COCPA NewsAccount - 2014 - January/February Issue

NewsAccount Jan/Feb 2014

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Contents Features

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4 Best Practices for 2013 Tax Prep

The CDOR provides 21 tips to help ensure a smooth filing season.

10 Boots to Suits

This innovative program helps student veterans transition into the workforce.

12 The Brand of You

How do you want to come across when people find you online?

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Roads, Tracks, and Runways

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Start Early to Save for College

The Colorado Department of Transportation manages everything with a tight budget.

As with most challenges, time can be the great equalizer. The more time available, the fewer resources needed.

Departments

Dec. 6, 2013, Young Professionals Committee members helped pack "Powersacks" for 700 children through Food for Thought, www.foodforthoughtdenver.org.

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2 Chair Column 7 This and That 25 Movers & Shakers 25 Classifieds Jan/Feb 2014 • www.cocpa.org •

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Chair Column

NewsAccount A bi-monthly publication of the Colorado Society of Certified Public Accountants Vol. 59, No. 5 January | February 2014 Board of Directors Marc C. Hendrikson, Chair Sheila M. Balzer, Vice Chair Lora L. Finley, Treasurer Scott E. Bush, Immediate Past Chair Mary E. Medley, Secretary Directors Carrie J. Bartow, Christine Benero, Peter J. Derschang, Sharon S. Lassar, Mark J. Smith, Debbi C. Warden Editorial Board Jack Allgood, James M. Boak, Kay R. Dragon, Jennifer Emerson, Georgia Z. Phillips, Patrick A. Lytle, Mark Paller, Barbara J. Tedesko, R. Stephen Van Meter, Michael D. West Mary E. Medley, President/CEO Elizabeth M. Julin, Deputy Director Krista Flynt, Editor/Publisher Natalie G. Rooney, Contributing Writer NewsAccount (ISSN #10899952) is published bimonthly by the Colorado Society of Certified Public Accountants, 7887 E. Belleview Ave., Suite 200, Englewood, CO 80111. NewsAccount is published in January, March, May, July, September, and November and reports information, news, and trends in the accounting profession. The Colorado Society of CPAs assumes no liability for readers’ business decisions in reference to advertisements or other information included in this publication.

Membership dues include a $9.90 one-year subscription to NewsAccount. Periodical postage paid in Englewood, CO, and additional mailing offices.

POSTMASTER: Send address changes to NewsAccount, Colorado Society of Certified Public Accountants, 7887 E. Belleview Ave., Suite 200, Englewood, CO 80111.

Net press run = 8,550 copies; sales through dealers and carriers, street vendors, and counter sales = 0; paid or requested mail subscription = 8,450; free distribution by mail = 50; free distribution outside the mail = 0; total free distribution = 50; total distribution = 8,500; office use, leftovers, spoiled = 350; returns from news agents = 0; total sum = 8,850; percent paid and/or requested circulation = 99%.

303-773-2877 • 800-523-9082 Fax: 303-773-6344 • cpa-staff@cocpa.org

NewsAccount is available online at www.cocpa.org.

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Celebrating the Profession

T

he end of the year always wraps up with a flurry of activity at the COCPA as we celebrate the amazing things CPAs accomplish at the annual “CPAs Make a Difference" gala. This event just keeps getting better, and this year was no exception.

On Nov. 7, more than 300 members, guests, and staff gathered to honor five of our CPA colleagues who are making a difference in the lives of others each and every day (photos on page 7). Whether they are effecting change in their local communities or thousands of miles away, the event is the perfect venue to recognize these dedicated CPAs for their outstanding leadership, generosity, and contributions to their communities.

The occasion also fosters member networking, a chance for old and new colleagues to connect and reconnect with each other. Those outside our profession would undoubtedly be surprised to see just how chatty CPAs really are. This year we made a point of allowing more time for mixing and mingling, which fostered a wonderful sense of camaraderie. We all get caught up in the daily grind, so having time to relax and talk with our peers in a social setting is a rare treat.

We recognized 56 of Colorado’s newly minted CPAs who joined us on stage to receive their CPA lapel pins. It is truly encouraging to welcome another generation of CPAs into our great profession. In addition, we recognized former AICPA Chair Greg Anton, CPA, CGMA, with the Distinguished Service Award for all that he has done, and will continue to do, for the profession, not just locally and nationally, but internationally as well.

Chair Hendrikson congratulates Greg Anton, right.

Another highlight of the evening was the capstone entertainment provided by CPA-turned-comedian John Garrett, who had us laughing so hard our sides hurt.

Accountants are funny. Don’t ever let anyone tell you otherwise.

Thanks to all those who participated in the evening’s silent auction and call for support, we raised $5,500 for future Educational Foundation scholarships, too.

If you have never attended CPAs Make a Difference, be sure to join us next year, on Nov. 6. You won’t be disappointed.

Before year-end, nearly all the COCPA committees met one more time to wrap up and debrief the important things they accomplished in 2013 and to begin planning for 2014 and beyond. Thanks to all of you and the COCPA staff who spend countless hours supporting your colleagues in this way. Your contributions are duly noted and greatly appreciated.s Email Chair Marc Hendrikson at HENDRIKS@citywidebanks.com.

Leadership News

Balzer To Become Chair

Corder Tapped For Vice Chair The Nominating Committee, chaired by COCPA immediate past chair Scott E. Bush, presents the following slate for COCPA leadership positions beginning May 1, 2014. The chair and vice chair serve for one year, and the treasurer and directors serve for two years. Watch for the March/April issue of NewsAccount in which you’ll find the biographical information on these nominees.

Congratulations to the following officer nominees: Chair Sheila M. Balzer, Holben Hay Lake Balzer CPAs LLC, Denver; Vice Chair/Chair-elect Steven R. Corder, Kundinger Corder and Engle PC, Denver; and Treasurer Tawnya R. Ramirez, Charter School Growth Fund, Broomfield. Marc C. Hendrikson, Citywide Banks, Aurora, continues on the Board as immediate past chair. COCPA CEO Mary E. Medley is the Board secretary.

Directors to begin a two-year term are: Victor A. Amaya, ClearPath Accountants LLC, Littleton; Craig A. Arfsten, Prosperion Financial Advisors, Greenwood Village; and Kelly G. Boggs, Reese Henry & Co., Inc., Aspen.

Continuing on the Board are directors Sharon S. Lassar, University of Denver School of Accountancy, Denver; Mark J. Smith, M.J. Smith & Associates, Greenwood Village; and public member Christine Benero, Mile High United Way, Denver.

The Board of Directors thanks for their service the following directors who will complete their terms on April 30, 2014: Carrie J. Bartow, CliftonLarsonAllen LLP, Colorado Springs; Peter J. Derschang, Brakes Plus, Centennial; and Debbi C. Warden, The Business Manager LLC, Greenwood Village.

The Nominating Committee presents the following nominees for the Educational Foundation Board of Trustees for a three-year term: Kristine Brands, Regis University, Denver; Amy E. King, The Business Manager, Greenwood Village; and Allen W. McConnell, University of Northern Colorado Monfort College of Business, Greeley.

Currently serving on the Foundation Board are David M. Dirks (President), Metropolitan State University of Denver, Denver; Brenda M. Clarke, Seigneur Gustafson LLP, Lakewood; Christine M. Haslam; Christine M. Haslam, CPA, Denver; Stephanie E. Hernandez, KPMG LLP, Denver; Jerald R. Kaiser (Past President), Crowe Horwath, Denver; Jill E. Korenek (Secretary/Treasurer), JDS Professional Group, Greenwood Village; Cynthia G. McGinley (Vice President), Jefferson Wells, Denver; William C. Sanden, SSA, PC, Colorado Springs; Mark T. Solomon, SM Energy Company, Denver; Alicia J. Sweeney, Consultant, Aurora; and Mary E. Medley. Susan M. Vachereau serves as executive director of the Foundation.s

Jan/Feb 2014 • www.cocpa.org •

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Best Practices for 2013 Tax Return Preparation

The Colorado Department of Revenue developed the following tips to help ensure a smooth income tax filing season. If you need to resolve a particularly troublesome client matter with the Colorado Department of Revenue, email COCPA CEO Mary E. Medley at mmedley@cocpa. org. Include the name(s) of the taxpayer(s), the Colorado Account Number(s), whether you have a Power of Attorney on file for the return(s) in question, and a brief description of the issue.

If you have it, attach a pdf of the most recent notice(s) the client(s) received. Medley will forward your email to the COCPA’s dedicated contact at the Department for assistance.

1) File all tax returns either through your tax software or through the CDOR's free Revenue Online service, www.colorado. gov/revenueonline. If you must file a paper return, you need to list the last name and SSN of the primary taxpayer on the top of every page of the return. The 2013 forms have a space on the first page for social security numbers but not on subsequent pages.

2) W-2s: When filing a paper return, all W-2s must be stapled to the form. When the W-2s don't add up to the withholding claimed on the Individual return (Line 25 of Form 104), return processing will stop. The taxpayer will be asked to send copies of the W-2s. When filing an electronic return, the CDOR recommends attaching scanned copies to the e-filed tax return. While there is no requirement to electronically attach scanned W-2s to an e-filed return, the copies will allow the Department to process the returns when questions arise during return review, or when the employers have not yet sent in their W-2 statements to the Department. Documents may also be submitted through Revenue Online. Click on Submit an e-Filer Attachment.

3) 1099s: The CDOR receives 1099 income withholding statements from entities that have withheld Colorado income tax on behalf of a taxpayer. Ask your clients if they

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have any 1099 statements that show Colorado withholding. When filing a paper return, the 1099s that show Colorado withholding should be stapled to the form in the same area where the W-2s are attached. When filing an electronic return, the CDOR recommends attaching scanned copies to the e-filed tax return. While there is no requirement to attach 1099s to an e-filed return, the copies will allow the Department to process the returns when questions arise during return review, or when the entities that issued the 1099s have not yet submitted the statements to the Department. The taxpayer’s 1099s may also be submitted through Revenue Online. See publication FYI Income 2.

4) Employer or Entity FEINs on W-2s/1099s: Review, compare, and verify Federal Employer Identification Numbers (FEINs) when entering them into e-file software. Make sure the numbers entered in the software match what is on the paper W-2 or 1099. If the FEIN entered into the tax software does not match the FEIN on the W-2 or 1099 submitted by the employer/entity, the taxpayer will be asked to submit paper copies of the W-2s/1099s.

