On Balance Magazine - Sept/Oct 2018

September | October 2018 | Vol. 14 No. 4 A publication of the Wisconsin Institute of CPAs | wicpa.org

Shaping

THE

Future Scott Dell, CPA, MBA, MAE, DBA Candidate | 6

Plus: Higher education looks ahead | 10 The case for continuing education | 14 Keeping the pipeline filled | 20 The art of tax planning | 24

Together, we can make a difference.

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A publication of the Wisconsin Institute of CPAs | wicpa.org

September | October 2018 Vol. 14 No. 4

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6 Features

Columns

6 Shaping the future Scott Dell, CPA, MBA, MAE, DBA candidate and recipient of the WICPA’s 2018 Educator Excellence Award, draws upon practical business and global experiences to motivate students.

By Marcia Tillett-Zinzow

24 TAX

Turning tax planning into an art Nothing gets the creative juices flowing like a new and sweeping tax law. A practitioner shares TCJA planning ideas.

By Terri Lillesand, CPA

10 Looking ahead Higher education rises to the challenge of remaining on the leading edge of developments in the profession.

By Joann N. Cross, CPA, PhD 14 The case for continuing education Three CPAs explain how their firms support ongoing professional development and why they think it’s critical.

By Ken Wysocky 20 Keeping the pipeline filled A strategic alliance is addressing the issue of an impending talent crisis within the profession.

By Wendy K. Potratz, CPA, CGFM, CMA, MBA

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28 MANUFACTURING

The research credit Some manufacturers may not realize Congress offers an incentive for companies who invest in research and development.

Find out if your company qualifies.

By Jim Brandenburg, CPA, MST

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34 RETIREMENT PLANS

Fiduciary flags: How to effectively manage your retirement plan fees Organizations that offer retirement plans as an employee benefit are subject to ERISA provisions—and recent litigation has focused on fees. Learn how to manage them.

By Joseph Topp, CPA 38 SOFT SKILLS

Got EQ? Emotional intelligence is closely linked to leadership. Organizations that understand what it is and why it’s important may have a competitive advantage.

By Bill Marklein

Departments 2 Odds & Ends | news briefs 3 Outlook | chair’s letter 4

Membership Matters | member benefits

19 In Touch | president & CEO’s message 26 Memorials | departed members 33 Kudos | members in the news

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Odds & Ends BDO USA, Smith & Gesteland combine forces 2018–19 WICPA OFFICERS/BOARD MEMBERS Chair Michael D. Akers, CPA, CBM, CFE, CGMA, CIA, CMA, PhD Chair-elect Neil R. Keller, CPA, ABV, CVA Past Chair William L. Komisar, CPA, JD Secretary/Treasurer Katherine L. Hauser, CPA, CGMA Directors Jon C. Gaines, CPA, CGMA, MBA Patrick G. Hoffert, CPA Daniel Holzhauer, CPA Debra L. Lenz, CPA, CGMA, CIA, CRMA Terri M. Lillesand, CPA Wendy A. Peters, CPA Steven A. Pullara, CPA, CGMA Matthew J. Schaefer, CPA, CGMA Angela C. Thomas, CPA AICPA Council Rick E. Dreher, CPA, CGMA Ryan J. Hanson, CPA, CGMA President & CEO Dennis F. Tomorsky, CPA, JD, CGMA Chief Financial & Operating Officer Tammy J. Hofstede Design & Layout Brett Stallman Advertising Terry Felker Editor Marcia Tillett-Zinzow Printing Delzer

Join us online!

BDO USA LLP has expanded its Wisconsin presence by adding the staff and partners of Smith & Gesteland LLP (S&G) to its practice on July 1. Founded in Madison in 1948, S&G brings a full range of accounting, tax, human resource management and information technology services to the BDO table, along with significant strength in the construction, technology, manufacturing, nonprofit and real estate industries. Combined with BDO’s existing offices in Madison and Milwaukee, the expanded firm will have 185 professionals serving Wisconsin clients.

Francis Investment Counsel named Retirement Plan Adviser of the Year PLANSPONSOR magazine has named Francis Investment Counsel LLC, a registered investment adviser, its 2018 Retirement Plan Adviser of the Year in the large plan category. The Brookfield firm is recognized for its leadership and commitment to excellence on behalf of its clients while evolving best practices in the industry.

Schenck merges with WKMR; will anchor new Wauwatosa building Effective July 1, regional Wisconsin CPA firm Schenck SC merged with Winter, Kloman, Moter & Repp (WKMR), giving Schenck additional offices in Brookfield and Oconomowoc. WKMR has provided audit, accounting, tax and business consulting services to closely held enterprises in southeastern Wisconsin since 1968.

The newly expanded Schenck will be the anchor tenant of Muir Woods Research & Technology Center, a new office development under construction in the Milwaukee County Research Park, Wauwatosa. The firm will move its Brookfield and Milwaukee offices into the new space and retain WKMR’s Oconomowoc office. Completion of the new building is slated for May 2019.

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On Balance is published six times a year by the Wisconsin Institute of Certified Public Accountants (WICPA).

Change of address should be sent to: Membership, W233N2080 Ridgeview Pkwy, Suite 201, Waukesha WI 53188; Phone: 262-785-0445 or 800-772-6939; Fax: 262-785-0838; email: jessica@wicpa.org.

Statements and opinions expressed are those of the authors and not necessarily those of the WICPA. Publication of an advertisement does not constitute an endorsement of the product or service by On Balance or the WICPA. Articles may be reproduced with permission. © Copyright 2018 On Balance.

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Help shape your magazine’s content!

We’re seeking members to serve on the 2018-2019 Editorial Advisory Committee.

For a minimal time commitment, you can have input into what is published in On Balance and other WICPA publications. If interested, contact Marcia Tillett-Zinzow, editor, at mtzinzow@icloud.com.

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OUTLOOK | CHAIR’S LETTER “What I’ve found is that, while I may provide feedback similar to that of a practitioner, students are more likely to listen to the business professional.”

Collaboration can help Wisconsin lead the way

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n the May/June issue, I commented that we need continued engagement between accounting practitioners and accounting educators, at both the high school and college level, to promote and advance the accounting profession.

Such engagement is beneficial for students, educators and practitioners. That is why the accounting education accreditation process for university accounting programs stresses this interaction.

Below are three examples of activities I believe can further this collaborative interaction and engagement.

1. Practitioners observe and evaluate student group presentations.

The educator and practitioner work together to develop a project whereby students make a group presentation that is followed by a question-and-answer period. This type of assignment simulates any type of business proposal. The preparation of a well-polished presentation is much different than students responding to questions they might not have anticipated.

The Q & A period forces students to listen to the question, think critically about it and respond in a timely manner.

Practitioners can participate in the evaluation process and provide constructive feedback. The use of a rubric enhances the consistency of the grading process and provides an organized critique of the students’ performance. What I’ve found is that, while I may provide feedback similar to that of a practitioner, students are more likely to listen to the business professional.

This type of activity can be used for either college or high school courses. Professionals can either attend the class in person or use technology to participate virtually. You may want to check with your local high school or college accounting program if you’re interested in participating in such a collaboration.

2. Academic and professional co-teach a class.

The practitioner and educator collaborating to teach a course provides an excellent opportunity for students to participate in a course that blends practice and theory, as well as the opportunity for accounting professionals and educators to work together. In this type of collaboration, the educator and practitioner each obtain a greater appreciation for how the other helps to advance

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our profession. We have started using this approach with some of our business courses at Marquette, and the student response has been very positive. Again, feel free to reach out to your local schools to inquire about or suggest co-teaching an accounting or business class.

3. Accounting professionals participate as members of accounting accreditation teams.

The interaction between the AICPA and the Association to Advance Collegiate Schools of Business (AACSB) has led to recent changes in the accreditation processes and standards whereby accreditation teams will now include both accounting educators and accounting professionals. In the past, the teams have been primarily educators. I have participated in several accreditation visits; and on a few of these, I’ve had the opportunity to work with some outstanding practitioners.

The AICPA will solicit names from state societies of accounting professionals who might be interested in participating as members of accreditation teams. Please send me a note if you are interested. Your participation could help Wisconsin to be a leader in this process.

Michael D. Akers, CPA, CFE, CIA, CMA, CGMA, CBM, PhD, is the Charles T. Horngren Professor and former chair of the Accounting Department at Marquette University School of Business. Contact him On Balance September | October 2018 at 414-915-6672 or michael.akers@marquette.edu.

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MEMBERSHIP MATTERS “Complete your new profile at wicpa.org/MyWICPA so we can better serve you and your interests. We’re continually expanding our online content to bring you updated and relevant information and new features.”

Join the discussion with Connect!

W

e hope you’ve had a chance by now to check out our new website! Please complete your new profile at wicpa.org/MyWICPA so we can better serve you and your interests.

You can now volunteer through your profile, select relevant areas of interest and update your communication preferences.

We’re continually expanding our online content to bring you updated and relevant information and new features.

The newest feature is our online communities, called Connect. Connect is your exclusive, members-only networking tool designed to connect you to our 7,300+ members who share your technical background, professional expertise and challenges. Use this online tool to collaborate with your peers and benefit from the expertise of our diverse membership.

To make the most of Connect, here are a few ideas: • Personalize your profile: Add your biography, job history and even your photo.

• Customize your settings: Control how much of your profile is visible to others, and set your default signature.

• Introduce yourself: Say hello to other community members.

