COCPA NewsAccount - September/October 2021

NEWSACCOUNT COLORADO SOCIETY OF CPAs • SEPTEMBER/OCTOBER 2021

Navigating the Pandemic: One CFO’s Challenges and Opportunities

RE AD TH E S PECI A L I N S ERT

Looking Back, Looking Forward: #COCPASTRONG PAGE 15

Honoring the 2021 Women to Watch PAGE 11

2021 Colorado Legislative Update: A Little Bit of Tax and A Lot of Impact PAGE 24

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NewsAccount | September/October 2021

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Contents Features 4

Commercial Real Estate: What’s Happening on the Front Range?

Eighteen months after the start of the COVID-19 pandemic, organizations continue to take varying approaches to a return to the office and leaving many to wonder what will happen to all the office space left vacant. Commercial real estate experts describe what’s happening in their communities.

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The New Colorado Privacy Act: Protecting Personally Identifiable Information On July 8, Gov. Jared Polis signed the Colorado Privacy Act into law, making Colorado the third U.S. state to pass comprehensive data privacy legislation.

What does it mean for businesses and individuals?

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Honoring the 2021 Women to Watch These six women embody all the CPA profession stands for, and they make a difference in their work, communities, and personal lives every day. Meet the 2021 Emerging Leaders and Leaders of Note.

21 Departments 2

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The DE&I Gap: We’ve Got Work to Do New research from the Institute of Management Accountants and the California Society of CPAs examines the accounting profession’s progress in attracting, retaining, and promoting diverse talent.

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Navigating the Pandemic: One CFO’s Challenges and Opportunities CFO Curtis Woitte spent much of the last 18 months trying to predict the unpredictable, often not knowing day to day what the next steps would be for the Denver Art Museum.

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2021 Colorado Legislative Update: A Little Bit of Tax and A Lot of Impact The Colorado General Assembly considered 678 bills this past session, only a handful of which are directly related to taxation. Three of them stand out for the impact they will have.

Chair Column

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Movers & Shakers

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In Memoriam, Classified Ads

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September/October 2021 | www.cocpa.org

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CHAIR COLUMN

NEWSACCOUNT

A bimonthly publication of the Colorado Society of Certified Public Accountants Vol. 67, No. 3 September/October 2021

Officers

Randy L. Watkins, Chair Angela Roberts, Vice Chair Peter J. Derschang, Treasurer Sharon S. Lassar, Immediate Past Chair Mary E. Medley, Secretary

Directors

Diego J. Baca, James N. Brendel, Jim Gilbert, Mary-Margaret Henke, Amy King, Kelly A. Kozeliski

Editorial Board

Jack Allgood, Steve Corder, Georgia Z. Phillips, Lori Anne Reinwald, Laura J. Theiss, Barbara J. Tedesko, Steve Van Meter, Michael D. West, Charlie Wright

Mary E. Medley, President/CEO, Editor Natalie G. Rooney, Contributing Writer Ariana Cassard, Blue Ocean Ideas, Design 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 $14.00 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 = 5,794 copies; sales through dealers and carriers, street vendors, and counter sales = 0; paid or requested mail subscription = 5,736; free distribution by mail = 0; free distribution outside the mail = 20; total free distribution = 20; total distribution = 5,756; office use, leftovers, spoiled = 38; returns from news agents = 0; total sum = 5,794; percent paid and/or requested circulation = 99%.

303-773-2877 • 800-523-9082 Fax: 303-773-6344

NewsAccount is available online at www.cocpa.org.

The Long and Winding Road

BY RANDY L. WATKINS, CPA, CGMA, CCIFP

W

e wanted to do it. We planned to do it. Then, we had to change how we did it - something we’ve all become familiar with since spring 2020. The “it”? The annual Chair Tour, a special series of visits with members across Colorado. The Tour not only gives the COCPA Chair the opportunity to interact with members and learn what’s important to them on the local level, but it also provides the opportunity to share with members what’s happening in the profession on the state and national levels.

This year, I especially looked forward to the Chair Tour, scheduled in late July and early August, because it would be one of the first times many of us would be together in person. Alas, “virtual only” became necessary, so we did what you’ve been doing, too.

Demonstrating we are, above all, flexible.

For me personally, the ability to be together in person can’t come soon enough. In the meantime, thank you to everyone who joined me virtually.

One of the topics I was excited to discuss is the history and evolution of environmental, social, and governance (ESG) metrics as the accounting profession prepares to play a more significant role. Stakeholders will continue to seek reliable and transparent information about ESG, and accountants already play an important role in providing assurance and advisory services to organizations to enhance confidence in reported information.

Many larger companies have been learning about and dealing with ESG issues for a while and are working hard to show their stewardship. They may not be reporting on it yet, but they are mindful and aware. We need to be paying attention because our profession is uniquely positioned to address these non-financial performance measures for our clients and organizations.

The ESG reporting landscape is complex, with several different frameworks to consider. A place I recommend beginning is the Value Reporting Foundation, created by the merger of the International Integrated Reporting Council (IIRC) and the Sustainability Accounting Standards Board (SASB) at www.integratedreporting.org. Also, the COCPA is looking at implementing aspects of ESG reporting. Email Mary E. Medley, mary@cocpa.org, if you’re interested in joining an ESG working group we plan to form later in the year.

WHAT’S UNDERWAY AND AHEAD You may have read in the May/June 2021 NewsAccount that the Board of Directors proposed a bylaws amendment to create a non-voting, ex-officio Board position for the Young Professionals Council chair. That amendment was approved at our July Board meeting. We are looking forward to welcoming Alexandria Romero who will bring the viewpoint of our younger colleagues into our Board meetings.

The Board also has been discussing the challenges of recruiting into the profession, encouraging young professionals to pursue the CPA credential, and keeping them in the profession. One factor: Accounting starting salaries often are lower relative to other business degrees - something we didn’t face when accounting starting salaries were well above those others, back in the day.

We must encourage students to think about accounting as early as high school. How do we move further downstream? The AICPA is developing new resources we’ll be looking to deploy here in Colorado. Also, efforts continue to include accounting as a recognized component of the STEM curriculum. Think STEAM for Science, Technology, Engineering, Accounting, and Math. The research tells us students and young professionals are most influenced by their employers, teachers, and parents. I ask you to do your part by encouraging promising students you know to consider and choose a career in accounting.

TAKING TIME AWAY AND TAKING CARE This past summer, our family took a (long and wonderfully winding) road trip to the Ozarks in our RV. It’s our favorite way to travel and gives us access to parts of the country we’ve never seen before. I admit we’re not exactly roughing it – I think our RV is larger than my first apartment in Denver – but what a great way to enjoy family time! I hope you’ve been able to enjoy some time away, too.

We’ve learned so much in so many ways since March 2020. We’ve seen - and perhaps experienced personally - the struggles that come with mental health issues. We’ve watched Olympic champions triumph - and step back from competition. We’ve gained new skills, stretched beyond what we thought possible, and endured, sometimes at great cost. Through it all, we’ve thrived in ways both real and unimaginable.

As we move into fall 2021, may you return to work - in office, virtually, or both - ready for the challenges ahead. It’s an exciting and important time for the accounting profession, our country, and our world. Thank you for making a positive impact in all you do.

Email Randy Watkins at rwatkins@bdo.com.

CPAs make a DIFFERENCE November 11, 2021

Westin Denver Downtown

2021 HEROES & HEROINES SOUGHT Nominations Deadline: September 22, 2021 Each and every day, away from the headlines, in businesses large and small across Colorado, and in others’ lives, CPAs make a difference. We will honor those contributions with the 2021 Everyday Heroes and Heroines Awards.

If you know a CPA who should be considered, please submit a nomination. Send a narrative, not to exceed three pages, explaining why you believe the candidate should be recognized and detailing his or her accomplishments.

Nominees must hold a CPA certificate and be a COCPA member. They should be “everyday” heroes and heroines who haven’t been recognized widely for their contributions.

Nominees should demonstrate significant service in one or more areas: INVOLVEMENT: Describe the nominee’s level(s) of involvement, length of involvement, and time devoted to nonprofit organizations and community activities.

LEADERSHIP: Describe the nominee’s position(s) held and substantial accomplishments achieved in one or more community organizations, including taking the lead in identifying and solving a problem, founding or rescuing an organization, or developing an innovative program.

IMPACT: Describe how the nominee’s actions benefited the community, improved the overall quality of life, helped others overcome adversity, or served as a role model for CPAs exemplifying the profession’s core values of integrity, competency, and objectivity.

For more information and to submit your nomination electronically, contact Kelli Davis, kelli@cocpa.org, 303-741-8610.

Nominate today at cocpa.org/CPAsMakeaDiff

September/October 2021 | www.cocpa.org

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ON THE FRONT RANGE

Commercial Real Estate: What’s Happening on the Front Range?

BY NATALIE ROONEY

Eighteen months after the start of the COVID-19 pandemic, organizations continue to take varying approaches to a return to the office and leaving many to wonder what will happen to all the office space left vacant. Commercial real estate experts describe what’s happening in their communities.

DOWNTOWN DENVER New data from real estate services firm CBRE shows vacancies in Denver’s office real estate market at an 11-year high with construction at an eight-year low.

From April through June, the metro-wide vacancy rate rose to 18.8 percent.

That doesn’t account for the still-increasing amount of sublease space hitting the market. Roughly five million square feet of technically “leased” space is now available to would-be second renters. That’s more than four percent of the total space that exists in the market today according to CBRE’s data.

The good news: Deals were signed for more than one million square feet of office space during the second quarter - a 44.4 percent increase over the roughly 662,000 square feet leased in the first three months of 2021. The combined total is still behind the 2.2 million square feet of space leased over the first half of 2020 and before the impact of the pandemic really hit the market.

Trent Rice, Corporate Solutions Director at Shames Makovsky Realty Company in Denver, describes the last 18 months in Denver’s commercial real estate market as utterly upended.

“It’s a shame to see what has become of the central business district area,” Rice observes. He has been a commercial real estate broker officing in downtown Denver for more than 25 years and says the overall market pre-COVID had never been better with low vacancies and nightlife in the core downtown.

The pandemic’s forced closing of businesses and hotels left downtown Denver a virtual ghost town almost overnight.

Now, as a result of the increased availability, Rice says landlords have had to sharpen their pencils by lowering face rates, increasing tenant finish allowances, and offering ‘soft cost’ concessions – abated rent, more free parking, and enhanced common area features – to attract tenants.

Rice predicts that 2021 will continue to be a tough road for much of Colorado’s commercial real estate industry as it recovers from a year and a half of large decreases in transaction volume, repricing, and complete abandonment of projects that were scheduled to begin in 2020 and early 2021. But he says it’s also a great time to be a tenant in the market, whether you’re negotiating a new lease, an early lease renewal at an existing facility, or asking a landlord to provide certain upgrades.

Tenants also will want to redesign their traditional office, retail, and restaurant spaces and rethink how products are being offered for sale. “I don’t see large office space users shying away from large office space use, but rather they will use space differently and build in more flexibility,” Rice says.

Industrial and supply chain logistic centers are among the least affected sectors due to the greater need for retailers to control real time inventory in a post-COVID era.

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NewsAccount | September/October 2021

“There does seem to be a light at the end of the tunnel, and it’s not a train,” Rice says.

“Many of our clients are realizing their employees have missed their interaction with co-workers. People are feeling more comfortable about coming back to the office, shopping in person, staying in hotels, and eating out in restaurants.”

DENVER SUBURBS Frederick de Loizaga, First Vice President at CBRE, exclusively represents and advises office tenants and focuses much of his business in Denver’s suburban market.

Most of 2020 was understandably quiet, and de Loizaga says even more than halfway through 2021, many questions remain unanswered from a macro perspective. “We don’t know exactly what companies’ plans are, but there is pent up demand for company leaders to get their people back to the office safely, and that’s leading to an increase in activity,” he says.

De Loizaga describes Q1 2021 as busy with a lot of behind-the-scenes activity – inquiries and discussions with company leaders who are trying to determine what percentage of employees will work from home and comparing that to the space they currently have. “Clients are asking us for guidance and thought leadership as we start coming back to the office and what it means for their company operations,” he says.

“While there are some generalities, each company’s plans and needs are unique and likely involve providing more flexibility to work not just from home but from other locations such as coffee shops. That’s going to be relevant and prevalent going forward.”

Q2 2021 began to translate into visible market activity, not just with tours, but also with larger deals being completed.

De Loizaga says it’s too early to identify if there is going to be a lasting paradigm shift with companies moving from downtown to suburban offices, but he’s seeing more of this than in pre-pandemic times. The most notable downtown Denver tenant to make the move to South Denver so far has been DCP Midstream, a Fortune 500 company.

“We’ve certainly seen interest and had inquiries from clients that are currently downtown and want to understand the suburban market better,” he says. “But will that turn into an actual trend? It’s too early to say.”

Office space size continues to be a question mark, as well. De Loizaga says regardless of

whether companies change their space size, the focus will be on a different use of the space. “Companies are thinking about their offices as more of a destination for their employees rather than just a workplace,” he says. “They understand with increased flexibility to work remotely, they need to make their offices into places where employees are safe, excited, and collaborative when they’re on site. There are things you can do with your real estate to meet those objectives.”

One interesting statistic de Loizaga notes is that despite the dynamic in the office environment over the past 18 months, rates haven’t dropped. “That’s hard to understand in some ways when you consider activity has

port lost its tenants. “They didn’t do another deal,” Dowis says. “They just put the brakes on. People are thinking twice and maybe aren’t prepared to pay higher rates while there is still uncertainty in the economy.”

In downtown Colorado Springs, which had single digit vacancy rates heading into the pandemic, Dowis hears talk of companies downsizing as employees continue to stay home. But so far there haven’t been a lot of users giving up large amounts of office space. “Not a lot of sublease space has hit the market yet,” he says.

