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As CFO, Heather will lead our internal financial management, human resources, informational technology, and administration support at Cassady Schiller, working closely with the partner group as they continue to grow the firm, enhance client service, and bring financial peace of mind to our valued clients.

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Creating a board of advisors is a key asset that begins with making sure you find the best people to join. Failure to take this process seriously can result in problems relating to oversight of management activities, delays in decision making and missed opportunities.  In many instances, companies fail to pay sufficient attention to the board-recruitment process, resulting in a group of advisors who are poorly trained and lacking the specific skills most needed.

I strongly recommend to founders and other senior executives that they take the time to develop and implement guidelines for an orderly recruiting and selection of board of advisor members.

One simple but often neglected step in board development is creating a description of the duties and expectations of advisors. It’s like a job description and should be written in a manner that informs candidates about the types of behaviors that will be expected of them. Consider the following list as an example:

• Attend regular meetings of the company’s board of advisors, which are held four times per year and which generally extend for about three hours each.
• Be accessible for personal contact with other board members and company officers between board meetings, as needed.
• Provide open and honest feedback to the company officers.
• Participate in an annual self-review process.
• Participate in the annual dinner and planning meeting for the advisory board.  This may be in addition to the other four meetings.
• In general, use your personal and professional skills, relationships, experiences and knowledge to advance the interests and prospects of the company.

To build your board, strongly consider the following:

• The board should be made up of three to five outsiders. Two people can try to find mutual agreement. With three, an advisor can afford to take chances. And a group of more than five tends to dramatically reduce productivity.
• Look for people who have already experienced what you are about to experience.  If you’re a service business, two of your three outside advisors should be from service businesses.
• The advisory board should be at the level you want to go to, rather than the level you’re at currently.  Members should have experience building a business, not merely running one. Don’t make the mistake of recruiting a highly visible executive from a big company.
• The matter of compensation is tricky. Some believe it is entirely unnecessary, but I believe you should compensate them fairly for their time.  You want people who are attracted to the type of business that you’re building. Some form of compensation — even token — tends to sharpen an advisor’s sense of responsibility and commitment. One way is to calculate your base hourly rate and pay your board members for their time at that rate. (Assume prep time is equal to meeting time.)

Unlike a board of directors, which has formal legal authority over a company and a fiduciary duty to its shareholders, an advisory board won’t make decisions for management and has no obligation to the owners or liability for the company’s actions. That said, if you’re not willing to execute the advice of the board, then you’d better not put one together. The greatest disrespect to a board, having given you a commitment of their time, is taking their time and doing nothing with it. Not only will you lose credibility with that board but with future board members as well.

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“We knew we could do it better – hands-on personal responsive service coupled with treating our co-workers like family,” he said. Their vision was to be recognized as the CPA and advisory firm of choice and to help their clients create financial peace of mind.

Cassady Schiller grew by double-digit percentages for the first 17 years of existence. Although the recession in 2009 and 2010 brought the growth model down to single digits, “we felt fortunate to still have minimal growth in those times,” he said. The firm had a strong 2012 with a significant rise in revenues and he expects to sustain incremental growth again in 2013.

To continue reading, click here to view full article on Business Courier’s website.

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June 20th featured panelists:

• David Cassady, managing partner, Cassady Schiller
• Dr. Robyn Chatman, president, Academy of Medicine of Cincinnati; Beacon medical director, HealthBridge
• Paul Kitzmiller, president, Core Resources Inc.
• Liza Smitherman, president, Brewster Pumping LLC;  vice president of professional development, Jostin Construction Inc.

This event will be held at the Taft Center at Fountain Square.

7:00 a.m. - Networking & Breakfast
8:00 a.m. – Program Begins
9:15 a.m. – Program Concludes

Tickets are $25 each and are non-refundable.  The deadline to register is June 13. Tickets purchased after June 13, if available, will be $35.

Register Today

For more information, contact Lisa Muhlenkamp at 513-337-9467 or lmuhlenkamp@bizjournals.com

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“You actually have to go all the way back to when I was in high school,” says Kitzmiller. “That’s where I met my wife Laura and her best friend Diana Mayfield.  That’s really where all of this started.” As Paul and Laura’s relationship grew leading to their marriage, so too did their friendship with Diana, who later married David O’Brien. As the two couples started their young families, they remained close. In 1995 Diana and David had triplets, each of whom was later diagnosed with severe autism. “This was during a time when the knowledge about autism and the support available was significantly lower than it is today,” says Kitzmiller. “In fact, at the time, the diagnosis rate for autism was around 1 in 10,000. Today, the rate is 1 in 88,” according to Kitzmiller.