• Ask questions: Get input from your peers with detailed queries.

• Give feedback: Provide answers to other members’ queries.

• Share: Post links, documents or other resources that might benefit others.

New communities and features will be added over the next several months as users get acquainted with Connect.

Join the discussion at wicpa.org/connect.

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September | October 2018

Check out our featured member benefit providers Pearl Insurance provides comprehensive and competitively priced coverage and has been providing accountants professional liability insurance for 60 years. Pearl is continuously evolving insurance plans, ensuring it stays ahead of the curve as an industry leader with coverage that is responsive to the needs of accounting professionals. Members receive product discounts and longevity credit for continuous WICPA membership.

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Spectrum co-sponsors two annual 401(k) investment seminars with four hours of CPD. Members receive retirement plan investor education as well as wealth management consulting.

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These affinity partners and more can be found at wicpa.org/discounts.

Tammy J. Hofstede is the chief financial and operating officer at the WICPA. Contact her at 262-785-0445 ext. 4518 or tammy@wicpa.org.

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NEW WEBSITE CHECKLIST: Complete your profile.

Review volunteer opportunities and sign up.

Register for an in-person or online CPD program.

Explore member benefit providers.

Post your rĂŠsumĂŠ to the Career Center.

Join our online communities at wicpa.org/connect.

JOIN US AT UPCOMING PROGRAMS & EVENTS! SEPT. 26

Not-for-Profit Accounting Conference, Brookfield

NOV. 1-2

Tax Conference, Milwaukee

OCT. 16

Networking at Sprecher Brewery, Milwaukee

NOV. 7

Networking at Capital Brewery, Middleton

OCT. 18

CPAs in Industry Conference, Wisconsin Dells

NOV. 13

Networking at Great Dane Pub, Wausau

OCT. 23

Retirement Plan Investment Seminar, Green Bay

NOV. 15

Accounting & Auditing Conference, Brookfield

OCT. 24

Networking at Lambeau Field, Green Bay

Go to wicpa.org/CPDcatalog for all your CPD and networking events!

Audited financial statements approved for fiscal year ended April 30, 2018 The Finance Committee of the WICPA Board has reviewed and approved the WICPA audited financial statements for the fiscal year ended April 30, 2018.

The WICPA Educational Foundation Board has reviewed and approved the audited WICPA Educational Foundation financial statements for the fiscal year ended April 30, 2018.

Members may request a copy of the audited financial statements by contacting WICPA Chief Financial & Operating Officer Tammy Hofstede at 262-785-0445, ext. 4518 or email tammy@wicpa.org.

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Photography by Adam Ryan Morris 6

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Shaping THE

Future

Scott Dell, CPA, MBA, MAE, DBA Candidate

By Marcia Tillett-Zinzow

I

f a “polymath” is someone who excels at many things and draws upon a broad base of knowledge and experience to solve problems, then call Scott Dell a polymath.

The accounting educator has served in the United States Navy, traveled the globe and studied abroad; practiced as an auditor for a Big Eight firm and as a consultant for a regional firm; exercised his entrepreneurial side by starting and running several businesses; worked as a motorcycle safety instructor; and for the last 25-plus years, taught college-level accounting.

As an academic, Dell is helping shape the future of the profession. But it’s also shaping him, as one of the things he loves about teaching is that he gets as much as he gives. “I learn when I teach,” he says.

Dell teaches at Marian University in Fond du Lac. He’s also been an adjunct professor for Upper Iowa University, Concordia University, Edgewood College and Cardinal Stritch College’s Programs in Management for Adults.

“While living in Madison, I had never heard of Marian until I saw an ad for an adjunct professor,” Dell said. He checked into it and thought it sounded like an interesting place. So he called and spoke with the accounting program director and was invited to come on board and start teaching the following fall. The director told Dell he’d give him a call at the end of the summer.

“And I never got the call,” Dell said. He found out later that the director had left Marian for another position.

The university eventually found Dell’s application and called to ask if he would accept a half-time position as the accounting

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program director. He said yes. Over time, the position evolved to full time, and now he’s been there for 13 years.

Recognized for excellence At the WICPA’s Member Recognition and Annual Business Meeting in May, Dell was presented with the 2018 Accounting Educator Excellence Award. The award recognizes innovation in teaching and motivating students.

Below are some of his methods: • LinkedIn requirement: An early adopter of the social network, Dell requires his students to have a LinkedIn profile, and he created a LinkedIn group for students to get them started networking. Because he teaches most of the financial accounting courses, the group includes more than just accounting students. “I get business students, marketing, sports and recreation, MIS, management, HR—a wide cross-section of students. The hands-on LinkedIn networking is powerful,” Dell said.

• Online learning: Dell brings technology into the classroom through Massive Open Online Courses (MOOCs), partly to encourage lifelong learning but also to introduce students to the power of the platform, which offers a wide range of self-study courses. “There are MOOCs on everything from how to make wine to public speaking, strategy, leadership, accounting,” he said. “Places like Harvard, Wharton, Stanford and the University of London basically offer MOOCs for free. It’s a growing arena that I think will help a lot more people get involved in education.”

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Like motorcycle riding, teaching is a “two-way street,” according to Dell. His latest ride is a Triumph Trophy, but 20 years ago he took his 5-year-old son on an unforgettable trip to Washington, D.C., on a Harley-Davidson. The trip was part of then Gov. Tommy Thompson’s Sesquicentennial Ride to celebrate Wisconsin’s 150th anniversary.

• Nonprofit boards: Students are required to attend a nonprofit board of directors meeting, where they are encouraged to network and required to make some LinkedIn connections. “They have to do a write-up and some financial analysis,” Dell said, “but the real goal is to get them out in the community and interacting with business professionals.”

• Financial Executive International (FEI): Dell serves on the board as career program chair for FEI and takes some of his students to the local chapter meetings. “They get to interact with senior-level executives from across the country, and they realize that the professionals there are just as interested in them as they are in what’s going on with the profession,” he said.

• Toastmasters International: Dell initiated a local Toastmasters chapter in which community members and students participate. “It’s another way to get students involved in the community,” he said. “And they gain communication and leadership skills, which are invaluable.”

• Students in Free Enterprise (SIFE): Dell started a SIFE chapter at Marian and encourages students to

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join. Now known as Enactus, the organization works with students, educators and business leaders to encourage socially responsible entrepreneurship.

• Model United Nations: The Model U.N. program teaches communication and negotiation skills and emphasizes the cross-cultural nature of business. “Students need to realize this is a global economy,” Dell said. “What we do in Fond du Lac does affect people in Singapore, which also affects people in Croatia, which also affects people in Tokyo.”

Few have experienced as many cultures as Dell, who served two years in the U.S. Navy, has traveled extensively and was first exposed to classic accounting while studying abroad in Israel. He incorporates his knowledge of the global economy into his teaching.

On the future of the profession When asked how important accounting education is to the future of the profession, Dell didn’t miss a beat. “It IS the future of the profession,” he said.

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There has been past concern about not having enough accounting educators to staff college accounting programs and handle the needs of students. But the growing participation of practitioners in the classroom has somewhat softened that concern, according to Dell.

“We’re now able to get people who have practical experience and actually want to be in the classroom and share their insights with students,” he said.

“Folks coming from the profession and going into teaching—that’s a big pressure relief.”

To practitioners interesting in teaching, Dell says this: “Anybody who is in the accounting field is able to study, able to achieve, able to succeed, able to communicate with clients. Communicating with students can sometimes be an art, but it’s a natural extension and, I think, would give a lot back to the professional who shares their experience in the classroom. I learn so much from my students. That’s why I do it.”

A passion for business and travel

With more practitioners helping out in the classroom, the main concern now is the ongoing decline in candidates for the CPA Exam. Dell thinks the 150-credit-hour requirement has been a challenge and could be at least partly to blame. The original 120-credit-hour requirement was changed to adapt to a rapidly changing business environment and to ensure competency not only in technical areas, but also in the necessary nontechnical areas such as ethics, communication and use of new technologies. This often means a fifth year of college, and that can be a turnoff for some.

After a few years working in accounting firms early in his career, Dell pursued his goal of entrepreneurship. His successful businesses include consulting, computer training and satellite TV/ internet businesses.

“Freshmen coming in say, ‘You mean I have to go to school another year? Four is enough!’ And then they’re on the five- or six-year plan anyway,” Dell said.

The computer training business was a franchise of New Horizons, which became the world’s largest computer training company. Dell bought into the franchise in the company’s first year of franchising and grew the Wisconsin office from a staff of three to almost 100 employees at three locations before selling it off.

How to attract students to the profession is an ongoing topic of discussion among practitioners and educators alike. Dell, like many others, believes these efforts should start in high school or even middle school. “It has to start younger; it can’t just start in college,” he said. “The activities that are out there, the clubs and the groups that can get people interested and excited—that will plant the seeds we can reap for students coming in.”

Dell also believes helping students establish goals can help stem the tide of declining exam candidates.

“We can’t just say it’s about money,” he said. “You almost have to have a deeper commitment going in of why it means something. The only reason I went into accounting was because I knew it was a core competence for success in business.”

“If you can’t understand the numbers, understand the flow, understand being profitable and being in it long term, you’re out of business faster than anything,” he said. “I think that emphasizing the goal, or the end, and developing the means to that end will inspire folks to pursue it.”