Dowis adds that considerable synergy has developed in downtown Colorado Springs

“Companies are thinking about their offices as more of a destination for their employees rather than just a workplace.” slowed a lot, but that’s just the reality,” de Loizaga says. “The suburban market is seeing owners provide higher concession packages such as free rent and parking, and increased tenant improvement allowances to build out or use at the tenant’s discretion.”

COLORADO SPRINGS Colorado Springs was on fire in the pre-pandemic days, says Randy Dowis, Principal/ Senior Broker at NAI Highland, LLC. His expertise comes from 38 years working in the industrial sector. “There is so much redevelopment happening all over the city.”

Multi-family and apartment projects, a new stadium district, and industrial real estate all have contributed to growth. Amazon has plans for nearly five million square feet along with FedEx, Rocky Mountain Coors, and other big distributors.

The pandemic put things on a brief hold, but Dowis says that only lasted about 60 days.

“Then it all exploded again,” he says.

Uncertainty still exists, however. While Dowis says the office market hasn’t been crushed, office users still haven’t returned in person.

Q2 saw the backfill of all of the older second and third generation space with vacancies down to two percent. Now, new product is coming out of the ground, and Dowis observes that things are a little quiet on the high cube distribution product fulfillment. A project with 165,000 square feet at the air-

thanks to nearly $1.5 billion invested or announced. “That’s more activity than we’ve had in the past two decades,” he says. “There are a lot of new restaurant concepts which had unfortunate timing because of the pandemic, but new retail is coming along with the stadium district and phenomenal redevelopment of the southwest.”

Dowis describes his mood about the market as cautiously optimistic. “I can’t believe how many apartment developers are still talking about building, and they can’t build single family homes fast enough,” he says. While inflation remains a concern, he wonders if it will derail the expansion.

“Colorado Springs has become the jewel of the Front Range. Everyone discovered it and wanted to come here,” Dowis says. “Everything is working to our advantage. The cost of living here is still cheaper than in Fort Collins, Denver, and Boulder, but it’s not as inexpensive as it was. I’ve got my fingers crossed.”

FORT COLLINS In the months leading up to the pandemic, Ryan Schaefer, CEO, Principal, Affinity Real Estate Partners, Inc., says the market for apartments, single family, and industrial property were all hot while retail and office properties were stable with vacancy rates in the five to six percent range. Rent growth was modest.

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ON THE FRONT RANGE CONTINUED FROM PAGE 5 In March and April 2020, there was a fairly immediate change as restaurants and hotels closed, and delinquency rates for those assets went up significantly, creating financial stress for tenants and landlords.

By summer 2020, shopping centers were seeing delinquency rates of 60 percent; pre-pandemic rates were 2.89 percent. As of March 2021, Schaefer says those numbers were back below 11 percent. “We haven’t lost nearly as many small businesses and large companies as we feared we would,” he says. “There were a few notable bankruptcies in large retail that were already in distress. The pandemic was the last straw rather than the cause.”

Now, Schaefer says the forecast for the Fort Collins area is quite positive based on population growth. “Six of the ten fastest growing cities in the United States are along the I-25 north corridor,” he says. Larimer County is the number one market in the U.S. based on offers of sales pending which are up 125 percent year over year.

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With a lower cost of living than Denver, Fort Collins has benefitted from the wave of people moving from other major U.S. metropolitan areas. The population shift combined with an all-time low of builder inventory has created strong demand for residential development land.

Schaefer says discussions about the future of office space mirrors what’s happening on the national level and runs the length of the spectrum. On one end are companies like Facebook and Twitter that say they will let employees work from home forever, and on the other end are JP Morgan Chase and Goldman Sachs that say it’s time to return to the office. Office vacancy rates are at about 7.7 percent.

“Experts are predicting that per capita demand for office space will decrease 10 percent which for the United States means we have 16 years of supply,” Schaefer says. “That doesn’t mean it will take 16 years before we see office buildings being built though because existing inventory will become functionally obsolete and will be repurposed

NewsAccount | September/October 2021

or torn down. Northern Colorado will see favorable population and employer growth, and that will drive growth again.”

As the trend toward online shopping continues to grow, Schaefer says regional malls will continue to be stressed. “Over time, I think you’ll see less bricks and mortar retail in Northern Colorado,” he says. The struggle to find workers is contributing to an already difficult situation.

What is booming in Northern Colorado is demand for industrial space. “We now have greater square footage of industrial space in Northern Colorado than retail and office space combined,” Schaefer says.

Year over year, the region added two times more industrial space than retail and office space combined. Even with the growth in online shopping, Schaefer points out that companies still need space to store and distribute their goods. Vacancy rates for industrial space are under 5 percent in Northern Colorado, and year over year rental growth was three percent.

DATA SECURITY

The New Colorado Privacy Act: Protecting Personally Identifiable Information

BY NATALIE ROONEY

On July 8, Gov. Jared Polis signed the Colorado Privacy Act (Act) into law, making Colorado the third U.S. state to pass comprehensive data privacy legislation. The new law is set to take effect, July 1, 2023.

T

he Act borrows in part from the European Union’s General Data Protection Regulation (GDPR) and more significantly from the existing California Consumer Privacy Act (CCPA) and Virginia Consumer Data Protection Act (VCDPA).

The law applies to any individual, corporation, government or governmental subdivision or agency, business trust, estate, trust, limited liability company, partnership, association, or other legal entity (“Controller”) that: • alone, or jointly with others, determines the purposes for and means of processing personal data, or • delivers commercial products/services targeted to Colorado residents, and • during a calendar year, controls or processes personal data of at least 100,000 consumers, or • derives revenue or receives a discount on the price of goods or services from the sale of personal data and controls or processes personal data of at least 25,000 consumers

Sensitive personally identifiable information can include: • Full name • Social Security number • Driver’s license

“The Act serves as a benchmark for customers and data,” says Scott Peyton, Partner, Advisory Services, in Grant Thornton LLP’s Denver office. “If you’re doing business and selling here and hold your customer’s personal data, you are likely subject to this new legislation.”

WHAT IS PII? Personally identifiable information (PII) is information that, when used alone or with other relevant data, can identify an individual.

• Mailing address • Credit card information • Passport information • Financial information • Medical records Non-sensitive personally identifiable information is easily accessible from public sources and can include: • Zip code • Race CONTINUED ON PAGE 8

September/October 2021 | www.cocpa.org

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DATA SECURITY CONTINUED FROM PAGE 7 • Gender • Date of birth • Place of birth • Religion KNOW YOUR PII Cybercriminals are increasingly breaching data systems to access PII, which is then sold to buyers in underground digital marketplaces. If you’re storing PII, it’s critical to know where it is and how it’s protected if you want to stay on the right side of the law – and your customers.

Data can leave the enclave of an organization in many ways. You might experience an external threat from a cyber attack or an intentional or accidental release from an internal party.

When customers entrust you with their information, it’s critical to know: • What data and information do you have that might be considered private?

• Where is that information? Is it on servers or someone’s thumb drive?

• How is that data protected?

The best protection comes from a layered approach.

Donny Shimamoto, CPA, CITP, CGMA, founder and managing director of IntrapriseTechKnowlogies LLC, compares good cybersecurity strategy to an onion – multiple layers of protection to deter criminals as they encounter layer after layer of obstacles.

A firewall, which serves as the outermost layer, will check emails and attachments for phishing links and viruses. Next generation antivirus software can actually detect if a virus is starting to encrypt files and if so, roll it back.

“We want to layer defenses to make sure it’s very hard for someone to infiltrate the data and do something with it, copy it, corrupt it, or install ransomware,” says Scott Peyton.

“You need to know what’s important so that the crown jewels – which include your customers’ data – are protected.”

Depending on the type of organization and the type of data, the means of protection will differ. There’s no one recipe that’s right for everyone.

CYBER HYGIENE Organizations make some common mistakes regarding the tools and their financial investment in cybersecurity. The biggest one: Not having good cyber hygiene.

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Peyton describes good cyber hygiene as doing the basic blocking and tackling well and consistently. “People tend to focus on the big, shiny penny – licensing the latest cutting-edge software,” he says. While that’s important, many vulnerabilities need to be constantly addressed.

Hacker groups trade information about vulnerabilities in various technologies whether that’s servers and routers that data passes through or software that hasn’t received the latest patch. There’s a lesson here. “As soon as a vulnerability is known and published, white hats need to patch and fix that crack in the dam faster than the hackers can access it,” Peyton says.

While there has been progress in protecting customer information, remember that threats don’t come only from external sources. One of the biggest exposures comes from those on your own team who need access to sensitive

Remember that threats don’t come only from external sources. information every day just to do their jobs.

They may expose data unintentionally by clicking on a phishing link or intentionally if they’re disgruntled or want to share information for their own financial gain.

Peyton says the best defense is a good offense.

• Use preventative controls. Block the use of removable devices, even if they’re encrypted.

• Restrict access. Don’t allow employees access to information they don’t need. If an employee needs to access customer or patient records, permit “view only” with no ability to change or copy the information.

• Build in detective controls. An organization like a hospital might have hundreds of thousands of transactions of legitimate activity. How can one unusual transaction be flagged? Algorithms can show if behavior from a certain user is normal or not. Peyton describes it as a network within a network to ferret out things that don’t look right. Once activity has been flagged by an automated process, it can be further investigated by a human or artificial intelligence.

NewsAccount | September/October 2021

Too often, organizations rely solely on the technology, incorrectly thinking an antivirus and a firewall are enough, Shimamoto says.

One of the most critical layers is training employees themselves to spot red flags. It sounds simple, and yet a survey of more than 1,000 IT professionals by automation company Ivanti revealed 74 percent of companies have fallen prey to phishing in the past year. Thirty-seven percent said that a lack of technology and understanding among employees was a main cause for the increase in successful phishing attacks, and 34 percent directly blamed a lack of employee understanding. Ninety-six percent said their organizations offered training about phishing, but only one third said 80 - 90 percent of employees at their organizations had completed such training.

Cybercrime is evolving so rapidly that annual employee training isn’t enough, says Shimamoto. Quarterly or even monthly mini-trainings are key to keeping awareness high.

Peyton encourages clients to understand their cybersecurity maturity posture – how prepared they are for the threats they face.

Is there an informal ad hoc program with some data but no defined roles and responsibilities, or is cybersecurity more mature with tools and roles and training? “It’s about understanding the baseline of where you are and if your level of maturity adequately mitigates your unique cybersecurity risks,” he says.

FINES & TRUST: THE COSTS OF A BREACH What happens if you don’t shore up your cyber defenses and jeopardize PII? States are getting serious. Depending on the state and the industry, you’ll face legal issues and fines. California’s privacy law has teeth: civil penalties up to $2,500 for each violation or $7,500 for each intentional violation of the law. If you consider California had a population of approximately 39.5 million people as of 2019, these costs could add up quickly for organizations that commit violations.

Beyond the financial ramifications, Peyton says the biggest issue at stake is trust.

“Breaches are a fact of life,” he says. “How you handle a breach is important. What did you do to protect your customers and their data? How did you take care of customers after the breach? Did you notify them timely, and let them know what you’re doing in response? Are you aware of what data was exposed? Don’t try to stall, hide, or say it’s

not your fault. That can only further erode your customers’ confidence in you in an already challenging situation.”

“Experts have been saying for years that attacks will increase in number and sophistication despite what we do to protect ourselves,” Shimamoto says. “You can use technology for good or evil. Advances in technology are making it even easier for criminals. It’s going to continue to evolve.”

If Shimamoto could offer one piece of advice, it would be to think about cybersecurity as a business issue, not just an IT responsibility. “This is really about your business, your customers, and your employees, and balancing the risk of a cyber incident with your relationship to stakeholders and the impact to the business itself,” he says. “The impact of a cyber incident is far beyond the technology.”

FOR MORE INFORMATION ABOUT COLORADO’S PRIVACY ACT VISIT: The full text of the Colorado Privacy Act leg.colorado.gov/sites/default/files/2021a_190_signed.pdf Colorado’s Consumer Data Protection Laws: FAQ’s for Businesses and Government Agencies https://coag.gov/resources/data-protection-laws/ Cybersecurity resources from the AICPA https://www.aicpa.org/interestareas/frc/assuranceadvisoryservices/ cybersecurity-resources-for-organizations-and-cpa-firms.html

LEARN MORE Understanding Your Cybersecurity Tech Options: How Non-Techies Can Mitigate Their Malware Risks (Webinar) Oct 20 • Nov 17 • Dec 06

Register at cocpa.org/cybersecuritytech

Kathy Brents

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Office: 866-260-2793 kathy@accountingbizbrokers.com Kathy: 501-514-4928 christy@accountingbizbrokers.com Christy: 501-499-4357 September/October 2021 | www.cocpa.org

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Mary E. Medley, CEO COCPA

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These are just some of the reasons why COCPA selected CAMICO as the Society’s sponsored provider of Professional Liability Insurance.

Alpa (Keily) Evans Account Executive T: 800.652.1772 Ext. 6720 E: aevans@camico.com W: www.camico.com

Accountants Professional Liability Insurance may be underwritten by CAMICO Mutual Insurance Company or through CAMICO Insurance Services by one or more insurance company subsidiaries of W. R. Berkley Corporation. Not all products and services are available in every jurisdiction, and the precise coverage afforded by any insurer is subject to the actual terms and conditions of the policies as issued. © CAMICO Services, Inc., dba CAMICO Insurance Services. All Rights Reserved.

KUDOS AND CHEERS

Leading By Example: Celebrating the 2021 Women to Watch

BY KELLI DAVIS On August 27, in collaboration with the AICPA, the COCPA honored the following individuals with the 2021 Women to Watch Award. Leaders of Note have attained leadership positions within their organizations, have made notable contributions to the accounting profession, help improve their workplaces, and mentor others. Emerging Leaders have demonstrated leadership and have made significant contributions to the profession and their communities, while on the path to the highest levels of advancement.

