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Our news articles are posted on a regular basis to give our clients relevant and timely information about matters pertaining to our financial services. Browse through our current and archived articles to learn more.

Commercial Insurance :: ‘Heartbleed’ Bug Underscores Need for Cyber Risk Insurance

American businesses took a one-two punch in the gut this spring: Investigators discovered a serious vulnerability in a popular cryptographic protocol in very common use by commercial Web developers all over the world. The so-called “Heartbleed Bug” was nestled in the very prominent OpenSSL cryptographic software library, and allowed cyber thieves to steal information that both the Web programmers and the end user/customers thought was protected. The popular website Mashable.com published an extensive list of websites and vendors whose systems may have been compromised by the Heartbleed Bug. If you do business with any company on this list that may have been affected, you may wish to change your password information.
Just a matter of days later, the largest arts and crafts store in America, Michael’s, announced that thousands of credit card numbers had been compromised. Aaron Brothers, a Michael’s subsidiary, was also affected by an attack by highly sophisticated criminals using malware that had not been encountered before by their security consultant firms. Michael’s has contained the threat, and the malware is no longer compromising credit card numbers and expiration dates. The attack occurred between May 8, 2013 and January 27, 2014, potentially affecting 2.6 million cards.

Furthermore, Florida officials are now investigating an attack on Hess customers who purchased gas using their credit cards. Criminals installed a number of card skimmers at a number of Hess stations in Florida.

These attacks come on the heels of a massive leak of credit card information at the prominent Target chain of retail stores.

Businesses who take any form of electronic payment must consider themselves
at risk of liability arising from the compromise of their electronic payment systems.

The result isn’t just a risk to customers and card-issuing banks. Businesses who take any form of electronic payment must consider themselves at risk of liability arising from the compromise of their electronic payment systems. As we saw from the Heartbleed Bug, even the most sophisticated businesses with large and highly skilled information technology staffs of their own were vulnerable to flaws in the coding far upstream.

Furthermore, as we see in the Hess case, smaller firms can no longer assume they will not be targeted by cyber-thieves. If they can install skimmers on gas pumps and go undetected for months, they can install them almost anywhere. And it may well be the business that winds up holding the bag for liability for damages caused by cyber attacks that they failed to prevent. A recent survey showed that some 72 percent of all cyber breaches occur at small-to-medium sized businesses.

Liability can also come from government sources: The Federal Trade Commission recently filed suit against the Wyndham hotel chain for failing to provide adequate security for customers’ private information, after the FTC dealt with the fallout of three separate breaches in just a few years.

 

Cyber Risk Insurance
Fortunately, it is possible for businesses to purchase protection against this potentially devastating risk, through obtaining cyber risk insurance. This insurance protects the company against catastrophic liability arising from cyber attacks or other information security lapses.  Policies are now available from a variety of firms, and are designed to be affordable and realistic even for the smallest businesses that may be affected.

What’s Covered?
CyberLliability insurance, or cyber risk insurance, is still evolving, but policies could cover one or more of the following risks, according to the National Association of Insurance Commissioners:

 • Liability for security or privacy breaches. This would include loss of confidential information by allowing, or failing to prevent, unauthorized access to computer systems.

• The costs associated with a privacy breach, such as consumer notification,

customer support and costs of providing credit monitoring services to affected consumers.

• The costs associated with restoring, updating or replacing business assets stored electronically.

• Business interruption and extra expense related to a security or privacy breach.

• Liability associated with libel, slander, copyright infringement, product disparagement or reputational damage to others when the allegations involve a business website, social media or print media.

• Expenses related to cyber extortion or cyber terrorism.

• Coverage for expenses related to regulatory compliance for billing errors, physician self-referral proceedings and  Emergency Medical Treatment and Active Labor Act proceedings.

One size does not fit all. It’s crucial to take a look at the specific language of the policy as well as the premium, and choose the policy that best fits your overall risk management strategy and liability exposure.

 

Contact G.R. Reid Insurance for more information about Cyber Liability Insurance.