After 10 years of the New Horizons franchise, Dell got into the DISH Network satellite TV/ internet business, which included Dish, DirecTV, Charter, Wild Blue, Vonage and HughesNet. In addition to his teaching responsibilities, he currently coowns an international business with a Pakistani business partner.

This takes him out of the country and feeds his passion for travel.

Marcia Tillett-Zinzow is a Wisconsin freelance writer and editor. Contact her at mtzinzow@icloud.com.

“I’ve been on four continents,” he said with a smile. “I have a couple more to go.”

With the goal of entrepreneurship in mind, Dell thought carefully about what parts of a business might be important to its success. He considered management, marketing, sales, operations and accounting and came away with the idea that they were all important, but none was more critical than accounting.

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Looking Ahead How the college curriculum is preparing future CPAs

A

s old as the practice of accounting is, CPAs cannot afford to stop learning, but they can look to their new hires as bellwethers of what is to come. It has become increasingly important for our colleges and universities to remain By on the leading edge of developments Joann Noe Cross, in the accounting field, and most of us are rising to the challenge. All CPA, CGFM, CGMA, CMA, PhD of us remember our own academic adventures from Intermediate Accounting to Tax and Auditing. But today, these courses bear little, if any, resemblance to what we remember.

Traditional topics revisited The Intermediate textbook continues to get longer and more complex. Whereas in the past we focused on the balance sheet, the income statement has taken on increased importance as revenue recognition becomes increasingly complex. Topics such as derivatives, hedging, financial instruments and stockbased compensation are the new norm.

Audit, too, has changed. The Risk Assessment Audit Standards introduced in 2008 changed the way we think about assurance. Now our students not only study the performance and documentation of the familiar substantive procedures, but they are also asked to consider the wider range of risks to “fair presentation.” The importance of environmental, political and global impacts are introduced across the curriculum by clearer integration of those “other” business and liberal studies courses.

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This has occurred mainly through the increased emphasis on the assessment of learning. We now are gaining a better understanding of exactly what our students need to know to be successful and whether or not, upon graduation, they have that knowledge.

Dealing with the information explosion Probably the most disruptive shift in preparation for a career in accounting has occurred in the area of information systems. From use of technology as a tool to the ubiquitous integration of technology as a necessity, this shift has necessitated a complete rethinking of the role of the auditor and the accountant in today’s business environment. Although we have had computer-related accounting courses for many years, the content has shifted. We have moved from electronic review of written transactions to QuickBooks to sophisticated courses teaching students how to develop and/or customize accounting systems in a cloud environment. Of course, these developments have major impacts on the way we discuss and implement internal control.

When first proposed in 1992, as a response to the SEC’s perception of an increase in financial statement fraud, internal control was simple and straightforward. The focus was primarily on control of the newly developed computer systems and related inputs and outputs. Today, students delve into designing and improving those systems as well as practicing the documentation of said controls.

Increased emphasis on soft skills This article would be remiss if it did not address the tremendous explosion of employer demand for many and

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varied soft skills. Public speaking, written communications, email etiquette, dining etiquette and networking are among those skills demanded and respected. Today’s CPA is an expert in business management, in marketing and in social media.

All of these are offered and/or required as courses with handson opportunities.

New courses introduce needed skills Universities have developed an abundance of new courses to address the demand for expanded skills in a variety of areas.

The expansion of the not-for-profit sector in the United States of America has led the University of Wisconsin–Oshkosh to develop a required course in government and not-for-profit accounting. This course introduces students to the not-for-profit world by means of hands-on consultation with local agencies funded by the United Way. The students report on their financial findings through written reports that are used by the United Way in allocating resources and through presentations to both their classmates and the agencies.

New courses in web-based applications development and enterprise risk management allow students to hone their skills in areas currently peripheral to accounting but potentially essential in the future. In particular, enterprise risk management lends itself to showcasing the ability of the accounting professional to lead an organization’s strategic, data-oriented planning process. After all, accountants are experts at retrieving and organizing data in meaningful ways—skills reinforced by the emphasis on such presentations throughout the curriculum.

New delivery models Many universities and colleges are also experimenting with new ways to bring content to students. Certainly the use of the internet and the flexibility it has provided has changed the way classes are structured as well as the way they are offered. No longer is problem practice exclusively pencil to paper. No longer do group projects require hours of face-to-face time. Today’s student can collaborate in the cloud with multiple group members simultaneously editing or drafting a single document.

Messaging and other communication methodologies facilitate instantaneous group interactions. Learning a topic interactively online and then using face-to-face class time to expand and explore that content has become the norm.

Electronic grading allows instructors to devote more time to interaction with students and practitioners. In addition, the internet facilitates the utilization—in real time—of examples and illustrations previously available only after expensive and extensive efforts.

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How do universities stay up with all this?

These changes, challenging for professionals, are particularly difficult for institutions of higher education. Predicting the future is never easy. Is what we see a trend or a flash in the pan?

Will this new idea have staying power or be gone tomorrow?

Educators spend significant amounts of time discussing these issues with each other and with experts in the field. They do research and present the results to their peers for criticism and expansion. They attend conferences that tackle the big questions and contemplate the path to the future. They read widely and seek insights from other disciplines. They interact with practicing professionals to understand the challenges facing them.

State CPA societies also contribute to the process by providing venues for the discussion of locally significant issues, such as the form and content of continuing professional development, which is currently under consideration by the WICPA’s Higher Education Committee.

Is this what’s happening everywhere?

Absolutely! New courses may vary, research may vary, professional connections may vary, but the cutting-edge spirit remains the same at all institutions of higher education. And tomorrow’s institutions will look even different. Nonetheless, it is people who make this all possible. Educators need CPAs’ support, and CPAs need educators’ support. Do you know about the exciting things going on at your local four-year institution?

Do you think it might be time to find out?

Joann Noe Cross, CPA, CGFM, CGMA, CMA, PhD, is a professor and student adviser in the Accounting Department at the University of Wisconsin–Oshkosh. Contact her at 920-424-1311 or crossj@uwosh.edu.

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THE CASE for continuing education

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Ongoing professional development is critical to reducing turnover, improving succession planning and employee engagement—and bringing in vital new business.

By Ken Wysocky

W

hen Glenn Miller, CPA, CGMA, began his career in accounting several decades ago, continuing professional development was rudimentary at best. “It basically was getting the 40 hours of technical training required to maintain my CPA license,” said Miller, who is managing partner at Wegner CPAs in Madison.

Things are dramatically different today at Wegner—and at other Wisconsin accounting firms. A shrinking labor pool, coupled with growing numbers of job-hopping millennials and the high costs associated with employee turnover and recruitment, make employee retention more critical than ever.

Experts say that continuing professional development, or CPD, is instrumental in reducing turnover and improving succession planning, employee engagement and job satisfaction.

Wegner began putting more emphasis on CPD programs about five years ago. “We came to the realization that we wanted more well-rounded business professionals,” Miller said.

“We want employees who are not only technically competent, but also good leaders who can go out and develop business.

“I was trained to be an accountant and learned all the technical stuff, but I never went through training on how to supervise people or develop business,” he said. “I learned on the job. But society has changed, in a good way, in that newer employees now are more demanding. That drove us to provide more soft-skills training.”

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Cynthia Lamphere, CPA, CGMA, a shareholder at Appleton-based KerberRose and a 33-year accounting veteran, concurs. Early in her career, CPD might have been an eight-hour tax or accounting course. Now there’s much more emphasis on how to be a good manager, partly in response to customers’ needs.

“I think CPAs are looked upon as trusted advisors in all kinds of matters,” she said. “They need to know more than just tax codes.

They need to be able to hire and manage people, as well as help clients. And in order to help clients, they need to know so much more than we used to. Many of our clients are small businesses that don’t have a human resources staff or a controller. So they’re looking for advice regarding many aspects of their operations— how to hire new staff, buy a building and so forth.”

At Hawkins Ash CPAs, based in La Crosse, management has emphasized more soft-skills development for the last five years or so, said Joe Haas, CPA, director of audit and accounting. “We realized that if we want successful leadership, we have to teach people how to do it. We have to give them some sort of training and a structure to work with,” Haas said.

Learning environments At Wegner, which employs about 130 people at four Wisconsin locations, management offers three different levels

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of CPD. One level includes ongoing technical training to satisfy the AICPA requirement for 120 hours of continuing professional education over a three-year period.

Another level is a leadership training program called Guiding Leaders, created by the firm and centered on two day-long sessions that feature an outside speaker. Miller said the sessions in this program focus on relevant topics such as teamwork, how to perform effective performance reviews and problem-solving. Participation ranges from all employees to specific smaller groups: for example, employees with more than five years of experience. During the day, participants might break into smaller groups and try to solve a problem presented by the speaker. “The sessions are held off-site to avoid workplace distractions,” Miller said.

The third level centers on ongoing business development training aimed at helping employees feel more comfortable about and adept at bringing in new business, a key credential for becoming a partner. For example, employees might attend a seminar on how to act at a professional networking event or how to get leads or sell business to a prospective client, he said.

“It’s a universal given among accounting firms that you have to know your stuff in order to become a partner,” Miller said.

“But you also have to be a good leader who’s respected by staff, and you also have to be able to bring in business. We want employees to make the most of opportunities. So we teach them how to get out of their shells a little bit and feel comfortable in business settings.”

Professional development At KerberRose, which employs about 150 people at 11 Wisconsin locations, CPD comprises everything from traditional seminars and conferences to in-house training.

