MACPA Statement // Fall 2023

STATEMENT MACPA’S

FA L L 2 0 2 3

‘All in this together’ Former MACPA Chair Lexy Kessler takes leading role as profession addresses talent shortage

ALSO INSIDE $1 million awarded for nontraditional apprenticeship programs in Maryland Page 10 MACPA seeks Congressional support for delay in Beneficial Ownership Information requirements Page 22

Maryland Association of Certified Public Accountants, Inc.

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CONTENTS FALL 2023 | Maryland Association of Certified Public Accountants, Inc.

CHAIR’S COLUMN.............................................................................. 2 FEATURES

‘All in this together’............................................................................................... 4

DEPARTMENTS

News & Views........................................................................................................ 8

Financial Planning................................................................................................ 12 Business and Industry.......................................................................................... 20 Tax Corner............................................................................................................ 22 From Our Partners............................................................................................... 28

CLASSIFIEDS........................................................................................... 34 MEMBER NOTES................................................................................ 34

MEMBER SERVICES Lauren McDonough Sydney Glen PEER REVIEW Cora Edwards PROFESSIONAL DEVELOPMENT Natalie Antonakas Kelly Brown Chris Dougherty Emily Trott SPONSORSHIP / ADVERTISING SALES Krislyn Suljak

2022–2023 BOARD OF DIRECTORS Christine Aspell, CPA Chair Thomas White, CPA, CGMA Vice Chair Maxene M. Bardwell, CPA, CIGA, CIA, CFE, CISA, CITP, CRMA Secretary/Treasurer Herbert J. Geary III, CPA, CGMA Immediate Past Chair Karl Ahlrichs, SHRM-SCP, SPHR, CSP Jackie Cardello, CPA Bo Fitzpatrick, CPA Robert Goldstein, CPA Michael Kimbrough, Ph.D., CPA Gregory Repas, CPA Brett Sanders, CPA Savedra N. Scott, CPA, CGMA, CrFAC, MSA, MBA

SENIOR STAFF Rebekah Olson, CPA CEO Laura Swann, CPA CFO Bill Sheridan, CAE CCO Mary Beth Halpern Director Technical Services/ Regulatory Affairs Dee Sullivan Director of Learning

WE WANT TO HEAR FROM YOU! See below to submit content

Bill Sheridan | MACPA Dulaney Center II 901 Dulaney Valley Road Suite 800 Towson, MD 21204 FOR CONTENT SUBMISSION: bill@macpa.org feedback@macpa.org TO ADVERTISE IN THE STATEMENT: sponsorship@macpa.org P: 410.296.6250 F: 410.296.8713 Toll free: 800.782.2036 The MACPA reserves the right to edit all submissions for grammatical style and / or length.

Statement of fact and opinion are made by the authors alone and do not imply an opinion on the part of the officers or members of MACPA. The Statement is published four times a year by the Maryland Association of Certified Public Accountants, Inc. Bill Sheridan, Editor Krislyn Suljak, Advertising Sales

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CHAIR’S COLUMN Talent solutions start with pipeline-building and end with purpose

BY CHRISTINE ASPELL / MANAGING PARTNER, KPMG BALTIMORE OFFICE

Our profession is experiencing a talent shortage — and it’s on all of us to address it. We must look beyond traditional recruiting approaches and actively share our stories with young talent so that we can meet today’s challenges head-on.

First, investing today to build and diversify the CPA pipeline for tomorrow is critical to the future of our industry. Inclusive, diverse teams produce better ideas, are more creative, and foster rich conversations and thoughtful decision-making.

We know that reaching diverse talent earlier in the educational and professional development process is key to creating a larger and more diverse CPA pipeline. Connecting with students early on and educating them about the profession has the potential to increase matriculation in accounting programs.

At KPMG, we brought on 3,300 interns this summer — our largest class of summer interns to-date. For the first time this year, we also offered our KPMG Empower High School Internship Experience to nearly 180 incoming junior and seniors in 11 markets across the country. This was a three-week paid program that introduced high school students from diverse backgrounds to careers in public accounting and professional services.

Along the way, we’ve had conversations with students, colleagues, and other professionals to help us understand what’s top-of-mind for the workforce of tomorrow and ensure our actions and programs embody the values the next generation wants to see in an employer.

We can all work together to invest in building a pipeline of diverse talent with excellent technical and communication skills, along with strong collaborative behaviors and an innovative and inclusive mindset.

Looking beyond efforts to build a diverse and robust pool of talent, we know that students entering the workforce today seek out companies with purpose and are looking for far more than lip service. Our job, then, is to help CPAs rediscover their purpose — the reason they were attracted to the profession in the beginning.

At the MACPA, we’ve been laser-focused on this area for a while now.

We want you and every member to return to the day you realized you wanted to devote your professional life to this work. Our job is to reconnect with that passion, and then share it with every student and young professional we know. “This,” we must tell them, “is what this profession is really about.”

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As part of our Women to Watch Awards breakfast in September, the MACPA asked nominees and attendees to share their CPA purpose with our members. They filled an online message board — you can find it at bit.ly/CPApurpose — with inspiring stories of our profession’s “why” in action. There are too many great ones to cite here, but I want to share a couple with you: • “My purpose is deeply rooted in my belief that CPAs are trusted advisors and are essential — whether in public accounting, business and industry, government, education, or non-profit sectors. It is a responsibility, obligation and honor to serve Maryland and her interests through our citizens, residents, businesses and communities.”

• “As the director of accounting at CareFirst BlueCross BlueShield, I am transforming health care in the Mid-Atlantic region by making quality care affordable, easy to use and available to everyone in Maryland, Washington, D.C. and Northern Virginia.”

Here’s what I love about these answers: They focus on the impact that CPAs have on the lives of others. Talk about inspiring. Those are stories worth sharing — and the more we share them, the more people who will see this as a career worth pursuing.

My firm, KPMG, is continually working to instill a greater sense of purpose in its own workforce — an example of which is beautifully captured by KPMG Partner Bruce Pfau in the Harvard Business Review (which you can read at bit.ly/KPMGpurpose). Initiatives like these reframe and elevate day-to-day work, driving high morale and increasing employee engagement, satisfaction and loyalty, while also bringing out the best in our people.

So here’s my challenge to you: Spend some time defining your own purpose. How is your work improving the lives of others? How are you making a difference? Write it down. Get good at telling that story. And then tell it — over and over again. The MACPA offers opportunities to stand in front of a group of students and share with them your passion for this profession. Contact us and we’ll help make that happen.

Every time we do that, we change our narrative for the better. We help the public see and understand what accounting and finance is really all about. And we open a student’s eyes to the possibilities that a career in these fields can offer.

STATEMENT

CONTINUED ON PAGE 8

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‘All in this together’ Editor’s note: Former MACPA Chair Lexy Kessler, a partner and Mid-Atlantic regional leader with Aprio, has taking a leading role in the profession’s efforts to address its recruitment, retention and talent challenges by chairing the National Pipeline Advisory Group, a panel of accounting stakeholders who are helping to shape strategies to address the profession’s talent shortage.

In August, Kessler spoke with the Journal of Accountancy’s Neil Amato about the talent shortage and the National Pipeline Advisory Group’s work.

The following is a transcript of that conversation. It is reprinted here with permission.

Former MACPA Chair Lexy Kessler takes leading role as profession addresses talent shortage Neil Amato: Lexy Kessler is the chair of the National Pipeline Advisory Group.

She brings to the Pipeline initiative more than 35 years of experience in the public accounting profession. Lexy is a CPA who holds the CGMA designation, and she’s the mid-Atlantic leader for Aprio, where she is a trusted adviser to business leaders in the region. Lexy is a former chair of the Maryland Association of CPAs and is a current member of the board of directors of the Association of International Certified Professional Accountants. First, Lexy welcome to the JofA podcast.

that perspective to the table for the conversation. They represent academia, public accounting, state societies, license boards, educators, and really trying to bring many perspectives to the table for the conversation. They reflect small, medium, large firms and also small to large states across the United States. The goal really was to get a diversity of opinions at the table and different perspectives so that we can make sure we’re not missing something in the conversation.

Lexy Kessler: Thank you, Neil. I appreciate you having me here today.

Kessler: I think the main responsibility is stemming from the fact that we are seeing the pipeline of talent is really inadequate to meet the capacity challenges of firms across the United States. What we want to do is address, dig down to figure out what are those root causes. We’re going to do that by holding various forums across the United States, different focus groups,

Amato: First, I guess I’d say regarding the National Pipeline Advisory Group, who are you guys and what are you doing?