Birth of a Mission

The real start of what eventually became Impact Autism began in 1999, when the O’Brien children were still young.  That’s when Diana’s brother, Frank Mayfield, looking for a way to help support his sister, started the Mayfield Classic, a charity golf outing to help raise money to support the autistic community in Cincinnati. “Frank had the vision to start the outing and ran it for a few years, raising about $10,000 each year,” recalls Kitzmiller. “At the time, our group at Core was not involved. We were actively supporting the March of Dimes as an organization,” says Kitzmiller. “The March of Dimes is a great organization, but as we learned more about the challenges faced by The O’Brien’s children and our knowledge of autism began to grow, I felt like we could really make an important local impact by getting involved in the golf outing,” recalls Kitzmiller. And when Paul and CORE Resources decided to get involved, they didn’t just stick their toes in the water. They jumped right in. In 2001 Kitzmiller became the chair of the golf outing and made it his personal mission, as well as the organization’s mission to increase participation and proceeds. The CORE Resources team organized and operated a telethon, called all of their business contacts, educated them on the cause, and urged them to participate in the outing. The results were astounding. In the first year after CORE became involved, proceeds from the golf outing topped $70,000.

Still, the golf outing was just an event. It was a once a year gathering to benefit a worthy cause. But the success of the event and the impact it made got Paul, Diana, and others involved thinking they could do even more. At the time the golf tournament only benefited the Autism Society of Cincinnati. “We needed a 501(c)(3) in order to take tax deductible contributions. Because we didn’t have our own organization, we chose one to partner with – the Autism Society,” says Kitzmiller. But the proceeds grew along with the awareness of many other wonderful organizations that were active in helping the autism community. “We realized there were also other groups doing great work. We had very lofty goals to grow the golf event, and wanted to be able to have a broader impact in the community.” The answer to their challenge was Impact Autism. Formed in 2006, Impact Autism has become the mechanism to generate funds and allocate them to operational organizations that are making real life impacts across the city.

Within CORE Resources, employees have fully embraced the opportunity to help an important cause. “Impact Autism has become an integral part of our culture. Our people genuinely care about the cause and are connected to those they are working to assist,” explains Kitzmiller. In fact, competitions have sprung up within the company, and teams compete against each other to see who can raise the most. “It’s gotten pretty competitive. We organize teams and compete throughout the year. Even the awards ceremony at the annual party has taken on a life of its own.”

Growing Influence Leads to Expanded Vision

Between 2006 and 2012, both the Mayfield Classic and Impact Autism saw substantial growth. With Diana O’Brien leading the organization as chairperson and founder and Paul Kitzmiller serving as president, the Mayfield Classic generated $265,000 in 2012. “Our funds have continued to grow with the golf event,” says Kitzmiller, “but just as importantly, we have continued to add wonderfully talented and dedicated people to our team.” With that growth has come new opportunities.  As the organization has continued to grow, so have Diana’s children, who are now teenagers approaching adulthood. “What we’ve come to realize is that there is a massive shortage of programs, facilities, and services designed to support the adult autism community,” explains Kitzmiller. “It’s a big need now, but it’s going to be an even bigger need down the road. With autism diagnoses rising more than 100 fold in the past 20 years, we are facing a challenge that’s only getting more complex. You have children who have learned to live with autism within their family structure that are just now beginning to enter adult life. And the numbers will only increase from here,” according to Kitzmiller.

The convergence of Impact Autism’s growth along with the growth and maturation of the O’Brien children brought a new vision into focus – developing Impact Centers in the Cincinnati area that are dedicated to long term service for adults with autism. “There’s just not that much out there right now. Families with autistic adult children have very limited options,” Kitzmiller explains. They can continue to live at home and be cared for by aging parents. They can get assistance in a state or local government facility, which Kitzmiller explains is not always a desirable option. Or they can get care at a privately funded facility. “Unfortunately, there just aren’t very many quality private facilities out there. And the cost to build and maintain quality facilities with excellent care is quite substantial.”

In 2012, Impact Autism made it a priority to build Impact Centers around the Cincinnati area. That meant putting an ambitious plan in place to achieve a daunting task.

With Vision Comes Application

While the Mayfield Classic had for years served as the primary revenue generator for Impact Autism, the Impact Centers would require a whole new level of funding. The Impact Centers also represented a new step for the organization, potentially moving them from an organization that focused on raising and distributing funds, to an organization with operational initiatives.