Some of it is provided by a range of outside groups, including the WICPA, the AICPA and Prime Global, an association of independent accounting firms.

In addition, employees meet with the manager of their local office each spring and develop a continuing professional development plan. If they’re interested in specializing in estates and trusts, for instance, their CPD plan will emphasize that.

“Anything that staff is interested in learning about, from estate planning to forensic accounting, we encourage,” Lamphere said.

“We want employees to think about their careers … and develop skills beyond just earning credentials in various fields.”

KerberRose management also offers shorter in-house sessions to teach staff about a wide range of topics. These range

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“We want employees to make the most of opportunities.

So we teach them how to get out of their shells a little bit and feel comfortable in business settings.”

– Glenn Miller, CPA, CGMA Managing Partner, Wegner CPAs from how to use new software more efficiently, to upcoming changes in financial accounting and nonprofit accounting standards, to new technology for payroll processing.

The company also offers a two-year mentoring program for managers, in which employees are paired with partners who provide them with professional career guidance.

In addition, the firm operates two programs that target future leaders: 1) the in-house KerberRose Leadership Program, which runs for one year and exposes high-potential employees to management and leadership courses, and 2) the Prime Global Leadership program, held at various locations around the United States.

“Some of our employees in the KerberRose Leadership Program graduate to the Prime Global program, where they receive training that centers on understanding their personalities so they can become better motivators and leaders,” Lamphere said. “It’s a much higher level of training.”

Finding service niches Along with required certification classes, the roughly 150 employees at Hawkins Ash—located at five offices in Wisconsin and three in Minnesota—give their managers a wish list at the start of each new year, detailing classes they’d like to attend that best fit their career paths. In addition, the company offers new employees opportunities to learn higher-level skills that go beyond what they learned in college.

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“We saw that new employees would come on board and be a bit lost about what to do for professional development,” said Haas. “So we help them create paths for continuing professional development by pinpointing a package of classes or webinars specific to their department or the clients they serve.

“It gives these new professionals a jump-start in learning more technical skills,” he said. “As their careers develop further, they take more soft-skills classes that focus on leadership and management. And as they get farther along on a partner track, they take even more leadership classes that are pertinent to becoming a partner.”

The classes also can boost business development, Haas added, noting that one partner at the firm attended a seminar about a particular kind of service, eventually leading the company to add that service to its offerings. “So it’s a way to grow the business, too,” he said. “Someone has to take the lead and get the knowledge, then come back and start to sell that service and perform it.”

Miller, Lamphere and Haas agreed that while it may be difficult to quantify the return on investment provided by CPD, they all know intrinsically that it benefits their companies.

At KerberRose, for example, Lamphere is confident the company’s programs are a key reason for its low turnover

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rate. “We also perform staff surveys every two years, in which we ask employees if they’re getting continuing professional development and support for it, and we always receive very good scores,” she said.

Lamphere also believes that the KerberRose programs contribute to business growth because when staff succeeds, clients succeed. That, in turn, makes the company more successful. “When your employees do what they want to do as far as professional development goes, they’re going to be successful because they’re passionate about it,” she said. “And that, in turn, helps their clients.”

Miller agreed, adding that employees at firms that fail to support comprehensive CPD will never be as skilled and polished as management would like them to be. “And that hurts business prospects in what’s already a very competitive marketplace,” he said. “Furthermore, people will leave if they don’t get that well-rounded training. If you provide only that technical piece of continuing development, you’ll end up losing good people.”

Ken Wysocky is a freelance writer based in Whitefish Bay. Contact him at 414-962-6202 or kwysocky@wi.rr.com.

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17

Newern

th ion Nor Locat inar m e S

Retirement Plan Investment Seminar Tuesday, October 23, 2018 8:00am - 12:00pm

SPECTRUM

SM

INVESTMENT ADVISORS

Co-Sponsored by

Spectrum Investment Advisors and the WICPA*

Radisson Hotel & Conference Center,

Green Bay, WI Featuring Green Bay Packer Hall of Famer

LeRoy Butler

Speakers Welcome - Introductory Remarks

James Marshall & Jonathan Marshall, MBA President/Founder, Spectrum & CIO/Partner Spectrum Investment Advisors

Retirement Plan Trends

Enjoy a half-day seminar on these topics and much more!

Manuel Rosado, MBA, AIF® Vice President/Partner Spectrum Investment Advisors

Retirement Plan Sponsor Legislative & S Fiduciary Update Bradford Campbell, Partner Drinker Biddle*

- Fiduciary best practices

Economic & Financial Markets Review

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From Wheelchair to Lambeau Leap

- Timely market and

economic insights

&

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David Lebovitz, Global Market Strategist JPMorgan Asset Management*

LeRoy Butler Green Bay Packer Hall of Famer* (autograph session to follow)

Complimentary Box Lunch Available Upon Conclusion *WICPA, Drinker Biddle, JPMorgan Asset Management and LeRoy Butler are not affiliated with Spectrum Investment Advisors

Registration Found on www.WICPA.org

4 SHRM PDC Credits 6329 W. Mequon Road

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262.238.4010

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4 HR (General) recertification credits 4 CPD credits will be available for attendance

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sia@spectruminvestor.com

www.spectruminvestor.com

Investment advice offered through Spectrum Investment Advisors, a registered investment adviser. Registration with the SEC does not imply a certain level of skill or training.

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IN TOUCH | PRESIDENT & CEO’s MESSAGE “My experience as WICPA president and CEO has been the most fulfilling and enjoyable experience of my career.”

Putting the Success in Succession

P

rior to becoming WICPA chief staff executive in 2006, my 17 years as an active WICPA member provided me with valuable insight regarding the WICPA and its members, mission and opportunities for continued success. This insight, along with my desire to apply my technical skills in a new executive role that would have a positive impact, inspired me to apply for the position of chief staff executive.

My experience as WICPA president and CEO has been the most fulfilling and enjoyable experience of my career, and I thank you for the opportunity to serve.

It was not obvious to me when I accepted the position in 2006 how different the CEO role would be from my prior three decades of experience as a technical expert in a specialized area. Serving as CEO has provided me the outstanding opportunity to further refine my executive skills in communication, leadership, collaboration and advocacy. These skills have helped me develop innovative initiatives, leverage opportunities to improve the WICPA and overcome challenges that were often outside of my control, to most effectively serve your needs.

In order to minimize disruption and risk to the WICPA in the event of my retirement or unexpected unavailability, I developed a succession plan and shared my general time frame for retirement as president and CEO with our volunteer leaders in 2016. Last year, the board of directors and I together determined that my early 2019 retirement would provide a sufficient amount of time for the board to apply executive succession best practices and for me to prepare the WICPA, and myself, for a successful transition.

The WICPA CEO Succession and Transition Task Force, chaired by Past Board Chair Steve Handrick,

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was established by the WICPA board in 2017. In June and July of 2018, the task force posted the CEO position in several publications and developed a timeline to interview candidates during the summer and fall of 2018 in order to have a successor in place early in 2019.

I look forward to providing as much assistance and flexibility as necessary to achieve the most positive outcome from the task force’s work. And, again, thank you for the opportunity to serve.

Dennis F. Tomorsky, CPA, JD, CGMA, is president & CEO of the WICPA. Contact him at 262-785-0445 ext. 4519 or dennis@wicpa.org.

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KEEPING THE PIPELINE FILLED

By Wendy K. Potratz, CPA, CGFM, CMA, MBA

T

he CPA profession is at a critical juncture, with demand for CPAs expected to increase, supply expected to remain constant, and retirements threatening to decrease the number of practicing CPAs by 75 percent by the year 2020. This article explores some of the activities designed to address these issues. Some are already in place; others are in process.

Within the state of Wisconsin, a strategic alliance has been formed to assemble and support the constituents within the accounting profession. The alliance consists of partnerships between the WICPA, the business community and our educational organizations, all of

whom have pulled together to address the issue of an impending talent crisis within the accounting profession.

The Strategic Planning Committee of the WICPA Educational Foundation, composed of leaders from these three contingents, was formed during the April 2018 meeting of the WICPA Educational Foundation Board.

One of the charges to that subcommittee, sent down from the board, was the focus on and investigation of creative ways to generate early awareness of the accounting profession and the career paths within. In addition, the newly formed committee will review the current processes for identifying participants and allocating the WICPA Educational Foundation Scholarships. The goal is to

THE FACTS Employment of accountants and auditors is projected to grow 10 percent from 2016 to 2026, faster than the average for all occupations.

Bureau of Labor Statistics —Occupational Outlook Handbook for 2017

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The AICPA estimates that approximately 75 percent of its members will be eligible to retire by 2020.

Projected accounting enrollment is still at an all-time high, but master’s enrollments have dropped to 2014 levels.

“Creating a ‘Retired CPA’ Status in the UAA”

“Supply of accounting graduates and demand for public accounting recruits”

—www.aicpa.org

—AICPA 2017 Trends Report

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Students from Wausau West High School got some hands-on accounting experience at the Milwaukee Bucks’ headquarters in Milwaukee.

ensure that scholarships are providing incentives for the best and brightest students to consider an education that will direct them to a place in the accounting profession.

The first meeting of the Strategic Planning Committee of the WICPA Educational Foundation took place Wednesday, Aug. 22. (See sidebar.)

Building on our current programs While there is certainly a need for new initiatives and review of existing programs as detailed above, many of the current programs developed through the WICPA Educational Foundation continue to provide avenues toward a stronger accounting profession and a healthy inflow of young professionals into the field.

