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The Kentucky

CPA

Journal

Issue 2 2018

The Journal of the Kentucky Society of CPAs

What's all the buzz about? Tax reform • The pass-through deduction: Looking forward • The TCJA’s changes to individual income taxation • When “entertainment” is no longer entertaining • State tax reform is here!

Also inside:

• Generally favorable to real estate, key depreciation benefit eludes businesses • Potential Kentucky implication of the Federal Tax Cuts and Jobs Act • Legislative recap

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The Kentucky CPA Journal / Issue 2 2018

What’s inside

What’s inside Administration

President's message.......................................... Page 4 Across the Board............................................... Page 6

Business and Industry

Tax reform: Generally favorable to real estate, key depreciation benefit eludes businesses.......................................................... Page 8

Tax in the Bluegrass

Potential Kentucky implication of the Federal Tax Cuts and Jobs Act........................ Page 10

Cover

The pass-through deduction: Looking forward............................................... Page 14 The TCJA's changes to individual income taxation............................................................... Page 18 When "entertainment" is no longer entertaining........................................................ Page 20

Legislative

2017 KyCPA-PAC members............................ Page 21 2018 legislative recap........................................ Page 24

CPE

Spotlight: Tax courses for 2018........................ Page 28 Federal Tax Updates......................................... Page 29 CPE calendar...................................................... Page 30 Conferences........................................................ Page 34

Ethics

The 2017-2018 KyCPA Board of Directors: Kevin Joynt, president, of Deloitte & Touche, Louisville William Jessee, immediate past president, of Henderman Jessee & Company, Louisville Rebecca Phillips, president-elect, of MCM CPAs & Advisors, Louisville Elizabeth Woodward, secretary-treasurer, of Dean Dorton, Lexington John Chamberlin of Van Gorder Walker, Erlanger Steve Daniels of T&C Contracting, Louisville, who is also a member of the executive committee Kris Kemp of Myriad CPA Group, Owensboro Skip Looney of Rudler, Fort Wright, who is also a member of the executive committee Wes Omohundro of Allen Company, Inc., Lexington Elizabeth Rankin of ANEW 401k TPA, Louisville Marisa Smith of Airgas MidAmerica, Bowling Green Douglas Allen of Kentucky Community & Technical College System, Versailles Heather Cochran of RFH in Lexington Esther Thompson-Long of LG&E and KU Services Company, Louisville Mike Campbell of Venminder, Elizabethtown and Cambell is also a member of the executive committee Editorial Board Chair: Mark Loyd of Bingham Greenebaum Doll, Louisville

Are you still independent? New ethics interpretation on data-hosting services......... Page 39

CEO - Darlene Zibart Editor - Kimberly Lindsey Associate editor - Katherine Sproles

Educational Foundation Golf Scramble......... Page 41 Create a Legacy.................................................. Page 42 Sponsor BASE Camp........................................ Page 43

Letters to the editor: If you have ideas to share, opinions to express or suggestions for future stories, please email Editor Kimberly Lindsey, KyCPA communications, marketing and creative director, at klindsey@kycpa.org.

Educational Foundation

Accounting careers

Interview Day is Sept. 21................................. Page 44

Society

Advertising: If you would like to advertise in The Kentucky CPA Journal, please contact the Society at marketing@kycpa.org; 502.266.5272.

Members

Please note: this publication is not technically reviewed. Opinions expressed in The Kentucky CPA are those of the authors and do not necessarily reflect Society policy or editorial concurrence. Publication of advertisements does not constitute an endorsement of products or services. The editor reserves the right to accept or reject advertising and editorial material in accordance with editorial judgment and publication guidelines.

Communication: KyCPA and you.................. Page 45 Meet the KyCPA staff....................................... Page 46 Recruitment video: Q&A with Bob Patterson..................................................... Page 49 100% Champions............................................... Page 50 Member profile: Eric Scott................................ Page 52 Member profile: Paulie Shively....................... Page 53 Welcome new members.................................... Page 54 Members in motion........................................... Page 54 Watercooler...................................................... Page 55

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The Kentucky CPA Journal / Issue 2 2018

Administration

President's message By Kevin Joynt, CPA

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hroughout the last year it has been an honor to serve you as President of the Kentucky Society of CPAs, and I am proud of what we have accomplished this year. However, my term is quickly coming to an end this summer and this will be my last president’s letter for the Journal before I relinquish the role to my appointed successor.

I vividly remember meeting on a spring afternoon with our now-retired CEO Penny Gold and past-presidents Bill Jessee and Bob Patterson to discuss board business when Gold confided in us that she was retiring soon. I realized I would be the president of our society during this leadership change and knew the succession process would be critical to our long-term success. My fellow board members agreed I should form a search/selection committee, which I would ultimately preside over as chairman. The process was exhaustive with many qualified candidates applying and going through the initial screening process. We ultimately selected

KyCPA’s

Leadership Luncheon and Annual Members Meeting Save the date

– June 15, 2018 – Featuring Kimberly Ellison-Taylor, global accounting strategy director for Oracle America and immediate past chairman of the board of directors of the AICPA. Includes a welcome reception and luncheon followed by Committee Day.

– The Olmsted, 3701 Frankfort Ave., Louisville – Details and registration coming soon. Watch your email or go to kycpa.org.

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The Kentucky CPA Journal / Issue 2 2018

Darlene Zibart as our CEO, who officially took the position on Dec. 1, 2017. I am proud of the selection we made in choosing Zibart and look forward to working with her and the board for many years to come after my term concludes. We also worked on many matters impacting the Kentucky CPAs during my term. I am proud of our effort in Frankfort which resulted in legislation passing that impacts our members. Thanks in part to a determined lobbying effort led by Charles George, vice president of government affairs and general counsel, the Society’s top priority this legislative session, HB 177, unanimously passed both the House and Senate and is set to become law this summer. The legislation makes Kentucky the 23rd state with a CPA firm mobility law, which allows firms outside the commonwealth to perform attest services and issue reports in

the state without registering or paying fees. Out-of-state firms operating in Kentucky will still be subject to Kentucky laws and regulations. It also allows the state board to privately reprimand CPAs and CPA firms and to provide CPAs and firms an opportunity to apply to have minor violations removed from their professional record after 10 years. Currently, CPAs and firms can be publicly reprimanded for all violations, no matter the severity, in perpetuity. Last year, we saw some firms publicly reprimanded for what many would consider insignificant violations, such as CPAs within the firm not completing their license renewal on time. KyCPA quickly acted on behalf of the profession by inserting the private reprimand option in HB 177. Thank you to Mr. George for his efforts on behalf of KyCPA. I appreciate your leadership.

Administration

On July 1, 2018, my term ends and Becky Phillips a partner at MCM CPAs and Advisors will assume the role of president. I have worked with Phillips for several years on the board and on the executive committee, and am pleased that she has accepted her nomination to serve our membership. She will do an excellent job and I know I leave us in excellent hands. I also wanted to say thank you as well to the awesome team at KyCPA. I appreciate everything each of you do for our membership. Finally, I wanted to say thank you to you for allowing me to serve you as president. It was an honor to be asked to lead the wonderful board of directors at the Society. About the author: Kevin Joynt is a managing director at Deloitte & Touche LLP in Louisville and can be reached at kjoynt@deloitte.com.

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The Kentucky CPA Journal / Issue 2 2018

Administration

Across the Board By Darlene Zibart, CPA

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pring into new opportunities for getting involved and giving back to your professional association. I urge you to take a moment and look at the many options you have for getting involved with KyCPA. Serving on a KyCPA committee is a choice, one that you can say yes or no to. I encourage you to think about the benefits that committee service provides to you, to your professional community and to the Society. Committee service is a great way to get to know CPAs with similar interests, improve the quality of Society programming, create business development opportunities, network and exercise your leadership skills. Studies find that those who volunteer with their professional organizations almost always get more out of the experience than they give and KyCPA is no exception. The foundation of this organization is built upon the devotion and commitment of its members. Without you, your ideas and your desire to make the Kentucky Society of CPAs the professional home for CPAs, our Society would become just a group of people with no purpose. But because of you, we not only have an impact on the number of students entering the accounting program, but we also provide scholarships to help them pay for the overwhelming cost of tuition. We have a seat at the table in Frankfort which was made even more evident to me during our recent legislative day in Frankfort. We even received recognition from Representative Rudy at the Small Business Caucus breakfast. We continue to develop top-notch

conferences and seminars based on the input from the members serving on those committees. Now is a good time to mark your calendar for important KyCPA events. The Annual Leadership Luncheon will be held at the Olmsted on June 15 (See p. 4 or contact Heather Hibbs to register at hhibbs@kycpa.org). This year we are fortunate to have Kimberly Ellison-Taylor, immediate past-chair of the AICPA and the Global Accounting Strategy Leader for Oracle, as our keynote speaker. If you’ve not had the pleasure of hearing Kimberly speak, you are in for a treat. Her passion and excitement for the accounting profession is contagious. The annual golf scramble is scheduled for June 18 at the University of Louisville Golf Club (See p. 41 for registration and sponsor information). The proceeds fund scholarships for Kentucky college students enrolled in an accounting program. Grab your friends, colleagues and clients and come out for a day of fun. Watch your email for a report from the KyCPA Nominations and Awards Committee with the names of the new nominees for the Board of Directors and Executive Committee on April 30. The report will also be posted on kycpa.org. We are fortunate to have such strong leadership, currently in office and on the horizon. Lindsay Fouts, CPA, has joined the Society as Controller; you may have read the member spotlight on Fouts in Issue 1. She comes to us with a strong background in financial reporting and has already had an impressive impact. One important change is moving the Society in the direction of becoming paperless. We look forward to the changes and innovation she will bring to the accounting function.

About the author: Darlene Zibart, CPA is the CEO of the Kentucky Society of CPAs. She can be reached at dzibart@kycpa.org or 502.736.1372.

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Find your

perfect fit Join a committee or task force

All of these things are possible when you become involved: • Influence your profession • make a difference • develop leadership and communication skills • share your expertise • network with valuable contacts Volunteering is the perfect opportunity to utilize your skills in a forum where the contributions of each member are valued and important. The professional relationships you develop will last a lifetime and the time investment is minimal compared to the rewards received. Please go to kycpa.org for more detailed committee and task force descriptions.

Committees • Accounting Career Opportunities • Commercial Real Estate • Construction • Continuing Professional Education • Editorial • Emerging Standards • Employee Benefits • Financial Institutions • Forensic Accounting & Business Valuation • Governmental Accounting

• Health Care • Insurance • Manufacturing • Members in Education • Members in Industry • Non-Profit • Professional Ethics • Retirement Planning • Tax

Task Forces

Join today!

• Business & Accounting Summer Education (BASE) Camp • Diversity • Women’s Initiatives

Sign up at kycpa.org or contact Heather Hibbs at 502.736.1368 or hhibbs@kycpa.org.


The Kentucky CPA Journal / Issue 2 2018

Business and Industry

Tax reform: Generally favorable to real estate, key depreciation benefit eludes businesses

By Bruce J. Belman, CPA

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he recent tax reform, commonly known as the Tax Cuts and Jobs Act (TCJA), generally is applicable for tax years beginning after Dec. 31, 2017. Real estate business fared fairly well under the reform. Tax-free exchanges are still available for real estate and the power of bonus depreciation has been enhanced, making the use of a cost segregation study even more beneficial to real estate businesses. In addition, since rates are coming down, accelerating deductions into 2017 can lock in a permanent benefit. The good news is that taxpayers still can perform a cost segregation study on property they currently own, and with an accounting method change, a taxpayer who has not already filed a tax return can get the benefit of the “catch-up” adjustment on their 2017 tax return.

Cost segregation study

Under current tax law, a cost segregation study can be performed on a building that was placed into service during a prior year to “catch up” the additional depreciation deductions in the current year. Amended tax returns are not required in order to take the catch-up deductions. The deductions can be taken on a 2017 return using the current year’s rates by filing Form 3115, “Application for Change in Accounting Method,” with the IRS. Because this

change is treated as an automatic change, Form 3115 is completed and filed along with the 2017 tax return. For example, if a business placed in service a $5 million building in 2007, a cost segregation study can be performed on the building today to recapture any missed depreciation. If 20 percent of the building is determined to be five-year property, the catch-up deduction will be approximately $750,000. For new buildings placed into service in 2017, additional depreciation benefits also might be available for renovations completed in 2017. If the costs qualify, 50 percent of the renovation cost might be deductible in the first year as bonus depreciation, and the taxpayer can take regular depreciation on the remaining basis. In addition, for costs incurred after Sept. 26, 2017, some of the renovations could qualify for 100 percent bonus depreciation. Any costs attributable to the renovation also should be considered in the context of the tangible property regulations to see if there are partial disposition and qualified improvement property deductions.

Business interest limitation

Real estate trades or businesses also can elect to circumvent the 30 percent business interest limitation. Beginning in 2018, the TCJA generally limits the annual deduction for business interest

Save the date Nov. 9 for the Commercial Real Estate Conference. 8


The Kentucky CPA Journal / Issue 2 2018

expense to an amount equal to 30 percent of the total of a taxpayer’s adjusted taxable income, business interest income and floor plan financing interest (if any). Adjusted taxable income is taxable income from trade or business activities before any deductions for interest, depreciation, amortization, net operating losses and the new pass-through deduction. After 2021, the limit becomes more stringent. The amount of any business interest not allowed as a deduction for any taxable year may be carried forward indefinitely and used in future years, subject to this and other applicable interest deductibility limitations and to certain restrictions applicable to partnerships. However, if a real property business agrees to use an alternative depreciation system (ADS) for its commercial, residential or qualified improvement property, the 30 percent limitation does not apply. Agreeing to ADS is not a horrible price to pay for the privilege of deducting all of your interest. Commercial property goes from 39 to 40 years and the TCJA helped residential property, which under the modified accelerated cost recovery system is depreciated over 27.5 years, by changing the ADS life for residential property from 40 to 30 years. However, as discussed later, qualified improvement property might have to use a 40-year life as the law currently stands.

Qualified improvement property

An apparent drafting error will keep businesses from getting a key depreciation benefit for real estate that Congress intended for them to receive as part of the recently passed tax reform unless a technical corrections bill resolves the problem. Prior to tax reform, improvements to real property classified as qualified leasehold improvements, qualified retail improvements and qualified restaurant property had a 15year life and were eligible for 50 percent bonus depreciation. The conference committee report indicates that Congress intended to combine the three types of property into a new category of real estate improvements called qualified improvement property (QIP) that would be eligible for a 15-year life and 100 percent bonus depreciation. QIP includes any improvement to an interior portion of a building that is nonresidential real property. Unfortunately for taxpayers, how the statute was drafted was not consistent with the clear congressional intent. To implement the congressional intent, the legislation had to do two things: 1. Eliminate qualified leasehold improvements, qualified retail improvements and qualified restaurant property from the code 2. Include QIP as 15-year property in IRC Section 168(e) (3)(E)

Business and Industry

Adding QIP as 15-year property is important as real estate improvements are not eligible for bonus depreciation unless they are classified as such. Congress completed the first task but failed to include QIP as 15-year property. By failing to change the classification of real estate improvements, any bonus depreciation for QIP was eliminated. Adding insult to injury, not only is the new QIP not eligible for bonus depreciation, the omitted classification change results in a 39-year depreciable life instead of the 15-year life that clearly was intended by Congress. Qualified leasehold improvements, qualified retail improvements and qualified restaurant property placed in service by Dec. 31, 2017, still will be eligible for 50 percent bonus depreciation and a 15-year life. Absent a technical corrections bill to correct the drafting error, however, QIP placed in service in 2018 and later years will not be entitled to bonus depreciation and will have a 39-year life. About the author: Bruce Belman is a partner at Crowe Horwath LLP and can be reached at 502.420.4525 or bruce.belman@ crowehorwath.com.