Kessler: Good question. We’ll start there. We’re a group of 22 people that represent various stakeholders, and bring

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Amato: What are responsibilities?

the

group’s

main

gathering of information, bringing the perspectives together so that we can get an idea and understanding of what is causing this, and then create a draft plan that we are shooting to present to council in May of 2024 with a draft plan of proposed solutions to help address that shortage.

Amato: Thank you for laying out that timeline. One of the hot topics as part of this discussion is about the 150-hour educational requirement, which is seen by some as an obstacle to people becoming CPAs. What is your thought on that educational requirement, which I guess essentially means another year of school after receiving an undergraduate degree for CPA candidates?

Kessler: That’s a great question as well. It is at the top of the list to discuss. The goal is to really explore the substantial equivalency early in our work. Are there ideas that we have not surfaced yet? Just to explain that for one moment, to get a license, you want STATEMENT

to be able to drive across state lines. You want to be able to practice across state lines.

We want to try to come to a solution that will preserve mobility, and perhaps there are other ways to get to becoming what that equivalency is to allow us to be successful on this particular topic. There are multiple topics or issues, I should say, leading to this. This is one of them, very important, lots of publicity, and we’re going to take it head on.

Amato: Do you have any first-person examples of how this issue, this slowdown in young adults choosing to become CPAs, has affected your firm or businesses that you work with?

Kessler: Absolutely. When I participate with AICPA conferences, etc., or state societylevel events, it’s one of the top topics is finding people. We’re having difficulty finding people. It goes back to that capacity strength that we’re seeing with less people coming into the pipeline or pipeline meaning into the profession in general. As a firm, with Aprio, we really are doing a lot to be the employer of choice. What are the things that an organization can do to be able to attract that talent because there’s just fewer people there to do it?

That’s also investing in technology and other tools to help get the work done, but you can only do that to a certain point because the reality is you still need people.

This is a professional service. We still need people to be able to do the work. We need people to do the analysis. We need people to interact with a client or a stakeholder, investor, community. Whatever it may be we need to be able to get our arms around that.

Amato: In addition to these issues of how can the pathway be cleared, what is it in the profession where maybe the people in the profession, the people in this group have to look inward?

Kessler: I thank you for bringing that up. It’s a critical piece to this, to the whole equation.

It’s an ecosystem that’s driving this. It’s not just one thing. For example, it’s not just the exam, it’s also the companies that people go to work for and what’s their experience like and there’s a lot of pieces that need

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to be discussed around that that we are starting to identify because it’s a community. It is a community of stakeholders that have to work together, which is why we’ve got the representation from the stakeholder community. It’s not 100%. We’re just the organizers of this, looking to pull in others because firms have a lot to say in this. We have an ownership that we need to take with that. That’s what we’re going to try to uncover and we’ll work through that.

Amato: In heading up this group, what are the things that excite you about it?

Kessler: Well, what really excites me is that there’s some major rock stars I get to work with, quite frankly. It’s just individuals that I love being around, people that — I’m just like a sponge listening to their experiences and why they think what they think. Do you know what I mean, what are the things that went into that? It just makes me a better, well-rounded businessperson, honestly. Then I’m just fascinated by it because I learned so much the first meeting that we had. It was amazing what came up in the conversation, a perspective that hadn’t even occurred to me and I’m on the board, so there you go.

I mean, it just will help to make me a better board member. And working with Jennifer Wilson, who is our facilitator with Convergence Coaching. She just has done a phenomenal job leading us so far. I’m excited to see where she’s going to take us as a group in getting to our goal of that May draft date.

Amato: I haven’t met all the people in the group. I’ve certainly heard a lot of their names. I’ve had a chance to have a few of them on the podcast and I am impressed.

They are great people to learn from and listen from.

Kessler: Absolutely.

Amato: In this leadership role with the group, why is this effort something that appeals to you?

Kessler: I didn’t even hesitate to accept taking on this role. I am about people.

I’m about making a difference, and it’s very important to me to give back to the

I think the main responsibility is stemming from the fact that we are seeing the pipeline of talent is really inadequate to meet the capacity challenges of firms across the United States. profession because it’s been so good to me. Several years ago, I went through some coaching and one of the things that they had us do was your leadership declaration, who are you as a leader. Who I am as a leader is an inspiration to people exploring the unthinkable. People think that this is not doable. It absolutely is doable. The reason I say that is because we all want the same result. It’s not like we disagree on the end result. We all agree on that and we can all work together to get to that end result, which is increasing the pipeline.

We may have different ideas of how we get there and that’s doable. That’s how we sit down at the table, which is what we’re doing and figure it out. I’m very confident that we can figure this out when you just take a step back and think about it from that perspective.

Amato: Is there anything you’d like to add as a closing thought on this topic?

Kessler: I just appreciate you taking the time to reach out and do this. It’s important that we get communication out there. We want the transparency that we are doing something about this and we’re trying to increase the pipeline, and we want people to provide us that feedback because we need that feedback to be effective on what we’re doing and we will be reaching out, like I said, with the forums and the focus groups. We want people to participate so I’m going to ask you to please participate.

We would like to hear from you. Again, we’re all in this together, and we’re pretty smart people. We can do this.

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CONTINUED FROM PAGE 11

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Explore these resources today: macpa.org/resource-library

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M A R Y L A N D A S S O C I AT I O N O F C P A S

STATEMENT

LEGAC Y MEMBERSHIP

The MACPA honors the 2023-2024 class of new Legacy Member inductees Michael Febrey Teh-Yung Fang Amy Rivera Philip Bass Tom Hood Fredric Leffler Joan Wingrove Tamara Vonderhorst Fred Hershenfeld Sandra Blyman Marsha Buss James Baxter Thomas Erisman Kevin Greenwell Michael Voslow Laura Selby Ed Kushlis Pamela King-Smith Katherine Coester William Fitzpatrick Gregory French James Kern Timothy Dec Steven Manekin

Donald Butt Joan Pratt Richard Kierson Joseph Lanciano Joseph Jordan William Jefferson Beatrice Beaubien Douglas Phillips Thomas Gardner Alexis Davis Richard Sinclair Jeffrey May Abdel Makhlouf Rayanne Beers Howard Tash Michael Weber Christopher Morris Vincent Nesline James Davis Denise Rinker Diana Petro Lawrence Regan Ronald Lipella Ma-Angeles Sadorra

Kevin Cross Gerard Lindner Louis Hutt Charles Meehan Dennis Alexander Donna Defino Steven Bowers David Mueller Donna Singer Lynn Lazzaro Daniel Herzel John Davis Katherine Browning Richard Siegel George Carter Mark Moser Steven Reamer Saul Bashoff Fred Burke Timothy Ring Joseph Dennis Carol Gardner Kimberly Shramko Andy Kim

Robert Brown Dinah Hanson Peter Brophy Brian Hildreth Robert Kennick II Herbert Greenwald William Robertson Louis Friedman Anthony Holland Howard Sachs Sharie Hyman John Dowd William Jones William Gorman Samuel Berman Frances Angelos Perry Levin John Draa Lisa Cines Harry Segal Michael Peters Ira Meier Joseph Neser Susan Murk

These professionals are joining a group of nearly 200 MACPA Legacy Members, a new designation started in 2022 to honor those with over 40 years of membership with MACPA. Thank you for your service to the public, our profession, and our association. We are #CPAProud.

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NEWS & VIEWS Three CPAs selected as Maryland’s ‘Women to Watch’ for 2023

BY BILL SHERIDAN, CAE

Three outstanding business leaders have been chosen by the Maryland Association of CPAs as Maryland’s “Women to Watch” for 2023.

they serve as role models not only for other women in the profession, but for every accounting and finance professional on the planet.”

The honorees are:

“We had 21 nominees for this year’s awards,” said Christine Aspell, CPA, chair of the MACPA’s 2023-24 Board of Directors. “This symbolizes a commitment on the part of every person in this room and once again sets Maryland CPAs apart in a way that makes me proud.”

• Christa Hood, CPA, LLC member and managing partner at Askey, Askey and Associates, CPA, LLC, in the “Emerging Leader” category.

• Samantha Haines, CPA, director of Tax Services at Rosen, Sapperstein and Friedlander, LLC, in the “Emerging Leader” category.

• Samantha Bowling, CPA, CFE, CGMA, managing partner at Garbelman Winslow CPA, in the “Experienced Leader” category.

Here’s a closer look at the winners and honorees in each of the two “Women to Watch” categories:

EMERGING LEADER: CHRISTA HOOD, CPA Christa Hood is LLC member and managing partner of Askey, Askey and Associates. The impact of Christa’s innovative thinking and technology adoption as owner have positively impacted both the firm’s operations and culture. She is a member of the Leadership of Southern Maryland’s Board of Directors, underscoring her deep commitment to nurturing and empowering the leaders of tomorrow, a value that she holds dear both professionally and personally.

