan audit? Contact the CPA’s business and financial advisors at Skoda Minotti at 440-449-6800.

Looking for a low-cost construction financing option? The American Recovery and Reinvestment Act of 2009 created a new category of bonds - Recovery Zone Bonds (RZB). These bonds are intended to stimulate economic recovery in designated “recovery zones”. There are two categories of RZBs – Recovery Economic Development Bonds ($10 billion allocated) and Recovery Zone Facility Bonds ($15 billion allocated).

Recovery Zone Economic Development Bonds – These are governmental bonds to be used for governmental purposes that will allow the county/large municipality to borrow on a lower cost than traditional tax-exempt financing.

Recovery Zone Facility Bonds – These are private activity bonds that permit counties/large municipalities to provide tax-exempt financing for private projects which historically would not qualify (e.g. large manufacturing plants, distribution centers, hotels, research parks, etc).

The government will allocate each category of RZBs to states based on each state’s decrease in employment compared to the national decrease in employment. The state then allocates the bonds to counties and large municipalities based on their decrease in employment compared to the state’s decrease in employment. We will provide an update once these bonds have been allocated.

To learn more about how Recovery Zone Bonds may benefit your business, click here to view a more detailed summary from Benesch Attorneys at Law.

Looking for a Cleveland or Akron accounting firm that provide services to the construction industry? Contact the Real Estate and Construction Group at Skoda at 440-449-6800.

The CPAs, business and financial advisors in Skoda Minotti's Real Estate and Construction Group recently authored an article for Builders Exchange Magazine.

The article summarizes some important accounting and tax provisions that construction professionals need to keep in mind. The article highlights the American Recovery and Reinvestment Act, the Energy Policy Act of 2005, qualified rehabilitation and low income housing tax credits.

To view this helpful article, click here.

Looking for a Cleveland or Akron accounting firm that provides services to the construction industry? Contact the Real Estate and Construction Group at Skoda Minotti at 440-449-6800.

Before I get to our first marketing blog entry, I wanted to take a moment to introduce myself. I’m Jonathan Ebenstein and I’ll be your author for the next ten or so paragraphs. I invite you to sit back, relax and open your mind.

If you’ve sifted at all through our Firm’s web site, you’d know that we are a CPA, Business and Financial Advisory firm.  We help our clients, mostly companies, grow their business through a myriad of professional services (i.e., Tax, Accounting & Auditing, IT, Financial Services, Litigation Advisory Services, Financial Staffing, etc.) Notice how well we just seamlessly cross sold our services.  Good stuff.  Keep reading.

What do I do?  Well up until January 31, 2009, I was in charge of the marketing department here at Skoda Minotti.  I’m the guy who with the help of my staff, re-branded the firm, wrote the marketing plan, handled all the public relations, negotiated, purchased and coordinated all the media, designed and wrote all the copy for our sales materials, website, advertising, blogs, e-newsletters, e-blasts and handled all the firm’s internal communications efforts. 

When we were done, as if you can ever be done marketing…BTW you can’t.  We looked around and thought, “Not too shabby. I bet we can help other companies do the same thing.”  And you know what? We can.  And we are going to.

On Feb 1, 2009 Skoda Minotti Marketing Services was launched (cue Chariots of Fire sound track).Wait a minute.  Hold on.  You’re going to launch a marketing service group during this economy?Yep.  And here’s why.

Down economies are actually the best time to ramp up your marketing efforts. It’s true. Recessions actually create unique marketing opportunities for companies that, if leveraged properly, can render your marketing efforts even more successful. Here’s why:

·          Since most people slash their budgets and pull back their marketing efforts during an economic slow down, there’s less “clutter” to compete against.

·          With less marketing messages for your target audience to sift through, the easier it is for them to see your message… and only your message.

·          Supply and demand.  With less demand for space and air time, media outlets will be more willing to make deals, such as decreased rates, increased placements, better placements and even category exclusivity.

·          Strengthen your brand.  Marketing during a down economy tells your customers and prospects that your company is confident in its staying power.

Then, when the economy pendulum swings back up, the companies, hopefully yours, that proactively marketed themselves during the downturn will have put themselves in a position to seize market share, reach new customers, and strengthen brand loyalties while their competitors are busy playing catch-up.

Looking for a Cleveland marketing consultant? Contact Skoda Minotti Marketing Services at 440-449-6800.

When forming an entity, do you know the pros and cons of a C corporation versus an S corporation? What about the advantages and disadvantages of a partnership, LLC or sole proprietorship?

These classifications may not seem important now, but they can have significant tax and liability consequences depending on your future plans for your business, especially if you are looking to sell.

For an overview of how entity type can affect your business, we invite you to view the August issue of Smart Business Cleveland, ”Entity Selection.”

Looking for Cleveland or Akron tax accountant? Contact Skoda Minotti at 440-449-6800.

Please note that Ohio’s sales tax filing requirements have changed. Starting with January 2009 sales tax (due 2/23/09), the state will no longer accept paper monthly sales tax forms. You will now need to file electronically using Ohio Business Gateway. To view the complete notice, click here.

You can find more information about electronic filing methods at www.tax.ohio.gov.

Looking for Cleveland or Akron tax accountant? Contact Skoda Minotti at 440-449-6800.

On October 3, 2008, President Bush signed into law the Emergency Economic Stabilization Act of 2008. Along with the much publicized financial markets rescue plan, the bill also contains $150 billion in tax relief. 

Other highlights of the Act include:

• Over 290 Changes to the Tax Code
• 2008 AMT Patch
• Tax Extenders
• Disaster Relief
• Energy Incentives
• Revised Preparer Penalty Standard
• Enhanced Child Tax Credit
• Broker Basis Reporting 

For a complete summary of all of these highlights, we recommend that you review this Emergency Economic Stabilization Act summary.

Looking for Cleveland or Akron tax accountant? Contact Skoda Minotti at 440-449-6800.
 

As you may have heard, the American Housing Rescue and Foreclosure Prevention Act of 2008 became law on July 30, 2008. What does this mean to you?

The three changes most likely to affect taxpayers include:

• Temporary tax credits for first-time homebuyers

• Temporary property tax deductions for non-itemizers

• Unfavorable new rule for properties converted into principal residences

There were also a number of other important changes, including:

• Corporations can use R&D and MTC carryovers instead of claiming bonus depreciation.
• Required information reporting for credit card and third-party payment network sales.
• Favorable changes to low-income housing and rehab credit rules.
• Interest from some tax-exempt bonds no longer added back for AMT.
• Interest from FHLB-backed state and local bonds can be tax-exempt.

If you would like to receive our recently issued comprehensive email report on the Act, please email information@skodaminotti.com, with the subject line: Housing Act.

Looking for Cleveland or Akron tax accountant? Contact Skoda Minotti at 440-449-6800.