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The Kentucky CPA Journal / Issue 2 2018

Tax in the Bluegrass

Potential Kentucky implication of the Federal Tax Cuts and Jobs Act By Mark A. Loyd, Esq., CPA

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ust when many of us thought Congress could not pass anything, they passed the Tax Cuts and Jobs Act, H.R. 1, and it became law on Dec. 22, 2017. Most changes go into effect in 2018. Kind of like federal tax reform, which had been talked about for years, Kentuckians have been talking about Kentucky tax reform for quite a while. Kentucky’s Governor even proposed tax reform during his election campaign. So, what does the Tax Cuts and Jobs Act portend for Kentucky’s tax system? Initially, Kentucky has adopted the federal Internal Revenue Code as of Dec. 31, 2015. So, Kentucky would need to enact legislation to adopt any changes that the Tax Cuts and Jobs Act put in place on the federal level.

Lower federal corporate and individual tax rates coupled with the new 20 percent qualified business income deduction for non-corporate taxpayers foreshadow lower Kentucky rates.

The federal corporate tax rate will drop to a flat 21 percent. This rate reduction was perceived to be necessary to bring the federal tax rates more in line with our nation’s global competitor countries. The top marginal federal individual rate will drop a little bit to 37 percent, but new Section 199A provides that an individual, trust or estate with qualified business income (QBI) could be entitled to a deduction of up to 20 percent of the amount of such income, with limitations. Qualified dividends and long-term capital gains are still taxed at a marginal rate of 20 percent. Note that income generated by businesses gets favorable rates. Kentucky income tax rates are not statutorily linked to federal tax rates. Interestingly, the corporate and individual marginal income tax rates are both set at 6 percent. The Governor has

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expressed a desire to lower Kentucky income tax rates. How can this be accomplished? Expanding the income tax base by eliminating what have been called “tax expenditures”? Increasing other taxes, like sales taxes, property taxes or excise taxes? Can Kentucky corporate income tax rates be set lower than Kentucky individual income tax rates? Like federal corporate income tax rates before the Tax Cuts and Jobs Act, Kentucky’s income tax rates are high in relation to states with which Kentucky competes, especially when local rates are considered. To be more competitive, Kentucky must lower its income tax rates. It would seem that any Kentucky tax reform legislation should include lower income tax rates. If the reform also addressed local incomebased license taxes, that would effectuate even more meaningful reform.

Federal elimination of personal exemptions and limitation of individual deductions signal the same for Kentucky. The Tax Cuts and Jobs Act eliminated personal exemptions and also limited individual deductions. Kentucky has decoupled from the Internal Revenue Code for these items. However, it can be anticipated that Kentucky may opt to move in this direction as well, perhaps moving to an Indiana-type model. This would enable Kentucky to lower its individual income tax rates, which in turn, would seemingly facilitate lowering the corporate income tax rate to match the lower individual income tax rate or perhaps an even lower rate. It is apparently not that easy with regard to local occupational taxes based on income. Surely, however, there is a way to figure out the local tax conundrum.

Elimination of corporate AMT and reduction of individual AMT portends potential elimination of the Kentucky LLET. The federal corporate alternative minimum tax (AMT) has been repealed and the individual AMT has been reduced. The Kentucky equivalent of the federal AMT is the limited liability entity tax (LLET)


The Kentucky CPA Journal / Issue 2 2018

which is a gross receipts and gross profits tax that functions like a minimum tax. Could the elimination of the federal AMT signal the elimination of the Kentucky LLET?

Eighty percent limitation of federal NOL deduction provides alternative methodology which could facilitate elimination of the LLET.

The deduction for net operating losses (NOLs) arising after 2017 will be limited to 80 percent of taxable income, which is determined without regard to the NOL deduction. NOLs can generally be carried forward indefinitely, but the two-year carryback and special carryback provisions are generally repealed, except for farming. Kentucky has its own NOL rules. However, the idea of limiting NOLs appears to be a lot simpler than the federal AMT or Kentucky LLET methods. Could limitation of NOLs be a simpler minimum tax methodology that Kentucky could adopt to replace the LLET?

Can Kentucky conform to Tax Cuts and Jobs Act’s 100 percent depreciation deduction and increased Section 179 expensing?

Under the Tax Cuts and Jobs Act, a 100 percent depreciation deduction is allowed for qualified property placed in service after Sept. 27, 2017 for both new and used property, and after 2017, the

Tax in the Bluegrass

amount that may be expensed under Section 179 is $1 million for qualified property with a phase-out threshold amount of $2.5 million indexed for inflation. Kentucky has historically decoupled from accelerated federal depreciation, but it has also recoupled. Kentucky could recouple using the revenue from other changes to offset the upfront cost. Keeping multiple fixed asset tax depreciation ledgers adds avoidable cost and complexity to taxpayers’ already heavy compliance burdens. Recoupling is the simple approach.

Tax Cuts and Jobs Act deduction limits and eliminations could pay for Kentucky to recouple with federal depreciation and expensing.

The Tax Cuts and Jobs Act eliminates or limits several deductions: • The domestic production activities deduction (DPAD) under Section 199 is repealed. Kentucky has allowed the DPAD with modifications. • All businesses are generally disallowed a deduction for net interest expense in excess of 30 percent of the business tax filer’s adjusted taxable income, computed without regard to deductions allowed for depreciation, amortization or depletion, but which may be carried forward indefinitely.

Continued on p. 12 kycpa.org

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The Kentucky CPA Journal / Issue 2 2018

Tax in the Bluegrass

Tax Cuts and Jobs Act continued • Tax-free like-kind exchanges are allowed only with respect to real property held for use in a trade or business or for investment. • There will no longer be commission and performance-based compensation exceptions to the $1 million annual limit on the deduction for executive compensation paid by publicly-traded corporations to certain covered officers, with certain exceptions for contracts previously in place. • Deductions for entertainment expenses, employee transportation fringe benefits and transportation expenses that are the equivalent of commuting for employees

(except as provided for the employee’s safety) are disallowed. Kentucky could use the incremental revenue from these changes and others, like the federal government did, to offset the cost of embracing accelerated depreciation and expensing.

Increase in federal estate tax deduction portends Kentucky death tax elimination.

The Tax Cuts and Jobs Act increases the federal estate tax deduction. The Governor’s tax plan contemplates eliminating the Kentucky inheritance tax. Could 2018 be the year the Kentucky inheritance tax dies?

“No, but the air doesn’t smell so foul here. If in doubt, Meriadoc, always follow your nose.” Gandalf in The Lord of the Rings: The Fellowship of the Ring (2001) The way Kentucky will react to the Tax Cuts and Jobs Act is anyone’s guess, but hopefully Frankfort will follow its collective nose and the commonwealth will go down the right path.

About the author: Mark A. Loyd, Esq., CPA, is a partner of Bingham Greenebaum Doll in Louisville and chairs its Tax and Employee Benefits Department. He chairs the Society’s Editorial Board and Tax Committee. He can be reached at MLoyd@bgdlegal.com; 502.587.3552.

Loyd will be speaking on May 22 at the Retirement Planning for the CPA Conference on the effects of the new tax law on retirement planning. See p. 36 for details and register at kycpa.org.

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DOWNLOAD THE FREE KYCPA APP New prizes just added! • Receive special offers from vendors • Earn bonus points for attending events, participating in fan polls and more • Earn rewards by collecting bonus points For more information, contact Kimberly Lindsey at klindsey@kycpa.org


The Kentucky CPA Journal / Issue 2 2018

The pass-through deduction: Looking forward

By Miranda L. Aavatsmark, CPA

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The Kentucky CPA Journal / Issue 2 2018

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t’s 11 p.m. on New Year’s Eve 2017 and I’m ready for a relaxing evening. My day started with checking my email and fretting that something was left undone after having had a frantic Friday at the office. We worked diligently sending last-minute estimate vouchers to clients, before the University of Louisville vs. University of Kentucky game started and, of course, Lexington would be completely shut down. But back to New Year’s Eve night. I sent my husband out for ice cream, a plain vanilla sundae with caramel. Simple right? It turns out all the fast food restaurants closed early so he decided to go to Walmart. He comes home with several bags full of items. He is so proud as he takes out the “vanilla” ice cream that, as it turns out, is “no sugar added” butter pecan flavored. In addition, he bought a wire basket (he thought I might like), burritos, milk and deodorant. When I think about tax reform this year it reminds me of my husband’s all too usual trips to the store. I send him out for something simple and he comes back with a bunch of random things and not exactly what I wanted. However, it’s late, I want ice cream and nothing is open, so I must eat this no-sugar butter pecan stuff. As it is with the new tax bill, tax reform is here—even if it is not exactly what we wanted or asked for. We know all too well in the accounting industry when Congress talks of simplifying the tax code, be prepared to navigate the labyrinth of rules, exceptions, limitations and special circumstance that are sure to ensue. That’s why, as soon as the final bill was released, CPAs dove right in trying to understand the deduction for pass-through businesses. Many CPAs work with business owners of pass-through entities and want to be prepared to answer their questions. Starting in 2018, business owners will potentially be allowed a deduction of 20 percent of their qualified business income from pass-through entities (including Schedule C, E and F businesses) when calculating taxable income. The deduction is calculated separately for each of the taxpayer’s businesses. Qualified business income is defined as the “net amount of qualified items of income, gain, kycpa.org

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deduction and loss with respect to any qualified trade or business of the taxpayer.” Note that shareholder wages and guaranteed payments are not included in the calculation of qualified business income. Here are the details and exceptions in simplified terms:

All businesses other than professional service business:

All business owners, other than professional service businesses, can take the full 20 percent deduction if their taxable income is less than $315,000 married filing jointly or $157,500 single/ head of household/married filing separately. Business owners whose taxable income is over $315,000 married filing jointly or $157,500 single/ head of household/married filing separately may potentially be entitled to a deduction, however, it may be limited based on wages paid in the business and tangible property owned.

Professional service businesses:

Professional services businesses (accountants, lawyers, doctors, etc.) can take the full 20 percent deduction if their taxable income is less than $315,000 married filing jointly or $157,500 single/ head of household/married filing separately. Professionals whose taxable income is between $315,000 - $415,000 married filing jointly or $157,500 - $257,500 single/head of household/married filing separately may potentially be entitled to a deduction, however, it may be limited based on wages paid in the business, tangible property owned and other factors. If taxable income of a professional is over $415,000 married filing jointly or $257,500 single/ head of household/married filing separately then no deduction is allowed.

Wage and tangible property limitation:

A taxpayer whose taxable income falls in the range where the wage and tangible property limitations apply will have to do a few extra calculations. The pass-through deduction will be limited to the lesser of:

Continued on p. 16

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The Kentucky CPA Journal / Issue 2 2018

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Pass-though continued 1. 20 percent of pass-through business income or 2. The greater of: a. 50 percent of W2 wages paid by the business or b. 25 percent of W2 wages paid by the business plus 2.5 percent of qualified tangible property owned by the business The wages and qualified property for each business is allocated to the individual owner based on his/her respective ownership percentage. Qualified tangible property is defined as the unadjusted basis of assets for a period no longer than the longer of the asset’s useful life or 10 years. I imagine this upcoming tax season to be much different than any others we CPAs have worked through thus far. We have the task of preparing 2017 returns, under the old law, while keeping in mind the new law and how that will affect our clients starting in 2018. Below are just a few ideas for the upcoming year: Slow down the depreciation! This may sound counterintuitive, but many business owners do not differentiate between cash flow and net profit for tax purposes. As a result, often businesses are not prepared to write a check on April 15 to pay their tax bill. However, given the pass-through deduction for businesses and lower rates, accelerated depreciation may not be as desirable. Sure, it is great to take a large deduction all in one year, but what about all those years afterwards cash is used to

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pay down an asset loan without a corresponding deduction? This is a great opportunity to create income and expense matching for business owners. Contribute to retirement and/or Health Savings Account (HSA). Taxpayers, especially business owners, will probably have more disposable income to invest in their retirement or HSA account. Additionally, contributions to retirement accounts and HSAs could reduce taxable income for those taxpayers whose income is near or over the limitations. For example, suppose Bob is a single filer self-employed attorney whose taxable income is $175,000 before calculating the pass-through deduction. If Bob contributed $17,500 or more to a retirement account he would be eligible to deduct the full 20 percent pass-through business deduction on his tax return. Income shifting. We cannot forget that S-Corporations must continue to pay “reasonable compensation” to their shareholders who provide services to the business. However, there is still an opportunity to think about how we structure the pay of business owners, other than for purposes of reducing payroll taxes. This could apply not only for S-Corporations but Partnerships as well. Shifting income from guaranteed payments to ordinary income will give partners the benefit of a deduction, assuming all limitations allow it.

Invest in assets. Do you or a business owner who is renting an office building have an opportunity to purchase it? As we have learned, property ownership can potentially be a factor in calculating the pass-through deduction. The building may be home to other business tenants that pay rent, which would increase cash flow. The business owner would also be entitled to the pass-through deduction on the rental income as well. Invest in employees. Suppose a doctor is providing services at capacity and would like to slow down or take time to manage the business. We could suggest they hire another doctor to help with the overflow and take over some of the patient care. Yes, the additional wages and benefits will be an expense of the business, but what if the additional expenses reduced the doctor’s income enough to reap the pass-through business deduction? This may or may not create a huge tax savings, but the benefits could be more intangible in nature. We also may be able to justify a lower salary for the doctor (if S-Corporation) if he/she is providing fewer personal services. Hire your spouse/children. What better way to shift income, reduce taxable income and create higher wages (for purposes of the W2 limitation)? We should be careful to communicate to our clients that the spouse/ child needs to be a legitimate employee. Other benefits of hiring spouses and children is the ability to contribute to an employer sponsored plan or an


The Kentucky CPA Journal / Issue 2 2018

IRA, (if they didn’t have earned income from another source). Re-evaluate how your entity is taxed. This is as good a time as ever to analyze a businesses’ entity choice. Does it perhaps now make sense for an S-Corporation to change to a partnership or C-Corporation? Should a Schedule C business convert to a different type of entity? Across the board, the tax savings may not be significantly different but depending on the business there could be reasons to change. Plan for succession. Business owners who are near retirement or have an interest in selling their business may now have many succession opportunities. The purchase of a business may be even more attractive to potential buyers as they may see the tax benefits and lower rates as an opportunity to take kycpa.org

over a business that they may not have been able to afford in the past. The sale could be to a key employee or competitor or relative. This is also a good time for owners to have an appraisal or business valuation performed. Refinance loans/contracts. Taxpayers with high interest loans or unfavorable contracts may have a chance to refinance or re-negotiate terms. Once businesses begin to realize tax savings they should start showing a much healthier balance sheet in the way of increased cash, investments, and equity and decreased debt. This may give them more leverage to negotiate more favorable terms. Innovate and expand. An increase in cash flow, equity and borrowing ability could translate into turning ideas and plans into reality. Business owners and executives have probably

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bounced around the idea of adding additional locations, expanding a product line or developing a new idea for years. Now the funds and resources may be available to make it happen. In closing, tax reform brings new challenges to CPAs, business owners and others in the financial community, but it also provides opportunities. We can use these opportunities to maximize tax savings and take full advantage of the deductions available under the 2017 Tax Cuts and Jobs Act. About the author: Miranda L. Aavatsmark, CPA, is a tax manager of Blue & Co., LLC in Lexington. She can be reached at maavatsmark@blueandco.com.

