Month: February 2023

RBT CPA’s Rebecca Reynolds, CPA, Admitted to the Partnership

FOR IMMEDIATE RELEASE

RBT CPAs LLP, takes great pleasure in announcing that Rebecca Reynolds, CPA, of Highland, New York, has been admitted to the Firm as a Partner.

Rebecca has been with the Firm’s Audit Department in Newburgh since 2014, when she graduated Mount Saint Mary College with an Accounting degree and subsequently earned an MBA. Rebecca is on the SUNY Orange Foundation Board, as well as the Board of Community Foundations of the Hudson Valley where she also serves as an Audit Committee chair. She has been volunteering with the United Way of Orange-Dutchess for more than eight years.

Rebecca grew up in Ulster County, NY and continues to live in Highland with her husband Chris and their two dogs. Rebecca says, “I am most excited to work on and grow our Audit team in the Poughkeepsie office, where we’re building our practice and establishing a presence in Dutchess County.” She adds, “I think RBT is unique because we have the resources of a large firm thanks to our RSM alliance, but still have a tight knit family culture.”

Managing Partner, Michael Turturro says, “Rebecca is a welcome addition to our partnership team. Her professionalism, energy, and enthusiasm are contagious and will no doubt contribute to her continued success as a team leader and valued client resource. Congratulations, Rebecca!”

RBT CPA’s Thomas Zupan, CPA, Admitted to the Partnership

FOR IMMEDIATE RELEASE

RBT CPAs LLP, takes great pleasure in announcing that Thomas Zupan, CPA, of Highland, New York, has been admitted to the Firm as a Partner.

Tom graduated from Pace University with an MBA in 2014 and four years later earned his CPA license. He joined RBT CPAs right after graduation in the Newburgh office as part of the client services team, specializing in the construction industry.

Tom has been a volunteer member of the Modena Fire Department for 13 years, first as an active firefighter and later as treasurer – a role he still holds today. He was born and raised as part of a large family in Highland in Ulster County, where he currently resides with his wife Heather. He is an avid golfer, and baseball card collector and seller.

Tom says, “At RBT, our vision and goals are not just to be the compliance accountant who files required paperwork. We want to be the trusted business advisor that clients know they can depend on to add value and help them grow.”

Managing Partner, Michael Turturro adds, “Tom is a hardworking, trustworthy professional who has put a lot of time and effort into getting to know the construction industry so he can best use his education and license to help clients in this vertical succeed. I know we’re going to see a lot of great things from Tom in the years to come.”

Qualify for Higher 179D Deductions Starting in 2023

More opportunities to take enhanced deductions under 179D are here. Make sure you understand changes and what you need to do – in terms of prevailing wages, apprenticeships, and recordkeeping – to maximize deductions.

Key changes now in effect include:

Minimum energy savings required has been reduced from 50% to 25%, based on the ASHRAE 90.1 standard in effect four years prior to the building’s placed-in-service date.
When prevailing wage and apprenticeship requirements are met and a building reduces annual energy and power costs by at least 25%, the deduction is $2.50/square foot. For each additional percentage that annual energy and power costs are reduced, the deduction increases by $.10, up to $5.00/square foot. (That’s up from $1.88/square foot in 2022.)
The maximum deduction is available every three years for a commercial building; four years for a government, instrumentality, not-for-profit or Tribal government building. (In the past, it could only be taken once.)
In addition to federal, state, and local municipal building owners being able to allocate 179D deductions to a designer or multiple designers (a.k.a. the person who creates the installation of energy-efficient commercial building property technical specifications), the same now holds true for tribal governments and any tax-exempt organization investing in energy-efficient property, including museums, religious buildings, hospitals, non-profit schools, and university-owned buildings.
The interim lighting rule and partial qualification rules no longer apply.

Prevailing wage and apprenticeship requirements established by the Inflation Reduction Act to qualify for green tax breaks took effect for construction or installation that began on or after January 29, 2023. On November 30, 2022, the IRS issued a notice with additional guidance clarifying requirements.

When it comes to prevailing wage, according to the DOL, laborers and mechanics must be paid the applicable prevailing wage for all hours performing construction, and in some cases alterations and repairs, on the site of a qualified facility. A prevailing wage includes the basic hourly wage rate and fringe benefit rate for each class of laborers and mechanics, for each type of construction, in a defined geographic area. Prevailing wages are determined by the Secretary of Labor and are posted on http://www.sam.gov.