5) Estimated Tax Payments and Prepayments — New for 2013 Income Tax Returns: Review Revenue Online account information prior to completing the return.

Revenue Online will allow you to verify the payment(s) received by the Department, which can reduce processing delays. Additionally, the 104 form has been modified to require separate designation of each payment type. Enter amounts on the correct lines as follows: • Prior-year Estimated Tax Carryforward: line 27 • Estimated Tax Payments: line 28 • Extension Payment: line 29 • Other Prepayments (104BEP, DR 0108, and DR 1079): line 30 6) 104CR: When calculations from the 104CR credit schedule are transferred to the 104 return, the 104CR must be included with the Form 104 regardless of whether it is elec-

tronically or paper filed. Please take care to enter the correct amounts on the correct lines in the tax software. You may be required to enter the credit amount or the amount that creates the credit. The Department needs to verify that these amounts came from the 104CR. • Refundable credits from Line 9 104CR go on Line 27 of the Form 104.

• Nonrefundable credits from Line 49 104CR go on Line 23 of the Form 104.

7) Amended Returns: Amended returns replace the original tax return. Therefore, it is imperative to attach/include all schedules and supporting documents with the 104X even when you are not changing the amount in a particular schedule. If the original return included a 104CR schedule, the 104CR must be included with the amended return even when the 104CR information or data did not change on the amended return.

All documentation must be included with the amended return, otherwise processing will be delayed, or credit, subtraction, or refund claims may be denied. See the web page "Correcting a Return," www.colorado.gov/cs/Satellite/Revenue/REVX/1190709086827.

The 104X and schedules must be completed and submitted together, whether this is done through Revenue Online or on paper.

If a paper 104X is filed, do not re-submit the original 104 form as this will complicate and delay return processing.

Make sure you use the appropriate 104X version for the year you are amending because the 104X is year-specific.

Individual income tax returns from 2009 and forward may be amended electronically through Revenue Online. You may amend online even if the original return was filed on paper. Revenue Online has all the information from the original return; there is no need to re-enter everything. If you do not have access to the Internet and cannot amend online, you may file a paper Form 104X. When changing the Colorado return because the IRS made changes to the federal return, you must file Form 104X within 30 days of being notified by the IRS. When the

IRS makes changes to federal taxable income, the Colorado return must be amended, even if there is no net change to the Colorado tax liability.

For more tips on how to amend an individual income tax return and information about how to avoid other common filing income tax filing errors, see the web page “How to Reduce Filing Errors on Income Tax Returns” (www.colorado.gov/cs/Satellite/Revenue/REVX/1237405396770).

8) Various Credits and Subtractions: Many credits and subtractions require additional supporting documentation to be submitted with the return. Be sure to review the income tax booklet and FYI publications for specific details. See the web page Individual Income Tax Booklet FYIs (www.colorado.gov/cs/Satellite/Revenue/ REVX/1219229527183).

9) Credit for Income Tax Paid to Another State (104CR Part IV): A copy of the tax return filed for each state must be included with the 104CR credit schedule and the Form 104. Include the portion of the return that shows tax paid to the other state (enough information for the CDOR to see the net tax liability after credits). The tax returns for the other states must be included as electronic attachments with an e-filed return or may be submitted through Revenue Online. For paper returns, a copy of each state income tax return must be submitted with the paper Form 104. See publication FYI Income 17.

10) Capital Gain Subtraction: The Department will make every effort to verify required documentation was included in the filing of the return before contacting the taxpayer for more information. That is why it is important to submit the following supporting documents with the return.

• A DR 1316 form, “Colorado Source Capital Gain Affidavit,” must be completed and included with the return (electronic or paper). With e-filed returns, attaching the form to the electronic return or submitting it as an E-Filer Attachment in Revenue Online is not sufficient. For electronic returns, the information must be data entered on the DR 1316 portion of the return.

• A copy of the closing statements for both the purchase and sale of the property or official documentation from the county detailing purchase date and price and sale date and price

• Copies of the first two pages of the corresponding federal return, Schedule D, and any Schedule D attachments • If the capital gain was received via a passthrough entity, documentation that the interest in the underlying business satisfies the required five-year holding period If Form DR 1316 is included, and the capital gain subtraction claimed is $100,000 or less, the Department will continue its practice of reviewing the capital gain subtraction claim two to three years after the return is originally filed, when the IRS provides federal return information to Colorado’s Discovery Section.

For more information, see publication FYI Income 15.

11) Child Care Contribution Credit: When a taxpayer claims the Child Care Contribution Tax Credit, the DR 1317, “Child Care Contribution Tax Credit Certification,” must be completed by the organization/entity that received the donation from the taxpayer. Then the organization gives the completed form to the taxpayer. A copy of this form must be submitted with the return that claims this tax credit. The taxpayer may complete the Social Security/Colorado Account Number portion of the certification form after the organization completes the form. For information about this credit, see publication FYI Income 35.

Taxpayers may obtain their Colorado Account Number (CAN) by accessing their tax account in Revenue Online (www.Colorado. gov/RevenueOnline).

Please note that the 2013 credit is limited to 50% of the amount generated and/or carried forward from prior years.

12) Enterprise Zone Credits — New for 2013 Income Tax Returns: All enterprise zone credits must now be claimed using Form DR 1366, “2013 Enterprise Zone Credit and Carryforward Schedule.” The total credit amount is calculated using this schedule. Enter the total amount on the 104 income tax return. IMPORTANT: There is an electronic return filing requirement for all taxpayers who claim these credits. Paper returns can only be filed if an electronic return would create a hardship for the taxpayer. Both the DR 1366 and the applicable certification form for each EZ credit claimed must accompany the income tax return, whether the return is

e-filed or submitted on paper. If your software product does not support the DR 1366, the Department suggests you file using Revenue Online, which has a document attachment feature.

13) Claiming Credits from a Passthrough Entity: Individuals claiming tax credits that are issued by a partnership should obtain from the partnership a federal K-1 schedule for each credit created and issued by the partnership. If a K-1 is unavailable, attach a statement to the individual return with the name of any pass-through entity. The Department verifies the claim by reviewing the partnership’s return. The K-1s or statements may be submitted through the Revenue Online “Submit an e-Filer Attachment service,” through tax software, or may be attached to a paper return.

14) Innovative Motor Vehicle Credit — New for 2013 Income Tax Returns: New legislation requires a new methodology for calculating the credit. The Department has developed Form DR 0617, the “Innovative Motor Vehicle Credit” schedule. Complete this form, and attach it to any income tax return claiming this credit. The Department checks a county motor vehicle database to verify ownership of these vehicles. If the registration is not in the taxpayer’s name in this database, the CDOR will ask for copy of the purchase invoice and proof of Colorado registration. For information about this credit, see publication FYI Income 67.

15) Colorado Minimum Tax Credit: Input the federal alternative minimum tax credit amount in the box within Line 31.

When the box is not completed, it causes the Colorado AMT to be denied even when the line item has the Colorado Minimum Tax Credit in it. See publication FYI Income 14.

16) Third Party Designee: When a taxpayer chooses to designate a Third Party to discuss a Colorado individual income tax return with Department staff, the designation has been expanded. The form now states, “Do you want to allow another person to discuss this return and any other information related to this return with the Colorado Department of Revenue?” The added language accommodates situations where other tax years have an impact on the return and allows the Department to discuss the information with the designee.

Tax Tips Continued on 6 Jan/Feb 2014 • www.cocpa.org •

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Tax Tips Continued from 5 The CDOR encourages e-filed returns because the Third Party designation is included in the electronic return, and CDOR staff can see the name and phone number of the Third Party Designee on the e-filed returns.

On paper returns, the Third Party Designee information is not data entered. Designee information from a paper return is not available until the paper return is imaged and attached to the taxpayer account, which could take a minimum of two weeks, depending on the time of year. During that time, it is possible the taxpayer may receive correspondence from the Department. If the Third Party Designee contacts the Department about the letter, staff may not have access yet to the paper return image. In the case of a paper return, customer service representatives may ask for a fax copy of the return with the designee information before providing information to the tax professional.

17) When in doubt, include attachments: Provide as much supporting documentation as possible.

Most MeF software (the abbreviation for what the IRS calls “Modernized e-File”) will allow for document attachments. If your e-file tax software does not support attachments, the CDOR strongly recommends using the Submit an e-Filer Attachment service in Revenue Online immediately after submitting the return. The documents will be directed to your client’s account. This will allow the Department to view these documents concurrently with the return.

When a return is filed in Revenue Online, you may submit the attachments during the return completion process.

For paper return submission, attach the required documentation to the return before mailing.

The CDOR recommends against using Form DR 1778 to submit documentation as it can delay processing a minimum of six weeks. The Department created the DR 1778 in the early days of e-file software availability when most software did not provide the document attachment option. It's now transitioning away from the DR 1778.

MeF (tax software) attachments are preferred, followed by Revenue Online e-Filer Attachments, and finally, attaching paper documents to the paper return. If you need to

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send paper documents separately, you must use the DR 1778 to enable the CDOR to get the documents into the taxpayer’s account.

18) What to expect based on when a return is filed: Filing state tax returns electronically or earlier in the year can result in receiving refunds faster.

Electronic filers can expect their refunds in about seven to 14 business days because the data is transmitted directly into the Department’s tax accounting system, which makes processing much faster than with paper returns.

Paper Returns Received in

January February March April

Taxpayer Refunded Within

14 days 21 days 28 days 45 days

19) Accepted Tax Software: The Department has a list of Accepted Software for individual income tax. The list shows supported tax credits and limitations by software name. As software is approved, through the third week of January, the list will be updated. See the Software Developers, Individual Income Web page (www.colorado.gov/cs/Satellite/Revenue/ REVX/1221734632978).

Look for the section entitled “Income Tax Year 2013 Software Developer Income Tax Forms and Information.” Click on the link “Accepted Software.”

20) Refund Status: You can monitor refund status through Revenue Online (www.Colorado.gov/RevenueOnline). Once you sign up through Revenue Online, you can file a return, view filing history, and conduct other common transactions with the Department.

21) File a Protest: Protests may be filed in Revenue Online without logging into a specific account. Look for File a Protest on the main Revenue Online site, www.Colorado.gov/RevenueOnline.