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The Kentucky CPA Journal / Issue 2 2018

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What’s all the talk about? The TCJA’s changes to individual income taxation By Erica Horn, CPA, JD

W

hile it is possible you missed it, it’s doubtful. The first major reform of the federal tax code in 30 years was enacted into law at the end of December. Promising tax cuts for everyone, the bill is called the Tax Cuts and Job Act (TCJA). This article highlights some of the changes made to individual income taxation.

Individual tax rates

Under the new tax law, the individual income tax brackets are structured as follows:

Tax rate Single percentage 10 $0 – $9,525 12 $9,526 – $38,700 22 $38,701 – $82,500 25 $82,501 – $157,500 32 $157,501 – $200,000 35 $200,001 – $500,000 37 $500,001+

Married filing jointly $0 – $19,050 $19,051 – $77,400 $77,401 – $165,000 $165,001 – $315,000 $315,001 – $400,000 $400,001 – $600,000 $600,001+

These rates are lower than the previous rates; however, not significantly lower. The big savings for individuals is to come through the near doubling of the standard deduction.

Personal exemptions and the standard deduction

The TCJA eliminates personal exemptions but compensates by increasing the standard deduction to $12,000 single and $24,000 married filing jointly (MFJ), indexed for inflation for tax years beginning

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after 2018. According to the Tax Foundation, nearly 70 percent of all filers take the standard deduction; meaning only 30 percent of filers itemize deductions. Therefore, even after the elimination of the personal exemption, when the lower rates are coupled with the increase in the standard deduction the result should be a tax decrease for many taxpayers.

So, what about the 30 percent that itemize deductions?

Every deduction on Schedule A has been modified to some extent. Accordingly, the 30 percent of taxpayers that have historically itemized deductions will be impacted. Some of the more significant changes are described below. Unless otherwise noted, these changes are in effect for tax years beginning after Dec. 31, 2017 and before Jan. 1, 2026.

Changes to deduction for medical and dental expenses

Under pre-TCJA tax law, the deduction for qualified medical expenses was allowed for qualified medical expenses exceeding 10 percent of adjusted gross income (AGI). This floor was reduced to 7.5 percent of AGI for taxpayers 65 and older, however that provision expired on Dec., 31, 2016. Under the TCJA, the 7.5 percent floor is extended through 2018.

Changes to state and local tax deduction

Under pre-TCJA tax law, taxpayers were entitled to a deduction, without limitation, equal to the state and local taxes (SALT) paid during the year. The deduction primarily consisted of state, local and/or foreign real property and income taxes paid. Under the new tax law, SALT deductions are capped at $10,000. Since this has traditionally been one of the largest itemized deductions, it is anticipated that it will have one of the greatest impacts on taxable income.


The Kentucky CPA Journal / Issue 2 2018

Changes to mortgage interest deduction

Under the TCJA, mortgage interest on loans used to acquire a principal residence and/or a second home remains deductible but only on debt up to $750,000. The limitation was $1 million under prior tax law. Taxpayers with debt acquired on or before Dec. 15, 2017, remain subject to the $1 million limitation, as the new law is not applied retroactively.

Changes to charitable contributions deductions

Under the TCJA, the limit for cash contributions has been extended from 50 percent to 60 percent of the contribution base, which is generally a taxpayer’s AGI. However, payments made to a college or university in exchange for the right to purchase tickets to an athletic event are no longer deductible.

Changes to miscellaneous itemized deductions

Under the new law, all miscellaneous itemized deductions that are subject to the 2 percent of AGI floor are no longer deductible. Common

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miscellaneous itemized deductions included unreimbursed employee expenses, investment expenses (i.e. brokerage fees) and tax preparation fees.

Is there more?

Yes, there is much more, but just three additional changes are discussed here. Expanded use of Section 529 account funds For distributions after Dec. 31, 2017, “qualified higher education expenses” include tuition at an elementary or secondary public, private or religious school, and various expenses associated with home schooling, up to a $10,000 limit per tax year. Individual Alternative Minimum Tax (AMT) The TCJA doesn’t repeal the AMT for individuals as was hoped for, but it does increase its exemption amounts. Before the TCJA, the individual AMT exemption for MFJ was $86,200 and that amount was reduced by 25 percent of the amount by which the couple’s alternative taxable income exceeded $164,100. The TCJA increases the AMT exemption amount to $109,400 MFJ and that amount is reduced by alternative taxable income above $1 million.

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Child tax credit Under pre-TCJA tax law, individuals could claim a maximum child tax credit (CTC) of $1,000 for each qualifying child under the age of 17. The CTC was phased-out for taxpayers with AGI above certain threshold amounts. The TCJA modifies the CTC by increasing the credit amount to $2,000 per qualifying child and increasing the threshold amounts for the phase-out to $400,000 MFJ and $200,000 for all other returns. Additionally, $1,400 of the CTC is refundable.

The talk has just begun

Much is yet to be determined about the changes enacted by the TCJA. There will be many more articles and discussions as issues and unintended consequences appear and regulations are issued. Be sure and stay tuned. About the author: Erica Horn, CPA, JD, is the associate director of tax services at Dean Dorton in Lexington. She can be reached at ehorn@deandorton.com.

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The Kentucky CPA Journal / Issue 2 2018

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When “entertainment” is no longer entertaining By Erica Horn, CPA, JD

I

t’s true – entertainment expenses incurred in connection with one’s business on or after Jan. 1, 2018 are no longer deductible as a business expense. The Tax Cuts and Jobs Act (TCJA) repeals the deduction for expenses related to entertainment, amusement or recreation (collectively “entertainment”) or expenses related to a facility used for entertainment.1 What does the repeal mean? That depends on how you define “entertainment.”

What is entertainment?

The Internal Revenue Code doesn’t provide a definition of “entertainment”. Instead, the definition is provided in regulations written by the Treasury. These regulations have the force and effect of law in most circumstances. Regulation § 1.274-2(b)(1)(i) provides, “The term entertainment means any activity which is of a type generally considered to constitute entertainment, amusement or recreation ….”2 While the definition is not very helpful, the examples provided are more enlightening. The regulation lists the following: entertaining at night clubs, cocktail lounges, theaters, country clubs, golf and athletic clubs or sporting events. The expenses related to the facility at which the entertaining takes place are also considered entertainment.3

The old law

Pre-TCJA, the general rule was a taxpayer could deduct entertainment expenses if the expenses were (1) ordinary and necessary for carrying on the business, (2) either directly related to or associated with the conduct of the business and (3) neither lavish nor extravagant.4 Even then, the deduction was limited to 50 percent of total expenses with, of course, a few exceptions; e.g., expenses of employees that were treated as compensation or employee expenses reimbursed by the employer.5 1 IRC § 274(a)(1)(A) and (B). All references, unless otherwise noted, are to the IRC subsequent to amendment by the TCJA. 2 26 CFR (“Reg.”) § 1.274-2(b)(1)(i). 3 Excluded from the definition of entertainment are supper money for an employee working overtime, hotel stays for an employee traveling on business, and automobiles usage by employees for business purposes. Id. 4 Pre-TCJA Code § 274(a), (e) and (k); Reg § 1.162-1, and Reg. § 1.274-2 (c) and (d).

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Simplification? – The new law

The new general rule: No deduction is allowed for entertainment expenses, including expenses related to facilities used for entertainment, such as suites or skyboxes at sports venues.6 Similarly, and not unlike the old statute, dues, membership fees or similar expenses paid for access to a facility or social, athletic or sporting club or organization are not deductible7 nor are amounts paid for membership in any club organized for business, pleasure, recreation or other social purposes.8

What does it mean?

Many questions exist about the new tax law, and the disallowance of entertainment expenses raises some questions. Certainty exists with regard to the specific activities listed by the IRS in its examples of what constitutes entertainment: entertaining at night clubs, cocktail lounges, theaters, country clubs, golf and athletic clubs or sporting events. This means tickets to basketball games or golf tournaments will not be deductible for tax purposes. But what about business meals used for “entertaining” existing or prospective customers and clients; is this the type of “entertainment” Congress and the President intended to disallow? The TCJA did not repeal the deduction for “business meals” which would seem to indicate these expenses are still deductible, albeit at 50 percent, if all other requirements are met. However, commentators are at odds as to whether such business meals are deductible at all. One position is that meals with customers or prospective customers are nondeductible unless there are significant discussions about business and the expenses are properly substantiated. May the technical corrections, guidance and regulations come soon!

5 Reg. § 274-2. 6 Post-TCJA Code § 274(a). 7 Id. at §274(a)(2)(A) and §274(a)(3). 8 Id. at § 274(a)(3). However, Reg. § 1.274-2(a)(2)(iii)(b) provides that expenses for membership to business leagues, trade associations, chambers of commerce, bar and medical associations and other groups not organized primarily for providing entertainment to members are allowable business expenses if the expenses are otherwise proper and have been properly substantiated.


The Kentucky CPA Journal / Issue 2 2018

Legislative

2017 KyCPA-PAC members W

e want to sincerely thank the following individuals for contributing to the KyCPAPAC in 2017. With generous contributors from Pikeville to Paducah, a strong statewide PAC enables the Society to have a voice in issues affecting the accounting profession and in policy decisions being made by the Kentucky General Assembly. The Society has worked hard to position itself as the resource of choice for legislators when dealing with tax, audit, licensing, and other business issues in Kentucky. The KyCPA-PAC needs your support to continue building stronger relationships with legislators and other policymakers. By pooling our resources, together we can expand our influence in Frankfort. It’s now time to make your 2018 contribution. To contribute, go to kycpa.org or send a check payable to KyCPA-PAC at 1735 Alliant Ave., Louisville, KY 40299. If you have any questions, contact Charles George at 502.266.5272 or charles@kycpa.org. PAC members listed made a contribution of at least $100 between Jan. 1, 2017 and Dec. 31, 2017. We make every effort to keep this list error free. However, if you see an error, please accept our apologies and notify us immediately.

Firm-level contributions • BKD LLP • Deloitte PAC

Platinum level - $500 and more

• Faye L. Dykstra, CPA, Retired, Louisville • Harry L. Freibert, CPA, Freibert CPA Group PLLC, Louisville • Lee Groza, CPA, MCM CPAs and Advisors LLP, Louisville • William J. Jessee, CPA, Henderman Jessee & Co PLLC, Louisville • Joseph C. King, CPA, Faulkner King & Wenz PSC, Mt Sterling • G. Alan Long, CPA, Baldwin CPAs PLLC, Richmond • Rebecca B. Myers, CPA, Marr Miller & Myers PSC, Corbin • Robert Allen Norvell, CPA, Blue & Co. LLC, Lexington

• G. Bradley Smith, CPA, MCM CPAs and Advisors LLP, Jeffersonville, IN • Christopher A. Ward, CPA, DMLO CPAs, Louisville

Gold level - $250 - $499

• Douglas R. Allen II, CPA, Kentucky Community & Technical College System, Lexington • Stephen R. Allen, CPA, Allen CPAs & Advisors PLLC, Lexington • Christopher E. Anderson, CPA, Dean Dorton PLLC, Lexington • Dennis R. Buckles, CPA, Buckles Travis & Hart PLLC, Leitchfield • Earl L. Calhoun, CPA, Calhoun & Company PLLC, Hopkinsville • Michael D. Campbell, CPA, Venminder, Elizabethtown • John R. Chamberlin, CPA, Van Gorder Walker & Company Inc., Erlanger • James E. Clark, CPA, James E. Clark CPA, Bardstown • Larry T. Clark, CPA, Robinson Hughes & Christopher, PSC, Danville • Heather R. Cochran, CPA, RFH PLLC, Lexington • Stephen W. Daniels, CPA, T&C Contracting Inc., Louisville • David C. Dick, CPA, Buetow LeMastus & Dick PLLC, Louisville • Kevin M. Doyle, CPA, Congleton-Hacker Co., Lexington • Timothy S. Eldridge, CPA, Baldwin CPAs PLLC, Flemingsburg • Myron D. Fisher, CPA, Baldwin CPAs PLLC, Richmond • Lisa D. Foley, CPA, Baldwin CPAs PLLC, Richmond • Chris M. Forthofer, CPA, Chris M. Forthofer CPA, Ft Thomas • Randall L. Franklin, CPA, Franklin Financial Group, Madisonville • Walter L. Goggin, CPA, Robinson Hughes & Christopher, PSC, Danville • Gregory H. Greenwood, CPA, Ernst & Young LLP, Louisville • Paula C. Hanson, CPA, Dean Dorton PLLC, Lexington

Continued on p. 22

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The Kentucky CPA Journal / Issue 2 2018

Legislative

KyCPA-PAC members continued • Christopher L. Hatcher, CPA, Baldwin CPAs PLLC, Louisville • Chris A. Humphrey, CPA, Baldwin CPAs PLLC, Lexington • Janet R. Jackson Hill, CPA, Baldwin CPAs PLLC, Flemingsburg • Kevin J. Joynt, CPA, Deloitte & Touche LLP, Louisville • Kristopher A. Kemp, CPA, Alexander Thompson Arnold PLLC, Henderson • Charles A. Kington, CPA, Berry Kington & Utley PSC, Madisonville • John T. Lane, CPA, John T. Lane and Associates LLC, Mt. Sterling • Brian S. Leedy, CPA, Ewing • John T. LeMastus, CPA, Buetow LeMastus & Dick PLLC, Louisville • Thomas A. Lirot, CPA, Thomas A. Lirot PSC, Radcliff • Clifton L. Looney Jr., CPA, Retired, Charlotte, NC • Mark A. Loyd Jr., CPA, Bingham Greenebaum Doll LLP, Louisville • Alan P. Luckett, CPA, Alan P. Luckett PSC, Louisville • Stephen M. Lukinovich, CPA, MCM CPAs and Advisors LLP, Jeffersonville, IN • J. Dale Lynch, CPA, Kelley Galloway Smith Goolsby PSC, Pikeville • Jason L. McKinney, CPA, McKinney & Associates LLC, Scottsville • Diane B. Medley, CPA, MCM CPAs and Advisors LLP, Louisville