As for apprenticeship requirements, as noted on Apprenticeship.gov, apprenticeship requirements are: “(1) a taxpayer must ensure that a certain number of labor hours of construction, alteration, or repair work, including work performed by any contractor or subcontractor, be performed by qualified apprentices (labor hour requirement), expressed as a percentage of total labor hours of construction, alteration, and repair work, subject to any applicable requirement for the ratio of apprentices to journeyworkers (ratio requirement); and (2) the taxpayer and any contractors and subcontractors who employ 4 or more individuals to perform construction, alteration, or repair work employ at least one qualified apprentice to perform such work (participation requirement).”

For both prevailing wage and apprenticeships, there are recordkeeping requirements. For complete details, including FAQs, see IRS Notice 2022-61, and watch for additional information in the months ahead, as the Treasury Department and IRS will likely issue additional guidance.

In the meantime, RBT CPA accounting, tax and advisory services professionals are available to help ensure you maximize this opportunity to create energy-friendly buildings and receive enhanced tax deductions. We’ve been supporting construction companies in and around the Hudson Valley for over 50 years and believe we succeed when we help you succeed. To learn more, contact one of our offices today.

The State of Manufacturing in New York: Where It Is & Where It Is Going

While the state of U.S. manufacturing for year end 2022 and the start of 2023 doesn’t look great, data seems to point to New York manufacturers facing tougher times than others. In general, 2022 ended up better than most thought it would but worse than they had hoped. The picture – based on January data – is somewhat dimmer for New York manufacturing, for at least the first half of 2023.

The S&P Global U.S. Manufacturing PMI for December was 46.2 (seasonally adjusted), a decrease from 47.4 in November the first time it fell below 50 since June 2020 and a decline in the sector’s health driven by weak demand (attributed to economic uncertainties and inflation), which drove output and new order contractions. By January 2023, it was slightly higher, showing contraction easing but factory activity falling for the third straight month. New orders, output, and inventories were down. Sales were subdued and demand was weak. Input costs and output charges were increasing even though supplier delivery times were stable and input buying contracted. Still, business confidence was up with hopes of stronger demand ahead, greater supply chain stability, and new product investments. (Trading Economics. “United States Manufacturing PMI.” https://tradingeconomics.com/united-states/manufacturing-pmi)

CFO.com reports: “The silver lining in all this, if there is one, is that December data showed cost burdens softening — the most since July 2020. ‘Respondents said lower prices for fuel, metals, and oil-related products dampened the overall upturn in operating expenses,’ according to S&P. Selling prices to customers also slowed at the fastest pace in two years because manufacturers passed through savings in an effort to stimulate sales amid the strong dollar.” (Ryan, Vincent. CFO.com, “December’s 64.2 Manufacturing PMI Shows Industry Contracted.” January 4, 2022. https://www.cfo.com/risk-compliance/supply-chain/2023/01/manufacturing-contraction-pmi-purchasing-managers-index-sp-weak-demand/)

According to January’s Empire State Manufacturing Survey, manufacturing activity in the state saw a big decline. As noted in the report issued by The Federal Reserve Bank of New York (The Fed), “The general business conditions index fell 22 points to -32.9, its lowest level since mid-2020 and the fifth worst reading in the survey’s history.”

44% of respondents indicated conditions worsened during the month, while 11% saw improvements.
New Orders Index dropped 28 points to -31.1.
Shipments Index dropped 28 points to -22.4.
Unfilled Orders Index decreased to -14.3, so more orders were getting filled.
Delivery times were unchanged.
Inventories Index was steady at 4.5, “pointing to a small increase in inventories.”
Employment growth stalled.
The average workweek shortened.
Input price increases slowed dramatically.
Selling price increases moderated.

The report also states: “Looking ahead, firms expect little improvement in business conditions over the next six months.”

How are manufacturing companies responding? The 2023 BDO Manufacturing CFO Outlook Survey identifies the strategies survey participants indicated they are taking to build resilience in 2023, including 48% taking Inflation Reduction Act clean energy incentives; 39% cost optimization/reduction; 36% digital transformation; 25% restructuring or reorganizing; and 21% are focused on understanding tax implications of business decisions. (Note that two of the five actions relate to tax planning and strategy.)

