Summer hours are in effect: Our offices close at NOON on Fridays from May 17th to July 12th
Please Note: Our office will be closed Wednesday, April 16th.
Summer hours are in effect: Our offices close at NOON on Fridays from May 17th to July 12th
Please Note: Our office will be closed Wednesday, April 16th.
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November 14, 2011
Colorado's Enterprise Zone program provides tax incentives to encourage businesses to locate and expand in designated economically distressed areas of the state. There are 16 Enterprise Zones and 2 sub-zones in Colorado. The taxpayer must be located in an enterprise zone to take advantage of many of these credits. To view the EZ Map, Click Here.
Here are the available credits:
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TAX CREDIT |
CREDIT AMOUNT |
FORM |
FACT SHEETS |
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Investment Tax Credit |
3% of equipment purchases |
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Job Training Tax Credit |
10% of qualified training expenses |
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New Business Facility (NBF) Jobs Credit |
$500 per new job |
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NBF Ag Processing Jobs Credit |
$1,000 total per new a.p. job |
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NBF Health Insurance Credit |
$200 x 2 years per new h.i. job |
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R&D Increase Tax Credit |
3% of increased R&D expenditures |
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Vacant Building Rehabilitation Tax Credit |
25% of rehabilitation expenditures |
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Manufacturing / Mining Sales and Use |
Expanded S&U tax exemption in EZ |
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Commercial Vehicle Investment Tax |
1.5% of commercial vehicle |
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Contribution Tax Credit |
25% of cash (12.5% in-kind) donations |
If your business will perform an activity on or after January 1, 2012 that will earn an EZ business tax credit, Colorado Revised Statute 39-30-103(7)(a) requires that your business receive pre-certification prior to commencing the activity that will earn the credit. Pre-certification is not required for the Contribution Tax Credit or the Manufacturing/Mining Sales and Use Tax Exemption.
Since pre-certification must be completed before activities are performed (i.e. purchase of equipment), we recommend that all businesses located in an enterprise zone pre-certify by 12/31/2011.
Forms DR0074, DR0076 and DR0077 can be certified electronically through the Colorado Web Portal (Click HERE to access.) Please remember to print a copy of the form before submitting. Upon receipt, an email will be sent approving your certificate, which you also need to print. Both the applicable form(s) and approval email must be sent to the Colorado Department of Revenue upon filing your income tax return.
Once a business has received the final "certified" EZ tax credit form, a business that is claiming an EZ tax credit will be required to file their income taxes electronically, unless the business will experience an "undue hardship because the taxpayer does not have access to a computer, or does not have sufficient internet access, internet capability, or computer knowledge to file income taxes electronically.”
(Effective January 1, 2011)
Colorado House Bill 10-200 sets a temporary requirement that businesses defer claiming an EZ Investment Tax Credit (ITC) that exceeds $500,000 in years 2011, 2012, and 2013. Businesses are “allowed to claim the deferred credit as an ITC carryover for 12 income tax years following the year the credit was originally allowed plus 1 additional income tax year for each income tax year that the credit was deferred.”
Since pre-certification must be completed before activities are performed (i.e. purchase of equipment), we recommend that all businesses located in an enterprise zone pre-certify by 12/31/2011.
The Colorado Office of Economic Development and International Trade (OEDIT) oversees the EZ program as staff for the Economic Development Commission. For more information on the EZ Program, visit the Colorado Enterprise Zone website (www.advancecolorado.com/ez). As your business consultant and tax advisor, we would also be happy to discuss any questions you might have. Call us at (719) 630-1186 or through our Secure Email.
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SKR+Co Nonprofit Newsletter
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Meet our Nonprofit Specialists
Steve Hochstetter, CPA, CVA, Audit Partner
Our Nonprofit Services
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There is much talk about accountability, especially financial accountability for charitable and other exempt organizations.
Nonprofits need to embrace accountability to protect the organization and its people, to demonstrate openness and forthrightness in external dealings and to support the greater good. Embracing accountability also helps not-for-profits fulfill their fiduciary responsibilities to donors, constituents and the public. But how can nonprofits truly embrace this abstract term?
There can be no accountability without good governance. You must set in place the means and measures to keep your organization in compliance with all applicable laws and rules as well as best practices. And most important, your not-for-profit must keep in line with its mission and guiding principles, including integrity.