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• William G. Meyer III, CPA, Strothman & Company, Louisville • Malcolm E. Neel III, CPA, Alexander Thompson Arnold PLLC, Henderson • Jack W. Omohundro, CPA, The Allen Company Inc., Lexington • Bradley J. Parrott, CPA, Brad Parrott CPA, PLLC, Henderson • Robert W. Patterson Jr., CPA, Patterson & Company PLLC, Louisville • Rebecca L. Phillips, CPA, MCM CPAs and Advisors LLP. Louisville • David R. Price, CPA, Jones Nale & Mattingly PLC, Louisville • Elizabeth Rankin, CPA, ANEW 401K TPA LLC, Louisville • Suzan H. Ross, CPA, Baldwin CPAs PLLC, Maysville • Mark A. Schaeffer, CPA, Bowden & Wood PLLC, Louisville • Stephen F. Schulz, CPA, MCM CPAs and Advisors LLP, Louisville • Kevin W. Schwartz, CPA, Schwartz Business Advisory, Owensboro • Marisa H. Smith, CPA, Airgas MidAmerica Inc., Bowling Green • Gary L. Stewart, CPA, Retired, Louisville • Theodore C. Stiles, CPA, Stiles Carter & Associates PSC, Elizabethtown • Dr. William D. Stout, CPA, University of Louisville, Louisville

• Raymond G. Strothman, CPA, Strothman & Company, Louisville • M. Kristin Stuedle, CPA, Stuedle Spears & Company PSC, Louisville • Wayne D. Sturgeon, CPA, Christian Sturgeon & Associates PSC, London • David E. Tate, CPA, BKD LLP, Louisville • Esther N. Thompson-Long, CPA, LG&E and KU Services Co., Louisville • William W. Upchurch, CPA, Baldwin CPAs PLLC, Richmond • Andrew J. VonLehman, CPA, VonLehman & Co Inc., Ft. Wright • Lori D. Warden, CPA, Rudler PSC, Ft. Wright • John D. Winslow, CPA, Baldwin CPAs PLLC, Louisville • Elizabeth Z. Woodward, CPA, Dean Dorton PLLC, Lexington • Michael R. Wurth, CPA, Clemens Guthrie & Wurth LLP, Owensboro • Robert J. Zik, CPA, Strothman & Company, Louisville

Silver level - $100 - $249

• Jaclyn T. Badeau, CPA, Tempur Sealy International Inc., Lexington • Garland H. Barr III, CPA, Retired, Lexington • Joseph L. Byrne, CPA, Alexander & Company PSC, Owensboro • David L. Conway, CPA, David L. Conway CPA, Central City


The Kentucky CPA Journal / Issue 2 2018

• Richard B. Crowder Jr, CPA, Allstate Tower Inc., Henderson • Anthony A. Davidson, CPA, Davidson Financial Services, Lexington • Lori F. Dearfield, CPA, Kelley Galloway Smith Goolsby PSC, Ashland • Daniel G. Drane, CPA, Drane & Company PLLC, Hardinsburg • Synthia E. Durham, CPA, Fowler Durham CPAs and Advisors PLLC, Munfordville • Clifford E. Fowler Jr., CPA, Fowler Durham CPAs and Advisors PLLC, Munfordville • Charles George, JD, Kentucky Society of CPAs, Louisville

• Thomas M. Hackney, CPA, First Lexington Company, Lexington • Scarlett G. Hibbs, CPA, Hibbs and Associates PLLC, Bardstown • Glenn R. Jennings, CPA, Delta Natural Gas, Winchester • Kelly J. King, CPA, Kelly King & Company CPAs, Crestwood • Austin Thomas Kring Jr., CPA, Retired, Lexington • Melissa C. Mattox, CPA, Kinkead & Stilz PLLC, Lexington • William K. Mays, CPA, Owl’s Head Alloys, Bowling Green • Christopher D. Meriwether, CPA, BKD LLP, Louisville

In this photo: Standing: Tom Hackney, Kevin Joynt, Faye Dykstra Sitting: Lori Warden, Rep. Jerry Miller, Charles George

Legislative

• Kevin J. Moser, CPA, Anneken Huey & Moser PLLC, Ft Wright • Gregory C. Mullins, CPA, Blue & Co LLC, Lexington • Mark A. Schmitt, CPA, MCM CPAs and Advisors LLP, Lexington • Eric D. Scott, CPA, Ernst & Young LLP, Louisville • Sheldon B. Stephens, CPA, Sheldon B. Stephens CPA PSC, Russell Springs • Laura L. Tallent, CPA, Tallent & Associates CPA, Louisville • Stephen F. Zink, CPA, MCM CPAs and Advisors LLP, Jeffersonville, IN

At the Capitol: KyCPA-supported HB 177 unanimously passed the House Licensing, Occupations and Administrative Regulations Committee on Feb. 7 after testimony from KyCPA. HB 177 makes several updates to Kentucky’s accountancy code, including CPA firm mobility and ultimately passed the General Assembly.

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The Kentucky CPA Journal / Issue 2 2018

Legislative

2018 legislative recap By Charles George, JD

Wild session ends with tax reform changes “You can’t make this stuff up” is something you often hear around Frankfort, but that phrase could not be more fitting of the 2018 Kentucky legislative session. If Netflix needed a new political drama to replace “House of Cards,” they could’ve set up shop in Frankfort these last few months (and gotten a nice film tax credit to boot). From harassment allegations to teacher protests to shark legislation, the neverending twists and turns finally culminated in a surprise tax reform package that sped through the process in the session’s waning moments. Throughout the 2018 General Assembly, KyCPA advocates reviewed nearly 900 bills, met with legislators, and joined forces with other business organizations to ensure your interests were represented at the Capitol. As a result of these efforts, many KyCPA priorities saw final passage, including several tax reform measures, CPA firm mobility, and reforms to Kentucky’s workers’ compensation and public pension systems. Because of our focus on tax reform, we were only able to highlight a few other bills. You can review our complete legislative recap at kycpa.org.

What passed?

CPA licensing – A key priority for KyCPA, HB 177 makes Kentucky the 24th state with a CPA firm mobility law, which allows firms outside the Commonwealth to perform attest services and issue reports in the state without registering or paying fees. Out-of-state firms operating in Kentucky will still be subject to our laws and regulations. It also allows the state board to privately reprimand CPAs and CPA firms, and to provide CPAs and firms an opportunity to have minor violations removed from their professional record after ten years. Currently, CPAs and firms can be publicly reprimanded for all violations, no matter the severity, in perpetuity.

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Finally, HB 177 authorizes the board to create a peer review oversight committee (PROC), whose purpose will be to monitor the peer review program now operated by the Illinois Society of CPAs. Importantly, per regulations to be developed by the board, members of this committee will only be authorized to monitor the peer review process, not report, disclose or discipline CPAs or firms. Executive branch budget – The $23.3 billion, twoyear state budget, HB 200, calls for across-the-board cuts of 6.25 percent to most state agencies, as well as the total elimination of some programs. Below are some highlights: • Contributes about $3.3 billion over two years to fully fund the state’s pension systems - over $1 billion for state employee pensions and nearly $2.3 billion for teachers’ pensions. Pension costs make up about 15 percent of the budget. • Increases K-12 education funding (also known as SEEK) to $4,000 per student and restores funding for school transportation and partially funds health insurance costs for teachers not yet 65 years old. Though the per-student amount is the highest in state history, education advocates say it’s 16 percent lower than 2008 when adjusted for inflation. Also, preschool and extended school services are subject to the 6.25 percent cut. • Cuts university base funding by 6.25 percent, which is partially offset by nearly $70 million in “performance-based” funding to be split by universities based on targeted metrics. • Restores programs that the governor proposed to eliminate, including the Kentucky Poison Control Center and the Mesonet weather monitoring program. It ends others, including the University Press of Kentucky and the Commission on Women. • Includes the Department of Revenue’s proposed integrated tax system (implemented over five years) as a capital project. The new technology will replace a patchwork of antiquated systems and improve taxpayer services.


The Kentucky CPA Journal / Issue 2 2018

Pension reform – Though the process wasn’t always pretty, SB 151 makes a number of key changes to the state’s public pension systems: • Phases the Kentucky Employee Retirement System (KERS) and the Kentucky Teachers Retirement System (KTRS) into a 30-year level dollar funding formula beginning FY21. • Places all new non-hazardous employees, including teachers, in a hybrid cash balance plan with 0 percent guaranteed interest, plus capture of 85 percent of any investment returns above that. While the new plan doesn’t guarantee a certain return, it also ensures that employees won’t lose money during a market downturn. • Ends “supersizing” of legislative pensions in the future by calculating benefits based upon legislative salary only and not allowing reciprocity for non-legislative compensation. • Ends inviolable contract for teachers hired after the effective date of the legislation. The inviolable contract for other state employees was removed in 2013. • Prohibits teachers from accumulating sick days to calculate their retirement benefit after December 31, 2018, though they will still be compensated for those days. • Makes no changes to current retirees. Workers’ comp – HB 2 reforms the state’s workers’ compensation system to make it more costeffective and efficient for employers while protecting injured workers. Among its many changes, the bill overturns two recent Supreme Court decisions that are projected to increase workers compensation costs for all employers in Kentucky. It also increases the maximum weekly benefit by 10 percent for workers. City audits – SB 91 raises the threshold for cities to have audits every other year from 1,000 in population to 2,000, which would capture about 60 cities. It requires financial statements to be submitted by Oct. 1, while the Feb. 1 audit deadline remains in place. If a city fails to complete an audit or financial statement by the deadline and doesn’t get an exemption from the Department of Local Government, state funds will be withheld.

Legislative

Rep. Steven Rudy (R-Paducah), chair of the House budget committee, with KyCPA's Charles George and Darlene Zibart.

What didn’t?

Licensing board re-organization – HB 465 would have re-organized the state’s 40+ professional licensing boards under the Public Protection Cabinet. The bill created certain standards and protocols such as board terms, member nomination, license application process, and disciplinary proceedings - by which all boards must follow. It also moved the State Board of Accountancy under the Department of Financial Institutions within the Cabinet. While boards maintain much of their autonomy, all proposed regulations and hiring decisions would have to be approved by the Cabinet. The legislation passed the House but never got a hearing in the Senate; it could be issued as an executive order over the interim. Tax-exempt purchases – SB 205 would have allowed contractors to directly purchase materials tax-exempt for construction projects on behalf of nonprofits or governmental agencies. It passed the Senate but never got a hearing in the House. Gas tax – HB 609 would have raised about $400 million annually for the state road fund by increasing the state gas tax by 10 cents per gallon and various other transportation fees. Backed with bipartisan support, a similar measure will likely be considered next session.

Continued on p. 26 kycpa.org

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The Kentucky CPA Journal / Issue 2 2018

Legislative

Legislative recap continued

Kentucky tax reform finally arrives

On April 2, the General Assembly passed HB 366 to reform Kentucky’s tax code. The governor vetoed the bill on April 9, but the legislature decided to override the veto on April 13. The following day, the legislature passed a “technical corrections” tax bill (HB 487). This legislation includes the bulk of HB 366 along with several key additions, including a shift to mandatory unitary combined reporting for multi-state corporations, a key manufacturing sales tax exemption on labor, and a change to possibly limit the energy exemption. Overall, HB 487 is estimated to provide additional revenue of $194.3 million in FY19 and $201.4 million in FY20. KyCPA and tax committee members met with key legislators over the past several weeks to discuss tax reform. During the veto period, KyCPA was the driving force behind a number of critical changes in HB 487. While the legislature deserves tremendous credit for taking a meaningful step toward comprehensive reform, we strongly believe further changes are needed, including reforms to our local tax system and repealing or fixing the limited liability entity tax (LLET). If the governor allows HB 487 to become law, it will take precedence over HB 366. If he opts to veto, presumably to force legislators back to the table for a special session, HB 366 will remain law without the “fixes” and other changes in HB 487.

Key provisions in HB 487

Individual Income Tax [FY19: -$104.4 million; FY20: -101.4 million] • Conforms to federal code as of Dec. 31, 2017 (includes federal tax reform); does not adopt increased expensing and depreciation provisions for capital improvements, and the 20 percent deduction related to pass-through income to individuals under IRC Section 199A. • Converts current graduated tax system, with rates ranging from 2 percent to 6 percent, to flat rate of 5 percent for all taxpayers effective for tax years beginning on or after Jan. 1, 2018. • Repeals personal credit of $10 per person. • Eliminates all itemized deductions except deductions for mortgage interest and charitable contributions.

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Eliminates long-term care and health insurance premiums allowed previously as a deduction from Kentucky AGI. Reduces pension income exclusion from $41,110 per person to $31,110.

Corporation Income Tax [FY19: -$29.8 million; FY20: -50.2 million] • Conforms to federal code as of Dec. 31, 2017 (includes federal tax reform); does not adopt the increased expensing and depreciation deductions for capital improvements. • Eliminates deduction for domestic production activities. • Converts current graduated tax system, with rates ranging from 4 percent to 6 percent, to flat rate of 5 percent for all taxpayers effective for tax years beginning on or after Jan. 1, 2018. • Changes apportionment and filing methodologies for multi-state corporations. o Replaces current three-factor apportionment formula with single sales factor apportionment formula, except for providers of communication and cable services. The sales factor for service entities will now be computed based on market-sourcing, not cost of performance. o Imposes mandatory unitary combined reporting for taxable years beginning on or after Jan. 1, 2019, with an election to file in Kentucky based on their federal affiliated group. Property Tax • Phases out the inventory tax by allowing a nonrefundable income tax credit of 25 percent for taxes timely paid in 2018 and increasing the credit by 25 percent each year until there is a 100 percent credit for taxes paid on business inventory for years beginning on or after Jan. 1, 2021. • Clarifies that computer software other than prewritten computer software is exempt from the property tax (e.g., “custom” software). Sales and Use Tax [FY19: +$192.5 million; FY20: +238 million] • Effective for transactions occurring on or after July 1, 2018, imposes sales and use tax for the first time on the following:


The Kentucky CPA Journal / Issue 2 2018

o Labor and services associated with the

repair, installation, and maintenance of taxable tangible personal property; includes exemption for manufacturers and industrial processors o Extended warranties; o Landscaping and lawn care services; o Janitorial services; o Pet care (small animal) veterinarian services; o Fitness and recreational sports centers; o Industrial laundry services; o Dry cleaning and laundry services; o Linen supply services; o Pet grooming and boarding services; o Diet and weight-reducing services; o Tanning services; o Limousine services; and o Admissions to campsites, campgrounds, recreational vehicle parks, bowling centers, skating rinks, health spas, swimming pools, tennis courts, weight training facilities, fitness and recreational sports centers, golf courses and country clubs. Repeals sales tax exemption for pollution control facilities for transactions occurring on or after July 1, 2018. Arguably limits the energy exemption for some manufacturers and industrial processors by changing the calculation of the cost of production; full scope of this provision is currently unknown. Positions Kentucky to collect sales tax from remote retailers selling tangible personal property or digital property in Kentucky in the event Quill Corp. v. North Dakota is overturned by the U.S. Supreme Court.

Credits and Incentives • Retains the Kentucky Industrial Revitalization Tax Credit, Investment Fund Tax Credit, and Angel Investor Tax Credit but additional reporting to the Legislative Research Commission is required. • Caps the Investment Fund Tax Credit and Angel Investor Tax Credit at $40 million each in total credits for years prior to Dec. 31, 2020, while applications for the credits are suspended in 2019 and 2020; allows $3 million each year to be awarded beginning in 2021.

