Firm Newsletters

Fall 2010 Edition

Are Big Changes Coming to the Georgia Tax System?

By Elizabeth Jonsson - beth@marshalljones.com

During the 2010 Georgia Legislative session, a Bill (H. B.1405) was passed that created a special tax council (the Council) to review all aspects of the Georgia tax system. Basically the Council will be reviewing everything relating to state revenue. The Council will likely focus on how to increase state sales tax revenue, potentially expanding sales tax to services, and evaluating the 119 special exemptions currently on the books. It is widely expected that there will be special focus on groceries as they currently have a full state sales tax exemption. Most Georgia counties currently impose a local sales tax on groceries. In addition, personal and corporate income tax rates will be on the table.

The Council is made up of 11 members. Four economists specifically named in the Bill, two individuals from business organizations that are chairpersons of organizations named in the Bill, four members to be appointed by the Lt. Governor and the Speaker of the House (two each), and the Governor. The Council had their first meeting on July 28^th at which time they elected AD Frazier (one of the two appointments made by House Speaker David Ralston) as chairman. Also during this meeting, Dr. Carolyn Bourdeaux from the Fiscal Research Center at Georgia State gave a presentation offering some insight into the broad nature of the review. She covered the need for adequacy, stability, equity, simplicity and ease of administration within a comprehensive tax system and the effect of taxpayer decisions on a tax system. Chairman Frazier said, “I expect to see our actions as a manifestation of economic development, as a manifestation of job creation, good business judgment, not so much an effort to fund existing expenditures.”

The Council is hosting meetings across the state, starting in late August through mid September, to give Georgia citizens an opportunity to express their opinions as to what should be addressed in tax reform. Also in September, the Council will have presentations from tax policy experts and private sector groups. The focus of these presentations will be to provide alternative tax systems for the Council to consider. Between the end of September and early December the council will draft their recommendations for proposed legislation. The Council will make recommendations on a comprehensive tax system which will go to a Special Joint Committee of Georgia Revenue Structure in early January 2011. This Joint Committee will then introduce one or more bills incorporating the recommendations without significant changes (emphasis added). The makeup of the Joint Committee will consist of 12 members of the legislature based on positions held on January 5, 2011. These positions are defined within H.B. 1405. It is interesting to note that the 12 members of this committee will not be identified until January 2011 as elections in November may change the members of the legislature, thereby changing leadership positions in both houses.

Probably the most unique aspect in the process of this tax reform is that when and if a bill(s) comes to a vote on both the House and Senate floors through the Joint Committee, no amendments will be allowed.

Additional information about the Special Council on Tax Reform can be found at http://fiscalresearch.gsu.edu/tax reform.

Health Care Reform and Small Nonprofits

By James Greg Logan — greg@marshalljones.com

Some aspects of the Patient Protection and Affordable Care Act (“PPACA”) are certain, including how the reform may affect nonprofits. The small employer tax credit is one of these certainties, as are health insurance exchanges. Other affected areas are not as clear and leaders among the nonprofit community are closely watching the reaction to this landmark measure.

Health care reform is a signature issue for the Obama administration, which has called for an overhaul of the existing health insurance and delivery systems to ensure that all Americans have access to affordable health care. Congress completed action on two reform bills that were designed to achieve these goals. Nonprofit organizations have been engaged in the policy debate to take advantage of the opportunities to reduce the costs they pay as employers and to extend health care coverage to the individuals served by the nonprofit community.

The PPACA, among other reforms, extends access to coverage for the uninsured and prevents the denial of insurance for pre-existing conditions. The National Council of Nonprofits in Washington, D.C. believes several provisions of the bill could help nonprofits control their health care costs. The Small Employer Credit would provide a tax credit allowing small nonprofit employers to deduct from their withholding tax liability 25% of qualified health costs from 2010-2013 and 35% of qualified costs for 2014 and onward for up to two additional years. Small nonprofits are those with 25 employees or fewer and average wages less than $50,000 per year.