Launched in 2014, the awards highlight the accomplishments and contributions of women in the CPA profession and demonstrate to emerging female leaders that success is not out of reach.

“We are incredibly proud of this year’s winners — indeed, of all the honorees for this year’s awards,” said MACPA CEO Rebekah Brown, CPA. “They represent the best this profession has to offer, and

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STATEMENT

NEWS & VIEWS at RSM US LLP. EXPERIENCED LEADER: SAMANTHA BOWLING, CPA, CFE, CGMA Samantha Bowling is managing partner of Garbelman Winslow CPAs. She has dedicated her life to making this profession better, both for employees at GW CPAs and for the wider profession through her volunteer efforts within the MACPA, the AICPA Council, and the Auditing Standards Board. Her mentorship has not only shaped careers but has also fostered a sense of camaraderie and community within her firm, the MACPA, and the AICPA. EMERGING LEADER: SAMANTHA HAINES, CPA Samantha Haines is director of Tax Services at RS&F, where she has helped streamline operations and is viewed as an extension of her client’s team, always working in their best interests. Sam supervises many team members and goes above and beyond for her clients, colleagues, community, and the profession. Her dedication to community service is reflected in her active involvement with both Towson University’s MentHER program and Autism Speaks.

Other honorees in the Emerging Leader category are: • Erin Clark, CPA, audit manager at SEK CPAs & Advisors.

• Sabrina Knott, CPA, CGMA, director of Tax and Compliance at Enterprise Community Partners, Inc. • Elizabeth McPherson, CPA, tax director at CliftonLarsonAllen, LLP. • Christie Stravino, CPA, MS, tax partner at Cohen & Company.

• Melissa Tarkett, CPA, MST, tax partner at Aprio LLP. • Taylor Tharp, CPA, assurance manager

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Other nominees in Leader category are:

the

Experienced

• Judy Barnhard, CPA, CFP, CDFA, executive vice president and director of Professional Services, Wealth Managing and Financial Planning Services at Councilor, Buchanan and Mitchell.

• Shelley Romano, CPA, partner and managing director, UHY LLP and UHY Mid-Atlantic Advisors.

• Janice Stucke, CPA, chief financial officer at Achieving the Dream, Inc. • Kate Vasiliev, CPA, partner and managing director at UHY LLP and UHY Mid-Atlantic Advisors.

The 2023 MACPA “Women to Watch” awards were made possible by the MACPA Foundation, which is committed to building a diverse CPA talent pipeline to secure the future of our profession.

The awards also were made possible by the following strategic partners: PREMIER SPONSORS • Aprio • CLA • Deloitte • KPMG • RSM

• Monique Booker, CPA, founding partner at SB & Company, LLC.

EVENT SPONSORS • Bookminders

• Kim Chaney, CPA, owner of Kimberly S. Chaney CPA LLC.

• Cohen & Co.

• Meg DeGroat, CPA, director at SC&H Group, LLC. • Nelly Gizdova, CPA, MS, partner at UHY LLP and UHY Mid-Atlantic Advisors.

• Susanne Holloway, MBA, CPA, professor of the practice, Salisbury University.

• Joan Leanos, CPA, director at Strategic Tax Planning CPAs LLC. • Rachel Mahmood, CPA, principal at CliftonLarsonAllen LLP.

• Councilor, Buchanan and Mitchell, CPAs & Business Advisors • Garbelman Winslow CPAs • GRF CPAs and Advisors • RS&F Business Consultants and Certified Public Accountants • SC&H Group • UHY LLP Bill Sheridan, CAE, is editor of The Statement and chief communications officer of the Maryland Association of CPAs.

• Randi Marquez, MST, CPA, managing senior partner, Liptz, Roberts & Marquez, Chartered, Certified Public Accountants.

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NEWS & VIEWS $1 million awarded for non-traditional apprenticeship programs in Maryland

BY THE AICPA

MACPA, AICPA, CIMA among partners in effort to create pipeline for fields with a high need for talent.

The Institute for American Apprenticeships and three partners were recently awarded a $1 million Maryland Works grant by the Maryland State Department of Education to fund the implementation of professional youth apprenticeship programs that address employment barriers for underserved and underrepresented populations in the State of Maryland.

The IAA has partnered with the AICPA & CIMA (accounting and finance), the SHRM Foundation, and the College of Southern Maryland (technical trades), who will register three new youth apprenticeships in Maryland. The partnership represents fields with a high need for talent across many industries, to drive these apprenticeship programs forward.

The Blueprint for Maryland’s Future requires the State to ensure that, by 2030-2031, 45% of high school graduates will have completed a registered apprenticeship program or have received an industryrecognized credential. “We are doing our part to set the tone and lay the groundwork for achieving this goal by creating a pipeline into careers in finance, human resources, and cybersecurity,” said Matt McKenney, president and CEO of the IAA. “Reimagining college and career pathways for Maryland’s high school students requires a partnership with school districts to help bolster the bridge from high school into good paying careers. We are investing these funds in response to market demand and funding foundational systems and processes needed to structure, sustain highquality college, and career pathways.”

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Maryland Works is a highly competitive grant opportunity that leverages the remaining one-time, State set aside American Rescue Plan Elementary and Secondary School Relief Funds to make a substantial investment in establishing an industry-aligned apprenticeship infrastructure for Maryland’s schools and business sectors. These programs reflect the national call to use one-time pandemic resources to ensure prekindergarten through grade 12 has direct pipelines to our most needed professions. The partnership will be working within several school districts in Maryland, including Baltimore and Montgomery Counties.

“Skills development and career progression are the new currencies for companies looking to hire, develop and keep the best talent,” said Tom Hood, CPA, CGMA, executive vice president of business growth and engagement for the AICPA and CIMA. “Considering the rapid pace of change, especially with technology, and the specialization required in the accounting and finance function, companies are increasingly seeking to ‘grow their own’ and to train and develop new hires and existing staff to meet the challenges they face as they transform to become the finance function of the future. In Maryland, we have partnered with the MACPA to provide this pathway through our recently launched Registered Apprenticeship for Finance Business Partners.”

“We are pleased to partner with the AICPA & CIMA in using the apprenticeship model to create opportunities for

Maryland students in the accounting and finance profession,” said Rebekah Brown Olson, CPA, CEO of the Maryland Association of CPAs. “Amid a changing workplace landscape, it’s more important than ever for employers to develop diverse talent with the skills and experience needed to manage the realities of the 21st century workplace. In partnership with visionary employers and the volunteer leaders of SHRM chapters and state councils, we are confident registered apprenticeships will mobilize the power of HR to provide innovative solutions and inspire the next generation of leaders for years to come,” said Wendi Safstrom, president of the SHRM Foundation.

“We are so very grateful to participate in this partnership, and it couldn’t have come at a better time,” shared CSM President Dr. Yolanda Wilson. “Our regional businesses, tech companies, and trade industries have told us they need a stronger workforce pipeline, and this funding will allow us to collaborate with them to position our students to thrive in these critical careers. The College of Southern Maryland is centering our work around student access, momentum, and mobility, emphasizing the importance of closing attainment gaps by developing programs and pathways with strong labor market value. At CSM, we understand that apprenticeships are critical to these efforts as they provide experiential learning opportunities and labor force connectivity.”

STATEMENT

Don’t miss the tax fun in 2023!

Each year, MACPA hosts the Don Farmer Tax Workshops, noteworthy programs that skillfully combine humor with up-to-the-minute tax updates.

Individual Income Tax Workshop

Corporate/Business Income Tax Workshop

Federal Tax Update

Thurs, Nov 16, 2023

Fri, Nov 17, 2023

Fri, Dec 15, 2023

Baltimore, MD + Live Stream CPE: 8 | PTIN/IRS CE available

Baltimore, MD + Live Stream CPE: 8 | PTIN/IRS CE available

LIVE WEBCAST CPE: 8 | PTIN/IRS CFP/CE available

Register for any combination of these three events here: MACPA.ORG/DON-FARMER REBROADCAST DATES AVAILABLE FOR ALL EVENTS.

CONTINUED ON PAGE 14 #MarylandCPAproud

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FINANCIAL PLANNING Managing risk with factors Editor’s note: The following article originally appeared on etf.com and can be found at etf.com/sections/index-investor-corner/swedroe-managing-risk-factors. It is reprinted here with permission of the author.

BY LARRY SWEDROE The “secret sauce” was adding exposure to factors (such as size and value) that provided a unique/independent source of excess return. In addition, these factors should be persistent across long periods of time, pervasive across the globe and asset classes, robust to various definitions, implementable (meaning they survive transaction costs), and have logical riskor behavioral-based explanations for why we should expect the premium to continue.