 

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Accounting & Tax :: The Aragona Trust Case: Can A Trust Be Treated as a Real Estate Professional?

During the last week of March 2014, the Tax Court, in the Frank Aragona Trust Case, held that a trust can qualify as a real estate professional under the passive activity loss rules based on the participation of trustees acting as employees of the rental activities. In its analysis, the Court addressed the issue of how a trust can determine material participation in a business. This decision becomes applicable to a broad range of businesses and not limited to real estate rentals.

There are two major consequences to a trust if a business interest is considered to be a passive activity:

1. Tax losses generated by the business interest can only be applied against income generated from other passive activity interests and cannot be used to offset investment income (e.g., interest, dividends, capital gains) and other non-passive business interests. This causes many trusts to be unable to currently use losses and increases income taxes. The limitation on the use of tax losses is particularly harmful to trusts due to the compressed income tax brackets. The maximum 39.6% tax rate applies to taxable income in excess of $11,950 for 2013.

2. For 2013 and later, the new 3.8% net investment income tax applies to passive activity business interests held by a trust. Unlike individuals, where the tax applies if modified adjusted gross income exceeds $200,000 (single filers) or $250,000 (joint filers), the new tax applies to trusts with modified adjusted gross income in excess of only $11,500. Additionally, the 3.8% tax will be imposed on gains generated from a sale of the business interest in the future.

If “material participation” can be demonstrated in the business activity, then income or loss generated from such activity will not be considered passive. However, rental activities are generally treated as passive regardless of the level of participation, unless a specific exception applies.  An exception exists for real estate professionals. A taxpayer is considered to be a real estate professional if:

a. More than one-half of “personal services” performed in trades or businesses during the year relate to certain real property trades or businesses; and

b. Personal Service hours exceed 750 hours.

If these requirements are satisfied, the rental activity is not deemed to automatically be passive. However, the taxpayer must still demonstrate “material participation” in the activity. In its regulations, the Service has provided several methods to determine material participation in an activity, several of which involve counting the hours worked in the business.

The facts of the new Tax Court case are:

• Frank Aragona (the grantor) formed a trust as grantor and trustee with his five children as beneficiaries. The five children were to share equally in the income of the trust. When Frank died in 1981, he was succeeded as trustee by five 5 children (as non-independent trustees) and his attorney (as the independent trustee). Three of the children (Paul, Frank and Annette) worked full-time as paid employees for a limited liability company which was wholly-owned by the trust (Holiday Enterprises LLC). The LLC also employed other persons, including a controller, leasing agents, maintenance workers, accounts payable clerks and accounts receivable clerks. All six trustees formally delegated their powers to Paul (the Executive Trustee) to facilitate the daily business operations. However, the trustees acted as a management board, met every few months, and made all major decisions regarding the trust’s business. The trust conducted some of its rental real estate activities through wholly-owned entities and some through entities in which it held a majority interest. Two of the working trustees (Frank and Paul) also owned minority direct interests in the flow-through entities.

• The trust treated losses from the real estate rental activities as deductible and not subject to the passive activity loss rules. The trust claimed that it should be treated as a real estate professional and that the trust materially participated in its real estate rental activities.

• The IRS determined on audit that the real estate losses should be subject to the passive activity loss limitation rules and were not deducible against non-passive activity income.

The IRS’ position is that a trust can never satisfy the requirements for real estate professional status since it must demonstrate that more than one-half of its “personal services” performed in the tax year were in real property related trades or businesses. The Service argued that “personal services” refer to the acts of individuals and cannot apply to an entity, like a trust.

The court rejected this position. It reasoned that if Congress wanted to exclude trusts from real estate professional status, it could have done so by explicit statutory language. Additionally, it stated that if the trustees are individuals, then personal services can be performed.