Author and nonprofit expert J. Steven Ott describes an organization’s governance as “a product of its purposes, people, resources, contracts, clients, boundaries, community coalitions and networks, and actions as prescribed (or prohibited) in its articles of incorporation and bylaws, state laws and codes, and the IRS codes and rules.”
When it comes to accountability and governance, the buck unquestionably stops with your board. Therefore, it’s critical that you help the board understand its responsibilities and focus its attention on carrying out the not-for-profit’s mission — not the process-oriented details best handled at the staff or committee level.
Keeping the financials spotless is critical. So make sure you conduct regular, board-approved audits that are attested to by the executive director and principal financial manager. Management should present internal financial statements to the board — or its audit or finance committee — and review performance against approved budgets on at least a quarterly basis. In addition, the board should establish and regularly assess financial performance measurements.
Your nonprofit must comply with all legally required reporting procedures — and certain financial practices that may apply to a specific activity. For example, one of your major funders or a national affiliate of your organization might require you to provide key performance indicators or other reports linking operational results with financial information.
As you carry out your initiatives, do so fairly and in the best interests of your constituents and community. Your status as a not-for-profit means you’re obligated to use your resources only toward your mission and to benefit the community that you serve. Programs should be evaluated accordingly, both in respect to the activities and the results or outcomes.
Communication is a big part of accountability. Your annual report, for example, should reflect your mission and summarize the year’s activities. It’s best practice for the report to also provide financial data for the year and other information, such as a list of board members, management staff and other key employees.
As a public document, your nonprofit’s Forms 990 for the previous three years will give your public a good overview of your organization’s exempt activities, finances, governance, compliance and compensation methods.
Your organization’s demonstration of accountability is likely to generate a positive response from your constituents, whether it’s in the form of donations, funding, volunteering or simply spreading the word about the merits of your nonprofit. And that’s the kind of outcome worth pursuing.
Do you bite your nails before your not-for-profit’s external audit each year? Does your staff start showing signs of anxiety in anticipation of the auditors walking in the door?
If this sounds like your situation, take a deep breath. Here are five tips for making the audit experience run more smoothly for you and your auditors.
Ask your auditor for a list of items they’ll need during the audit, with deadlines for each item, if such a list isn’t provided automatically. Talk to your auditor before the fieldwork if you have questions about any of the items, and let your auditor know right away if you won’t be ready by the agreed-upon dates.
Because surprise is a required element in the audit, you’ll also need to produce some information on the spot, such as specific expense reports, journal entry support, or grantor or program reports. But you can still prepare by establishing files during the year to collect the information you may need.
Your expectations of the audit should mirror your contract with the auditing firm. It will spell out what the audit will accomplish and your responsibilities.
Auditors once did accounting “clean-up” work for their clients during the audit, such as preparing year-end journal entries, fixed asset schedules, and various prepaid expense and accrued liability analyses. But today’s professional standards draw a clear line between accounting and auditing services, and your auditor must stay independent of your accounting processes, and as a result may be limited as to what he or she can do.
If there are accounting tasks you can’t do internally due to a lack of expertise, consider hiring a different firm to handle them. But if you’re fully capable and “own” the process, you can engage your audit firm to assist with certain analysis and adjustment information outside of the audit.
Draft and review your accounting and procedures manual. Self-assess inherent internal control weaknesses and determine the necessary internal controls to mitigate such weaknesses. Periodically ascertain whether your organization’s policies and procedures are being followed.
If your operations have changed or evolved, discuss these developments with your auditor during the year and update your policies and procedures accordingly. Waiting until fieldwork begins can delay the audit process.
Your auditor will apply risk standards during the audit. AICPA Statement on Auditing Standards No. 115, Communicating Internal Control Related Matters Identified in an Audit (SAS 115), defines deficiencies in internal control and other “material weaknesses” and “significant deficiencies.”
The auditor, for example, will look to see if there’s:
After reviewing the risk and internal control information you’ve assembled, your auditor could determine there is a “significant deficiency” or the more serious “material weakness.”
For any matter identified in the auditor’s SAS 115 letter, prepare a written response including whether you have taken or intend to take any action in response to the finding. This is important to the audit committee and board as they oversee the audit and the overall system of checks and balances.