By adding exposure to factors that not only provide higher expected returns but also uncorrelated returns, investors can lower their portfolio’s exposure to market beta and increase their exposure to safe bonds.

The holy grail of investing is the search for investment strategies that can deliver higher expected returns without increased risk, or the same expected return with reduced risk.

In our 2014 book, Reducing the Risk of Black Swans, my co-author Kevin Grogan and I showed how, for 20 years, our firm, Buckingham Strategic Wealth, has been using what we refer to as the science of investing (evidence from peerreviewed academic journals) to help investors build more efficient portfolios—portfolios that not only have delivered higher risk-adjusted returns, but have significantly reduced the negative impact of rare events known as “black swans.”

In other words, they can lower their allocation to equities because the equities they hold have higher expected returns.

As the following example shows, the result has been, at least historically, more efficient portfolios.

35 YEARS OF DATA Due to data limitations, we’ll examine the 35-year period from 1982 through 2016. In Figure 1.,there are two portfolios, A and B. Portfolio A has a typical allocation of 60% S&P 500 Index/40% five-year Treasury notes. Portfolio B will hold 25% stocks and 75% five-year Treasury notes.

With U.S. stocks representing roughly half of the global equity market capitalization, we will split the equity allocation equally between U.S. small value stocks (using the Fama-French U.S.

Portfolio A

Portfolio B

Annualized Returns/Standard Deviaton (%)

10.3/10.3

9.7/7.2

Years with Returns Above 15% Below -15%

11/1

9/0

Years with Returns Above 20% Below -20%

7/0

2/0

Years with Returns Above 25% Below -25%

2/0

2/0

Worst Year Return/Best Year Return(%)

-17.0/29.3

-1.4/28.0

Number of Years With Negative Return

5

3

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Figure 1.

Portfolio A: 60 percent S&P 500/40 percent five-year Treasury notes.

Portfolio B: 12.5 percent Fama-French U.S. Small Value (ex-utilities Index/12.5 perent Dimensional International Small Cap Value Index/75 percent five-year Treasury notes.

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FINANCIAL PLANNING Small Value Index) and international small value stocks (using the Dimensional International Small Cap Value Index).

As you can see in Figure 1, while Portfolio A produced an annualized return 0.6 percentage points higher than Portfolio B (10.3% versus 9.7%), it did so while experiencing volatility 3.1 percentage points greater (10.3% versus 7.2%). In relative terms, Portfolio A’s annualized return was only 6% greater than Portfolio B’s, while the volatility it experienced was 43% greater.

In addition, Portfolio B had fewer events in the “tails” of the return distribution (said another way, it had both fewer extremely good and fewer extremely bad return years). While Portfolio A had 11 years with returns greater than 15%, Portfolio B had nine.

And while Portfolio A had just a single year with a loss of greater than 15%, Portfolio B never experienced a loss that large.

Moving the hurdle to years with 20% gains/losses, we see that Portfolio A had seven years with returns greater than that level, and no years with losses of that size, while Portfolio B had just two years of gains that large. Moving the hurdle to the 25% level, both Portfolio A and Portfolio B had two years with returns in excess of that amount and no years with losses that great.

The best single year for Portfolio A was 1995, when it returned 29.3%. The best single year for Portfolio B was 1985, when it returned 28.0%. Note that while Portfolio B has just 25% in equities, its best year was almost as good as the best year for Portfolio A, which has 60% in equities. On the other hand, Portfolio A’s worst single year was 2008, when it lost 17.0%. The worst single year for Portfolio B was 1994, when it lost just 1.2%.

What’s more, while Portfolio A experienced five years of negative returns, Portfolio B experienced just three. Portfolio B was not only the more efficient portfolio, it offered much greater downside protection. Thus, Portfolio B should be greatly preferred by risk-averse investors, especially those in the withdrawal phase of their investment careers, when the order of returns increases in importance.

SUPPORT FOR FACTOR DIVERSIFICATION Louis Scott and Stefano Cavaglia, authors of the study “A Wealth Management Perspective on Factor Premia and the Value of Downside Protection,” published in the Spring 2017 issue of the Journal of Portfolio Management, provide support for the benefits of factor diversification.

The focus of their study, which examined four factors (value, size, momentum and quality), was to determine if factor diversification improved terminal wealth, and if it improved the odds of retirees in the withdrawal phase not outliving their portfolios.

The following table (Figure 2.), which did not come from the study, shows the annual correlation of returns of the four factors in U.S. equities for the period 1964 through 2016. Observe the negative correlations of the value, momentum and quality factors to market beta. Even the size factor does not have a Figure 2.

Factor

Beta

Size

Value

Momentum

Quality

Beta

1.00

0.28

-0.23

-0.18

-0.52

Size

0.28

1.00

0.01

-0.13

-0.52

Value

-0.23

0.01

1.00

-0.21

0.04

Momentum

-0.18

-0.13

-0.21

1.00

0.27

Quality

-0.52

-0.52

0.04

0.27

1.00

high correlation to market beta. These low/negative correlations should provide the dual benefits of diversification and downside protection.

To test their hypothesis, Scott and Cavaglia considered a baseline investment strategy comprising a passive, fully invested exposure to global equities over a 20-year horizon. They then examined the effect of adding an overlay of factor premiums on the distribution of terminal wealth. They used utility functions to quantify the hedging benefits of factor premiums to the baseline investment strategy. Their data set covers the period November 1990 through December 2012.

The authors used a bootstrapping technique (rather than a Monte Carlo simulation) to simulate returns in a way that preserved the autocorrelation observed in markets. They used the bootstrap simulations to generate alternative histories for the market and the four factor premiums.

They then used these histories to generate terminal wealth distributions from investing $1 across alternative investment strategies. The alternative investment strategies they considered were an investment in the global equity market, an investment in the global market complemented by an overlay in a risk premium (each factor considered independently), and an investment in the market complemented by an overlay of an equal-weighted (1/N) allocation to each factor premia.

In the case of a single factor, the overlay is $1 invested in the long side of the premium and $1 invested in the short side.

CONTINUED ON PAGE 14

FALL 2023

13

FINANCIAL PLANNING CONTINUED FROM PAGE 13

Figure 3.

Percentile

Global Mkt

Global Mkt & SMB

Global Mkt & HML

0.01

0.56

0.53

1.16

0.05

1.06

1.09

0.10

1.46

0.25

Global Mkt & QMJ

Global Mkt & Premia Portf

1.19

2.46

1.52

2.27

2.65

3.62

2.68

1.52

3.20

4.07

4.44

3.60

2.46

2.67

5.56

7.96

6.25

5.65

0.50

4.17

4.86

9.97

16.13

8.96

9.10

0.75

7.01

8.62

16.94

32.34

12.56

14.45

0.90

10.56

13.72

26.96

56.30

16.88

20.92

0.95

13.02

18.32

34.68

79.38

19.87

25.93

0.99

20.30

30.85

55.97

147.53`

26.76

36.65

In the case including all four factors, each factor has $0.25 invested in the long side and $0.25 invested in the short side.

The portfolios were rebalanced monthly.

The table above (Figure 3.) shows the terminal wealth at various percentiles of performance. For example, while $1 invested in the global market grows to a median value of $4.17 after 20 years, the fifth percentile of terminal wealth shows a value of $1.06, the first percentile shows a loss of 44%, and the top percentile (the 99th) shows an increase of more than twentyfold.

Note that with the sole exception of the first percentile of the portfolio that includes the global market plus the size factor overlay, the outcomes are improved. That particular outcome is due to the procyclical nature of the size factor.

However, results are quite different when we look at the portfolio with the quality factor overlay. This should not be surprising, because quality tends to outperform in negative market environments. That said, the downside protection did not come with an offsetting reduction in terminal wealth at any percentile.

In all cases, relative to the global market portfolio, the 1/N diversified portfolio produced dramatically superior results, enhancing both downside protection and terminal wealth in good environments.

WHAT IF FACTOR PREMIUMS DECLINE? Given that research has shown factor premiums tend, on average, to shrink by about one-third post-publication, Scott and Cavaglia then considered what would happen if the factor premiums shrunk to half the historical levels.

14

Global Mkt & UMD

As the following table shows, the portfolio of factor premiums continues to mitigate most of the unfortunate tail (the lower 5%) of the cases in which the investor’s terminal wealth is lower than at the starting point while improving terminal wealth inalmost all other cases—the 1/N overlay portfolio has higher terminal wealth in all percentiles, and avoids a loss even at the first percentile.

The authors also performed an interesting test. They compared the performance of a portfolio fully invested in global equities managed by an investor with market-timing skill set at 10% (they could accurately forecast 10% of bear markets, a high hurdle given the lack of evidence supporting the view that bear markets can be forecasted) with the performance of a strategy fully invested in global equities and an overlay of equalweighted factor premiums.