We congratulate them on their achievements and look forward to watching them soar.

LEADERS OF NOTE

Lisa Hackard, CPA •

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Partner, KPMG LLP, Denver

s a Denver-based KPMG audit partner in the firm’s Department of Professional Practice, Lisa is the partner in charge of KPMG’s U.S. system of quality control, which provides the foundation for audit and attestation quality.

With more than 23 years’ experience, she’s been recognized within the profession both nationally and internationally.

In nominating Lisa, Mike Bearup, Managing Partner of KPMG’s Denver office, writes, “Clients view Lisa as a valuable resource who is willing to approach issues and challenges from multiple perspectives before arriving at a conclusion.”

Aside from Lisa’s professional expertise – she provides audit and business advisory services primarily in the telecommunications, media, and technology industries, as well as in manufacturing, real estate, construction, mining, and oil and gas – she is personally committed to promoting awareness of disabilities and mental health matters. She is the national chair for KPMG’s Abilities in Motion (AIM) network; serves on the firm’s Accelerate 2025 Task Force which works to accel-

erate workplace diversity, equity, and inclusion initiatives; and leads the U.S. firm’s Resiliency pillar as part of its Culture network.

Bearup notes that Lisa “envisions a culture where the importance of mental and physical health are equally prominent and supported.”

To that end, she promotes awareness of disabilities and mental health matters through her involvement in local and national events, internal and external publications, and workshops on topics such as stress management, self care, resiliency, and happiness. Lisa launched the NewsAccount five-part series on mental health by telling her story.

She co-authored the next four, culminating with “Mental Health in the Workplace: Are You Ready?” which was published in the March/ April 2021 issue.

Bearup adds that Lisa “has made a significant impact by serving as a mentor and resource for partners and employees throughout the firm.” In a final endorsement of this honoree’s character, he writes, “Lisa is a very warm, engaging person, who makes relationship-building part of her day-to-day activities and something that happens naturally.” We celebrate Lisa for her commitment to the highest level of client service, coupled with technical expertise and a heart that embraces the most difficult issues with grace, guidance, and hope.

Sebrina Ivey, CPA/PFS , CIA • TM

Chief Compliance Officer/Director of Wealth Management, GHP

Investment Advisors, Inc., Denver

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n 2019, Sebrina Ivey was one of just seven CPAs nationwide to receive the AICPA Personal Financial Planning Standing Ovation Award which recognizes young CPAs who exhibit exemplary professional achievement.

Others closer to home have noticed and benefited from Sebrina’s professional acumen too. Nominator Robert Hochstadt, CPA/PFS , Principal, GHP

Investment Advisors, Inc. (GHPIA), notes that Sebrina has developed many of GHPIA’s systems and procedures that ensure the presence of adequate safeguards and the maintenance of strong internal controls.

“The company has enjoyed significant growth during the time that Sebrina has been a member, and she is very much committed to its continuance,” he writes, noting that she also spearheaded the development and implementation of data-processing techniques to foster the timely completion of cumbersome record-keeping tasks.

TM

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KUDOS AND CHEERS CONTINUED FROM PAGE 11 Outside of work, Sebrina shares her professional talents within the not-for-profit sector, serving as treasurer and Executive Board member for Developmental FX, an organization that serves children with developmental differences. Executive Director and co-founder Tracy Stackhouse writes that Sebrina’s “many contributions to the finance, human resources, and general business aspects of our organization have helped shape and transform our operations and internal controls. Her willingness to lend her time and talent to our organization has been immensely impactful in our goal to establish a sustainable organization.”

Stackhouse continues, “She is not only professional and reliable, but also her warm and welcoming demeanor is an absolute delight.”

Sebrina’s colleagues past and present echo this admiration for her engaging manner and say that they’ve bloomed under her mentorship.

Collette Williams, GHPIA accountant and marketing associate, writes,

Tammy J. Rivera, CPA •

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In March 2020, with the onset of the COVID-19 pandemic, BKD, along with every other organization, had to rethink its client-service strategies. As the firm transitioned to virtual formats for communi-

“There have been several points already in her career that we’ve asked Tammy to take on a new challenge, and she’s excelled in each role.” cation, training, and regulation and accounting updates, Tammy led a firm-wide virtual conference for healthcare clients and prospects on provider relief funding and its related spending compliance. In nominating Tammy as a Leader of Note, BKD Regional Managing Partner Jeff Ronsse writes, “She saw a need and led the charge to make sure that we continued to serve as trusted advisors to our clients.”

NewsAccount | September/October 2021

An avid soccer mom and enthusiastic cheerleader for her two sons, Sebrina balances the challenges of work and life and routinely encourages other women who’ve just stepped into the working-mom role. GHPIA Client Relations Manager Michelle Mills writes, “Having [recently] become a mother myself, I faced many challenges of balancing new‐mom life and work. Sebrina coached me through insurance changes, maternity leave, new‐mom best practices, and obstacles to prepare for. Thanks in part to Sebrina’s personal and professional example, I’m confident that I’m well‐equipped to handle the challenges of both work life and family life and to keep them in balance.”

Managing Partner, BKD CPAs and Advisors, Colorado/Salt Lake City

eader of Note Tammy Rivera seeks to make a difference for her clients, within her firm, and within the profession, and her community. As Managing Partner of BKD CPAs and Advisors’ Colorado-Salt Lake Practice Unit, Tammy’s passion for providing audit and client service to the healthcare sector has boosted clients’ performance and helped them meet vital compliance requirements. Noting that Tammy’s expertise is widely recognized throughout the firm, BKD CEO Tom Watson writes, “There have been several points already in her career that we’ve asked Tammy to take on a new challenge, and she’s excelled in each role.”

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“Working with Sebrina is exciting, challenging, and enlightening.

She is the type of leader who mentors her staff to improve and grow through guidance, encouragement, and her confidence in our abilities, which has made me, in turn, more confident.”

Within the firm, Tammy encourages, empowers, and innovates when it comes to enriching organizational culture and fostering diversity and inclusion. In 2014 she was appointed to the inaugural core committee to launch BKD’s SKY Initiative, a firm-wide diversity and inclusion endeavor. In 2019, she chaired BKD’s diversity and inclusion subcommittee, which focuses on attracting, retaining, and developing women and diverse leaders. Since its inception, the SKY program has yielded dozens of live training sessions, online education opportunities, and book club launches to further team members’ opportunities to grow professionally and enhance inclusivity.

Coaching is every strong leader’s responsibility; Ronsse notes that Tammy has coached and mentored several professionals within the BKD healthcare and tax teams. “Tammy always goes the extra mile to ensure that future leaders feel appreciated and supported as they progress in their career development,” he notes. “She helps teams navigate the challenges of public accounting and encourages staff to find the opportunities to give back to our communities and others around us.”

Tammy leads by example in that area too, having been involved with the Ronald McDonald House Charities of Southern Colorado for more than a decade. Currently serving as an honorary board member, she has held the positions of board member, executive team member, and president.

Tammy recently completed her tenure as Program Committee Chair for the Healthcare Financial Management Association’s (HFMA’s) Colorado Chapter, where she led the execution of all educational programming delivered to more than 600 healthcare professionals.

She is the co-founder of the Colorado Chapter’s Women in Leadership group, which brings together women from the healthcare industry for networking and educational events and serves as a platform for mentoring, coaching, and supporting women at all career levels.

Recently named President-Elect of the HFMA’s Colorado Chapter, Tammy will begin her Chapter presidency on June 1, 2022.

EMERGING LEADERS

Sarah Flischel, CPA •

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Director, Kundinger, Corder & Engle, P.C., Denver

merging Leader Sarah Flischel has made quite an impression on the senior members of her firm, Kundinger, Corder & Engle (KCE), a Denver CPA firm serving not-for-profit organizations. Managing Director Steve Corder and Director and President Laurie Anderson, who each have more than 30 years’ experience in public accounting, write that among the young professionals who have come and gone over the years, “Sarah is one individual we have worked with who uniquely stands out. Her hard work and dedication to the firm, the profession, the sector, and the community have elevated her far above her peers.”

Sarah has made a lasting impact by demonstrating leadership beyond her position. As a new manager, she provided the framework for, and was instrumental in implementing, a firm mentoring program, staff job descriptions and guidelines, and a firm resource library that KCE members use daily.

She also has been instrumental in improving the firm’s technology, which significantly enhanced KCE’s ability to communicate more efficiently and effectively with clients on industry and regulatory developments that require timely dissemination. Corder and Ander-

Allyson Lindsey, CPA •

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son report that Sarah routinely presents technical updates to firm members and has standardized many audit processes and procedures to help less experienced staff become better auditors.

Sarah’s strong client-relations skills are evident as well. Corder and Anderson note that “clients consider her their business partner, not just their auditor. Her leadership abilities are evident in the relationships she develops and the presence she exhibits when meeting with boards of directors.”

Sarah also focuses on engaging and developing young professionals to help grow the profession. As an active COCPA member, she mentors Educational Foundation scholarship recipients and serves on the Society’s Young Professionals Council. She has completed leadership programs with the COCPA, AICPA, and the Denver Chamber of Commerce.

Alexandria Romero, who serves with Sarah on the Young Professionals Council and nominated her as an Emerging Leader, notes that Sarah’s drive, determination, and work ethic have propelled her as a leader and an influential woman. According to Romero, Sarah “is still young in age and in her career, yet she has accomplished so much already.

She is a rising star and someone to watch as she continues to shine, not only within the CPA profession but also as a community leader as well.” This new mom of 11-month-old Haley sees what needs to be done, and she does it.

Senior Managing CPA/Partner, Bright!Tax, Fort Collins

hether engaging with members of her university alumni community, serving low-income taxpayers, or working with clients from around the world, Emerging Leader Allyson Lindsey brings to everyone her vision, leadership, and a natural affinity for helping and teaching others.

Greg Dewald, CEO and founder of Bright!Tax, which provides tax-filing services to Americans living in 190 countries worldwide, notes that when Allyson joined the firm following a successful tenure at Deloitte LLP, he “knew right away” that he was engaging with someone special. But, “little did I know,” he continues, “the profound effect she would have on our organization.”

Globally considered a thought leader regarding U.S. taxation for Americans living abroad, Allyson has contributed to Forbes magazine, frequently appears as a guest expert on global podcasts, and represented her firm when receiving the 2017 Global EMMA Award in Hong Kong. Dewald writes, “Allyson is uber-intelligent, and yet she couches that in a warm and extremely kind demeanor that puts others at ease.”

Allyson oversees technical training for Bright!Tax’s tax-preparation team, sales and client-service training for its managing CPAs, and

ongoing entrepreneurial and technological improvements on the administrative side. With both vision and foresight, Allyson fully developed, and now leads, the firm’s onboarding and training of new CPAs. DeWald reports that “Allyson turned our old model of hiring on its head. By employing Allyson’s modern methodologies, we are hiring smarter and employing only the best candidates.”

Allyson’s contributions are felt closer to home as well. Since 2016 she has served on the University of Denver School of Accountancy’s Alumni Engagement Council, where she has held the positions of Executive Committee Chair, Vice Chair, and Student Engagement Committee Chair.

Since her time as a University of Denver student volunteer with the Volunteer Income Tax Assistance (VITA) program, Allyson has continued volunteering with VITA each tax season, providing free tax-preparation assistance to low-income community members.

“Now, as a professional, Allyson understands the need for CPA assistance and always does her part to contribute meaningfully to her community,” DeWald writes.

When considering the global reach of Allyson’s professional endeavors in combination with her ongoing commitment to serving her community at home, Dewald concludes, “Allyson Lindsey makes a meaningful difference in the lives of people all over the world.”

CONTINUED ON PAGE 14 September/October 2021 | www.cocpa.org

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KUDOS AND CHEERS CONTINUED FROM PAGE 13

Alexandria Romero, CPA Director of Finance, Pueblo City-County Library District

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hen you consider the number of charities and community groups that have benefitted from the volunteer efforts of Emerging Leader Alex Romero – and think about all the individuals who in turn benefit from Alex’s generous gifts of time and talent – it’s hard to imagine how she fits it all in, plus serves as Director of Finance for the Pueblo City-County Library District and is mom to her eight-year-old son.

Alex does it all, with grace, smarts, and an infectious, joyous spirit.

Need to raise money for an important cause like CASA of Pueblo – that might involve rappelling off an office building? Alex is your go-to.

Want to make a difference in people’s lives – that might involve a week as a summer camp leader for high school girls? Alex knows what to pack and what to do. She’s already a super nova leader who’s leaving her mark wherever she shines.

Alex currently serves as President of the Junior League of Pueblo, where, in her previous role as treasurer, she helped the League improve the transparency and clarity of its financial reports in order to be more relevant in guiding operations.

She also lent her professional expertise to a group focused on one of her personal passions – running. When asked by the Southern Colorado Runners Club to help complete the Club’s 2017 Form 990, Alex realized that its books were incomplete. She worked to correct the issues and went on to revamp the Club’s accounting system, policies, and procedures. She also helped design the Club’s community grants program, which supports projects, events, and nonprofit organizations that promote a healthy lifestyle. Among the grant recipients were track teams and athletes who would otherwise lack the funds to participate in youth sports, thereby making them more accessible within the Pueblo community.

The list of community organizations to which Alex has given her time and talents goes on, and includes the Pueblo Downtown Association and Young Life of Pueblo. Alex’s community has noticed her contributions, too. In 2019, the Pueblo Latino Chamber of Commerce named her one of its inaugural 40 Under 40 Emerging Leaders. The same year, she helped to bring the Pumpkin Chase – a citywide scavenger hunt for middle and high school kids – back to Pueblo.