Don’t let the annual audit be the only time you talk to your auditor. If you save up all your questions, it’s likely to extend the length of the audit.
Also ask if there are new accounting pronouncements or changes for the year so you and the board aren’t surprised after year end. Be proactive in understanding the new guidance and its impact on your next audit and future financial reporting.
Although the audit — and the preparation that precedes it — requires some work, the benefits are plentiful. The audit not only assesses your overall financial condition, but also can pinpoint problems with financial management and financial reporting, identify ways to reduce risk and strengthen internal controls.
Since the revised IRS Form 990 debuted a few years ago, many nonprofits have been reviewing the policies on their books, improving them, and adding new policies to their collections. Form 990 doesn’t state that these policies are required, but asking about them implies that they should be in place. Form 990 aside, the public — concerned by stories of nonprofit mismanagement — has put more emphasis on nonprofit governance, including policy adoption and enforcement.
There’s good news about this policy-making uptick: Because so many organizations already have policies on the books, you can learn from their successes.
What types of policies do nonprofits need? Form 990 asks nonprofits if they have policies on:
Policies on gift acceptance, investment practices and joint ventures also have become more popular in recent years.
Here is a selected listing of organizations and websites that can help you in developing or improving your nonprofit’s policies:
BoardSource. At http://www.boardsource.org, you can purchase policy samplers on a variety of topics. An extensive policy sampler contains 241 policies on 48 topics under the categories of ethics and accountability, board and board members, chief executive, finance and investments, fundraising, personnel, communications and committees.
Independent Sector. This nonpartisan coalition of approximately 600 national organizations, foundations and corporate philanthropy programs posts model policies at http://independentsector.org under “The Principles for Good Governance and Ethical Practice Resource Center.” You can download them for free.
National Council of Nonprofits. At http://www.councilofnonprofits.org, members have access to a variety of policy-related information, including a Form 990-related “governance practices” checklist and sample policies on conflict of interest, document retention and destruction, board review of compensation policy, joint venture and partnership, and other topics.
Although you should customize your own policies — rather than go with a boilerplate — there’s something to be said about not reinventing the wheel. Just be sure to carefully adjust policies from other sources to fit your operation. Make sure, for example, that the processes are practical for your size and structure, and that the titles and positions listed for policy oversight are correct.
Your CPA can help you customize a policy or review the one you devise. Your lawyer also should review any policy before it’s adopted.
September 22, 2011
There have been discussions about separate private company accounting standards for years. Now standard-setters may actually do something about it. The Financial Accounting Foundation (FAF) — parent organization to the Financial Accounting Standards Board (FASB) — will soon decide whether to adopt recommendations made earlier this year by a blue-ribbon panel on standard setting for private companies.
The panel recommended that the FAF establish a separate, private company standards board to develop appropriate exceptions and modifications to U.S. Generally Accepted Accounting Principles (GAAP) that would “better respond to the needs of the private company sector.” The new board would work closely with FASB, and its standards would be incorporated into FASB’s Accounting Standards Codification (ASC).
However, the board would have final authority over all exceptions and modifications. The panel also recommended the creation of a “differential framework” to guide the new board’s standard-setting activities.
In the United States, public and private companies, for the most part, are subject to the same set of accounting standards — GAAP. Public companies are required under SEC rules to prepare audited, GAAP-compliant financial statements. Generally, private companies aren’t legally obligated to follow GAAP, but they may need to do so to satisfy lenders, sureties, venture capitalists or other stakeholders.
Preparing GAAP financial statements can be a challenge for private companies, particularly in the current environment. During the last several years, FASB has been shifting toward a fair-value-based accounting approach. In other words, GAAP increasingly requires companies to report assets and liabilities at fair value rather than historical cost. This trend is increasing the complexity and cost of complying with GAAP, which now demands periodic valuations and impairment testing for many financial statement items.
This type of information is valuable to public company investors, who use it to evaluate the price of securities traded in the stock exchanges or other public markets. But lenders and other users of private company financial statements tend to be less interested in fair value and more interested in free cash flow and a company’s ability to pay its debts. In some cases, GAAP can make it more difficult for these users to get the information they need.