One such program, repeatedly acknowledged as a continuing success, is the WICPA Educational Grants Program. The program provides grants and other support for numerous activities developed through the coordinated efforts of Wisconsin high schools, institutions of higher education and accounting professionals. These programs and projects are designed to broaden and advance the awareness, perception and future of the accounting profession. Each year, the WICPA Educational Foundation awards more than $50,000 in Accounting Career Awareness Grants to Wisconsin high school teachers who attend the Educator Accounting Symposium and create programs, projects and curriculum to

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promote accounting as a career. For 2018 alone, there were 38 accounting awareness grants awarded, totaling nearly $53,000.

Two prominent programs supported by the Accounting Career Awareness Grants include the UW–Whitewater “Explore Accounting” and UW–Oshkosh “Titans Are Accountants” events. These half-day programs, organized and facilitated by individuals within the accounting departments of these two University of Wisconsin System schools, bring together high school students, high school instructors and CPAs in the professional community with the intention of educating students about and promoting awareness of the accounting profession.

Typical sessions during these events include: • The exploration and promotion of accounting as a college major.

• A peek into “a day in the life of an accounting major” through presentations, mock lectures, college student panel discussions, campus tours and the opportunity for lunch at the campus union.

• Access to professionals from different fields within the profession through panel discussions and Q&A sessions. Professionals offer insights into their specific backgrounds and journeys within the accounting profession and share information about the exciting opportunities a career in accounting offers.

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Feedback from students, professionals and high school teachers highlights the positive impact of these programs.

The application and awareness programs offered through UW–Whitewater and UW–Oshkosh are not the only projects funded by the WICPA Accounting Career Awareness Grants. In Spring 2018, a Wausau West High School Business Education instructor, Dawn Jameson, teamed with Steven P. Rajek, CPA, and Nathaniel T. Bartz, CPA, to develop a creative and fun program designed to make accounting students at Wausau West aware of all the different careers in the accounting field. In April, the team took 23 students from the Advanced Accounting and Marketing classes on a field trip to the Milwaukee Bucks’ corporate office.

The students completed hands-on practicum tasks that involved computing what actually happens in the sports marketing field. They completed five scenarios pertaining to depreciation, payroll, fund-raising, reconciliation of a bank statement and expense(s) of players. In addition, the students were part of a focus group on “Bucks Gaming,” the Milwaukee Bucks’ new video game platform, introduced by the team in December 2017.

Afterward, students stayed for the Milwaukee Bucks vs.

Brooklyn Nets game. The students were able to see how accounting and marketing are used in the arena and gained a better understanding of the industry outside the office setting.

Strategic Planning Task Force Update When the article on these pages was written, the Aug. 22 meeting of the WICPA Educational Foundation Strategic Planning Task Force had not yet taken place.

We are inserting this update just before the magazine goes to press.

One of the outcomes from the task force’s meeting was the formation

Filling the professional pipeline

of strategies designed to increase

Facts and figures at the beginning of this article portrayed a somewhat dire scenario of increasing demand for accountants, a consistent supply of new accountants and the looming threat of widespread decreases in the existing pool of CPAs by 2020. The great news for accounting constituents in the state of Wisconsin is this: There’s a network of partnerships, fostered through the WICPA Educational Foundation, working to formulate new strategies and continue existing successful programs designed to ensure that our accounting profession remains the vibrant and exciting career path it always has been. Their hope is that, through their efforts, Wisconsin business will be supplied with the focused, enthusiastic, well-prepared accountants needed to fulfill the needs of the profession well into the future.

attendance and participation in the WICPA Educator Accounting Symposium held each November.

The task force also is exploring ways to develop and refine programs to make high school and college students aware earlier of the opportunities available to accounting professionals, and to provide incentives for the best and brightest students to consider

Wendy K. Potratz, CPA, CGFM, CMA, MBA, is an accounting professional, a senior lecturer in Accounting at UW-Oshkosh and a member of the WICPA Educational Foundation Board.

Contact her at 920-424-1454 or potratzw@uwosh.edu.

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an accounting career.

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{ Tax | TCJA strategies }

Tax Cuts and Jobs Act Turning tax planning into an art

A

By Terri Lillesand, CPA

s a tax specialist, there is nothing that gets the creative juices flowing more than a new and sweeping tax law. The Tax Cuts and Jobs Act (TCJA) certainly fits that description. Over the last nine months, it’s been fun to read the new law and discuss potential planning strategies with other tax experts. The following is an accumulation of a few planning ideas:

Itemized deductions

State income taxes: With only a $10,000 combined deduction allowed for income and real estate taxes, strategy will still matter. A Wisconsin resident will want to pay at least $2,500 per year in real estate taxes to take maximum advantage of the $300 Wisconsin property tax credit. In addition, deducting real estate taxes first and then using state income taxes to hit the $10,000 limit will hopefully minimize any taxable state tax refund the following year.

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Charitable contributions: Those with charitable intentions should consider funding a donor-advised fund (DAF). The donor receives a tax deduction upon funding the DAF. The DAF can then distribute donations to the recipient charities in a manner that reflects the taxpayer’s traditional giving pattern as opposed to the “bunched” charitable contributions for income tax purposes. Unlike a private foundation, a DAF never has to distribute a minimum amount of funds each year.

Investment interest expense: If a taxpayer will no longer itemize deductions in 2018 or future years, double-check whether it is beneficial to treat capital gains and dividends as ordinary income to allow more investment interest expense deduction. In other words, if investment interest expense is no longer going to result in a tax deduction in the future because the taxpayer will no longer itemize, it might be wise to trade capital gains rates for ordinary rates so more investment interest expense can be deducted currently.

While this can be done in future tax years, the 2017 tax return is the key place to look at this. An amended return can be filed

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for 2017 if the election to forego capital gains rates was not made on an originally filed return and it would be beneficial to do so.

You can make the election on an amended return filed within six months of the due date of your return (excluding extensions).

Write “Filed pursuant to section 301.9100-2” on the amended return and file it at the same place you filed the original return.

and after. For a married taxpayer, the deduction is allowed in full if the taxpayer’s taxable income is less than $315,000. If taxable income exceeds $315,000, the deduction may be limited if the trade or business does not pay sufficient wages or have a sufficient investment in fixed assets. The trade or business must pay 28 percent of its trade or business income as wages.

Net operating losses (NOLs)

Alternatively, if a taxpayer needs to rely on the fixed asset limitation because it does not pay sufficient wages, it may consider capitalizing more expenditures under the “repair regulations” under IRC Section 263(a) to increase the unadjusted basis of assets used to calculate the 2.5 percent limitation. Then, taking Section 179 or 100 percent bonus, if eligible, would put you in the same tax position as deducting those items. Hopefully, tax depreciation software will provide the reports that will be needed for this purpose.

Carrybacks: A carryback is no longer allowed for losses that are generated in tax years ending after Dec. 31, 2017.

Unfortunately, fiscal-year taxpayers will lose the ability to carry a loss back from a year ending in 2018, even though it is a 2017 tax year. Contrast this with calendar-year taxpayers who were able to carry back their 2017 tax year losses. Some view this as a drafting error. In fact, the Senate Finance Committee has asked the IRS to reflect legislative intent on guidance and enforcement of this. But, unfortunately, it will take legislative corrections to fix this issue.

Eighty percent taxable income limitation: The Internal Revenue Code does not clearly state this, but the use of NOLs— limited to 80 percent of taxable income—is for losses generated in tax years beginning after Dec. 31, 2017. So while a fiscal-year taxpayer that generates a loss in its year ending in 2018 cannot carry the loss back (pending a legislative change), the loss is usable against 100 percent of taxable income in the future. Making an NOL larger, while not allowed as a carryback, is still good strategy for a fiscal year ending in 2018, as it is not subject to the 80 percent taxable income limitation.

Limitation on losses for taxpayers other than corporations While it’s not a planning opportunity, a provision that hasn’t seen much publicity but should be reviewed is the $500,000 limitation on losses for noncorporate taxpayers. Starting in 2018, individuals will be subject to an overall $500,000 net loss limitation for all trades or businesses combined. Any loss not allowed will become part of the taxpayer’s net operating loss, which can only be carried forward and can only be used to offset 80 percent of taxable income. Guidance will be needed to help in the definition of trade or business. In the right circumstances, this could have a big impact on a taxpayer who may incur large losses but still have taxable income. You may need to create a plan to minimize the impact of this provision.

Qualified business income deduction–199A A deduction of 20 percent of an individual’s qualified trade or business income is allowed for tax years starting Jan. 1, 2018,

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Trusts and estates Recent IRS guidance clarified which deductions are still allowable. A trust is subject to the $10,000 state tax limitation and the disallowance of all 2 percent miscellaneous deductions, such as investment fees. However, a trust is still able to deduct tax-preparation fees, as these are not a 2 percent miscellaneous deduction. Because of the disallowance of some of the deductions mentioned above, accounting income of the trust may likely be larger than the distributable net income (DNI) of the trust. If distributions are based on accounting income, this will create taxable income to the trust, as not all of the DNI will be distributed to the beneficiary. Also remember that the favorable changes in the alternative minimum tax (AMT) for individuals were not made for trusts or estates. The above changes will require more proactive planning for trusts and estates.

Keep in mind Wisconsin’s onerous law of not being able to base current-year estimated tax payments on prior-year tax if the current-year taxable income is more than $20,000.