While you focus on what you can do from a manufacturing point of view to ride out these uncertain times, remember you can count on RBT CPAs accounting, tax, audit, and business advisory professionals to help your business develop and execute a tax plan to help build overall business resilience. We’ve been serving manufacturing companies in the Hudson Valley and beyond for over 50 years and believe we succeed when we help our clients succeed.

To learn more about creating a tax strategy that promotes resilience, give RBT CPAs a call today.

NYS Regents 10 Biggest Proposed Budget Items for 2023-2024

In December, the New York State Board of Regents outlined budget and legislative priorities for the 2023-2024 school year. Here are highlights of the 10 items requiring the biggest share of the proposed budget.

#10. $10.5 million for College and Career Pathways in support of high school opportunity and career success. This will involve consolidating Advanced Course Access (ACA), Pathways in Technology Early College High Schools (P-Tech) and Smart Scholars Early College High Schools (SS-ECHS) into one new program, called College Credit and Career Opportunity Program to help high school students earn transcripted college credit and/or pursue a career pathway.

#9. $11.1 million for Higher Education Opportunity Program (HEOP); Science and Technology Entry Program (STEP); Collegiate Science and Technology Entry Program (CSTEP); and Liberty Partnerships Program (LPP), in support of high school opportunity and career success. This will be used to enhance supports and services to students in these programs, designed to improve outcomes and opportunities for students from economically disadvantaged and underrepresented populations.

#8. $15 million to Enhance Supports and Services for Postsecondary Success of Students with Disabilities as part of the advancing equity, excellence, and access guiding principle. A $13 million increase over current spending, this will be used to provide accommodations, supports, summer college prep programs, and faculty and staff training.

#7. $16.6 million to Build Sufficient Department Staff Capacity to rebuild New York State Education Department (NYSED) capacity to serve the public. $12.9 million will support 150 new positions, including 36 in Information Technology Services. An additional $3.7 million will fund 37 positions to support key Regents initiatives.

#6. $18 million for My Brothers Keeper to support the key area of high school opportunity and career success. This would enable the program to continue at current funding levels.

#5. $21 million for Computer Based Testing (CBT) Implementation to support the advancing equity, excellence, and access guiding principle. Funds would support the transition to 100% CBT for grades 3 to 8 English Language Arts, Math, and Science assessments. Of the total, $1 million is for increasing vendor capacity, while the balance covers costs for assuming responsibility for scoring.

#4. $21.1 million for Streamlining Early Childhood Programs to support lifelong learning, academic success, and improved outcomes. This will help redesign the State Education Department’s PreK funding to provide universal access for all four-year-olds by 2030 and all three-year-olds by 2035, while reducing barriers to dual enrollment of preschool students with disabilities in inclusive PreK classrooms. Of total funds, $1.1 million is for staff and a consultant to develop a redesign implementation plan. The remaining $20 million is for a preschool inclusivity grant awarded to districts providing a continuum of services for children with mild or moderate disabilities and children with severe or multiple disabilities.

#3. $27.82 million for Capital Needs of the Indigenous and State Operated Schools to advance the equity, excellence, and access guiding principle. Of the total, $250,000 will go towards a building conditions survey and $27.57 million is for rolling capital funding to meet immediate health and safety needs, while establishing a capital planning process for five state-owned school buildings, including Tuscarora Nation School, Onondaga Nation School, St. Regis Mohawk Nation School, Rome School for the Deaf, and Batavia School for the Blind.

#2. $45 million in State Aid for the Public Library Construction Program as part of its rebuilding capacity of the NYSED to serve the public and advancing equity, excellence, and access principles. Funds will begin to address the statewide need of $1.52 billion for public library construction and renovation, and address library structural needs for adequate broadband infrastructure. For 2023-24, $45 million (an $11 million increase) is requested.

#1. $375 million for Relieving School District Mandates, as part of its rebuilding the NYSED’s capacity to serve the public. This will fund valid school district prior year state aid claims and penalty forgiveness, while a multi-agency team convenes to streamline financial reporting.

As for state aid, the Regents are asking for an additional $3.4 billion for the 2023-2024 school year, and expressed commitment to support all school districts through fully funding foundation and other state aid as provided by law; provide universal access to Career and Technical Education for all interested students; and provide options to encourage districts to expand programs and services via greater regional collaboration.