Consider, for example, employee stock options. Historically, these options were reported at their “intrinsic value” — that is, the amount (usually zero) by which the underlying stock’s market value on the grant date exceeded the option exercise price. Several years ago, however, FASB modified its standards to require companies to expense employee stock options based on their grant-date fair value, using one of several option-pricing models.
Valuing options can be complex — especially for private companies with limited trading data. Plus, many lenders view stock options as a noncash expense that has little effect on a company’s ability to pay its debts. So, from their perspective, reporting options at grant-date fair value actually distorts the company’s income. For that reason, they add the expense back into net income when evaluating a company’s financial statements.
Proponents of separate private company accounting standards point to fair value reporting as well as other GAAP provisions that may be irrelevant at best and counterproductive at worst in a nonpublic setting. They include:
As a result, many private companies prepare non-GAAP financial statements — on a cash or income tax basis, for example — while others opt to receive “qualified” opinions from their auditors. Many lenders accept these financial statements or waive certain GAAP requirements because they recognize that compliance can be burdensome and that many GAAP standards lack relevance for private companies.
The concept of separate standards for private companies isn’t without its critics, however. Some opponents argue that financial statements are either correct or they aren’t, and that separate standards will lead to inconsistency and lack of comparability.
They advocate a single set of standards that can be modified, if appropriate, on a case-by-case basis by agreement between a company and its financial statement users. They also contend that, if GAAP standards are overly complex or burdensome, they should be simplified for all companies, both public and private.
The blue-ribbon panel considered several models for addressing the needs of private companies, including a standalone GAAP built from the ground up and several versions of International Financial Reporting Standards (IFRS), including IFRS for Small and Medium Entities.
In settling on U.S. GAAP with exceptions and modifications for private companies, the panel explained that a standalone set of standards could take a significant amount of time to create and could be significantly different from current U.S. GAAP. It also rejected the various IFRS options, noting that “U.S. private companies should not be leading the charge, en masse, to an IFRS-based set of standards before the SEC makes a decision on U.S. public companies…”
The panel concluded that a new board with standard-setting power would be the most effective approach. In the panel’s view, FASB is too focused on public company financial reporting to address the needs of private companies.
The panel noted that FASB’s Private Company Financial Reporting Committee (PCFRC) has submitted approximately 40 recommendation letters since it was formed in 2007. Although FASB has modified some standards, generally by changing effective dates or disclosure requirements for private companies, the panel concluded that many private company stakeholders view the PCFRC’s work as “not being wholly successful because the FASB has not also shown a willingness to consider carefully and approve, where appropriate, the possibility of measurement, recognition, or presentation differences.”
It’s not yet certain how the FAF will respond to the blue-ribbon panel’s recommendations. But there’s widespread support for the panel’s approach among accountants and finance executives, as reflected in the vast majority of nearly 2,000 letters the FAF has received. Keep in mind that the FAF’s decision and ultimate approach may be affected by the SEC’s decision, expected later this year, on whether to adopt IFRS for U.S. companies.
If you own a private company and have questions about how the blue-ribbon panel’s proposed recommendations might affect how you prepare your financial statements, please give us a call. We would be happy to answer your questions.
DATE: Tuesday, December 6, 2011
TIME: 3:00-4:30 p.m.
LOCATION: The FIne Arts Center, Music Room
PRESENTERS:
Judy Kaltenbacher, CPA, Managing Tax Partner
Doreen Merz, CPA,Tax Manager
Jordan Empey, CPA, Supervising Senior Tax Consultant
For more information on this seminar, CLICK HERE
Date and location to be determined.
For more information on this seminar, check back with us.
Do you bite your nails before your not-for-profit’s external audit each year? Does your staff start showing signs of anxiety in anticipation of the auditors walking in the door? If this sounds like your situation, take a deep breath. Here are five tips for making the audit experience run more smoothly for you and your auditors.
There is much talk about accountability, especially financial accountability for charitable and other exempt organizations. Nonprofits need to embrace accountability to protect the organization and its people, to demonstrate openness and forthrightness in external dealings and to support the greater good. Embracing accountability also helps not-for-profits fulfill their fiduciary responsibilities to donors, constituents and the public. But how can nonprofits truly embrace this abstract term?