Even if a trust satisfies the requirements of being a real estate professional, this merely means that its rental activities are not considered to be per se passive activities. The trust must still demonstrate that it materially participates in the same manner as any non-rental activity. The IRS position has historically been that a trust can materially participate in a business activity only if the trustee of the trust sufficiently participates in the business,in his or her capacity as a trustee . This means that any time spent in the activity in some other capacity (e.g., employee of the business entity) must be ignored.

The Trust argued that it should be able to count the hours worked by certain trustees as employees of the business. It also argued that it should be able to count the hours of non-trustee employees and agents in demonstrating material participation.

The Court stated that the trustees were bound under Michigan law to administer the trust solely for the interests of the trust beneficiaries and they were not relieved of this duty even when acting in another capacity. Therefore, the time of the trustees spent as employees of the businesses owned by the trust should be used in determining material participation. From all the facts of the case, it was clear that the trustees materially participated in the business activities.

This case offers a number of planning opportunities for trusts to maximize the benefits of business losses and to avoid the new net investment income tax.

 

 

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Accounting & Tax :: Full Time Real Estate Agent Did Not Establish Material Participation

The recent Tax Court decision in Charles Gragg and Delores Gragg v. Commissioner of Internal Revenue, stressed the importance of taxpayers correct determination of material participation in rental real estate activity to avoid passive loss treatment. Only participation on the rental real estate activities may be considered when determining if the taxpayer materially participates.

Generally, losses from rental real estate activities are considered passive. The term passive activity includes any activity which involves the conduct of any trade or business, and in which the taxpayer does not materially participate. Passive losses may not be used to offset most taxable types of income. However, taxpayers who materially participate in their rental real estate activities are not subject to this passive-loss limitation.

There are two qualifications that taxpayers must meet in order to be deemed to materially participate:

1. More than one half of the personal services performed in trades or businesses are performed in real property trades or businesses in which the taxpayer materially participates, and

2. The taxpayer must perform more than 750 hours of service.

The facts in the Gragg case are as follows:

In 2006 and 2007, taxpayers Charles and Delores Gragg reported rental real estate losses in excess of their rental real estate income. Charles and Delores argued that because Delores is a qualified real estate agent, her full-time occupation relieves the couple from having to demonstrate material participation.

Delores provided the court with estimates of the amount of time spent rather than actual rental records. In 2006, Delores had estimated that she spent 40 hours over a two month period and an additional 100 hours after the tenants had moved out. She also claimed to have spent approximately 200 hours at another property dealing with tenant problems, and approximately 300 hours restoring property.

The records did not reflect a means of how the hours were calculated. Even if the amount of hours were above 750, Delores would have been required to make an election in order to treat all real estate properties as one activity, which was not done. Since there was no election, the taxpayers were required to separately establish their material participation for each of their rental properties.

The records do not show any estimates for 2007. Because of this, the court concluded that the estimates provided by Delores were not a “reasonable means” of documenting her material participation. The documents provided were deemed unreliable and not deemed a reasonable means to show participation.

Delores Gragg’s real estate activities are treated separately from her rental activities. Her status as a full-time real estate agent did not establish her material participation in each of her separate rental real estate activities. Further, she failed to demonstrate her material participation in the two rental properties which were deemed distinct from her real estate agent job. Therefore, the court decided that the taxpayers did not materially participate in their rentals even though Delores Gragg worked as a full-time real estate agent.

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Financial & Wealth :: What Is the Capital Gains Tax?

capital_gains_taxCapital gains are the profits realized from the sale of capital assets such as stocks, bonds, and property. The capital gains tax is triggered only when an asset is sold, not while the asset is held by an investor. However, mutual fund investors could be charged capital gains on investments in the fund that are sold by the fund during the year.

There are two types of capital gains: long term and short term; each is subject to different tax rates. Long-term gains are profits on assets held longer than 12 months before they are sold. The American Taxpayer Relief Act of 2012 instituted a 20% long-term capital gains tax rate for taxpayers in the 39.6% income tax bracket and extended both the 0% capital gains tax rate for individuals in the 10% and 15% tax brackets and the 15% capital gains tax rate for all other tax brackets. Short-term gains (on assets held for 12 months or less) are taxed as ordinary income at the seller’s marginal income tax rate.