Assistance for Tax Professionals The Tax Practitioners’ Helpline, 303-2322419, is reserved for tax professionals and receives priority attention. Department staff answer calls, Monday through Friday, 8 a.m. to 4:30 p.m., except on state holidays. After hours, tax professionals may leave a message.

Calls are returned the next business day. s

CDOR Issues DOMA Filing Status Rule The Internal Revenue Service (IRS) ruled, Aug. 29, 2013, that same-sex couples legally married in any state must file a joint Form 1040 or two returns filing separately with the IRS, regardless of the marriage law of the state where they live. IRS officials said the ruling was made to provide certainty and clear, coherent tax filing guidance. The IRS ruling applies to all federal tax purposes, including income and gift and estate taxes.

Colorado’s state tax code is directly tied to that of the federal government and uses Federal Taxable Income as the starting point of its state income tax return. Therefore, it is necessary for Colorado taxpayers to file their state income tax returns using the same filing status that they elected on their federal income tax return. Departing from federal tax filing status would require the recalculation of taxable income and would impose significant difficulties in the administration of Colorado personal income tax.

To provide Colorado taxpayers with clarity about how to file state income taxes in light of the August 2013 IRS ruling, the Department of Revenue promulgated emergency regulation 39-22-104.7.7, Income Tax Filing Status, as follows: 1. General Rule. Because the Colorado income tax return begins with federal taxable income, all taxpayers shall file their Colorado income tax return using the same status that they use on their federal income tax return.

2. Any couple that files a joint federal income tax return must also file a joint state income tax return. State income tax provisions that depend upon federal income tax filing status will be administered in accordance with federal income tax filing status.

3. Any taxpayer filing as single, separate, or head-of-household shall file their Colorado income tax return in the individual taxpayer’s name only. Taxpayers filing a joint federal return shall file a Colorado income tax return jointly for both taxpayers. s

2013 CPAS MAKE A DIFFERENCE Nov. 7, 2013, everyday heroes and heroines were honored. New CPAs were recognized. CPA turned comedian John Garrett provided the laughs. And, the "Oldies but Goodies" triumphed over the "Young and Restless" in CPA Feud. It was truly a night to remember. Mark you calendar for Nov. 6, 2014, and plan to attend next year.

Photos by Bill Cronin, www.croninphoto.com

Jan/Feb 2014 • www.cocpa.org •

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Tax Issues

Sales Tax on Software and Database Access

BY BRUCE NELSON, CPA

I

t is no secret that Colorado has the worst sales tax environment in the United States.

The reason, of course, is that Colorado’s cities come in two sizes. First, there are the state-collected, or “statutory,” cities, which piggyback off the state’s sales tax, using state forms and, with a few exceptions, the same tax base. Then there are the “home-rule” cities, which, like separate little states, require their own separate registration, licensing, and forms and, most importantly, define their own tax base.

Sales tax on software is an excellent illustration of the diversity in the tax base that makes compliance in Colorado so difficult.

The state, for example, does not tax custom software but only “standardized,” i.e., canned, shrink-wrapped, “off-the-shelf” software, and even then the state won’t tax “standardized” software if it is downloaded electronically.

Buy a copy of Quicken at your local big box retailer, and you will pay sales tax. Download it electronically from Quicken’s website, and, so long as you don’t receive any tangible personal property with your purchase, it isn’t taxable. [See CRS §39-26-102(15)(c) and Colorado FYI Tax Publication No. Sales 89.]

Denver’s rule on software is simple but draconian: All software is taxable. [See DRMC §§53-25(7) and 53-96(6) and City and County of Denver Tax Guide, Topic No. 18 Data Processing.] Boulder, like the state, distinguishes between canned and custom software but defines the latter as the purchase of software where the modification costs of the purchase exceed 25% of the price of the unmodified software. [See BRC §3-1-1 and Tax Regulation 11: Computer Software.] Fort Collins also distinguishes between canned and custom programs but defines custom software as “software programs designed and created specifically” for a single user. [See FCMC §25-71 and Rule Computer Hardware and Software.]

As complicated as the sales tax rules on software have become, a recent court case in Boulder has made everything even worse.

Boulder imposes its sales tax on “computer software contained on cards, tapes, discs,

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coding sheets, or other machine-readable or human-readable form...”

Boulder assessed Ball Aerospace use tax on the purchase of software downloaded electronically. The District Court judge held for Ball Aerospace; since electronic downloads were not one of the enumerated forms of software described in the city ordinance, they were not taxable. The Court of Appeals disagreed, holding that once the software comes to rest on a taxpayer’s hardware, it meets the “form” requirement implicit in the Boulder ordinance. Ball Aerospace appealed to the Colorado Supreme Court, but the Court declined to review the decision. This is now the law in the City of Boulder. [See Ball Aerospace & Techs. Corp. v. City of Boulder, 2012 COA 153 (September 9, 2012).]

Boulder also assessed use tax on Ball’s payments for online databases involving technical journal articles, conference materials and papers, contract opportunities, market analysis, and medical hazard and risk reference information. Unlike Denver, the City of Boulder does not tax information services. Nevertheless, the City assessed use tax on these transactions, not as an information service, but as a use of software in the City. The Appeals Court went on to say that the payments for the use of online databases were also subject to use tax because “[w]hen accessing a commercial database, the customer is … granted a right to use the database host's computer system and software. For example, when the customer searches for certain material on the host's webpage, he or she is using the host's server and its search engine program.” In short, paying for the right to use someone’s website is taxable because it is a taxable use of software in Boulder. The fact that the taxpayer did not download anything to his or her computer or that the website may be sitting on a server halfway around the world is irrelevant to the Court. According to the city and the Court, that access is a taxable use of software in Boulder.

By any standard, this is a terrible decision for taxpayers. First, the Court ignored the plain language of the ordinance — electroni-

cally downloaded software is not software contained on a card, tape, disc, coding sheet, or other form. Second, the Court ignored the “true object” of the online database purchases.

The taxpayer is not purchasing software; the taxpayer is purchasing information and related services. The Court confused the object of the transaction with the means to convey that object.

Nevertheless, because the Colorado Supremwe Court declined to review the decision, it is binding for those businesses that are located in or are doing business in Boulder.

Those affected should review their sales and purchases and make adjustments accordingly, i.e., sellers should start collecting the tax, and purchasers should start accruing and remitting the tax where appropriate.

It is important to remember that this is a decision that affects all taxpayers, not just software companies. Whether you are in retail, manufacturing, construction, or services, any payments you make to remote sellers for services are arguably at risk. Taxpayers outside of Boulder should be prepared for their own home-rule city to apply the Ball Aerospace decision in their hometown. Other homerule cities may not be as successful as Boulder, but there is no doubt they will try. s Bruce Nelson, CPA, is a Director with EKS&H. Contact him at bnelson@eksh.com.

April 25, he'll teach: "Manufacturing and Sales Tax — Continuing Opportunities" and "Construction Contractors — Essential Concepts, Tax Savings Opportunities, and Traps for the Unwary in Sales and Use Tax" at the COCPA.

Renew your CPA certificate now!

NOMINATIONS SOUGHT

Deadline March 7, 2014 Emerging Leaders

Women CPAs who — while still on the path to the highest levels of advancement — have made significant contributions to the profession and their communities, demonstrated leadership, been involved with their alma maters or other local colleges and universities, and/or created and implemented unique initiatives.

• All certificates — Active, Inactive, and Retired — must be renewed to remain in good standing.

• If you have not renewed your certificate, it is now past its November 30, 2013 expiration date. The grace period for late renewals ends on January 31, 2014.

• After January 31, your certificate will expire, and you may be subject to disciplinary action.

Renew Online: www.dora.colorado.gov/professions/renewal A $15 late charge will be applied to your renewal fee.

Leaders of Note

Women CPAs who have attained leadership positions within their organizations, made major or unique contributions to the profession, participated in public and community service, been published, and not only help to improve their workplaces but also mentor others.

Office of the State Auditor Local Government Audit Division has moved.

Office of the State Auditor

To request a nomination form, contact Terry Cervi at tcervi@cocpa.org.

SAVE THE DATE May 22, 2014 4:30 to 6:30 p.m.

Location TBD

State Services Building 1525 Sherman St., 7th Floor Denver, CO 80203

Make a note of the following new phone numbers: Office of the State Auditor – Local Government 303-869-3000 (303-866-3338 is no longer a working number.)

OSA Local Government Fax — 303-869-3061 (303-866-4062 is no longer a working number.)

Justin Smith, Program Assistant — 303-869-3001 (303-866-5351 is no longer a working number.)

Submit local government audit reports to osa.lg@state.co.us Jan/Feb 2014 • www.cocpa.org •

9

Volunteer Opportunities

Boots to Suits

Mentor Program Pairs Veterans with Professionals to Jumpstart Civilian Careers

BY NATALIE ROONEY

I

t can be challenging to make your way in the corporate world when your interview wardrobe consists of fatigues and your resume includes only your military rank.

This is the situation facing thousands of U.S. military personnel each year as their service to our country ends and they prepare for new lives as college students, employees, and leaders. Fortunately, Boots to Suits, an innovative program through the University of Colorado Denver (CU Denver), can help with the transition.

Meeting a Need Izzy Abbass, an Army veteran who served in Desert Storm, is the program director for Boots to Suits, which operates out of the Veteran Student Services Office on the CU Denver campus. He says the program is designed to assist highly trained and well-educated veterans as they move from the classroom to a career.

When individuals leave the military, they are able to take advantage of the GI Bill and pursue their dreams of college and a postmilitary career. They attend school for free where they choose their own major and receive a living stipend.

“Colorado is home to more than twenty-five thousand student veterans, “ Abbass notes. “Our state ranks tenth in the nation for the number of student veterans. That number will at least double over the next five

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years because of the reductions in force taking place.”

Abbass says Colorado schools have made a big effort to create a supportive environment for veterans.

Matching, Mentoring, and Shopping The Boots to Suits program partners with the Denver Chamber of Commerce to match each student veteran with a mentor in his or her area of study.

Mentors assist student veterans in a variety of ways, helping them understand what they’ll face as they move into their chosen careers. Resume preparation, translating military skills into “business speak,” preparing a LinkedIn profile, using social media, and networking are key aspects of the student/ mentor relationship.

“We want to help our student veterans create networks,” Abbass says. “That’s where jobs are sourced.”