Alex is heavily invested in the accounting profession, particularly in engaging those who are new to the profession to offer mentorship, support, and networking opportunities. She chairs the COCPA’s Young Professionals Council, serves as an ex-officio member of the COCPA Board of Directors, and participates in the COCPA Educational Foundation’s Mentors Program. Nationally, Alex is a graduate of the AICPA Leadership Academy and serves as Vice Chair of the AICPA Young Membership Leadership Committee.

In nominating Alex as an Emerging Leader, her spouse Patrick Romero writes, “She is passionate about bringing new CPAs and those in the CPA testing process into the COCPA, helping them to engage and create a network of fellow CPAs across the profession.” Alex’s passion is the profession’s, her community’s, her colleagues’, and her family’s gain. And, she knows how to use her gifts for good.

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NewsAccount | September/October 2021

Past Award Recipients LEADERS OF NOTE

EMERGING LEADERS

2012 Mira Finé, CPA Dianne Ray, CPA Karen Turner, Ph.D., CPA

2012 Sheila Balzer, CPA Nina Currigan, CPA Megan Donohue, CPA

2013 Peggy Jennings, CPA Lynne Lehr-Buck, CPA Sandy Shoemaker, CPA

2013 Jami Coulter, CPA Georgia Phillips, CPA Kelly Rodriguez, CPA Rhonda Willert, CPA

2014 Stacey Hekkert, CPA Tracy Huggins, CPA Judy Vorndran, CPA 2015 Lori Gibson, CPA Katrina Salem, CPA Laura Srsich, CPA 2016 Judy Cain, CPA Christine Noel, CPA Debbi Warden, CPA 2017 Laurie Anderson, CPA Jane Everhart, CPA 2018 Kimberley Higgins, CPA Sharon Lassar, Ph.D., CPA (Florida) Leslie Schaus, CPA 2019 Stephanie Drew, CPA, CFE Amanda Jo Erven, CPA, CIA, CFE Kelly Kozeliski, CPA

2014 Mary-Margaret Henke, CPA Jennifer Scholz, CPA Jessica Seidlitz, CPA 2015 Tyra Litzau, CPA Monica Martinez, CPA Shauna Shafer, CPA 2016 Erin Breit, CPA Meghan Mahala Dack, CPA Kerri Hunter, CPA 2017 Ksenia Popke, CPA Rebecca Kelley, CPA Andrea Geerdes, CPA 2018 Kristin Holthus, CPA Danika Greiner, CPA 2019 Janeen Hathcock, CPA Elizabeth Maldin, CPA Rosie Sanchez, CPA

Kelli Davis, COCPA Executive Assistant, supports CEO Mary E. Medley and Rebecca Campbell, COO/CLO. She rejoined the COCPA in December 2020, having previously worked with the Society after college graduation. We’re delighted to have her and her writing talent on the team again.

Contact her at kelli@cocpa.org.

SPECIAL INSERT: SPECIAL COCPA INSERT ANNUAL REPORT

LOOKING

Back, LOOKING Forward: #COCPA STRONG

In a year defined by challenge, the COCPA worked hard to support you.

As we think about the past year, words like “uncertain,” “challenging,” and “remote” come to mind. Here at COCPA, we think of others, like

RESILIENCE • GROWTH • COMMUNITY

PART 1

Looking Back

This past year, your COCPA focused on these five themes in serving you:

PROFESSIONAL DEVELOPMENT & INFORMATION SHARING CONNECTION & COMMUNITY CAREER DEVELOPMENT & ENHANCEMENT LEGISLATIVE & REGULATORY ADVOCACY MEMBER BENEFITS & SERVICE With these themes in mind, here’s what being #COCPASTRONG meant in the last membership year and how we are preparing for future success.

September/October 2021 | www.cocpa.org

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SPECIAL INSERT

#COCPASTRONG MEANT

#COCPASTRONG MEANT

ENHANCING YOUR VIRTUAL LEARNING

ADVOCATING FOR LEGISLATIVE AND REGULATORY SUCCESS

Your COCPA provided:

Staff and members expanded outreach to the Colorado State Board of Accountancy, Colorado General Assembly, and Colorado Department of Revenue and:

• 200+ hours of virtual CPE. • Free COVID-19-related programs and legislative updates for 895 participants.

• Hot-topic courses on PPP, a Small Firm Town Hall series, U.S. banking environment, and economic updates.

• The Tax Year in Review virtual “road show.”

• 115 hours of complimentary CPE programs.

• Ongoing featured events to offer vital content and connection.

#COCPASTRONG MEANT

GROWING ONLINE COMMUNITY COCPA members participated in: • COCPA Connect, your online discussion forum, with 4,660 visits and 1,067 new posts.

• Ensured CPAs and accountants were identified as “essential” workers.

• Lobbied for meaningful improvements to HB20-1420, the Colorado Tax Fairness Act. • Worked with the Governor’s Office and legislators to address NOL carryforward issues through HB21-1002.

• Worked with the Colorado Department of Labor and Employment to address issues with fraudulent unemployment insurance benefits claims.

• Contacted Colorado Congressional Delegation members frequently regarding the Payroll Protection Program, PPP loan forgiveness, IRS filing deadline extensions, and inequities in implementation of new federal relief programs.

• Testified at the Colorado Capitol even while in partial lockdown.

• Hosted online working groups and roundtables on critical topics.

• Six online Chair Tour events.

• Young Professionals networking and education opportunities.

• Complimentary virtual chapter events, including guidance on the U.S. government’s financial statements and How to Use the New Colorado Sales and Use Tax System (SUTS) website.

• Online Tax Study Groups.

#COCPASTRONG MEANT

FOCUSING ON MEMBER EXPERIENCE AND VALUE Your COCPA team: • Supported you with under 2-minute response times via live chat.

#COCPASTRONG MEANT

BUILDING A STRONGER PROFESSION You: • Donated $35,500 on Colorado Gives Day to support accounting students.

• Awarded $107,500 in Educational Foundation of COCPA scholarships to Colorado college and university accounting majors.

• Participated in online leadership programs.

• Volunteered with the COCPA Diversity, Equity, and Inclusion Working Group.

• Reimagined Student Interview Day online and launched the mock CPA Exam program.

• Provided Peer Review services to 570 Colorado and New Mexico CPA firms.

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NewsAccount | September/October 2021

• Responded to 4,572 member calls and 2,907 live-chats.

• Added partnerships to offer additional programming and discounts.

• Introduced an AI-based, member-customized, e-newsletter.

• Implemented the Entrepreneurial Operating System (EOS)™ to improve organization performance and member experience.

• Updated the COCPA brand architecture to emphasize who we are, what motivates us, how we work, and our branding guidance.

• Performed three quick pulse member experience surveys and shared the results.

• Converted every in-person program (except three) to a virtual event — with no interruption in service. All three are back and reimagined for 2021.

SPECIAL INSERT

PART 2

What does #COCPASTRONG mean as we

Look Ahead ?

The future is bright for you and your COCPA, 6,300 members strong.

Here’s where we’re headed.

Continued innovations in virtual learning and networking opportunities

Continued implementation of AI to bring you the content you want to see

Renewed commitment to diversity and inclusion programs

Partnerships with other state CPA societies to bring you even more CPE opportunities

Expanded study group and volunteer committee opportunities

Continued improvement and growth of cocpa.org to meet your needs

Growth of COCPA Connect online discussion platform

100% Membership plan and perks for firms, companies, and organizations

New partnerships to provide complimentary CPE and additional professional savings

Expanded digital options for programs, communication, connection, and service

We’re here to make a difference for you and the Colorado accounting profession by providing relevant learning and career growth opportunities, facilitating meaningful connections, encouraging diversity and inclusion within the profession, and supporting a positive business environment through legislative and regulatory advocacy.

C PAs are essential.

And together, we thrive. We are

#COCPA STRONG

Watch the video at cocpa.org/COCPASTRONG

September/October 2021 | www.cocpa.org

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DIVERSITY, EQUITY, AND INCLUSION

The DE&I Gap: We’ve Got Work to Do

BY NATALIE ROONEY

New research from the Institute of Management Accountants (IMA) and the California Society of CPAs (CalCPA) examines the accounting profession’s progress in attracting, retaining, and promoting diverse talent. The goal was to perform a holistic assessment of the current state of the U.S. accounting profession from a DE&I perspective and understand the diversity gap between the profession and its leadership.

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MA and CalCPA cosponsored the nationwide study of DE&I with three demographic focus areas: race and ethnicity, gender, and LGBTQIA.

COCPA, as a research contributor for this study, invited members to take part in the study through survey responses and personal interviews.

The study was designed to identify: • Key factors contributing to the underrepresentation of certain demographic groups in the profession in senior leadership roles • Current DE&I perceptions and experiences of accounting practitioners • Actions needed to remedy underrepresentation of certain groups in the profession at all organizational levels Of the 3,136 U.S. accounting and finance professionals who took the online survey, 47% identified as female, 68% identified as white or Caucasian, and 7% identified as LGBTQIA. The research results were released in the report, bit.ly/Diversifying-Accounting.

WHY NOW? After the death of George Floyd in May 2020, IMA held a staff town hall. Employees had the opportunity to speak freely and vulnerably, says Loreal Jiles, IMA Director of Research - Digital Technology & Finance Transformation. As she listened to staff speak, a colleague sent an email highlighting recent appointments of senior leaders across the accounting profession. There was little diversity among the new leadership. “We’re in the research department,” the colleague asked. “Can’t we do something about this?” Jiles felt they could.

The result was the report which is launching conversations throughout the profession and is a first step in what Jiles hopes will be new partnerships and collaborative efforts to make strides toward significant change.

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NewsAccount | September/October 2021

DIVERSITY, EQUALITY, AND BELONGING The research confirmed a continuing, significant diversity gap between those in executive leadership ranks and the broader accounting profession as well as the U.S. population.

According to the report, African Americans make up 8.5 percent of the profession but only 1 percent of partners at U.S. CPA firms and 1.5 percent of CFOs of Fortune 500 and S&P 500 companies. A similar diversity gap exists for women and other racial and ethnic groups.

Responses from diverse talent indicate that they believe they aren’t advancing in the profession because of a lack of equity and inclusion.

There’s an important distinction between equity and inclusion and equality and belonging, Jiles explains. “The outcome of inclusion is belonging.

And the outcome of equity is equality. If there weren’t systemic, and in some instances, inherent, disadvantages and biases, we wouldn’t need equity. Our deliberate emphasis on equity, rather than equality, in this study considers where we are today, highlighting that sometimes sameness of treatment does not result in proportional fairness,” she says. “Our ultimate outcome is to have diversity, equality, and belonging, but you can’t get to belonging without inclusion, and equality can’t happen without equity. It does a disservice to demographic groups when they’re not on a level playing field. Employees don’t have a sense of belonging without organizations fostering an inclusive environment. This is about diversity, equality, and belonging and how we get there.”

Even as an experienced researcher, Jiles is sometimes surprised by research results. In this instance, she says she didn’t have an appreciation for how widespread the equity and inclusion problems are.

“It’s reasonably easy to see the diversity gap – you can’t dispute the numbers,” she says. “But the more people we talk to, the more stories we hear about inequitable practices and exclusive behavior. I didn’t expect it to touch so many people.”

A data point, which didn’t surprise Jiles as much as it gave her hope, was the number of white, heterosexual males who are just as passionate about DE&I as some of the underrepresented groups. “That comforted and encouraged me,” she says.

Data specific to the Asian American demographic revealed information Jiles says isn’t often discussed. The general representation of Asian Americans in the profession is greater in proportion to representation in the U.S. population – until you factor in the numbers at the leadership level. Then it’s lower. “That was one of the most compelling pieces of evidence of equity and inclusion driving the diversity gap,” Jiles says. “It’s not a representation problem since the talent clearly exists. But why aren’t they moving beyond middle management?”

UNCONSCIOUS BIAS What does inclusion – or exclusion for that matter – look like? During the personal interview portion of the research, a man, who identifies as gay and holds a senior leadership role, spoke about how he was not invited to attend a corporate golf outing. All other men in the department were invited. No women were invited. When the man asked why he wasn’t invited, he was told it was assumed he wouldn’t be interested in golf.

“We all have assumptions and biases,” Jiles says. “Maybe there was no ill intent - or an unconscious bias - but he should have been invited.

Let the individual make the call. A step beyond inviting everyone is asking the team what outing they might prefer instead of choosing for them.”

Jiles says inclusion isn’t just about the invitation. It’s also about being included in the decision making and then valuing the input. “Ask your

Jiles says Inclusion isn’t just about the invitation. It’s also about being included in the decision making and then valuing the input. team and respect their responses,” she says. “Work needs to be done in decision-making – sitting in the virtual room, inviting the perspective of everyone, and not leaving until you’ve heard and equally valued every voice.”

This isn’t just about the demographics, she adds. It’s about different personalities and other intangible aspects of diversity. “Leadership has to be aware enough to say, ‘I want to include the perspective of everyone on my team in this decision.’ This is an intentional and deliberate process whether it’s about a group outing or a strategic business decision. That’s how people get to feeling they belong – if they’re consistently and equally valued and respected.”

FINDING ACCEPTANCE ELSEWHERE Another data point from the research demonstrates how the lack of DE&I poses risks to the success of the profession’s transformation: 43 percent to 55 percent of respondents from groups underrepre-

sented at senior levels left their employers due to a perceived lack of equitable treatment. At least 30 percent of underrepresented groups surveyed left because of a lack of inclusion.

As many as 18 percent of the respondents from diverse demographic groups left the profession altogether due to these factors.

Where is diverse talent going, and what can we learn?

Jiles says LGBTQIA individuals seek out industries that have a reputation as more inclusive of people who identify like themselves. Some individuals indicated they knew in college that they would seek positions in the hospitality industry and avoided the college of business because they viewed the hospitality industry as more welcoming.