They found that the distribution of terminal wealth across all percentiles is greater for the factor premiums strategy than for the skill-based strategy. In other words, the factor premiums strategy dominates the skill-based one, creating a very high hurdle for active management in terms of ability to time markets.

DOES FACTOR DIVERSIFICATION MAKE THE ROAD LESS BUMPY? Scott and Cavaglia next tested to see if the factor portfolio allowed investors to “sleep better,” perhaps improving their ability to stay disciplined and avoid panicked selling. They noted that the median value of the drawdowns for a strategy fully invested in the market was 0.43 (a loss of 43%), suggesting investors will be exposed to at least one sizable, nasty event on their journey to achieving their retirement goals.

STATEMENT

FINANCIAL PLANNING The authors found that the overlay portfolio can smooth the ride, providing smaller drawdowns at every percentile, even with the 50% haircut to the premiums applied.

Scott and Cavaglia also considered the utility of the downside protection. The research shows investors are, on average, riskaverse. Therefore, they are willing to “buy insurance” (accept lower expected returns) to protect against downside losses.

Using utility functions, with varying degrees of risk aversion, they found that, in all cases, the value of downside protection provided by the factor overlay portfolio (benchmarked against the market P&L) is economically large and significant, emphasizing the factor overlay portfolio’s protection against individuals’ aversion to losses.

SUMMARY Scott and Cavaglia showed the distribution of terminal wealth of a market portfolio strategy can be significantly enhanced via an overlay that allocates capital equally across the four premiums they studied.

In particular, the factor exposures help to mitigate downside risk. Importantly, their simulations demonstrated that, even if the means of the premiums were halved, their drawdown mitigation properties would be preserved.

Finally, they showed that active asset allocation strategies require significant market-timing skill to outperform a passive factor-premium-based overlay strategy.

Larry Swedroe is a principal and the director of research for Buckingham Strategic Wealth, an independent member of the BAM Alliance.

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FINANCIAL PLANNING Estate tax exemption to be slashed in 2025: Are you prepared?

BY THOMAS J. STEMMY, CPA, CVA, EA

Estate planners are beginning to see more warning signs that the friendly rules for estate taxes will soon be coming to a halt. When the Tax Cuts and Jobs Act was enacted in 2017, Congress made it clear the plan was to drastically raise the taxes on estates in 2025. How? By simply cutting back the ever-increasing lifetime exemption for estate / gift transfers. (The exemption is expected to be more than $13 million in the next two years.)

By adding a “sunset” provision in the tax code, lawmakers made it clear that 2025 will be the last year one could make a gift transfer and take advantage of the lofty exemption before it goes back to the 2017 threshold level of $5 million (adjusted for inflation.)

Despite all the warnings, not many taxpayers have been paying close attention to the need for serious gifting strategies with their family members. Many ask, “Why bother?” With the lifetime exemption at historic highs, there is no pressing need to get assets out of their estate. Now, however, with “sunset” getting closer, many are starting to wonder if it is time to step up their gifting plans before it’s too late.

On the other hand, you may be among those who still hesitate because you don’t trust Congress. Some believe any aggressive asset transfers made before the Dec. 31, 2025 deadline might be considered a tax avoidance scheme — or a tax loophole. As

16

a result, any last-minute gifts might be “clawed back” into your estate and face a tax hit later when the exemption will be changed from about $13 million to $5 million (adjusted for inflation).

ENTER THE ‘ANTI-CLAWBACK’ RULE In 2019, the IRS issued regulations that provide solace to estate planners who have been reluctant to step up their gifting plans because of congressional uncertainty. The new “anti-clawback” regulations provide protection for most gift transfers made before the 2025 deadline - especially when there has been a straightforward, bona fide transfer of an asset to a family member.

Example: In early 2025, Jack plans to transfer outright cash and shares of stock valued at $7 million to his two children to reduce his taxable estate. The value of the gifts will be well below the $13 million exemption expected in 2025. Thus, without a major overhaul in the existing tax law, there is little likelihood that those assets will ever be clawed back (and taxed) regardless of the size of Jack’s estate down the road.

CAUTION: ‘ANTI-CLAWBACK’ PROTECTION MAY NOT BE ALLOWED IN CERTAIN CASES In 2022, the IRS proposed further regulations that essentially provide warning about which kind of gift transfers can be clawed back into your estate. Generally, the gift transfers that are not

STATEMENT

FINANCIAL PLANNING eligible for clawback protection are commonly seen as gifts with strings attached to them – and gifts in which the donors reserve rights to access funds or retain beneficial use and control of the property transferred.

Some common gift transfers that could be clawed back into your estate (and taxed later) involve complex gifting strategies such as those that create (a) “lifetime estates,” and (b) trusts that preserve grantor retained interests — traditionally known as GRATs, GRUTs, GRITs and QPRTs, etc. — under sec. 2702.

Straightforward gifts will be protected from clawback.

Note: Regardless of your preference for a gifting strategy, any substantial gift transfers that you plan to make should be discussed with your estate attorney and tax professional. They will look at the size of your net worth and help you determine if a stepped-up gifting plan is in your best interest.

IS NOW THE RIGHT TIME TO GET ASSETS OUT OF YOUR ESTATE? Runaway inflation could be a game-changer.

For many taxpayers, the paradigm in estate planning has shifted dramatically since the Tax Cuts and Jobs Act became law in 2017. Since then, there has been much warning (and hype) about the importance of getting assets out of your estate now while the getting is good.

These warnings make good sense for some. However, it all depends on the size of your net worth. If it’s high enough to be taxed, there is much that can be gained with gifting – especially when every taxpayer can transfer as much as about $13 million to family members without ever costing their estate one dollar in taxes. (If married, you can transfer up to $26 million and preserve the exemption for two estates through a technique known as portability.)

And so, the key question remains: Is a stepped-up gift transfer plan before the Dec. 31, 2025 deadline a good idea in your situation?

Once you have a realistic projection of your estate’s value, you will be able to see how much (if any) exposure you have to estate taxes during this period of historic reshuffling with the lifetime exemption.

YOUR ANSWER COULD DEPEND ON INFLATION You are reminded that in 2017, inflation was estimated to be around 3%, while highs recently have been hovering over 8%. As a result, many taxpayers are seeing a substantial increase in the fair market value of the assets they own. Everybody should take a renewed look at the changing value of their net worth, including portfolio holdings, real estate, business interests, and any assets that will impact their estate’s overall value.

First, a look at the ultra-high net worth taxpayer: The value of some taxpayers’ assets may have been increasing to a point where their overall estate could be valued high enough to be taxed at rates as high as 40% (a tax rate that will apply for estates reaching around $14 million in value). Because of inflation, this value could be reached sooner rather than later for those with a higher net worth. High-net worth individuals could lock in major tax savings with an accelerated gifting plan by taking advantage of an exemption as high as $13 million, while it’s still available.

However, the vast majority face a different playing field.

Remember, all estates will be subject to tax if they are valued at more than the $5 million exemption that has been scheduled for 2026. However, the “adjusted for inflation” phrase that was included in the statute could make a notable difference for your estate plan.

Note: With the inflationary spiral in existence, the $5 million lifetime exemption that was targeted in 2017 is expected to increase to about $7 million when the rules change in 2025.

Put another way, if you feel comfortable that your estate likely will never reach $7 million in value, it’s possible that a stepped-up gifting plan will not be necessary to protect your family from federal estate taxes.

However, one cautionary note with your state of residence: Be aware that some states also impose an estate tax, although not as severe as IRS. Maryland happens to be a state that taxes estates valued at more than $5 million. In one example, a value of $6.2 million in Maryland could trigger a tax liability of $68,240 in 2023.

Again, state-imposed taxes on your estate will typically be minor when compared to the IRS. Nevertheless, they should not be overlooked. In fact, some will argue that the tax imposed on smaller estates will not be enough to justify the cost of an aggressive gifting plan.

KEY TAKEAWAYS 1. Take a fresh look at the changing value of your overall estate. Amid ongoing inflation, you need to obtain a realistic projection of the value of your estate in the near term to determine if a stepped-up gifting plan is right for you.

2. High net worth taxpayers are reminded that the lifetime exemption will be reduced to about $7 million in 2025.

However, these taxpayers can still make straight-forward gifts of up to about $13 million before Dec. 31, 2025 without ever having to incur a gift / transfer tax – provided the gift has no strings attached to it.