Student veterans and their mentors meet a minimum of six times, but most of the relationships last far longer. The student typically comes to the mentor’s place of employ-

ment to visit with various departments and get a feel for corporate life.

Where does the “suits” part of the program come into play? At Brooks Brothers, of course. The program receives grants to help fit and pay for a custom-tailored suit for each Boots to Suits participant. “We want to help them look the part of a professional as well,” Abbass says, adding that a group of Marines said they felt like Julia Roberts’ character in the movie Pretty Woman on the day they went to be fitted for their suits.

Boots to Suits has matched 160 students with mentors since it started in 2012, including 30 students who are majoring in finance, 21 in accounting, four in finance and risk management, and seven in financial management. The remaining students are in a variety of majors including global energy management, human resources, and information systems.

Preparing to Transition Casey McCurdy was one of the first Boots to Suits participants. He served for four years in the U.S. Air Force Honor Guard in Washington, D.C., participating

Changing Your Certificate Status in funerals at Arlington National Cemetery and other ceremonies at the White House, the Capitol, and the Pentagon.

McCurdy was an accounting major, but he was unsure of what area of the profession to pursue after graduation. “I had no idea what I wanted to do after finishing school,” he says.

During McCurdy’s senior year, he was assigned a mentor, Lisa Cochell, CPA, senior tax manager at Hein & Associates LLP in Denver. Cochell heard about Boots to Suits through the Denver Chamber of Commerce and contacted Abbass in hopes of serving as a mentor. With two stepchildren in the military, she was supportive of the concepts behind the program.

Cochell’s knowledge and expertise were welcomed immediately. “Lisa helped us understand the timing of accounting internships and hiring,” Abbass says.

Tax season was on the horizon when McCurdy and Cochell first met. She was determined to help him find a job and transition successfully. “There isn’t a checklist for how to do that,” she says. “In the military, their lives are so regimented, and college is somewhat similar. I wanted to help Casey figure out what he wanted to do.”

McCurdy and Cochell began meeting to discuss his goals. “She was a great mentor,” McCurdy says of Cochell. “She knows about so many different aspects of accounting. She was able to give me an overview of her experiences and the pros and cons of working in different areas. It was nice to have someone to go to who had her depth of experience.”

Cochell helped McCurdy brush up his resume and customize it for each interview, adding key words she knew would be important to employers in different areas of accounting. The two also discussed interview techniques and potential questions, writing professional letters and e-mails, and how to make the most of on-campus interview opportunities. McCurdy also shadowed Cochell at Hein to get a feel for day-to-day activities at a firm.

Their efforts paid off. McCurdy is now a staff tax auditor with the City and County of Denver. “It was a smoother transition than I thought it would be,” McCurdy says.

Abbass notes that all participants have given Boots to Suits rave reviews, describing the experience as impactful for both the mentor and the mentee. “We had a student who invited his mentor to the final suit fitting. While there, as a thank you, the student gave his mentor the United States flag he received when he retired from the military. That’s how impactful this program is.”

Future Plans Abbass says that student veterans appreciate the program, and mentors love it.

“They’re doing something real in terms of supporting the men and women serving our country,” he says. “This is more than putting a magnet on your car to support our troops.

This is sharing your expertise with someone who’s done so much.”

The goal is to expand Boots to Suits to more schools in the CU system. The program could really be called “Boots to Anything,” Abbass says. “We want it to be “boots to whatever you want to do,” whether that’s international law, the environment, or joining the FBI. We want to help student veterans achieve their dreams.”s

Get Involved You don’t have to be a veteran yourself to participate with Boots to Suits. You can: • Be a mentor • Enlist an intern • Hire a vet • Suit up a vet Sign up online at http://tinyurl. com/boots2suits or contact Izzy Abbass, Program Director, Boots to Suits, Veteran Student Services Office at 303-5565813 or izzy.abbass@ucdenver.edu. Abbass can also arrange a presentation about the program for your company or organization.

Are you thinking about retirement from your public accounting career?

Have you started a new job in industry and you think maintaining your Colorado CPA certificate in active status is no longer necessary? If your answer to either of these questions is yes, or if you’re considering a career move that could affect your certificate status, pay close attention.

New rules, effective, July 1, 2013, may mean you have a few tasks to complete before making the leap.

For specific requirements, go to the Colorado State Board of Accountancy website, www.dora.colorado.gov/professions, and review the new rules in Chapter 6, Certificate Requirements, Discipline, Maintenance, and Status Changes. Please note: • You must be current with your continuing professional education (CPE) when you apply for a change to Inactive or Retired Status. Although the rules do not require you to take a certain number of hours at a specific time during the two-year CPE reporting cycle, the number of hours needed is calculated based on 10 hours per calendar quarter – or 40 hours per year and 80 hours per two-year period, including four hours of ethics, and no more than 16 hours of CPE in the Personal Development field of study.

• You must complete and submit an application to change your status – AND, you should do so before or after the current renewal period, November 30 of each odd-numbered year, or within the subsequent 60-day grace period through January 31, of the succeeding even-numbered year. You’ll find the downloadable application forms and further details on the State Board website under the “Professionals (Applications and Forms)” tab on the home page.

The COCPA can help you navigate the new requirements. For assistance, contact COCPA CEO Mary E. Medley at mmedley@cocpa.org.

Jan/Feb 2014 • www.cocpa.org •

11

Personal Development

of YOU

The

Managing Your Reputation in a Digital World

BY NATALIE ROONEY

I

f someone conducted an Internet search on your name, what would come up? And once someone found you, how would you be perceived? In today’s wired world, it’s important not only to have an online presence but also to manage it proactively so people see exactly what you want them to see.

Why People Are Looking for You Perhaps a prospective client wants to learn more about you and the way you do business. A potential employer may be checking to see what information exists about you beyond your resume. How do you want to come across when people find you online?

Lida Citroën, principal of LIDA360, Greenwood Village, helps companies and professionals gain a competitive advantage through reputation management. “You want to stand out and be known for the values that make you unique,” she says.

“While it may seem unfair that we live in a world where people judge us and make decisions based on what they read online, that's reality today,” Citroën says. “We’re taught not to care what people think about us, but it does matter. I might not get a proj-

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• NewsAccount • Jan/Feb 2014

ect or get promoted because I’m not seen as management material. Or I might not get a client because they’ve never heard of me.”

As a result, reputation management is critical. “Your current audience — potential clients, competitors, vendors, and supporters — all want to know about you. It makes them feel comfortable to vet, evaluate, and refer someone,” she says.

Building a Brand: You We build our reputation and a perception of ourselves every time we show up anywhere — in person or online — and that becomes our brand. Citroën helps her clients focus on long-term reputation management. “The equity in your reputation is so valuable,” she says, emphasizing that people don’t do business with other businesses; they do business with people. “Reputation management gives people control over how others view and perceive them.”

How do you build a reputation and brand online? Start with treating the online space or social media as another marketing channel, just like producing a traditional brochure, being interviewed by the media, networking in the community, or hosting an event.

The next step is to develop a strategy.

How do you want to come across? How do you want to be positioned? Who are your target audiences, and what do you want them to know, feel, and do? “That’s exactly how you would create a brochure or website,” Citroën points out.

Once your strategy is in place, you can make decisions about specific channels like LinkedIn or YouTube. Your strategy will drive how and where you appear online.

There is no one-size-fits-all solution.

Citroën offers a reminder that applies to everyone from students to CEOs: “Don’t forget: nothing you ever post online is private.

Ever. Not instant messages, social media, blog posts. Nothing. We tend to feel more comfortable and casual on certain social media platforms,” and that, Citroën says, “is a big mistake. People do and say things online that they’d never say in the presence of a client or colleague. It can be dangerous. Your reputation is everything. It takes a long time to build it. A few really poorly thought out posts can damage your reputation in an instant.”

Citroën offers the following tips: • Put yourself in your audience’s shoes.

What do they need to see and feel about you online? Speak to them where they are, whether that’s Facebook, LinkedIn, or another channel, and in a way they’ll relate to you. Your strategy drives where and how you show up.

• Be consistent. How you appear online should match your print materials, how you behave when you meet people, and what others say about you.

Authenticity is important.

• Have clear goals. Why are you doing this? What results do you want to achieve? Spend more time and money on what’s working. It will take trial and error.

Hiding Isn’t the Answer If you think staying off social media altogether is easier, you may be doing yourself more harm than good. While there are valid exceptions to having an online presence, ultimately controlling and managing your own image instead of letting the marketplace control it is more beneficial.

“People have a lot more control than they might think in terms of social media,” Citroen says. “I have had to drag clients kicking and screaming onto an online platform. When they see it’s manageable, engaging, and rewarding, it becomes a safer place.”

Managing Growth Sarah Johnson, chief growth strategist at Inovautus Consulting, Boulder, focuses on marketing to help CPA firms grow. That growth almost always involves a digital strategy.

“It’s important to communicate in a way that’s relevant,” Johnson says. “We help firms understand how to embrace digital, identify strategies that make sense for them, and implement those strategies successfully.”

For firms and CPAs who just don’t feel the need to be online, Johnson offers a gentle nudge. “Every CPA needs an online presence with at least the basic facts,” she says.

Today, 50% of e-mails are read on a mobile device. “That means people aren’t at their desktop computer conducting research,” says Johnson. “Phones aren’t ringing off the hook to get information. In this era, people reach out in other ways.”

Buyers are doing their due diligence by researching you, your products, and your services. If you have a good presence online, it builds and supports your credibility, giving someone a reason to reach out, Johnson says. Without an online presence, “You’re losing business before you even get

it. If you cannot be reached through online channels, you’re out of luck,” she cautions.

What might be worse than having no online presence at all? Having an online presence that isn’t credible, Johnson says.

“If someone’s initial point of contact with you is poor, it sets an expectation.” CPAs should set an impressive expectation, whether that’s with a website, social media, or more traditional marketing efforts. “All of it has an impact,” she adds.

Johnson offers the following tips for managing your online presence: • Create a solid foundation. Make sure you have a website that is in good condition and that you update regularly. In addition, make sure the technical structure of your website allows you to be found through search engines.

• Determine goals. What are you trying to accomplish with social media? Your goals will determine the best platforms to use. LinkedIn is the number one tool for CPAs and provides more conversions than any other platform.

• Write content. Get your name out there by writing for your own blog or contribute to another website. Be sure to set up Google Authorship. It takes

just a few minutes to do and will link readers to your profile on Google+, adding credibility. Use a profile photo so you’re no longer a faceless name.