Interviewees indicated that African Americans gravitate to entrepreneurship or nonprofit organizations.

“Diverse talent will leave to go where they’re more welcome or will choose to work at a specific company where their network has said they will be welcome,” Jiles says.

NEXT STEPS The report concluded that for the accounting profession to continue to grow and succeed with a robust talent pipeline, immediate actions need to be taken to address DE&I issues. This includes bringing in and promoting talented people based on relevant and unbiased factors while ensuring persons of all backgrounds have equal access to opportunities within the profession.

The report suggests action in four areas: • Raise awareness by identifying and mitigating bias so people of all backgrounds are recognized and valued.

• Attract diverse talent by promoting the profession as a desirable career path for people regardless of gender, ethnicity, race, or LGBTQIA identification.

• Drive career promotion by taking specific steps to ensure that people of diverse backgrounds have equitable access to the factors that enable career advancement.

• Increase accountability for progress by defining, transparently reporting, and linking performance to DE&I metrics.

Jiles says survey respondents offered hundreds of ideas for change that were categorized into each of the four areas. “There are actions both individuals and organizations can take across the profession,” she says. There’s an ethical obligation for individual CPAs to improve DE&I. Whether we like it or not or believe it, we operate in the public interest and are expected to act fairly and with integrity, exercising judgment without being compromised by bias. When you think about DE&I in that context, individuals need to commit to making changes ourselves. How do we personally ensure we’re making people feel they belong, are respected, and valued?”

Easy steps to take include using different pronouns and the term spouse or partner rather than wife or husband. “A lot of these things can happen on the individual level before you even get to the organizational level,” Jiles says. “If more people took these steps, we’d be in a better place.” She says it’s also important to hold peers accountable.

“We talk about organization-level metrics, but we personally can have zero tolerance for bias-based behavior.”

Jiles emphasizes that while organizations can have diversity goals, if those goals aren’t supported by equitable practices and inclusive behavior, there won’t be long-term change.

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DIVERSITY, EQUITY, AND INCLUSION CONTINUED FROM PAGE 19 Employees also need a forum to report inappropriate behavior.

“People have to believe the process actually works and there’s a safe space,” she says.

Jiles describes the report as phase one – understanding the state of the profession and the data. “We first needed to put data behind the problem and recognize that this is global,” she says. A series of global DE&I studies is now underway.

Phase two is working on DE&I solutions. “It’s not only how we implement effective solutions but also the actions we’ll take to hold ourselves accountable for widespread change across the profession.”

PROGRESS TOGETHER Those who don’t support the profession’s DE&I efforts, and who think meritocracy is fine, tend to point to the progress of women as an example. Jiles points out, however, that the growth of women in the accounting profession has been the direct result of targeted and deliberate action. “We need to apply that same rigor to see if we can make equal if not greater improvement for other demographic groups.”

There remains a significant population of leadership that doesn’t subscribe to the need to enact change, and unfortunately, some of the biggest naysayers are in positions of power, Jiles says. “A CFO can have a positive impact or a negative impact. It’s about tone at the top.”

“Imagine the change a controller who leads 200 people could have if committed to DE&I progress over three to five years through equitable opportunities and an inclusive culture.”

DE&I is a personal responsibility for everyone. C-suite leaders need to lead by example, Jiles says. “We talk the good talk, but don’t always lead by example. We need to be out in front, have those difficult conversations transparently, have a true open door, and use our positions to enact change. Imagine the change a controller who leads 200 people could have if committed to DE&I progress over three to five years through equitable opportunities and an inclusive culture.”

Change won’t happen overnight, but Jiles says if we want sustainable improvement, there must be action behind goals.

Organizations such as state CPA societies and other professional associations must work together to enact change. “Historically, associations have gone their own route to enact change in a specific area,” Jiles says. “There will be more widespread progress if we work together.”

The COCPA DE&I Working Group is exploring ways to address the issues of diversity, equity, and inclusion and offer programs and resources. To volunteer with the group, contact Stacy Svendsen, stacy@ cocpa.org.

CPAs make a DIFFERENCE Celebrating

2021 Everyday Heroes and Heroines November 11, 2021

Westin Denver Downtown cocpa.org/CPAsMakeADiff

20

NewsAccount | September/October 2021

PERSPECTIVE

Navigating the Pandemic: One CFO’s Challenges and Opportunities

BY NATALIE ROONEY

C

urtis Woitte, CPA, Deputy Director and CFO of the Denver Art Museum, has spent much of the last 18 months trying to predict the unpredictable. “Like everyone, we really didn’t know what we didn’t know in the spring of 2020,” he says. “We were just trying to navigate around the challenges without knowing day to day what the next steps would be.”

The museum remained closed for more than three months, and Woitte and his team began running scenarios to deter-

mine what direction they might take, creating plans and launching a health and safety committee composed of members from the museum’s security, facilities, visitor operations, and exhibitions teams to prepare to reopen the facility when regulations permitted.

In late June 2020, the museum was able to open on a limited basis. “In essence, whatever it cost us to open was what we were generating in revenue,” Woitte says. “At that point, breakeven was a good thing, but most important was to have ample resources to keep the facility clean and to open in a way that employees and visitors felt safe.”

CONTINUED ON PAGE 22 September/October 2021 | www.cocpa.org

21

PERSPECTIVE CONTINUED FROM PAGE 21 Art museums have extensive air filtration systems to protect the artwork. These systems proved beneficial as the museum reopened its doors to visitors. The exhibits team reinvented exhibitions to accommodate social distancing, migrating people through exhibits in a way they wouldn’t end up congregating in areas.

Museum staff who could work from home continued to do so, keeping onsite staff to the minimum needed to maintain a safe, clean, and secure facility.

The rules of engagement, of course, continued to morph, and the health and safety team met weekly to discuss the updates and next steps.

SCENARIO PLANNING Stimulus programs helped the museum’s financial scenarios be far less grim than originally anticipated, even as the pandemic stretched on. Patrons attending during summer and fall 2020 had an almost personalized experience since attendance continued to be capped. “We were able to give people a great, safe experience, which they were looking for since there were so many things they couldn’t do during that time period,” Woitte says.

The museum staff continued to adjust and adapt throughout the fall and winter COVID surges as restrictions remained in place.

“We told our board what we thought was going to happen, and we continued to keep everyone in the loop as we navigated our way through it all,” Woitte says.

In February, the finance team rewrote all of its fiscal plans because the May 2020 plans were based on assumptions that no longer applied. “We knew we’d need latitude and have to manage our way through not knowing when we’d have answers,” Woitte remembers. “We were transparent with our staff and board and shared what we were thinking along the way.”

Over the winter, the museum team continued to operate within restrictions. “We managed our way through the inconsistencies of what was going to happen, and here we are, still trying to predict the unpredictable,” Woitte says. “But it was time to start making some commitments.”

PLANNING FOR THE BIG EVENT One big event originally scheduled for May 2020 – the reopening of the Martin Building after a $150 million renovation – had to be postponed. The building first opened in 1971 and has been completely renovated over the last four years. Its seven-story silhouette is one of the first-ever high-rise art museums and is the only completed building in North America by the renowned Italian modernist Gio Ponti.

The museum staff had been eagerly awaiting the reopening event. “We had hoped to open to fanfare, but of course, we had to delay,” Woitte says. “That decision was a killer for me, personally, but trying to open with the restrictions in place would have drained our resources. We wanted to open successfully and give the building and the artwork the fanfare both deserve.”

The Denver Art Museum has announced it will reopen its expanded and reimagined campus to the public with a free general admission day on Oct. 24, 2021, unveiling all eight levels of its iconic Lanny & Sharon Martin Building (formerly the North Building) and the new Anna & John J. Sie Welcome Center.

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NewsAccount | September/October 2021

PEOPLE, PATRONS, & FUNDING With his eye on the October event, Woitte has a few big things on his mind.

First, the people side – bringing back to the office many museum staff who have continued to work from home. “It has been a challenge,” he admits. “We promised we’d give staff a long period of time to be aware of when we were coming back and that we’d have a transition plan.” True to his word, the health and safety committee developed a detailed plan for a return to the office, including key dates and milestones that mapped out the return to the new normal. “It’s a tired term,” he knows, “but we need to talk about what kind of organization we want to be moving forward. We’re taking into consideration that we want to maintain staff and visitor safety and their experience.”

To that end, museum leadership is working to engage staff and holding interactive events so it isn’t simply about coming to the office.

Staff with life challenges will be given latitude to resolve those issues before everyone is back on the museum campus full time.

Woitte acknowledges a lot of complexities are involved. “Opening a building at the same time we’re all coming back to the office is big,” he says. “The return is one thing but opening a new facility and building out new operational policies and procedures mean business plans need to be put into place.”

FUTURE FORWARD The museum team turned to its Tier 1 cultural institution peers Denver Botanic Gardens, the Denver Center for the Performing Arts, Denver Museum of Nature & Science, and Denver Zoo – to exchange ideas for operations and reopening. “We have a lot of similarities and work under the same set of rules,” Woitte says. “It was helpful to collaborate about staffing and navigating the city and state parameters which were the number one challenge to opening safely.”

The museum maintains a three-year forecast, so Woitte says it has a good idea about exhibition programs for that timeframe. “We have a

snapshot of what the future holds from a fiscal perspective to ensure we live up to our long-term sustainability principles,” he says.

Woitte can’t contain his excitement as he looks ahead to the opening of the Martin building. He has been with the museum for 11 years and remembers discussing the project when he interviewed for his position. “It’s an 11-year project coming to fruition,” he says. “Seeing that happen is monumental for me, and it’s the next stage of this museum as we lean into what’s ahead for our expanded campus.”

KEYS: CREATIVITY & TRANSPARENCY “I think anyone who sat in the CFO seat these past 18 months has had to be creative in how they approached things when we really didn’t know what to expect,” Woitte says. “Creativity in accounting isn’t necessarily a word that’s appreciated, but a lot of CFOs had to get creative in a time of extreme uncertainty. It is no easy feat.”

Transparency with the museum staff and board was critical to navigating the pandemic environment. Woitte says both the staff and the board welcomed it. “By being transparent and letting them know where things stood, we could show we had a plan in place and could pull levers,” he says. “When times get rocky, you can have open and

“Trust doesn’t get built overnight, but it goes a long way when you need it.” honest conversations with the finance and audit committees. We talked about what we didn’t know, how we were running scenarios, and walked them through our assumptions and logic base. That transparency helped us go through this process as smoothly as we could have hoped. That trust doesn’t get built overnight, but it goes a long way when you need it.”

September/October 2021 | www.cocpa.org

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AT THE STATEHOUSE

BY MARK KOZIK, ESQ., AND BRUCE M. NELSON, CPA

2021 Colorado Legislative Update: A Little Bit of Tax and A Lot of Impact

The Colorado General Assembly considered 678 bills this past session, only a handful of which are directly related to taxation. Several were bills to clean up defects and anachronisms in the law. Others enacted procedural changes, extended expiring tax checkoffs, modified property tax valuations, and either expanded or restricted various exemptions, deductions, and credits. 1

T

hree bills, however, stand out for the impact they will have on Colorado taxpayers, both individuals and businesses. They include House Bill 21-1311 (Income Tax), House Bill 21-1312 (Insurance Premium, Property, Sales, and Severance Tax), and House Bill 21-1327 (SALT Parity Act). We’ll take them one at a time.

But first, we look at House Bill 21-1002, an effort to address unintended consequences of the legislature passing House Bill 20-1420, the “Tax Fairness Act,” in 2020.

HOUSE BILL 21-1002 (INCOME TAX) CARES Act Benefits House Bill 21-1002 allows taxpayers to recoup some, if not all, of the deductions lost by Colorado taxpayers through the state’s earlier decoupling from the federal CARES Act. The corporate income tax aspects of House Bill 21-1002 are addressed in the July/August 2021 NewsAccount (Tracking Changes in the Computation of Colorado Corporate Taxable Income, pp.

22-27). HB21-1002 contains analogous provisions that allow individual taxpayers to recoup some, if not all, of the Colorado deductions lost through the state’s earlier decoupling from the CARES Act. These individual provisions operate similarly, but not exactly, the same as those for corporations. In general, they allow a “catch-up” subtracting modification for 2020 to capture the federal CARES Act benefits lost for Colorado purposes under House Bill 20-1420. To the extent that this modification exceeds an individual’s 2020 Colorado taxable income, it is carried forward, with caps on how much carryover can be used in years through 2025, with whatever remains 1

2 3

unused deductible in 2026 (subject to taxable income limitation).2 Colorado Earned Income Tax Credit (EITC) Prior to amendment by House Bill 21-1002, the Colorado earned income tax credit would have been expanded for 2021 and later years to include resident individuals who would have qualified for the credit but for the fact that the individual, the individual’s spouse, or one or more of the individual’s dependents did not have a social security number valid for employment.3 As amended, the expanded credit also applies to 2020.4 See discussion below for additional changes made to the Colorado EITC by House Bill 21-1311.

HOUSE BILL 21-1311 (INCOME TAX) This bill makes 12 different changes to Colorado’s income tax laws. According to the Legislative Declaration, the goal of the bill is to: • Conform Colorado’s tax code to other states’ provisions, “so that Colorado is less of an outlier around the country in how taxpayers compute their taxes owed.”5

5

See CRS § 39-22-104(z) for this “catch-up” modification.

CRS § 39-22-123.5(2.5)(a), as amended by House Bill 21-1002, Section 2.

House Bill 21-1311, Section 1(1)(b)(I).

6

• Reduce tax avoidance by updating certain tax provisions related to business structures.6 • “... adjust the availability of certain tax expenditures so that the availability and extent of tax expenditures are more fairly distributed across taxpayers.” 7 To that end, the bill made the following changes for individual and business taxpayers: Individuals Section 529 Plans Section 529 plans, also known as “qualified tuition programs,” allow taxpayers to provide for higher education expenses through either savings or prepaid tuition plans. Colorado’s section 529 program is managed by CollegeInvest, a not-for-profit division of the Colorado Department of Higher Education.