3. All other taxpayers should also focus on the $7 million estate exemption that is projected for 2025. If it is expected that your estate will never be close to $7 million CONTINUED ON PAGE 18

FALL 2023

17

FINANCIAL PLANNING CONTINUED FROM PAGE 17

in value, you may not need to undertake any stepped-up gifting strategies. On the other hand, if your estate value will possibly exceed $7 million, you should ask your estate attorney about the wide assortment of tried-and-tested strategies that have long minimized estate taxes for family planners. Some common strategies could include marital trusts, discount techniques, family limited partnerships, and other trust strategies.

A FINAL CAUTIONARY NOTE Don’t overlook a gift tax return if it is due.

The restructuring of the lifetime exemption continues to raise questions about the requirements to file gift tax returns (Form 709). Family planners are generally aware that a return only needs to be filed when a gift is made that is more than the annual exclusion (which also changes with inflation). For 2023, the taxfree gift limit has now been increased to $17,000. If married, you can give up to $34,000 to as many individuals as you choose.

However, savvy planners are also aware that any lifetime gift transfers are tied to their overall estate. And, with the generous lifetime exemption teetering around historic highs, some feel

18

that their smaller sized estate will never be taxed anyway. They might contend, “No harm in putting off the filing of a return just because a gift was made that was a bit more than the annual exclusion. No tax due, no penalty, right?”

This argument has faults for several reasons. First and foremost, the return is required by law when you make a gift that is more than the annual exclusion (whether- or-not a tax is owed at the time). Further, there are no assurances what the lifetime exemption will be in the coming years in view of the fragile economy and the tinkering of Congress. Finally, if your estate is reviewed after your death, it is not uncommon for an IRS examiner to search for any lifetime gift transfers that had not been reported.

PLANNING TIP Filing a gift return starts the clock ticking on the three-year statute.

After that, a reported gift, which has been adequately disclosed, cannot be challenged by IRS. This could be particularly important in certain cases – such as those that involve the valuation of gifted property, valuation discounts, and generation skipping allocations, etc.

STATEMENT

FALL 2023

19

BUSINESS AND INDUSTRY Future of finance: Moving beyond traditional boundaries Editor’s note: The following article was originally published by Financial Management magazine. It is republished here with permission.

BY REBECCA MCCAFFRY, FCMA, CGMA

The AICPA & CIMA Future of Finance 2.0 research finds the rise of the hybrid professional, new ethical and regulatory considerations, and more One of the clearest messages from our Future of Finance 2.0 research program and its emerging themes report is that finance professionals are working across traditional functional boundaries to create value for the organizations in which they work.

We now describe ourselves in terms that could have shocked previous generations of accountants: innovators, entrepreneurs, and architects. In earlier times, our tenacious grip on the rulebook saw nothing positive in combining the words “creative” and “accounting”. Today, though, we realize that developing creativity in finance teams can help us break through barriers.

Accountants have moved on from their graysuited roots — but do our stakeholders see that? There is still a dichotomy between our self-image as a forward-thinking dynamic profession and the restrictive gatekeeper/ scorekeeper perception sometimes held by others, which is a barrier to progress.

Finance business partnering is a familiar concept that seeks to break through functional boundaries. Yet the relationship can easily revert to passive “assisting” rather than active “partnering”. Being an effective finance business partner requires

20

not only proficiency with the accountant’s technical toolkit, and knowledge of the business and business acumen, but also confidence in the softer skills of communication, negotiation, and empathy.

Hybrid professionals — leaders who have expanded their finance remit to include HR, IT, data, or operations responsibilities — have begun to challenge professional boundaries as well. Promotion and career development are no longer aimed exclusively at obtaining the CFO role.

AICPA members and CIMA members hold a wide range of leadership roles, and in the current economic situation, the careeraccelerating effect of a strong financial skillset should not be underestimated.

In today’s A.I.-powered world, the question of ethical boundaries frequently arises. The existing ethics of A.I. are closely linked to

more general business ethics. However, given the huge potential impact of A.I. upon people, a widening of that ethical scope seems appropriate. The profession of the (very near) future will need to give serious consideration to societal and moral concerns, putting aside a strict focus on business competition in favor of a collaborative, greater-good approach.

Our research finds that the work of finance professionals is beginning to cross organizational boundaries, aiming to better understand how business operations may, for example, incentivize climate destruction, as well as the true cost of those operations on people, planet, and profit. Again, to understand this effectively, we must take the bigger-picture approach — focusing on industries, regions, and countries rather than individual companies.

STATEMENT

BUSINESS AND INDUSTRY Kate Raworth’s 2017 book Doughnut Economics goes a step further, warning against overshooting our irreplaceable planetary boundaries (the Earth’s ecological limits) through a profit focus. Instead, she proposes a new goal of meeting the needs of all within the means of the living planet.

We all recognize that finance will have a role to play, although the scope of this role is not yet clear.

One way to address that scope, however, could be to challenge our beloved regulatory boundaries — examples of this are the IFRS S1 and IFRS S2 global sustainability standards that launched in June. Forwardthinking accountants see these standards as

a starting point, rather than an easy target or tick-box compliance exercise.

Perhaps the single most important boundary to push is the mindset boundary. Back in 2019, our research paper, Re-inventing Finance for a Digital World, proposed adoption of the “digital mindset”, where we confront complexity, work in an agile and creative manner, and harness curiosity to continually learn. This still holds true today. By breaking free of our traditional professional boundaries, we challenge others to broaden their minds and change their perception of us. By going above and beyond our safe, familiar core duties, we will transcend those boundaries.

Rebecca McCaffry, FCMA, CGMA, is associate technical director, Research & Development–Management Accounting, at AICPA & CIMA, together as the Association of International Certified Professional Accountants. She is currently leading AICPA & CIMA’s Future of Finance 2.0 research programme, which explores the future state of the finance profession and its wider ecosystem, defining essential skills, competencies, and knowledge. For more information on the project, email FutureofFinance@aicpa-cima.com.

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21

TAX CORNER MACPA seeks Congressional support for delay in Beneficial Ownership Information reporting requirements FROM THE MACPA BLOG lawmakers’ support of these measures.

The MACPA also is among a large number of accounting professionals advocating for this delay, including the AICPA and a coalition of organizations that includes the following: • Latino Tax Pro • National Association of Black Accountants • National Association of Enrolled Agents • National Association of Tax Professionals • National Conference of CPA Practitioners • National Society of Accountants • National Society of Black Certified Public Accountants • National Society of Tax Professionals • Padgett Business Services • Diverse Organization of Firms The Maryland Association of CPAs has called on federal legislators to support two bills that have been introduced – Senate Bill S. 2623 and companion legislation in the House, H.R. 4035, “The Protecting Small Business Information Act of 2023.” This legislation would delay the start date for the Beneficial Ownership Information (BOI) reporting requirements until all required rulemaking is final, and all rules would take effect on the same date.

The BOI reporting requirement is an anti-money laundering initiative enacted through the Corporate Transparency Act in 2021, which mandates that BOI

22

information is reported to the Financial Crimes Enforcement Network.

• H&R Block

• Read more about Beneficial Ownership Information at bit.ly/ BOIcoalition.

“The MACPA has been in contact with our state’s federal legislators to ask for their co-sponsorship of this legislation,” said MACPA President and CEO Rebekah Brown, CPA, “and we share the AICPA’s concerns about the reporting requirements and the negative impact it will have on small CPA practitioners and small businesses.”

In conjunction with the American Institute of CPAs, the MACPA will continue to advocate for a delay in the implementation of the BOI, and for additional time for small businesses and their CPA business advisors to understand the potential impact of these reporting requirements, including steep penalties for non-compliance. MACPA officials have already send letters to Maryland’s congressional delegation seeking

• Prosperity Now

HERE’S HOW YOU CAN HELP To keep the bills in question moving, the MACPA and the AICPA would like to obtain as many co-sponsors as possible

STATEMENT

TAX CORNER “The MACPA has been in contact with our state’s federal legislators to ask for their co-sponsorship of this legislation” in both the U.S. House and U.S. Senate.

We are asking members to reach out to their House of Representatives members to ask them to co-sponsor H.R. 4035, and to also reach out to their two United States Senators to ask them to co-sponsor S. 2623.

Please note: You can use as many or as few of the talking points below as you are comfortable with. Also, please feel free to speak from your own experience. Personal experience does wonders to help your Member of Congress understand an issue.

• You can find your House of Representatives member at House.gov.

TALKING POINTS FOR A PHONE CALL WITH YOUR MEMBER OF CONGRESS’ STAFF: • I am calling to discuss my concerns with the FinCEN (pronounced finsen) Beneficial Ownership Reporting Requirements.

• You can find your two U.S. senators at Senate.gov.