Those tips, says Johnson, are the bare minimum for CPAs and firms who want to establish an online presence. Adding outlets, such as LinkedIn, Twitter, and Facebook, depends on your specific strategy.

Regardless of which outlets you use, Johnson emphasizes that everything is tied to content strategy. “It’s not enough to just have a LinkedIn profile,” she says. “You need to have a robust profile and use it.

You get out of it what you put into it.”

Don’t feel bad if you’re not up to speed on the latest in digital strategy. Schools are just starting to teach these concepts. Up until now, everyone has been learning by just jumping into the fray. “It’s a relatively new area,” Johnson says. “Don’t be afraid to ask for help. There are established practices, and there are people who can help you.”s Contact Lida Citroen at Lida@ LIDA360.com. Contact Sarah Johnson at sjohnson@inovautus.com.

Hit the Rink with Us Come for CPA Night, Jan. 30, when the Avalanche take on the Minnesota Wild at the Pepsi Center, Denver.

Network and enjoy drinks and appetizers at the pre-game reception. Then take in the game from the club seats section.

Family and friends welcome Register at www.cocpa.org.

Jan/Feb 2014 • www.cocpa.org •

13

Roads, Tracks, and Runways:

CDOT Oversees It All

BY NATALIE ROONEY

T

he Colorado Department of Transportation (CDOT) is responsible for Colorado’s 9,146mile transportation system which includes 23 million miles of road and 3,447 bridges, a big enough job in and of itself. But CDOT is more than roads and bridges.

This gargantuan state department also includes the Division of Aeronautics, which supports aviation interests statewide, and the Division of Transit and Rail, which provides assistance to numerous transit systems in the state.

If you've ever wondered who monitors facilities, road signs, rest stops, advertising billboards, and safety programs and campaigns like “Click it or ticket,” CDOT handles those too.

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• NewsAccount • Jan/Feb 2014

Humble Beginnings CDOT didn’t exist in 1909 when Colorado passed its first highway bill and formed the three-member Highway Commission to approve work and allocate funds. What officially became CDOT in 1991 began as the State Department of Highways in 1917. Today, it is the cabinet department that plans for, operates, maintains, and constructs the state-owned transportation system.

CDOT is responsible for a highway system that encompasses more than 9,100 center-lane miles (about 23,000 total lane miles), and handles more than 28 billion vehicle miles of travel annually. Although the national interstate system accounts for only about 10%, or 952, of the center-lane miles on the

state system, about 40% of state-highway travel within Colorado takes place on Interstate highways.

“Anything that touches transportation, we touch,” says Amy Ford, CDOT’s director of communications. “We are all things transportation.”

Statewide Structure CDOT operates under the direction of the Colorado Transportation Commission, which is composed of 11 members who represent specific districts. The commission directs policy and adopts Departmental budgets and programs. Gov. John Hickenlooper recently nominated past COCPA chair Sidny K. Zink, CPA, Durango, to the Commission.

She must be confirmed by the Colorado Senate this January.

As Zink puts it, "The Department’s billion dollar budget is hard to get your arms around.

Given the reality of fiscal constraints, CDOT is wisely revamping its approach to project funding, revising its cash flow model to better meet a practical philosophy of keeping our existing transportation system operative.

We may never have the money to expand and enhance the system as we might like, so let’s make sure it keeps the Colorado economy moving as best we can. In my application for the Commission seat, I highlighted that my CPA background might be particularly useful in this time of change."

The Executive Director’s Office leads the Department in planning for and addressing Colorado’s transportation needs. The executive director and other members of the senior management team set the direction of the Department, make recommendations to the Transportation Commission, assure consistent communication, set internal policy, set short-term and long-range goals, and provide leadership for the Department through the execution of the Transportation Commission’s policies and budgets. CDOT’s Chief Engineer directs the Department’s construction, safety, maintenance, and operations programs.

Divisions and offices within CDOT perform an array of functions. They include the new Division of Transportation Systems Management & Operations (TSM&O) which focuses on implementing low-cost, high-value operational improvements to get more out of Colorado’s existing transportation system, and the new Office of Major Project Development. It will help CDOT and the High Performance Transportation Enterprise (HPTE) more effectively and efficiently develop major projects through the promotion of consistency in the advancement, management, and oversight of such projects.

Competing for Dollars CDOT receives its revenue from the Highway Users Tax Fund (made up of the gas tax, vehicle registration fees, and other fees), fees, and surcharges related to Senate Bill 09108 (FASTER), Capital Construction Funds, a sales and excise tax on aviation fuel, and more.

Future revenue sources will include general fund transfers to the State Highway Fund and Capital Construction Fund over five years, contingent upon specific economic and fiscal conditions. The Department also receives revenue from federal sources including the federal Highway Trust Fund.

The problem? Demand for services continues to grow, expenditures are increasing, and revenues are decreasing. CDOT’s 2014 budget of $1.08 billion is down from a 2007 high of $1.6 billion.

It includes: $496 million for capital maintenance.

Also known as asset management, these funds pay for strategic fixes (rehabilitation, repair, treatments) to extend the life of an asset. This includes surface treatment; bridge rehab/reconstruction; the Intelligent Transportation System; culverts; rockfall mitigation; tunnels; equipment; and buildings. $254 million for annual maintenance.

These funds are distributed statewide with consistent levels of service maintained across the state. These include snow and ice control; signing and striping; roadway surfaces; roadside facilities; material/equipment/buildings; planning/scheduling; Intelligent Transportation Systems maintenance; structure maintenance; tunnel activities; and roadside appearance. $194 million in pass-through grants.

These funds, along with 40% of the federal Highway User Tax Fund (approximately $320 million annually) are distributed directly to local governments/planning organizations to use for things like surface transportation programs; congestion mitigation air quality; transit and rail; transportation and alternatives; bridges; and recreational trails. $137 million for special programs. This area includes all programs (except those funded federally) coordinated through CDOT regions in collaboration with local planning partners: FASTER safety; highway safety investment (federal); regional priority; railway highway crossing (federal); hot spots; and traffic signals.

Making the Cut: Determining a Project List Of course, we all think our local project is the most critical. And while CDOT would love to drop everything and head to your

neck of the woods, tough decisions must be made about which projects make “the list” and which ones don’t.

Ford says at current funding levels, CDOT focuses on maintaining assets.

“There’s no money to expand for the future.”

Ford describes the Department’s planning process as a statewide endeavor. “We work with the different Transportation Planning Regions and Metropolitan Planning Organizations throughout the state,” she explains.

Colorado has 10 Transportation Planning Regions (TPRs) and five Metropolitan Planning Organizations (MPOs). CDOT works with each of them to plan priorities for the next 10 to 20 years. Local elected officials in cities and counties are also involved.

The process is complex and simultaneously addresses mobility, congestion, safety, changes to roads, capacity, and improvements to bridges to name just a few of the components.

Coping with a Shortfall Unfortunately, CDOT's budget doesn’t come close to addressing all of Colorado’s transportation system needs — falling approximately $772 million short.

“We have the funds to manage what we currently have and no funds to add to our system,” Ford says. “Plans are great, but we’re operating in a fiscally constrained environment. How do we maintain what we have?

How do we make sure we keep our roads and bridges safe? We have to make hard choices about what gets done and what doesn’t.”

The Department’s new asset management program helps to balance and manage projects that are higher risk. “We determine what’s most critical to fix first, and do it on a statewide level,” Ford explains.

In 2009, Colorado passed the FASTER legislation which raised vehicle registration fees and brought badly needed revenue into the system. The funds were dedicated to bridges and safety after it was determined that many of Colorado’s bridges and roads were functionally obsolete and didn’t meet modern design standards. Ford points to the legislation as the reason Colorado now has 96% of its bridges in good or fair condition, one of the higher percentages in the country.

CDOT Continued on 16 Jan/Feb 2014 • www.cocpa.org •

15

CDOT Continued from 15 While highly congested urban areas may seem to need the most immediate attention, Ford says the Department also works constantly in rural areas to reduce fatalities on roads that might not have adequate shoulder space. “We’re looking at the rest of the asset management program with the same eye we’re using to evaluate bridges,” she says.

Accounting for Transportation CDOT is changing how it budgets and expends funds for transportation projects, Ford says. The new effort, known as Responsible Acceleration of Maintenance and Partnerships (RAMP), will better coordinate project expenditures and available funding.

Currently, CDOT does not advertise a project until all of the money is “in the bank,” which means the Department is saving money for projects over multiple years before construction begins. In addition, some projects take several years to construct.

As a result, money often sits unspent when it could be utilized much sooner.

Under the RAMP program, CDOT will fund multi-year projects based on year of expenditure, rather than saving for the full amount of a project before construction begins. RAMP provides a $300 million a year increase for five years. The Department hopes that the combination of RAMP and asset management will stabilize the condition of the highway system over the next decade.

“RAMP came about because an accountant said, ‘We can do this differently,’” Ford says. “It was a matter of someone pointing out that while CDOT’s financial modeling was safe and we could do the projects we needed to do, there was an opportunity to get our money more quickly into construction.”

Another initiative is Moving Ahead for Progress in the 21st Century Act (MAP-21).

The 2012 legislation updates and replaces the Safe, Accountable, Flexible, and Efficient Transportation Equity Act: A Legacy for Users Act of 2005 (SAFETEA-LU), specifically reauthorizing federal transportation programs, providing budget authority for federal transportation apportionments, and updating federal statutes governing the U.S.

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• NewsAccount • Jan/Feb 2014

Department of Transportation (USDOT) and its various agencies and programs.

Ford says MAP-21 is changing how the Department prioritizes and manages its assets on a risk basis. “We’re looking at how we manage all of our assets when we know we only have the funds to manage them and not expand them,” she says.

MAP-21 provides spending authority through Sept. 30, 2014. The bill reauthorizes the three federal motor fuel taxes that support the Highway Trust Fund through Sept.

30, 2016, in addition to other apportionments with small inflationary adjustments.

It’s important to note that federal funds don’t come without some strings. Certain funds can only pay for certain projects.

“There are formulas for distributing the funds,” Ford says. Some funds, called PassThrough Grants, come straight to CDOT from the federal government, to be distributed to Colorado’s TPRs and MPOs. “We distribute based on different categories per assessment management and our portfolio,” she says.