The taxable amount of each gain is determined by a “cost basis” — in other words, the original purchase price adjusted for additional improvements or investments, taxes paid on dividends, certain fees, and any depreciation of the assets. In addition, any capital losses incurred in the current tax year or previous years can be used to offset taxes on current-year capital gains. Losses of up to $3,000 a year may be claimed as a tax deduction.

If you have been purchasing shares in a mutual fund over several years and want to sell some holdings, instruct your financial professional to sell shares that you purchased for the highest amount of money, because this will reduce your capital gains. Also, be sure to specify which shares you are selling so that you can take advantage of the lower rate on long-term gains. The IRS may assume that you are selling shares you have held for a shorter time and tax you using short-term rates.

Capital gains distributions for the prior year are reported to you by January 31, and any taxes that must be paid on gains are due on the date of your tax return.

Higher-income taxpayers should be aware that they may be subject to an additional 3.8% Medicare unearned income tax on net investment income (unearned income includes capital gains) if their adjusted gross income exceeds $200,000 (single filers) or $250,000 (married joint filers). This is an outcome of the Patient Protection and Affordable Care Act.

 

The information in this article is not intended to be tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security.

This material was written and prepared by Emerald.
© 2014 Emerald Connect, LLC All rights reserved.

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Accounting & Tax :: IRS Reiterates Warning of Pervasive Telephone Scam

phonepadlThe Internal Revenue Service recently issued another strong warning for consumers to guard against sophisticated and aggressive phone scams targeting taxpayers, including recent immigrants, as reported incidents of this crime continue to rise nationwide. These scams won’t likely end with the filing season so the IRS urges everyone to remain on guard.

The IRS will always send taxpayers a written notification of any tax due via the U.S. mail. The IRS never asks for credit card, debit card or prepaid card information over the telephone. For more information or to report a scam, go to www.irs.gov and type “scam” in the search box.

People have reported a particularly aggressive phone scam in the last several months. Immigrants are frequently targeted. Potential victims are threatened with deportation, arrest, having their utilities shut off, or having their driver’s licenses revoked. Callers are frequently insulting or hostile – apparently to scare their potential victims.

Potential victims may be told they are entitled to big refunds, or that they owe money that must be paid immediately to the IRS. When unsuccessful the first time, sometimes phone scammers call back trying a new strategy.

Other characteristics of this scam include:

  • Scammers use fake names and IRS badge numbers. They generally use common names and surnames to identify themselves.
  • Scammers may be able to recite the last four digits of a victim’s Social Security number.
  • Scammers spoof the IRS toll-free number on caller ID to make it appear that it’s the IRS calling.
  • Scammers sometimes send bogus IRS emails to some victims to support their bogus calls.
  • Victims hear background noise of other calls being conducted to mimic a call site.
  • After threatening victims with jail time or driver’s license revocation, scammers hang up and others soon call back pretending to be from the local police or DMV, and the caller ID supports their claim.
  • If you get a phone call from someone claiming to be from the IRS, here’s what you should do:
  • If you know you owe taxes or you think you might owe taxes, call the IRS at 1.800.829.1040. The IRS employees at that line can help you with a payment issue, if there really is such an issue.
  • If you know you don’t owe taxes or have no reason to think that you owe any taxes (for example, you’ve never received a bill or the caller made some bogus threats as described above), then call and report the incident to the Treasury Inspector General for Tax Administration at 1.800.366.4484.
  • If you’ve been targeted by this scam, you should also contact the Federal Trade Commission and use their “FTC Complaint Assistant” at FTC.gov. Please add “IRS Telephone Scam” to the comments of your complaint.


Taxpayers should be aware that there are
other unrelated scams
(such as a lottery sweepstakes)
and solicitations (such as debt relief)

that fraudulently claim to be from the IRS.