The first step taken was to visit with a few foundations about the possibility of funding and at the same time begin visits at other autism centers around the country to research best practices. The foundations had a positive response, but had specific interest in getting involved in something with a technology component. “We then stepped back and asked ourselves what kind of technology we could develop. Diana came up with the idea of creating an app that a person with autism could use to help manage their daily activities,” explains Kitzmiller. “People with autism often benefit greatly from having reminders throughout their day to create repetitiveness, which helps them manage their daily activities much more effectively.”

Diana, a Principal at Deloitte Consulting and Managing Principal of the Deloitte University and Talent Development for Deloitte’s 60,000 employees, dedicated herself to developing the application. Impact Autism partnered with the development firm Barefoot Proximity to develop a mobile application for individuals living with autism. “The application had two goals,” explains Kitzmiller. “First, we wanted to develop something that would truly make a positive impact for individuals with autism. The second goal was to generate funding through sales of the application and form foundations willing to help support the vision of the Impact Centers.”

The application was no small undertaking. It took nearly a full year of development, half a million dollars, and a whole lot of blood, sweat and tears from the Impact Autism team. And while the development was not without its challenges, ultimately, it was a success. The application was launched at last year’s Mayfield Classic and is now available for public purchase.

Looking Forward, Staying Focused

With the application on the market, managing the organization has become a more complex assignment. “We are actively working to accelerate the application in the marketplace,” Kitzmiller says. “At the same time, we are continuing to research best practices and potential site locations for the first Impact Center in Cincinnati.” And while there is no definitive date for when an Impact Center might open, Kitzmiller has a timetable in mind. “Diana’s children are 17. When they are 22, they will be out of the public system. And they aren’t the only ones facing this situation. So that certainly has to be a target.”

Kitzmiller and CORE Resources are committed to continuing to actively support Impact Autism well into the future. “The need continues to grow. We are just now starting to feel the impact and responsibility of caring for a rapidly expanding adult autism community,” says Kitzmiller. “How is society going to handle an aging population with autism? If we aren’t dealing with it now, we are certainly going to be dealing with it in 10 to 20 years.”

Even with a board full of talented individuals, an ever expanding list of volunteers, and companies like CORE Resources behind it, Kitzmiller believes that autism still needs greater awareness and that Impact Autism can still make an even bigger impact. “We still need more help,” explains Kitzmiller, “I would encourage people to visit the website and get involved. Come out and join us for a great event the first Monday in October. If you know someone who may benefit from the app, spread the word.” For any individual who wants to take a bigger step, Kitzmiller points to another opportunity. “We are always looking for more talented, dedicated, qualified board members. If you have interest in working with a great group of people in order to help another great group of people, give us a call.”

For more information on Impact Autism, including the application, the Mayfield Classic, or other opportunities to support or volunteer, visit impactautism.org or impacteverydayapp.com to get the application helping people with autism today.

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Tax planning and ATRA

Returns just filed (or that will be filed under extension by October 15, 2013) reflect the tax laws as they existed in 2012 (with some expired provisions renewed retroactively for 2012 by ATRA). Looking ahead, your 2013 return to be filed in 2014 will reflect the many changes to the Tax Code made by ATRA. Because the new law was passed at the beginning of the year, it was overshadowed by the filing season. However, its provisions impact every taxpayer and it’s vital to take time to gauge how they will affect you. The list of changes made by ATRA is long: many generous tax incentives, such as the $1,000 child tax credit, enhanced adoption credit, and enhanced earned income credit, are made permanent. ATRA also permanently “patches” the alternative minimum tax (AMT), which definitely will impact planning for taxpayers liable for the AMT. The new law also extends permanently the Bush-era tax rate cuts for individuals except taxpayers with taxable income above $400,000 ($450,000 for married couples filing a joint return). Income above these levels is taxed at 39.6 percent effective January 1, 2013. ATRA also increased the tax rates on qualified capital gains and dividends for higher income taxpayers. All these changes and more are set in motion by ATRA.

 New proposals to consider

Looking ahead, some new proposals could impact tax planning in 2013 and beyond. President Obama has proposed to reduce the value to 28 percent of certain deductions and exclusions that would otherwise reduce taxable income in the 33, 35 or 39.6 percent tax brackets. The President also re-proposed the so-called Buffett Rule, now referred to as the “Fair Share Tax” for taxpayers with incomes above $1 million (with full phase-in above $2 million). Moreover, the President has proposed to limit contributions and accruals on tax-favored retirement benefits, including IRAs, qualified plans, tax-sheltered annuities, and deferred compensation plans. The limit generally would apply when a taxpayer accumulates total retirement amounts that exceed the amount necessary to provide the maximum annuity permitted for a defined benefit plan. The President’s proposals are expected to be debated in Congress as lawmakers and the White House try to reach an agreement on tax reform and deficit deduction. President Obama has said he wants an agreement before August, which could significantly change your tax planning for 2013 and beyond. Our office will keep you posted of developments.