Stay tuned as Governor Hochul is scheduled to release her 2024 budget today, with final approval due April 1.

RBT CPAs is a leading accounting, tax, audit, and advisory firm that has been serving clients in the Hudson Valley and beyond for over 50 years. Known for our exceptional customer experience, professionalism, and ethics, RBT CPA staff members believe we succeed when we help you succeed. If you’re interested in learning more, give us a call.

Should You Offer an Individual Coverage Health Reimbursement Account (ICHRA) In Lieu of Group Medical Plan Coverage?

With group medical plan coverage costs projected to increase between 5% and 6% next year, employers are in a tough spot. Keep offering this valuable coverage and absorbing big cost increases as part of their overall recruitment, retention, and engagement efforts, or consider an alternative that’s growing in popularity: Individual Coverage Health Reimbursement Accounts (ICHRAs).

ICHRAs came into being in 2020 and allow employers to reimburse employees with tax-free dollars for some or all the cost of medical insurance they purchase on their own, as well as certain out-of-pocket costs like copayments and deductibles. They are similar to a Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) introduced in 2017 but offer more flexibility and features. Here are some highlights:

The employer decides how much to contribute to the ICHRA. As long as that amount is considered “affordable”, an employer will meet any Affordable Care Act coverage mandate that applies.
A covered employee purchases his/her own coverage – inside the Marketplace or out – and gets reimbursed with ICHRA funds to offset some or all of the monthly premiums (depending on how much the employer contributes). This enables the employee to decide which plan has the benefits (i.e., prescription drug), network doctors, and other features that are meaningful to him/her. Employers can also contribute funds to help cover out-of-pocket costs.
If an employee chooses to purchase a plan outside of the ACA Marketplace, the employer can offer him/her the option to pay any premium amounts above the employer’s ICHRA contribution using tax-free dollars via a cafeteria plan.
ICHRA reimbursements are tax-deductible for employers and tax-free for employees. So instead of paying payroll taxes on reimbursements given, the reimbursements qualify as an employer tax deduction. In addition, reimbursements are not considered taxable income to employees.

As a result, employees are given the flexibility to choose the coverage that best meets their cost and healthcare needs. Employers can get out of the resource-intensive business of managing, negotiating, and paying directly for group medical plan coverage. Plus, they can manage costs better than ever because they set the limit on how much they’ll contribute to an ICHRA.

ICHRAs also offer a lot of flexibility to employers. For example, an employer can choose which classes of employees are eligible for the ICHRA, while still offering a group medical plan to others. So, an employer may decide to offer an ICHRA to employees in New York, but not Ohio; to full-time employees, but not part-time; etc. An employer can even decide to offer the ICHRA as the only medical plan option to all new hires (a good way to transition away from group medical plan sponsorship over time).

With ICHRAs, small businesses that couldn’t afford to offer traditional coverage now have an option that can strengthen their ability to attract and retain employees. Businesses that already offer medical plan coverage may decide an ICHRA may be a better fit for certain employee classes. All employers may view it as a viable alternative to taking on the risk of managing, negotiating with, and paying for group medical plan coverage.

According to ICHRA FAQs issued jointly by the U.S. Department of Treasury, the U.S. Department of Labor, and the U.S. Department of Health and Human Services, it is projected that “in the next 5-10 years, roughly 800,000 employers will offer Individual Coverage HRAs to pay for insurance for more than 11 million employees.”

Still, there are a lot of technicalities that need to be worked through if you’re considering making the move. For example, employees must choose between the ICHRA and health premium tax credit through the ACA Marketplace. Also, small employers must choose between an ICHRA or Small Business Healthcare Tax Credit – they can’t have both.

For more information, review Healthcare.gov’s ICHRA Decision Guide; Takecommandhealth.com’s guide; and Healthinsurance.org’s ICHRA overview.

Interested in learning more? RBT CPA affiliate Visions Human Resource Services staff is available to conduct benefit plan analysis, while RBT CPAs can help you understand the tax implications of choosing an ICHRA versus other options. Give us a call if you have any questions about this or anything related to your accounting, tax, audit, and business advisory needs. We’ve been serving businesses in the Hudson Valley for over 50 years and believe we succeed when we help you succeed. Call RBT CPAs today.