Colorado taxpayers may claim a state income tax deduction for contributions to such plans. Effective Jan. 1, 2022, the bill caps the annual deduction at $20,000 per taxpayer per beneficiary for single filers and $30,000

For a complete listing of 2021 tax legislation with descriptions, see the Preliminary Tax Digest prepared by the Office of Legislative Legal Services at 2021-preliminary-digest-2nd-ed.pdf (colorado.gov).

CRS § 39-22-123.5(2.5)(a).

4

This bill makes 12 different changes to Colorado’s income tax laws.

House Bill 21-1311, Section 1(1)(b)(II).

House Bill 21-1311, Section 1(1)(b)(III).

7

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NewsAccount | September/October 2021

per taxpayer per beneficiary for joint filers.8 For tax years beginning on or after Jan. 1, 2023, the cap will be adjusted annually “by the percentage change in the combined average annual costs of tuition and room and board for all state institutions of higher education....”9 The bill requires CollegeInvest to provide the Colorado Department of Revenue reports beginning Jan. 1, 2022, containing information on account owners and contributors, including name, social security number, contribution amounts, and distribution amounts. This reporting is generally for contributions and distributions made on or after Jan. 1, 2021.10 Finally, CollegeInvest must provide reports to the Department of Revenue on distributions to Colorado taxpayers from 2017 forward, a sample of which the Department essentially will audit (and make assessments if it determines that the correct amount of tax on a distribution was/is greater than that reported by the taxpayer).11 Excess Itemized Deduction Addback For income tax years beginning on or after Jan. 1, 2022, Colorado taxpayers with federal adjusted gross income equal to or exceeding $400,000 dollars must, if single, add back to federal taxable income the amount by which their itemized deductions exceed $30,000, and if married filing jointly, $60,000.12 Pension/Annuity Subtraction For tax years beginning before Jan. 1, 2022, individuals who are age 55 to 64 at the end of the year and who receive pension and annuity income that is included in federal adjusted gross income may deduct from federal taxable income up to $20,000. The limit is $24,000 if they are age 65 or older at the end of the year.13 There is also a subtraction of up to $20,000 for amounts received as pensions or annuities by individuals who are younger than age 55 at the end of the year

if such benefit is received because of the death of the person originally entitled to the benefit.14 Effective for tax years beginning on or after Jan. 1, 2022, these caps generally continue, except that in the case of individuals who are age 65 or older at the end of the year and who have social security benefits that alone are in excess of the $24,000 cap, the cap has been modified to allow for the subtraction of all social security benefits included in federal taxable income.15 Colorado Earned Income Tax Credit (EITC) The Colorado EITC is a refundable credit available to Colorado resident individuals and calculated as a percentage of the EITC claimed on the individual’s federal income tax return.16 For tax years beginning before Jan. 1, 2022, the Colorado EITC is equal to 10 percent of the federal EITC.17 For tax years beginning in 2022, along with those beginning on or after Jan. 1, 2026, the Colorado

security number will not affect eligibility for the Colorado EITC.20 Also, the Colorado EITC is computed without regard to certain changes in the federal EITC provided under IRC § 32(n).21 Colorado Child Tax Credit Although CRS § 39-22-129 was enacted in 2013 to provide a Colorado Child Tax Credit based off the federal child tax credit provided in IRC § 24, activation of the Colorado credit had been blocked by CRS § 39-22129(4) pending enactment by Congress of the federal “Marketplace Fairness Act of 2013” (or sufficiently similar legislation). However, because HB21-1311 eliminated the block, the Colorado Child Tax Credit will take effect beginning with tax year 2022. The credit is refundable, and the amount is determined by a taxpayer’s filing status and income.22 According to the Legislative Council Staff Fiscal Note, the amounts are as follows:

AMOUNTS OF THE COLORADO CHILD TAX CREDIT SINGLE FILERS

JOINT FILERS

FEDERAL AGI*

% OF FEDERAL CREDIT

FEDERAL AGI*

% OF FEDERAL CREDIT

Up to $25,000

60 percent

Up to $35,000

60 percent

$25,001 to $50,000

30 percent

$35,001 to $60,000

30 percent

$50,001 to $75,000

10 percent

$60,001 to $85,000

60 percent

*AGI = adjusted gross income EITC is 20 percent of the federal EITC.18 For tax years beginning in 2023 through 2025, the Colorado EITC is 25 percent of the federal EITC.19 For tax years beginning on or after Jan. 1, 2020, the fact that a Colorado resident individual, his/her spouse, and/or dependents does/do not have a valid social

Note that the percentages shown here assume that certain enhanced federal child tax credit provisions generally applicable to 2021 are not extended to later years.23 If they are extended, the Colorado credit percentages will be generally decreased by 50 percent.24 Also note that dependents without CONTINUED ON PAGE 26

CRS §§ 39-22-104(4)(i)(II)(A) and (B).

8

CRS § 39-22-104(4)(i)(II)(C).

9

CRS § 39-22-104(4)(i)(V).

10

CRS §§ 39-21-103(1.5)(a)-(c).

11

CRS § 39-22-104(3)(p).

12

See CRS § 39-22-104(4)(f)(III) as in effect until June 23, 2021.

13

See CRS § 39-22-104(4)(f)(II).

14

CRS § 39-22-104(4)(f)(III)(B). It appears this change only applies to individuals who are 65 or older. Since one can start receiving social security at 62, it seems that an individual who is 62-64, who gets social security benefits in excess of $20,000 is limited to subtracting $20,000. Further clarification may be required by the Department of Revenue.

15

CRS § 39-22-123.5.

16

CRS § 39-22-123.5(2)(a).

17

CRS § 39-22-123.5(2)(b).

18

CRS § 39-22-123.5(2)(c)(I).

19

CRS §§ 39-22-123.5(a), (b), and (d). Note that House Bill 21-1002 included 2020 in the years for which the Colorado EITC is allowed even if federally required social security numbers are missing.

20

See CRS § 39-22-123.5(2.7).

21

CRS §§ 39-22-129(3.5), (4), and (5).

22

See CRS §§ 39-22-129(3.5) and (4) and § 9611 of the American Rescue Plan Act of 2021 (P.L. 117-2).

23

24

See CRS § 39-22-129(3.5). The table is drawn from the Legislative Council Staff’s fiscal note.

September/October 2021 | www.cocpa.org

25

AT THE STATEHOUSE CONTINUED FROM PAGE 25 a valid social security number can qualify for Colorado’s Child Tax Credit.25 Finally, special rules apply in the case of a part-year resident.26 Colorado Capital Gains Modification For many years, Colorado has provided a subtraction modification to “qualified taxpayers” for capital gains on qualified property acquired on or after May 9, 1994, and owned for at least five uninterrupted years.27 Effective for tax years beginning on or after Jan. 1, 2022, House Bill 21-1311 narrows the scope of the capital gain subtraction to sales of certain agricultural land by taxpayers filing an IRS Schedule F, Profit or Loss From Farming.28 Businesses Food and Beverage Expenses To provide relief and stimulate the food and beverage industry, the 2021 federal Consolidated Appropriations Act increased the federal income tax business expense deduction for “restaurant” meals from 50 percent to 100 percent through Dec. 31, 2022.29 The Colorado legislature would have none of it.

For the calendar year 2022, the bill requires taxpayers to add back to federal taxable income any deduction for food and beverage expenses that exceeds 50 percent.30 Extension of the Limitation on Qualified Business Income Deduction (IRC § 199A) House Bill 20-1420 required taxpayers filing singly with adjusted gross income over $500,000 and those filing married filing jointly with incomes over $1,000,000, to add back to federal taxable income, in arriving at Colorado taxable income for 2021 and 2022, their qualified business income deduction under IRC § 199A. That addback provision is

now extended through Dec. 31, 2025. However, the addback does not apply to taxpayers filing IRS form Schedule F, Profit or Loss From Farming, for the year the deduction is claimed for federal purposes.31 “Tax Havens” Effective for tax years beginning on or after Jan. 1, 2022, Colorado combined groups must include within their affiliated group any C corporations that are “incorporated in a foreign jurisdiction for the purpose of tax avoidance.”32 Any corporation incorporated in the specific listed jurisdictions will be treated presumptively as if there for the purposes of tax avoidance.33 To rebut this presumption, the taxpayer must prove “to the satisfaction of the executive director” of the Department of Revenue that the corporation in question is incorporated in the listed jurisdiction for “reasons that meet the economic substance doctrine described in Section 7701(o) of the Internal Revenue Code.”34 The listed jurisdictions include Andorra, Anguilla, Antigua and Barbuda, Aruba, The Bahamas, Bahrain, Barbados, Belize, Bermuda, Bonaire, British Virgin Islands, Cayman Islands, Cook Islands, Curaçao, Cyprus, Dominica, Gibraltar, Grenada, Guernsey-Sark-Alderney, Isle of Man, Jersey, Liberia, Luxembourg, Malta, Marshall Islands, Mauritius, Monaco, Montserrat, Nauru, Niue, Panama, Saba, Samoa, San Marino, Seychelles, Sint Eustatius, Sint Maarten, St. Kitts and Nevis, St. Lucia, St. Vincent and the Grenadines, Turks and Caicos Islands, U.S. Virgin Islands, and Vanuatu. 35 The bill repeals the subtraction for IRC § 78 dividend income for C corporations incorporated in “a foreign jurisdiction for the purpose of tax avoidance pursuant to section 39-22-303(8)(b)(II).” 36

The bill also provides subtractions to shareholders for certain items of income from foreign corporations that due to changes in federal legislation may result in the same income being counted twice, once at the federal level and again in an aggregate return at the Colorado level. These modifications relate to income included in the shareholder’s federal taxable income under IRC §§ 951(a) and 951A(a). 37 The ”Finnigan” Rule Colorado has switched from the “Joyce” rule to the “Finnigan” rule for unitary/combined sales factor apportionment purposes.38 What does that mean? Let’s begin with a

Debate has been ongoing for many years about whose sales ought to be included in the sales factor numerator of a group of corporations subject to combined reporting. little background. “Joyce” and “Finnigan” refer to two different ways of calculating the sales factor numerator in a unitary/ combined return. Debate has been ongoing for many years about whose sales ought to be included in the sales factor numerator of a group of corporations subject to combined reporting.39 The Legislative Council Staff summed it up this way:

CRS § 39-22-129(3.5)(a).

25

CRS § 39-22-129(6).

26

CRS § 39-26-518. See also Colorado publication, Income Tax Topics: Colorado Capital Gain Subtraction (May 2021).

27

See CRS § 39-22-518(2)(a)(I.5), 39-22-518(2)(b)(I)(B.7); and 39-22-518(2)(b)(II)(C).

28

See IRC § 274(n)(2)(D).

29

CRS § 39-22-104(3)(q)(I).

30

CRS § 39-22-104(3)(o).

31

CRS § 39-22-303(8)(b)(I).

32 33

CRS § 39-22-303(8)(b)(II) regarding the definition of “corporation” for purposes of this provision.

CRS § 39-22-303(8)(b)(II).

34

CRS § 39-22-303(12)(b). A similar bill, House Bill 16-1275, was introduced in 2016 as part of a wave of tax haven legislation proposed in Alabama, Kansas, Kentucky, Louisiana, Maine, Massachusetts, Montana, Oregon, and New Jersey. The tax haven legislation took various forms including “blacklists” such as exhibited here, but with mixed success. Other states tried to define a tax haven only to find that given certain definitions, states such as Delaware, Nevada, South Dakota, and Wyoming qualified as tax havens. For an entertaining and informative presentation with the appropriate amount of righteous indignation on all sides, see Billy Hamilton, “Wyoming LLC: How Cheyenne Became a ‘Little Cayman Island,” State Tax Notes, (April 25, 2016); Oliver Bullough, “The Great American Tax Haven: Why the Super-Rich Love South Dakota,” The Guardian (November 14, 2019); and Steven Dean and Attiya Waris, “Ten Truths About Tax Havens: Inclusion and the ‘Liberia’ Problem,” Brooklyn Law School Legal Studies (April 2021).

35

See CRS §§ 39-22-304(3)(j).

36

See CRS §§ 39-22-304(3)(q)(I) and (II).

37

CRS § 39-22-303(11)(c)(II)(B).

38

The names come from two decisions of the California State Board of Equalization: Appeal of Joyce, Inc., No. 66 SBE 069 (Cal. SBE Nov. 11, 1966), and Appeal of Finnigan Corporation, Cal. St. Bd. of Equal., August 25, 1988 (Finnigan I); Opin . on Pet. for Rhrg, Cal. St. Bd. of Equal., January 24, 1990 (Finnigan II).

39

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NewsAccount | September/October 2021

Under current law (the Joyce rule), each individual corporation within a combined group is treated as an individual taxpayer, and as such for a corporation to have tax liability within Colorado [or any other state] it must have “nexus” to the state (i.e., a significant economic presence within the state). Under the Finnigan rule, the combined group is treated as a single taxpayer, and as such if one corporation in the combined group has nexus to Colorado, all of the affiliated corporations are considered to have a nexus to Colorado for tax liability apportionment purposes.40 The controversy over Joyce/Finnigan is best illustrated by the fact that California began as a Joyce state, became a Finnigan state, then back to being a Joyce state, and now is, again, a Finnigan state.

A useful example of the Joyce/Finnigan debate is sourcing “throwback sales.” Assume a Colorado retailer that is not a member of a Colorado combined group makes online sales of tangible personal property to customers in Utah. Assume further that the retailer either does not have income tax nexus with Utah, or that if it does it is protected from Utah income tax under Public Law 86-272, and accordingly it is not subject to Utah income tax. Colorado will require those sales to be “thrown back” into the Colorado sales numerator.