 NII surtax takes effect

The 3.8 percent Medicare surtax on net investment income (NII) became effective January 1, 2013. The NII surtax on individuals equals 3.8 percent of the lesser of: Net investment income for the tax year, or the excess, if any of the individual’s modified adjusted gross income (MAGI) for the tax year, over the threshold amount. The threshold amount in turn is equal to $250,000 in the case of a taxpayer making a joint return or a surviving spouse, $125,000 in the case of a married taxpayer filing a separate return, and $200,000 in any other case.

The IRS issued proposed regulations in 2012 intending them to be “reliance regulations.” Nonetheless, taxpayers continue to be confused over certain sections. Although final regulations are promised “within 2013″ so they would be available for the 2013 tax year and 2014 filing season, current misinterpretation of the proposed regulations can impact on tax strategies now being put into motion in 2013. Any misinterpretation can also bear on 2013 estimated tax that may be due to cover any 3.8 percent NII surtax liability. Our office will keep you posted of developments.

Vehicle depreciation limits increase for 2013

Tax planning for 2013 is helped by the IRS’s release of inflation-adjusted limitations on depreciation deductions for business-use of passenger automobiles, light trucks, and vans first placed in service during calendar year 2013. Some of the depreciation limits are identical to the limits for 2012; other ceilings have increased by $100. The 2013 dollar limits reflect the inflation adjustments both with the extension of bonus depreciation by ATRA and without. If bonus depreciation is allowed to lapse after 2013, as President Obama has proposed, the dollar limits for 2014 would be lower but would still be adjusted for inflation. The maximum depreciation limits under Code Sec. 280F for passenger automobiles first placed in service during the 2013 calendar year are: $11,160 for the first tax year ($3,160 if bonus depreciation does not apply); $5,100 for the second tax year; $3,050 for the third tax year; and $1,875 for each succeeding tax year. The maximum depreciation limits under Code Sec. 280F for trucks and vans first placed in service during the 2013 calendar year are slightly higher. Keep in mind that SUVs and pickup trucks with a gross vehicle weight rating (GVWR) in excess of 6,000 pounds continue to be exempt from the luxury vehicle depreciation caps based on a loophole in the operative definition.

IRS audits of business property write-offs on “stand-down”

The IRS announced in March that it had updated its 2012 directive that generally instructs employees to discontinue audits of costs to maintain, replace or improve tangible property. The updated directive tells employees not to begin examining those issues for tax years beginning on or after January 1, 2012 and before January 1, 2014. The directive retains the “stand-down” of audit activity in this area beginning in 2012. The IRS also advised that it intends to make changes to temporary regulations regarding certain de minimis rules, routine maintenance and more.

Prepare for employer and individual mandates under PPACA

The IRS issued long-awaited proposed reliance regulations on the employer mandate under the Patient Protection and Affordable Care Act (PPACA). An applicable large employer is an employer that employed an average of at least 50 full-time employees during the preceding calendar year, including full-time equivalent (FTE) employees. The statute defines a full-time employee as an employee who on average was employed for at least 30 hours of service per week.

The PPACA also generally requires individuals, unless exempt, to carry minimum essential health insurance coverage after 2013 or make a shared responsibility payment. The IRS has issued proposed regulations on the individual mandate. The proposed regulations, the IRS explained, are intended to mitigate the affordability test for related individuals.

IRS ramps up oversight of foreign accounts

The Foreign Account Tax Compliance Act (FATCA) gives the agency new tools to discover tax evasion. In January, Treasury and the IRS issued final regulations under FATCA that describe the requirements for foreign financial institutions (FFIs), nonfinancial foreign entities (NFFEs), and other taxpayers to comply with FATCA’s reporting and withholding regimes on U.S. and foreign account holders. The 544-page regulation package seeks to harmonize the United States’ regulatory requirements with the use of intergovernmental agreements (IGAs) to implement FATCA.

Simplified safe harbor for claiming home office deduction

The home office deduction is one of the most complex in the Tax Code. In response, the IRS announced a simplified safe harbor method for claiming the home office deduction for tax years beginning on or after January 1, 2013. Under the safe harbor, taxpayers determine the amount of deductible expenses for qualified business use of the home for the tax year by multiplying the allowable square footage by the prescribed rate. The allowable square footage cannot exceed 300 square feet and the prescribed rate is $5.00, which provides a maximum deduction under the safe harbor of $1,500. The IRS indicated it may revisit the prescribed rate amount in the future.