Losing deductions at the federal level will make this Wisconsin provision apply to more taxpayers.

These strategies represent only a small sample of possible planning opportunities. There are many more to consider and many more to come after initial IRS guidance is issued in the next few months. Who says accountants aren’t creative?

Terri Lillesand, CPA, is a tax shareholder at Schenck SC in Sheboygan and leads the firm’s tax practice. She has nearly 30 years’ experience in tax compliance, planning and client representation for the IRS and state tax issues. Contact her at 920-458-0341 or terri.lillesand@schencksc.com.

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memorials Marshall L. Berg, CPA

John A. Kemmeter, CPA

Marshall L. Berg, CPA, of Mount Horeb, died Sunday, July 22, in Madison. He was 87. A native Californian, Berg owned several CPA firms in California as well as in Mount Horeb. In addition to WICPA, he was a member of Rotary International, Vassa and Sons of Norway.

John A. Kemmeter, CPA, of Fort Atkinson, died Friday, June 8. He was 67. Kemmeter graduated from Fort Atkinson High School in 1969, then attended the University of Wisconsin–Madison, where he earned a master’s in accounting and attended law school. His 40-year career as a CPA included employment by several public accounting firms and insurance companies.

(1931–2018)

Dennis W. Bersch, CPA (1932–2018)

Dennis W. Bersch, CPA, died Monday, June 4, in Mequon. He was 85. Bersch served in the U.S. Navy and attended St. Norbert College and Marquette University. He began his career at Arthur Anderson before starting his own firm: Bersch & Co. He was a member of Associated General Contractors of America and served on the President’s Advisory Council at St. Norbert College and the boards of Cardinal Stritch University and Skylight Opera Theater.

(1951–2018)

James King, CPA (1923–2018)

James King, CPA, died Friday, July 20, at age 95. King was born in Green Bay and attended Lake Forest College in Illinois, where he met his wife.

The couple moved to Milwaukee in 1949, and King took a job with Arthur Andersen. He subsequently became president of Kalmbach Publishing Co. King was a member of the Hobby Industry Association executive board, the National Model Railroad Association, the WICPA and the AICPA.

Wesley R. Christensen, CPA

Glen L. Olson, CPA

Wesley Christensen, CPA, of Madison, died Monday, July 2. He was 97. Christensen began his accounting career with Price Waterhouse in Milwaukee prior to becoming a CPA. He became a CPA in 1947 and joined the WICPA in 1949, retaining his membership until his death. In 1950, Christensen moved to Tomah to start his own accounting practice; he retired from Hill, Christensen & Co. in 1982. He continued to serve clients as a sole practitioner, performing management consulting and trust work, until he retired in 2007.

Glen L. Olson, CPA, died Friday, April 20, in Eau Claire. He was 91. Olson served in the U.S. Army during World War II and, after completing his military service, returned to central Wisconsin to begin his lifelong career as a CPA. Olson served clients throughout Wisconsin and neighboring states for more than 50 years. In addition to the WICPA, he was a member of the Mehara Shrine Club of Eau Claire.

Todd Christopher Craft, CPA

(1954–2018)

(1921–2018)

(1966–2018)

Todd Christopher Craft, CPA, died Wednesday, July 11. He was 51.

Craft studied at Quincy College, became a CPA and joined Clifton Gunderson in Peoria, Illinois, in 1994. He was named partner in 2000 and director of tax in 2006, when he moved his family to the Milwaukee area. He was soon named chief business officer. In his final years with CliftonLarsonAllen (CLA), he was managing principal of CLA’s Southeastern Wisconsin Practice. Craft served as vice chair of the Wisconsin Accounting Examining Board and was a member of The Executive Committee (TEC), which recognized him in 2016 as Inspirational Leader of the Year.

Robert Di Renzo, CPA (1925–2018)

Robert Di Renzo, CPA, of Neenah, died Sunday, June 10, at age 93.

Di Renzo served as a B17 bomber pilot in World War II and as a fighter pilot in Korea. He was a major in the Air National Guard and legal officer for the air wing, flying out of the Air National Guard unit in Madison for 25 years. He held both undergraduate and law degrees from the University of Wisconsin–Madison. In 1953, he co-founded the CPA firm of Di Renzo and Bomier and the attorney/ CPA firm of Di Renzo, Simonis & Miller.

(1927–2018)

Carol J. Sanchez, CPA Carol J. Sanchez, CPA, of Hartland, died Monday, May 28, after a struggle with lung disease. She was 63. Sanchez served as treasurer on the board of directors for the Town Hall Library Foundation in North Lake.

Terry D. von Haden, CPA (1939–2018)

Terry D. von Haden, 79, a longtime WICPA member and co-founder of SVA Certified Public Accountants, died Saturday, June 2, at the Oakwood Memory Care Unit. Von Haden was also a member of the AICPA and the Wisconsin Accounting Examining Board. He graduated from Madison Business College in 1961 with a degree in accounting and enlisted in the Army National Guard in 1962, serving as a medical corpsman. In 1970, he became a CPA, and in 1974 he and John Suby founded Suby, Von Haden & Associates (now SVA CPAs). Von Haden retired in 2014.

Clifford A. Wiernik, CPA (1958–2018)

Clifford A. Wiernik, CPA, Stevens Point, died Wednesday, Feb. 14.

He was 59. Wiernik worked as an accountant and computer analyst for Aqua Finance in Stevens Point for 18 years. He was involved in his community and active with the Boy Scouts, Knights of Columbus and the St. Bronislava Parish Holy Name Society.

If you are aware of a member obituary and believe it should be included in Memorials, please send a copy of the obituary or contact Marcia Tillett-Zinzow at mtzinzow@icloud.com.

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Everything you care about is in this house.

Things your family just can’ t afford to lose.

We can help you protect it with a Home and Highway® policy from West Bend.

The Home and Highway policy also offers protection for your family pet. And because you’re a member of the WICPA, you could also receive a discount on your annual premium.

To find out what else the Home and Highway has to offer, contact this Official Supplier of the Silver Lining.

Professional Insurance Programs at (414) 277-0154 or info@profinsprog.com or to find an agency near you, visit thesilverlining.com.

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{ Manufacturing | R & D tax credit }

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Manufacturers should take advantage of this tax incentive.

By Jim Brandenburg, CPA, MST

I

n today’s fast-paced business world, with everchanging technologies and advances, manufacturers need to continually seek ways to improve their products and processes. They face stiff competition, both domestically and from abroad, creating a constant need to find and develop new products or manufacturing processes just to survive.

Decision makers at manufacturing companies realize they need to improve their products, but they may not be aware that Congress offers an incentive for companies who invest in research and development (R&D) activities. The R&D tax credit—or “research credit”—has been around for more than 30 years. However, many manufacturers may not understand how this credit works and how they can benefit from it.

How the research credit works Most manufacturers are now conducting R&D activities just to be competitive, and they may also be participating in research that generates a research credit.

The credit is available for businesses that spend and invest in “qualified research.” For purposes of the credit, this term has a specific definition, and it could differ from how management views research. For a business’s research to be classified as qualified research, tax rules stipulate the following: • Technological in nature. The research must involve the physical sciences—such as physics, engineering, computers, chemistry and biology—and not the social sciences.

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• Process of experimentation. At the project’s outset, the research must have some element of uncertainty as to whether the new product or process can be developed or how to develop it.

• New or improved business product or process.

The research the business undertakes must result in a new or improved product or process. The manufacturer will need to quantify how new or improved the product or process is. The key here is that the new or improved product or process needs to be new or improved to the business doing the research, not something new in the industry overall. Thus, a manufacturing company may have been in business for a long time, and its leaders may not think they have done anything innovative, but if they invest in a product or process that is new or improved to their business, this could qualify for the research credit.

Once a manufacturer determines its research work is eligible for the research credit, the company needs to determine the extent of the credit. For purposes of the credit, research costs include three main sources: • Wages paid to the employees conducting the research work.

• The cost of supplies used in the research efforts.

• If outside parties were paid to carry out any of the company’s research, 65 percent of that amount.

Note: It is important for a manufacturer to document these expenses as well as the details of the qualified research activities.

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{ Manufacturing | R & D tax credit }

There are several methods for calculating the research credit, but the most common approach now is the Alternative Simplified Credit (ASC) method. Under the ASC method, the current year’s total research costs, as described above, are compared to 50 percent of the average of the prior three years’ research expenses.

The current year’s research credit is the product of 14 percent of the excess of the current year’s research expenses over 50 percent of this average. The example below shows how this works: Wisco Widget is developing new gears that are more durable and less costly. In 2018, the company spent $600,000 in wages and supplies in its research activities, and these costs meet the definition for qualified research. Further, the average of the qualified research costs over the prior three years was $480,000. The federal research credit for Wisco Widget for 2018 would be $50,400, determined using the following formula: .14 x [600,000 – (.50 x $480,000)] = $50,400.

Rules governing utilization of the research credit Companies that generate a research credit can take this credit in addition to claiming a current deduction for these research expenses, although some limitations may apply. Once a manufacturer determines that its research efforts produced a research credit, the next step is to find out whether the

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business can use the credit it generated. Limitations that could curb the current utilization of the research credit include the following: • Entity: The research credit is available to both C corporations and owners of pass-through entities such as S corporations and partnerships.