But what happens if the retailer is part of a combined group with a subsidiary that has nexus in Utah and is not protected under 86-272? Is the sale still thrown back into Colorado? If Colorado applies the Joyce rule, the sale is thrown back because the entity making the sale is not subject to Utah income tax. If Colorado applies the Finnigan rule, the sale is not thrown back into Colorado, because, viewing the group as a whole, it is subject to Utah income tax. In short, the question is this: In the case of a Colorado combined group, when determining whether you must throw back sales into your state’s numerator, do you look to the nexus of each individual corporation, or do you look to the nexus of the unitary group as a whole?

Here is an example of the impact under Colorado’s traditional Joyce rule with Utah’s Finnigan rule. Companies A, B, and C have Utah and Colorado nexus, but C is protected

by P.L. 86-272 from Utah income tax.

The ABC combined group is made up of three separate corporations, A, B, and C. A and B have nexus in both Colorado and Utah, but C only has nexus in Colorado. However, C makes sales into Utah. Here are the companies’ respective sales: COLORADO

UTAH

A

$ 6,000

$

1,000

B

$ 6,000

$ 8,000

C

$ 6,000

$ 3,000

Totals

$ 18,000

$ 12,000

$ 30,000

Colorado is a Joyce state and its factor is 70% because the $3,000 in Utah sales are thrown back into the Colorado numerator.

A

$ 6,000

B

$ 6,000

C

$ 9,000

Totals

$ 21,000

$ 21,000 divided by 30,000 = 70%

Because Utah is a Finnigan state, its factor is 40% because C’s Utah sales of $3,000 are not thrown back into the Colorado numerator, but stay in the Utah numerator, because C is part of a combined group in which A and B have nexus with Utah.

A

$

1,000

B

$ 8,000

C

$ 3,000

Totals

$ 12,000

Notice that in the previous example, more than 100% of the sales of the combined group of ABC have been apportioned. In short, ABC is paying tax on more than 100% of its sales. Thus, sales from a Joyce state with throwbacks into a Finnigan state will result in the sale being in both state’s numerators, and the taxpayer will be paying tax on more than 100% of income. State tax administrators do not seem to be bothered by this as much as taxpayers. However, sales from a Finnigan state into a Joyce state will result in the sale being excluded from both state’s numerators, and the taxpayer will be paying tax on less than 100% of income. Taxpayers do not seem to be bothered by this as much as state tax administrators. In any event, this double counting of the sale in both the Colorado and Utah numerators has now been eliminated with Colorado’s adoption of the Finnigan rule.

$ 12,000 divided by 30,000 = 40%

Taxable Income of Non-U.S. C Corporations Effective for tax years beginning on or after Jan. 1, 2022, the “federal taxable income” of certain non-U.S. C corporations for Colorado income tax purposes will be computed on a separate-entity basis, under U.S. generally accepted accounting principles, in the currency in which the corporation’s books are maintained, independently audited, and modified to take into account book-tax adjustments necessary to reflect federal and state tax law. This calculation is to be based on the corporation’s worldwide income.

This taxable income amount will then be converted into U.S. dollars. Unrealized foreign currency gains and losses will not be recognized.41 According to the statute, this provision will apply to C corporations that are not incorporated in the U.S. and not included in a consolidated federal income tax return.42 Finally, the executive director of the CONTINUED ON PAGE 28

HB 21-1311, Revised Fiscal Note, Legislative Council Staff (May 17, 2021)

40

CRS § 39-22-304(1)(b)(I).

41

CRS § 39-22-304(1)(b)(I).

42

September/October 2021 | www.cocpa.org

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AT THE STATEHOUSE CONTINUED FROM PAGE 27 Department of Revenue can provide “other procedures to reasonably approximate” the income and loss in this case, and also to “reasonably approximate the income or loss and apportionment factors of members [of a combined return] with foreign operations.43 Employee Stock Ownership Plan (ESOP) Conversions The bill establishes an income tax credit for certain costs incurred by a qualified business in establishing an employee stock ownership plan, an employee ownership trust, or in converting to a worker-owned cooperative. The idea is for the owners of these businesses to sell their businesses to their employees rather than to out-of-state buyers.44 The credits are equal to 50 percent of the qualified conversion costs, but they (the credits) cannot exceed either $25,000 (for worker-owned cooperative or employee ownership trust transactions) or $100,000 (for employee stock ownership plan transactions).45 This credit is available for tax years beginning Jan. 1, 2022 through Dec. 31, 2026.46 See CRS § 39-22-542 for extensive details.

Captive Insurance Companies In general, insurance companies pay a Colorado gross premiums tax under CRS § 10-3-209 and are exempt from Colorado income tax.47 The bill provides that a “disqualified insurance company,” defined as a captive insurance company whose gross receipts for the taxable year are 50 percent or less from “premiums from arrangements that constitute insurance for federal tax purposes,” is no longer exempt from income taxes.48 The bill makes a corresponding amendment to CRS §§ 10-3-209(1)(a) and 10-6-128(1) that exempted disqualified insurance companies from the Colorado premiums tax. The law was effective upon enactment, June 23, 2021.49

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HOUSE BILL 21-1312 (INSURANCE PREMIUM, PROPERTY, SALES, AND SEVERANCE TAX) House Bill 21-1312 is a grab bag of random items thrown into one bill, each of which has little or nothing to do with anything else in the bill.

Insurance Premium Tax Rate Prior to HB21-1312, insurance companies generally paid a 2 percent Colorado premiums tax. Insurance companies “maintaining a home office or a regional home office” in Colorado paid the tax at a 1 percent rate. Qualifying for this reduced rate required that the company perform in Colorado certain functions related to its operations in Colorado and other states or that it maintain significant direct insurance operations and sufficient functional operations in Colorado.50 The legislature believed that the reduced tax rate had “failed to achieve the intended result.” Under HB21-1312, in order to meet the home office/regional home office requirement, the company must meet the existing test described above, and it also must maintain a workforce in Colorado equal to 2 percent of the company’s total domestic workforce for taxes due and payable for calendar year 2022, 2.25 percent for taxes due and payable for calendar year 2023, and 2.5 percent for taxes due and payable for calendar years 2024 and later.51 In making the workforce calculation, employees of certain related entities are included, while certain agents, brokers, and staff are not.52 HB21-1312 also narrows the exemption from premiums tax that is applicable to certain policies or contracts related to annuity plans. The new rule is effective for taxes due and payable for calendar years 2021 and later. See CRS § 10-3-209(1)(d)(IV) for details.

Property Tax - Valuation of Property HB21-1312 clarifies that the actual value of

property reflects fee simple ownership.53 Also, the value of personal property is to be based on its “value in use.”54 The property tax administrator is to provide a definition of “value in use.”55 Business Personal Property Tax Exemption Currently, there is an exemption from business personal property tax for personal property that would be listed on a single personal property schedule totaling less than $7,900. This legislation increases the threshold to $50,000 for property tax years beginning on Jan. 1, 2021 and Jan. 1, 2022, with the exemption amount to be adjusted for inflation after that.56 The state must reimburse local governments for any shortfalls due to the increase in the exemption amount.57 Further, if reimbursements are not made for any year, the exemption generally reverts, effective for the property tax year commencing the following January 1 and subsequent years, to what it would be under the current law.58 Sales and Use Tax The legislative declaration states that the sales and use tax changes “are intended to reflect the general assembly’s intent of how the existing statute should be interpreted,” to codify the Department of Revenue’s “long-standing treatment of digital goods,” “to tax sales of tangible personal property no matter the delivery method,” and “to clarify that amounts charged for mainframe computer access, photocopying, and packing and crating are sales and purchases of tangible personal property subject to state sales tax.” It will not be surprising if there is (1) push-back in the state and local tax community to some or all of these declarations, intentions, clarifications, and codifications, questioning whether they do, in fact, reflect long-standing Department practice and/or (2) litigation claiming these amendments are TABOR violations.59

CRS § 39-22-304(1)(b)(II).

CRS § 39-22-542(1)(a).

CRS § 39-22-542(3)(a).

CRS § 39-22-542(3)(a).

CRS § 39-22-112(1) prior to amendment by HB 21-1311, effective June 23, 2021. See CRS § 10-3-209.

See CRS §§ 10-1-102(6.5) and 39-22-112(1).

HB 21-1311.

CRS §§ 10-3-209(1)(b)(II)(A) and (B).

CRS §§ 10-3-209(1)(b)(II.5).

CRS §§ 10-3-209(1)(b)(II.7) CRS § 39-1-103(5)(a).

CRS § 39-1-104(12.3)(a)(I).

CRS § 39-1-104(12.3)(a)(I).

CRS §39-3-119.5(2)(a)(V-VIII).

CRS §§ 39-3-119.5(3).

CRS § 39-3-119.5(2)(b)(1)(C) and (B).

The Colorado Taxpayer’s Bill of Rights (TABOR) is an amendment to the state constitution passed by the voters in 1992 that requires taxpayer approval of new taxes, tax rate increases, or changes in tax policy. TABOR limits the amount of money the state of Colorado can collect and spend. It limits the annual increase in state revenue to inflation plus the percentage change in state population. Any money collected above this limit must be refunded to taxpayers unless the voters otherwise allow the state to keep or spend it.

TABOR is located in Section 20 of Article X of the Colorado Constitution.

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NewsAccount | September/October 2021

HB21-1312 provides definitions for “mainframe computer access,” “photocopying,” “packing and crating,” “digital goods,” and “tangible personal property,” all in CRS § 39-26-102. It also restates the property and services taxed by expressly adding mainframe computer access, photocopying, and packing and crating to the items taxed in CRS § 39-26-104(1)(a), where the definition of “tangible personal property” now includes “digital goods.”

The bill defines “mainframe computer access” as “the provision of access to computer equipment for the purpose of storing or processing data.” It does not include “the provision of access to computer equipment for the purpose of examining or acquiring data maintained by the vendor.” It also does not include “the provision of access to computer equipment incident to electronic computer software delivery, as defined in subsection [CRS § 39-26-102](15)(c)(II) (C) of this section, or incident to the use of computer software hosted by an application service provider, as defined in subsection [CRS § 39-26-102](15)(c)(II)(A) of this section.”60 We will have to wait for guidance from the Department of Revenue before we can understand the scope and scale of what “mainframe computer access” means.

The bill defines “packing and crating” as “tangible personal property furnished to prepare tangible personal property purchased at retail for delivery to a location designated by the purchaser.”61 It is not clear how this provision will coordinate with the current sales and use tax exemption for packaging provided in Special Regulation 9.62 Further direction is needed.

Not so controversial is the bill’s provision imposing tax on photocopying, which is defined as “the sale of a document rendered on paper or other similar material by a machine that creates an accurate reproduction of the original.” Excluded from the term

is “the provision of a photocopy in connection with services if the purchaser is not charged separately for photocopying.”63 Many thought that already was taxable.

Prior to amendment by the bill, CRS § 39-26102(15)(a)(I) stated that “tangible personal property” means corporeal personal property. The bill adds, “The term embraces all goods, wares, merchandise, products, and commodities, and all tangible or corporeal things and substances that are dealt in and capable of being possessed and exchanged, except as set forth in this subsection (15).”

The bill goes on specifically to include “digital goods” in the definition of “tangible personal property.”64 For this purpose, “digital good” is defined as “any item of tangible personal property that is delivered or stored by digital means, including but not limited to video, music, or electronic books.”65 Note that CRS § 39-26-102(15)(b.5)(I), which expressly includes digital goods in the definition of “tangible personal property,” states that, “The method of delivery does not impact the taxability of a sale of tangible personal property. Examples of methods used to deliver tangible personal property under current technology include but are not limited to compact disc, electronic download, and internet streaming.” However, CRS § 39-26-102(15)(b.5)(II) defines “digital good” as “any item of tangible personal property that is delivered or stored by digital means, including but not limited to video, music, or electronic books.”

The bill amends CRS § 39-26-104(1)(a), which simply used to state that sales tax is imposed on the retail sale of tangible personal property, to now state that it is imposed on such sales, “including, but not limited to, the amount charged for mainframe computer access, photocopying, and packing and crating.” It is not clear why these items were not defined as tangible personal property, as were digital goods. Finally, the bill imposes

a cap on the vendor fee. Retailers with total taxable sales exceeding $1,000,000 for any filing period are not permitted a vendor’s fee for that period.66 Severance Tax In BP America Production Co. v. Colorado Dep’t of Revenue (2016), the Colorado Supreme Court held that cost of capital associated with natural gas transportation and processing facilities is a deductible cost for severance tax purposes.67 Colorado’s oil and gas severance tax is based on the “gross income” derived from the sale of an extracted natural resource.68 Under CRS § 39-29-102(3)(a), “gross income” is calculated based upon “the gross lease revenues, less deductions for any transportation, manufacturing, and processing costs borne by the taxpayer.” BP America Production successfully argued that “any transportation, manufacturing, and processing costs” included the cost of capital.69 House Bill 21-1312 attempts to reverse the BP decision by limiting the allowable deduction to only those transportation, manufacturing, and processing costs (including depreciation) that are direct and actually paid or accrued by the taxpayer.”70 The legislation also phases out both the tax exemption for the first 300,000 (for 2021) tons of coal produced per quarter and the 50 percent (for 2021) tax credit for coal produced annually from underground mines and lignitic coal. Both of these phaseouts are gradual, with complete phaseout for 2026 and later.71 HOUSE BILL 21-1327 (SALT PARITY ACT) The federal Tax Cuts and Jobs Act of 2017 placed a $10,000 annual cap on the federal income tax deduction for state and local taxes claimed by individuals on Schedule A, line 5a. The cap did not affect C CONTINUED ON PAGE 30

CRS § 39-26-102(5.7). See also CRS § 39-26-104(1)(a). The Fiscal Note for HB21-1312 states, “The provision extending sales taxable property and services to mainframe computer access is assumed to apply to the purchase price of cloud-based data storage services only. However, the bill may be interpreted to extend to data storage infrastructure as a service or other cloud-computing or processing services.” It is unclear how much authority such comments carry so further guidance from the Department may be needed.