Big Idea Projects If CDOT can only cover critical projects, will “big idea” projects, like high-speed rail in Colorado’s I-70 and I-25 corridors, ever come to fruition? Studies have shown the high-speed rail concept is feasible, and Ford says the Department is in the process of examining the ideas. Estimates put the project at $22 billion to construct. Where would the money come from? Ford says all options are on the table at this point including creating toll roads, increasing the gas tax, a general sales tax increase that would be sunsetted, and creating public/private partnerships.

MPACT 64, a coalition of advocacy groups from each of the state’s 64 counties has been studying what options citizens would be willing to support to raise additional revenue for transportation. “It comes down to what people have an appetite for,” Ford says.

Future Shock If things are constrained now, the future looks even tougher. By 2040, CDOT estimates Colorado’s population will grow by 54% to 7.7 million. Vehicle travel will jump

to 47.9 billion miles traveled, and the average traffic delay will soar 188% with a current 17-minute delay becoming a 50-minute delay.

A survey by the Colorado Transportation Coalition revealed that Coloradans are willing to pay more for transportation, but they have their limits. Seventy percent of those surveyed said they would be willing to pay $30 a year. When the tab is raised to $60 per year, 68% say they are willing to pay more. That willingness declines slightly to 66% when asked if they would pay $90 a year.

Willingness to pay a higher gas tax is another story. Colorado’s gas tax hasn’t increased in more than two decades. At 40.4 cents, the state’s rate is below the national average of 49.4 cents, but when polled, only 33% of Coloradans say they would support a five cent increase per gallon.

The Department is working to leverage public/private partnerships to use private money to address public sector needs. However, it’s clear the state can’t build its way out of growth and congestion issues.

“We’re continually asking how we successfully manage people’s mobility, use lanes effectively, and increase the reliability of lanes,” Ford says. Options being considered are tolled express lanes where the tolled lanes would be built by private investors who would then collect the tolls. Ford says this is a common practice in Europe. “The private sector is definitely interested in this model,” she says, adding that this type of system accelerates construction. CDOT’s first public/ private partnership is the U.S. 36 corridor to Boulder, bringing a project to fruition that the Department wouldn’t be able to fund for 20 years. Approximately one-third of the cost would be from public funds with the additional dollars coming from the private sector.

Other corridors under consideration for this model include I-70 east to Denver International Airport, the I-70 mountain corridor, C-470 around Denver, and I-25. Ultimately, it comes down to what Coloradans say they want versus what they’re willing to fund. If CDOT’s coffers don’t increase, projects will stay on the list until they’re deemed critical, says Ford. “For now, we’re doing as much as we can to be as efficient as possible, to tighten our belts, and to get the most possible out of our program.”s

Tax Checkoff is a simple way to help clients help others.

Please take a moment to help your clients with their charitable intentions by explaining the voluntary checkoff. For more information, scan the QR code or visit www.spurrfp.com/mhac.

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www.eksh.com Jan/Feb 2014 • www.cocpa.org •

17

Education

Best Plan for College Savings: An Early Start

BY DOUGLAS P. HEPBURN, CPA, PFS, CFP

As with most challenges, time can be the great equalizer. The more time that is available, the fewer resources are necessary, provided assets can grow at a rate faster than inflation. With college tuition costs rising at a rate greater than 5% above inflation, planning should begin as soon as one has children, if not before.

The luxury of time permits investors to take on greater risk in exchange for potentially greater returns. As the time horizon gets shorter, though, the need for liquidity and lower volatility dictate a lower risk strategy likely to result in lower returns.

Funding Options

P

arents of high school children have every right to be terrified about the potential cost of college, and personal financial planners can play an important role in assuaging their clients’ fears by working with them to develop a comprehensive college savings plan.

According to a report from The College Board, average tuition rates for 2012-2013 ranged from $3,131 for a two-year degree at a public college to $29,056 for a four-year degree at a private institution. These figures do not include room, board, books, and transportation, which can drive the annual price to over $60,000 for students at elite schools. As with most financial planning opportunities, the options are typically determined by three drivers: resources, time, and risk tolerance. Individually, each factor plays a different role in developing the solution, so it’s important to evaluate each in relation to the other when crafting a plan.

By far the greatest determinant of success is resources. For clients with a surplus, time and risk tolerance become less important as the likelihood of failure is significantly reduced. In these cases, taxes would be the greatest penalty for failing to plan. For those where resources are constrained, time and risk tolerance take on greater importance.

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• NewsAccount • Jan/Feb 2014

The most flexible way to fund college tuition is through taxable savings since assets are liquid and the parent maintains control. The downside is that it can be extremely inefficient for those in higher tax brackets. The resurrection of the 39.6% tax bracket and the addition of the net investment income tax means clients could end up paying 43.4% in federal tax alone on each marginal dollar of investment income.

One strategy to avoid this is to transfer income-producing assets to children through custodial accounts, such as Uniform Gift to Minors Act (UGMA) or Uniform Transfers to Minors Act (UTMA) accounts. Under “Kiddie Tax” rules, it is possible for dependent children to receive up to $2,000 in unearned income, tax free. Depending on the minor’s state of residence and the type of account, the custodian has full control over the funds while the child is under the age of termination (18, 19, or 21). Once that age is reached, the child will have full access without restrictions — an uncomfortable thought for many parents.

Section 529 plans are a good choice because the assets can grow tax-deferred, and distributions used to pay qualified expenses are taxfree. These plans are offered as either prepaid tuition or investment plans.

Prepaid tuition plans permit contributors to purchase college credits in advance to offset future tuition costs. Credit values are designed to grow at the rate of tuition inflation as defined by the plan, and the sponsor bears much of the risk in meeting the intended goals.

Alternatively, 529 investment plans are similar to defined con- Determining Need tribution plans, in that the contributor decides how much and how For most Americans, one or more of the key factors (resources, often to contribute. Performance is dictated by the choice of the un- time, or risk tolerance) is significantly constrained. This results in a derlying mutual funds, and the investor bears all of the risk. funding gap that is usually filled by student aid in the form of scholGenerally 529 plans are sponsored by state governments. A key arships, grants, and loans. According to The College Board’s Trends consideration in choosing a 529 plan is whether state-specific laws in Student Aid 2013, over the past 30 years total student aid from all favor in-state plans by providing greater benefits. These plans gen- sources has increased from $36 billion to $238 billion (2012 dolerally have fees and expenses associated with them and are sold by lars). This includes government, institutional, and private grants as prospectus/disclosure document. The primary well as loan subsidies, tax credits, and derestriction on 529s is that the earnings on disductions. tributions not used for qualifying higher eduThere are two types of scholarships cation expenses are subject to income tax and available to students: merit-based scholFor most parents, a 10% penalty. arships and need-based scholarships. If a borrowing ends up being Another benefit of 529 plans is the abilchild has a unique skill or attribute that a ity to place five years of gifts into the plan particular college or university would like the first, if not the only, in one lump sum. For those who have acto have as part of its student body, that option they consider. cess to such large gifts, this presents a sigcould work to your client’s benefit. For exnificant opportunity for generational planample, a child who is gifted in mathematics ning. Considering the annual gift exclusion may qualify for merit-based aid. But not all is $14,000 for 2014, two grandparents schools give merit aid. For instance, many could fund $140,000 in one year through gift splitting. If all four highly competitive schools do not give merit scholarships since, pregrandparents are alive, they could fund up to $280,000 or the sumably, all of their students would qualify. A family doesn’t have maximum permitted by the plan sponsor, whichever is less. The to be financially needy to qualify for merit-based scholarships, so it caveat is that the contributors must survive the full five years fol- makes sense to advise clients to go through the financial aid process lowing the gift. to see what they qualify for.

For children entering or already in college, direct payments The first step in the financial aid process is to determine the Efof tuition by grandparents is one of the most powerful planning fective Family Contribution (EFC). This is the dollar amount of tools as tuition payments are not subject to gift or generation education expenses that is expected to be borne by the family. There skipping taxes. This strategy can also work for prepayment of tu- are two ways to calculate EFC: the federal methodology, which is ition, provided the prepayments are nonrefundable and become accomplished through the Free Application for Federal Student Aid the sole property of the school.

(FAFSA) form, and the institutional methodology (IM), which is a Other tax-advantaged savings options include Coverdell Edu- variation often used by private institutions. The FAFSA will be escation Savings Accounts (CESA) and Education Savings Bonds. sential in determining whether the student qualifies for federally CESA accounts are similar to 529 accounts in that they are fund- sponsored financial aid programs. The IM was developed to get a ed with after-tax money and the gains can be distributed tax-free clearer picture of the family’s need by adding some income and aswhen used for qualifying education expenses. That is where the sets that the FAFSA ignores, and it can vary from one institution to similarities end. another. Schools that use the IM will often require the CSS Financial CESA contributions are limited to a maximum of $2,000 per Aid PROFILE. Because the information that goes into both models year per beneficiary, and the contributor’s ability to gift is phased is derived from the client’s balance sheet and Form 1040, tax planout when modified adjusted gross income (MAGI) reaches ning and advance preparation can play a key role in determining the $220,000 for joint filers and $110,000 for single filers. One ad- EFC each year the student is enrolled and applies for aid. vantage CESAs have over 529 plans is that the assets can be used The first step is to calculate available income (AI), which confor elementary or secondary education as well as college expenses. sists of adjusted gross income (Form 1040, Line 37) plus untaxed But the restrictions have made these accounts less advantageous. income and benefits (retirement plan contributions, child support, Education Savings Bonds (Series EE and I) are issued by the tax-exempt interest, etc.) minus taxes and an income-protection alU.S. Treasury, and interest on the bonds is tax-free if used for lowance. qualifying education expenses. The interest exclusion is phased Discretionary net worth is then calculated by adding cash, savout for families with MAGI between $113,950 and $143,950. ings, investments, and the adjusted value of business/farm interests Traditionally this has been the option for more risk-averse clients. to arrive at net worth, which is then adjusted for the education Other limitations such as an annual maximum purchase amount savings and asset protection allowance to arrive at discretionary also apply. net worth. This total is

College Continued on 20

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Education

College Continued from 19 multiplied by an asset conversion rate to arrive at the contribution from assets, which gets added to AI to arrive at adjusted available income (AAI). The parents’ contribution is then determined from a table. Added to the parent’s contribution is 50% of the student’s income, less taxes and income allowance, plus 20% of the student’s assets.