The IRS encourages taxpayers to be vigilant against phone and email scams that use the IRS as a lure. The IRS does not initiate contact with taxpayers by email to request personal or financial information. This includes any type of electronic communication, such as text messages and social media channels. The IRS also does not ask for PINs, passwords or similar confidential access information for credit card, bank or other financial accounts. Recipients should not open any attachments or click on any links contained in the message. Instead, forward the e-mail to phishing@irs.gov.

More information on how to report phishing scams involving the IRS is available on the genuine IRS website, IRS.gov.

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Human Resource Services :: Talent Acquisition, Employee Retention Solutions & Strategies

HRmagnificationOur Human Resource experts specialize in talent acquisition that has successfully matched candidates and employers at a stay-rate of over 95%. The proprietary process we have developed can assist with the hiring needs at every level in any industry. The recruitment process includes placing ads in multiple modalities, telephone interviews, in-person behavioral based interviews, assessments, interview summaries, salary negotiation, background and reference checks and on-boarding assistance.

Once you have the latest addition to your team, it is the “honeymoon” period that is going to be the most critical in your new hire’s career within your organization. We advise and assist you to help your business with the integration of new hires at every level.

Contact us for more information on our Human Resource Management Services.

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Accounting & Tax :: The Supreme Court Rules that Severance Payments can be Subject to FICA

In an 8-0 decision, the U.S. Supreme Court, on March 25, ruled that retailer, Quality Stores Inc., a large specialty agricultural retailer, was not entitled to a refund of FICA paid on severance payments the company paid to its employees due to layoffs.

Quality Stores, which had over 300 stores, closed all stores and fired all employees in 2001 and 2002. The company paid the disputed taxes and sought a refund claiming that wages should not include severance paid as a result of bankruptcy. Quality Stores contended that the payments represented supplemental unemployment compensation, not wages.

The case was presented in many lower courts that were divided on the issue. The Supreme Court decision reverses rulings by the 6th U.S. Circuit Court of Appeals and a federal district court, which found the payments were not considered taxable wages. The payments were made to 1,850 former employees let go after the company filed for bankruptcy.

The decision is a victory for the present administration and the Justice Department who estimated that the government could face more than $1 billion in tax refund claims from other employers if the decision was upheld. Therefore, all protective claims that were previously filed will be denied and no refunds will be forthcoming to any similarly situated taxpayers.

Text of the opinion is available at http://www.supremecourt.gov/opinions/13pdf/12-1408_6468.pdf.

 

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Accounting & Tax :: New York State Enacts Broad and Significant Tax Reform in New Budget

On March 31, 2014, Governor Andrew Cuomo signed into law a Budget Bill that contains broad and sweeping tax reform provisions that impact both businesses and individuals. These new laws include changes which will impact tax base, tax rates, apportionment methodology, nexus, tax credits and estate tax reform. Except where noted, the changes below are effective for taxable years beginning on or after January 1, 2015.

Notable Changes Adopted in the Budget

Property Tax Relief for Homeowners
For years beginning on or after January 1, 2014, the Budget includes a two-year property tax freeze to homeowners. This will be accomplished through payment of a rebate by New York State. In year one of the freeze, New York will provide tax rebates to homeowners who live in a jurisdiction that does not impose a property tax increase greater than 2%. In year two, rebates will be provided to homeowners who live in a jurisdiction that does not impose a property tax increase greater than 2% and agree to implement a shared services or administrative consolidation plan. This rebate does not apply to New York City homeowners.