In addition to the tax credit, health insurance exchanges will provide a mechanism for individuals and employers to buy lower-cost health insurance as a part of a purchasing pool. All employers with fewer than 100 employees and individuals with income between 133% and 400% ($24,352 – $73,240) of the federal poverty level will be eligible to participate in the exchanges once they are operational. States are permitted to allow employers with more than 100 employees access to the exchanges after 2017. The law anticipates that the exchanges will be operational by January 1, 2014.

The measure also provides grants for up to five years to small employers that establish wellness programs, in addition to providing technical assistance and other resources to evaluate employer-based wellness programs.

There is no doubt that controlling costs associated with reform will be challenging, and it will be important going forward to be aware of the tools available and the systems that are in place to assist nonprofits.

Firm News

The Community Service Side of Marshall Jones

Accounting Services Manager, Dina Binion, serves as a safe keeper in the Divorce Care for Kids (DC4K) program. DC4K is a 13-week program that helps children ages 5 - 12 heal from the pain caused by separation, divorce or the death of a parent. Dina also volunteers as a small group leader in the preschool area of her church's children's ministry.

Tax Senior Associate, Jonathan Luke has joined the Buckhead Business Association’s ‘YoungBucks’ which is open to all young professionals who work, live, play or have an interest in Buckhead. The members of YoungBucks also seek to strengthen the community by getting involved in community service activities. Past recipients have been the Atlanta Humane Society, Camp Twin Lakes, Shepherd Center, Atlanta Community Food Bank and more.

Hire Act

By Elizabeth Jonsson - beth@marshalljones.com

In March 2010, the Hire Incentives to Restore Employment (HIRE) Act was enacted. Two of the intended goals of this legislation are to encourage businesses to hire new employees and acquire capital assets. There are two opportunities in this bill that will be advantageous to small businesses:

• Hiring and retaining new employees -
  • This provision gives employers a tax holiday on the employer paid social security tax (6.2%) for newly hired employees that were previously unemployed. The individual hired must have worked less than 40 hours, in total, in the 60 days prior to employment. In addition, the holiday only applies to individuals hired between February 3, 2010 and January 1, 2011. It is very important to be aware of the timing of the tax holiday, as it only applies to wages paid between March 19, 2010 and December 31, 2010. The newly hired worker can be full-time or part-time and in certain circumstances, a previously laid off employee can be rehired and the employer will still qualify for the tax holiday. However, if the new employee is hired to fill an existing position, the open position must have been created by either the previous employee resigning voluntarily or having been fired for cause.
  • Another provision of the new hiring incentive is a tax credit. This credit is allowed if an employee, hired after February 3, 2010, continues to work for the taxpayer for at least 52 consecutive weeks. This credit is calculated at the lesser of $1,000 or 6.2 % of the wages paid to the retained employee during the 52 week period. There are a few caveats in qualifying for this credit:
  • The employee must stay for the entire 52 weeks. The credit is not prorated if the employee voluntarily leaves within the 52 week period;
  • The wages paid to the employee for the second 26 week period must be at least 80% of the wages paid during the first 26 weeks;
  • This credit does not apply to wages for household employees or individuals who are eligible for foreign earned income exclusion;
  • Finally, this credit is to be taken on the 2011 income tax returns, filed in 2012. No carry back of this credit will be allowed.

1. Additional investments in fixed assets –
   • The HIRE Act extends the opportunity for certain taxpayers to expense assets acquired after December 31, 2009. The extension allows a business to expense up to $250,000 of asset additions. However, as there has been no extension of the bonus depreciation provision, the decision to expense or depreciate in the current year will produce a much larger swing in taxable income. The taxpayer may elect to expense some or all of the acquired assets under Section 179. Consistent with the other provision of this bill, there are a few items that need to be noted:
     • There is a phase-out if annual purchases exceed $800,000 with no expensing;
     • The §179 expensing option is available for new and used assets;
     • Off the shelf computer software is eligible property for this purpose;
     • The extension applies to tax years beginning after December 31, 2009 and before January 1, 2011, allowing fiscal year taxpayers to expense property purchased in 2010.