Legislative

Caps the Film Industry Tax Credit at $100 million annually and converts it to a nonrefundable credit. Repeals the following incentives: Leasehold Interest of Property Contributed as Living Quarters for Homeless (not used); Coal Incentive Credit (expired); Donated Edible Agricultural Products Tax Credit (expired); Kentucky Environmental Stewardship Tax Credit (not used). Retains the Kentucky Jobs Retention Tax Credit (KJRA) and Incentives for Energy Independence Act Tax Credit (IEIA).

Administrative Changes • Includes five administrative changes specifically proposed by KyCPA: o Extends time to protest a tax assessment (45 to 60 days) and report federal tax changes to the Department of Revenue (30 to 180 days); o Eliminates “pay-to-play” bond to appeal a tax case to Circuit Court; o Prohibits the state from contracting with third parties to collect taxes on a contingency basis; and o Modifies the burden of proof for taxpayers to bring a suit against the state for violating taxpayer rights. • Requires electronic filing for employers that issue more than 25 withholding statements, and for corporations or pass-through entities with gross receipts of $1 million or more, for tax years beginning Jan. 1, 2019. Tobacco tax [FY19: +$136 million; FY20: +115.1 million] Raises cigarette tax by 50 cents to $1.10 per pack, and imposes floor stock tax on cigarettes. What’s next Assuming HB 487 becomes law, KyCPA and its tax committee will be working with the Department of Revenue on guidance and regulations related to its implementation. About the author: Charles George is KyCPA’s VP of government affairs and general counsel. He can be reached at cgeorge@kycpa.org or 502.736.1366.

kycpa.org

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The Kentucky CPA Journal / Issue 2 2018

CPE

Spotlight: Tax courses for 2018 Ron Roberson is back!

One of Kentucky’s favorite instructors will be in the Commonwealth teaching: June 4 Social Security 8 CPE hours

In this class we discuss qualifying for benefits; benefits for divorcees, widows and widowers; dependent children; disabled children; planning to maximize benefits, and special issues such as windfall elimination and government pension offsets. We even show you how the benefit is calculated; how to sign up; and how to add social security consulting to your office. This course also includes a short review of Medicare.

June 5 Tax Cuts and Jobs Act 8 CPE hours Over 95 percent of the law goes into effect in 2018 and in this course we have two goals: first, discuss and analyze the changes for individuals and small businesses in-depth; and second, provide dozens and dozens of planning tips the professional may utilize for their clients. We include an Excel calculator of the 20 percent flow-through deduction as well as discussion of how this new law may affect the choice of operating entity for a business.

On Sept. 20 John Evanich will be teaching: Guide to Tax Reform (AM) 4 CPE hours

The widespread changes of the TCJA affect many aspects of individual and business taxes, beginning in 2018, and your clients will be coming to you with a myriad of concerns and planning questions. Don’t get caught off guard. This 4-hour seminar will get you up to speed on all the critical aspects of the new law and prepare you to effectively advise both your individual and business clients.

Section 199A: The 20 percent Deduction for Pass-throughs (PM) 4 CPE hours

Now that the new tax bill has been enacted, tax practitioners have one pressing question about it – how does the 20 percent deduction for pass-through entity owners work? In response to hundreds of questions about this deduction asked during trainings on the TCJA, Surgent developed a 4-hour seminar on Section 199A, complete with numerous examples illustrating how this deduction works in an interesting, insightful, and practical program.

Tax planning will be a huge area for practitioners over the coming years. Here are some seminars to help: June 25 Tax-Planning Guide for S Corps, Partnerships and LLCs June 26 Individual and Financial-Planning Tax Camp July 27 Advanced Tax Strategies for LLCs and Partnerships Oct. 18 Partnership and LLC Core Tax Issues: Formation through Liquidation Oct. 19 S Corp Core Tax Issues: Formation through Liquidation

28

Oct. 22 Nov. 1 Nov. 1 Nov. 2 Dec. 20

Hottest Tax Planning Developments Under the Current Law Estate and Life Planning Issues for the Middle-Income Client A+ College Savings Planning: Maximize Resources and Tax Benefits How Much Money Will You Need to Retire? Practical Planning Strategies Practical Planning Boot Camp: S Corps and LLCs


The Kentucky CPA Journal / Issue 2 2018

CPE

Federal Tax Updates Multiple opportunities to attend federal tax updates

Y

our clients look to you to provide guidance and you can look to us to provide the education you need. We have scheduled outstanding speakers to bring you comprehensive and timely information. They will lead you through the many significant changes in the tax laws and show you how to guide your clients through important planning decisions in the most effective ways possible.

Best Federal Tax Update Kentucky Road Show with Ed Harter Harter has been teaching tax seminars in Kentucky for more than 20 years. He is one of our highest-rated instructors and frequently receives perfect scores for this class. Get full coverage of all tax changes and implications for individuals and businesses with a view toward planning. This will be in a town near you – do not miss it! • Oct. 22 - Paducah • Oct. 23 - Owensboro • Oct. 24 - Somerset • Oct. 25 - Eastern Kent. • Oct. 26 - Florence

Pat Garverick brings his dynamic federal tax updates back to Louisville Garverick uses multiple screens to move between the course materials and various websites. He can customize his presentation based on the audience—you will get your questions addressed! Includes comprehensive manuals with new forms and schedules, practice aids, real world examples and the Phoenix Beach Quick Reference Chart. • Nov. 11 Federal Tax Update -- Individuals X • Nov. 12 Federal Tax Update – C and S Corps, Partnerships and LLCs X

2-Day Federal Tax Update with Bob Jennings, President of Taxspeaker® Dec. 3-4 - Louisville Jan. 14-15 - Lexington “Bob finds a way to make sitting in a tax seminar interesting and almost enjoyable. I have sat thru tax classes for 38 years and listened to many speakers. Bob is by far the best speaker and instructor I have ever listened to.” - RB As the only continuing education company whose manuals ever won the coveted CPA Practice Advisor Reader’s Choice Award (2016), Taxspeaker® is known for its industry-leading manuals, expert and energetic speakers, and award-winning research and compliance checklists and guides.

1-Day Federal Tax Update with Mark Mirsky Jan. 4 - Louisville X The 2017 Tax Cuts and Jobs Act is the most significant tax reform bill passed in decades. It contains both long and short-term impacts to most taxpayers— individuals, estates/trusts, and businesses. Mirsky along with his team from ROI CPE will utilize their coaching style to present, summarize and simplify the key points of the reform bill as well as other current legislation and rulings. They will break down the TCJA into comprehensible action items that can be applied to your clients’ specific needs. Prepare for a fast-paced team approach and enjoy this one-day seminar.

kycpa.org

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The Kentucky CPA Journal / Issue 2 2018

CPE

CPE calendar Date

Title

AM/ City PM

CPE Credit

CPE Type

Member Early Fee

5/7-8

Governmental Accounting and Auditing Conference

Louisville

16

YB

424

5/17-18 5/22

Kentucky Accounting Educators Conference

Louisville

15

CPE

199

Retirement Planning for the CPA Conference X

Louisville

8

CPE

324

5/23

Health Care Conference

Louisville

8

CPE

324

6/4

Social Security

Louisville

8

TX

289

6/5

Tax Cuts and Jobs Act X

Louisville

8

TX

289

6/8

Manufacturing Conference X

Louisville

8

CPE

324

6/18

Form 990: Exploring the Form’s Complex Schedules

Louisville

8

TX

289

6/19

Governmental Accounting and Auditing Update

Louisville

8

YB

289

6/20

Practical Tax Research

Louisville

4

TX

159

6/21

Audits of 401(k) Plans X

Louisville

8

A&A

289

6/25

Excel Pivot Tables, Formulas and Best Practices

Louisville

4

IT

159

6/25

Tax-Planning Guide for S Corps, Partnerships and LLCs

Louisville

8

TX

289

6/26

Individual and Financial-Planning Tax Camp

Louisville

8

TX

289

7/13

Community Bank Update X

Louisville

7

CPE

289

7/23

Real-World Frauds Found in Governments

AM

Louisville

4

YB

159

7/23

Real-World Frauds Found in Not-for-Profits

PM

Louisville

4

YB

159

7/24

Not-for-Profit Financial Reporting: Mastering the Unique Requirements X

Louisville

8

YB

289

8/6

Professional Issues Update

PM

Pikeville

4

Ethics

79

8/10

Professional Issues Update

PM

Ashland

4

Ethics

79

8/13

Annual Update for Accountants and Auditors

Eastern KY

8

A&A

274

8/13

Annual Update for Accountants and Auditors

Owensboro

8

A&A

274

8/13

Form 1041: Income Taxation of Estates and Trusts

Louisville

8

TX

289

8/14

Advanced Tax Strategies for LLCs and Partnerships X

Louisville

8

TX

289

8/14

Annual Update for Accountants and Auditors

Lexington

8

A&A

274

8/14

Annual Update for Accountants and Auditors

Elizabethtown

8

A&A

274

8/15

Annual Update for Accountants and Auditors

Florence

8

A&A

274

8/15

Annual Update for Accountants and Auditors

Bowling Green

8

A&A

274

8/16

Audit Workpapers: Documenting and Reviewing Field Work

Louisville

8

A&A

289

8/16

Technology Update

AM

Louisville

4

IT

159

8/16

Top PDF Features

PM

Louisville

4

IT

159

8/17

Advanced Excel Reporting-Best Practices, Techniques and Tools

AM

Louisville

4

IT

159

8/17

Securing Your Data-Practical Tools for Protecting Information PM

Louisville

4

IT

159

8/17

Annual Update for Preparations, Compilations and Reviews

Louisville

8

A&A

289

AM PM

X Live Webcast option

30


The Kentucky CPA Journal / Issue 2 2018

Date

Title

AM/ City PM

8/23

Forensic Accounting and Litigation Conference X

8/24

Business Valuation and Litigation Conference X

8/23-24

Forensic Accounting and Litigation and Business Valuation and Litigation Conferences

8/27

Professional Issues Update X

PM

8/30

Cybersecurity Risk Management Program: What You Need to Know

8/30

CPE

CPE Credit

CPE Type

Member Early Fee

Louisville

10

CPE

399

Louisville

10

CPE

399

20

CPE

529

Louisville

4

Ethics

79

AM

Louisville

4

IT

159

Cybersecurity Advisory Engagements: What You Need to Know

PM

Louisville

4

IT

159

8/31

Professional Issues Update

PM

Bowling Green

4

Ethics

79

8/31

U.S. GAAP: Review for Business and Industry X

Louisville

8

A&A

289

9/20

Fraud Update: Detecting and Preventing the Top Ten Fraud Schemes

Louisville

8

A&A

289

9/20

Section 199A: Understand the 20 Percent Deduction for Pass-throughs X

PM

Louisville

4

TX

159

9/20

Tax Cuts and Jobs Act: Guide to Tax Reform X

AM

Louisville

4

TX

159

9/21

Buying and Selling a Business

Louisville

8

TX

289

9/21

Frauds and Internal Controls for Revenue, Purchasing & Cash Receipts X

Louisville

8

A&A

289

9/24-25

Audit Skills Training Level 2 -- Staff Accountant

Louisville

16 +

A&A

499

9/26

Financial Institutions Conference

Louisville

8

CPE

324

9/27-28

CPAs in Business and Industry Conference

Louisville

16

CPE

424

9/28

Professional Issues Update

Paducah

4

Ethics

79

10/18-19

Audit Skills Training Level 4 -- In-Charge

Louisville

16 +

A&A

499

10/18

Partnership & LLC Core Tax Issues: Formation Through Liquidation

Louisville

8

TX

289

10/19

S Corp Core Tax Issues: Formation Through Liquidation

Louisville

8

TX

289

10/22

Annual Update for Preparations, Compilations and Reviews X

Louisville

8

A&A

289

10/22

Hottest Tax Planning Developments Under the Current Tax Law

AM

Louisville

4

TX

159

10/22

IRS Disputes: Identifying Options for Your Client

PM

Louisville

4

TX

159

10/22

Best Federal Tax Update

Paducah

8

TX

274

10/23

Best Federal Tax Update

Owensboro

8

TX

274

10/23

Annual Update for Accountants and Auditors

Louisville

8

A&A

289

10/23

Reviewing Individual Tax Returns: What Are You Missing?

AM

Louisville

4

TX

159

10/23

Reviewing Partnership Tax Returns: What are you Missing?

PM

Louisville

4

TX

159

10/24

Best Federal Tax Update

Somerset

8

TX

274

PM

Continued on p. 32 kycpa.org

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The Kentucky CPA Journal / Issue 2 2018

CPE

CPE Calendar continued Date

Title

AM/ City PM

CPE Credit

CPE Type

Member Early Fee

10/24

Capitalized Costs and Depreciation: Key Issues and Answers X

AM

Louisville

4

TX

159

10/24

Taxation of Property Transactions X

PM

Louisville

4

TX

159

10/25

Best Federal Tax Update

East KY

8

TX

274

10/25

Controller's Update: Today's Latest Trends X

AM

Louisville

4

FIN

159

10/25

Lean Accounting and Management: Save Money by Streamlining Operations X

PM

Louisville

4

FIN

159

10/26

Best Federal Tax Update

Florence

8

TX

274

10/26

The Changing Role of the Controller: Advancing from Tactical to Strategic

AM

Louisville

4

Manage

159

10/26

Analyzing a Company's Financial Statement

PM

Louisville

4

FIN

159

10/29

Professional Issues Update

PM

Louisville

4

Ethics

79

10/30

Accounting and Auditing Update

AM

Lexington

4

A&A

159

10/30

Preparation, Compilation, and Review Engagements: Update and Review

PM

Lexington

4

A&A

159

10/31

Integrating Audit Data Analytics into the Audit Process X

Louisville

8

A&A

289

10/31

National Social Security Advisor Course

Louisville

8

TX

350

11/1

Select Estate and Life Planning Issues for Middle-Income Clients X

AM

Louisville

4

TX

159

11/1

A+ College Savings Planning: Maximizing Resources and Tax Benefits X

PM

Louisville

4

TX

159

11/2

How Much Money Do You Need to Retire: Practical Planning Strategies

Louisville

8

TX

289

11/2

Professional Issues Update

Owensboro

4

Ethics

79

11/5

Construction Contractors: Accounting, Auditing and Tax X

Louisville

8

A&A

289

11/6

A&A Update for Small Business

Louisville

8

A&A

289

11/7

Latest Developments in Government & Nonprofit Accounting

Lexington

8

YB

274

11/8

Fraud & Abuse in NFPs & Governments: Stealing from Everyone

Louisville

8

YB

289

11/09

Commercial Real Estate Conference X

Louisville

8

CPE

324

11/9

Professional Issues Update

Erlanger

4

Ethics

79

11/12

Federal Tax Update for Individuals X

Louisville

8

TX

289

11/13

Federal Tax Update for Business X

Louisville

8

TX

289

11/12-13

Federal Tax Update for Individuals and Business (combo) X

Louisville

16

TX

529

11/16

Professional Issues Update

Corbin

4

Ethics

79

11/26

Governmental and Not-for-Profit Annual Update X

Louisville

8

YB

289

11/27

Accounting and Reporting for Not-for-Profit Organizations

Louisville

8

YB

289

11/27

Kentucky State Tax Conference

Louisville

8

CPE

324

PM

PM

PM

X Live Webcast option

32


The Kentucky CPA Journal / Issue 2 2018

Date

Title

11/28

Revenue Recognition: Mastering the New FASB Requirements

11/29

AM/ City PM

CPE

CPE Credit

CPE Type

Member Early Fee

Louisville

8

A&A

289

Leases: Mastering the New FASB Requirements

Louisville

8

A&A

289

11/29

Fiduciary Returns – Form 1041 Workshop with Forms

Louisville

8

TX

289

11/30

Accounting of Estates and Trusts: Fiduciary Accounting and Tax Issues

Louisville

8

A&A

289

11/30

Professional Issues Update

Lexington

4

Ethics

79

12/3-4

Federal Tax Update for Individuals and Business

Louisville

16

TX

529

12/6-7

Audit Skills Training Level 3 -- Experienced Staff

Louisville

16

A&A

499

12/10

Forensic Accounting Investigative Practices X

Louisville

8

A&A

289

12/10

5 Critical A&A Issues for Public Accountants in 2018

AM

Louisville

4

A&A

159

12/10

Mastering Accounting for Income Taxes

PM

Louisville

4

A&A

159

12/11

Identity Theft: Preventing, Detecting & Investigating

Louisville

8

A&A

289

12/11

Annual FASB Update and Review

AM

Louisville

4

A&A

159

12/11

Financial Statement Disclosures: Guide for Small and Midsize Businesses

PM

Louisville

4

A&A

159

12/12

Real Estate Tax Boot Camp

Louisville

8

TX

289

12/13

Reviewing Pass-Through Tax Returns: What Are You Missing?