Corporation Tax Rates
For tax years beginning on or after January 1, 2016, the Budget provides for a tax rate reduction from the current 7.1 percent to 6.5 percent of Entire Net Income (ENI) for corporate taxpayers. Certain New York manufacturing taxpayers will benefit from a zero tax rate effective for tax years beginning January 1, 2014 (more detail below). The Budget also contains:

  • A reduction of the tax rate applied to the capital base computation, such that the current rate of 0.15 percent will be phased out for tax years beginning on or after January 1, 2021.
  • Changes to fixed dollar minimum tax that could increase the tax for taxpayers who pay under this methodology.
  • Additional tax brackets added to the fixed dollar minimum computation. Current law has a top bracket for the minimum tax which includes taxpayers with New York receipts over $25 million and a corresponding tax of $4,500. The new law has a top bracket of New York receipts of over $1 billion and a corresponding tax of $200,000.
  • Elimination of the tax on minimum taxable income and the separate tax on subsidiary capital.
  • An increase in the Metropolitan Business Surcharge from the 17 percent to 25.6 percent for tax years beginning on or after January 1, 2015, but before January 1, 2016. (The rates for future years will be determined at a later date.)

Rate Reduction for New York Manufacturers
Effective for tax years beginning on or after January 1, 2014, the Budget provides for a zero tax rate to be imposed on “qualified New York manufacturers”. A qualified New York manufacturer is a manufacturer owning property in New York that would be eligible for the investment tax credit and meets certain dollar value thresholds. It should be noted that the zero tax rate is applicable only to New York C corporations. The current legislation does not address the availability of a zero tax rate to flow- through entities such as New York S Corporations or entities taxed as partnerships. To qualify for the corporate income tax elimination available to manufacturers, non C corporation companies would have to restructure. This provision is deemed to be a major boon to businesses, especially in the upstate regions.

Apportionment Method
New York will join the trend of other states who have adopted a single sales factor apportionment methodology by adopting a market based sourcing regime for purposes of determining the revenue allocated to New York State. New rules are provided to address receipts from services, intangible property, sales of digital property and transactions in various types of securities. These rules will not impact businesses who sell tangible personal property.

Combined Reporting
New York’s current law provides for combined reporting based on the presence of substantial intercompany transactions. The new law replaces these rules with combined reporting now based upon unitary provisions. Combined reporting will now be required by any taxpayer:

  • That owns or controls, directly or indirectly, more than 50% of the capital stock of one or more corporations or
  • More than 50% of the capital stock of which is owned or controlled either directly or indirectly by one or more other corporations or
  • More than 50% of the capital stock of which, and the capital stock of one or more other corporations, is owned or controlled , directly or indirectly, by the same interests and
  • That is engaged in a unitary business with those corporations.

Corporations may elect to be combined with non-unitary companies provided that ownership thresholds are met. This election is irrevocable and is binding for the current year plus six additional years. The election will be automatically renewed for the next seven year period unless revoked.

Net Operating Losses (NOL)
The new law changes the NOL provisions from a pre-apportionment to post-apportionment computation. It also ends the requirement that the New York NOL usage will be limited to the same amount of NOL used for federal tax purposes. This will serve to “decouple” the New York NOL from the federal NOL. New rules also allow taxpayers to reduce future taxable income using NOL’s generated under the old (pre-apportionment basis) using a computation of a modified amount. A three year carryback period is permitted for NOL’s incurred in post-reform taxable years (but no NOL can be carried back to a taxable year beginning before January 1, 2015.)

Tax Credits
Several new and expanded tax credits are contained in the budget including:

  • Effective January 1, 2014, a new property tax credit equal to 20% of the real property taxes paid during the taxable year by qualified New York manufacturers. The budget will reduce manufacturers’ property taxes-even if they are paid through a lease. Manufacturers already getting tax breaks through other state programs, such as the Empire Zone or IDA, cannot claim the additional property tax reductions.
  • Extension of the Empire State Commercial Production Credit through December 31, 2017,
  • A refundable credit for telecommunications excise taxes paid by Start-Up New York companies,
  • A new tax credit for musical and theatrical production companies equal to 25% of qualified production and transportation expenses, capped at $4 million per year,
  • Extension of the Lower Manhattan Sales and Use Tax Exemption through September 1, 2017,
  • Expands the investment tax credit to include the purchase of qualified depreciable property used in New York by businesses, in addition to manufacturers, including industrial waste facilities, research and development activities, broker-dealers in connection with the purchase or sale of stocks, bonds and securities, businesses providing investment advisory services for a regulated investment company, or loan origination services in connection with the purchase or sale of securities and businesses engaged in qualified film production activities.