TWO WAYS TO REACH OUT TO CONGRESS: PHONE CALL OR E-MAIL The two easiest ways to get your message to lawmakers in Congress is either via a phone call or through their website messaging system.

FOR A PHONE CALL WITH CONGRESSIONAL STAFF OR LEGISLATORS 1. From your member of Congress’ website, call the Washington, D.C., office and ask to speak to the “legislative staff member” responsible for “financial services issues.” If the staff person is not available, you can leave a message on the staff person’s voicemail or ask for a call back.

2. Identify yourself as a CPA and as a voting constituent of the Representative or Senator. You may be asked to share your e-mail or street address so they can respond to you via a letter or e-mail.

3. Tell the staff person that you are calling to discuss your concerns with the FinCEN (pronounced fin-sen) Beneficial Ownership Reporting Requirements.

• The FinCEN rule goes into effect on Jan. 1, 2024. Many small businesses do not know this filing requirement will impact them beginning in 2024.

We are deeply concerned that the small business community will not be ready to comply and request that you co-sponsor (in the House) H.R. 4035 or (in the Senate) S. 2623, the “Protecting Small Business Information Act of 2023.”

• By FinCEN’s own calculations, they expect 32.6 million filings in the first year that filings are due, and 5 or 6 million filings every year thereafter.

• Most businesses will be subject to the filing requirement. Certain large operating entities and certain publicly traded companies are exempt. There is a list of 23 exceptions, but most businesses are not exempt. Most 501(c) and 501(a) organizations are exempt from filing.

• Penalties on the taxpayer are steep – $500 per day (up to $10,000) and up to two years of imprisonment for willfully not filing.

• Given the steep penalties, we expect many small businesses will seek the assistance of a trusted financial professional to assist with their reporting requirement.

• Any change in beneficial ownership information must be reported to FinCEN within 30 days. This could potentially mean that this would become a monthly reporting tracking requirement for tax professionals to keep up with client information changes to ensure they are compliant with the reporting requirements.

• Professional providing any business advice as to who the beneficial owner or company applicant is could be deemed the unauthorized practice of law. CPAs across the country will be contacting their state regulators, insurance carriers, and / or legal counsel to further discuss this issue.

At the moment, no state has issued any specific guidance regarding whether providing advice on the BOI reporting requirement is considered unauthorized practice of law.

• Because of these concerns, we ask that your office cosponsor the “Protecting Small Business Information Act of 2023” (H.R. 4035 or S. 2623). This legislation will provide a delay allowing small businesses to ensure they are prepared to report their beneficial ownership information.

• To conclude the call, offer to be a resource to staff on this issue in the future.

FOR AN E-MAIL TO YOUR MEMBER OF CONGRESS 4. From your Member of Congress’ website homepage, typically you can select the “Contact me” or “Connect” or similar link on your Member of Congress’ homepage and it will take you to their online form.

5. Fill out the required information, and if you are asked to select the specific issue type, you can select economy,

CONTINUED ON PAGE 24

FALL 2023

23

TAX CORNER CONTINUED FROM PAGE 23

financial services, tax, or any other issue that sounds like it might fit.

better understand their new reporting requirements under the rule.

6. In the comment box, you can copy / paste the following message.

Remember, you may edit as you would like to fit your personal narrative on this issue. The more personal experience you share, the better your message will be received by your Members of Congress.

We have concerns with the rule as many small businesses do not know this filing requirement will impact them beginning in 2024. It is expected that there will be 32.6 million filings in the first year that filings are due, and 5 or 6 million filings every year thereafter.

I am a CPA practitioner and constituent.

I am writing today to urge you to co-sponsor the “Protecting Small Business Information Act of 2023” introduced in the U.S. House of Representatives as H.R. 4035 and in the U.S. Senate as S. 2623. This legislation would delay the start date of the Financial Crime Enforcement Network (FinCEN’s) Beneficial Ownership Information (BOI) reporting requirements and would provide additional time for small businesses to learn about and

24

Existing small businesses have one year, until Jan. 1, 2025, to comply with the reporting requirements. New small businesses formed in 2024 and any existing business with changes in beneficial ownership information must report to FinCEN within 30 days.

Penalties for non-compliance on small business owners are steep – $500 per day (up to $10,000) and up to two years of imprisonment for willfully not filing. Given these steep penalties, we

expect many small businesses to seek the expertise and assistance from the trusted financial professionals whom they often turn to for help with various reporting requirements.

A delay would provide small businesses and their trusted financial professionals with the necessary time to prepare for BOI reporting. Please consider co-sponsoring H.R. 4035 or S. 2623, the “Protecting Small Business Information Act of 2023,” to signal your support of the small business community.

Thank you for your consideration and please do not hesitate to reach out to me for further information on this issue.

You can personalize this message with any additional information you would like your Members of Congress to know about this issue.

STATEMENT

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FROM OUR PARTNERS Clients judge your firm by its website.

Here are 4 ways to make it great.

BY CHRIS CROMER

How often do you think about your firm’s website? For leaders at many firms, the answer is “rarely.” Once your site is up and running, there are a million other priorities competing for your attention. This can be especially true for smaller firms – if you don’t have a dedicated web team or even an IT person, you may only think about your web site when it goes down.

But your website plays a central role in the relationship between your firm and your existing clients, as well as prospects who are looking for a CPA they can trust. It’s often their first point of contact – who among us doesn’t visit a service provider’s website when we’re assessing whether we should work with them? In a matter of moments, potential clients will judge your firm based on what they find on your site. For existing clients, your firm’s website can serve as a hub for service delivery – the place where they download forms, upload data, check on the status of your work and more.

If your firm’s website isn’t a priority, it should be – clients and prospects are paying closer attention than you might expect.

FOUR AT THE CORE Entire books have been written about what makes a great website – but you probably don’t have time for that. So here are four fundamental features that make for a great firm website: 1. Short, memorable URL. Your URL is your web address – like CPA.com. The best ones are short, which makes them easy to remember and advertise. But as websites have proliferated over the years, it’s become more difficult to secure short URLs in familiar domains such as .com and .net.

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2. Clean design, simple structure. How quickly can a visitor make sense of your site? The answer depends on the combination of simple, straightforward design elements, easy navigation and concise copywriting. Seasoned web developers know from experience that it’s usually quite difficult to achieve simplicity – but it’s worth it.

3. Strong call to action. You know what you want visitors to do, so say it clearly and prominently. Don’t make them hunt for your call to action.

4. Clear contact information. How many times have you tried to find a restaurant’s phone number on their site, only to get lost deep in the “about us” section? Sometimes visitors just want to know how to call or email you. Make it easy.

A SIMPLE NEW TOOL FOR BUILDING YOUR FIRM’S SITE (AND IT’S FREE) Maybe your firm hasn’t launched its website yet. Or maybe it has an outdated website, making it easier to start from scratch rather than overhaul it to embrace these principles.

If either describes your current situation, CPA.com has developed a simple, practical

tool to help you get up and running with a basic site that embraces best practices in web design for accounting firms. Our free .cpa Starter Site the simplest way to launch your own professional website.

The Starter Site is: • Easy to use: Just fill out a simple onepage template • Professionally designed: No need to find your own web designer • Commitment-free: You can turn it off at any time.

The Starter Site is only available to owners of a .cpa domain, the only secure, verified, top-level domain exclusive to the accounting profession.

There’s never been a better time to make a fresh start, building on the proven principles above to improve web traffic and conversions – and we’ve made it easy to get going. It’s just one more benefit of being a licensed CPA. To learn more, visit http://domains.cpa.

Chris Cromer is director of operations for CPA.com.

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This extensive interactive seminar is essential for tax practitioners who need the latest updates on individual tax law. Attendees are provided with a comprehensive review of Form 1040, information on recent tax legislation as well as forthcoming changes in 2023.

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FROM OUR PARTNERS 5 ways to maintain culture in a remote world

BY BETH ROESSNER M.A.

The COVID-19 pandemic ushered in the work-from-home-era for many CPA firms and organizations. Now, three years since the pandemic’s onset, many organizations have embraced remote work — either fulltime or in hybrid situations.

Although remote work offers flexibility, the overall culture of the firm could change as interactions shift online. With employees being separated by states, time zones, and in some cases countries or hemispheres, business leaders are continuing to find new and innovative ways to boost workplace connectedness, belonging, and engagement.

Four experts discuss their best tips to cultivating and maintaining a robust culture with their remote workforces in the webcast “How to Maintain Culture in a Remote World.”

FORGE TRUST “Trust is at the very top of the list when establishing and sustaining a remote culture,” said Jody Grunden, CPA, Partner and Virtual CFO Practice Leader, Summit Virtual CFO by Anders. “Employees want choice, and they want clarity.”