Other factors that affect EFC include the size of the family, age of the oldest parent, and other students in college at the time the FAFSA is completed.

The need calculation is somewhat easier, beginning with the annual cost of attendance (tuition, room, board, fees, books, etc.), minus EFC and other resources, such as meritbased and private scholarships, and the net result is adjusted need. Depending on the institution and its desire for a particular student to attend, the financial aid department may come up with additional financial support to fill this gap. Chances that they will eliminate your EFC, however, are low.

Free Money The best aid that students can receive is in the form of grants and scholarships because these don’t need to be repaid. In addition, if they are not conditioned on employment or service, they are not subject to income tax.

Federal grants are based on need and require recipients to maintain a minimum GPA. The most commonly recognized is the Pell Grant, which is awarded to undergraduate students and has a maximum value of $5,645 for the 2013-2014 award year.

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For the 2011-2012 academic year, dependent students whose parents earned less than $30,000 received 60% of all Pell Grants.

Only 5% of recipients in the same category had parents with incomes over $60,001.

Scholarships, on the other hand, are often merit-based and can be offered through the institution, the state, or other organizations such as corporations, private or community foundations, and religious and fraternal organizations. In virtually all cases, recipients are required to meet minimum qualifications and apply for the scholarship.

Getting information on scholarships used to be challenging, but in recent years websites such as www.fastweb.com and www. scholarships.com have sprung up to meet demand.

Self-Funding After determining the actual cost of attendance and deducting the benefit of any aid, the remainder needs to be funded by the family. This will either be paid out of current income, liquidation of assets, or loans.

For clients with sufficient cash flow, paying the remaining costs out of income may be the easiest solution, provided it doesn’t negatively impact other goals such as retirement. The primary consideration in these cases is opportunity cost. If the client didn’t use those funds to pay education-related costs, would the alternative have been a more productive use of capital?

Liquidating assets can be an acceptable strategy if close attention is paid to the tax ramifications of any sales, as well as the opportunity cost of not keeping the asset. In

this case, 529 accounts, CESAs, and education bonds would make the most sense to liquidate first since distributions used for qualified expenses are tax-free.

The next items for liquidation would be assets in the child’s name where long-term capital gains can be taken without paying tax. Under the American Taxpayer Relief Act of 2012, long-term capital gains that would otherwise be taxed at a rate below 25% are taxed at a 0% rate. Considering the 25% tax bracket for single taxpayers begins at income over $36,900, a long-term gain beneath that limit could result in a tax savings of up to $7,380, assuming the gain would otherwise be taxed at 20% if the asset were owned by the parent.

For many years, parents were advised to overfund permanent life insurance policies as a way to accumulate savings that do not need to be reported on the FAFSA form. For clients in this situation, borrowing against the policy’s cash value can be a source of dollars for education, but great care needs to be taken to make sure the policy doesn’t collapse, leaving the owner with a large tax bill on untaxed earnings inside the policy.

Loans For most parents, borrowing ends up being the first, if not the only, option they consider. Here, too, there are many choices. The two types of federal student loans are Stafford and Perkins.

Stafford loans can either be subsidized or unsubsidized. For subsidized Stafford loans, the government pays the interest while the student is enrolled. There is a six-month grace period before payments begin after graduation, and the principal can be repaid over 10 to 25 years. To qualify for a subsidized Stafford loan the student must have a financial need and be enrolled at least halftime.

Students who don’t qualify for this subsidy can get an unsubsidized Stafford loan. The difference is that the student must repay all of the interest, including interest accrued during the college years. The current interest rate on both Stafford loans is 3.86%, with annual and cumulative borrowing limits for each.

Perkins loans are made through, and repaid to, the school the student is attending. While interest rates can vary on these loans, the repayment term is generally 10 years with a nine-month grace period following graduation. To qualify, a student must attend at least part-time and have an exceptional financial need. The annual borrowing limit on Perkins loans is $5,500, for a total of $27,500 as an undergraduate. In each case, the student is the borrower and is responsible for repayment of the loan.

For parents unconcerned about cosigning for their dependent children, PLUS loans are often used to fill any gaps remaining after Stafford or Perkins loans have been maximized. These generally carry a higher interest rate than Stafford loans and have no annual limits. Payment begins 60 days after disbursement, but parents have the option to defer interest payments while the student is enrolled at least half-time.

Many parents have opted to pay for college education with home equity loans or lines of credit. This strategy may have merit due to the home mortgage interest deduction, but your clients will have to weigh this advantage against the additional debt burden that they will be solely responsible for and the tax benefits that the child will forego.

Parents unable or unwilling to use home equity loans can opt for private loans. Depending on the lender, they may be able to get better terms than direct federal student loans and avoid cosigning.

Even if a client doesn’t qualify for need-based financial aid, there are subsidies available for education through the tax code, including the Tuition and Fees Deduction, the American Opportunity Credit, and the Lifetime Learning Credit. While the benefits are limited, every bit counts.

Accounting Scholarships The Educational Foundation of the COCPA offers $2,500 scholarships to upper division accounting majors at Colorado colleges and universities.

Both undergraduate and graduate students are eligible. Scholarships are awarded in July.

For an application and more information, head to www.want2bcpa.org.

Information and application forms for AICPA scholarships are available at www.thiswaytocpa.com.

Conclusion There are numerous strategies available to help clients either reduce their reportable assets/income so that they can reduce their EFC or find other ways to pay for education that may be deductible. These strategies often focus on income shifting, asset shifting, or employment in the family business.

Each client’s facts and circumstances present different opportunities that can be applied to solve their tuition-funding need. Invariably, the solution is likely to be a combination of strategies working together to achieve their goals. The only way to determine which ones will work is to ask clients if college education for their children is important to them, and then model the solutions to show what works best for their specific situation. s Douglas P. Hepburn, CPA, PFS, CFP, is an investment advisor representative with Cetera Advisors LLC, El Segundo, Calif. He is also a member of the Pennsylvania CPA Journal Editorial Board. He can be reached at dhepburn@hepburnadvisors.com. Article reprinted with permission of the Pennsylvania Institute of CPAs

Foundation Benefits from Your Support

Thank You

On Dec. 10, 2013, the Educational Foundation of the Colorado Society of CPAs participated in Colorado Gives Day, an initiative to increase philanthropy in Colorado through online giving. The Foundation received almost $3,000 from members and friends of the profession.

If you missed it, you can still donate through www.ColoradoGives.org. Contribute with a Visa, MasterCard, Discover, or American Express, or by using the information from a personal checking, business checking, or savings account. Your contribution is tax deductible to the full extent permitted by law.

Thank you for supporting Colorado accounting students.

Your dollars really do make a difference.

Jan/Feb 2014 • www.cocpa.org •

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Industry

Renewable Energy Financing: Partly Sunny or Impossibly Gloomy?

BY LIZETTE PEÑA, CPA

According to the National Renewable Energy Lab (NREL), a national laboratory of the U.S. Department of Energy based in Golden, Colo., wind and photovoltaics (PV) required an estimated $35 billion in 2012 to finance installations of 16.4 GW of power.

The U.S. share of global solar installations in 2013 reached 13%, up from 5% in 2008, and a solar project will be installed in the U.S., on average, every four minutes.

This all sounds great, right? Not really.

Although renewables are up, they represented only 11% of total U.S. energy production in 2012. Adequate financing is key. What are the hurdles? What’s working in the industry?

What are the opportunities for the future?

Challenges Identified To understand the real concerns with financing renewable energy (RE) projects, I personally spoke with bankers, investment bankers, and tax equity investors.

Conventional Financing – Bankers Technology Risk: The number one concern is the technology risk associated with projects and a lack of understanding of the technology itself. Questions include: Will this project be obsolete in three years? How do I value this collateral?

Project Lenders: Conventional bankers are not in the business of being a project lender. Instead, they fund companies and individuals with cash flow, collateralized assets, revenues, and receivables.

Business Risk: In addition to the abovementioned concerns, the related risks associated with an early stage RE company can scare bankers away. Admittedly, an early growth stage company has limited to no collateral, historical earnings, or sales. Your ideal bank target? Not really.

Policy Risk: Bankers could mitigate these risks by attending the NREL Energy Ex-

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• NewsAccount • Jan/Feb 2014

many RE projects do not fit in with traditional investment bankers’ portfolio requirements. They want an ROI of three to five years, not twenty.

Business Risk: The business risk associated with early growth stage RE companies (lack of revenues and cash flow) makes this investment unattractive. This is complicated by the fact that this industry is capital intensive and not easily scalable, as software can be.

Finally, can we point to a Google-like example in the industry? These potential funders are looking for real success stories that will instill confidence in this industry. ecutive Leadership Academy which educates business professionals about RE technologies.

However, there is still one significant sticking point: the lack of significant and consistent support from the federal government.

It's not about subsidies or tax incentives. In fact, most well-run RE organizations aim to be self-sufficient. It’s about creating policies that embrace the transition to RE and leading by example. Instead, we have expiring tax credits, lack of consistent utility programs, and unfocused planning and leadership to integrate renewables into the grid. This creates an uncertain environment for everyone — the lender/source of financing, the business owner, and the customer.

Investment Bankers Policy Risk: The single biggest concern for this group is related to policy risk. Similar to conventional bankers, investment bankers are uncomfortable with inefficient government policy and red tape overrunning good business policies. With government leadership changing every two to four years, investors find it difficult to operate. The lack of significant and consistent U.S. government support creates too much uncertainty for many investment bankers to fund these projects.

Long Payback Periods: Long payback periods and return on investment (ROI) for

Tax Equity Investors Limited Tax Benefits: As discussed previously, tax benefits are on the decline, and therefore, these types of investors will also decline.

Contract negotiations: These are costly and time consuming.

What's Working Prologis deployed over 100 megawatts of rooftop solar through March 31, 2013, according to Drew Torbin, it's Vice President of Renewable Energy. Also, SolarCity, a publicly traded energy service provider in the distributed solar generation market, has grown significantly in the past three years with annual installations of 156MW in 2012, up from 15 MW in 2009. How is this possible?

Following are two of the common investment structures used in the industry.

Partnership FLIPs Partnership FLIPS monetize available tax credits such as production tax credits for wind energy or investment tax credits (ITC) for solar energy. In a FLIP: • The tax equity investor owns the largest percentage (typically 99%) of the

partnership/project during the first six to seven years.