Economic Nexus Standards
The Budget adopts an economic nexus standard such that a corporation deriving receipts of $1 million or more in a taxable year will now be subject to New York State tax. A corporation will be deemed to be doing business in the state if it has issued credit cards to 1,000 or more customers with mailing addresses within New York State. This provision will have the effect of bringing more out-of-state corporations into the grasp of New York State taxation.

Corporate Partner Nexus
Current law provides that a non-New York corporation is “doing business” and subject to New York taxation if it is a partner in a partnership or a member in a limited liability company or partnership (other than a portfolio investment partnership) and meets one of 10 tests such as holding a greater than 1% LP interest. The new law provides that a corporate partner will now be subject to tax in New York by holding any type of partnership/LLC/LLP interest that is doing business in the state.

Fulfillment Center Exception
Current New York law included an exception to the establishment of nexus if an out-of-state corporation’s only activity in the State was the use of an unrelated fulfillment center in New York to store and ship inventory. The new law repeals this exception.

Merger of Bank Tax and Corporate Tax Regime
One of the Governor’s stated reasons at the beginning of the budget process was to provide tax simplification and relief and improve voluntary compliance. The elimination of the separate bank tax regime is purported to address this simplification. Banks will now be taxed under the corporate tax provisions. Thrift institutions and Qualified Community Banks (“QCB”) will be entitled to one of three special subtraction modifications effective for tax years beginning on or after January 1, 2015:

  • Special subtraction modification #1 – Thrifts and QCB will be allowed a deduction of 32% of entire net income that exceed charge-offs, or
  • Special subtraction modification #2 – Small Thrifts and QCB will be allowed a deduction of 50% of the net interest income related to “Qualifying Loans”. One of the qualifications for Small Thrifts is the average assets of the taxpayer or affiliated group must not exceed $8 billion. Qualifying loans are small business loans or a residential loan the principal amount is $5 million or less, or
  • Special subtraction modification #3 – Small Thrifts and QCB that has maintained a captive REIT on April 1, 2014 will be allowed a deduction of 160% of the dividends paid deduction allowed for federal income tax purposes. A small Thrift or a QCB that maintains a captive REIT will not be allowed to utilize either of the first two modifications.

One of the qualifications of a QCB is that the average assets of the taxpayer or affiliated group must not exceed $8 billion. Each of these subtraction modifications require detailed information that will all be subject to questions under audit. Depending on which subtraction modification used the change to the taxpayers’ effective tax rate could be a permanent benefit or a temporary benefit.

Other change effecting financial institutions includes

  • Apportionment for loan interest income will be customer sourced instead of the greater of the income producing activities.
  • Qualified financial instruments can be allocated to NYS on a fixed percentage method of 8% instead of commercial domicile.

Estate and Gift Tax Reform
The budget includes language which will generally conform New York’s estate tax to the federal estate tax law as of January 1, 2014. The New York estate tax exemption rises to $2,062,500 for decedents dying on or after April 1, 2014 and will increase each year until reaching an exemption of $5,250,000 for those dying on or after April 1, 2017 and before January 1, 2019. The exemption will then be indexed for inflation. The new law also requires an addition to the estate tax base for gifts made by the decedent within 3 years of death if the decedent was a New York resident at the time the gift was made (applies to gifts made on or after April 1, 2014 and before January 1, 2019). The law makes no changes in the current New York estate tax rate.

Concluding Summary
As described above the new budget contains a myriad of changes which will impact many taxpayers – located both within and outside of New York State. As the effective date for many of these provisions is January 1, 2015, taxpayers should evaluate the impact the changes have on their tax filing methodology and overall tax liability.

It should be noted that the enactment date of this bill, March 31, 2014, creates a first quarter 2014 law change. Impact on financial statement disclosures and deferred tax assets or liabilities should be taken into account when evaluating the potential effect to financial statement preparation.