• Losses: If the business is currently generating a loss and not paying tax, the research credit in the current year is not available. This limitation applies to both corporate and individual taxpayers. The research credit that cannot be used is not lost altogether; it can be first carried back one year to determine if this limitation applies to that business in that year. If it is still not used in that prior year, it is then carried forward for up to 20 years, with the credit subject to this limitation in each year. While a complex process to go through in these years, it provides a greater likelihood that the originally generated research credit will eventually be used.

• Passive Hurdle: The research credit for an individual taxpayer who is not involved in the business—that is, who is treated as “passive” with respect to the business— is subject to a limit based on the income tax generated by the passive income the taxpayer earned. This limitation does not apply to a C corporation or to an owner who is “active” with respect to the business.

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• Alternative Minimum Tax (AMT): The research credit might run into a limitation based on the AMT position of the taxpayer. This limitation no longer applies for a C corporation beginning in 2018, but for individuals it depends on whether the business is a “qualified small business,” which is defined as a business with an average of less than $50 million in average gross revenues. If the manufacturing company is a qualified small business, then the AMT limitation does not apply. If it is not a qualified small business, the AMT limitation applies but is less of an issue, as last year’s tax reform bill reduced the AMT. While these limitations may seem onerous, they are lesser in scope than in prior years and may, therefore, provide more opportunities for taxpayers to use their research credits. Manufacturers should analyze their situations to determine if they meet these new softened constraints.

Research credit for startups In 2015, Congress also expanded the research credit for newly formed companies. These companies may be conducting research activities, but as they likely are losing money in their early years, there is no current tax benefit for any research credit they generate. This special rule applies to a “qualified small business,” which in this case is defined as a company with: (1) gross receipts of less than $5 million for the tax year, and (2) no gross receipts for any tax year before the five-tax-year period ending with the tax year.

For qualifying startup companies, any generated research credit can be used to offset the company’s payroll tax obligations instead of just carrying this credit forward.

Thus, any newly formed manufacturer should explore the details of the research credit with payroll tax relief.

Wisconsin companies win twice Wisconsin allows a similar research credit—again for both C corporations and pass-through entities—as

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long as the research is conducted in Wisconsin. Thus, Wisconsin manufacturers win twice. Not only are they rewarded for their R&D efforts with a federal research credit, but they also get the Wisconsin credit for any research activities conducted in the state!

Summary Manufacturers know the realities of shifting technologies and competition in the marketplace. But Congress lends a helping hand by offering incentives to encourage investment in R&D. Manufacturers who have not taken this credit in the past should evaluate whether the work they are now doing qualifies for the research credit and if they can use this credit. This is an analysis they should explore soon, for it is likely their competitors have already done it.

Jim Brandenburg, CPA, MST, is a tax partner with Sikich LLP. He has more than 35 years of experience assisting manufacturers with corporate and partnership tax law, mergers and acquisitions, and tax legislation. Contact him at 262-754-9400 or jim.brandenburg@sikich.com.

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Terri S. Boxer, J.D.

Robert E. Dallman, J.D., LL.M.

Thomas P. Guszkowski, J.D., LL.M.

Katie Hanley, J.D.

Megan K. Heinzelman, J.D., LL.M.

Courtney A. Hollander, J.D.

Megan L.W. Jerabek, J.D.

Thomas J. Kammerait, J.D., CPA

Benjamin D. LaFrombois, J.D.

Marcus S. Loden, J.D., LL.M.

Thomas A. Myers, J.D.

Randy S. Nelson, J.D., CPA

Timothy A. Nettesheim, J.D., LL.M.

Katelyn A. Pellitteri, J.D.

Thomas J. Phillips, J.D., LL.M.

David J. Roettgers, J.D., CPA

John A. Sikora, J.D.

Steven M. Szymanski, J.D., MBA

Robert B. Teuber, J.D.

Daniel S. Welytok, J.D., LL.M.

Peter J. White, J.D., CPA

New Tax Law. Experienced Tax Lawyers. von Briesen’s team of experienced tax lawyers, many of whom have advanced designations, help businesses and individuals navigate the new tax law.

The bottom line? We get results.

To learn more about our Tax Law Section and the services we offer, please contact Robert Mathers, Tax Section Chair, at rmathers@vonbriesen.com.

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vonbriesen.com/tax

Robert A. Mathers, J.D., CPA, Section Chair

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kudos

Kevin Block, CPA

Kevin Block, CPA, an accountant with MBE CPAs LLP in Sun Prairie, completed Sun Prairie’s community leadership program, Leadership XXI. The class graduated May 16.

James Lindell, CPA

James J. Bolgert, CPA, JD, owner of Bolgert Mediation in Sheboygan, has been accepted by the American Arbitration Association to its National Roster of Arbitrators.

Scott Dell, CPA, MBA, MAE

Scott Dell, CPA, MBA, MAE, DBA candidate and assistant professor of accounting at Marian University, Fond du Lac, has received Marian University’s 2018 Social Justice Award.

Kermit Ellefson, CPA, has joined the board of directors of Vibetech Inc., a global physical and occupational therapy equipment company that recently opened a research and development office in Sheboygan.

Dan Fabich, CPA, will serve another term as treasurer on the Literacy Green Bay board of directors.

Jamin Friedl, CPA, has been promoted to finance director/comptroller for the City of Stoughton. He was formerly a finance manager at Stoughton Utilities.

Ed Jaekel, CPA, published an editorial in the July 9 issue of the Tomah MonitorHerald and Tomah Journal. He serves as chairman of the board of directors for the La Crosse Area Chamber of Commerce.

Want your

James Lindell, CPA, received a 2017 Outstanding Discussion Leader Award from the American Institute of CPAs (AICPA). Recipients of the award ranked in the top 10 percent of all AICPA instructor evaluations for 2017.

Joe Niemann, CPA, has been promoted to senior accountant at Dwayne Johnson & Associates, Waukesha.

Joe Niemann, CPA

Michael Ruby, CPA, ABV, PFS, CGMA

Diane Rieder, CPA, has earned the Certified Chief Executive designation from the Credit Union Executives Association. She is chief financial officer for Premier Financial Credit Union.

Michael Ruby, CPA, ABV, PFS, CGMA, has been appointed managing partner of KerberRose CPAs, taking on the role held

by David Kerber, CPA, since the firm’s inception in 1979. Kerber will remain active in the firm as an accountant.

Gabrielle Thomas, CPA, has joined SVA Certified Public Accountants, Madison, as a principal.

David Traczyk, CPA, a sole practitioner in Hurley, was inducted in August into the Hurley Education Foundation Distinguished Alumni and Friends for 2018 for his continued strong support of education.

Dennis Wojahn, CPA, will continue his service on the Literacy Green Bay board of directors.

new job, promotion or award mentioned in Kudos?

H Email your announcement and photo in JPG format to mtzinzow@icloud.com. H

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{ Retirement Plans | Fee management }

Fiduciary Flags How to effectively manage your retirement plan fees

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I Joseph Topp, CPA

f your organization offers retirement plans as an employee benefit, you’re subject to the provisions of the Employee Retirement Income Security Act (ERISA), a federal law that covers administrative aspects of these plans. Recently, ERISA litigation has been grabbing headlines, and they seem to have a common theme: retirement plan fees.

The courts do not suggest lowest cost is a safe haven. Instead, precedent points to the fiduciary’s duty to maintain a reasonable cost structure with evidence that oversight of participant fees occurs. If you’re one of the chief people responsible for the oversight of your organization’s plan, what should you do?

By understanding the components of your plan’s cost structure and applying current best practices, you can prudently manage participant fees and help boost account balances in the process.

Understand the types of fees paid The three largest expenses associated with the operation of your retirement plan are asset management, plan administrative services (record keeping) and advisory services. Before offering tips on effectively negotiating and managing these costs, let’s understand each expense.

Asset management: This is the largest single cost to the plan and, therefore, your participants. The stated expense ratio of the investment vehicles you make available to your participants often includes more than the fees required by the asset management firm. The “more” refers to revenue sharing (loads and 12b-1 fees) and represents an addition to the expense ratio that is used to provide compensation to other plan service providers. In fact, plan sponsors commonly use revenue sharing to pay for plan advisory and record keeping services.

Remaining revenue-sharing dollars may be used to purchase additional plan services, such as participant communication and education. As the revenue-sharing amounts are included in the fund’s stated expense ratio, they represent a concealed cost. Additionally, because these fees are asset based, they grow as the invested assets increase from market appreciation and contributions. This means automatic annual pay raises for any provider compensated through revenue sharing.

Record keeping: The plan’s record keeper performs a host of critical daily administrative functions for the plan, including maintaining the individual participant accounts, safeguarding the plan’s assets, providing plan documents and performing compliance testing. Historically, record keepers’ compensation was derived from a combination of asset management fees, revenue sharing

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{ Retirement Plans | Fee management }

Asset management

Record keeping

Advisory services

Retirement plan expenses and participant charges for transactions such as loans or distributions. Consequently, much of their compensation lacked transparency.

Advisory services: Many plan sponsors utilize an adviser to assist with the selection and monitoring of investments and to provide education services to the plan participants. It is a common industry practice for the adviser to be compensated by the annual stream of revenue sharing generated by the plan’s assets.

Negotiate efficient fee arrangements Now that we’ve identified the primary types of expenses you might encounter, let’s develop a framework to best manage and control these costs.

While asset management costs are asset based, the plan sponsor may choose from a wide selection of share classes and cost structures. Our recommendation is to seek the lowest possible cost shares for which your plan will qualify, eliminating share classes with revenue sharing built into their pricing. By doing so, you will improve transparency and obtain greater control over the plan’s overall cost structure.