Lexington

8

TX

274

12/13

Annual Accounting and Auditing Update X

Louisville

8

A&A

289

12/13

Mastering Basis Issues for S Corps, Partnerships and LLCs

AM

Louisville

4

TX

159

12/13

Essential Depreciation and Expensing Update

PM

Louisville

4

TX

159

12/14

Compilations, Review and Preparations: Annual Update

Louisville

8

A&A

289

12/14

Protecting Your Client and Your Firm From Tax Return Identity AM Theft

Louisville

4

TX

159

12/14

Mergers and Acquisitions: Tax and Due Diligence Considerations

Louisville

4

TX

159

12/17-18

Kentucky Technology Conference

Louisville

16

IT

449

12/19

Applying the Uniform Guidance in Your Single Audits

Louisville

8

YB

289

12/19

Social Security, Medicare and Prescription Drug Benefits X

Louisville

8

TX

289

12/20

Practical Planning Bootcamp for S Corps and LLCs

Louisville

8

TX

289

12/20

Best Practices for Payroll Taxes and 1099 Issues X

Louisville

8

TX

289

1/4/19

1-day Federal Tax Update X

Louisville

8

TX

349

1/10/19

Get Ready for Busy Season: New Forms, Filing Issues and Critical Developments

Louisville

8

TX

289

1/10/19

Tax Prep Boot Camp-Individual

Louisville

8

TX

289

1/11/19

Tax Forms Boot Camp: LLCs, Partnerships and S Corporations

Louisville

8

TX

289

1/1011/19

Tax Forms Boot Camp: Indivudual, LLCs, Partnerships and S Corps

Louisville

16

TX

478

1/1415/19

Federal Tax Update for Individuals and Business

Lexington

16

TX

529

PM

PM

kycpa.org

33


Register at kycpa.org

NEXT 2018

Conferences Governmental Accounting and Auditing Conference May 7-8 - Marriott Louisville East 16 CPE hours

2 hours of Ethics and 14 hours of Yellow Book, or 16 hours of Yellow Book

May 7

May 8

A practical approach to testing compliance and internal control over compliance Melisa Galasso, CPA

Reporting model reexamination Lisa Parker, CPA, CGMA

Yellow Book update Melisa Galasso, CPA, Galasso Learning Solutions, Charlotte, N.C.

What accounting IT users can do to protect cyber security Dan Collins, CISSP, Crowe Horwath, Lexington Breakouts 1) A practical approach to major program determinations (using an example SEFA) Melisa Galasso, CPA 2) Ethics in the governmental environment Elizabeth Woodward, CPA, Dean Dorton, Lexington Breakouts 3) Applying lessons learned from GASB 68 to GASB 75 Melisa Galasso, CPA 4) Ethics in the governmental environment Elizabeth Woodward, CPA AICPA enhanced audit quality Melisa Galasso, CPA

Fee: KyCPA member: $474

34

GASB update Lisa Parker, CPA, CGMA, Governmental Accounting Standards Board, Norwalk, Conn.

Legislative update Charles George, Kentucky Society of CPAs, Louisville Breakouts 5) Internal audit and risk management Jim Tenza, CPA, Dean Dorton, Louisville 6) Auditing laws and regulations at a city/ county Tammy Patrick, CPA, Kentucky Auditor of Public Accounts, Frankfort Breakouts 7) Writing report findings Tammy Patrick, CPA 8) Trends and current focus at the Auditor of Public Accounts Alice Wilson, Kentucky Auditor of Public Accounts, Frankfort Mid-year economy: Where are we and where are we going Dr. Chris Kuehl, Armada Corp. Kansas City, Kan.

Nonmember: $674


The Kentucky CPA Journal / Issue 2 2018

CPE

Kentucky

Accounting Educator’s Conference

May 17-18 - Gratzer Education Center, Louisville 15 CPE hours

May 17

May 18

Designing an internal audit course and careers in internal audit Dr. Urton Anderson, University of Kentucky, Lexington

From the horse’s mouth: What I wish I knew two years ago Panel discussion of post-graduate students Ben Olliges, CPA, Bowden & Wood, Louisville Megan Greer, CPA, PwC, Louisville Eric O’Reilly, CPA, Elmcroft Senior Living, Louisville Shelby Clements, CPA, Dean Dorton, Louisville

Legislative and professional issues updates Charles George, JD and Darlene Zibart, CPA, CGMA, CITP, Kentucky Society of CPAs, Louisville Monopoly game: An active learning exercise to teach accounting cycle Dr. Richard Hale, CPA, Berea College, Berea Fresh ideas in education Dr. Mark Edmonds, University of Alabama, Birmingham, Ala. What’s hot in educational products Five Presentations from sponsors/exhibitors Reception with sponsors and firms *Followed by: KyCPA Board and Accounting Chair Dinner

Improving business communication skills Krystal Bronson, BKD, Louisville Emerging standards update: Panel discussion Christine Koenig, CPA, DMLO, Louisville Glenn Bradley, CPA, MCM, Louisville Simon Keemer, CPA, Dean Dorton, Louisville Kentucky State Board of Accountancy update Dick Carroll, Kentucky State Board of Accountancy, Frankfort Current issues in blockchain accounting and taxation Jason Tyra, Jason M. Tyra, CPA, PLLC, Dallas, Texas Raising the bar in ethical decision making Alfonso Alexander and Ryan Hirsch, NASBA Center for the Public Trust, Nashville, Tenn.

Fee: $199 Educators only. No discounts available. kycpa.org

35


Register at kycpa.org

NEXT 2018

Conferences Retirement Planning for the CPA Conference May 22 - Gratzer Education Center, Louisville Live webcast option

8 CPE hours

This conference is for those who are advising clients on retirement or considering retirement in the near future. Topics include:

The effects of the new tax law on retirement planning Mark Loyd, CPA, Esq., Bingham Greenebaum Doll, Louisville

Help your clients sort through the Social Security maze Marc Kiner, CPA, Premier Social Security Consulting, Cincinnati, Ohio

Valuations of businesses: How to prep your business for sale Rob Kester, CPA, Blue & Co. LLC, Louisville

Finishing well: Retirement income strategies and considerations Michael Gross, MoneyLife Planners, Inc., Louisville

Cybersecurity David Reedy, CyberRisk Management, Harrodsburg Asset protection in retirement Whitney Wilson, Elder Law of Louisville

Cost control and care solutions to support aging in place Lee Ann Taylor, Diversified Nursing Consultants LLC, New Albany, Ind.

Early Bird Fee: Register by May 8

KyCPA member: $324

Nonmember: $424

Regular Fee: After May 8

KyCPA member: $374

Nonmember: $474

36


The Kentucky CPA Journal / Issue 2 2018

CPE

Health Care Conference May 23 - Gratzer Education Center, Louisville 8 CPE hours This conference is for CPAs and finance professionals at health care organizations, hospitals, physician practices, and CPAs who advise health care clients. Topics include:

Kentucky's opioid epidemic Dr. Allen Brenzel, Cabinet for Health and Family Services, Frankfort Concurrent Sessions 1) Medicare Advantage: Fact or fiction Cristine Miller, MCM CPAs and Advisors, LLP, Louisville 2) Long term care regulations Shawn Stevison, CPA, Dean Dorton, PLLC, Louisville 3) Kentucky Health Information Exchange: Past, present and promise Dr. Martha Riddell, University of Kentucky College of Public Health, Lexington Karen Chrisman, JD, Kentucky Office of the Health Benefit Exchange, Frankfort

Concurrent Sessions 4) The effects of Baby Boomers on Medicare John Moore, Atria Senior Living, Louisville 5) What’s happening to “Obamacare” and where’s health care reform headed now? Doug McSwain, Wyatt Tarrant & Combs, LLC, Lexington 6) Cyber SOCs: One size fits all Barry Mathis, PYA, PC, Knoxville, Tenn. CFO Panel Moderator: Barry Pennybaker, CPA, MCM CPAs and Advisors, LLP, Louisville Panel: Alan Archbold, Mercy Health, Paducah Adam Kempf, Norton Healthcare, Louisville Lori Ritchey-Baldwin, St. Elizabeth Healthcare, Ft. Mitchell

Early Bird Fee: Register by May 9

KyCPA member: $324

Nonmember: $424

Regular Fee: After May 9

KyCPA member: $374

Nonmember: $474

kycpa.org

37


Register at kycpa.org

NEXT 2018

Conferences GO THE EXTRA MILE, IT’S NEVER CROWDED!

Manufacturing Conference June 8 - Gratzer Education Center, Louisville Live webcast option

8 CPE hours This conference is for CPAs and financial professionals working in manufacturing and logistics, and CPAs who advise manufacturing clients. Topics include:

Sales and use tax issues: Nexus for the manufacturing sector Mike Grimm, JD, MCM Tax Service Team, Louisville State and local tax incentives in Kentucky and Indiana Katie Smith, CPA, Kentucky Cabinet for Economic Development, Frankfort Trevor Lane, Indiana Economic Development Corporation, Indianapolis, Ind. Lean manufacturing: Process mapping within a department and using data analytics JC Wilkinson, CPA, Katz, Sapper and Miller, Indianapolis, Ind.

Cybersecurity: Trends, threats, and how to respond Jason Miller and Kevin Cornwell, CPA, Dean Dorton, Louisville Fraud in the supply chain Matthew Dixon, KPMG, Indianapolis, Ind. Future of accounting and its impact on manufacturing Molly Sutherland, Sutherland & Associates, Lexington Economic update for the manufacturing sector Chris Kuehl, Armada Corporate Intelligence, Kansas City, Kansas

Early Bird Fee: Register by May 24

KyCPA member: $324

Nonmember: $424

Regular Fee: After May 24

KyCPA member: $374

Nonmember: $474

For a list of all upcoming conferences refer to the CPE calendar on p. 30 or go to kycpa.org.

38


The Kentucky CPA Journal / Issue 2 2018

Ethics

Are you still independent? New ethics interpretation on data-hosting services

By Jason Miller Are you currently providing a service that will soon impair your independence?

The AICPA Professional Ethics Executive Committee (PEEC) recently adopted a new interpretation, Hosting Services, which appears in the AICPA Code of Professional Conduct’s “Independence Rule” (ET §1.295.143) under “Nonattest Services” and applies to practitioners who provide nonattest services to attest clients. Under the new rule, providing hosting services to attest clients will soon (effective Sept. 1, 2018) impair independence when a CPA takes responsibility for maintaining internal control over an attest client’s electronic information.

Where is the new line?

Your firm’s independence will be impaired if you: 1) assume responsibility for safeguarding or maintaining internal control of a client’s financial or even critical non-financial information; 2) control

client data such that it becomes incomplete or only accessible through the CPA; or 3) provide disaster recovery or business continuity services for an attest client. In these three services areas, the PEEC is concluding that by providing hosting services, a CPA is delivering services that cross the “management activity” restriction.

What are some examples that impair independence?

 Cloud-hosted accounting software – If the CPA firm is managing the hosted software on their internal hardware or leased cloud servers, then the client is dependent on the CPA firm for controlling their critical financial information, and independence is impaired.  Website hosting – If the CPA firm hosts a client’s website on their internal hardware or leased cloud servers, then independence is impaired.  Disaster recovery – If the CPA enters into an engagement with the attest client by which they are playing a role in holding the client’s

Continued on p. 40

kycpa.org

39


The Kentucky CPA Journal / Issue 2 2018

Ethics

Ethics continued data backups or contingent processing environment to be used for disaster recovery or business continuity, then independence is impaired.  Contract management system – If the CPA firm offers the attest client services for a hosted solution to manage the client’s business contracts, then independence is impaired. Please note the preceding list is not intended to be all-inclusive.

What are some examples that do not impair independence?

 Cloud-hosted accounting software – If a thirdparty software provider is responsible for the hosting, management, and availability of the hosted accounting solution and the client is controlling the access to the

system, an independence issue would not be created. The primary differences between this scenario and the one above is the CPA is not controlling access to the system, and the client can maintain access to the information independent of the CPA. The client should be responsible for managing user access to the information for both their employees and the CPA team members.  Storage of client information for performance of engagement – The CPA may maintain copies of a client’s information required to provide engagement services. Information should not be the only copy or originals.  Client portal – The CPA firm may provide a secure electronic service to share information back and forth

with a client, again as long as the information is required for the CPA to perform approved services and the information is not the only copy or original. Please note the preceding list is not intended to be all-inclusive. Public accounting firms should always consider all applicable rules as defined in ET section 1.295 when providing non-attest services to attest clients. As a reminder, the changes discussed in this article do not take effect until Sept. 1, 2018. This allows for adjustments to existing engagements. The PEEC is also evaluating revisions to ET section 1.295.145 – Information Systems Design, Implementation, or Integration. Watch for proposed changes, expected to be released later in 2018.

About the author: Jason Miller is the director of business and technology consulting at Dean Dorton, specializing in technology compliance including IT audit and cybersecurity, cloud-based accounting systems, and managed IT services among other technology solutions. For more information, visit www. deandortontech.com or contact Jason Miller at jmiller@ddaftech.com.  

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2018 KyCPA Educational Foundation

Sign up to play and/or sponsor Name:_______________________________________

Golf Scramble

Company:____________________________________

Enjoy a round of golf and contribute to the profession’s future. It’s a win-win.