Proposed Banking Regulations

By James Greg Logan - greg@marshalljones.com

In January, President Barack Obama proposed new limits on the size and activities of the nation's largest banks. President Obama said he wanted to toughen existing limits on the size of financial firms and force them to choose between the protection of the government's safety net and the often-lucrative business of trading for their own accounts or owning hedge or private-equity funds. "Never again will the American taxpayer be held hostage by a bank that is too big to fail," President Obama said.

Under the Obama proposal, banks that accept federally insured deposits or have the right to borrow from the government would be prohibited from owning, investing in or sponsoring hedge funds or private-equity funds. "You can choose to engage in proprietary trading, or you can own a bank, but you can't do both," an administration official said.

The President also called for expanding the reach of a 1994 law that forbids banks from acquiring other banks if the acquisition would cause the bank’s insured deposits to be greater than 10% of the nation’s total. The expansion would cover other types of funding—such as banks' short-term borrowing from financial markets—and perhaps put a cap on the share of assets any one firm could hold.

Big banks and related trade groups attacked the Obama proposals as unnecessary and unwise. Over the past several years, banks have bulked up their profits in areas far beyond taking deposits, making loans and trading stocks and bonds on behalf of customers. Some have bought or sponsored hedge funds. Others have moved to invest their own money in the financial markets.

If accepted by Congress, the Obama proposals could force significant changes in how the nation's biggest banks do business. The new rules would take effect over a three to five years time period once enacted.

While the bill appears to be headed for final passage, May’s Senate vote to delay final action put the time frame for passage in question, including the fate of several contentious amendments that remained unresolved.

Letter from Charlie

We continue to be more proactive with our clients and to be responsive to their service needs.

In the latter case, we are pleased to report that we now provide contract CFO services through association with individuals who have CFO experience.

We will be using a variety of methods to reach out to our clients:

1. Our website and Linkedin and Facebook sites provide timely information on a host of tax, accounting and financial issues. We encourage our clients and other interested parties to sign into these sites as “fans” to receive unobtrusive updates on these issues.
2. Before year end, we will have stratified our client database by several categories and will be providing periodic emails on “breaking news” (generally tax legislation) pertinent to each specific client as the news occurs. We expect a flurry of new tax legislation in the near future due to the likely expiration of the Bush tax cuts at the end of this year.
3. We are planning our first annual tax seminar this fall, open to all of our clients. We anticipate a 4pm to 6pm tax briefing, with refreshments and networking opportunities to follow.

We encourage your feedback. Proactivity and responsiveness are areas in which we are striving to improve. We appreciate hearing from you on these issues.

Firm News

Marshall Jones is pleased to announce the appointment of Elizabeth (Beth) Jonsson, CPA as a Senior Tax Manager. Beth has considerable tax experience both in public and private accounting. She has an impressive academic background with a degree in Economics from Rhodes College; an MBA in Accounting and a J.D. with concentration in taxation from Emory University. We plan to use Beth’s skills in a variety of capacities in our tax department including planning, research, compliance, supervision and review. We are confident that our clients will benefit from Beth’s considerable expertise, and we look forward to having her get to know you. Welcome aboard Beth!

Marshall Jones proudly joined several sponsors of the second annual Feel the H.E.A.T. 5K Run/Walk at St. Columba’s Episcopal Church in Suwanee on February 20, 2010. Proceeds from the run benefited the Heating Energy Assistance Team, a non-profit organization that helps low income Georgians provide for their energy needs.

Ellen Siegfried has joined the Management of an Accounting Practice (MAP) Committee of the Georgia Society of CPA’s. She has also volunteered to be a member of the MAP Conference task force responsible for planning the 2010 conference to be held in the fall.

Accounting Services Leader, Dina Binion, is the proud grandmother of a healthy baby boy, Lennon Michael, born May 13th. At birth he weighed 7 lbs 4 oz and was 19 inches long. Congratulations Dina!!