Inevitably, your investment menu will continue to generate some revenue sharing. Current industry best practice suggests instructing your record keeper to return these amounts to the specific participant accounts invested in the funds creating the revenue.

For your plan record-keeping costs, the elimination of revenue sharing will require negotiation of an independent fee for the plan record keeping services. Require your provider to establish a fixed-dollar fee based on the number of participant accounts record-kept. This fee, a per-participant fee, will vary

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as the number of plan participants changes, aligning costs more closely to services provided. When discussing fees, inquire about other direct and indirect sources of revenue received based on your plan. Examples of additional compensation record keepers receive include shareholder servicing fees (negotiated between the record keeper and investment manager) and platform or shelf-space fees.

Similarly, remember to address advisory costs, which may also be tied to the asset values of your plan. Instead, require a fixed-dollar fee arrangement.

Equitably allocate costs to your participant base Most plan sponsors elect to charge all plan-related expenses to the plan. Historically, cumulative costs were shared across the plan on a pro-rata basis based on plan assets. With a pro-rata allocation, however, participants with large account balances pay a greater share of the plan administrative costs than participants with smaller balances. The large account holders may feel as though they are subsidizing the costs for those saving less diligently.

An alternative method is to divide the costs equally among the participants in the plan in the form of a fixed, per-participant charge. Allocation on a per-participant basis establishes a uniform cost across all participants. On the other hand, it results in the low balance accounts paying a meaningfully larger percent of their account each year for plan services, hindering their ability to grow their accounts.

Recognizing these concerns, an increasingly popular strategy is a fee allocation methodology that incorporates elements

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of pro rata and uniform costs. A fixed per-participant fee ranging from $40–$80 per year is assessed to every participant, regardless of account balance. The remaining money necessary to pay administrative costs is allocated on a pro rata basis according to the participant’s account balance. This methodology provides participants with greater transparency and effectively communicates a base cost of participation in the plan, regardless of account balance.

Your participants have a right to fully see and understand the cost of participating in your retirement benefit. Your responsibility as a plan fiduciary, and your desire to assist them in building retirement wealth, will be well served by having a prudent process to monitor and manage the ongoing cost profile of the plan. Implementation of the strategies described won’t exempt you from a potential ERISA claim, but you will be well positioned to construct your defense.

TOPP’S COST TIPS • Utilize lowest-cost share class funds.

• Drive out revenue sharing.

• Return remaining revenue sharing to participants.

• Request fixed-dollar per-participant record keeping fee.

• Establish fixed-dollar adviser fee.

• Develop transparent participant cost allocation methodology.

Joseph Topp, CPA, is a principal with Francis Investment Counsel LLC, Brookfield, a registered investment adviser working exclusively with qualified retirement plans. Contact him at 262-781-8950 or joseph.topp@francisinvco.com

• Monitor and benchmark all plan costs annually.

Join the WICPA Board of Directors!

The WICPA is seeking members to serve on its board of directors.

Opportunities include: • Staying up-to-date on professional issues

• Providing strategic governance in accordance with the WICPA strategic plan, mission and vision

• Acquiring new leadership and training skills

To apply, visit wicpa.org/BoardApplication through Nov. 16, 2018.

Applicants must be WICPA CPA members in good standing. A “CPA member” is defined as a WICPA member who has obtained a certificate as a CPA from the Accounting Examining Board of the State of Wisconsin, or from a similar legally constituted authority in any other state, possession or territory of the United States or the District of Columbia.

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Questions?

Contact jessica@wicpa.org.

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{ Soft Skills | Emotional intelligence }

Adaptability

Got

EQ? SelfAwareness

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Organizations that understand emotional intelligence may have a competitive advantage.

By Bill Marklein

N

ew technologies are liberating CPAs from traditional analytical thinking by significantly improving efficiencies and convenience.

Machine learning and automation in particular are making emotional intelligence incredibly relevant to the accounting industry.

In addition, mobile devices, social media and email correspondence continue to dominate our lives. Our constant interaction with technology rewires our brains in a negative way and limits our ability to emotionally connect with ourselves and others. If we want to build better relationships, become servant leaders and connect employees to the mission and vision of the organization, we must begin focusing on emotional intelligence and human-only competencies.

Commonly abbreviated as EI or EQ (emotional quotient), emotional intelligence is the awareness of our emotions and the ability to manage our own emotions and be sensitive to the emotions of others. It plays a big role in human relationships and is directly linked to communication, client relations, career advancement, organizational culture and 21st-century leadership.

Emotional intelligence is a human-only competency that cannot be executed by machine learning and automation. Its three integral components are as follows: 1. Self-Awareness The ability to accurately self-assess is the key driver in confidence and mindful leadership. We cannot lead others unless we have self-awareness to lead ourselves first.

2. Adaptability This is the ability to respond professionally and with confidence and composure to different personalities, environments and strategies. More times than not, the number one reason for stalled promotions and career advancement is a lack of adaptability.

3. Empathy Empathy is the ability to “feel” with another human being and understand their story and perspective. Many managers fall short of leadership because, even though they are “book

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smart,” they are not emotionally smart. They lack empathy, which makes them come across as cold, uncompassionate and unable to connect with others.

The leadership connection Emotional intelligence is closely linked to leadership.

Research done by my company has found that characteristics of EI comprise 95 percent of the attributes professionals list as qualities of individuals who have made a significant positive impact on their lives. These are the attributes listed most often: • Compassion • Confidence • Unconditional • Encouragement • Supportive • Kindness • Genuine Business leaders who work on developing their emotional intelligence can gain a competitive advantage. We have found that, surprisingly, young professionals are excited about developing their emotional intelligence and establishing real human connections. At a 2017 young professionals summit held in Iowa, 73 percent of young professionals said social media does not make them feel more human. We know that anxiety and stress are at an all-time high, and research suggests the internet is partly to blame. The new normal is a hunger for real human connection and belonging.

Emotional intelligence is not only intrapersonal (selfawareness) and interpersonal (person-to-person) but also is cultural. The search for top talent in today’s market is highly competitive, and the winning firms will be those with a culture that includes emotionally connecting to current and potential employees. Wisconsin employers with the following characteristics can win the competition for top talent: • Senior leadership and managers with a commitment to emotional intelligence, creating a vibrant workplace culture where all employees can bring their best to work.

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{ Soft Skills | Emotional intelligence }

• Leadership emotionally connecting the team to “the why” of the organization, creating an inspiring vision and shared purpose that goes far beyond individual roles and a paycheck.

• Leaders connecting employees to the social fabric of the community outside the workplace to create a feeling of belonging.

Learning emotional intelligence Emotional intelligence can definitely be developed with training and practice. Below are a few practical tips: Observe your thoughts. Our minds can become a snow globe of irrational thoughts, and leaders need to be careful not to attach to each snowflake. Freeing your mind of these thoughts will position you to be in the present moment without judgment or biases and give you excellent executive presence for the pressing needs immediately in front of you.

Find time to pause and unplug. Disengage from technology and enjoy your immediate surroundings. We can have self-awareness of our thoughts in stillness during the busy grind of work and life. During the day, find time for quiet reflection and self-awareness of our emotions and how we are feeling. The beauty is that we can do this anywhere. For difficult decisions, adopt the long-pause or 24-hour rule. The purpose of this rule is to provide time for sufficient thought before making a major decision. It can also help to defuse a difficult situation or potential conflict.

Embrace all emotions. Negative emotions give us wisdom.

Negative emotions are part of life and illuminate the positive emotions such as joy and peace. It is impossible and utopian to

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always expect experiencing joy with the erratic ups and downs of business and life. Life happens: Be resilient and embrace it!

Strive to feel what others are feeling (empathy), and develop an interest in co-workers’ and clients’ stories. Like an iceberg, we often only view what’s above the surface, but there is a whole story beneath it. Below the surface is the sweet spot where you can come to really know someone. Is this individual an introvert? An extrovert? A reader? A writer?

A Packers fan? A fan of art? What makes them come alive?

Once we have empathy, curiosity and a desire for real understanding, we can improve sales, influence, leadership, trust and coaching. The Golden Rule in my company is “treat others how they want to be treated,” and this all starts with empathy.

Empathy is not only human-to-human social awareness but also a profound organizational awareness. Leaders must be aware of how everybody is feeling and connected on a team.

Some leaders intuitively know how people influence each other within the network, and they have executive presence to adapt in real time with the ebb and flow of workplace emotions, strategy and changing talent. Others must develop those skills.

Organizations must champion emotional intelligence to stay current and build a competitive advantage. The rising star CPAs will be the ones who, in a new era of constant disruption and change, lead themselves and others with a commitment to self-awareness, adaptability and empathy.

Bill Marklein is the founder and CEO of Employ Humanity, a Wisconsin-based business that inspires emotional intelligence.

Contact him at sayhello@employhumanity.com.

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2019 WICPA

A

W

A

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NOMINATE SOMEONE YOU KNOW FOR AN EXCELLENCE AWARD! H Accounting Educator H Community Service H Accounting Student H Distinguished Career H Business & Management H Diversity & Inclusion H CPA in Public Practice H Woman to Watch H Young Professional Submit your nomination at wicpa.org/awards by Nov. 9, 2018.

Recipients will be announced in January and honored at the Member Recognition Banquet & Annual Business Meeting on May 9, 2019.

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