City, State, and Zip: ____________________________

Address:______________________________________ Phone:__________________ Fax:_________________ Email:_______________________________________ Please register the following from my company to play golf in the scramble at $160 per person or $600 per foursome which includes lunch, golf and the reception that follows.

____________________________________________ ____________________________________________ ____________________________________________ ____________________________________________

Why should you sponsor?

June 18 University of Louisville Golf Club,

Simpsonville, Ky

 All proceeds directly benefit the Society’s Educational Foundation.  All donations are tax deductible. The Foundation is a 501(c)(3) organization. $500 Level Sponsor  Signage at registration, hole and reception. You will receive verbal recognition at the golf reception and recognition in The Kentucky CPA Journal.  Hole Sponsor (18 available)  Longest Drive Sponsor (2 available)  Straightest Drive Sponsor (2 available)  Closest-To-The-Pin Sponsor (3 available)  Hole-in-One Sponsor (1 available) $1000 Level Sponsor  Special signage at registration, lunch and reception. You will also receive verbal recognition at the golf reception and recognition in The Kentucky CPA Journal.  Scramble Luncheon Sponsor (3 available) (Special singular signage at lunch.)  Scramble Beverage Cart Sponsor (2 available) (Special signage on beverage cart)  Reception Sponsor (3 available) (Special singular signage at reception) Total Amount $____________  Company  Personal  Enclosed is a check  Please charge MC/Visa/AMEX _____________________________Exp. Date_______

The value of the goods and services received is $160/person.

For more information visit kycpa.org

Signature_____________________________________

Send payment to: KyCPA Educational Foundation 1735 Alliant Avenue, Louisville, Ky. 40299 Contact Charles George to play or sponsor at cgeorge@kycpa.org.


The Kentucky CPA Journal / Issue 2 2018

Educational Foundation

Create a Legacy Legacy Named Scholarships AssuredPartners Baldwin CPAs PLLC BKD True Expertise Accounting Blue & Co., LLC Brandon Lloyd Warden Memorial Brown-Forman Diversity Crowe Horwath LLP Dave Calzi Dean Dorton PLLC Deloitte & Touche LLP DMLO CPAs Ernst & Young LLP Freibert CPA Group PLLC Gordon Ford Memorial Henderman, Jessee & Co. PLLC Kelley Galloway Smith Goolsby PSC KPMG LLP KyCPA Presidents Louis T. Roth Memorial MCM CPAs and Advisors National Insurance Agency Papa John’s International Patterson & Company PLLC Penny Gold Honorary PricewaterhouseCoopers LLP Sadie Mae Strothman & Company Accounting William J. Caldwell (Henderman Family Foundation)

Legacy LEADERS CIRCLE • Baldwin CPAs PLLC • BKD LLP • Crowe Horwath LLP • Deloitte & Touche LLP • Ernst & Young LLP • KPMG LLP • Louis T. Roth & Co., PLLC • MCM CPAs and Advisors • Patterson & Company PLLC

Heritage CIRCLE

• Blue & Co., LLC • Bramco, Inc. • Brown-Forman Corporation • Buetow LeMastus & Dick PLLC • DMLO CPAs • Kelley Galloway Smith Goolsby PSC • Strothman & Company

Destiny CIRCLE

• Dave Calzi, CPA • Cloyd & Associates PSC • Dean Dorton PLLC • Fister, Williams & Oberlander PLLC • Freibert CPA Group PLLC • Henderman Family Foundation • Henderman Jessee & Co. PLLC • Jones Nale & Mattingly PLC • Stephen Lukinovich, CPA • Allen Norvell, CPA • Republic Bank & Trust Company • RFH PLLC • Rudler PSC • SKW CPAs & Advisors PLLC • Stock Yards Bank & Trust Co. • Rick Ueltschy, CPA

Pave the Way Campaign Contributor Create a Legacy Campaign Contributor Pave the Way and Create a Legacy Campaign Contributor

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The Kentucky CPA Journal / Issue 2 2018

Educational Foundation

New contributions (does not include pledge payments) Feb. - March 2018 Legacy Circle

Honors CIRCLE

Ernst & Young LLP

AssuredPartners William D. Stout, CPA Raymond G. Strothman, CPA Strothman & Company

Destiny Circle

Williams G. Meyer III, CPA

*Contributed to the Penny Gold Honorary Scholarship

Caring CIRCLE

Fowler Durham CPAs and Advisors PLLC* Thank you for supporting the KyCPA Educational Foundation.

If you would like see a complete list or to give to the Foundation, go to kycpa.org. If you see an error or need more information, please contact Lindsay Fouts at lfouts@kycpa.org.

June 10-14

8 1 0 2 SE BA P CAM

Sponsor BASE Camp The Business Accounting Summer Education Camp for high school sophomores, juniors and seniors builds a foundation for the future by influencing exceptional high school students to pursue a career in business and accounting. Levels of sponsorship: $1,000 - *Gold sponsor $750 - *Silver sponsor $500 - *Bronze sponsor $250 and below are listed in the student manual. *Go to http://bit.ly/BASEcamp2018 to view sponsor level details.

You may pay for your sponsorship online by May 11 at http://bit.ly/BASEcamp2018 or mail to the KyCPA Educational Foundation, 1735 Alliant Avenue, Louisville, KY 40299, Attn: BASE Camp.

BASE Camp 2017 Participants Go to http://bit.ly/BASEcamp2018 or contact Elizabeth Payne at BASEcamp@kycpa.org for more information or if you have any questions. kycpa.org

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The Kentucky CPA Journal / Issue 2 2018

Accounting careers

Interview Day is Sept. 21 Hosted by Georgetown College on Friday, Sept. 21, this annual recruiting event for smaller colleges and universities is open to students seeking full-time employment or an internship.

Firms - By bringing students from across the state

to a central location, firms like yours have the opportunity to recruit from schools that fall outside of their normal recruiting efforts.

Students - In order to ensure students from all

schools have an equal opportunity to interview, resumes from 10 graduating students and 10 internship candidates from each school will be accepted. Resumes are due Thurs., Aug. 30 and will be accepted on a first-come, first-served basis for each school.

Contact Samantha Soutar at ssoutar@kycpa.org to register your firm, or if you have questions regarding the event.

2017 Interview Day snapshots

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The Kentucky CPA Journal / Issue 2 2018

Society

Communication: KyCPA and you K

yCPA strives to communicate information that is specific to your individual needs. We are asking for your help in order to accomplish this successfully.

Your member profile

The most effective way to help is to keep your member profile up to date. This helps determine what information you want to receive and how you want to receive it. It's easy, go to kycpa.org, login, go to your profile and review it to make sure it is up to date. A great time to do this is each spring or when you have a change in address, employer or responsibilities.

Email communications

The next important step is to make sure electronic communications you need are getting to your inbox. Some may be landing in your junk or may be blocked by your company or firm's security. The following is a full list of KyCPA electronic communications: • The Kentucky CPA Online is sent the third Wednesday of every month to public practice members. • News for Business and Industry is sent the fourth Wednesday of every month to business and industry members. • New Kentucky Accounting Educator E-news is sent the third Wednesday of every month to members who are college accounting educators. • KyCPA Student eNews is sent the third Wednesday of every month to accounting student members. • The Kentucky CPA Journal is sent to all members five times per year. • Legislative Update is sent weekly during legislative session January-April. • KyCPA Business Intelligence Brief is sent daily Monday through Friday. • CPE seminars and/or online program information is sent every Tuesday Note: Individual emails will vary depending on your profile.

kycpa.org

• Conference information emails are sent to their intended audiences. Individual emails will vary based on your profile. To view the list of conferences see page 34 or go to kycpa.org. • CPE Catalog is emailed three times each year to those who opt to receive it via email on their member profiles. • Upcoming events - occasionally we will send individual emails regarding other member events.

Mailings

• The Kentucky CPA Journal is sent to members five times per year. Note: Life and student members are not sent the printed version of this publication. • CPE Catalog is mailed to those who opt to receive it via mail on their member profiles. This is sent in the spring, summer and fall. • Conference postcards are mailed to their intended audience eight to ten weeks prior to most conferences. You may also view a PDF of each postcard at kycpa.org.

New KyCPA web site

Yes, you read that correctly. We are rolling out a new web site in May. The new kycpa.org will have many features to help you easily obtain the information you need even more quickly. Be sure to check it out. Call 502.266.5272 if you have questions. Note: Your user name will be your email address, be sure you have a unique email address in your profile.

KyCPA App The KyCPA App includes a list of our upcoming conferences and member events, rewards, special offers and more. Download for free in your App or Play store. See page 13 for details.

Social media

Posts are a mix of news, member spotlights, fun videos and more. • Like us on Facebook: facebook.com/kycpa.org • Stalk us on Twitter: @KyCPAnews and @KyCPAdvocacy • Link up on LinkedIn • Watch us on youtube.com/kycpas • Picture us on Instagram: KyCPAnews

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The Kentucky CPA Journal / Issue 2 2018

Society

Meet the KyCPA staff T

here have been changes in the last few months at KyCPA to better serve all of our members. Several staff have gained new responsibilities or have changed to an entirely different role. We also want to introduce a few new staff. Staff contact information can be found at kycpa.org or you may call 502.266.5272 with any questions.

Executive Chief Executive Officer Darlene Zibart, CPA *Dec. 2003 dzibart@kycpa.org

Leads staff in the execution of KyCPA and KyCPA Educational Foundation missions • Oversees execution of KyCPA Board of Directors directives • Serves as the primary staff liaison to the KyCPA and the KyCPA Educational Foundation executive committees • Leads the organization on national and state professional issues, legislative and regulatory activities and external relations _____________________________________________ •

Advocacy VP of Government Affairs | General Counsel Charles George *July 2012 cgeorge@kycpa.org • Advocates for CPA profession before legislative and administrative bodies • Raises funds for KyCPA Political Action Committee • Provides legal counsel to CEO and board of directors • Oversees KyCPA Association Health Plan

46

Communications, Marketing and Graphic Design Communications, Marketing and Creative Director Kimberly Lindsey *Oct. 2002 and Dec. 2000-Sept. 2001 klindsey@kycpa.org • Accountable for all aspects and oversight of internal and external communications, marketing and design • Content and creative direction for the Society’s web site, social media, App and printed materials • Editor of The Kentucky CPA Journal and author of various articles • Continually strengthening the CPA and KyCPA brand Communications, Marketing and Design Coordinator Katherine Sproles *June 2017 ksproles@kycpa.org • Responsible for the Society’s social media presence on Facebook, Twitter, Instagram and LinkedIn; administrator of pages and content postings • Updates App content (including graphics); selects prizes and designs graphics to be placed on prizes • Associate editor of The Kentucky CPA Journal and author of various articles • Assists with marketing and communication initiatives by designing materials such as flyers, ads and graphics and/or producing videos


The Kentucky CPA Journal / Issue 2 2018

Continuing Professional Education

Conference Manager Leslie Larkins *May 2006 llarkins@kycpa.org

• Works with several planning committees to identify topics and speakers for our conferences • Creates conferences that appeal to our members and provide excellent speakers and content • Communicates with conference speakers on deadlines and other communications Seminar Manager Kim Puckett *Aug. 2016 kpuckett@kycpa.org

• Administers educational seminars held at Gratzer Education Center and other venues • Provides member support for professional development products and services • Liaison to seminar vendors and speakers • Assists the Education Director as needed

Society

Finance

Education Director Lisa Kemper *July 2011 lkemper@kycpa.org

• Directs all continuing education offerings • Manages vendor relations for education programs • Oversees budget for all education programs

Controller Lindsay Fouts, CPA *Feb. 2018 lfouts@kycpa.org

• • • •

Financial statements and General Ledger A/P and A/R Cash flow, budgeting Contact for auditors, insurance and bank

Membership Membership and Operations Director Heather Hibbs *Sept. 1993 hhibbs@kycpa.org • Develops and oversees membership recruitment and retention strategies • Manages member benefits and partner programs • Organizes member engagement and social events • Oversight of internal operations Membership Coordinator Kristin Knott *March 2016 kknott@kycpa.org • Assists in the implementation of membership recruitment and retention initiatives • Provides member service and support • Responsible for CMS and data integrity • Assists with member events

Continued on p. 48

kycpa.org

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The Kentucky CPA Journal / Issue 2 2018

Society

Meet the staff continued

Membership/Accounting Careers

Office

Membership Development Manager Samantha Soutar *March 2015 ssoutar@kycpa.org • Responsible for college student membership and programs o College Leadership Institute o CPA Exam Workshops o Student Ambassador Program • Expanding member outreach

Office Manager Tawni Miller *March 2018 tmiller@kycpa.org

• The first friendly, smiling face you see when you walk through the front door • Handles general office management tasks and procedures • Responsible for answering the phone, inventory, A/P • Assists the CEO and controller as needed

*Start date of employment at KyCPA.

Other contacts

Business and Accounting Summer Education (BASE) Camp Elizabeth Payne at BASEcamp@kycpa.org

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The Kentucky CPA Journal / Issue 2 2018

Society

Recruitment video: Q&A with Bob Patterson F

ive months ago, KyCPA and Bob Patterson sat down to film a recruitment video. The video’s purpose was to show potential candidates what was unique about Patterson & Company and attract certain talent. Patterson reflected on the process with us to show other firms and companies the value of making their own recruitment videos.

What was your primary goal for the video?

Our primary goal in shooting the video was to articulate our business model to prospective staff members and to talk about what makes us different as a firm.

What did your potential candidates think of the video?

In the interview process I talked to our candidate about what they thought of the video. Their response was almost exactly the reason we wanted to make the video in the first place, to represent things that we felt made us different. Really the most important takeaway from that was our culture. We feel that we have a very collaborative culture. We tried to show that in the video and that was one of the takeaways from the candidate.

Why do you think it’s important for potential candidates to experience firm culture?

I think it’s important for potential candidates to see our culture prior to walking in the door. I don’t know that we are different than other people, but we do work hard to have a collaborative culture. We utilize technology. We have an open floor plan in many parts of the office. It makes it easy to move around and ask questions.

Did it cost a lot of money? Was the process difficult?

The process was pretty easy and in fact it was kind of fun. We had a team meeting to talk about what we wanted to get across in the video, and then we had all of our team members involved in the process. It actually went very well. As far as the expense goes, it wasn’t that significant to start off with. It helped us recruit one CPA already, and it helped in the interview process. It came out in the interview process that it was one of the deciding factors (for the candidate to apply to the firm).

Tesa Hamilton, candidate hired by Patterson & Company What did you think about the firm after watching the promotional video?

I noticed that they had a lot of technology, and it looked like they interacted really well with each other. It kind of gave me an inside perspective of their firm without just looking at the website. I thought that they would provide the resources I needed to do my position.

Did the video influence your job decision?

It definitely made me more inclined to interview with them. From my perspective all the firms kind of looked the same from the outside so being able to look inside their firm was nice.