60

CRS § 39-26-102(6.4). See also CRS § 39-26-104(1)(a).

61

See Colorado Special Regulation SR-9, Sales of containers, labels, tags, cartons, packing cases, wrapping paper, twine, wire, pallets, skids, bags, shipping cases, bottles, cans, and similar articles and receptacles sold to manufacturers, producers, wholesalers, jobbers, retailers, or other licensed vendors for use as containers, labels, and furnished shipping cases for articles sold by them are not taxable..

62

CRS § 39-26-102(6.5). See also CRS § 39-26-104(1)(a).

63

CRS §§ 39-26-102(15)(b.5)(I).

64

CRS §§ 39-26-102(15)(b.5)(II).

65

CRS § 39-26-105(1)(d)(IV).

66

BP America Production Co. v. Colorado Dep’t of Revenue, 2016 CO 23, 2016 WL 1639829 (Apr. 25, 2016).

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CRS § 39-29-105.

68

BP America Production Co. v. Colorado Dep’t of Revenue, 2016 CO 23, 2016 WL 1639829 (Apr. 25, 2016).

69

CRS § 39-29-102(3)(a).?

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CRS § 39-29-106(2)(b),(3.5), and (4).

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September/October 2021 | www.cocpa.org

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AT THE STATEHOUSE CONTINUED FROM PAGE 29 corporations. Naturally a great hue and cry swept across the country, leading both states and individuals to seek a way to avoid the limitation, as both taxpayers and state tax administrators said, to find a workaround.72 Several states have created workarounds including Alabama, Arkansas, Connecticut, Georgia, Idaho, Louisiana, Maryland, and New Jersey. Legislation is pending in other states. The approach varies, but the tack the Colorado legislature took was to treat the deductibility of state and local taxes equally for C corporations, S corporations, and partnerships.73 In short, the legislation allows partnerships and S corporations to elect to pay their state income taxes, beginning in 2022, at the entity level, rather than at the individual level. The IRS announced in Notice 2020-75 that it would not challenge state income tax deductions taken at the passthrough entity level.

The legislation adds Subpart 3, §§ 39-22340 to 39-22-346, which may be cited as the “SALT Parity Act,” to Title 39, Article 22, Part 3 of the Colorado Revised Statutes. An “electing pass-through entity” (PTE), meaning an S corporation, partnership, or “presumably” a limited liability company taxed as a partnership, may make an annual election to be taxed at the entity level.74 The election is binding on “all electing pass-through entity owners.”75 However, a corporate partner that is unitary with a partnership cannot qualify as an electing pass-through entity owner.76 The election is available for tax years beginning on or after Jan. 1, 2022, but only in years in which there is a SALT cap at the federal level.77 In short, the electing pass-through entity is treated as if it were a C corporation for purposes of deducting the state and local taxes.78 The electing pass-through entity is subject to Colorado income tax at a flat rate of 4.55 percent, and any available credits must be claimed by the entity and cannot be passed through to the entity’s owners.79 Because the tax is being

paid by the electing PTE, the PTE owners should exclude any of the PTE’s income from their individual returns, because tax has already been paid on that income by the PTE.80 Thus, Colorado offsets the tax paid at the PTE level with a subtraction for the income passed through by the PTE. To the extent the partner, member, or shareholder does not have taxable income from the PTE, neither will the partner, member, or shareholder will be entitled to an IRC § 199A deduction.81 See CRS §§ 39-22-340 to 39-22-346, 39-22-104(3)(r) and (4)(aa), 39-22304(3)(r), and 39-22-601(1)(a)(IV) for details.

Miscellaneous Numerous smaller bills were enacted. The following is a select list. For a complete listing of all 2021 legislation, see the Office of Legislative Legal Services Session Laws at https://leg.colorado.gov/session-laws.

Senate Bill 21-19 allows property tax notices of valuation to be mailed on a postcard.

Senate Bill 21-130 allows counties, municipalities, and special districts to exempt up to 100 percent of business personal property from the levy and collection of property taxation for the 2021 property tax year and be reimbursed by the state for the taxes waived.

Senate Bill 21-223 details the locations at which Department of Revenue hearings can be held including, at the election of the taxpayer, by video conference.

Senate Bill 21-260 is not a tax provision but a transportation bill creating numerous new sources of funding for the state’s transportation system. The bill creates four new state enterprises to impose a variety of fees including among others a retail delivery fee, a passenger ride fee, and a short-term vehicle rental fee. For example, beginning in 2022, the retail delivery fee imposes a delivery fee on retail deliveries of tangible personal property, which includes at least one item subject to the state’s sales tax. The fees, similar to the state sales tax, will be collected from the purchaser

by the retailer and remitted to the Colorado Department of Revenue.

Senate Bill 21-282 extends the small business sourcing exception that was to expire on June 20, 2021, to Feb. 1, 2022. House Bill 19-1240 required destination sourcing for state and state-collected sales tax with an exception for small retailers with less than $100,000 in sales. That exception was to expire 90 days after the state’s sales tax rate lookup tool became effective. On April 1, 2021, the Department notified the public that its geographic information lookup tool was available online, thereby triggering the original expiration date of June 30, 2021.

House Bill 21-1083 addressed valuation appeals. In the past, when a property owner appealed the valuation, it could not be increased on appeal. The legislation removes this restriction, so be careful in your appeals.

House Bill 21-1233 made numerous changes to Colorado’s conservation easement provisions that are beyond the scope of this article but deserve close study by those involved with such issues.

That ends our summary for this year. With any luck, next year will be a quiet one during which we can take a break and catch up.

Perhaps we are being too optimistic.

Mark Kozik is Of Counsel with Holland & Hart, LLP, Denver, Colo. Bruce M. Nelson, CPA, Fort Collins, Colo., is a frequent COCPA author/instructor with more than 35 years’ experience in state and local tax.

He is the Editor-in-Chief of the Journal of State Taxation. This article does not necessarily represent the opinions of the authors’ employers, should not be considered the rendering of tax or legal advice, and is not intended to provide specific guidance or advice for any issue in any particular jurisdiction.

One might draw attention to the fact that the legislature, while fighting “tax havens,” created its own. But that would just be petty.

72

CRS § 39-22-341.

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CRS § 39-22-343(1). We added the word “presumably” because the actual text of the statute does not mention limited liability companies. That said, CRS § 39-22-103(5.6) defines partnership as “any group or organization that is a partnership, as defined by section 761 (a) of the internal revenue code, and is required to file a return under section 6031 (a) of the internal revenue code,” and CRS § 39-22-103(11) goes on to say that “any term used in this article, except as otherwise expressly provided or clearly appearing from the context, shall have the same meaning as when used in a comparable context in the internal revenue code, as amended, in effect for the taxable period. Due consideration shall be given in the interpretation of this article to applicable sections of the internal revenue code in effect from time to time and to federal rulings and regulations interpreting such sections if such statute, rulings, and regulations do not conflict with the provisions of this article.” Given those two provisions, it seems unlikely that the absence of specific mention of an LLC in the Colorado statute will deny members of an LLC that is treated as a partnership for federal income tax purposes from the benefits of the SALT Parity Act.

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CRS § 39-22-343(1).

75

CRS § 39-342(2).

76

CRS § 39-22-343(2).

77

CRS § 39-22-344(2).

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CRS §§ 39-22-344(1) and (3).

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CRS §§ 39-22-344(3), 39-22-104(4)(aa), and 39-22-304(3)(r).

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CRS § 39-22-104(3)(r).

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NewsAccount | September/October 2021

VOLUNTEER OPPORTUNITIES

New Group Connects CPAs and Nonprofits

BY NATALIE ROONEY

Nonprofit organizations are brimming with people who are passionate about mission, but sometimes they need a little help in the financial realm. The COCPA’s new Nonprofit Working Group seeks to provide some of that help by bringing CPAs and nonprofit organizations together.

T

he timing felt right to form the new group when COCPA members began reaching out to Derrol Moorhead, COCPA’s Director of Member and Business Development. They had questions and ideas about how the COCPA could support smaller nonprofit organizations specifically. Moorhead, whose background is in associations and nonprofits, wondered if a working group might be the answer. He wasn’t exactly sure what the group would look like, but he knew from experience and anecdotal member comments that nonprofits needed more support.

The COCPA leadership team and several members, including Tiffany Knight, CPA, Director and Shareholder at Kundinger, Corder & Engle, P.C., and Lori Anne Reinwald, CPA, Director at Lori Anne Reinwald, CPA, began brainstorming. Quickly, a motto for the working group emerged: CPAs Give Back.

Over several months, the group narrowed down its list of ideas and reached out to the Colorado Nonprofit Association to ask: What accounting support do smaller nonprofits need? That led to more ideas including a Town Hall held last August to give nonprofits an opportunity to ask the accountants anything.

The working group will focus on connecting nonprofits with experts who can help them.

Expert connection is often a big piece that’s missing.

Reinwald has volunteered on the COCPA’s Nonprofit Conference planning committee for several years. “We see a lot of nonprofits, especially smaller ones, that have a lot of questions about finance. Where do they get those answers if they don’t have a CPA on staff? The working group will focus on connecting those nonprofits with experts who can help them. Expert connection is often a big piece that’s missing.”

Moorhead says the group also is looking to create a database that matches nonprofits with those seeking positions as volunteers or board members. This idea serves the dual purpose of helping the nonprofit find the skills it needs and providing COCPA members with new volunteer opportunities.

“We’re working on new ways to pair CPAs with nonprofit boards,” Knight says. “We’ve been discussing how to deliver that and make sure nonprofits know how they can make those connections.”

Another potential project includes a nonprofit volunteer day when CPAs come together and give back to various organizations. The group also hopes to team up with the COCPA Member Connections Committee for another Cocktails for a Cause event later this year.

HELPING CPAS GET INVOLVED Reinwald hopes one of the outcomes of the new group will be more young accounting professionals joining nonprofit boards. “It might seem intimidating to jump into a board position, but when it comes to the financials, you might be the only person who understands what a financial statement is. When the auditor comes to speak, it helps to have someone with that expertise at the table. If you’re willing to give your time, it’s so fulfilling, especially when you find a mission you’re passionate about.”

The first board Reinwald joined was early in her career. It was filled with doctors and nurses who were experts on vaccines, but she was the only one with financial expertise. “The CEO depended on me to ask questions and create a budget. It was really fulfilling work.”

Knight echoes that sentiment. “We have valuable expertise, and we don’t always realize how we can benefit these nonprofits. Being on a board can help you know you’re giving back.” She served on a small nonprofit board and ended up helping the organization get acquired by a larger nonprofit. “I learned things along the way that have benefited my career, as well,” she says.

To learn more or join the COCPA Nonprofit Working Group, visit cocpa.org/volunteer or email Derrol Moorhead at derrol@cocpa.org.

September/October 2021 | www.cocpa.org

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MOVERS & SHAKERS MATT LEACH Dalby, Wendland & Co. Firm Administrator Matt Leach was awarded the Public Accounting Firm Manager designation (PAFM) by the CPA Firm Management Association (CPAFMA).

As part of its Best in Business 2021, the Colorado Springs Business Journal awarded Erickson, Brown & Kloster, PC the Gold award in the accounting firms category. Stockman Kast Ryan + Co. earned Silver, and BiggsKofford, PC earned Bronze.

LOREN HOFER, JENNIFER STREET, GABRIELLE KALOW, AND KELSEY RICKSTREW Also, the firm promoted Loren Hofer, CPA, and Jennifer Street, CPA, to tax manager; Gabrielle Kalow, CPA, to audit supervisor; and Kelsey Rickstrew, CPA, to audit senior.

KELLEY & CHULICK, CPAS Kelley & Chulick, CPAs, Woodland Park, was named a Best Accounting Firm by Pikes Peak Courier readers, retaining its Gold winner status among accounting firms in the Courier’s Best of Teller County.

LISA M. RECTOR, CPA Lisa M. Rector, CPA, Lisa M. Rector, CPA PC, earned the Pikes Peak Courier’s Silver award.

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NewsAccount | September/October 2021

2021 LEADFIT Congratulations to the 2021 LeadFit participants who are learning new leadership skills virtually. Pictured here with facilitator Lorrie Blanchard Tietze, Interface Consulting LLC, and COCPA’s Mary E. Medley are Carolyn Bernard, Emma Bodine, Kristin Filak, Edward Freeman, Judy Hartman, Jake Linstrom, Michelle Monroe, Alexandria Romero, Katie Watt, and Kim Zingale.

SAVE THE DATE

TAX STUDY GROUPS Boulder/Longmont Tax Study Group VIRTUAL ONLY

Wednesday, Sep. 22, and Wednesday, Oct. 20 Additional 2021 dates: Nov. 17, Dec. 15. For more information, contact Lynn M. Mitton, CPA, MT, MPA, 303-499-7445, or email lmitton@tandemcpas.com.

Established CPAs can make a difference for aspiring CPAs by giving to the Educational Foundation. Your dollars provide scholarship support for highly qualified accounting students at Colorado colleges and universities. Invest in the future of the CPA profession in Colorado.

Denver Tax Study Group VIRTUAL ONLY

Tuesday, Sep. 28, and Tuesday, Oct. 26 Additional 2021 date: Dec. 7. Register at www.cocpa.org.

GIVE.COCPA.ORG

IN MEMORIAM We extend our sympathy to the families and friends of the following members: F.C. “Clint” Maxfield Grand Junction, Colo., Member since 1958 Joan F. Tutor Gunnison, Colo., Member since 1977

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September/October 2021 | www.cocpa.org

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