If you have any questions about these or any other federal tax developments and their impact on tax planning, please contact our office at 513-483-6699.

2013 First Quarter Federal Tax Developments – Cassady Schiller – Cincinnati CPA

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Vesting basics

When thinking about vesting, remember that participants are always 100 percent vested in their own plan contributions. “Vested” money is the amount the participant is legally entitled to at the time of employment termination.

For employer contributions, vesting generally is computed based on the number of years of service worked with over 1,000 earned hours. Plan documents can vary in the computation period: Some use the anniversary of the participant’s participation, while others use the plan year after the participant’s first anniversary.

Not all employer contributions are subject to a vesting schedule. For example, a safe harbor match is always immediately 100 percent vested when it’s allocated. But both regular matching and profit sharing contributions may be subjected to a vesting schedule.

Schedule types

There are three types of vesting schedules:

1. Immediate vesting. This is exactly what it sounds like — participants are immediately 100 percent vested in the employer money allocated to them.

Immediate vesting can help attract employees, and it’s the simplest type of vesting to administer. But it doesn’t provide an incentive for employees to stay with the company, and it can be costly when employees depart after a relatively short period of employment.

2. Graded vesting. This kind of vesting schedule can vary, but under the Pension Protection Act of 2006 (PPA), graded vesting schedules cannot be more than six-year graded. A graded vesting schedule can be more, but not less, generous than the following schedule:

Some plan sponsors opt for a more-generous graded vesting schedule in which a participant is vested 20 percent after the first year, with an increased 20 percent vesting each year afterward until the participant is 100 percent vested at five years. Others are even more generous, vesting participants with 25 percent after the first year, and an additional 25 percent for the next three years, resulting in 100 percent vesting after the fourth year.

More-generous vesting schedules can attract employees but may be less effective in retaining them and can increase costs when employees depart. Less-generous vesting periods may be less effective in attracting employees, but they can be more effective in retaining them and reduce costs if employees leave before the vesting period is over.

3. Cliff vesting. Under this type of vesting, a participant isn’t vested at all in employer contributions and then, like falling off a cliff, becomes 100 percent vested all at once. Under the PPA, a cliff vesting schedule can’t be more than a three-year cliff as follows:

A two-year cliff would be another option, under which a participant would be 0% vested after the first year and 100 percent vested after the second. Cliff vesting might be used by employers that want to retain employees for a certain period of time before vesting, such as restaurant or retail businesses that can have high turnover rates. 

Other vesting issues

Determining the vested portion of a participant’s account is important when calculating amounts available for loans and hardship distributions. For example, a participant cannot take more than 50 percent of his or her vested account balance — up to $50,000 — for a loan.

Plan sponsors must provide an annual notice to participants indicating the employer matching provisions. You can change a vesting schedule, but benefits cannot be taken away from a participant. For example, if you have an employer match using a five-year graded vesting schedule, you can’t amend the plan to a six-year graded vesting schedule. However, you could amend the plan to a four-year graded vesting schedule or even to immediate vesting.

If you decide to change a vesting schedule to allow for a shortened grade, set up a new source “bucket” for the employer match money that’s deposited after the amendment. This segregates the employer match money by vesting schedule so it’s clear which vesting schedule is applicable to the new source money.

Getting it right

Keep in mind that a plan sponsor can have either a graded vesting schedule or a cliff vesting schedule on an employer contribution source, but not both. All vesting schedules must be in the plan document, available to participants on their request. By choosing the right vesting schedule, you can help ensure your plan will meet your goals.

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Brokers surveyed say they are currently seeing an increase in the number of deals being completed, compared to the same time in 2012. What’s more, the rest of 2013 will be even more successful. In the survey, 54% of brokers expect slight to significant improvements, while only 13% expect no change from the activity so far this year.

In the wake of the presidential election and “fiscal cliff” worries, buyers and sellers are being proactive in the marketplace. “Owners finally feel their businesses are healthy enough to put on the market, and buyers are finding better lending options to fund their purchases,” says the study. With the economy improving and stocks at record highs, it isn’t surprising to see the market growing more crowded.

In terms of tax effects, over 91% of brokers surveyed say that tax changes are either slightly or greatly deflating small business values. Continued uncertainty about tax changes is inducing many business owners to sell now rather than risk the possibility of even more detrimental tax changes in the future, says the study.

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