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Human Resource Services :: Information Dictates the Strategy

Our team of trained and certified Human Resource specialists use comprehensive assessment tools to enable you to assess your current unique organizational culture, which provides significant benefits for both recruiting and management purposes. What makes one person successful, or less successful, in an organization can be very telling in terms of how you manage those people, and how you hire similar employees to create a team that works well together and produces maximum returns.

Once the combination of assessment tools are completed and analyzed, we deliver a full in-depth “Core” report on the results per individual and as a team. We will also provide management strategies and recommendations based on the results to use for future recruiting purposes.

Contact us for more information our Human Resource Management Services.

 

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Notice of Employee Rights to Paid Sick Leave

Under New York City’s Earned Sick Time Act (“Sick Leave Law”), employees of [COMPANY] are entitled to paid sick leave under the following terms and conditions.

Accrual of Paid Sick Leave
Employees accrue sick leave at the rate of one hour for every 30 hours worked, up to a maximum of 40 hours of paid sick leave per calendar year. [COMPANY]’s calendar year begins on [January 1] and ends on [December 31].
Employees who were employed prior to April 1, 2014 began to accrue paid sick leave on April 1, 2014. Employees who began their employment with [COMPANY] after April 1, 2014 begin to accrue paid sick leave on their first day of employment.

Use of Paid Sick Leave
Employees who were employed prior to April 1, 2014 may begin to use paid sick leave on July 30, 2014. Employees who began their employment with [COMPANY] after April 1, 2014 may not begin using paid sick leave until after they have completed 90 days of employment. No more than 40 hours of paid sick leave may be used in a calendar year. Paid sick leave must be used in increments of at least four hours. Once accrued, employees may use paid sick leave if:

  • The employee has a mental or physical illness, injury, or health condition; the employee needs to get a medical diagnosis, care, or treatment for the employee’s mental or physical illness, injury, or condition; or, if the employee needs to get preventive medical care.
  • The employee must care for a family member who needs medical diagnosis, care, or treatment for a mental or physical illness, injury, or health condition, or who needs preventive medical care.
  • [COMPANY] closes due to a public health emergency or the employee needs to care for a child whose school or child care provider closes due to a public health emergency.

For purposes of the Sick Leave Law, the following are considered “family members”: child, grandchild, spouse, domestic partner, parent, grandparent and child or parent of an employee’s spouse or domestic partner and sibling (including a half, adopted, or step sibling).

If the need for the use of paid sick leave is foreseeable, an employee must provide his or her supervisor with seven days advance notice of the intention to use paid sick leave. If the need is unforeseeable, an employee must provide his or her supervisor with notice as soon as practicable (reasonable).

In order to use paid sick leave, an employee must provide written verification that the leave was used for the one of the purposes listed above. If an employee uses paid sick leave for more than three full consecutive work days, the employee must provide [COMPANY] with documentation from a licensed health care provider indicating the need for the amount of paid sick leave used. (Please note that [COMPANY] may request additional documentation in certain circumstances in which other laws are at issue, such as the Americans with Disabilities Act and the Family and Medical Leave Act).

Unused Paid Sick Leave
Unused paid sick leave is carried over to the following calendar year and is not paid out at termination.

Department of Consumer Affairs (“DCA”)
Employees who believe their Sick Leave Law rights have been violated may file a complaint with the DCA.

No Retaliation
[COMPANY] will not retaliate against employees for requesting or using paid sick leave, filing a complaint with the DCA in good faith, communicating with anyone about a violation of the Sick Leave Law, participating in an administrative or judicial action regarding an alleged violation of the Sick Leave Law or informing anyone about their rights under the Sick Leave Law.

Union Employees
Employees who are covered by a collective bargaining agreement (“CBA”) in effect on April 1, 2014 are not entitled to paid sick leave under the Sick Leave Law until the CBA expires and only if a subsequent CBA does not (1) waive employees’ rights under the Sick Leave Law and (2) provide for comparable benefits.

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