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But establishing trust also depends on firm leadership changing its mindset. “For a lot of accounting firms, the mindset is ‘What have you done? How many hours have you worked today?’” said Grunden. “With a fully remote environment, it’s completely different. We’re results oriented. Trust is the building block. You’ve got to have that trust and change the mindset of working a 40-hour work week.”

But trust goes two ways said Tom Barry, CPA, Managing Partner, at Los Angelesbased firm GHJ. “Yes, firms must trust their staff members, but staff members should also develop trust in their employers,” Barry said. “Modeling flexibility, creating upward opportunities … the employee needs to trust that the employer is working toward those things.”

ENABLE FLEXIBILITY Attracting talent became a business issue for Barry’s firm. To address the challenge, firm leadership acknowledged that their employees needed and wanted more flexibility. “We drive our firm on a concept of

balance of family, self, and firm. The commitment to all three individually drives the collective success. If we didn’t work remotely, we could never work that way.

Flexibility affords it.

“If an employee is expected to be present 100% of the time, they miss out on family obligations or other extracurriculars,” said Barry.

Flexibility is a “business necessity,” and the desire for flexibility transcends generations. “This is not just young people telling us they don’t want to be in an office,” said Lisa Simpson, CPA, CGMA, Vice President, Firm Services, AICPA® & CIMA®. “I think this is important to figure out the right balance for everyone in your firm.”

PRACTICE INTENTIONALITY WITH SCHEDULING Even with some or all staff working remotely, many firms still want to employ some in-person workdays, and it matters how those are scheduled. Simpson, who lives more than two hours from the office, doesn’t want to be stuck in virtual meetings after commuting into the office. “You don’t

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FROM OUR PARTNERS “You don’t want just a day in the office being on Zoom calls all day. I want intentional interactions.

I want to make it more meaningful.” want just a day in the office being on Zoom calls all day. I want intentional interactions.

I want to make it more meaningful.”

Lack of intentional scheduling “could be what trips us up in hybrid,” said Margaret Heneghan, Deputy Chief People Office & Chief People Officer at AON. “My days in the office could be Monday and Tuesday, but my team members are there Wednesday and Thursday. We’re ships passing,” said Heneghan. “Employers should provide flexibility and clarity of who is in the office when so we can get the most time together.”

In addition to planning days when everyone can congregate in the office, Barry wants to ensure that the needs of those who can’t meet in-person are met. “We also need to be cognizant of the equity in all of this,” said Barry. “For those 80 people who are not coming in, how do we not make them feel excluded from those who are coming in?”

FOSTER RELATIONSHIPS WITH HIGHPROFILE, IN-PERSON EVENTS Although Barry’s firm operates a hybrid working environment and Grunden’s is 100% remote, both see the importance of several all-staff, in-person meetings or retreats each year. “We’ve found that after about six months of being fully remote, folks start getting disconnected,” said Grunden, who started twice yearly retreats in 2010.

“They start losing their connection to the organization.” In-person events, like retreats or all-staff meetings, help correct that.

FALL 2023

Retreats hosted by Grunden’s firm fly staff into a specific location, like Nashville, and are given chances to mingle, work, connect, and even listen to a live performance.

“Our team loves the retreats. They can’t wait to go to them,” said Grunden.

Barry’s firm started with four yearly allstaff, in-person meetings and reduced the total to two as four proved too many from a logistics perspective, but Barry believes they are invaluable. “This is an investment in our people to engage, to grow and to learn with one another,” said Barry.

Although Grunden and Barry concede that gathering everyone to one location is a significant expense, it ultimately helps reduce training and onboarding costs. “You have one, two, or three people stay another year or two, and that return is tremendous,” said Barry. “This is a new cost of business.”

CHANGE ONBOARDING PRACTICES TO BOLSTER ENGAGEMENT The pandemic complicated onboarding as new hires couldn’t access the office. Grunden revealed that many of his pandemic recruits left not too long after being hired and cited the lack of culture and inclusion. Grunden’s team is dispersed across the country and meetings face-to-face are near impossible. Instead, he and his leaders learned quickly to communicate the importance of the virtual environment throughout the entire onboarding process — from initial interviews through their first days at work.

To act as resources and guides, Grunden hired two professionals trained in business psychology who work directly with employers to ensure “they’re getting the best experience possible in a remote world.” If a staff member is struggling, employees can confide in either of these professionals to find possible solutions.

FIRM CULTURES CAN THRIVE REMOTELY Many firms and organizations were slowly implementing more remote work options prior to the COVID-19 pandemic but “COVID was really an accelerant to all this,” Barry said. “Everything was moving in that way; it just made us get there in a hurry.”

Heneghan, Barry, Grunden and Simpson agree that remote work provides many different benefits compared to in-person offices, but considerations need to be made for everyone to thrive in an online environment.

“You have to be super deliberate in a remote environment because you can’t see the person,” Grunden said.

In addition to these topics, the panellists discuss the importance of learning from the new generation of workers, how to ensure everyone is working toward the same goal, training managers for virtual environments, and much more in the full webcast “How to Maintain Culture in a Remote World.”

To boost your organization’s culture, be sure to check out the available talent resources from the Transforming Your Business Model project. You can find the talent resources to cultivate an inclusive culture and retain people at your firm and throughout the profession.

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The Association of International Certified Professional Accountants, powering leaders in accounting and finance around the globe © 2021 Association of International Certified Professional Accountants. All rights reserved. 2102-49162

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CPE SEMIN AR SER IE S NOVEMBER 28

LIVE WEBCAST

8 AM

Governmental and Not-for-Profit Accounting and Auditing

2 DAYS. 8 COURSE OPTIONS. Four for Fall is a two-day CPE event offering courses in a wide range of topics. Each day there are two, 4-hour CPE sessions, with different options for each session. Attendees can create their own custom curriculum.

A TOTAL OF 16 HOURS OF CPE ARE AVAILABLE.

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Reviewing S Corporation Tax Returns: What Are You Missing?

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MEMBER NOTES FIRM NOTES Katie Roberts, CPA, an in-charge accountant with Lanigan Ryan in Gaithersburg, has earned her CPA license.

Lanigan Ryan of Gaithersburg has been named a Top 400 Firm

by Inside Public Accounting.

Sarah Shank has been promoted to senior associate in the Hagerstown office of SEK, CPAs & Advisors.

CLASSIFIEDS job openings CPA FIRM SEEKING MOTIVATED PROFESSIONAL High Quality Mid-size Towson CPA Firm seeks tax season professionals with experience in individual or business income tax preparation (or review). Flexible schedule, challenging work and excellent compensation.

Experience with ProSystem FX Tax is a plus.

Contact: Kenneally & Company 660 Kenilworth Drive, Suite 104 Towson, MD 21204 410-321-9558 E-mail: dmiller@jlkcpas.com

HOW TO SUBMIT A CLASSIFIED AD To submit a classified ad, contact Krislyn Suljak at krislyn@macpa.org, or 443-632-2307.

REPLIES TO ADS WITH FILE NUMBER: Email krislyn@macpa.org, or reply via mail:

mergers & acquisitions INTERESTED IN BUYING A PRACTICE? Gross Revenues Shown: $210K East of Worchester, MA Area; $1.8M Northern Middlesex County, MA CPA; $190K Western Plymouth County; $120K Natick, MA Tax Practice; $300K Beverly/Danvers Area CPA Practice; $365K Southern Springfield; $634K South Coast, MA CPA Practice; For more information or to see nationwide listings, please visit www.APS.net.

THINKING OF SELLING YOUR PRACTICE? Accounting Practice Sales is the leading marketer of accounting & tax practices in North America. We have a large pool of buyers, both individuals & firms, looking for practices now. We also have the experience to help you locate the right fit for your firm and negotiate the best price and terms. To find out more about our risk-free and confidential services, call Bradley Holmes with The Holmes Group at 1-800-397-0249 or email Bradley@apsholmesgroup.com.

INTERESTED IN BUYING A PRACTICE? See local and nationwide listings at www.APS.net and register for free email updates or call us at 1-800-397-0249.

MACPA, Classified Ads 901 Dulaney Valley Road, Suite 800, Towson, MD 21204

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MACPA COULDN’T DO EVERYTHING THAT WE DO FOR OUR MEMBERS WITHOUT OUR

PREFERRED PROVIDERS

L E AR N M O R E AT

www.macpa.org/preferred-provider-futureready-resources For information about sponsoring MACPA programs or to learn more about advertising with the MACPA please contact Krislyn Suljak or email sponsorship@macpa.org.

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MARYLAND ASSOCIATION OF CERTIFIED PUBLIC ACCOUNTANTS 901 Dulaney Valley Road, Suite 800 Towson, MD 21204 410.296.6250 | www.macpa.org