• The tax equity investor utilizes accelerated depreciation expense deductions over six years.

• The tax equity investor monetizes the ITC immediately.

• After depreciation is exhausted, the ownership “flips” to the developer and the tax equity investor owns a very small percentage.

Steps for a successful FLIP 1. Identify the RE project.

2. Get the project ready to start. a. Take care of contract and logistical details, land site, construction schedule, and get permits pulled. b. Make it easy and attractive to the investor by having all the details worked out ahead of time.

3. Find the appropriate investor(s).

Lease Pass-through Similar to a FLIP, these structures are designed with a tax equity investor (lessee) to utilize the ITC, and the developer (lessor) retains the depreciation benefits and ownership of project. This type of structure appears to work well in states with high energy prices such as California and is utilized by SolarCity.

Investor Appetite The key is matching the investor to the project size. Large banks favor larger projects. US Bank and Wells Fargo have internal divisions with the capacity and expertise for financing these projects. Family offices favor smaller projects to diversify their investment portfolios. There are investors that specialize in the energy space such as Boulder, Colo., based Main Street Power and NRG Energy, a Standard & Poors 500 company.

Opportunities for the Future The key to successful and increased funding for RE projects lies in the ability to provide low cost financing that will attract capital. Specifically, opportunities for financing RE include the following: Master Limited Partnerships Currently, this partnership structure is only available to the energy extraction industries — oil, natural gas, coal extraction, and pipeline projects. RE projects are ineligible to organize under this structure which provides access to lower cost capital and is traded like corporate stock. Income is taxed as a partnership/flow-through and is more liquid than traditional financing to energy projects. In May 2013, U.S. Senator Chris Coons (DE) introduced the MLP Parity Act to modify the federal tax code, but the law remains unpassed.

Asset-backed Securities These are public capital vehicles that allow for payments on assets like mortgages and cars. Properly structured, they are cost efficient systems to encourage customer ownership in residential and small RE systems.

Municipal and Infrastructure Bonds These are fairly liquid investments that may match the long-term ROI goals of institutional investors.

NREL has published two reports on these investment structures which provide more information: "Mobilizing Public Markets to Finance Renewable Energy Projects: Insights from Expert Stakeholders," and "Financing U.S. Renewable Energy Projects Through Public Capital Vehicles: Qualitative and Quantitative Benefits."

Every year, RE is becoming a more significant provider into our current energy system. After understanding some of the challenges faced by investors, it appears that with focused and continued education of the industry and technologies coupled with favorable government policies, the United States will be able to successfully compete with Germany and China in the race to lead the RE challenge.s Lizette Peña, CPA, of CliftonLarsonAllen LLP, Broomfield, recently graduated from the NREL Energy Executive Leadership Program.

Contact her at lizettepena@gmail.com.

Jan/Feb 2014 • www.cocpa.org •

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FASB Update

Thumbs Up For Private Company GAAP Exceptions Nov. 25, 2013, the Financial Accounting Standards Board (FASB) endorsed two GAAP exceptions for private companies, marking a milestone in the work to provide simpler, less costly rules for private companies while producing financial statements that reflect economic reality.

The endorsement of exceptions crafted by the Private Company Council (PCC) means exceptions for private companies will be written into GAAP. The exceptions will:

tiously on private companies and not-forprofits.”

In addition to the two approved exceptions, the PCC requested FASB endorsement of an exception to applying variable-interest entity (VIE) guidance to common-control leasing arrangements for private companies.

FASB also will consider whether the VIE alternative should apply to public companies.

• Exempt private companies from having to perform impairment tests for goodwill subsequent to a business combination.

• Provide a simplified hedge accounting approach for accounting for certain interest rate swaps that private companies other than financial institutions enter to convert variablerate debt to fixed-rate debt. Private companies whose only derivatives are such swaps also would be exempted from certain fair value disclosures.

FASB also added a project to its agenda to determine whether changes to goodwill impairment accounting also should be made for public companies and not-for-profits.

The Board acknowledged that this may create additional changes for private companies at a later date in what Board members called a “double switch.”

The Board chose to offer private companies immediate relief rather than denying the relief in the interest of possible future consistency. “Ideally it would have been substantially more effective and efficient to have done this holistically,” said FASB Chairman Russell Golden. “… I think there is a double-switch risk, but I think it can be mitigated by educating the privatecompany constituents and working expedi-

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The endorsed goodwill exception directs private companies to amortize goodwill over 10 years, or less than 10 years if the company can demonstrate that another useful life is more appropriate. Under the exception, a private company will be able to make an accounting policy decision to perform its impairment testing at the entity level or the operating level.

A private company would test goodwill for impairment only when a triggering event occurs that may reduce the fair value of an entity or reporting unit (if elected) below its carrying amount. The exception also would eliminate Step 2 of the impairment test.

The guidance can be applied prospectively for goodwill existing as of the beginning of the period of adoption, and for goodwill generated from business combinations occurring in the first annual period beginning after Dec. 15, 2014, and interim and annual periods thereafter. Goodwill that exists at the beginning of the period of adoption can be amortized prospectively over 10 years, or less than 10 years if another useful life is more appropriate. Early adoption is permitted.

Small private companies are most likely

BY KEN TYSIAC

to benefit from the exception, according to Greg Forsythe, the leader of Deloitte’s Center of Valuation Excellence. “The view is the difficulty of monitoring and tracking — continually — and performing this impairment analysis, outweighs the benefits of doing it,” Forsythe said. “That’s the arena where it’s going to be appreciated most.”

But larger private companies may face a difficult decision. If they have any inkling of plans to go public, they may decline to use the exception because it would be challenging to reconfigure their historical accounting at a later date, Forsythe said.

The possible changes to public company accounting also could be significant, he said. Board members said the International Accounting Standards Board (IASB) also is considering changes to goodwill impairment.

The other approved exception — the simplified hedge accounting approach — is a practical expedient that allows private companies to qualify for hedge accounting under Topic 815, Derivatives and Hedging.

For private companies using this approach, the periodic income statement charge for interest would be similar to the amount that would result if the private company had entered into fixed-rate borrowing rather than variable-rate borrowing.

The approach will take effect for the first annual period beginning after Dec. 15, 2014, and interim and annual periods thereafter. Early adoption is permitted.

For complete details and information on other FASB initiatives, go to www.fasb.org.s Ken Tysiac, ktysiac@aicpa.org, is a senior editor with the Journal of Accountancy.

Reprinted with permission from the Journal of Accountancy.

Classifieds Opportunities Available Audit Senior/Manager. Dynamic and growing regional CPA firm seeks motivated CPA with 5+ years experience in Audit and Local Government. This opportunity offers rewarding work all while living in Vail Valley, Colorado. Please email cover letter and resume to jobs@ mcmahancpa.com.

Practices for Sale, Purchase, or Merger

Networking Happy Hour

January 23

5:30 p.m. - 7:30 p.m.

Hacienda Colorado 4100 East Mexico Ave. Denver,CO 80222 FREE No Need to RSVP

Fred Mehring, Select Business Group, Inc., specializes in the sale, merger, and acquisition of accounting and tax practices. Over 25 years of experience. Confidentiality stressed!

Call Fred Mehring at 303-771-3100, fax 303-477-6010, or fmehring@selectbg.com.

Movers & Shakers Katrina Salem, CPA, PricewaterhouseCoopers, LLP, Denver, received the Denver Business Journal’s 2013 Outstanding Women in Business Award, in the banking, finance, and accounting category.

Raymond S. Cerney, CPA, moved his office to 7623 E. Jamison Dr., Centennial, CO 80112. His phone number remains the same, 303-758-7712

The Business Manager, LLC, Greenwood Village, was selected by the Colorado Community College System to provide bookkeeping and treasury services for eight Career and Technical School Organizations (CTSO) for a five-year term.

Mark J. Smith, M.J. Smith and Associates, Greenwood Village, was named a Five Star Wealth Manager for 2013.

In Memoriam

We regret the loss of the following COCPA members. We extend our sympathy to their families, colleagues, and friends.

11th Annual MCC Wine Tasting and Networking

January 15

5:30 p.m. – 7:30p.m.

The Wild Women Winery at D'Vine Wine Denver 1660 Champa St., Denver $40.00 Includes: 5 wine tastings, 1 full glass of your favorite, and Gourmet Appetizers through the evening • Only 30 openings available • Friends and co-workers welcome

Reserve a ticket at www.cocpa.org.

Claudia Simmons Beattie Member since 1996 Rifle, Colo.

Randall S. Carmichael Member since 2012 Boulder, Colo.

David R. "Bob" German Member since 1987 Fort Collins, Colo.

Marie M. Messner Member since 1992 Cortez, Colo.

Jan/Feb 2014 • www.cocpa.org •

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Colorado Society of Certified Public Accountants 7887 E. Belleview Ave., Suite 200 Englewood, CO 80111-6076

Periodicals Postage

Dig into January CPE Learn what you need to know before the work piles up…

Preparing Individual Tax Returns for New Staff and Para-Professionals Jan. 9 (COCPA) Edward A. Harter If your new staff accountants, data processing employees, paraprofessionals, and bookkeepers could use some hands-on guidance to prepare complicated federal individual income tax returns this season, sign them up for this highly rated course.

• $355 /$507 The Complete Guide to Preparing Limited Liability Company, Partnership, and S Corporation Federal Income Tax Returns Jan. 10 (COCPA) Edward A. Harter Are you ready? This course prepares the preparer. Learn the six steps for preparing S corporation returns and the eight steps for preparing partnership and LLC returns.

• $355 /$507

Transform Your Busy Season With Tools You Already Use Jan. 13 (COCPA) Bryan L. Smith Be sure your spreadsheets are set up to eliminate common errors, know when and how to supplement your PC with a mobile tablet, and discover additional tips and techniques that will make this busy season more productive and less stressful. • $355/$507 Look Who's Back!

2013 Federal Tax Update Jan. 15 (Hyatt Regency–DTC) Don Farmer Get the updates you need to know about 2013 tax developments while considering practical solutions to problems and tax planning opportunities.

Leave this course with fresh ideas and a 200+ page reference manual!

• $410/$586 • Denotes Member/Nonmember Course Fees

TO REGISTER Visit: www.cocpa.org Call: 303-773-2877 Toll Free: 800-523-9082