To view the Patterson & Company recruitment video or to find out more about producing your own video go to kycpa.org or contact Kimberly Lindsey at klindsey@kycpa.org.

kycpa.org

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The Kentucky CPA Journal / Issue 2 2018

Society

KyCPA honors 100% Champions T



















 









he following firms and businesses ensure all eligible CPA employees are members of KyCPA. This demonstrates their commitment to the profession, to the Society’s high ethical standards and a commitment to life-long learning. We appreciate their support of KyCPA and its mission. The information below is verified annually at the time of membership renewals. Inclusion on this list is an opt-in basis. If your organization would like to join the list of 100% Champions, or you have questions about the program, please contact Heather Hibbs at hhibbs@kycpa.org or 502.736.1368. 



























We make every effort to ensure the accuracy of this list. If you have voluntarily notified us of your 100% Champion status and we have left your name off this list, please let us know immediately, by contacting Heather Hibbs at hhibbs@kycpa.org.

100% Champions as of March 27 • • • • • • • • • • • • • • • • •

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Addington & Mills, PSC, Lexington Alexander & Company, PSC, Owensboro Alexander Toney & Knight, PLLC, Madisonville Alford Nance Jones & Oakley, LLP, Madisonville The Allen Company, Inc., Lexington Allen CPAs & Advisors, PLLC, Lexington Allston Advisory Group, LLC, Louisville Anderson Jones CPAs, PSC, Maysville Andrews Tackett & Associates, PSC, Flatwoods ANEW 401K TPA, LLC, Louisville Anneken Huey & Moser, PLLC, Ft Thomas Anneken Huey & Moser, PLLC, Ft Wright Baldwin CPAs, PLLC, Lexington Baldwin CPAs, PLLC, Maysville Baldwin CPAs, PLLC, Flemingsburg Baldwin CPAs, PLLC, Louisville Baldwin CPAs, PLLC, Richmond

• • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • •

Bennett & Company, CPAs, Louisville Berry Kington & Utley, PSC, Madisonville BKD, LLP, Louisville BKD, LLP, Bowling Green Blue & Co., LLC, Lexington Blue & Co., LLC - Commercial, Louisville Bowden & Wood, PLLC, Louisville Bramel & Ackley, PSC, Ft Wright Buckles Travis & Hart, PLLC, Leitchfield Buetow LeMastus & Dick, PLLC, Louisville Buschermohle & Company, PSC, Louisville Calhoun & Company, PLLC, Hopkinsville Campbell Myers & Rutledge, Glasgow Carr Riggs & Ingram, LLC, Bowling Green Carr Riggs & Ingram, LLC, Russellville CHAN Healthcare, Louisville CHAN Healthcare, Lexington Charles T. Mitchell Company, PLLC, Frankfort Charles T. Mitchell Company, PLLC, Versailles Christian Sturgeon & Associates, PSC, London Compton Kottke & Associates, PSC, Louisville Craft Noble & Company, PLLC, Richmond Crowe Horwath, LLP, Louisville Crowe Horwath, LLP, Lexington Dean Dorton, PLLC, Lexington Dean Dorton, PLLC, Louisville Delta Natural Gas Co., Inc., Winchester DMLO CPAs, Louisville Drane & Company, PLLC, Hardinsburg Duncan Smith & Stilz, PSC, Lexington Ebelhar Whitehead, PLLC, Owensboro Elmcroft Senior Living, Louisville Embry & Watts, PLLC, Morgantown Embry & Watts, PLLC, Beaver Dam Evans Harville Atwell & Co., CPAs, PLLC, Somerset Faulkner King & Wenz, PSC, Mt Sterling Fister Williams & Oberlander, PLLC, Lexington Flynn Accounting, LLC, Jeffersonville, Ind. Fowler Durham CPAs and Advisors, PLLC, Munfordville Franklin Financial Group, Madisonville Freibert CPA Group, PLLC, Louisville Garstka Gander & Crabb, PSC, Lexington Shirley E. Gifford, CPA, Ferguson Grover Greweling & Company, PSC, Louisville Hamilton Thomas & Co., PLLC, Louisville


The Kentucky CPA Journal / Issue 2 2018

• • • • • • • • • • • • • • • • • • • • • • • • • • • • • •

Harding Shymanski & Company, PSC, Louisville Harris & Associates, PSC, Somerset Harrod & Associates, PSC, Frankfort Hibbs and Associates, PLLC, Bardstown Hoover and Morris, PLLC, Livermore Jaynes and Jaynes, PSC, Richmond John T. Lane and Associates, LLC, Mt Sterling Jones Nale & Mattingly, PLC, Louisville Kauffmann & Associates, CPAs, Louisville Kelley Galloway Smith Goolsby, PSC, Pikeville Kelley Galloway Smith Goolsby, PSC, Ashland Kelley Galloway Smith Goolsby, PSC, Cold Spring Kemper CPA Group, LLP, Henderson King + Company, CPAs, Louisville Kinkead & Stilz, PLLC, Lexington Kirby & Moore, LLP, Bowling Green Louis T. Roth & Co., PLLC, Louisville Lutz & Associates, Inc., Madisonville Marr Miller & Myers, PSC, Corbin Mather & Company, CPAs, LLC, Louisville McKinney & Associates, LLC, Scottsville MCM CPAs and Advisors, LLP, Jeffersonville, Ind. MCM CPAs and Advisors, LLP, Louisville MCM CPAs and Advisors, LLP, Cincinnati, Ohio MCM CPAs and Advisors, LLP, Lexington Miller Mayer Sullivan & Stevens, LLP, Lexington Monroe Shine & Company, Inc., Louisville Morgan & Associates, LLC, West Liberty Munninghoff Lange & Co., CPAs, Covington Neikirk Mahoney & Company, PLLC, Louisville

kycpa.org

• • • • • • • • • • • • • • • • • • • • • • • • • • • • • •

Society

Owensboro Municipal Utilities, Owensboro Padgett & Mastronardo, PLLC, Walton Tony Page CPA, PLLC, Murray Patterson & Company, PLLC, Louisville Peck & Milford, LLP, Paducah Radwan Brown & Co., PSC, Lexington Reed & Co. of Mayfield, PSC, Mayfield Retirement Management Services, LLC, Louisville RFH PLLC, Lexington Vickie C. Richardson CPA, PSC, Mt Sterling Robinson Hughes & Christopher, PSC, Danville Rueff and Associates, PLC, Louisville SKW CPAs & Advisors, PLLC, Lexington Smith & Company CPAs, PLLC, Bardstown Southern Star Central Gas Pipeline, Owensboro Stephens & Lawson, PSC, Louisville Stiles Carter & Associates, PSC, Bardstown Stiles Carter & Associates, PSC, Elizabethtown Strothman & Company, Louisville Stuedle Spears & Company, PSC, Louisville Sullivan & Curry, LLP, Greenville Sullivan Morris Sullivan & Hart, PSC, Lexington Summit Strategic Advisors, LLC, Louisville Tallent & Associates, CPA, Louisville Van Gorder Walker & Company, Inc., Erlanger Verbeck & Kaleher CPAs, Inc., Taylorsville Welenken CPAs, Louisville Williams Williams & Lentz, LLP, Paducah Wise Buckner Sprowles & Associates, Campbellsville Young & Wadlington, PLLC, Lexington

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The Kentucky CPA Journal / Issue 2 2018

Members

KyCPA member profile: Eric Scott, CPA M

eet Eric Scott the Senior Manager of Tax Services at Ernst & Young. He’s 33 years old with a bachelor’s in accounting from Bellarmine. During his time as a KyCPA member, Eric has served on the Taxation committee since 2010 and chaired the committee from 2013 to 2016. He joins the Board of Directors this summer and will serve on the Audit committee as well. Outside of KyCPA, Scott has served on the board of Kentucky Opera since 2013 and chairs the Special Events and Fundraising committee. Eric also plays piano.

KyCPA: What is the best part of your job?

KyCPA: What inspired you to become a CPA?

ES: The rest of the time I spend with my wife and our two kids, Annabelle, 10, and Jacob, 7.

ES: I actually went into college as a business administration major. Keith Richardson, who was professor and chair of the accounting program at the time, saw that I was doing pretty well. He asked me, “What do you want to do (when you graduate)?” I said something in business since that was my major. He said, “Well do you want to have a job when you graduate?” So he convinced me to be an accounting major. It was with his mentorship that I switched and began on the career path of becoming a CPA.

52

ES: What I do in taxes is highly technical and I really enjoy that aspect. Also, it’s a dynamic world and nothing demonstrates that better than the federal tax reform package that just passed in December. You can never really step back and say, ‘I know everything there is to know.’ That situation will never occur in our career in tax because there’s always things changing at the local, state or federal level. I love the dynamics of it because it will always be changing.

KyCPA: Outside of Kentucky Opera and piano, what do you like to do in your free time? KyCPA: What advice do you have for students in accounting classes?

ES: Show up. Be engaged, and be with it. The material is difficult. Studying for the CPA exam is difficult, but I can’t stress enough that it’s extremely worth it. So show up, and if you are in those classes be there. Be engaged in it and stay with it. It’s worth the effort.


The Kentucky CPA Journal / Issue 2 2018

Members

KyCPA member profile: Paulie Shively, CPA M

eet Paulie Shively, the vice president of tax compliance at Trilogy Health Services. Shively has a bachelor of science in mathematics and a bachelor of business administration in accounting, and she serves as a board member for the Trilogy Scholarship Foundation. She has two children, Tucker, 21, and Brock, 19.

KyCPA: What do you like to do for fun?

KyCPA: What inspired you to become a CPA?

KyCPA: Why do you like working in industry as an accountant?

PS: I have a certain aptitude when it comes to working with numbers. It’s a skill with many applications. Being a CPA provides the holder with continuous growth opportunities through new experiences.

KyCPA: What’s the best aspect of your job?

PS: Trilogy has defined core values that create an employee-centric culture in our health care facilities as well as our corporate offices. One of our core beliefs is, “Satisfied employees promote a positive experience for our residents.” I have had the good fortune to participate in Trilogy initiatives that are designed solely to enhance the work and personal lives of all of our employees. It feels good to be part of something bigger than yourself.

kycpa.org

PS: I enjoy being active; biking, tennis, watersports.

KyCPA: Any advice for students in accounting?

PS: I would make obtaining your CPA certification a priority. Obtaining your certification takes commitment, drive and accounting knowledge. These traits are widely recognized by business leaders and will help open doors to new opportunities.

PS: As a business, Trilogy provides health care services to the elderly. Having seen first-hand from my mother how difficult daily tasks can become as a person ages, I have come to appreciate health care professionals in this line of work. My role in accounting supports Trilogy’s health care services. Constantly changing tax laws keeps the compliance aspect new and fresh. Even though I am in a specialized area, I have the good fortune of working with multiple functions to secure tax abatements, credits and exclusions.

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The Kentucky CPA Journal / Issue 2 2018

Members

Welcome new members Student

Rachael Burch, University of Louisville Nanhao Chen, Transylvania University Rebecca Maria Duff, Transylvania University Mark Anthony Gebhart, Northern Kentucky University Lana Glover, Southern New Hampshire University Kyle Patrick Gullett, Transylvania University Jackson A. Jeffries, Transylvania University Trevor Jackson Kahnmann, Northern Kentucky University Jessica Gina Koors, Transylvania University Allison G. Lyon, Asbury University Braden Wayne Miller, University of the Cumberlands Hardik Pravin Patel, Northern Kentucky University Olivia Taylor Potts, Western Kentucky University Ashley Jordan Rains, Northern Kentucky University Amanda Lynn Rowe, Northern Kentucky University Lauren Sendelbach, Northern Kentucky University Chase Jacob Slyder, Northern Kentucky University Tyler Jeffery Stevens, Morehead State University Bridgitte M. Waldrop, Northern Kentucky University Jacqueline M. Wandling, University of Louisville Sarah Anne White, Northern Kentucky University Alexander Daniel Zuesli, Northern Kentucky University

Non-CPA Associate

Lindsay Rae Beard, Rodefer Moss & Company, PLLC, New Albany, Ind. Kimberly Ann Fenwick, Boston Ricky Lucas, Collins & Slone, CPAs, Pikeville Lydia Renee Robinson, WireCrafters, LLC, Louisville Danielle Mayling Yap, RFH, PLLC, Lexington

Regular

William S. Bishop, Claiborne Farms, Paris William Matthew Carpenter, Fayette County Attorney’s Office, Lexington C. Glen Combs, Crowe Horwath, LLP, Lexington Thomas L. Evans, Jr., Louisville Simona M. Feraru-Boborodea, Columbia Andrew Gapinski, Ernst & Young, LLP, Cincinnati, Ohio Hilary Morgan Kelly, Bowling Green Paul Nicholas Murphy, PBI Bank, Louisville William G. Nolan, Ernst & Young, LLP, Akron, Ohio Clayton E. Raymer, Crestwood Alan Lee Schroering, Alan Luckett, PSC, Louisville Thomas J. Schulte, Louisville Amy M. Smith, Amy Smith CPA and Advisors, PLLC, Lexington James W. Taylor, Springfield Charles Vernia, Louisville Brian Thomas Weldon, Nicholasville Kristopher M. Whitaker, Louisville

Members in motion Firms

Buchenberger, Eggers and Spurr, LLC and Baldwin CPAs, PLLC have merged and will continue operating under the Baldwin CPAs name. The merger will add two partners, Kathie Eggers and David Buchenberger.

Awards and recognition

Dean Dorton Allen Ford, PLLC was recently named as a Top Firm in the Southeast again along with being named to the Beyond the Top 100: Firms to Watch list by Accounting Today.

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The Kentucky CPA Journal / Issue 2 2018

Watercooler

By the watercooler Congratulations you made it through another tax season! Enjoy some funny tax quotes. “Isn’t it appropriate that the month of the tax begins with April Fool’s Day and ends with cries of May Day!” – Robert Knauerhase “On my income tax 1040 it says “Check this box if you are blind.” I wanted to put a check mark about three inches away.” – Tom Lehrer “Thinking is one thing no one has ever been able to tax.” – Charles Kettering “The taxpayer: that’s someone who works for the federal government, but doesn’t have to take a civil service examination.” – Ronald Reagan “Worried about an IRS audit? Avoid what’s called a red flag. That’s something the IRS always looks for. For example, say you have some money left in your bank account after paying taxes. That’s a red flag.” – Jay Leno “When it comes to taxes, there are two types of people. There are those that get it done early, also known as psychopaths, and then the rest of us.” – Jimmy Kimmel “The politicians say “we” can’t afford a tax cut. Maybe we can’t afford the politicians.” – Steve Forbes “The U.S. Senate is considering a bill that would tax Botox. When Botox users heard this, they were horrified. Well, I think they were horrified. It’s difficult to tell.” – Craig Ferguson

kycpa.org

“This is the season of the year when we discover that we owe most of our success to Uncle Sam.” – The Wall Street Journal “This is too difficult for a mathematician. It takes a philosopher.” – Albert Einstein, on filing tax returns. “Collecting more taxes than is absolutely necessary is legalized robbery.” – Calvin Coolidge “The art of taxation consists in so plucking the goose as to obtain the largest amount of feathers with the least amount of hissing.” – Jean-Baptiste Colbert

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The Kentucky CPA Journal - Issue 2 2018  

What's all the buzz about? State tax reform and much more.

The Kentucky CPA Journal - Issue 2 2018  

What's all the buzz about? State tax reform and much more.